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Cover Stories Series 2013> Shanghai to Pilot Free Trade Program> Archive
UPDATED: January 7, 2013 NO. 2 JANUARY 10, 2013
Time to Settle Tariff Disputes
Cooperation is the only way forward for Chinese and American businesses
By Lan Xinzhen

COMMERCE COOPERATION: Chinese Vice Premier Wang Qishan (fourth left) co-chaired with U.S. Trade Representative Ambassador Ron Kirk (second right) and U.S. Commerce Acting Secretary Rebecca Blank (third right) the 23rd JCCT in Washington, D.C. on December 19, 2012 (LI TAO)

The Chinese Ministry of Commerce (MOFCOM) over the past two years may be the national trade administrator that has been under the most pressure compared to any of its global counterparts. Most of that pressure has come from trade frictions between China and the United States, which have not eased in spite of China's strong year-end showing.

While other Chinese ministries and commissions have been consumed with wrapping up the year since mid-December, the MOFCOM is still busy settling China-U.S. trade frictions. On December 18, the MOFCOM said that a panel regarding China's request for consultations on the U.S. amendment to Tariff Act had been officially formed.

MOFCOM spokesman Shen Danyang said that China has always abided by WTO rules and opposed trade protectionism in all forms and hopes the dispute can be settled.

Inconceivable actions

The dispute over the amendment to the Tariff Act began with a lawsuit.

On July 30, 2007, the U.S. Department of Commerce (DOC) launched anti-dumping and countervailing duty investigations on the imports of off-the-road tires from China. The DOC in July 2008 levied countervailing duties of up to 19.5 percent and anti-dumping duties up to 210.48 percent against Chinese exports of off-the-road tires.

According to U.S. Tariff Act of 1930, countervailing duties do not apply to "non-market economy" countries. Since the U.S. Government has not yet recognized China's market economy status, its action against Chinese tires is illegal. In September 2008, China's Hebei Xingmao Tire Co. Ltd. and U.S. importer GPX International Tire Corp. sued the DOC at the United States Court of International Trade.

Three rulings by the court on September 18, 2009, August 4, 2010 and October 1, 2010 all ruled that the DOC must halt its countervailing duties against related Chinese enterprises.

On November 29, 2010 the DOC appealed to the Court of Appeals for the Federal Circuit, which ruled in favor of the Chinese company on December 19, 2011, saying that under the Tariff Act of 1930, it is illegal for the DOC to launch countervailing duty investigations against non-market economies.

Since 2006, the DOC has initiated more than 30 countervailing duty investigations against imports from China. The ruling by the Court of Appeals for the Federal Circuit indicates that the DOC's countervailing duty investigations against China lack a legal foundation, including action against China's photovoltaic products and wind power equipment.

Unwilling to accept its defeat, the U.S. Government on March 5, 2012 applied to the Federal Circuit for a retrial and managed to convince the U.S. Congress to rewrite the law and overturn the Federal Circuit's ruling. On the same day, the Congress passed an amendment to the Tariff Act of 1930, allowing countervailing duties to be applied retroactively to 2006 to merchandise from non-market economies.

The amendment, clearly targeting China, legalized punitive tariffs by the United States against Chinese commodities.

On March 13, 2012, U.S. President Barack Obama signed the amendment into law.

With the new law passed, the Federal Circuit sent the case, titled GPX International Tire Corp. v. United States, back to the United States Court of International Trade to weigh the constitutionality of the law.

Appeal to WTO

The Chinese Government expressed its discontent with the amendment. On September 17, 2012. The MOFCOM requested consultations on the amendment to the Tariff Act at the WTO. The dispute involves 24 categories of products with a total value of $7.23 billion.

China and the United States held consultations in Geneva on November 5. The Chinese side pointed out that the United States initiated more than 30 countervailing duty investigations against China with retrospective consequences, putting Chinese enterprises into an uncertain legal environment. The Chinese side expressed its hope that the United States would abide by WTO rules, according to Shen, but so far it has failed to address China's concerns. A final ruling by the WTO is expected by the end of 2013.

Yuan Zheng, a researcher with the Institute of American Studies at the Chinese Academy of Social Sciences, said that by altering the tariff act, the U.S. Congress has given the green light to the U.S. Government to initiate new punitive tariffs, which will have an adverse impact on China-U.S. trade relations for both sides.

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