WORLD TRADE  
ORGANIZATION  WT/DS379/R 
22 October 2010 
 
 (10-5262) 
 Original:   English 
  
 
     
 
    
 
   
UNITED STATES – DEFINITI VE ANTI-DUMPING AND 
COUNTERVAILING DUTIES ON CERTAIN PRODUCTS 
FROM CHINA  
 
 
  
Report of the Panel 
 
 
 
   WT/DS379/R 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
I. INTRODUCTION ................................................................................................................... .1 
A. COMPLAINT OF CHINA ................................................................................................................1  
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL ..................................................................1  
C. ADDITIONAL PROCEDURES FOR THE PROTECTION OF BUSINESS CONFIDENTIAL 
INFORMATION .............................................................................................................................2  
II. FACTUAL ASPECTS ..............................................................................................................2  
A. INVESTIGATIONS COVERED BY THIS DISPUTE ..............................................................................2  
1. Circular Welded Carbon Quality Steel Pipe ..........................................................................2  
(a) Countervailing duty investigation.............................................................................................. .2 
(b) Anti-dumping investigation ..................................................................................................... ...4 
2. Light–Walled Rectangular Pipe and Tube .............................................................................4  
(a) Countervailing duty investigation.............................................................................................. .4 
(b) Anti-dumping investigation ..................................................................................................... ...5 
3. Laminated Woven Sacks .......................................................................................................... 5 
(a) Countervailing duty investigation.............................................................................................. .5 
(b) Anti-dumping investigation ..................................................................................................... ...6 
4. Certain New Pneumatic Off-the-Road Tires..........................................................................7  
(a) Countervailing duty investigation.............................................................................................. .7 
(b) Anti-dumping investigation ..................................................................................................... ...8 
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................8  
A. CHINA ............................................................................................................................... ...........8  
B. UNITED STATES .........................................................................................................................10  
IV. ARGUMENTS OF THE PARTIES ......................................................................................10  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................11  
VI. INTERIM REVIEW...............................................................................................................11  
A. REQUEST FOR REVIEW SUBMITTED BY CHINA ...........................................................................11  
B. REQUEST FOR REVIEW SUBMITTED BY THE UNITED STATES .....................................................14  
VII. INTRODUCTION TO FINDI NGS BY THE PANEL.........................................................16  
A. GENERAL PRINCIPLES REGARDING TREATY INTERPRETATION , THE APPLICABLE 
STANDARD OF REVIEW , AND BURDEN OF PROOF .......................................................................16  
1. Rules of treaty interpretation ................................................................................................1 6 
2. Standard of review............................................................................................................. .....17  
3. Burden of proof................................................................................................................ .......18  
B. CHINA 'S PROTOCOL OF ACCESSION ..........................................................................................19  WT/DS379/R 
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  VIII.
 CHINA'S CLAIMS PERTAINING TO THE USDOC'S DETERMINATIONS 
THAT CERTAIN SOES AND SOCBS WERE PUBLIC BODIES....................................20  
A. CLAIMS OF CHINA .....................................................................................................................20  
B. MAIN ARGUMENTS OF THE PARTIES .........................................................................................20  
1. China.......................................................................................................................... ..............20  
2. United States.................................................................................................................. ..........25  
C. MAIN ARGUMENTS OF THE THIRD PARTIES ..............................................................................32  
1. Argentina ...................................................................................................................... ...........32  
2. Australia ...................................................................................................................... ............33  
3. Brazil......................................................................................................................... ...............33  
4. Canada ......................................................................................................................... ............34  
5. European Communities..........................................................................................................3 4 
6. Japan.......................................................................................................................... ..............34  
7. India .......................................................................................................................... ...............35  
8. Mexico......................................................................................................................... .............35  
9. Norway......................................................................................................................... ............35  
10. Saudi Arabia................................................................................................................... .........36  
11. Turkey......................................................................................................................... .............36  
D. ASSESSMENT BY THE PANEL .....................................................................................................37  
1. Interpretation of the term "public bo dy" in Article 1.1(a)(1) of the SCM 
Agreement...................................................................................................................... ..........37  
2. The USDOC's determinations that certain SOEs and SOCBs were "public 
bodies" ........................................................................................................................ .............50  
(a) Background..................................................................................................................... ..........50  
(b) USDOC public body determinations in resp ect of government-owned input suppliers 
(SOEs)......................................................................................................................... ..............51  
(i) CWP investigation .............................................................................................................. ......51  
(ii) LWR investigation.............................................................................................................. .......52  
(iii) LWS investigation .............................................................................................................. .......54  
(iv) OTR investigation .............................................................................................................. .......55  
(c) USDOC public body determination in respect of SOCBs ........................................................55  
(d) Assessment by the Panel........................................................................................................ ...58 
(i) SOE input suppliers as public bodies .......................................................................................59  
(ii) SOCBs as public bodies......................................................................................................... ...63 
(iii) Concluding remark .............................................................................................................. .....64  
IX. CHINA'S CLAIMS PERTAINI NG TO SPECIFICITY.....................................................64  
A. DE JURE  SPECIFICITY OF SOCB  LENDING TO THE TIRE INDUSTRY ............................................64   WT/DS379/R 
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  1. Claims of China................................................................................................................ .......64  
2. Main arguments of the Parties...............................................................................................64  
(a) China.......................................................................................................................... ...............64  
(b) United States .................................................................................................................. ...........66  
3. Main arguments of the Third Parties....................................................................................67  
(a) Australia...................................................................................................................... ..............67  
(b) European Communities........................................................................................................... ..68 
(c) Saudi Arabia ................................................................................................................... ..........68  
4. Assessment by  the Panel........................................................................................................ .68 
(a) Interpretation of Article 2. 1 of the SCM Agreement ................................................................69  
(i) Limitation of access ........................................................................................................... .......69  
(ii) "Certain en terpri ses" .......................................................................................................... ......73  
(b) USDOC de jure  specificity determination................................................................................75  
(i) Central Government planning documents ................................................................................78  
(1) The GOC 11th Five-Year Plan (2006-2010 ).............................................................................. 78 
(2) The Implementing Regulation of the 11th Five-Year Plan ........................................................ 79 
(3) The GOC Catalogue (11th Five-Year Plan )............................................................................... 81 
(4) The GOC 10th Five-Year Plan (2001 – 2005) and the SETC Circular 716 ............................... 84 
(ii) Provincial and municipal govern ments planning documents ...................................................86  
(1) General ............................................................................................................................... .......86  
(2) GTC ............................................................................................................................... ...........87  
(A) USDOC determination............................................................................................................ ..87 
(B) Guizhou and Guiyang planning documents..............................................................................87  
(3) Starbright ............................................................................................................................... ...89 
(A) USDOC determination............................................................................................................ ..89 
(B) Hebei planning documents....................................................................................................... .89 
(iii) Conclusion in respect of planning documents ..........................................................................90  
(iv) USDOC determination that SOCBs acted pu rsuant to government industrial policies 
in making loans to the tire industry ..........................................................................................9 0 
(v) Conclusion by the Panel ........................................................................................................ ...93 
B. REGIONAL SPECIFICITY OF LAND-USE RIGHTS ........................................................................93  
1. Claims of China................................................................................................................ .......93  
2. Main arguments of the Parties...............................................................................................93  
(a) China.......................................................................................................................... ...............93  
(b) United States .................................................................................................................. ...........95  
3. Main arguments of the Third Parties....................................................................................96  WT/DS379/R 
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  (a)
 Australia...................................................................................................................... ..............96  
(b) Canada ......................................................................................................................... .............97  
(c) European Communities........................................................................................................... ..97 
4. Assessment by  the Panel........................................................................................................ .97 
(a) Interpretation of Article 2. 2 of the SCM Agreement ................................................................97  
(i) "Certain enterprises" as referred to in Article 2.2 of the SCM Agreement ..............................98  
(ii) "Designated geographical region" in Article 2.2 of the SCM Agreement ..............................101  
(b) USDOC regional specificity determination ............................................................................102  
(i) USDOC determination............................................................................................................ 102 
(ii) Assessment by the Panel ........................................................................................................ .103 
X. CHINA'S CLAIMS PERTAINI NG TO BENCHMARKS................................................107  
A. CLAIMS OF CHINA ...................................................................................................................107  
B. APPLICABLE PROVISIONS OF THE COVERED AGREEMENTS .....................................................108  
C. ORDER OF ANALYSIS OF CLAIMS ............................................................................................109  
D. REJECTION OF IN-COUNTRY BENCHMARKS AND RESORT TO ALTERNATIVES – THE 
SOFTWOOD LUMBER DISPUTES ................................................................................................110  
E. CHINA 'S CLAIMS UNDER ARTICLE 14(D) OF THE SCM  AGREEMENT – SOE- PRODUCED 
INPUTS ............................................................................................................................... ......112  
1. Claim of China ................................................................................................................. .....112  
2. Main arguments of the Parties.............................................................................................112  
(a) China.......................................................................................................................... .............112  
(b) United States .................................................................................................................. .........113  
3. Main arguments of the Third Parties..................................................................................115  
(a) Australia...................................................................................................................... ............115  
(b) Canada ......................................................................................................................... ...........115  
(c) European Communities........................................................................................................... 116 
(d) India .......................................................................................................................... ..............116  
(e) Japan .......................................................................................................................... .............116  
(f) Mexico ......................................................................................................................... ...........117  
(g) Saudi Arabia ................................................................................................................... ........117  
(h) Turkey......................................................................................................................... ............118  
4. Assessment by the Panel.......................................................................................................1 18 
(a) Can evidence of government predomin ance alone suffice to establish market 
distortion? .................................................................................................................... ...........118  
(b) USDOC determination with respect to HRS inputs (CWP and LWR investigations)............120  
(c) USDOC determination with respect to  BOPP inputs (LWS investigation)............................124   WT/DS379/R 
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  F. CHINA 'S CLAIMS UNDER ARTICLE 14(D) OF THE SCM  AGREEMENT – GOVERNMENT -
PROVIDED LAND -USE RIGHTS ..................................................................................................126  
1. Claim of China ................................................................................................................. .....126  
2. Main arguments of the Parties.............................................................................................126  
(a) China.......................................................................................................................... .............126  
(b) United States .................................................................................................................. .........127  
3. Main arguments of the Third Parties..................................................................................128  
(a) Australia...................................................................................................................... ............128  
(b) European Communities........................................................................................................... 128 
(c) Mexico ......................................................................................................................... ...........128  
(d) Saudi Arabia ................................................................................................................... ........128  
4. Assessment by the Panel.......................................................................................................1 29 
G. CHINA 'S CLAIMS UNDER ARTICLE 14(B) OF THE SCM  AGREEMENT – GOVERNMENT 
PROVISION OF PREFERENTIAL LENDING ..................................................................................131  
1. Claims of China................................................................................................................ .....131  
2. Main arguments of the Parties.............................................................................................131  
(a) China.......................................................................................................................... .............131  
(b) United States .................................................................................................................. .........134  
3. Main arguments of the Third Parties..................................................................................136  
(a) Australia...................................................................................................................... ............136  
(b) European Communities........................................................................................................... 137 
(c) Japan .......................................................................................................................... .............137  
(d) Mexico ......................................................................................................................... ...........137  
(e) Saudi Arabia ................................................................................................................... ........137  
4. Assessment by the Panel.......................................................................................................1 38 
(a) Whether Article 14(b) permits rejection of in-country interest rates as benchmarks, 
and if so, under what circumstances .......................................................................................138  
(b) The USDOC determinations not to rely on interest rates in China as benchmarks for 
SOCB loans..................................................................................................................... ........145  
(i) The CFS Paper determination relied upon by the USDOC in the OTR, CWP and LWS 
investigations ................................................................................................................. .........146  
(ii) OTR Investigation .............................................................................................................. .....150  
(iii) CWP Investigation .............................................................................................................. ....152  
(iv) LWS Investigation .............................................................................................................. .....152  
(c) Assessment by the Panel........................................................................................................ .153 
H. PANEL 'S TERMS OF REFERENCE – BENCHMARKS ACTUALLY USED BY THE USDOC..............154  
1. Introduction................................................................................................................... ........154  WT/DS379/R 
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  2.
 Main arguments of the Parties.............................................................................................154  
(a) China.......................................................................................................................... .............154  
(b) United States .................................................................................................................. .........155  
3. Assessment by the Panel.......................................................................................................1 55 
I. CONSISTENCY WITH ARTICLE 14(D) OF THE SCM  AGREEMENT OF THE BENCHMARKS 
ACTUALLY USED BY THE USDOC  – LAND -USE RIGHTS ..........................................................157  
1. Claim of China ................................................................................................................. .....157  
2. Factual background............................................................................................................. .157 
3. Main arguments of the Parties.............................................................................................159  
(a) China.......................................................................................................................... .............159  
(b) United States .................................................................................................................. .........160  
4. Main arguments of the Third Parties..................................................................................162  
(a) European Communities........................................................................................................... 162 
(b) Saudi Arabia ................................................................................................................... ........162  
5. Assessment by the Panel.......................................................................................................1 62 
J. CONSISTENCY WITH ARTICLE 14(B) OF THE SCM  AGREEMENT OF THE LOAN 
BENCHMARKS ACTUALLY USED BY THE USDOC  – RMB-D ENOMINATED LOANS ................165  
1. Claim of China ................................................................................................................. .....165  
2. Factual background............................................................................................................. .165 
3. Main arguments of the Parties.............................................................................................166  
(a) China.......................................................................................................................... .............166  
(b) United States .................................................................................................................. .........167  
4. Main arguments of the Third Parties..................................................................................168  
(a) Australia...................................................................................................................... ............168  
(b) Saudi Arabia ................................................................................................................... ........168  
5. Assessment by the Panel.......................................................................................................1 68 
K. CONSISTENCY WITH ARTICLE 14(B) OF THE SCM  AGREEMENT OF THE LOAN 
BENCHMARK ACTUALLY USED BY THE USDOC  – U.S.  DOLLAR -DENOMINATED 
LOANS ............................................................................................................................... ......170  
1. Claim of China ................................................................................................................. .....170  
2. Main arguments of the Parties.............................................................................................171  
(a) China.......................................................................................................................... .............171  
(b) United States .................................................................................................................. .........172  
3. Assessment by the Panel.......................................................................................................1 72 
XI. CHINA'S CLAIM PERTAINING TO "CREDIT" OR "OFFSET" FOR 
UNSUBSIDIZED TRANSACTIONS..................................................................................173  
A. CLAIMS OF CHINA ...................................................................................................................173   WT/DS379/R 
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  B. MAIN ARGUMENTS OF THE PARTIES .......................................................................................173  
1. China.......................................................................................................................... ............173  
2. United States.................................................................................................................. ........177  
C. MAIN ARGUMENTS OF THE THIRD PARTIES ............................................................................181  
1. Canada ......................................................................................................................... ..........181  
2. European Communities........................................................................................................181  
3. India .......................................................................................................................... .............182  
4. Japan.......................................................................................................................... ............182  
5. Norway......................................................................................................................... ..........182  
D. FACTUAL BACKGROUND .........................................................................................................183  
E. ASSESSMENT BY THE PANEL ...................................................................................................185  
1. Period of investigation ........................................................................................................ ..186  
2. "Good" in the sense of Article 14(d) of the SCM Agreement...........................................188  
3. Degree of flexibility for investigating authorities under Article 14 of the SCM 
Agreement...................................................................................................................... ........188  
4. The USDOC benefit determination in respect of rubber inputs.......................................190  
5. Conclusions.................................................................................................................... ........192  
XII. CHINA'S CLAIMS PERTAINING TO THE PROVISION OF SOE-
PRODUCED INPUTS BY PRIVAT E TRADING COMPANIES....................................192  
A. CLAIMS BY CHINA ...................................................................................................................192  
B. MAIN ARGUMENTS OF THE PARTIES .......................................................................................193  
1. China.......................................................................................................................... ............193  
2. United States.................................................................................................................. ........194  
C. MAIN ARGUMENTS OF THE THIRD PARTIES ............................................................................196  
1. Australia ...................................................................................................................... ..........196  
2. Canada ......................................................................................................................... ..........196  
3. European Communities........................................................................................................196  
4. Mexico......................................................................................................................... ...........197  
5. Saudi Arabia................................................................................................................... .......197  
6. Turkey......................................................................................................................... ...........197  
D. ASSESSMENT BY THE PANEL ...................................................................................................197  
1. Financial contribution ......................................................................................................... .200 
2. Pass-through of benefits ....................................................................................................... 201 
XIII.  CHINA'S CONSEQUENTIAL CLAIMS...........................................................................206  
XIV.  CHINA'S CLAIMS PERTAINING TO "DOUBLE REMEDIES" .................................206  
A. INTRODUCTION .......................................................................................................................206  WT/DS379/R 
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  1.
 Background ..................................................................................................................... ......207  
2. Claims of China................................................................................................................ .....209  
(a) China's "as applied" claims.................................................................................................... .209 
(b) China's "as such" claims ....................................................................................................... ..209  
B. UNITED STATES REQUESTS FOR PRELIMINARY RULINGS ........................................................210  
1. Main arguments of the Parties.............................................................................................210  
(a) United States .................................................................................................................. .........210  
(i) U.S. request for ruling concerning China' s failure to consult on the "omission"...................210  
(ii) U.S. request for ruling under Article 6.2 of the DSU..............................................................211  
(b) China.......................................................................................................................... .............212  
(i) U.S. request for ruling concerning China' s failure to consult on the "omission"...................212  
(ii) U.S. request for ruling under Article 6.2 of the DSU..............................................................212  
2. Assessment by the Panel.......................................................................................................2 13 
(a) U.S. request for a preliminary ruling with respect to the alleged failure to consult on 
the "omission"................................................................................................................. ........213  
(b) United States request for a preliminary ruling under Article 6.2 of the DSU.........................219  
C. CHINA 'S "AS APPLIED " CLAIMS ...............................................................................................219  
1. Introduction................................................................................................................... ........219  
2. General considerations with respect to th e potential for "double remedies" to 
arise from the simultaneous imposition of countervailing duties and of anti-dumping duties calculated pursuant to the U.S. NME methodology ...............................220
 
(a) Main arguments of the Parties ................................................................................................22 0 
(i) China.......................................................................................................................... .............220  
(ii) United States.................................................................................................................. .........223  
(b) Main arguments of the Third Parties ......................................................................................224  
(i) Argentina ...................................................................................................................... ..........224  
(ii) Australia...................................................................................................................... ............225  
(iii) Brazil......................................................................................................................... ..............225  
(iv) European Communities........................................................................................................... 225 
(v) Japan.......................................................................................................................... .............225  
(vi) Mexico......................................................................................................................... ............225  
(vii) Norway......................................................................................................................... ...........226  
(c) Assessment by the Panel........................................................................................................ .226 
3. Claims under Article VI of the GATT 1994 and Articles 10, 19.3, 19.4 and 32.1 
of the SCM Agreement .........................................................................................................23 0 
(a) Main arguments of the Parties ................................................................................................23 0 
(i) China.......................................................................................................................... .............230   WT/DS379/R 
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  (ii) United States.................................................................................................................. .........232  
(b) Main arguments of the Third Parties ......................................................................................235  
(i) Argentina ...................................................................................................................... ..........235  
(ii) Australia...................................................................................................................... ............236  
(iii) Brazil......................................................................................................................... ..............236  
(iv) Canada......................................................................................................................... ...........236  
(v) European Communities........................................................................................................... 237 
(vi) India.......................................................................................................................... ..............237  
(vii) Japan.......................................................................................................................... .............238  
(viii) Mexico......................................................................................................................... ............238  
(ix) Norway......................................................................................................................... ...........238  
(c) Assessment by the Panel........................................................................................................ .239 
(i) Introduction ................................................................................................................... .........239  
(ii) Claim under Article 19.4 of  the SCM Agreement ...................................................................239  
(iii) China's claim under Article 19. 3 of the SCM Agreement .......................................................244  
(iv) China's claims under Article 10 of the SCM Agreement and Article VI:3 of the GATT 
1994 ........................................................................................................................... .............245  
(v) China's claim under Article 32. 1 of the SCM Agreement .......................................................247  
4. Claims under Articles 12.1 and 12.8 of the SCM Agreement ...........................................248  
(a) Main arguments of the Parties ................................................................................................24 8 
(i) China.......................................................................................................................... .............248  
(ii) United States.................................................................................................................. .........248  
(b) Assessment by the Panel........................................................................................................ .248 
5. Claims under Article I:1 of the GATT 1994.......................................................................249  
(a) Main arguments of the Parties ................................................................................................25 0 
(i) China.......................................................................................................................... .............250  
(ii) United States.................................................................................................................. .........252  
(b) Main arguments of the Third Parties ......................................................................................254  
(i) Canada......................................................................................................................... ...........254  
(c) Assessment by the Panel........................................................................................................ .254 
XV. CHINA'S CLAIM PERTAINING TO THE USDOC'S FAILURE TO PROVIDE 
AT LEAST 30 DAYS TO REPLY TO THE NEW ALLEGATIONS AND 
SUPPLEMENTAL QUESTIONNAIRES...........................................................................260  
A. CLAIM OF CHINA .....................................................................................................................260  
B. MAIN ARGUMENTS OF THE PARTIES .......................................................................................260  
1. China.......................................................................................................................... ............260  
2. United States.................................................................................................................. ........261  WT/DS379/R 
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  C.
 MAIN ARGUMENTS OF THE THIRD PARTIES ............................................................................263  
1. Argentina ...................................................................................................................... .........263  
2. Canada ......................................................................................................................... ..........264  
3. European Communities........................................................................................................264  
D. ASSESSMENT BY THE PANEL ...................................................................................................264  
1. Interpretation of the term "questionnaires" in Article 12.1.1 of the SCM 
Agreement...................................................................................................................... ........264  
2. The questionnaires and subsequent requ ests for information issued by the 
USDOC .......................................................................................................................... ........272  
XVI.  CHINA'S CLAIM PERTAINING TO THE USDOC'S APPLICATION OF 
"FACTS AVAILABLE" ......................................................................................................275  
A. CLAIMS OF CHINA ...................................................................................................................275  
B. MAIN ARGUMENTS OF THE PARTIES .......................................................................................275  
1. China.......................................................................................................................... ............275  
2. United States.................................................................................................................. ........276  
C. ASSESSMENT BY THE PANEL ...................................................................................................276  
XVII.  CONCLUSIONS AND RECOMMENDATIONS..............................................................280   WT/DS379/R 
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 LIST OF ANNEXES 
 
ANNEX A 
 
Executive Summaries of First Written Submissions of the Parties 
 
Contents Page 
Annex A-1 Executive Summary of the First Written Submission of China  A-2 
Annex A-2 Executive Summary of the First Written Submission of the 
United States  A-11 
Annex A-3 Response of China to U.S. Request for Preliminary Rulings A-20 
 
 
ANNEX B 
 
Third Party Submissions 
 
Contents Page 
Annex B-1 Executive Summary of the Third Party Submission of Argentina   B-2 
Annex B-2 Executive Summary of the Third Party Submission of Australia B-7 
Annex B-3 Executive Summary of the Third Party Submission of Brazil B-13 
Annex B-4 Executive Summary of the Third Party Submission of Canada B-17 
Annex B-5 Executive Summary of the Thir d Party Submission of the European  
Communities  B-21 
Annex B-6 Executive Summary of the Third Party Submission of Japan B-26 
Annex B-7 Executive Summary of the Third Party Submission of Mexico B-31 
Annex B-8 Executive Summary of the Third Party Submission of Norway B-35 
Annex B-9 Executive Summary of the Third Party Submission of Saudi Arabia  B-40 
Annex B-10 Executive Summary of the Third Party Submission of Turkey B-45 
Annex B-11 Third Party Oral Statement of Argentina   B-47 
Annex B-12 Executive Summary of the Third Party Oral Statement of Australia B-49 
Annex B-13 Third Party Oral Statement of Brazil B-52 
Annex B-14 Third Party Oral Statement of Canada B-54 
Annex B-15 Third Party Oral Statement of the European Communities  B-58 
Annex B-16 Third Party Oral Statement of India  B-61 
Annex B-17 Third Party Oral Statement of Japan B-65 
Annex B-18 Third Party Oral Statement of Mexico B-67 
Annex B-19 Third Party Oral Statement of Saudi Arabia B-71 
Annex B-20 Third Party Oral Statement of Turkey B-74 
 
 
ANNEX C 
 
Executive Summaries of Second Writ ten Submissions of the Parties 
 
Contents Page 
Annex C-1 Executive Summary of the Second Written Submission of China  C-2 
Annex C-2 Executive Summary of the Second Written Submission of the 
United States  C-12 
 WT/DS379/R 
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 ANNEX D 
 
Oral Statements of the Parties, First and Second Panel Meetings 
 
Contents
1 Page 
Annex D-1 Executive Summary of the Oral Statement of China – First Meeting D-2 
Annex D-2 Executive Summary of the Opening Statement of the United States 
– First Meeting D-7 
Annex D-3 Oral Statement of the United States regarding the U.S. Preliminary 
Ruling Request – First Meeting D-12 
Annex D-4 Closing Statement of the United States – First Meeting D-16 
Annex D-5 Executive Summary of the Oral Statement of China – Second 
Meeting D-18 
Annex D-6 Executive Summary of the Opening Statement of the United States 
– Second Meeting D-23 
Annex D-7 Closing Statement of China – Second Meeting D-28 
 
ANNEX E 
 
Procedures for the Protection of Business Confidential Information 
 
Contents Page 
Annex E-1 Procedures for the Protection of Business Confidential Information   E-2 
 
ANNEX F 
 
Request for the Establishment of a Panel 
 
Contents Page 
Annex F-1 Request for the Establishment of a Panel by China  F-2 
 
 
                                                      
1 Titles of oral statements are as submitted by the parties.  WT/DS379/R 
 Page xiii 
 
 
 TABLE OF CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Ceramic Tiles Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of 
Ceramic Floor Tiles from Italy , WT/DS189/R, adopted 5 November 2001, 
DSR 2001:XII, 6241 
Australia – Automotive 
Leather II Panel Report, Australia – Subsidies Provided to Producers and Exporters of 
Automotive Leather , WT/DS126/R, adopted 16 June 1999, DSR 1999:III, 951 
Brazil – Aircraft Appellate Body Report, Brazil – Export Financing Programme for Aircraft , 
WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, 1161 
Brazil – Aircraft Panel Report, Brazil – Export Financing Programme for Aircraft , 
WT/DS46/R, adopted 20 August 1999, as modified by Appellate Body Report 
WT/DS46/AB/R, DSR 1999:III, 1221 
Brazil – Aircraft (Article 22.6 – Brazil) Decision by th e Arbitrators, Brazil – Export Financing Programme for 
Aircraft – Recourse to Arbitration by Brazil under Article 22.6 of the DSU and 
Article 4.11 of the SCM Agreement , WT/DS46/ARB, 28 August 2000, 
DSR 2002:I, 19 
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres , 
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body 
Report WT/DS332/AB/R, DSR 2007:V, 1649 
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 
Canada – Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft , 
WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report 
WT/DS70/AB/R, DSR 1999:IV, 1443 
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive 
Industry , WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, 
DSR 2000:VI, 2985 
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry , 
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate 
Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043 
Canada – Continued Suspension Appellate Body Report, Canada – Continued Suspension of Obligations in the 
EC – Hormones Dispute , WT/DS321/AB/R, adopted 14 November 2008 
Canada – Dairy Appellate Body Report, Canada – Measures Affecting the Importation of Milk 
and the Exportation of Dairy Products , WT/DS103/AB/R, WT/DS113/AB/R 
and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057 
Canada – Dairy (Article 21.5 – New Zealand 
and US) Appellate Body Report, Canada – Measures Affecting the Importation of Milk 
and the Exportation of Dairy Products – Recourse to Article 21.5 of the DSU 
by New Zealand and the United States , WT/DS103/AB/RW, 
WT/DS113/AB/RW, adopted 18 Decem ber 2001, DSR 2001:XIII, 6829 
Chile – Price Band System 
(Article 21.5 – Argentina)  Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the 
DSU by Argentina , WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II, 
513 
China – Publications and 
Audiovisual Products Appellate Body Report, China –  Measures Affecting Trading Rights and 
Distribution Services for Certain Publications and Audiovisual Entertainment 
Products , WT/DS363/AB/R, adopted 19 January 2010 WT/DS379/R 
Page xiv  
 
 Short Title Full Case Title and Citation 
China – Publications and 
Audiovisual Products Panel Report, China –  Measures Affecting Trading Rights and Distribution 
Services for Certain Publications and Audiovisual Entertainment Products , 
WT/DS363/R and Corr.1, adopted 19 January 2010, as modified by Appellate 
Body Report WT/DS363/AB/R 
EC – Bananas III (Ecuador) (Article 22.6 – EC) Decision by th e Arbitrators, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by 
the European Communities under Article 22.6 of the DSU , 
WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, 2237 
EC – Countervailing Measures on DRAM Chips Panel Report, European Communities – Countervailing Measures on Dynamic 
Random Access Memory Chips from Korea , WT/DS299/R, adopted 
3 August 2005, DSR 2005:XVIII, 8671 
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, 
DSR 1998:I, 135 
EC – Salmon (Norway) Panel Report, European Communities – Anti-Dumping Measure on Farmed 
Salmon from Norway , WT/DS337/R, adopted 15 January 2008, and Corr.1 
EC – Selected Customs 
Matters Appellate Body Report, European Communities – Selected Customs Matters , 
WT/DS315/AB/R, adop ted 11 December 2006, DSR 2006:IX, 3791 
Egypt – Steel Rebar Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from 
Turkey , WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, 2667 
Indonesia – Autos Panel Report, Indonesia – Certain Measures Affecting the Automobile 
Industry , WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1 
and 2, adopted 23 July 1998, and Corr. 3 and 4, DSR 1998:VI, 2201 
Japan – DRAMs (Korea) Appellate Body Report, Japan – Countervailing Duties on Dynamic Random 
Access Memories from Korea , WT/DS336/AB/R and Corr.1, adopted 
17 December 2007, DSR 2007:VII, 2703 
Japan – DRAMs (Korea) Panel Report, Japan – Countervailing Dutie s on Dynamic Random Access 
Memories from Korea , WT/DS336/R, adopted 17 December 2007, as 
modified by Appellate Body Report WT/DS336/AB/R, DSR 2007:VII, 2805 
Korea – Commercial Vessels Panel Report, Korea – Measures Affecting Trade in Commercial Vessels , 
WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, 2749 
Mexico – Anti-Dumping Measures on Rice Appellate Body Report, Mexico – Definitive Anti-Dump ing Measures on Beef 
and Rice, Complaint with Respect to Rice , WT/DS295/AB/R, adopted 
20 December 2005, DSR 2005:XXII, 10853 
Mexico – Corn Syrup 
(Article 21.5 – US) Appellate Body Report, Mexico – Anti-Dumping Investigation of High 
Fructose Corn Syrup (HFCS) from the United States – Recourse to 
Article 21.5 of the DSU  by the United States , WT/DS132/AB/RW, adopted 
21 November 2001, DSR 2001:XIII, 6675 
Mexico – Olive Oil Panel Report, Mexico – Definitive Countervailing Measures on Olive Oil from 
the European Communities , WT/DS341/R, adopted 21 October 2008 
Mexico – Taxes on Soft Drinks Panel Report, Mexico – Tax Measures on Soft Drinks and Other Beverages , 
WT/DS308/R, adopted 24 March 2006, as modified by Appellate Body Report WT/DS308/AB/R, DSR 2006:I, 43 
US – Anti-Dumping Measures on Oil Country Tubular Goods Appellate Body Report, United States – Anti-Dumping Measures on Oil 
Country Tubular Goods (OCTG) from Mexico , WT/DS282/AB/R, adopted 
28 November 2005, DSR 2005:XX, 10127  WT/DS379/R 
 Page xv 
 
 
 Short Title Full Case Title and Citation 
US – Anti-Dumping Measures 
on PET Bags Panel Report, United States – Anti-Dumping Measures  on Polyethylene Retail 
Carrier Bags from Thailand , WT/DS383/R, adopted 18 February 2010 
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion-Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 
3779 
US – Certain EC Products Appellate Body Report, United States – Import Measures on Certain Products 
from the European Communities , WT/DS165/AB/R, adopted 
10 January 2001, DSR 2001:I, 373 
US – Certain EC Products Panel Report, United States – Import Measures on Certain Products from the 
European Communities , WT/DS165/R and Add.1, adopted 10 January 2001, 
as modified by Appellate Body Report WT/DS165/AB/R, DSR 2001:II, 413 
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application 
of Zeroing Methodology , WT/DS350/AB/R, adopted 19 February 2009 
US – Continued Zeroing Panel Report, United States – Continued Existence and Application of Zeroing 
Methodology , WT/DS350/R, adopted 19 February 2009, as modified as 
Appellate Body Report WT/DS350/AB/R 
US – Corrosion-Resistant 
Steel Sunset Review Appellate Body Report, United States – Sunset Review of Anti-Dumping 
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3  
US – Cotton Yarn Appellate Body Report, United States – Transitional Safeguard Measure on 
Combed Cotton Yarn from Pakistan , WT/DS192/AB/R, adopted 
5 November 2001, DSR 2001:XII, 6027 
US – Countervailing Duty 
Investigation on DRAMS Appellate Body Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131 
US – Countervailing Duty 
Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic 
Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/R, adopted 20 July 2005, as modified by Appellate Body Report WT/DS296/AB/R, DSR 2005:XVII, 8243 
US – Countervailing Measures on Certain EC Products Appellate Body Report, United States – Countervailing Measures Concerning 
Certain Products from the European Communities , WT/DS212/AB/R, 
adopted 8 January 2003, DSR 2003:I, 5 
US – Countervailing Measures 
on Certain EC Products (Article 21.5 – EC) Panel Report, United States – Countervailing Measures Concerning Certain 
Products from the European Communities – Recourse to Article 21.5 of the DSU by the European Communities , WT/DS212/RW, adopted 
27 September 2005, DSR 2005:XVIII, 8950 
US – Customs Bond Directive Panel Report, United States – Customs Bond Directive for Merchandise 
Subject to Anti-Dumping/Countervailing Duties , WT/DS345/R, adopted 
1 August 2008, as modified by Appellate Body Report WT/DS343/AB/R, 
WT/DS345/AB/R 
US – Export Restraints Panel Report, United States – Measures Treating Exports Restraints as 
Subsidies , WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 
5767 WT/DS379/R 
Page xvi  
 
 Short Title Full Case Title and Citation 
US – FSC 
(Article 21.5 – EC) Panel Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European Communities , WT/DS108/RW, adopted 29 January 2002, as modified by 
Appellate Body Report WT/DS108/AB/RW, DSR 2002:I, 119 
US – FSC (Article 22.6 – US) Decision by th e Arbitrator, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Arbitration by the United States under 
Article 22.6 of the DSU and Article 4.11 of the SCM Agreement , 
WT/DS108/ARB, 30 August 2002, DSR 2002:VI, 2517 
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border 
Supply of Gambling and Betting Services , WT/DS285/AB/R, adopted 
20 April 2005, DSR 2005:XII, 5663 (Corr.1, DSR 2006:XII, 5475) 
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of 
Gambling and Betting Services , WT/DS285/R, adopted 20 April 2005, as 
modified by Appellate Body Report WT/DS285/AB/R, DSR 2005:XII, 5797 
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 
23 August 2001, DSR 2001:X, 4697 
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of 
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 
4051 
US – Lead and Bismuth II Panel Report, United States – Imposition of Countervailing Duties on Certain 
Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the 
United Kingdom , WT/DS138/R and Corr.2, adopted 7 June 2000, upheld by 
Appellate Body Report WT/DS138/AB/R, DSR 2000:VI, 2623 
US – Line Pipe Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Circular Welded Carbon Quality Line Pipe from Korea , 
WT/DS202/AB/R, adopted 8 March 2002, DSR 2002:IV, 1403 
US – MFN Footwear  
 GATT Panel Report, United States – Denial of Most-Favoured-Nation 
Treatment as to Non-Rubber Footwear from Brazil , DS18/R, adopted 
19 June 1992, BISD 39S/128 
US – Offset Act (Byrd Amendment) Appellate Body Report, United States – Continued Dumping and Subsidy 
Offset Act of 2000 , WT/DS217/AB/R, WT/DS234/AB/R, adopted 
27 January 2003, DSR 2003:I, 375 
US – Oil Country Tubular Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti-Dumping 
Measures on Oil Country Tubular Goods from Argentina , WT/DS268/AB/R, 
adopted 17 December 2004, DSR 2004:VII, 3257 
US – Shrimp (Ecuador) Panel Report, United States – Anti-Dumping Measure on Shrimp from 
Ecuador , WT/DS335/R, adopted on 20 February 2007, DSR 2007:II, 425 
US – Shrimp (Thailand) / 
US – Customs Bond Directive Appellate Body Report, United States – Measures Relating to Shrimp from 
Thailand / United States – Customs Bond Directive for Merchandise Subject 
to Anti-Dumping/Countervailing Duties , WT/DS343/AB/R, 
WT/DS345/AB/R, adopted 1 August 2008 
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada , 
WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, 571  WT/DS379/R 
 Page xvii 
 
 
 Short Title Full Case Title and Citation 
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada , WT/DS257/R and Corr.1, 
adopted 17 February 2004, as modified by Appellate Body Report 
WT/DS257/AB/R, DSR 2004:II, 641  
US – Softwood Lumber IV 
(Article 21.5 – Canada) Appellate Body Report, United States – Final Countervailing Duty 
Determination with Respect to Certain Softwood Lumber from Canada – 
Recourse by Canada to Article 21.5 of the DSU , WT/DS257/AB/RW, adopted 
20 December 2005, DSR 2005:XXIII, 11357 
US – Softwood Lumber V Appellate Body Report, United States – Final Dumping Determination on 
Softwood Lumber from Canada , WT/DS264/AB/R, adopted 31 August 2004, 
DSR 2004:V, 1875 
US – Softwood Lumber VI (Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International 
Trade Commission in Softwood Lumber from Canada – Recourse to 
Article 21.5 of the DSU by Canada , WT/DS277/AB/RW, adopted 
9 May 2006, and Corr.1, DSR 2006:XI, 4865 
US – Stainless Steel (Mexico) Panel Report, United States – Final Anti-Dumping Measures on Stainless 
Steel from Mexico , WT/DS344/R, adopted 20 May 2008, as modified by 
Appellate Body Report WT/DS344/AB/R 
US – Underwear Appellate Body Report, United States – Restrictions on Imports of Cotton and 
Man-made Fibre Underwear , WT/DS24/AB/R, adopted 25 February 1997, 
DSR 1997:I, 11 
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3 
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton , WT/DS267/R, 
Corr.1, and Add.1 to Add.3, adopted 21 March 2005, as modified by 
Appellate Body Report WT/DS267/AB/R, DSR 2005:II, 299 
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, 
and Corr.1, DSR 1997:I, 323 
US – Zeroing (EC) Appellate Body Report, United States – Laws, Regulations and Methodology 
for Calculating Dumping Margins ("Zeroing") , WT/DS294/AB/R, adopted 
9 May 2006, and Corr.1, DSR 2006:II, 417 
US – Zeroing (Japan) Appellate Body Report, United States – Measures Relating to Zeroing and 
Sunset Reviews , WT/DS322/AB/R, adopted 23 January 2007, DSR 2007:I, 3  WT/DS379/R  
 Page 1 
 
 
 I. INTRODUCTION 
A. COMPLAINT OF CHINA  
1.1 On 19 September 2008, China requested consu ltations with the United States pursuant to 
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes  
("DSU"), Article XXIII:1 of the General Agreement on Ta riffs and Trade 1994  ("GATT 1994"), 
Article 30 of the Agreement on Subsidies and Countervailing Measures  ("SCM Agreement") and 
Article 17 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and 
Trade 1994  ("AD Agreement").  The consultations  concerned definitive anti-dumping and 
countervailing duties imposed by the United States on imports of four products from China (circular 
welded carbon quality steel pipe, pne umatic off-the-road tires, light–wa lled rectangular pipe and tube, 
laminated woven sacks).1  China and the United States held consultations on 14 November 2008.  
These consultations failed to resolve the dispute. 
1.2 On 9 December 2008, China requested the estab lishment of a panel pursuant to Articles 4.7 
and 6 of the DSU, Article XXIII:2 of the GAT T 1994, Article 30 of the SCM Agreement, and 
Article 17 of the AD Agreement.2 
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL  
1.3 At its meeting on 20 January 2009, the Di spute Settlement Body ("DSB") established the 
Panel pursuant to the request of China in documen t WT/DS379/2, in accordance with Article 6 of the 
DSU. 
1.4 The Panel's terms of reference are the following: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by China in document WT/DS379/2, the matte r referred to the DSB by China in that 
document, and to make such finding s as will assist the DSB in making the 
recommendations or in giving the rulings provided for in those agreements." 
1.5 On 23 February 2009, China requested the Dir ector-General to determine the composition of 
the Panel, pursuant to paragraph 7 of Article 8 of the DSU. 
1.6 On 4 March 2009, the Director-General composed the Panel as follows: 
Chairperson:  Mr. David Walker Members:  Mr. Thinus Jacobsz 
Ms Andrea Marie Brown 
1.7 Argentina, Australia, Bahrain, Braz il, Canada, the European Communities
3, India, Japan, 
Kuwait, Mexico, Norway, Saudi Arabia, Chinese Taipei and Turkey reserved their rights to 
participate in the Panel proceedings as third parties.4 
                                                      
1 WT/DS379/1, ("China request for consultations"). 
2 WT/DS379/2, ("China request for establishment of the Panel"). 
3 On 1 December 2009, the Treaty of Lisbon amending the Treaty on European Union and the Treaty 
establishing the European Community  ("Treaty of Lisbon") (done at Lisbon, 13 December 2007) entered into 
force.  On 29 November 2009, the WTO received a Verbal Note (WT/L/779) from the Council of the European Union and the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon , as of 
1 December 2009, the European Union replaces and succeeds the European Community. WT/DS379/R 
Page 2  
 
 1.8 The Panel met with the parties to the dis pute on 7-8 July 2009 and 11-12 November 2009, 
and with the third parties on 7 July 2009. 
1.9 The Panel submitted its interim report to the parties on 11 June 2010 and submitted its final 
report to the parties on 23 July 2010. 
C. A
DDITIONAL PROCEDURES FOR THE PROTECTION OF BUSINESS CONFIDENTIAL INFORMATION  
1.10 On 26 March 2009, China requested the Pane l to adopt additional working procedures 
concerning Business Confidential Information ("BCI").  To that effect, China submitted to the Panel a 
set of proposed BCI procedures.  The parties had the opportunity to present written and oral 
comments regarding China's request.  Following th e exchange of views between the parties, on 
7 April 2009 the Panel adopted additional procedur es for the protection of BCI.  These procedures are 
set forth in Annex E. 
II. FACTUAL ASPECTS 
2.1 This dispute concerns the definitive anti-dum ping and countervailing duties imposed by the 
United States as a result of four anti-dumping a nd four countervailing duty investigations conducted 
by the United States Department of Commerce (" USDOC"), covering four products from China: (i) 
Circular Welded Carbon Quality Steel Pipe ("CWP" ); (ii) Certain New Pneumatic Off-the-Road Tires 
("OTR"); (iii) Light–Walled Rectangular Pipe and Tube ("LWR"); and (iv) Laminated Woven Sacks 
("LWS").5  China claims that the final USDOC determina tions that led to the imposition of the duties, 
the orders imposing the duties themselves, and cer tain aspects of the conduct of the underlying 
investigations are inconsistent with the United States' obligations under th e covered Agreements.  
China also challenges an alleged imposition by th e United States of "double remedies" resulting from 
the application, in the four sets of investigations  at issue, of anti-dumping duties calculated under the 
US non-market economy ("NME") methodology6 simultaneously with countervailing duties on the 
same products.  China also makes "as such" claims against the alle ged U.S. failure to provide the 
USDOC with legal authority to avoid the impositi on of double remedies in such circumstances. 
A. INVESTIGATIONS COVERED BY THIS DISPUTE  
1. Circular Welded Carbon Quality Steel Pipe 
(a) Countervailing duty investigation 
2.2 On 5 July 2007, the USDOC initiated a counter vailing duty investigation on imports of CWP 
from China.7  The products covered by the investigati on were certain circular welded carbon quality 
steel pipes as classified in tariff sub-headings 7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 7306.30.50.85, 7306.30.50.90, 7306.50.10.00, 7306.50.50.50, 
7306.50.50.70, 7306.19.10.10, 7306.19.10.50, 7306.19.51.10, and 7306.19.51.50 of the Harmonized 
Tariff Schedule of the United States ("HTSUS"), and as described more specifically in the USDOC's 
                                                                                                                                                                    
 
4 WT/DS379/3. 
5 Hereinafter referred to as "the four sets of inves tigations at issue" or "the four sets of anti-dumping 
and countervailing duty investigations". 
6 Under Section 773(c) of the US Tariff Act of 1930  (19 U.S.C. 1677b(c)), normal value in anti-
dumping investigations involving products from NME countries is determined on the basis of values of factors 
of production in countries that the US DOC has designated as market economies. 
7 Notice of Initiation of Countervailing Duty Investigation: Circular Welded Carbon Quality Steel Pipe  
from the People's Republic of China  ("CWP Notice of Initiation"), Exhibit CHI-5, pp. 36668 and 36670.  WT/DS379/R  
 Page 3 
 
 
 countervailing duty order.8  The exporters/producers concerned were Tianjin Shuangjie Steel Pipe 
Group Co., Ltd. ("Shuangjie"), Weifang East Stee l Pipe Co., Ltd. ("East Pipe"), and Zhejiang 
Kingland Pipeline and Technologies Co., Ltd. ("Kingland").9  The period of investigation for the 
purpose of the subsidy determinati on was 1 January to 31 December 2006.10 
2.3 During the course of the investigation, ther e were communications and exchanges between 
the USDOC and the parties to the investigation, inter alia , questionnaires and responses including 
supplemental requests for information pertaining  to new subsidy allegations, arguments, and 
comments.11  On 13 November 2007, the USDOC published in the Federal Register a notice of 
preliminary affirmative counter vailing duty determination, pr eliminary affirmative critical 
circumstances determination, and alignment of final countervailing dut y determination with final anti-
dumping duty determination.12  On 5 June 2008, the USDOC pub lished a final countervailing duty 
determination.13  On 22 July 2008, the USDOC published an  amended final determination and notice 
of countervailing duty order, findi ng "net subsidy rates" ranging from 29.62 per cent to 616.83 per 
cent, and indicating that it would direct U.S. Cust oms and Border Protection to require importers to 
post cash deposits equal to these net subsidy rates.14 
2.4 The USDOC determined, inter alia , that the government provision of hot-rolled steel ("HRS") 
to certain producers through state-owned enterp rises ("SOEs") constituted subsidies that were de facto  
specific.  In addition, the USDOC found that the provision of HRS through private trading companies 
that had purchased HRS from state-owned producers and/or suppliers also constituted countervailable 
subsidies.  The USDOC resorted to adverse facts available to determine the amount of SOE-produced 
HRS that investigated pipe producers had purch ased from trading company suppliers.  The USDOC 
determined that private prices in China could not be used as benchmarks to determine the existence 
and amount of benefit conferred by such subsidies and as a result resorted to alternative benchmarks 
in conducting its bene fit determination. 
2.5 Based on adverse facts available, the USDOC al so determined that China provided subsidies 
in the form of preferential lending by state-owne d commercial banks ("SOCBs")  to one investigated 
producer, East Pipe, and that these subsidies were de jure  specific.  In determining the existence and 
amount of the benefit from the loans, the USDOC cons idered that it would not be appropriate to use 
the interest rate applicable to loans issued by Chinese banks as a benchmark and instead constructed a 
proxy interest rate to determine the existen ce and amount of benefit conferred by the loans.15 
                                                      
8 Circular Welded Carbon Quality Steel Pipe  from the People's Republic of China: Notice of Amended 
Final Affirmative Countervailing Duty Determination and Notice of Countervailing Duty Order  ("CWP 
Countervailing Duty Order"), Exhibit CHI-8, p. 42546. 
9 Circular Welded Carbon Quality Steel Pipe from the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination; Pr eliminary Affirmative Determination of Critical 
Circumstances; and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty 
Determination ("CWP Preliminary Countervailing Duty Determination"),  Exhibit CHI-6,  p. 63876. 
10 Id., p. 63881. 
11 See, e.g.,  Exhibit CHI-6, pp. 63876-63877; and  Circular Welded Carbon Quality Steel Pipe from the 
People's Republic of China: Final Affirmative Coun tervailing Duty Determination and Final Affirmative 
Determination of Critical Circumstances  ("CWP Final Countervailing Duty Determination"), Exhibit CHI-7, 
pp. 31966-31967. 
12 Exhibit CHI-6, p. 63876. 
13 Exhibit CHI-7, p. 31969. 
14 Exhibit CHI-8, p. 42547. 
15 Issues and Decision Memorandum for the Fina l Determination in the Countervailing Duty 
Investigation of Circular Welded Carbon Quality Steel Pipe  from the People's Republic of China , ("CWP 
Countervailing Duty I&D Memo"), Exhibit CHI-1, pp. 9-12, 14-15, 62-67 and 72-79. WT/DS379/R 
Page 4  
 
 (b) Anti-dumping investigation 
2.6 In parallel to the countervailing duty investig ation on CWP from China, the USDOC initiated 
an anti-dumping investigation with respect to the sa me product.  The period of investigation for the 
dumping determination was 1 October 2006 to 31 March 2007.  The USDOC treated China as an 
NME country for purposes of determining normal value and calculating the margins of dumping.  On 
5 June 2008, the USDOC published a final anti -dumping duty determination, finding dumping 
margins ranging from 69.20 per cent to 85.55 per cent.
16  On 22 July 2008, the USDOC published an 
anti-dumping duty order, indicating that it would di rect U.S. Customs and Border Protection to 
require importers to post cash depos its equal to these dumping margins.17 
2. Light–Walled Rectangular Pipe and Tube 
(a) Countervailing duty investigation 
2.7 On 24 July 2007, the USDOC initiated a counter vailing duty investigation on imports of 
LWR from China.18  The products covered by the investig ation were certain welded carbon-quality 
light-walled steel pipe and tube, of rectangular  (including square) cross section, having a wall 
thickness of less than 4mm as classified in tariff sub-headings 7306.61.50.00 and 7306.61.70.60 of the 
HTSUS, and as described more specifically  in the USDOC's countervailing duty order.19  T h e  
exporters/producers concerned were Qingdao Xi angxing Steel Pipe Co., Ltd. ("Qingdao"); 
Zhangjiagang Zhongyuan Pipe–Making Co., Ltd. ("ZZPC"); and Lets Win.20  The period of 
investigation for purposes of the subsidy dete rmination was 1 January to 31 December 2006.21 
2.8 During the course of the investigation, ther e were communications and exchanges between 
the USDOC and the parties to the investigation, inter alia,  questionnaires and responses including 
supplemental requests for information pertaining  to new subsidy allegations, arguments, and 
comments.22  On 30 November 2007, the USDOC published in the Federal Register a notice of 
preliminary affirmative countervailing duty determin ation and alignment of final countervailing duty 
determination with final an ti-dumping duty determination.23  On 24 June 2008, the USDOC published 
a final countervailing duty determination, finding "n et subsidy rates" ranging from 2.17 per cent to 
200.58 per cent.24  On 5 August 2008, the USDOC published a countervailing duty order, indicating 
                                                      
16 Issues and Decision Memorandum for the Final Determination of Sales at Less than Fair Value  
("CWP Anti-Dumping Duty I&D Memo"), Exhibit CHI-9, pp . 10-14; Notice of Final Determination of Sales at 
Less Than Fair Value and Affirmative Final Determination of Critical Circumstances:  Circular Welded Carbon 
Quality Steel Pipe from the People's Republic of China ("CWP Final Anti-Dumping Duty Determination"), 
Exhibits CHI-10, pp. 31970-31973. 
17 Notice of Antidumping Duty Order: Circular Welded Carbon Quality Steel Pipe from the People's 
Republic of China ("CWP Anti-Dumping Duty Order"), Exhibit CHI-11, pp. 42548-42549. 
18 Notice of Initiation of Countervailing Duty Investigation: Light–Walled Rectangular Pipe and Tube 
from the People's Republic of China  ("LWR Notice of Initiation"), Exhi bit CHI-18, pp. 40281 and 40283. 
19 Light–Walled Rectangular Pipe and Tube from the People's Republic of China: Notice of 
Countervailing Duty Order  ("LWR Countervailing Duty Order"), Exhibit CHI-21, pp. 45405-45406. 
20 Light–Walled Rectangular Pipe and Tube from the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination and Ali gnment of Final Countervailing Duty Determination 
with Final Antidumping Duty Determination  ("LWR Preliminary Countervailing Duty Determination"), Exhibit 
CHI-19, p. 67703. 
21 Id., p. 67706. 
22 See, e.g.,  Exhibit CHI-19, pp. 67703-67704; and Light–Walled Rectangular Pipe and Tube from the 
People's Republic of China: Final Affirmative Countervailing Duty Investigation Determination ("LWR Final 
Countervailing Duty Determination"), Exhibit CHI-20, p. 35643. 
23 Exhibit CHI-19, p. 67703. 
24 Exhibit CHI-20, p. 35642.  WT/DS379/R  
 Page 5 
 
 
 that it would direct U.S. Customs and Border Pr otection to require importe rs to post cash deposits 
equal to these net subsidy rates.25 
2.9 The USDOC determined, inter alia , that the government provision of HRS through SOEs 
constituted financial contributions  that conferred benefits, and that such subsidies were de facto  
specific.  The USDOC also determined that th e provision of SOE-produced HRS through private 
trading companies constituted countervailable subsidi es.  The USDOC resorted to facts available to 
determine the amount of SOE-produced HRS that  investigated producers purchased from trading 
companies.  The USDOC considered that private prices for HRS in China could not be used as 
benchmarks to determine the existe nce and amount of benefit conferred and, as a result, resorted to 
out-of-country benchmarks for the purposes of benefit determinations.26 
(b) Anti-dumping investigation 
2.10 In parallel to the countervailing duty investig ation on LWR from China, the USDOC initiated 
an anti-dumping investigation with respect to the sa me product.  The period of investigation for the 
dumping determination was 1 October 2006 to 31 March 2007.  The USDOC treated China as an 
NME country for purposes of calculating the normal value and margins of dumping.  On 
24 June 2008, the USDOC published a final an ti-dumping duty determination, finding dumping 
margins ranging from 249.12 per cent to 264.64 per cent.27  On 5 August 2008, the USDOC published 
an anti-dumping duty order, indicating that it would direct U.S. Customs and Border Protection to require importers to post cash depos its equal to these dumping margins.
28 
3. Laminated Woven Sacks 
(a) Countervailing duty investigation 
2.11 On 25 July 2007, the USDOC initiated a counter vailing duty investigation on imports of LWS 
from China29, as classified in tariff sub-headings  6305.33.0050, 6305.33.0080, 392 3.21.0080, 
3923.21.0095, 3923.29.0000, 3917.39.0050, 3921.90.1100, 3921.90.1500, 5903.90.2500, 4601.99.0500, 4601.99.90 00, and 4602.90.000 of the HTSUS, and as described more specifically in 
the USDOC's countervailing duty order.
30  The exporters/producers concerned were Han Shing 
Chemical Co., Ltd. ("Han Shing Chemical"); Ningbo Yong Feng Packaging Co., Ltd. ("Ningbo"); 
Shangdong Qilu Plastic Fabric Group, Ltd. ("Q ilu"); Shangdong Shouguang Jianyuan Chun Co., Ltd. 
                                                      
25 Exhibit CHI-21, p. 45406. 
26 Issues and Decision Memorandum for the Fina l Determination in the Countervailing Duty 
Investigation of  Light–Walled Rectangular Pipe and Tube from the People's Republic of China ("LWR 
Countervailing Duty I&D Memo"), Exhibit CHI-2, pp. 8-10 and 25-37; and Exhibit CHI-19, pp. 67707-67708. 
27 Final Determination of Sales at Less Than Fair Value and Affirmative Determination of Critical 
Circumstances, in Part: Light–Walled Rectangular Pipe and Tube from the People's Republic of China  ("LWR 
Final Anti-Dumping Determination"), Exhibit CHI-23, pp. 35652-35654. 
28 Light–Walled Rectangular Pipe and Tube from Mexico,  the People's  Republic of China, and the 
Republic of Korea: Antidumping Duty Orders; Light–Walled Rectangular Pipe and Tube from the Republic of 
Korea: Notice of Amended Final Determination of Sales at Less Than Fair Value ("LWR Anti-Dumping Duty 
Order"), Exhibit CHI-24, p. 45405-45406. 
29 Laminated Woven Sacks from the People's Republic of China: Initiation of Countervailing Duty 
Investigation ("LWS Notice of Initiation"), Exhibit CHI-33, pp. 40839-40840. 
30 Laminated Woven Sacks from the People's Republic of China: Countervailing Duty Order  ("LWS 
Countervailing Duty Order"), Exhibit CHI-36, pp. 45955-45956. WT/DS379/R 
Page 6  
 
 ("SSJ"); and Zibo Aifudi Plastic Packaging Company Limited ("Aifudi").
31  The investigation 
concerned imports during the period from 1 January to 31 December 2006.32 
2.12 During the course of the investigation, ther e were communications and exchanges between 
the USDOC and the parties to the investigation, inter alia,  questionnaires and responses including 
supplemental requests for information pertaining  to new subsidy allegations, arguments, and 
comments.33  On 3 December 2007, the USDOC publishe d in the Federal Register a notice of 
preliminary affirmative counter vailing duty determination, pr eliminary affirmative critical 
circumstances determination, and alignment of final countervailing dut y determination with final anti-
dumping duty determination.34  On 24 June 2008, the USDOC pub lished a final countervailing duty 
determination, finding "net subsidy rates" ranging from 29.54 per cent to 352.82 per cent.35  O n  
7 August 2008, the USDOC published a countervailing dut y order, indicating that it would direct U.S. 
Customs and Border Protection to require importers  to post cash deposits equal to these net subsidy 
rates.36 
2.13 The USDOC determined, inter alia , that the provision of biaxial-oriented polypropylene 
("BOPP") by SOEs constituted a fina ncial contribution which conferred a benefit and that this subsidy 
was specific.  The USDOC used an out-of-country benchmark to determine the existence and amount 
of the subsidy benefits and relie d on adverse facts available to de termine the extent of government 
ownership of BOPP producers in China.  Also ba sed on adverse facts available, the USDOC found 
that the provision of preferential loans by govern ment policy banks and SO CBs constituted subsidies 
which were de jure  specific.  In determining the existence and amount of the benefit from the loans, 
the USDOC considered that it would not be appropriate  to use the interest ra te applicable to loans 
issued by Chinese banks as a benchmark and instead c onstructed a proxy interest rate to determine the 
existence and amount of benefit conferred by the loans.  Finally, the USDOC also found that the 
government provision of land-use rights was a c ountervailable subsidy, and used out-of-country 
benchmarks to determine the existen ce and amount of the subsidy benefits.37 
(b) Anti-dumping investigation 
2.14 In parallel to the countervailing duty inves tigation on LWS from China, the USDOC initiated 
an anti-dumping investigation with respect to the sa me product.  The period of investigation for the 
dumping determination was 1 October 2006 to 31 March 2007.  The USDOC treated China as an 
NME country for purposes of determining normal value and calculating the margins of dumping.  On 24 June 2008, the USDOC published a final anti- dumping duty determination, finding dumping 
                                                     
 
31 Laminated Woven Sacks from the People's Re public of China: preliminary Affirmative 
Countervailing Duty Determination; Preliminary Affirma tive Determination of Critical Circumstances, In Part; 
and Alignment of Final Countervailing Duty Determi nation With Final Antidumping Duty Determination 
("LWS Preliminary Countervailing Duty Determ ination"), Exhibit CHI-34, pp. 67893-67894. 
32 Id., p. 67899. 
33 See, e.g.,  Exhibit CHI-34, pp. 67893-67894 and 67905; and Laminated Woven Sacks From the 
People’s Republic of China: Final Affirmative Count ervailing Duty Determination and Final Affirmative 
Determination, in Part, of Critical Circumstances  ("LWS Final Countervailing Duty Determination"), Exhibit 
CHI-35, pp. 35639-35640. 
34 Exhibit CHI-34, p. 67893. 
35 Exhibits CHI-35, pp. 35639 and 35641. 
36 Exhibit CHI-36, pp. 45955-45956. 
37 Issues and Decision Memorandum for the Final Affirmative Countervailing Duty Determination: 
Laminated Woven Sacks from the People’s Republic of China  ("LWS Countervailing Duty I&D Memo"), 
Exhibit CHI-3, pp. 11-21, 49-70 and 82-83.  WT/DS379/R  
 Page 7 
 
 
 margins ranging from 64.28 per cent to 91.73 per cent.38  On 7 August 2008, the USDOC published 
an anti-dumping duty order indicating that it would direct U.S. Customs and Border Protection to require importers to post cash deposits  equal to these anti-dumping margins.
39 
4. Certain New Pneumatic Off-the-Road Tires 
(a) Countervailing duty investigation  
2.15 On 7 August 2007, the USDOC initiated a count ervailing duty investigation on imports of 
OTR from China.40  The products covered were certain new pneumatic off-the-road tires as classified 
in tariff sub-headings 4011.20.10.25, 4011.20.10.35, 4011.20.50.30, 4011.20.50.50, 4011.61.00.00, 4011.62.00.00, 4011.63.00.00, 4011.69.00.00, 4011.92.00.00, 4011.93.40.00, 4011.93.80.00, 4011.94.40.00, and 4011.94.80.00 of the HTSUS, and as described more specifically in the USDOC's 
countervailing duty order.
41  The exporters/producers concerned were Guizhou Tire Co., Ltd. 
("GTC"); Hebei Starbright Tire Co., Ltd. ("Starbright"); and Tianjin United Tire & Rubber International Co., Ltd. ("TUTRIC").
42  The period of investigation for purposes of the subsidy 
determination covered 1 Ja nuary to 31 December 2006.43 
2.16 During the course of the investigation, ther e were communications and exchanges between 
the USDOC and the parties to the investigation, inter alia , questionnaires and responses, including 
supplemental requests for information pertaining  to new subsidy allegations, arguments, and 
comments.44  On 17 December 2007, the USDOC published in the Federal Register its preliminary 
affirmative countervailing duty determination.45  On 15 July 2008, the USDOC published a final 
countervailing duty determination, finding "net subs idy rates" ranging from 2.45 per cent to 14.00 per 
cent.46  On 4 September 2008, the USDOC published a countervailing duty order indicating that it 
would direct U.S. Customs and Border Protection to  require importers to pos t cash deposits equal to 
these net subsidy rates.47  
2.17 The USDOC determined, inter alia , that the government provision of preferential loans, 
through government polic y banks and SOCBs, constitu ted a subsidy which was de jure  specific.  With 
respect to one investigated producer, the USDOC also found that the government provision of land-
use rights constituted a countervailable subsidy.  With  respect to both types of subsidies, the USDOC 
used out-of-country benchmarks to determine the ex istence and amount of benefit conferred.  The 
USDOC further found that the government provisi on of natural and synthetic rubber through SOEs 
                                                      
38 Laminated Woven Sacks from the People's Republic of  China: Final Determination of Sales at Less 
Than Fair Value and Partial Affirmative Determination of Critical Circumstances  ("LWS Final Anti-Dumping 
Duty Determination"), Exhibit CHI-38, pp. 35646-35648. 
39 Notice of Antidumping Duty Order: Laminated Wo ven Sacks from the People's Republic of China 
("LWS Anti-Dumping Duty Order"), Exhibit CHI-39, pp. 45941-45943. 
40 Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Initiation of 
Countervailing Duty Investigation ("OTR Notice of Initiation"), Exhibit CHI-49, pp. 44122 and 44124. 
41 Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Countervailing 
Duty Order ("OTR Countervailing Duty Order") , Exhibit CHI-52, pp. 51627-51628. 
42 Certain New Pneumatic Off-the-Road Tires From the People's Republic of China: Preliminary 
Affirmative Countervailing Duty Determination ("OTR Preliminary Countervailing Duty Determination") , 
Exhibit CHI-50, p. 71361. 
43 Id., p. 71363. 
44 See, e.g.,  Exhibit CHI-50, pp. 71361 and 71363-71376; and Certain New Pneumatic Off-the-Road 
Tires From the People's Republic of China: Final Affirmative Countervailing Duty Determination and Final 
Negative Determination of Critical Circumstances  ("OTR Final Countervailing Duty Determination"), Exhibits 
CHI-51, p. 40481. 
45 Exhibit CHI-50, pp. 71360, 71366-71370, 71372-71374 and 71376. 
46 Exhibits CHI-51, pp. 40480 and 40483. 
47 Exhibit CHI-52, p. 51629. WT/DS379/R 
Page 8  
 
 constituted a countervailable subsidy.  The USDOC al so found that the provision of rubber through 
private trading companies that had purchased  rubber from state-owned producers constituted a 
countervailable subsidy.  To determine whether th e government provision of rubber, either through 
SOEs or private trading companies, had conferre d a benefit on investigated producers, the USDOC 
used import prices of rubber paid by investigated producers and, where available, private prices in 
China as a benchmark.
48  
(b) Anti-dumping investigation 
2.18 In parallel to the countervailing duty investig ation on OTR from China, the USDOC initiated 
an anti-dumping investigation on the same product.  The period of investigation for the dumping determination was 1 October 2006 to  31 March 2007.  The USDOC treated China as an NME country 
for purposes of determining normal value and calculati ng the margins of dumping.  On 15 July 2008, 
the USDOC published a final anti-dumping duty determination.
49  On 4 September 2008, the USDOC 
published an amended final dete rmination and anti-dumping duty order, finding dumping margins 
ranging from 5.25 per cent to 210.48 per cent, indicating that it would direct U.S. Customs and Border Protection to require importers to post cash deposits equal to these dumping margins.
50 
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
A. CHINA  
3.1 China requests that the Panel make the following findings:51 
(i) The USDOC's findings that the government of China provided a financial 
contribution in the form of goods in the four countervailing duty determinations were inc onsistent with Article 1.1 of the SCM Agreement 
and, as a consequence, with Articles 10 and 32.1 of the SCM Agreement and 
Article VI:3 of the GATT 1994; 
(ii) The USDOC's findings that private trading companies provided a financial 
contribution in the form of goods in the LWR, CWP, and OTR countervailing duty determinations were  inconsistent with Article 1.1 of the SCM 
Agreement and, as a consequence, wi th Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994; 
(iii) The USDOC's findings of benefit in the four countervailing duty 
determinations in respect of the goods allegedly provided by the government 
of China and private trading companies were inconsistent with Article 14 of 
the SCM Agreement and, as a consequen ce, with Articles 10 and 32.1 of the 
SCM Agreement and Article VI:3 of the GATT 1994; 
                                                     
 
48 Issues and Decision Memorandum for the Final Affirmative Countervailing Duty Determination: 
Certain New Pneumatic Off-the-Ro ad Tires (OTR Tires) from the People's Republic of China  ("OTR 
Countervailing Duty I&D Memo"), Exhibit CHI-4, pp. 7-15, 25-26, 80-83, 93-112, 151-155 and 169-191. 
49 Certain New Pneumatic Off–The-Road Tires from th e People's Republic of China: Final Affirmative 
Determination of Sales at Less Than Fair Value and Partial Affirmative Determination of Critical Circumstances  ("OTR Final Anti-dumping Determination"), Exhibit CHI-54, pp. 40485-40491. 
50 Certain New Pneumatic Off-the-Road Tires From  the People's Republic of China: Notice of 
Amended Final Affirmative Determination of Sales at Less Than Fair Value and Antidumping Duty Order  
("OTR Anti-dumping Duty Order"), Exhibit CHI-55, pp. 51624 and 51626. 
51 China first written submission, para. 468; second written submission, para. 315.  WT/DS379/R  
 Page 9 
 
 
 (iv) The USDOC's inclusion of only positiv e benefits in its calculations of 
whether producers in the OTR countervailing duty investigation obtained benefits from the alleged provision of goods, while excluding negative 
benefits in those calculations, was inc onsistent with Articles 10, 14, 19.1, 
19.4, and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994; 
(v) The USDOC's findings of financial contribution and specificity in the OTR 
countervailing duty determination in resp ect of the alleged "policy lending" 
subsidy were inconsistent, respectively, with Article 1.1 and Article 2 of the 
SCM Agreement and, as a consequen ce, with Articles 10 and 32.1 of the 
SCM Agreement and Article VI:3 of the GATT 1994; 
(vi) The USDOC's findings of benefit in the LWS, CWP, and OTR countervailing 
duty determinations in respect of the alleged "policy lending" subsidy were 
inconsistent with Article 14 of the SCM Agreement and, as a consequence, 
with Articles 10 and 32.1 of the SCM Agreement and Article VI:3 of the 
GATT 1994; 
(vii) The USDOC's findings of specificity and benefit in the LWS countervailing 
duty determination in respect of the provision of land-use rights were inconsistent, respectively, with Ar ticle 2 and Article 14 of the SCM 
Agreement and, as a consequence, wi th Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994; 
(viii) The USDOC's finding of benefit in the OTR countervailing duty 
determination in respect of the provisi on of land-use rights was inconsistent 
with Article 14 of the SCM Agreement and, as a consequence, with Articles 10 and 32.1 of the SCM Agreem ent and Article VI:3 of the GATT 
1994; 
(ix) In connection with the four sets of anti-dumping and countervailing duty 
determinations at issue, the USDOC's use of its NME methodology to 
determine normal value in the anti-dum ping determinations , concurrently 
with a determination of subsidiza tion and the imposition of countervailing 
duties on the same products, was inconsis tent with Articles 10, 19.3, 19.4, 
and 32.1 of the SCM Agreement and with Article VI of the GATT 1994; 
(x) The United States' failure to provide sufficient legal authority for the USDOC 
to avoid the imposition of double remedies for the same alleged acts of 
subsidization when it imposes anti-dumpi ng duties determined pursuant to its 
NME methodology simultaneously with  the imposition of countervailing 
duties on the same product means that US law is, in all such instances, 
inconsistent "as such" with Articles 10, 19.3, 19.4, and 32.1 of the SCM 
Agreement and with Article VI of the GATT 1994; 
(xi) In each of the four sets of an ti-dumping and countervailing duty 
determinations at issue, the USDOC's fa ilure to extend to imports from China 
the same unconditional entitlement to the avoidance of a double remedy for the same alleged acts of subsidiza tion that it extends to like products 
originating in the territory of other Me mbers was inconsistent with Article I:1 
of the GATT 1994; WT/DS379/R 
Page 10  
 
 (xii) The United States' failure to provide sufficient legal authority for the USDOC 
to avoid the imposition of double remedies for the same alleged acts of subsidization when it imposes anti-dumpi ng duties determined pursuant to its 
NME methodology simultaneously with  the imposition of countervailing 
duties on the same product means that, in  all such instances, the United States 
will fail to extend to imports from Ch ina the same unconditional entitlement 
to the avoidance of a double remedy that it extends to like products originating in the territory of other Memb ers, in violation of Article I:1 of the 
GATT 1994; 
(xiii) The USDOC's failure in the four counte rvailing duty investigations to give 
the Government of China and interested parties 30 days to respond to all 
questionnaires  used in the investigations was inconsistent with Article 12.1.1 
of the SCM Agreement; 
(xiv) The USDOC's failure in the LWR and CWP countervailing duty 
investigations to notify respondent prod ucers of the information it required 
and to provide them with an ample opportunity to present relevant evidence 
prior to resorting to facts available was inconsistent w ith Article 12.1 and 
Article 12.7 of the SCM Agreement.
52 
3.2 In addition, China requests that the Panel rej ect the United States' requests for preliminary 
rulings, referred to in the next paragraph.53 
B. UNITED STATES  
3.3 The United States requests that the Panel re ject China's claims in their entirety.54  In addition, 
the United States requests that the Panel make certa in preliminary rulings:  the United States requests 
that the Panel find that the measure identified in China's Request for the Establishment of a Panel as 
part of China's "as such" claims  with respect to "double remedies" (i.e., "the failure of the 
United States to provide legal authority for the US Department of Commerce to avoid the imposition 
of a double remedy when it imposes anti-dumping duties determined pursuant to the US NME 
methodology simultaneously with the imposition of  countervailing duties on the same product") as 
well as China's "as such" claims on double remedies themselves fall outside the Panel's terms of 
reference.55 
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments of the parties, as set forth in  the executive summaries of their submissions 
provided to the Panel, are attached to this Repor t in Annexes A, C and D (see List of Annexes, 
pages xi and xii). 
                                                      
52 In its second written submission, China withdrew the request for findings and recommendations it 
made in its first written submission with respect to its claim against the USDOC's failure to invite China for 
consultations prior to its initiation of investigations into new subsidy allegations, which China had alleged was 
inconsistent with Article 13.1 of the SCM Agreement.  China indicated that it withdrew its request in this 
respect "[i]n light of the United States' confirmation that it considers Article 13.2 of the SCM Agreement to impose an obligation to provide China with the opportunity to consult throughout a CVD investigation, 
including with respect to new subsidy allegations." (China second written submission, footnote 260). 
53 China response to the United States' request for preliminary rulings, para. 40. 
54 United States first written submission, para. 495. 
55 Id., para. 86.  WT/DS379/R  
 Page 11 
 
 
 V. ARGUMENTS OF THE THIRD PARTIES 
5.1 The arguments of the third parties, as set forth in the executive summaries of their 
submissions provided to the Panel, are attached to  this Report in Annex B (see List of Annexes, 
pages xi and xii).56 
VI. INTERIM REVIEW 
6.1 On 11 June 2010, the Panel issued its Interim Report to the parties.  On 25 June 2010, both 
parties submitted requests for the review of preci se aspects of the Interim Report.  On 2 July, the 
parties submitted comments on one another's requests for review. 
6.2 This Interim Review section summarizes the parties' requests for review and comments 
thereon, as well as our responses.  Because the footno te numbering (but not the paragraph numbering) 
of our Report has changed due to changes made at th e interim review stage, fo r the sake of clarity the 
footnote references in this section reflect  the numbering in the Final Report.   
A. REQUEST FOR REVIEW SUBMITTED BY CHINA  
6.3 China requests that we refer in footnote 52 to paragraph 3.1  to the reason given by China 
for withdrawing its request for findings and r ecommendations with respect to its claim under 
Article 13.1 of the SCM Agreement.  The United St ates does not object to this request.  We have 
modified footnote 52 as requested by China.   
6.4 China  proposes that we either entirely delete, or modify, paragraph 8.3 , arguing that this 
paragraph does not accurately summarize its argum ent, which according to China is accurately 
summarized in paragraphs 8.4-8.6.  In particular , China submits that (as the Panel correctly notes 
elsewhere) it did not argue that SOEs and SOCBs in general, or the particular ones involved in these 
investigations, as a matter of law could never be considered public bodies, and must in all cases be 
treated as private bodies under Article 1.1; but that instead it argued that the actions of state-owned 
corporate entities are prima facie  private, and thus presumptively  not attributable to a Member under 
Article 1.1 of the SCM Agreement absent either a fi nding of entrustment or direction, or a finding that 
such entities were public bodies, as China believes that  term should be interpreted in accordance with 
the Vienna Convention on the Law of Treaties.  Ch ina similarly suggests that we change the drafting 
of the first sentence of paragraph 8.55  to indicate that a public body, although not identical to a 
government, must nonetheless possess characteristics si milar to those of a "government" as identified 
by the Appellate Body in Canada – Dairy , i.e., should be defined as "a n entity which exercise powers 
[or authority] vested in it by a 'government' for the purpose of performing functions of a 'governmental' character".  Finally, China suggests th at we make similar modi fications to the last 
sentence of paragraph 8.64
.  The United States objects to China's request to delete paragraph 8.3, 
and suggests instead that we delete its third, four th and fifth sentences, as China does not appear to 
object to the first two sentences.  The United Stat es does not object to China's proposed modifications 
of paragraphs 8.55 and 8.64.  We have introduc ed drafting changes to paragraph 8.3 to more 
accurately reflect China's argument as summarized in pa ragraphs 8.4-8.6, and ha ve added citations in 
new footnote 67.  We also have modified paragraphs  8.55 and 8.64 to reflect China's suggestions and 
have added citations in new footnote 149.  Furtherm ore, for the sake of internal consistency and to 
more accurately reflect China's position, we  have introduced corresponding changes to 
paragraphs 8.63, 8.66, 8.69, 8.70, 8.73, and 8.82.  
                                                      
56 Argentina, Australia, Brazil, Canada, the European Communities, Japan, Mexico, Norway, Saudi 
Arabia and Turkey provided written submissions and/or ma de oral statements at the Panel's meeting with the 
third parties.  Bahrain, Kuwait and Chinese Taipei  did not provide written submissions or make oral 
presentations. WT/DS379/R 
Page 12  
 
 6.5 China  submits that paragraph 8.18
 does not accurately describe its position with respect to 
the so-called "five-factor" test applied by the USDOC in certain prior countervailing duty investigations, arguing that before the Panel it never endorsed the five-f actor test as a proper basis for 
determining the existence of a public body under the SCM Agreement or criticized the USDOC for 
failing to employ that test.  China submits that it ma de clear in its submissions to the Panel that the 
five-factor test was "exclusively a creature of U.S. law," whose "consistency vel non  with Article 1.1 
of the SCM Agreement, as interpreted in accordance with Article 31 of the Vienna Convention, is not 
before the Panel in this case."  China recalls its st atements to the Panel that while two of the five 
factors were "highly germane" to the public body inquiry, the remainder of the factors were of "little 
relevance," and adds that in this  same paragraph the Panel correctly notes China's view that the five-
factor test is relevant for this proceeding only to  establish that prior to the four countervailing duty 
investigations at issue, the USDOC itself had r ecognized that determining whether a state-owned 
entity qualified as a public entity was a multi-factor, fact-intensive inquiry under U.S. law.  We note that China requests no specific modifications to this pa ragraph, however.  Related to the issue it raises 
in regard to paragraph 8.18, China also objects to paragraph 8.125
.  China argues that this paragraph 
incorrectly suggests that China made "arguments" regarding the meaning of "public body" based on 
the five-factor test, and incorrectly characterizes Ch ina's statement, that it took "no solace" from the 
USDOC's statement that it would reconsider applicati on of the five-factor test in an eventual future 
administrative review, as indicating that China consid ers application of that test to be mandatory.  
Rather, China indicates, it made this statement in  connection with its argument that the USDOC not 
only had applied the wrong substantive rule with respect to the term "public body", but also had 
improperly shifted the burden to China to disprove the USDOC's presumption based on a per se  
majority ownership rule that all SOEs are public bodies.  China considers that paragraph 8.125 not 
only is an incorrect summary of China's position but also is wholly unnecessary to the Panel's 
analysis, and should be deleted. 
6.6 The United States disagrees with China's comment s on paragraphs 8.18 and 8.125.  Regarding 
paragraph 8.18, the United States notes China's statements before the Panel that the USDOC 
"abandoned" the five-factor test in favour of a " per se  rule, and concerning the USDOC's commitment 
to "reconsider the feasibility of applying the five-fact or test during an administrative review," that "[a] 
Member may not avoid responsibility for failing to  honour its WTO obligations by promising to 
consider complying with them in th e future."  The United States asserts that despite China's effort to 
"emphasize" that it was not asking the Panel to determ ine the consistency of the five-factor test with 
Article 1.1 of the SCM Agreement, it was neverthe less critical of the USDOC's determination not to 
employ the test in the investigations at issue in th is dispute.  The United States similarly considers that 
paragraph 8.125 accurately describes China's argumen t before the Panel concerning the five-factor 
test, this paragraph noting both China's affirma tive "disclaimer that it is not arguing about the 
consistency of the five-factor test with Article 1.1 of the SCM Agreement" and the implication in 
China's argument that the "USDOC was obligated to ha ve applied that test. . . ."  The United States 
recalls that China raised the five-factor test and appeared to consider that the test addresses what 
China identified the "'key' question regarding whether an entity is a public body" ( i.e., whether it 
exercises governmental authority).  The United States  therefore considers that it was prudent of the 
Panel to address in this paragraph the legal question whether under the SCM Agreement it is 
necessary to examine the five factors to establis h that an entity is government-controlled. 
6.7 We have made certain modifications to the pa ragraphs identified by China in response to 
these comments.  First, to more comprehensively re flect China's arguments regarding the five-factor 
test, we have introduced new footnote 94 to paragra ph 8.18.  In paragraph 8.125, we have modified 
the drafting and have added a cross-reference in footnote 248 to more clearly distinguish between 
China's arguments and the Panel's a ppreciation of those arguments.  We also have clarified that we 
examine the potential relevance of the five-factor t est under Article 1.1 of the SCM Agreement for the 
sake of the completeness of our analys is, notwithstanding China's disclaimer.  WT/DS379/R  
 Page 13 
 
 
 6.8 China objects to the wording in footnote 186 , which it requests that we modify to reflect 
language in the Panel Report in US – Countervailing Duty Investigation on DRAMS that the USDOC 
might have been able to treat wholly-government-ow ned entities as 'public bodies' rather than 'private' 
bodies, depending on the circumstances.  The Un ited States does not share China's concern, but 
considers that if we amend the drafting of this f ootnote in response to China's request, we should more 
closely track the language used by the Appellate Body  in that dispute.  We have modified footnote 
186 to reflect the language used by the Appellate Body.   
6.9 China  requests that we add a statement to footnote 274  to indicate that China had referred to 
evidence that borrowers in the OT R tire industry obtained loans fro m SOCBs at interest rates that 
were not materially different from interest rat es on loans made by SOCBs to borrowers in other 
industries.  The United States does not object to th is request.  We have am ended this footnote as 
requested by China.   
6.10 China requests that we modify paragraph 9.25  to clarify that China's position is that the 
term "subsidy" in Article 2.1(a) of the SCM Agre ement means a "subsidy" as defined in Article 1 of 
that Agreement.  The United States does not object to  this request.  We have modified the drafting of 
this paragraph to reflect China's comment.   
6.11 China  notes that, unlike in footnote 693,  the Panel makes no reference in paragraphs 10.26 
and 10.70 of the Report either to the United States' clar ification that the United States was not relying 
on the Protocol of Accession in its arguments against China's claims under Article 14, or to the Panel's 
reliance on that clarification to conclude that its an alysis of those claims would not take the arguments 
of the United States referring to the Protocol into  account.  The United States does not believe that 
any modification to the Report as requested by Chin a's comments is necessary, and in particular 
considers it unnecessary to duplicate, in the paragra phs identified by China, the Panel's summary in 
paragraph 10.11 and in footnote 693 of the U.S.  position with respect to China's Protocol of 
Accession.  In response to China's request we have added new footnote 464 to paragraph 10.12 
indicating that while we include the United Stat es' arguments referencing China's Protocol of 
Accession in our summary of arguments with respect to the interpretation of Article 14(d), we do not 
take those arguments into account in our an alysis of China's claims on benchmarks.  
6.12 China  requests that, for the sake of completeness, we add a statement to footnote 582  to 
paragraph 10.88  of the Report noting China's reference before us to a statement concerning 
government intervention in credit markets, containe d in an expert report that had been submitted 
during the countervailing duty investigation.  The Un ited States does not consider that an additional 
specific reference to the Report would enhance the clarity or completeness of the citation in the 
footnote, but provides no further basis for its objection.  We have inserted into footnote 582 a reference to the expert report. 
6.13 China  requests that the Panel delete the phrase  "(a term for which China offers no 
explanation)" in the second sentence of paragraph 10.121
.  China submits that it provided, in 
paragraph 235 of its first written submission a nd Exhibit CHI-107, a definition of the term 
"commercial" from the New Shorter Oxford English Di ctionary, and cited two ot her panel reports that 
have considered the meaning of the term "commerc ial".  China submits that its reference to the 
"ordinary course of commerce" is consistent with  these definitions.  The United States objects to 
China's request because in its view the explanation that China provides in support of its request serves 
only to highlight that China failed to provide an y explanation for the term "ordinary course of 
commerce," a term that China invented in an effort to persuade the Panel to give a particular meaning 
to the term "commercial" in Article 14(b) of the SCM Agreement.  We have not accepted China's 
request to delete the phrase in question, and have  added new footnote 620 regarding the sources cited 
by China for the meaning of the term "commercial".   WT/DS379/R 
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 6.14 China requests that in paragraph 11.11
 and footnote 821 to paragraph 11.59  we reflect 
that China's use of the term "basi c reasonableness test" with respect to Article 14 was a reference to 
the Panel Report in EC – Countervailing Measures on DRAM Chips , as reflected in China's answer to 
Panel question 7 following the second meeting.  The United States does not object to including a reference or a footnote in paragraph 11.11 indicating that China cited to the EC – DRAMs report, but 
disagrees that such a note should be repeated in footnote 821, as that footnote reflects the Panel's 
conclusion.  The United States considers that the test  that China sought to have the Panel establish in 
the present dispute is not at all similar to that applied by the panel in EC – DRAMs.  In response to 
China's request, we have indicated in footnote 768 to paragraph 11.11 that China was referring to the 
EC – DRAMs panel report.  In addition, in footnote  821, we have introduced language further 
explaining our conclusion contained in that footnote.   
6.15 China requests that we delete the first sentence of paragraph 14.84
 on the grounds that 
China has never stated that "the issue of double remedies in respect of domestic subsidies is an issue 
which the covered agreements do not address."  The Un ited States does not object to this request.  As 
requested by China, we have deleted this sentence.   
B. REQUEST FOR REVIEW SUBMITTED BY THE UNITED STATES  
6.16 The United States requests that we delete the second sentence of paragraph 8.104  of the 
Interim Report, including the footnote thereto, as th at sentence is inaccurate.  In particular, the 
United States indicates that, contrary to the characte rization in that sentence, in the LWR investigation 
the USDOC did not rely on facts available to determ ine that certain SOEs were "public bodies".  The 
United States also requests us to delete the third sentence of paragraph 8.129  of the Interim Report 
for the same reason, and that we identify Baosteel  as a trading company rather than as a producer.  
China does not object to these requests.  We ha ve made the modifications requested by the 
United States.   
6.17 The United States requests that in paragraph 8.122 , we refer to Bridgestone as "a domestic 
interested party", rather than as "the applicant".  China does not object to this request.  We have made 
the change requested by the United States.  
6.18 The United States  requests that in paragraph 9.14  we modify the drafting to indicate that the 
USDOC found that the planning documents prohib ited policy lending to "restricted" projects and 
"projects to be abolished".  China raises no objection to this request.  We have modified 
paragraph 9.14 as requested by the United States. 
6.19 The United States  requests that we add to paragraph 9.101  references to two pieces of 
evidence in addition to those already referred to as the basis for the USDOC's determination that 
SOCBs followed government policies in making their lending decisions.  The United States requests, 
in particular, that we indicate that the USDOC also had before it a Chairperson's report on the 
transitional review of China at the WTO, and inte rviews of independent fi nancial experts conducted 
by the USDOC in 2007.  China objects to this request.  Concerning the Chairman's report on the 
transitional review of China at the WTO, China submits that the modification requested by the 
United States would be misleading as the statement in that report quoted by the United States in its 
request for interim review in fact was a statemen t by the United States during the transitional review, 
and was not, contrary to the United States' implication, a finding by the WTO Committee on Subsidies and Countervailing Measures.  China furthe r argues that, contrary to the language proposed 
by the United States, the Committee did not make any "finding" that could have been "confirmed" 
through USDOC interviews of "financial experts" .  China further notes that  the identities of these 
"experts" were never disclosed, and that the only r ecord of their opinions are the summaries that the 
USDOC itself prepared in ex parte  meetings from which all interested parties were excluded.  The 
United States  also requests that we clarify, in the f ourth sentence of this paragraph, that the  WT/DS379/R  
 Page 15 
 
 
 verification referred to was that in the CFS Paper investigation.  China does not object to this request.  
We have inserted the requested reference to the CFS Paper investigation, but have not made the other 
changes requested by the United States.  Concerning  the report on the transitional review of China, 
while this document apparently was at least partia lly on the record of the investigation, we find no 
reference to it in the USDOC's determination.  Concerning the USDOC's interviews of financial 
experts, we see no need to add anything to our Report, given that footnote 394 already cites the 
references to these interviews in the USDOC's determination.   
6.20 The United States  requests that we insert in paragraph 11.19  a summary of two points that it 
raised in response to China's argument based on  the term "good" in Article 14(d) of the SCM 
Agreement, as in the Interim Report this paragraph reflected only one of the three points raised by the 
United States.  China raises no objection to this request.  We have modified paragraph 11.19 as 
requested by the United States.   
6.21 The United States requests that we insert in footnotes  863 and 864 to paragraph 12.53  
references to the exhibits containing information on GTC, as in the Interim Report these footnotes 
only referred to exhibits pertaining to TUTRIC.  China does not object to this request.  We have 
modified these footnotes to refer to the exhibits pe rtaining to GTC identified by the United States.   
6.22 The United States  requests that we make certain changes to paragraph 14.69 and footnote 
965.  The United States submits that this paragra ph and footnote could be misunderstood to suggest 
that the NME methodology necessarily entails a comp arison with unsubsidized costs of production, 
whereas there is nothing inherent in the use of an  NME methodology that results in a comparison with 
unsubsidized costs of production, and the costs of  production in the surrogate economy may well be 
subsidized themselves.  The United States therefor e requests that the Panel revise its statement to 
reflect the fact that the use of an NME methodology may result in the use of unsubsidized costs of 
production.  For similar reasons, the United States  suggests that we revise the second sentence in 
paragraph 14.72  so that it would read: "... the use of an NME methodology leads to an asymmetric 
dumping margin comparison to the extent that  an unsubsidized normal value is being compared  to a 
subsidized export price." (our emphasis)  China obj ects to the changes proposed  by the United States, 
arguing that, as it explained in its first written su bmission, when using its NME methodology the 
USDOC seeks to ensure that the surrogate values that it uses represent "market determined" values, 
which by definition are unsubsidized values, and that the USDOC avoids the use of any surrogate 
value that may itself be subsidized in the surr ogate economy.  Referring to Exhibit CHI-123, China 
also submits that the U.S. Congress has specifically  directed the USDOC to "avoid using any prices 
which it has reason to believe or suspect may be dum ped or subsidized"; China also notes that in 
GPX , the CIT observed that the U.S. NME methodolog y compares the producer's export price to a 
"presumptively subsidy-free constructed normal value. "  We note, in response to the United States' 
request, that paragraphs 14.69 and 14.72 form pa rt of the Panel's discussion of the effects, at the 
conceptual level , of the use of NME methodologies.  As indicated in these paragraphs, conceptually, a 
market-economy surrogate value is a value that is  market-determined, and therefore unsubsidized.  
Thus, in our view, making the change requested by the United States would not add to the clarity of the Panel's discussion of the effects of the use of NME methodologies.  We have nonetheless added the word "presumptively" in footnote 965 to reflect the fact that, in practice, surrogate values may not, 
in all instances, be exempt from any subsidization.  In response to the United States' request we also 
have clarified the parties' arguments on the issue (by adding new footnote 936 and modifying 
footnote 974) to more accurately reflect their respective positions on the issue.   
6.23 The United States also suggests typographical and other technical corrections to 
paragraph 9.24
, footnote 425 to paragraph 9.118 , paragraph 11.39 , footnote 998 to 
paragraph 14.90 , paragraph 14.138 , footnote 1109 to paragraph 15.9 , footnote 1125 to 
paragraph 15.30 , and footnote 1146 to paragraph 15.48 .  China does not object to these WT/DS379/R 
Page 16  
 
 suggestions.  We have made the corrections suggested by the United States, as well as a number of 
others in other paragraphs of the Report.   
VII. INTRODUCTION TO FI NDINGS BY THE PANEL 
A. G
ENERAL PRINCIPLES REGARDING TREATY INTERPRETATION , THE APPLICABLE STANDARD OF 
REVIEW , AND BURDEN OF PROOF  
1. Rules of treaty interpretation 
7.1 Article 3.2 of the DSU directs panels to appl y "customary rules of interpretation of public 
international law" in the interpretation of the provi sions of the covered agreements.  It is well settled 
in WTO law that the principles codified in Articles 31-33 of the Vienna Convention on the Law of 
Treaties ("Vienna Convention")  are such customary rules.  These provisions read as follows: 
"Article 31:  General rule of interpretation 
 1. A treaty shall be interpreted in goo d faith in accordance with the ordinary 
meaning to be given to the terms of the trea ty in their context and in the light of its 
object and purpose. 
 
2. The context for the purpose of the inte rpretation of a treaty shall comprise, in 
addition to the text, including its preamble and annexes:  
(a)  any agreement relating to the tr eaty which was made between all the 
parties in connection with the conclusion of the treaty; 
(b)  any instrument which was made by one or more parties in connection 
with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 
 3. There shall be taken into account, together with the context: 
 
(a)  any subsequent agreement between the parties regarding the 
interpretation of the treaty or the application of its provisions; 
(b)  any subsequent practice in the application of the treaty which 
establishes the agreement of the parties regarding its interpretation; 
(c)  any relevant rules of internati onal law applicable in the relations 
between the parties. 
 4. A special meaning shall be given to a te rm if it is established that the parties 
so intended. 
 
Article 32:  Supplementary means of interpretation 
 
Recourse may be had to supplementary me ans of interpretation, including the 
preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the 
meaning when the interpretation according to article 31: 
 
(a)  leaves the meaning ambiguous or obscure;  or (b)  leads to a result which is ma nifestly absurd or unreasonable. 
  WT/DS379/R  
 Page 17 
 
 
 Article 33:  Interpretation of treaties authenticated in two or more languages 
 
1. When a treaty has been authenticated in two or more languages, the text is 
equally authoritative in each language, unless the treaty provides or the parties agree 
that, in case of divergence, a particular text shall prevail. 
 
2. A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an au thentic text only if the treaty so provides 
or the parties so agree. 
 
3. The terms of the treaty are presumed to have the same meaning in each authentic text.  4. Except where a particular text prevails  in accordance with paragraph 1, when 
a comparison of the authentic texts discloses a difference of meaning which the 
application of articles 31 and 32 does not remove, the meaning which best reconciles 
the texts, having regard to the object and purpose of the treaty, shall be adopted".  
2. Standard of review 
7.2 Article 11 of the DSU sets out the standard of re view applicable in WTO panel proceedings in 
general.  This provision imposes upon panels a comprehensive obligation to make an "objective 
assessment of the matter", both factual and legal.  Article 11 of the DSU provides, in relevant part: 
"The function of panels is to assist th e DSB in discharging its responsibilities under 
this Understanding and the covered agreements.  Accord ingly, a panel should make 
an objective assessment of the matter before  it, including an objective assessment of 
the facts of the case and the applicability of and conformity with the relevant covered 
agreements, and make such other findi ngs as will assist the DSB in making the 
recommendations or in giving the rulings pr ovided for in the covered agreements". 
7.3 It is well settled that in reviewing ( inter alia ) a countervailing duty determination, a panel 
may not conduct a " de novo  review" of the evidence or substitu te its judgement for that of the 
competent authorities.  A panel may not reject an  agency's conclusions simply because the panel 
would have arrived at a different outcome if it were making the determination itself.
57  A panel must 
also limit its examination to the evidence that was before the agency during the course of the 
investigation, and must take into account all such ev idence submitted by the parties to the dispute.  At 
the same time, a panel must not simply defer to th e conclusions of the investigating authority.  A 
panel's examination of those conclusions must  be "in-depth" and "critical and searching".58 
7.4 A panel reviewing an investigating authority' s determination should examine whether the 
determination is "reasoned and ad equate", and more specifically, whether the investigating authority 
provided a "reasoned and adequate" explanation as to :  (i) how the evidence on the record supported 
its factual findings; and (ii) how those factual findings supported the overall subsidy determination.59  
In US – Softwood Lumber VI (Article 21.5 – Canada) , the Appellate Body pr ovided more guidance on 
how a panel should apply these principles in its evaluation of factual findings: 
"A panel's examination of [an investigating authority's] conclusions must be critical 
and searching, and be based on the information contained in the record and the 
                                                      
57 Appellate Body Report on US – Countervailing Duty Investigation on DRAMS , paras. 183 and 187. 
58 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada) , para. 93. 
59 Appellate Body Report on US – Countervailing Duty Investigation on DRAMS , para. 186. WT/DS379/R 
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 explanations given by the authority in it s published report.  A panel must examine 
whether, in the light of the evidence on th e record, the conclusions reached by the 
investigating authority are reasoned and ade quate.  What is 'adequate' will inevitably 
depend on the facts and circumstances of th e case and the particular claims made, but 
several general lines of inquiry are likely to be relevant.  The panel's scrutiny should 
test whether the reasoning of the authority is  coherent and internally consistent.  The 
panel must undertake an in-depth examin ation of whether the explanations given 
disclose how the investigating authority treat ed the facts and evidence in the record 
and whether there was positive evidence before it to support the inferences made and 
conclusions reached by it.  The panel must examine whether the explanations 
provided demonstrate that the investigating authority took proper account of the 
complexities of the data before it, and that it explained why it rejected or discounted alternative explanations and interpretations of the record evidence.  A panel must be 
open to the possibility that the explanations given by the authority are not reasoned or 
adequate in the light of other plausible a lternative explanations, and must take care 
not to assume itself the role of initial trier of facts, nor to be passive by 'simply 
accept[ing]  the conclusions of the competent authorities'".
60 
3. Burden of proof 
7.5 The general principles regarding the allocati on of the burden of proof in WTO dispute 
settlement require that a party claiming a violation of a provision of a WTO agreement by another Member assert and prove its claim.
61  With respect to these general rules on allocation of the burden 
of proof, the Appellate Body observed that: 
"[...] in WTO dispute settlement, as in most legal systems and international tribunals, 
the burden of proof rests on the party that asserts the affirmative of a claim or defence.  A complaining party will satisfy its burden when it establishes a prima facie  
case by putting forward adequate legal argum ents and evidence.  The nature and 
scope of arguments and evidence required 'will necessarily vary from measure to 
measure, provision to provision, and case to case'.  When a claim is brought against a WTO Member's legislation or regulation, a panel may, in some circumstances, consider that the text of the relevant lega l instrument is sufficiently clear to establish 
the scope and meaning of the law.  However, in other cases, a panel may consider that additional evidence is necessary to do so.  On ce the complaining party has established 
a prima facie case, it is then for the responding party to rebut it".
62 
7.6 China, as the complaining party in this dispute, must therefore make a prima facie  case of 
violation of the relevant provisions of the WTO ag reements it invokes, which the United States must 
refute.  A prima facie  case is one which, in the absence of effective refutation by the other party, 
requires a panel, as a matter of law, to rule in favour of the party presenting the prima facie  case.  We 
also note, however, that it is generally for each party asserting a fact, whether complainant or 
respondent, to provide proof thereof.  In this resp ect, therefore, it is also for the United States to 
provide evidence supporting the facts which it asserts. 
                                                      
60 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada) , para. 93.  (footnote 
omitted, emphasis original). 
61 Appellate Body Report on US – Wool Shirts and Blouses , p. 14, DSR 1997:I, at 323. 
62 Appellate Body Report on Chile – Price Band System (Article 21.5 – Argentina) , para. 134.  
(footnotes omitted)  WT/DS379/R  
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 B. CHINA 'S PROTOCOL OF ACCESSION  
7.7 In addition to the obligations contained in the covered agreements, which apply to all 
Members, China has undertaken speci al obligations under its Protocol of Accession.  Section 15 of 
China's Protocol of Accession is of relevance to th e issues before the Panel.  It provides as follows: 
"15. Price Comparability in Determining Subsidies and Dumping 
 Article VI of the GATT 1994, the Agreement on Implementation of 
Article VI of the General Agreement on Tariffs and Trade 1994 ("Anti-Dumping 
Agreement") and the SCM Agreement  shall apply in proceedings involving imports 
of Chinese origin into a WTO Member  consistent with the following: 
 (a) In determining price comparability under Article VI of the GATT 
1994 and the Anti-Dumping Agreement, the importing WTO Member shall use either 
Chinese prices or costs for the industry under investigation or a methodology that is not based on a strict comparison with domes tic prices or costs in China based on the 
following rules: 
(i) If the producers under investigation can clearly show that market 
economy conditions prevail in the indu stry producing the like product with 
regard to the manufacture, production and sale of that product, the importing WTO Member shall use Chinese prices or costs for the industry under investigation in determining price comparability; 
(ii) The importing WTO Member may use a methodology that is not 
based on a strict comparison with domest ic prices or costs in China if the 
producers under investigation cannot clearly show that market economy 
conditions prevail in the industry produ cing the like product with regard to 
manufacture, production and sale of that product. 
 (b) In proceedings under Parts II, III and V of the SCM Agreement, 
when addressing subsidies described in Articles 14(a), 14(b), 14(c) and 14(d), 
relevant provisions of the SCM Agreement  shall apply; however, if there are special 
difficulties in that application, the importing WTO Member may then use methodologies for identifying and measuring the subsidy benefit which take into account the possibility that prevailing terms and conditions in China may not always be available as appropriate  benchmarks.  In applying such methodologies, where 
practicable, the importing WTO Member should adjust such prevailing terms and 
conditions before considering the use of  terms and conditions prevailing outside 
China. 
 (c) The importing WTO Member shall notify methodologies used in 
accordance with subparagraph (a) to th e Committee on Anti-Dumping Practices and 
shall notify methodologies used in accord ance with subparagraph (b) to the 
Committee on Subsidies and Countervailing Measures".
63 
                                                      
63 China's Protocol of Accession, annexed to Ministerial Decision on China's Accession, WT/L/432. WT/DS379/R 
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 7.8 Also referred to by the parties and of potential relevance to this dispute are certain paragraphs 
of the Report of the Working Party on the Accession of China (the "Working Party Report"), namely paragraphs 150-151 and 171-173.
64 
VIII.  CHINA'S CLAIMS PERTAINING TO THE USDOC'S DETERMINATIONS THAT 
CERTAIN SOES AND SOCBS WERE PUBLIC BODIES 
A. CLAIMS OF CHINA  
8.1 China claims, in respect of the provision of goods (inputs), that the USDOC's determinations 
that certain SOEs were "public bodies" were in consistent with Article 1.1(a)(1) of the SCM 
Agreement.  Thus, China argues, the USDOC's findings  in the four countervailing duty investigations 
of financial contributions by a government in th e form of provision of goods to respondent producers 
were inconsistent with Article 1.1 of the SC M Agreement.  China further claims that, as a 
consequence, the United States acted inconsistently  with Articles 10 and 32.1 of the SCM Agreement 
and Article VI:3 of the GATT 1994.65 
8.2 China claims, in respect of the provision of lo ans, that the USDOC's determinations that 
certain SOCBs were "public bodies" we re inconsistent with Article 1. 1(a)(1) of the SCM Agreement.  
Thus, China argues, the USDOC's finding in the OT R countervailing duty inves tigation of financial 
contribution by a government in the form of alleged "policy lending" w as inconsistent with Article 1.1 
of the SCM Agreement.  China further claims that, as a consequence, the United States acted 
inconsistently with Articles 10 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994.66 
B. MAIN ARGUMENTS OF THE PARTIES  
1. China 
8.3 China challenges as invalid the USDOC's findings in the investigations at issue that SOEs 
producing inputs, and SOCBs providing loans, we re "public bodies" within the meaning of 
Article 1.1(a)(1) of the SCM Agreement.  Therefore,  China considers inconsistent with that Article 
the USDOC's determinations that the provision of  inputs and of loans by these entities constituted 
financial contributions by public bodies.  China argues that in the absence of evidence that these 
entities were vested with and exercised government al authority, as a matter of law their actions 
needed to be deemed those of private, not public, bodies.67  Given this, only if the USDOC had found 
that these entities were "entrusted or directed" in  the sense of Article 1.1(a)(1)(iv) of the SCM 
Agreement to provide the inputs or the loans could it have lawfully concluded that that the financial 
contributions were made by the Government of Ch ina.  China maintains that because the USDOC did 
not examine whether there had been such entrustmen t or direction, its dete rminations of financial 
contributions by the Government of China were inc onsistent with Article 1.1 of the SCM Agreement, 
and as a consequence, with Articles 10 and 32.1 of the SCM Agreement, as well as with Article VI:3 
of the GATT 1994.68 
8.4 China argues that the Appellate Body recognized in US – Countervailing Duty Investigation 
on DRAMS  that under well-established principles of customary international law, the actions of state-
                                                      
64 Report of the Working Party on the Accession of China, WT/ACC/CHN/49 and 
WT/ACC/CHN/49/Corr.1 reproduced in WT/MIN(01)/3. 
65 Paragraphs B.1(a)(i) and B.1(e)(i)- (iii) of the "as applied" claims in China request for establishment 
of the Panel; China first written submission, para. 468 (a); second written submission, para. 315 (a). 
66 Paragraphs B.1(c)(i) and B.1(e)(i)- (iii) of the "as applied" claims in China request for establishment 
of the Panel, China first written submission, para. 468 (d); second written submission, para. 315 (e). 
67 See, e.g. , China first written submission, paras. 95-96 and 158-160. 
68 China first written submission. paras. 34-40.  WT/DS379/R  
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 owned corporate entities are prima facie private, and thus presumptively not attributable to a Member 
under Article 1.1 of the SCM Agreement.69  China argues that instead of focusing as it should have on 
whether the SOEs and SOCBs were "private bodies" that had been "entrusted or directed" by the 
Government of China or a public body to provid e inputs and loans, respectively, the USDOC relied 
on a per se rule of majority government ownership in  determining that these entities were "public 
bodies".70  In China's view, this interpretation of th e term "public body" is impermissible under a 
correct application of the principles of treaty interpretation.  For China, while government ownership is relevant to the question of control, and thus to  the inquiry in Article 1.1(a)(1)(iv) as to whether a 
private body has been directed to  perform governmental functions, ownership has little relevance in 
determining whether an entity is a public body.
71 
8.5 Rather, China asserts, to be a "public body", an entity must be authorized by the law of the 
state to exercise functions of a governmental or public character, and the act s in question must be 
performed in the exercise of such  authority.  In this context Chin a, paraphrasing the Appellate Body 
in Canada – Dairy , argues that a "public body" should be defined as "an entity which exercises 
powers [or authority] vested in it by a 'governme nt' for the purpose of performing functions of a 
'governmental' character".72  According to China, what distinguishes the conduct of public bodies 
from that of private bodies is not the degree of government ownership – the government may have ownership interests in both – but the source a nd nature of the authority the entities possess and 
exercise.  China states therefore that  in the investigations at issue in the present dispute, absent actual 
evidence establishing that the state-owned entiti es were vested with authority to exercise 
governmental authority in connection with the provision of the alleged financial contributions at issue, 
as a matter of law those entities' actions must be deemed to be those of private entities.
73 
8.6 China asserts that it is not arguing that government-owned entities can never be public bodies 
within the meaning of Article 1.1(a)(1), but rather  that their conduct should be deemed presumptively 
private, and consistent with that presumption, th eir conduct ordinarily should be examined under the 
entrustment or direction standard of Article 1.1(a )(1)(iv) of the SCM Agreemen t.  If the evidence in a 
particular case established that a government-owned  entity was exercising delegated authority to 
perform functions of a governmental character, then it  would be appropriate to conclude that it was a 
public body and that subparagraph (iv) was inapp licable.  But absent such evidence, China argues, 
subparagraph (iv) should apply and th ere is no legitimate justification in the text, context or object and 
purpose of the SCM Agreement for the arbitrary test  the United States has advanced that would make 
such entities public bodies in all cases merely by  virtue of their government ownership.74 
8.7 China relies on various dictionary definitions of the term "public" to argue that the ordinary 
meaning of the term "public body" requires the ess ential elements that such  an entity acts for the 
welfare and best interests of a nation or community as a whole, and does so under the authority, or officially on behalf, of the nation or community as a whole.
75  China argues further that the phrase in 
Article 1.1(a)(1), "a government or other public body" explicitly equates, and treats as "functional 
equivalents", the terms "government" and "public body".76  According to China, the Agreement 
differentiates between this type of  entity and "private bodies" in Article 1.1(a)(1)(iv), the actions of 
which require "entrustment or direction" from a government to perform one of the functions 
                                                      
69 Id., para. 34, citing to Appellate Body Report on US – Countervailing Duty Investigation on DRAMS , 
para. 112 and footnote 179. 
70 See, e.g.,  China first written submission, paras. 34 -36; second written submission, para. 23. 
71 China first written submission, paras. 39-40 and 48. 
72 Id., paras. 53-55, citing to Appellate Body Report on Canada – Dairy , para. 97; second written 
submission, para. 4. 
73 China first written submission, para. 61. 
74 China oral statement at the second meeting of the Panel, paras. 30-31. 
75 China first written submission, paras. 50 -51; second written submission, para. 6. 
76 China first written submission, para. 52. WT/DS379/R 
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 enumerated in Article 1.1(a)(1)(i)-(iii) in order to be  deemed financial contributions by a government.  
For China, the fact that entrustment or direction of the actions of private bodies brings those actions within the purview of "government financial c ontribution" demonstrates that in all cases, the sine qua 
non of a "financial contribution" is the exercise of some element of governmental authority in 
connection with performing functions of a governmental character.
77 
8.8 China also considers that the definitions of the corresponding French and Spanish terms 
"organisme public" and "organismo público" in Article 1.1 of the SCM Agreement support its 
argument concerning the ordinary meaning of the te rm "public body".  China argues that all three 
terms are presumed to have the same meaning under Article 33(3) of the Vienna Convention, and that 
the Panel must examine this meaning.  According to  China, the French term  "public" and the Spanish 
term "público" connote "governmental" , which is consistent with severa l dictionary definitions of the 
English term "public".  China also points to the OECD Economics Glossary which it argues equates 
"organisme public" with the English term "government agency".78  China further argues that in the 
Agreement on Agriculture the Spanish term "organis mo público" is expressly equated to the English 
term "government agency", and that the Appellate Body in Canada − Dairy  established unequivocally 
that the same Spanish and French terms at issue in  Article 1.1 of the SCM Agreement have the same 
meaning as the English term "government agency".79  According to China, Article 33 of the Vienna 
Convention requires the Panel to interpret the Englis h term "public body" consistently with the fact 
that the French and Spanish versions of that term  mean "government agency", and the only coherent 
way to do so is to interpret the English terms "public body" and "government agency" as functional 
equivalents, just as they are treated in the French and Spanish languages.80 
8.9 China disagrees with the United States concerni ng the meaning of the conjunction "or" in 
Article 1.1(a)(1) between the terms "government" and "public body".  In China's view, this word does 
not suggest that the two terms must have wholly di ssimilar and unrelated meanings, but only that the 
terms are not identical.  China argues that "or" freque ntly connects words or phrases that are similar or 
functional equivalents, and cites the report of the US – Export Restraints panel's reference to the word 
"or" between the phrases "a government makes paymen ts to a funding mechanism" and "entrusts or 
directs a private body" in subparagraph (iv) of Article 1.1(a)(1) as meaning that the two phrases 
captured equivalent government actions.81 
8.10 China also disagrees with the United States c oncerning the significance of the adjective "any" 
to modify "public body" in Article 1.1(a)(1) of the Agreement.  According to China, the "any" only 
indicates that all entities that qualify as public bodies – however that term is defined – are captured 
within the scope of Article 1.1, but says nothing ab out the characteristics that define a public body, 
and offers no support for the United States' per se  majority government ownership test.82 
8.11 China argues that its interpretation of the term "public body" also is supported contextually by 
the General Agreement on Trade in Services (the "GA TS").  According to China, paragraph 5(c)(i) of 
the Annex on Financial Services to the GATS (the "GATS Financial Services Annex") defines the 
term "public entity" as an "entity owned or controll ed by a Member, that is principally engaged in 
carrying out governmental functions or activities for governmental purposes [...]".  For China, this 
                                                      
77 Id., paras. 56-58. 
78 China second written submission, paras. 8-9; oral statement at the first meeting of the Panel, 
paras. 23-24. 
79 China second written submission, paras. 10-11, citing to Appellate Body Report on Canada – Dairy , 
para. 97. 
80 Id., paras. 8 and 13; oral statement at the second meeting of the Panel, paras. 4-10. 
81 China response to Panel question 14 (first mee ting); oral statement at the second meeting of the 
Panel, paras. 11-12, citing to Panel Report on US – Export Restraints , para. 8.32. 
82 China oral statement at the second  meeting of the Panel, para. 13.  WT/DS379/R  
 Page 23 
 
 
 definition reflects a similar view of the functiona l equivalence between "government" and "public 
body" that, in China's view, exists in Article 1.1 of the SCM Agreement.  In addition, China argues, 
the GATS definition indicates that when an entity is  "merely 'owned or controlled by a Member'", it 
will qualify as a public entity only if it is "carryin g out governmental func tions or activities for 
governmental purposes", that entities owned or controlled by governments may carry out both 
governmental and commercial functions, and that  they are deemed to be "public" only when 
principally engaged in the former.  According to China, Article I:3(a) of the GATS also provides 
relevant context by defining "measures by Memb ers" to include measures by governmental actors 
("central, regional or local governments or authoriti es") and non-governmental bodies "in the exercise 
of powers delegated by central, regional or local governments or authorities".  China argues that if the 
actions of non-governmental bodies may be attributed to a Member for purposes of the GATS only 
when they are exercising authority delegated to th em by the government, it is difficult to envision any 
rational justification for applying any less demandi ng a standard for attributing the actions of a 
"public body" to a Member under Article 1.1 of the Agreement.83 
8.12 China refers to the International Law Commissi on's Draft Articles on Responsibility of States 
for Internationally Wrongful Acts (the "Draft Ar ticles") as compelling its interpretation of the term 
"public body" in Article 1.1 of the SCM Agreement.   According to China, as a general matter prior 
panels and the Appellate Body have  considered the Draft Articles "relevant rules of international law 
applicable in the relations between the parties" , in the sense of Article 31(3)(c) of the Vienna 
Convention, for purposes of interp reting the covered agreements.84 
8.13 In this regard, concerning the interpretation of Article 1.1 of the SCM Agreement, China 
recalls that in US – Countervailing Duty Investigation on DRAMS  the Appellate Body referred to the 
Draft Articles in the section of its report entitled "The meaning of the terms 'entrusts' and 'directs'" in 
Article 1.1(a)(1)(iv).85  In particular, China notes the Commentary to Article 8 of the Draft Articles, to 
which the Appellate Body referred in a footnote in the US – Countervailing Duty Investigation on 
DRAMS  report.86  According to China, this passage of  the Commentary makes clear that state 
ownership is not sufficient to attribute the conduct of a state-owned corporate entity to a state, and by 
extension to a Member for purposes of Article 1.1 of  the SCM Agreement, and that instead it supports 
China's view of the term "public body".  Furtherm ore, in China's view, the Appellate Body's citation 
of this passage demonstrates that the Draft Articl es are "relevant rules of international law" for 
purposes of interpreting the WTO Agreement, and thus  must be relied upon in the present dispute in 
determining whether the USDOC's determination that the SOEs and SOCBs were public bodies was 
consistent with the SCM Agreement.87 
8.14 China further argues that to th e extent that the panel in Korea – Commercial Vessels can be 
read as endorsing a test for determining whether an entity is a public body solely by reference to 
government ownership or control, its reasoning is no t persuasive and should not be followed.  China 
argues in this regard that among other errors, that  panel failed to acknowledge  the mandatory nature 
                                                      
83 China first written submission, paras. 62-67; response to Panel question 21 (first meeting). 
84 See, e.g.,  China first written submission, para. 70; citing to Appellate Body Reports on Canada – 
Continued Suspension , para. 382; US – Line Pipe , para. 259; US – Cotton Yarn , para. 120 and footnote 90; 
Panel Reports on Brazil – Retreaded Tyres , para. 7.305 and footnote 1480; Mexico – Taxes on Soft Drinks , 
para. 8.180; and Decision by the Arbitrator(s) on Brazil – Aircraft (Article 22.6 – Brazil) , para. 3.44; US – FSC 
(Article 22.6 – US) , paras. 5.26 and 5.58-5.61; and EC – Bananas III (US) (Article 22.6 – EC) , para. 6.16. 
85 China first written submission, para. 72, citing to Appellate Body Report on US – Countervailing 
Duty Investigation on DRAMS , para. 112 and footnote 179. 
86 Id.  The cited passage from the Commentary reads:  "Since corporate entities, although owned by and 
in that sense subject to the control of the States, are considered to be separate, prima facie their conduct in 
carrying out their activities is not attributable to the Stat e unless they are exercising elements of governmental 
authority [within the meaning of Article  5 of the Draft Articles]".  (Id.). 
87 China first written submission, paras. 72-73. WT/DS379/R 
Page 24  
 
 of recourse to customary principles of interna tional law under Article 31(3)(c) of the Vienna 
Convention, an oversight that in China's view cannot be reconciled with what it considers the 
Appellate Body's express reliance on the Draft Articl es in interpreting Article 1.1(a)(1)(iv) of the 
SCM Agreement.  According to China, defining " public body" solely by reference to government 
ownership or control cannot be reconciled with the Appe llate Body's recognition in US – 
Countervailing Duty Investigation on DRAMS , consistent with customary international law, that the 
conduct of a state-owned corporate entity presumptively is not attributable to a government unless that entity is exercising governmental authority within  the meaning of Article 5, or determined to be 
under the direction or control of the State within the meaning of Article 8, of the Draft Articles.
88   
8.15 Concerning the object and purpose of the SC M Agreement, China considers that the 
United States' interpretation, if accepted, would ha ve far-reaching and troubling implications for the 
proper application of the SCM Agreement.  Here, Ch ina disagrees with the argument advanced by the 
United States that a majority ownership rule is  necessary to "prevent circumvention of the SCM 
Agreement […] so that subsidizing governments cannot hide behind their ownership interests in 
enterprises to avoid the reach of the SCM Agreement."  China considers this to be a baseless concern, 
because subparagraph (iv) of Article 1.1 is an  acknowledged anti-circumvention provision that 
squarely addresses it.89  China also disagrees with what it view s as the United States' argument that 
the entrustment or direction standard is too burdensome and might be evaded when government-owned entities are involved.  China is concerned that  if the position of the United States is accepted, 
subparagraph (iv) would become a dead letter for entities with majority government ownership – a 
category of entities to which, in China's view, subpara graph (iv) was previously considered applicable 
by both panels and WTO Members alike.
90 
8.16 China considers that the interpretation advocated by the United States, which in its view is not 
based on the actual treaty standards, would flout th e object and purpose of the SCM Agreement.  In 
particular, China argues, the SCM Agreement "refle cts a delicate balance between the Members that 
sought to impose more disciplines on the use of su bsidies and those that sought to impose more 
disciplines on the application of countervailing measur es".  Both aspects of th is "balance" are evident 
in Article 1.1, including the "discipline" imposed by the entrustment or direction standard.  For China, 
the possibility that it may not be easy, as a practical  matter, to meet the standards of a covered 
agreement has never dissuaded the Appellate Body from strictly enforcing those standards, and it 
urges the Panel to be guided by the same approach here.91 
8.17 Concerning the USDOC's findings of financial c ontribution in the form of provision of inputs 
by SOEs, China argues that the determination that the SOEs were public bodies was flawed, such that 
the financial contribution findings we re inconsistent with the SCM Ag reement.  In particular, China 
argues that for the USDOC to have validly conclude d that the SOEs were public bodies, it would have 
had to, but did not, examine whether they were auth orized by Chinese law to exercise functions of a 
governmental character or public character normally exercised by State actors, "and"  the acts alleged 
to have constituted financial contri butions were performed in the exer cise of such authority.  Rather, 
China argues, the USDOC applied a per se  rule of majority ownership to  conclude that the SOEs were 
public bodies.92  China makes the same argument in respect  of the USDOC's findings that the SOCBs 
were public bodies.93 
                                                      
88 China first written submission, para. 83. 
89 China oral statement at the second meeting of the Panel, paras. 21-24. 
90 Id., paras. 25-27. 
91 Id., paras. 28-29. 
92 China first written submission, paras. 86-87. 
93 In its first written submission, China argues that the analytical framework applied by the USDOC to 
determining whether the SOCBs were public bodies "bears some resemblance to a proper interpretation of  WT/DS379/R  
 Page 25 
 
 
 8.18 China criticizes the USDOC for not applying the five -factor test that it had applied in certain 
prior cases94:  (i) government ownership; (ii) the government's presence on the entity's board of 
directors; (iii) the government's control over th e entity's activities; (iv) the entity's pursuit of 
governmental policies or interests; and (v) whether th e entity is created by stat ute.  China argues that 
in some prior cases where this test was applied,  the USDOC had found that even 100 per cent 
government-owned entities were not public bodies under U.S. law, and thus could not convey 
financial contributions unless they were "entrusted or directed" to do so.95  While China asserts that it 
is not raising before the Panel th e consistency with Article 1.1 of  the SCM Agreement of the five-
factor test96, China also takes issue with th e USDOC's statements in three of the investigations in the 
present dispute that there was insuffi cient record evidence to apply th e five-factor test as, beyond the 
levels of government ownership for some companies,  the Government of China had not provided the 
information needed to apply the test.  China argues that this statement indicates that for the USDOC 
any provision of goods by a state-owned entity may be presumed to be a financial contribution unless 
there is evidence establishing that the entity is not a public body.97  China states that the five-factor 
test is relevant for this dispute to establish that prior to the investigations at issue, the USDOC had 
recognized that determining whether a state-owned entity qualified as a public entity was a multi-
factor, fact-intensive inquiry even under U.S. law.98  China considers that the USDOC improperly 
shifted the burden to the Government of China to disprove the presumption that all SOEs are public 
bodies, thereby abrogating its responsibilities as an inv estigating authority.  In this context, China 
cites a statement by the Appellate Body that "t he investigating authorit y has a duty to seek out 
information on relevant factors and ev aluate their probative value in order to ensure that its 
determination is based not on presumpti ons, but on a sufficient factual basis ".99  (emphasis added by 
China) 
2. United States 
8.19 The United States rejects China's arguments.  Concerning the ordinary meaning of "public 
body", the United States submits that the definitions  of the term "public" include:  "belonging to, 
affecting, or concerning the community or nation", and that dictionary definitions identified by China 
include:  "Relating or belonging to an entire communit y, state, or nation" and "of or relating to the 
people as a whole; that belongs to, affects or concerns the community or the nation".  The 
                                                                                                                                                                     
Article 1.1(a)(1)", in that the USDO C appeared to recognize that in order for loans by SOCBs to constitute a 
financial contribution by a public body there must be evidence that the banks were endowed with governmental 
authority to provide preferential loans in furtherance of a public purpose, and that the countervailable loans were 
made by the SOCBs in the exercise of this authority.  (Id., paras. 186-187).  In response to the United States' 
arguments that the USDOC analysis was not based on the considerations referred to by China, but instead was 
based on control by the government, with government ownership figuring prominently in regard to control, China states that although the USDOC did not conclude that the SOCBs were public bodies by applying a rule 
of majority ownership, this is the defence the United Stat es advances to the Panel, which in China's view fails. 
94 While China indicates that the five-factor test is "exclusively  a creature of U.S. law" whose 
consistency with the SCM Agreement is not before the Panel (China first written submission, footnote 69), 
China also states that in the investigations at issue, the USDOC "abandoned" this test in favour of a " per se  
majority ownership test" (Id., para. 91); China refers to the "fatal" problems with the USDOC's "excuse" and "rationale" for not applying the test (Id., paras. 94-95);  and China indicates that it "takes no solace" in the 
USDOC's statement in some of the final determinations at issue that it would reconsider the feasibility of 
applying the five-factor test during an administrative, should a countervailing duty order be imposed (Id., para. 100), arguing that a Member "may not avoid responsibility for failure to honour its WTO obligations by 
promising to consider complying with them  in the future" (Id., para. 101)..   
95 China first written submission, para. 90. 
96 Id., footnote 69. 
97 Id., paras. 94-95. 
98 Id., footnote 69. 
99 Id., para. 98, citing to Appellate Body Report on US – Anti Dumping Measures on Oil Country 
Tubular Goods , para. 201. WT/DS379/R 
Page 26  
 
 United States notes that one of the dictionaries relie d upon by China defines "public" as:  "In general, 
and in most of the senses, the opposite of private (adj .)", and that the word "private" means:  "Of a 
service, business, etc.:  provided or owned by an in dividual rather than the State or a public body".  
For the United States, this is an important poi nt because the bodies at issue in the dispute are 
businesses.  Accordingly, because the ordinary meaning of the term "public" is the opposite of 
"private", the meaning of the term "public" would in clude "provided or owned by the State or a public 
body rather than an individual".
100  According to the United States, therefore, however the term 
"public" is examined, its ordinary meaning include s the notion of belonging to, or being owned by, 
the state, and if an entity is owned by the state, the ordinary meaning of the term "public" indicates that it can be a "public body" under the SCM Agreement.
101 
8.20 In terms of context, the United States notes that the term "public body" in Article 1.1(a)(1) is 
part of the disjunctive phrase "by a government or any public body [...]".  By using two different 
terms to refer to the type of entity that can pr ovide a financial contribution, the SCM Agreement 
expresses distinct and different meanings for th e terms "government" and "public body".  Treaty 
interpretation should give meaning a nd effect to all terms of a treaty , and "a treaty interpreter is not 
free to adopt a meaning that would reduce pa rts of a treaty to redundancy or inutility".102  T h e  
United States also argues that the word "any" before "public body" means, inter alia , "of whatever 
kind" of the being or thing at issue, and that th rough the use of the term "any", the SCM Agreement 
indicates that there might be different "kinds" of public bodies.  For the United States, "any" also 
indicates that the drafters of the SCM Agreement did not intend the term "public body" to have a 
meaning that would relate back to the term "government".103 
8.21 The United States also disagrees with China that the French and Spanish versions of the SCM 
Agreement require reading the term "public body"  as "government agency" (i.e., as the same as 
"government").  The United States argues that the issu e in the present dispute is the interpretation of 
the term "public body" or "organismo público" or  "organisme public".  The United States considers 
that there is no discrepancy between these terms.  Re garding China's argument that in Article 9.1 of 
the Agreement on Agriculture the English term " government agency" is translated in the Spanish 
version as "organismo público", the United States c onsiders that any discrepancy between the English 
and Spanish versions exists in that Agre ement, which is not before this Panel.104 
8.22 The United States rejects China's argument that  Article 1.1(a)(1) "explicitly equates" the 
terms "government" and "public b ody" making them "functional equiva lents", and that therefore the 
essence of a "public body" should be the same as th e essence of a "government", namely to perform 
certain functions pursuant to government authority and power.  In the view of the United States, if this 
were the case, there would have been  no need for the use of two different terms in Article 1.1(a)(1).  
Pursuant to accepted rules of treaty interpretati on, the terms "public body" and "government" cannot 
be equivalent.105  The United States argues that the term "private body" in Article 1.1(a)(1)(iv) is 
relevant context.  In the view of the United States,  given that the term "private body" is the opposite 
of "public body", and the ordinary meaning of th e term "private" includes the notion of being owned 
by individuals, not the state, the term "private" in the context of Article 1.1(a)(1) indicates that a 
"public body" can be an entity owned by the state.   For the United States, because "government" and 
                                                      
100 United States first written submission, paras. 95-96. 
101 Id. para. 97; opening statement at the first meeting of the Panel, para. 22. 
102 United States first written submission, para. 98; second written submission, para. 24. 
103 United States second written submission, paras. 20-21; opening statement at the second meeting of 
the Panel, para. 4. 
104 United States second written submission, para. 36; opening statement at the second meeting of the 
Panel, paras. 11 and 14. 
105 United States first written submission, para. 99; opening statement at the first meeting of the Panel, 
para. 23.  WT/DS379/R  
 Page 27 
 
 
 "public body" are distinct, the fact that state-ow ned enterprises and state- owned commercial banks are 
not the government does not bar them from being considered public bodies.  The United States also 
considers that the distinct terms "private body" a nd "public body", mean that a public body is not a 
privately-owned entity, and can be an entity owned by the government.  Taken together, this means 
that a "public body" includes entities owned by the government, but not necessarily exercising 
functions of a governmental character.  The Un ited States argues that, not surprisingly this 
interpretation is consistent with the ordinary meaning of the word "public".106 
8.23 The United States finds further context in Chin a's Protocol of Accession, which "include[s] 
the commitments referred to in pa ragraph 342 of the Working Party Report" as an "integral part of the 
WTO Agreement".  The United States cites language in the Report concerning the discussion of state-
owned enterprises in China (including banks) which in  its view makes clear that China's state-owned 
enterprises are government actors, or at least public bodies, within the meaning of the SCM 
Agreement.  The United States argues that at the very least this language demonstrates that China 
accepts that actions by state-owned enterprises cons titute financial contributions by a government, 
without the need for a finding of entrustment or dire ction, and that this is a recognition that Chinese 
state-owned enterprises are "public bodies" within  the meaning of Article 1.1(a)(1) of the SCM 
Agreement.107 
8.24 The United States disagrees with the contextual argument of China based on the term "public 
entity" in the GATS Financial Services Annex.  Th e United States argues that the GATS is a different 
agreement with an entirely different field of applica tion, and that the term "public entity" used in the 
GATS is different from the term "public body".  The United States argues that the term "public entity" 
in that context should not be considered to ha ve the same meaning as "public body" in the SCM 
Agreement; and that the definition of "public entit y" is solely "for the purposes of" the GATS, and 
thus was not intended to create implications for ot her Agreements.  The United States also disagrees 
with China that Article I:3 of the GATS is relevant context, as that provision contains neither the term 
"public body" nor anything else that shed s light on the meaning of that term.108 
8.25 The United States points to prior statements of the Appellate Body and panels that the object 
and purpose of the SCM Agreement is to "strengt hen and improve GATT disciplines relating to the 
use of both subsidies and countervailing measures, wh ile, recognizing at the same time, the right of 
Members to impose such measures under certain conditions" and "to impose multilateral disciplines 
on trade-distorting subsidization".109  Accordingly, the United States argues, the Appellate Body and 
panels have sought to ensure that the SCM Agreement not be interpreted rigidly or formalistically in a 
manner that would undermine its disciplines on trade-di storting subsidization.  Consistent with this 
object and purpose, and the need to prevent circumve ntion of the SCM Agreement, in the view of the 
United States the term "public body" should be in terpreted so that subsidizing governments cannot 
hide behind their ownership interests in ente rprises to avoid the reach of the SCM Agreement.110 
8.26 The United States disagrees with China that the Draft Articles are relevant rules of 
international law for purposes of interpreting the te rm "public bodies".  The United States argues that 
the Draft Articles are not an agreement relating to  the SCM Agreement made in connection with the 
                                                      
106 United States first written submission, paras. 100-101. 
107 See, e.g.,  United States first written submission, paras. 102-103; second written submission, 
para. 39. 
108 United States first written submission, paras. 104 and 106; response to Panel question 21 (first 
meeting); second written submission, para. 35. 
109 See, e.g.,  United States first written submission, para . 107, citing to Appellate Body Report on US – 
Softwood Lumber IV , para. 64 and Panel Report on Brazil – Aircraft , para. 7.80. 
110 Id., para. 108, citing to Panel Reports on Canada –  Autos, para. 142; Australia – Leather II , 
para. 9.56; and Appellate Body Report on US – Softwood Lumber IV , para. 95 (quoting Appellate Body Report 
on US – Carbon Steel , paras. 73-74). WT/DS379/R 
Page 28  
 
 conclusion of the SCM Agreement, nor an instru ment made by any parties relating to the SCM 
Agreement, in the sense of Article 31 of the Vienna  Convention, nor one of the "covered agreements" 
set forth in Appendix 1 to the DSU.  They thus are not "context" as that term is used in the Vienna 
Convention.  Nor are the Draft Articles a sub sequent agreement or practice regarding the 
interpretation or application of the SCM Agreemen t.  A report of which the United Nations General 
Assembly merely "took note" in 2001 cannot, in the vi ew of the United States, inform the meaning of 
provisions of the WTO agreements that en tered into force almost six years earlier.
111  The 
United States also disagrees that the Draft Articles ar e a "relevant rule of international law" that are 
applicable in this case.  The United States furthe r considers that China inappropriately lifts the 
standards in the Draft Articles and reads them almost verbatim  into the SCM Agreement.  The 
United States argues that by their own terms, the Draf t Articles are inapplicable to an interpretation of 
Article 1.1(a)(1) of the SCM Agreement.112 
8.27 In this regard, the United States submits that th e Draft Articles state that their purpose is not 
to define the primary rules establishing obligations u nder international law, but rather to define when 
a state (as opposed to some other entity) is responsib le for a breach of those primary rules.  In the 
context of countervailing duties under the SCM Agreement, according to the United States the 
primary rule is contained in Article 10 of the SC M Agreement, and the question in the present dispute 
is whether the United States breached this primary obligation, about which the Draft Articles have 
nothing to say.113  The United States also notes the lex specialis  clause of the Draft Articles.  In the 
view of the United States, the SCM Agreement is a special rule of international law in the sense of 
that provision, which governs when a financial cont ribution occurs, and defines the "State" in a way 
that may produce different consequences from the Dr aft Articles, using the phrase "a government or 
any public body within the territory of a Member [. . .]", the proper interpretation of which is based on 
its ordinary meaning when read in its context and in light of the object and purpose of the SCM 
Agreement.  The United States argues that the standa rds in the Draft Articles thus have no relevance 
or application to the special rule in Article 1.1(a)(1) of the SCM Agreement.114 
8.28 The United States also disagrees that the Appellate Body in US – Countervailing Duty 
Investigation on DRAMS endorsed the principles in the Draft Articles.  Rather, in a footnote 
constituting dicta , the Appellate Body noted the unremarkabl e proposition that the conduct of private 
bodies is presumptively not attributable to the St ate and cited to the commentaries on the Draft 
Articles.  The question in US – Countervailing Duty Investigation on DRAMS , whether certain private 
bodies were entrusted or directed by the government w ithin the meaning of Article 1.1(a)(1)(iv) of the 
SCM Agreement, such that their provision of loans and equity was attributable to the government, is 
different from that in the present dispute, i.e. , whether certain entities constitute "public bodies" 
within the meaning of Article 1.1(a)(1) of the SCM Agreement, a question to which the Appellate 
Body did not speak in US – Countervailing Duty Investigation on DRAMS .115 
8.29 The United States further disagrees that the A ppellate Body found the Draft Articles to be 
relevant rules of international law.  The United States submits that the Appellate Body's comment 
only notes the existence of the Draft Articles, and appears in passing, making the reference to the 
Draft Articles all the less compelling.  By contr ast, in the view of the United States, China reads 
                                                      
111 United States first written submission, paras. 112-1 13; opening statement at the first meeting of the 
Panel, para. 18. 
112 United States first written submission, para. 114; second written submission, para. 47. 
113 United States first written submission, para. 115. 
114 Id., paras. 116-117. 
115 See, e.g.,  United States first written submission, para. 118; response to Panel question 16 (first 
meeting); second written submission, para. 41.  WT/DS379/R  
 Page 29 
 
 
 provisions of the Draft Articles into the SCM Agreem ent as integral parts of the text, although they 
are not relevant to interpreting the term "public body".116 
8.30 The United States agrees with the conclusion of the panel in Korea – Commercial Vessels  that 
"an entity will constitute a 'public body' if it is cont rolled by the government (or other public bodies)".  
In the view of the United States, this reasoning is consistent with the ordinary meaning of the term 
"public body" in its context and in light of  the object and purpose of the SCM Agreement.117  The 
United States states that majority government owners hip can demonstrate control, in that government 
ownership gives the government the ability to appoi nt managers and directors and thereby to oversee 
operations.  For the United States, it would be an u nusual situation where the owners of the entirety 
of, or a majority share in, a company could not appoint the leadership (and thereby oversee 
operations), or could not control the company.118  The United States thus agrees with the Korea – 
Commercial Vessels  panel that in all cases, public body stat us "can be determined on the basis of 
government (or other public body) control", and notes that in analyzing control, although the panel 
cited evidence that the government appointed various  entities' managers and directors, and that the 
government approved and oversaw the entities' opera tions, it gave the most weight to government 
ownership of the body.  It called the fact that one  bank was almost fully government-owned "highly 
relevant and arguably dete rminative" in the question of government control.119 
8.31 The United States submits that when concludi ng that a public body is one controlled by a 
government or other public body, the panel rejected Korea's argument that an entity is not a "public 
body" if it engages in market activities on commercial terms.  The panel noted that this would mean 
that the panel should apply the "benefit" test in a "public body" analysis, such that on one day a given 
entity could provide financing on ma rket terms, and thus constitute a "private" entity, while the next 
day it could make cash grants and then constitute a "public" body.  For that panel, "the question of 
whether an entity is a public body should not depe nd on an examination of whether that entity acts 
pursuant to commercial principles".  In the view of the United States, China repeats Korea's failed 
argument when it argues that an entity is only a p ublic body when it engages in government functions, 
not commercial activities.120  The United States also agrees with the Korea – Commercial Vessels  
panel that pursuit of a public policy objective is not essential to a public body determination.  The 
United States asserts that China's proposed elements of (i) legal authority to exercise functions of a 
governmental or public character, and (ii) actions perfo rmed in exercise of such authority, are similar 
to those rejected in Korea – Commercial Vessels .121  In the view of the United States, a standard of 
government ownership or control is consistent with the object and purpose of the SCM Agreement 
because it will ensure that subsid izing governments cannot hide behind their ownership interests, 
while at the same time not treating any entity wi th which a government has a merely tangential 
relationship as a public body.122 
8.32 The United States thus rejects China's argument th at ownership and control are irrelevant to a 
"public body" analysis, and are only relevant to an "entrustment or direction" analysis pursuant to 
Article 1.1(a)(1)(iv) of the SCM Agreement.  The United States asserts that most of China's argument 
on this point flows from its mistaken reliance upon the Draft Articles, in particular Article 5, which 
China analogizes to the public body question, and Arti cle 8, which it analogizes to the entrustment or 
                                                      
116 United States first written submission, para. 119. 
117 Id., para. 121, citing to Panel Report on Korea – Commercial Vessels , para. 7.50. 
118 Id., paras. 121 and 125. 
119 Id., paras. 124-125, citing to Panel Report on Korea – Commercial Vessels , paras. 7.50, 7.55, 7.172, 
7.353 and 7.356. 
120 Id., para. 122, citing to Panel Report on Korea – Commercial Vessels , paras. 7.44-45. 
121 Id., para. 123, citing to Panel Report on Korea – Commercial Vessels , para. 7.55. 
122 Id., para. 126. WT/DS379/R 
Page 30  
 
 direction question.
123  According to the United States, in US – Countervailing Duty Investigation on 
DRAMS  (which China cites in support of its argument concerning the Draft Articles), both the panel 
and Appellate Body recognized a distinction betw een, on the one hand, entities which potentially 
could be public bodies because they were owned or  controlled by a government and, on the other 
hand, entities which could not be public bodies beca use they were not owned or controlled by a 
government.  The Appellate Body noted that there were three classes of creditors in that case, 
following from the USDOC's grouping of the creditors in the countervailing duty investigation:  (A) 
public bodies; (B) government-owned or controlle d creditors; and (C) creditors not owned or 
controlled by the government.  The United States not es that some creditors in Group B were 100 per 
cent owned by the government, and recalls that the Appellate Body in this context cited the panel's 
statement that "in its view, the USDOC might have  been entitled to treat these 100 per cent-owned 
firms as 'public bodies', but having refused to so classify them, the USDOC was required to establish entrustment or direction with respect to such credito rs".  In the view of the United States, while this 
statement does not constitute a finding by the Appellate  Body or the panel in that case, it suggests that 
the distinction in that case was between creditors th at were owned or controlled by the government, 
on the one hand, and creditors that were not owne d or controlled by the government, on the other 
hand.  Those in the first group could be public b odies and those in the second group were entrusted or 
directed by the government or by public bodies.
124 
8.33 The United States considers this distinction important because, in its view, China posits a 
false dichotomy whereby ownership or control is relevant only to the question of entrustment or 
direction, but not to the question of whether an entity is a public body.  For the United States, 
ownership and control, while perhaps relevant in an  entrustment or direction analysis, are the central 
factors in a public body analysis, as was recognized by the panel and the Appellate Body in US – 
Countervailing Duty Investigation on DRAMS , and rightly adopted by the panel in Korea – 
Commercial Vessels .  Control, indicated by whole or majority ownership, can lead to a public body 
analysis, while the giving of responsibility to, or exercising authority over, an entity that is not 
necessarily government-owned or controlled will l ead to an entrustment or direction analysis.125 
8.34 The United States maintains that the USDOC's dete rminations in the investigations at issue 
that certain state-owned enterprise producers of HRS, rubber, and petrochemicals were "public 
bodies" are consistent with Article 1.1(a)(1) of th e SCM Agreement.  According to the United States, 
the USDOC applied a rule of majority ownership to  determine whether an entity was a public body, 
and found that if the government was the majority owner, then that producer was a public body.  
Given that the "public body" findings are consiste nt with the SCM Agreement, the United States 
argues that there was no need for the USDOC to determine whether the government entrusted or 
directed the state-owned enterprises to provide  goods for less than adequate remuneration.126 
8.35 Concerning the provision of loans by SOCBs in  the OTR investigation, and the USDOC's 
determination that the SOCBs in question were  public bodies, the United States rejects China's 
characterization that this determination was based on (i) whether there was a policy in place to 
provide preferential lending to the OTR industry, an d (ii) whether there was evidence that the SOCBs 
provided preferential loans to the industry pursuant to  this policy.  Rather, the United States argues, 
the USDOC relied upon "'all information on the record'" and its finding in the 2007 Coated Free 
Sheet Paper  countervailing duty investigation  (the " CFS Paper investigation").127  In the CFS Paper  
investigation, according to the United States, the USDOC found that the SOCBs were public bodies 
                                                      
123 United States first written submission, para. 131. 
124 Id., para. 132, citing to Appellate Body Report on US – Countervailing Duty Investigation on 
DRAMS , para. 131. 
125 Id., para. 133. 
126 Id., para. 135. 
127 Id., paras. 164-166.  WT/DS379/R  
 Page 31 
 
 
 on the basis that they were controlled by the government, in which connection "[g]overnment 
ownership of the banks, of course, figured prominen tly".  Other factors included the legacy of state 
control over the banks, the incomplete banking sector  reforms in China, and government involvement 
in bank decision-making.  The United States ar gues that the USDOC's finding in the OTR 
investigation thus was based on these same factors.128 
8.36 The United States rejects China's assertion th at the USDOC should have applied a fact-
intensive inquiry to determine whether the i nput producers were empowered by Chinese law to 
exercise governmental authority and in fact were exerci sing that authority, rather than applying a rule 
of majority ownership.  In the view of the United States, the USDOC's use of a five-factor approach in 
prior cases is irrelevant in the present dispute, as the only question for the Panel is whether the 
USDOC's determination in the challenged investiga tions that the Chinese state-owned enterprises are 
"public bod[ies]" is consiste nt with the SCM Agreement.129 
8.37 The United States nevertheless discusses the five-fa ctor test to clarify for the Panel some of 
China's statements.  In the count ervailing duty investigation of DRAMs from Korea , the USDOC 
analyzed five factors to determine whether entiti es were public bodies.  This approach was based 
upon factors analyzed in a 1987 investigation of Fresh Cut Flowers from the Netherlands  and a 1992 
investigation of Pure Magnesium and Alloy Magnesium from Canada .  The United States notes first 
that these two investigations pre-dated by many years the adoption in the SCM Agreement of the 
"public body" and "entrusts or directs" language, as well as the equivalent language in U.S. domestic 
law.130  In the Flowers  investigation, the relevant entity w as 50 per cent owned by the government, 
and it therefore was necessary to examine other factors, because majority ownership by the 
government was not present.  The USDOC concl uded that the government provided subsidies 
"through" this entity, but there is no way to tell whether this conclusion would be a "public body" finding or an "entrustment or direction" finding under today's standards.  In the Magnesium 
investigation, the USDOC found that an entity w as a "government entity" (which is probably more 
akin to today's "public body" term) based la rgely upon government ownership and control.
131 
8.38 In answer to a question from the Panel, the United States indicates that the USDOC also had 
applied the five-factor test in an investigation of Coated Paper from Korea , in an investigation and 
review of DRAMs from Korea , in an investigation of Hot-Rolled Steel Flat Products from South 
Africa , and in an initiation of an investigation of steel wire rod from various countries .  The 
United States indicated that in other cases, howev er, the USDOC had taken a different approach, 
analyzing primarily ownership or control.  Accordi ng to the United States, these past cases indicate 
that the USDOC approaches public body issues on a case-by-case basis, with the five-factor test 
usually arising where there is not clear evidence  of government ownership or control.  For the 
United States, this makes sense as most of the five  factors relate to ownership or control of an 
entity.132 
8.39 The United States thus considers that these past decisions do not indicate a USDOC 
interpretation of the "public body" languag e in the SCM Agreement.  Concerning the DRAMS from 
Korea investigation, the United States recalls that th e USDOC analyzed five factors and, as China 
notes, concluded that certain 100 per cent governme nt-owned banks in that case were not public 
bodies.  The United States submits that the critical factor explaining this determination that 100 per 
cent government-owned banks were not necessarily pub lic bodies was that, as the USDOC stated in 
that investigation, "temporary [government] ownership of the banks due to the financial crisis is not, 
                                                      
128 United States first written submission, paras. 166-167. 
129 Id., para. 137. 
130 Id., paras. 138-139. 
131 Id., para. 140. 
132 United States response to Panel question 22 (first meeting). WT/DS379/R 
Page 32  
 
 by itself, indicative that these banks are [government ] authorities".  Accordingly, the United States 
argues, the history of this issue makes clear th at the USDOC's analysis of more factors than 
ownership was born out of a case (the Flowers from the Netherlands  investigation) in which there was 
a 50-50 ownership split between the government  and a private entity.  Then, in the DRAMS from 
Korea  investigation, an analysis of more than owne rship, and even of entrustment or direction for 
some banks, was necessary due to the fact that th e Korean government had assumed many temporary 
ownership stakes as a result of the Korean financial crisis.
133  The United States considers logical the 
statement of the panel in US – Countervailing Duty Investigation on DRAMS  that "[d]epending on the 
circumstances, 100 percent government ownership mi ght well have justified the treatment of such 
creditors as public bodies".134  The United States further notes that in a subsequent countervailing duty 
administrative review of Hot-Rolled Carbon Steel Flat Products from India , the USDOC found that a 
98 per cent government-owned mining company governed by the Ministry of Steel was a public body, without reference to any more factors.
135 
8.40 Thus, in the view of the United States, the USDOC did not abandon any five-factor analysis, 
and no such analysis was either pertinent or n ecessary, in the cases in the present dispute.  
Furthermore, any five-factor analysis or abandonment thereof is irrelevant to the question before the 
Panel in the present dispute, that is, whether the US DOC's application of a rule of majority ownership 
to Chinese state-owned companies is consistent wi th the SCM Agreement.  In the view of the 
United States, while the discussion concerning the investigation of DRAMS from Korea  demonstrates 
that there may be situations in which government  ownership, even majority government ownership, 
may not be determinative of the public body question, the present dispute is not such a case.136 
8.41 Finally, concerning burden, the United States  objects to China's argument that the USDOC 
improperly placed the burden upon the Government of  China to provide evidence pertaining to the 
public body question.  The United States argues that given China's recognition in the Working Party Report that state-owned enterprises can be treat ed as public bodies, the USDOC's approach was 
entirely reasonable, and that there was no evidence on the record to suggest that Chinese state-owned 
enterprises should be treated any differently during th e four countervailing duty investigations at issue 
than what China committed to at the time of its accession to the WTO.  For these reasons, the 
United States asserts that the USDOC's findings that Chinese state-owned enterprises are "public 
bodies" are not inconsistent with the SCM Agre ement, and that accordingly, the USDOC had no 
obligation to consider whether these entities were  entrusted or directed to provide financial 
contributions.
137 
C. MAIN ARGUMENTS OF THE THIRD PARTIES  
1. Argentina 
8.42 Argentina disagrees with China that "welfare" a nd "best interests" are more relevant factors 
than government control to determine whether an en tity is a "public body" within the meaning of the 
SCM Agreement.  Argentina considers that the diffe rence between public and private in Article 1.1 of 
the SCM Agreement has to do with the corporate form  of control of entities and not with the ultimate 
destination of the goods and services that these entities provide.  In fact, Argentina argues, while there 
are public entities producing private goods, there ar e private entities producing public goods.  Thus, 
Argentina agrees with the standard of government control enunciated by the Korea – Commercial 
                                                      
133 United States first written submission, paras. 141-142. 
134 Id., para. 143, citing to Panel Report on US – Countervailing Duty Investigation on DRAMS , 
para. 7.8 and footnote 29. 
135 Id., para.143. 
136 Id., para. 144. 
137 Id., paras. 145-146.  WT/DS379/R  
 Page 33 
 
 
 Vessels  panel as the basis for determining whether an entity is a public body.  In Argentina's view, 
government ownership is sufficient to establish cont rol and to establish that an entity is a public body 
within the meaning of the SCM Agreement.138 
2. Australia 
8.43 Australia believes that, consistent with the findings of the Appellate Body in US – 
Countervailing Duty Investigation on DRAMS , it is important not to conflate the test for entrustment 
or direction (which has to do with the nature of the action being undertaken) with the definition of a 
public body (which has to do with the identity of the actor).  In Australia's view, the government 
control test enunciated in Korea – Commercial Vessels  is correct, and governme nt ownership is strong 
evidence of government control, but not necessarily de terminative.  Australia considers that the Draft 
Articles do not address the definition of "public body" , and that therefore they offer no interpretative 
assistance as to Article 1.1 of the Agreement.  Sim ilarly, Australia considers that the definition of 
"public entity" in paragraph 5(c) of the GATS Fi nancial Services Annex doe s not provide relevant 
interpretative context since this definition is limited to  the purpose of that agreement.  In Australia's 
view, an apparent interpretative recourse to "contex t" cannot be used to transform the scope of a 
provision in a way that is not otherwise available fro m the text.  Nor can interpretative context be used 
to include an additional test of exercising governme nt authority that is not apparent from the text, 
particularly when the inclusion of such a test would undermine the clear distinction between the 
definition of public body and the test for entrustment or direction.  Finally, Australia considers that 
paragraph 172 of China's Working Party Report provides historical ev idence of the nature of Chinese 
SOEs (including banks), rather than evidence of thei r current nature, but that such historical evidence 
could be relevant for assessing whether an entity is  a "public body" within the meaning of the SCM 
Agreement.139 
3. Brazil 
8.44 Brazil considers that majority state shareholding  does not suffice to char acterize an enterprise 
totally or partially-owned by the State as a "public body".  Rather, "public body" refers to an entity 
closely assimilated to the government itself and, consistent with the approach adopted by the 
Appellate Body in US – Countervailing Duty Investigation on DRAMS , the use of the term 
"government" throughout the Agreement – to refer i ndistinctly to "a government or any public body" 
– emphasizes the closeness of the nexus between bo th concepts.  Brazil believes that an entity is 
closely assimilated to the government if it performs functions and exercises attributions that are 
typical of the government, and that this understanding  is confirmed by the Draft Articles and by the 
Appellate Body precedents.  Relying on the Appellate Body's reasoning in US – Countervailing Duty 
Investigation on DRAMS , Brazil considers that ownership is not  determinative but that it may be one 
relevant element in assessing both if an entity has the nature of a "public body" or if it is a "private 
body" entrusted or directed by the government.  Thus, for Brazil, investigating authorities must establish whether the government entrusted or dir ected a company which, albeit owned or controlled 
by the government, is prima facie  a private entity; or if investigating authorities believe that such 
company has the nature of a public body, they must  establish that the company is closely assimilated 
to the government itself.  In Brazil's view, the anti-circumvention objective in the SCM Agreement 
was meant to be achieved through the standard of "e ntrustment or direction" and not by a broad and 
"fast track" interpretation of the term "public bo dy" which, Brazil adds, would rather allow the 
                                                     
 
138 Argentina third-party submission, paras. 39 and 47-48. 
139 Australia third-party submission, paras. 9-13; third-party oral statement, paras. 10-14; third-party 
response to Panel question 1(a). WT/DS379/R 
Page 34  
 
 circumvention of the steps provided for in Article  1.1(a) for the determination of a financial 
contribution.
140 
4. Canada 
8.45 Canada believes that government control determ ines whether an entity is a "public body", 
consistent with the findings of the Korea – Commercial Vessels  panel which, according to Canada, 
found that control was "evidenced primarily" by the fact that an entity was wholly government-
owned.  Canada also notes that upon its accession to the WTO, China con ceded that its SOEs 
constitute public bodies.  Further, Canada argues that  China's interpretation of the term "public body" 
would render such term inutile , i.e., in the case of government provision of goods, SOEs would 
putatively be "private bodies" except where they ar e exercising governmental authority attributed to 
them by the law of the State to sell such goods.  Thus, Canada argues, there would be no need for 
SOEs to be defined as "public bodies" for their ac tions to be considered as a financial contribution 
under Article 1.1 (a)(1)(iii).  In ad dition, Canada argues that under China's interpretation of "public 
body", sales made by Chinese SOEs would not be  considered "financial contributions" under 
Article 1.1(a)(1)(iii).  Moreover, Canada agrees w ith the United States that the term "private" 
excludes the notion of being owned by the State, and argues that sales made by Chinese SOEs also 
could not be considered "financial contribution" under Article 1.1 (a)(1)(iv).  As a result, Canada 
submits that under China's interpretation, a gove rnment could do indirectly (through an entity it 
controls) what it cannot do directly (i.e., to pr ovide goods without the application of the SCM 
Agreement's disciplines).  Thus, in Canada's view, Ch ina's interpretation is inconsistent with the main 
object and purpose of the SCM Agreement.141 
5. European Communities 
8.46 The European Communities considers that the Panel should examine China's Working Party 
Report in assessing whether the SOEs at issue are "pub lic bodies".  Regarding Article 1.1 of the SCM 
Agreement, the European Commun ities considers that the terms "government" and "public body" 
should be understood as equivalents, since Article 1.1( a)(1) states that both are "referred to in this 
Agreement as 'government'".  The European Comm unities also considers that a high level of 
government ownership is a very rele vant factor in determining whethe r an entity is a "public body" in 
the sense of the Agreement, and notes that previous panels and the Appellate Body have considered 
this factor (although among other factors) in determin ing whether an action by an entity is attributable 
(directly or indirectly) to the government.  The Eu ropean Communities does not consider that a test, 
such as the "five-factor" test alleged by Ch ina, is required by the SCM Agreement.142 
6. Japan 
8.47 Japan considers that the Draft Articles are irrele vant to interpreting the term "public body", in 
particular that they neither define nor use the term "public body" in any way.  Japan points to the fact 
that Members agreed to the defi nition of "public entity" in para graph 5(c) of the GATS Financial 
Services Annex as suggesting that Members did not import this definition into the SCM Agreement 
but rather left the term "public body" undefined.  Japan also considers that no provision of the WTO 
Agreements suggests that a "public body" under Ar ticle 1.1(a)(1) of the SCM Agreement would be 
limited to entities that have been empowered by the "l aw of the State", and that the scope of this term 
should be rather examined in accordance with the partic ular facts of any given case.  Thus, Japan is of 
the view that the consistency of the USDOC's fi ndings of public bodies should be examined based on 
                                                      
140 Brazil third-party submission, paras. 4-12; third-party oral statement, paras. 3-7. 
141 Canada third-party submission, paras. 10-17; third-party response to Panel questions 1 and 2. 
142 European Communities third-party submission, paras. 6-12; third-party response to Panel 
question 1.  WT/DS379/R  
 Page 35 
 
 
 the totality of the facts underlying the investigati ons at issue.  Japan agrees with China that 
government ownership does not conclusively est ablish that an entity is a "public body".143 
7. India 
8.48 India considers that the ordinary meaning of the term "public body" does not warrant a 
presumption that government control or ownership ar e sufficient to determine that a company is a 
"public body".  India is of the view that a high level of government ownership may be a pertinent 
factor, but not determinant for determining whether an entity is a "public body", and that such an 
interpretation is consistent with  previous WTO cases where panels have looked at the level of 
government ownership and at "other" re levant factors.  India also cons iders that in order to consider 
an entity closely assimilated to the government, such assimilation must go beyond mere ownership 
and the entity must perform functions or attributions  that are typical of the government.  Finally, India 
states that because government ownership is consider ed insufficient as to guar antee "entrustment" in 
Article 1.1(a)(1)(iv), it is even more implausible to argue that ownership brings to the conclusion that 
an entity is a "public body".144 
8. Mexico 
8.49 Mexico considers that China's interpretation of  "public body" is erroneous.  According to 
Mexico, this interpretation is not only inconsiste nt with the Working Party Report but also would 
exclude public enterprises that provide goods and ser vices as provided for in Article 1.1(a)(1)(iii) of 
the Agreement.  Mexico further notes that in US – Countervailing Duty Investigation on DRAMS  the 
Appellate Body did not address the definition of "p ublic body", nor did the Appellate Body determine 
that the "public" characterization of an entity was dependant on the way in which such entity acts.  
Mexico adds that whether an entity acts in accordance with market prin ciples is relevant to the benefit 
determination but that whether an entity is a "public  body" must be determined on the basis the level 
of government ownership.  Mexico also considers th at the Draft Articles are irrelevant to interpreting 
the term "public body" (i.e., the concept of "publi c entity" in the Draft Articles is limited to the 
context of "wrongful acts", whereas subsidies under the WTO rules are not considered wrongful acts) 
and that the fact that a term appears in several WTO Agreements does not imply that its meaning is 
the same in all agreements (i.e., the ordinary meaning of a term s hould be determined in its context 
and in light of the purpose of the Agreement in wh ich the term appears).  According to Mexico, an 
entity is a "public body" if it is controlled by the government and there is evidence that the government, in fact, exercises such control.  Mexico considers that this interpretation is consistent 
with the ordinary meaning of this term, arguing th at according to the "Dictionario Esencial de la 
Lengua Española", "public body" means any legal person that belongs to the State.
145 
9. Norway 
8.50 Norway considers that Article 1.1(a)(1)(iv) of the Agreement is relevant to interpreting the 
term "public body" in the SCM Agreement.  Accordi ng to Norway, this provision makes clear that the 
distinction between "public bodies" and "private  bodies" rests on whether the body in question 
performs governmental functions or not.  That is, if the body does not perform governmental 
functions, any financial contribution it provides is onl y attributable to the State if the government has 
entrusted or directed it to provide such contribution.  Although the panel reports on EC – 
Countervailing Measures on DRAM Chips  and Korea – Commercial Vessels  are differently worded 
(i.e., while the former considered 100 per cent owners hip as insufficient to establish "entrustment" or 
                                                      
143 Japan third-party submission, paras. 16-21. 
144 India third-party submission.  (This submission contains no paragraph numbering). 
145 Mexico third-party submission, paras. 38-43 and 47; third-party oral statement, paras. 10-11 and 13-
16; third-party response to Panel questions 1 and 2. WT/DS379/R 
Page 36  
 
 "direction", the latter considered that such percenta ge (among other factors) was sufficient to establish 
that an entity was a public body), Norway consid ers that both reports support the position that 
government ownership is not sufficient, in itself, to  determine that an entity is a "public body", and 
that other factors (in particular, the exercise of  governmental functions) must be present.  Thus, 
Norway submits, not all companies with more th an 50 per cent government ownership (or even 
100 per cent ownership) are automatically to be  considered "public bodies", but rather, the 
determining factor would be whether th e body exercises "governmental functions".
146 
10. Saudi Arabia 
8.51 Saudi Arabia considers that the term "public  body" refers to an entity vested with 
governmental authority that exercises governmental functions and that government ownership (alone) 
does not suffice to deem an entit y a "public body" under the Agr eement.  Saudi Arabia argues, inter 
alia, that:  (i) the terms "organismo publico" and "organisme public" (in the Spanish and French 
versions of the Agreement, respectively) refer i ndistinctively to both "public body" and "government 
agency", and that in Canada – Dairy  the Appellate Body interpreted both terms to mean an entity that 
"exercises powers vested in it by a government to perform functions of governmental character"; (ii) 
the drafters considered the terms "government " and "public body" to be equivalents since 
Article 1.1(a)(1) states that both are to be "referred to in this Agreem ent as 'government'"; (iii) the fact 
that "public bodies" can "entrust or direct" private bodies confirms that they must possess some sort of 
governmental authority; (iv) consiste ntly with the panel's finding in EC – Countervailing Measures on 
DRAM Chips , state ownership is not sufficient to conclude that an entity is entrusted or directed and, 
thus, a fortiori , such ownership is not sufficient to consider  an entity to be a "public body", as such a 
finding would eliminate the need to determine the existence of entrustment or direction; (v) in US – 
Countervailing Duty Investigation on DRAMS  the Appellate Body accepted, in the context of 
Article 1 of the Agreement, the Draft Articles' c onclusion that the conduct of state-owned entities is 
not attributable to the State "unless they are exercising elements of governmental authority"; (vi) in Korea – Commercial Vessels , the panel's findings were based on "control" and not "ownership" and 
therefore that report supports that a "public body" is  an entity that is controlled by the government; 
and (v) the GATS definition of "public entity", whic h requires more than mere government ownership 
or control, provides useful context to interpreti ng "public body" in the SCM Agreement.  Finally, 
Saudi Arabia considers that China's Working Pa rty Report should not be used as the basis for 
interpreting the term "public bodies", i.e., the Work ing Party Report contains commitments specific to 
China, while the WTO Agreement, including Article  1 of the SCM Agreement, applies to all WTO 
Members.
147 
11. Turkey 
8.52 Turkey considers the terms "government" and "p ublic body" in Article 1.1(a)(1) of the SCM 
Agreement as distinct, and thus requi ring to be constructed differently.  Namely, Turkey is of the view 
that institutions falling under the definition of th e term "government" cannot be classified as "public 
bodies".  According to Turkey, China's interpretation narrows the actual meaning of the term "public 
body" and equates it to the term "government", a nnulling therefore the distinction between the two 
terms and rendering the term "public body" meani ngless.  Turkey considers both the Draft Articles 
and the GATS Financial Services Annex to be irrele vant.  In Turkey's view, the Draft Articles' lex 
specialis  clause makes it impossible to apply them, and the GATS Financial Services Annex makes 
clear that the definition provided therein applies "f or the purposes of [that] Annex" exclusively.  
Turkey agrees with the panel in Korea – Commercial Vessels  that government control is the most 
                                                      
146 Norway third-party submission, paras. 12-21. 
147 Saudi Arabia third-party submission, paras. 23-28, 32-46 and 47-50; third-party oral statement, 
paras. 2-12.  WT/DS379/R  
 Page 37 
 
 
 proper criterion for determining whether an entity is  a "public body", and that government ownership 
is the main indicator of control.148 
D. ASSESSMENT BY THE PANEL  
1. Interpretation of the term "public body" in Article 1.1(a)(1) of the SCM Agreement 
8.53 In examining China's claims concerning the US DOC's determinations in all four of the 
countervailing duty investigations at issue in this dispute that the SOEs that provided certain inputs 
were public bodies, and in the OTR investigation that  the SOCBs that provided loans also were public 
bodies, the first issue that we must address is the meaning of the term "public body" in Article 1.1(a)(1) of the SCM Agreement. 
8.54 The relevant text of Article 1.1 of the SCM Agreement reads as follows: 
"1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if: 
(a)(1) there is a financial contribution by a government  or any public body  within 
the territory of a Member (referred to  in this Agreement as "government"), 
i.e. where: 
[...] 
(iv) a government makes payments to a funding mechanism, or entrusts or directs 
a private body  to carry out one or more of the type of functions illustrated 
[...] above."  (emphasis added) 
On its face, Article 1.1 of the SCM Agreement id entifies three possible types of actors that could 
convey government financial contri butions:  "governments", "public bodies", and "private bodies" that 
have been "entrusted or directed" by the government to make a financial contribution.  Given that the 
USDOC found that the entities in question were "pub lic bodies", the focus of China's claim is the 
meaning of the term "public body" in the SCM Agreement.  We note nevertheless that we must interpret the entire phrase "a government or any pub lic body within the territory of a Member 
(referred to in this Agreement as 'governme nt')" in order to find that meaning. 
8.55 We recall that China's argument is that the terms "government" and "public body" are 
"functional equivalents", with the meaning of th e latter (while not identical to "a government")
149 
being "'an entity which exercises powers [or author ity] vested in it by a 'government' for the purpose 
of performing functions of a 'governmental' characte r'" (in essence, the same definition as that given 
by the Appellate Body to the term "government  agency" in Article 9.1 of the Agreement on 
Agriculture).150  For the United States, on the other hand , the terms "government" and "public body" 
have distinct meanings.151  The particular interpretative questi on thus posed by China's claim is how 
broad or narrow a meaning should be given to the te rm "public body", as used in Article 1.1(a)(1) of 
the SCM Agreement. 
8.56 We note that the interpretative process under Artic le 31 of the Vienna Convention is a holistic 
one, that the ordinary meaning of treaty terms may be  ascertained only in their context and in light of 
                                                      
148 Turkey third-party submission, paras. 4-25; third-party oral statement, paras. 4-8. 
149 China second written submission, paras. 15-16. 
150 China first written submission, para. 55, paraphrasing the definition of "government agency" set 
forth by the Appellate Body in Canada – Dairy . 
151 United States first written submission, para. 98. WT/DS379/R 
Page 38  
 
 the object and purpose of the treaty
152, and that dictionary meanings alone are not necessarily capable 
of resolving complex questions of interpretation.153  That said, the task of interpreting a treaty must 
begin with its specific terms.154 
8.57 As the SCM Agreement contains no definition of either "government" or "public body", 
dictionary definitions provide a useful starting point .  The definitions of "government" include:  "The 
governing power in a State; the body or successive bodies of people governing a State; the State as an 
agent; an administration, a ministry".155  The definition of "to form a government" is consistent with 
this definition:  "Establish an administration, esp. after a general election".156  These definitions seem 
to conform to the meaning of this term in comm on parlance as referring to the formal organs of 
government (agencies, offices, ministries, etc.).  Th is is in fact the meaning ascribed to the term 
"government" by both parties. 
8.58 The dictionary definition of "public" includes th e following:  "Of or pertaining to the people 
as a whole; belonging to, affecting, or concerning the community or nation".157  Both parties submit 
definitions of the term "public" that are similar to  this.  China also submits additional definitions 
which, in its view, indicate that the essential elem ents of a "public" body are that it acts for the 
welfare and best interests of a nation or community  as a whole, and does so under the authority of, or 
officially on behalf of, the nation or community as a whole.158 
8.59 The dictionary definition of "body" includes:  "a group of individuals regarded as an entity; a 
corporation"159; and "a number of individua ls spoken of collectively, usually as united by some 
common tie, or as organized for some purpose; a coll ective whole or totality; a corporation; as, a 
legislative body, a clerical body".160  On the basis of these definitions, therefore, the term "public 
body" standing alone could include, inter alia , "corporations" "belonging to the community or 
nation".  We note here that there seems to be no universally-accepted definition of the term "public 
body", and China has not put one forward.  We recall that China argues that the dictionary definitions 
of the word "public" compel a narrow reading of the term "public body" as something functionally 
equivalent to "government agency" or "government", i.e., as an entity authorized by law to exercise 
functions of a governmental or public character, who se acts are performed in the exercise of such 
authority.  We consider that the above definitions would appear to encompass, but could not be said to 
be limited to, such entities. 
8.60 Nor, in practice, do governments share a uniform and narrowly-drawn meaning of the term 
"public body" such that as proposed  by China in their actual usage.   To the contrary, different 
jurisdictions have varying definiti ons and practices as to what for purposes of their own domestic laws 
                                                      
152 Appellate Body Report on China – Publications and Audiovisual Products , para. 348. 
153 Appellate Body Report on  US – Gambling , para. 164. 
154 Appellate Body Report on US – Carbon Steel , para. 62. 
155 Shorter Oxford English Dictionary, L. Brown (ed.) (Claredon Press, 1993), Vol. I, p. 1123 (the 
"Shorter Oxford English Dictionary"). 
156 Id., Vol. I, p. 1123. 
157 Id., Vol. II, p. 2404. 
158 China first written submission, para. 51.  The definitions submitted by China are:  "of or relating to 
the people as a whole; that belongs to, affects or concerns the community or the nation"; "authorized by, serving 
or representing, the community; carried out or made on behalf of the community or State"; "aimed at or devoted to the promotion of the general welfare; committed to the best interests of the community or nation"; "[a]cting in 
an official capacity on behalf  of the people as a whole"; "of, relating to, or affecting all the people or the whole 
area of a nation or state … of or relating to a government"; and "relating or belonging to an entire community, 
state, or nation".  (Id., para. 50). 
159 Free Dictionary online  (accessed 28 April 2010) <http://www.thefreedictionary.com >. 
160 Accurate and Reliable Dictionary online (accessed 28 April 2010) <h ttp://ardictionary.com/>.  
(emphasis added)  WT/DS379/R  
 Page 39 
 
 
 and systems are considered "public bodies".  So me of these go well beyond government agencies or 
similar organs of government, and include, inter alia , government-owned or -controlled corporations 
providing goods and/or services.161 
8.61 We also consider the French and Spanish versions of Article 1.1(a)(1) of the SCM 
Agreement, and in particular, of the term "pub lic body", about which the parties have presented 
arguments.  The French term for public body is "o rganisme public", and the Spanish is "organismo 
público".  In French, the word "organisme" (in th e non-biological sense) has the broad meaning of an 
organized grouping of elements (persons, offi ces, etc.) working to a common purpose (e.g., 
"institution formée d'un ensemble d'éléments c oordonnés entre eux et remplissant des fonctions 
déterminées; […] , chacun des services ainsi coordonnés, ou des associations de personnes les 
constituant"162, and "[e]nsemble des services, des bureaux affectés à une tâche").163  The French word 
"public" also has a broad meaning, including related to, belonging to, or controlled by the State (e.g., 
"d'État, qui est sous contrôle de l'État, qui appartie nt à l'État, qui dépend de l'État, géré par l'État").164  
The Spanish term "organismo" is defined similarl y to the French "organisme" as referring to a 
grouping of elements forming a body or institution  (e.g., "conjunto de oficinas, dependencias o 
empleos que forman un cuerpo o institución").165  The Spanish term "público", like the French 
"public", is defined as belonging to or related to  the government (e.g., "perteneciente o relativo al 
Estado o a otra administración").166  Here, as in the English, we co nsider that while these definitions 
                                                      
161 We note two examples: 
  Example 1 :  (from Free Dictionary online  (accessed 28 April 2010) 
<http://encyclopedia.thefreedictionary.com/Scottish+public+bodies>):   
"Scottish public bodies are a group of organizations that are funded by the Scottish Government.  It includes executive and adviso ry non-departmental public bodies [...]; 
tribunals, and nationalised industries
.  These bodies are distinct from executive agencies of the 
Scottish Government, as they are not considered to be part of the Government and staff of public bodies are not civil servants".  (emphasis added) 
 
 Example 2 :  (from EC Commission Research Directorate note on "Public bodies in 
FP6 contracts", (accessed 28 April 2010 ) <http://ec.europa.eu/research/fp6/model-
contract/pdf/fp6-public-bodies-annex5231_en.pdf>):   
"What is a public sector body ? 
Any
 public authority or entity set up under public law by a state or one of its authorities  (e.g. 
government). Even if such an entity has a lega l personality (e.g. French universities), it acts on 
behalf of the State with regard to and within the limits of its specifi c areas or competencies. 
Activities carried out by such authorities or entities may be of a commercial nature ".  
(emphasis added)  
162 "Institution composed of inter-related elements, and performing a specific function; each of the 
services thus coordinated, or of the associations of the persons comprising it".  ( Centre National de Ressources 
Textuelles et Lexicales (accessed 28 April 2010) <http://www .cnrtl.fr/definition/organisme>). 
163 "Ensemble of services and offices devoted to a task".  (Le Nouveau Petit Robert, J. Rey-Debove and 
A. Rey (ed.) (Dictionnaires Le Robert, 2002), p. 1798). 
164 "Of the State, that is controlled by the State, that belongs to the St ate, that depends on the State, that 
is run by the State".  ( Centre National de Ressources Textuelles et Lexicales (accessed 28 April 2010) 
<http://www.cnrtl.fr/def inition/public>).  See also Le Nouveau Petit Robert, J. Rey-Debove and A. Rey (ed.) 
(Dictionnaires Le Robert, 2002), p. 2114)):  "Qui concerne le peuple pris dans son ensemble, qui appartient à la 
collectivité sociale, politique et en émane; qui appartient  à l'État ou à une personne administrative [...]" ("That 
relates to the people taken in its totality, that belongs to society, the body politic, and emanates from it; that belongs to the State or to an administrative entity"). 
165 "Group of offices, dependencies or employments that form a body or institution".  ( Real Academia 
Española Dictionary online (accessed 28 April 2010) <http://buscon.rae.es/draeI/>). 
166 "Belonging or related to the State or other administration".  ( Real Academia Española Dictionary 
online  (accessed 28 April 2010) <http://www.rae.es>).  We note that this is the Spanish definition put forward WT/DS379/R 
Page 40  
 
 could encompass the narrow meaning espoused by Ch ina of the term public body, or organisme 
public, or organismo público, we see no indication that they are limited to that meaning. 
8.62 Our view is confirmed by examples that we fi nd of uses of the terms "organisme public" and 
"organismo público" to cover, inter alia , government-owned or -controlled entities that are engaged in 
activities other than those of a strictly governmental character.  For example, in French one use of the 
term "organisme public" (identified as a synonym of  the term "organisme gouvernemental") is a body 
or entity created by a law or decree, the majority of whose directors are appointed by the government 
or a minister, and which has a certain autonomy, ev en if a large part of its global financing comes 
from the State.
167  The synonymous term "organisme gouvernmental" in turn can mean "distinguished 
from the Ministerial apparatus, from other decentr alized public entities, and from entities covered by 
private law", and as including "State enterprises", whose "main function is [...] of a commercial, 
financial or industrial nature, and which seeks to be self-financing".168  An example in Spanish is 
Spain's Law 6/1997 of 14 April 1997, on the Organization and Functi oning of the General 
Administration of the State, which identifies th ree types of "organismos públicos":  "autonomous 
bodies", "public business entities", and "State agencies".169  Not only do the above sources showing 
various governments' usages give meaning to th e terms "organisme public (gouvernemental)" and 
"organismo público" that go well beyond government agencies and formal arms  of the government as 
such, both also include as public bodies certain  "business" entities owned and/or controlled by 
governments. 
8.63 Given the above, we are not persuaded by Chin a's argument that the meaning of the terms 
"organisme public" and "organismo público" is lim ited to "government agency" or other entity vested 
with and exercising governmental authority, and thus  that the English term "public body" must be 
understood to be the "functional equi valent" of "government".  China bases this argument principally 
on the fact that the English term "governments or their agencies" in Article 9.1 of the Agreement on 
Agriculture appears in the Spanish version as " gobiernos o [...] organismos públicos", and on the 
French and Spanish versions of  the Appellate Body Report in Canada – Dairy , in which the English 
term "government agency" is translated respectiv ely as "organisme public" and "organismo público".  
China also cites the OECD Economics Glossary whic h translates "organisme public" as "government 
agency" in this context.  While these definitions and usages indicate that "public body" can have the 
narrow meaning of "government agency" or similar entity, as discussed above we have found other 
definitions and usages showing a broader possible sc ope.  We thus do not cons ider this definitional 
                                                                                                                                                                     
by China for the word "público".  While China translates th e term "perteneciente a" as  "pertaining to", in fact 
this term connotes "belonging to".  ( See, e.g.,  The Oxford Spanish Dictionary, B. Galimberti (ed.) (Oxford 
University Press, 2003), p. 630; Spanish Dict online  (accessed 28 April 2010) 
<http://www.spanishdict.com/translate/perteneciente>). 
167 "Organisme créé par une loi ou un décret dont la majorité des dirigeants et des administrateurs sont 
nommés par le gouvernement ou par l'un de ses ministres, et qui jouit d'une certaine autonomie, même si une 
bonne part de son financement global provient de l'État. Synonyme : organisme gouvernemental".  (Johanne 
Turbide et al,  HEC Montreal, Chaire de gestion des arts,  "Règles de Base TPS-TVQ pour les OBNL Culturels" 
(accessed 28 April 2010) <http://www.gestiondesarts.com/index.php?id=1519>). 
168 "[…] les sociétés d’État, dont la fonction dominante est la gestion de nature commerciale, financière 
ou industrielle tout en poursuivant un objectif d’autofi nancement".  (ENAP, L'Observatoire de l'administration 
publique, "Les organismes gouvernment aux" (2010) (accessed 28 April 2010) 
<http://www.etatquebecois.enap.ca/docs/s te/organisation/a-organismes.pdf>). 
169 In particular, Article 43.1 of this Law reads:   
"1. Los Organismos públicos se clasifican en: 
 a. Organismos autónomos. 
 b. Entidades públicas empresariales. c. Agencias Estatales, que se regirán por su normativa específica y, supletoriamente, 
por esta Ley."  WT/DS379/R  
 Page 41 
 
 
 analysis to give a conclusive answer to how the term "public body", as it appears in the SCM 
Agreement, should be understood. 
8.64 Indeed, as noted, a treaty term can only be prope rly understood in its context and in the light 
of the object and purpose of the treaty, and we thus  now turn to the immediate context of the term 
"public body" in Article 1.1(a)(1) of the SCM Agre ement, and in particular how "public body" is 
related to the term "a government" in  the drafting of the provision.  In this regard, the question raised 
by China's claim is whether the clause " a government or any public body  within the territory of a 
Member (referred to in this Agreement as  'government' )", by collectively referring to the two terms "a 
government" and "any public body"  as "government", means that these terms must be read as 
"functional equivalents", such that a "public body" must possess characteristics similar to those of a 
government, i.e., must be an entity which "exercises powers [or authority] vested in it by a 
'government' for the purposes of performing f unctions of a 'governmental' character". 
8.65 We consider significant that in Article 1.1( a)(1) the terms "a government" and "any public 
body" are separated by the disjunctive "or", suggesting that they are two separate concepts rather than 
a single concept or nearly synonymous.  In addition,  the use of the word "a" before "government" at 
the beginning of the clause, and the use of the word "any" before "public body", further suggest that 
these terms have separate meanings.  Furthermore, the word "any" before "public body" suggests a 
rather broader than narrower meani ng of that term, i.e., as referring to "public bodies" of "any" kind.  
Taking these contextual elements together suggests a meaning of the term "public body" as something 
separate from and broader than "government" or "govern ment agency", and we consider that given the 
use of the words "a", "or" and "any", this read ing of the phrase "a government or any public body" 
gives meaning to that phrase as a whole. 
8.66 We now turn to the collective term "governme nt" that is equated to the entire phrase "a 
government or any public body within the territory of a Member" in the clause at issue.  We recall that 
the phrase as a whole reads:  "a government or an y public body within the territory of a Member 
(referred to in this Agreement as 'government')".  Wh ile for China, the use of  the collective expression 
"government" compels a reading of the terms "a government" and "any public body" as "functional 
equivalents", we consider more likely that the u se of the collective expression is merely a device to 
simplify the drafting, to avoid having to repeat the entire phrase "a government or any public body" throughout the SCM Agreement.  This can easily be the case even if the two elements "a government" 
and "any public body" have very distinct mean ings.  We note that a similar drafting device is 
employed in Article 2.1 of the SCM Agreement, on specificity, where the undeniably very different 
concepts of "an enterprise or industry or group of en terprises or industries" are collectively referred to 
as "certain enterprises".  In our view, this collec tive expression is used to simplify the drafting of 
Article 2, as it obviates the need to repeat the en tire long phrase "an enterprise or industry or group of 
enterprises or industries" every time this concept appear s in the text.  Yet, given that the term "certain 
enterprises" is defined as having the meaning of the longer phrase, where "certain enterprises" appears 
in Article 2 it must, by definition, refer to any
 of its underlying constituent elements.  Thus, a subsidy 
that is limited to a single enterprise ("an enterp rise") is, for purposes of the SCM Agreement, limited 
to "certain enterprises".  Equally, a subsidy that is limited to, e.g., three industries (i.e., a "group of 
industries") also is limited to "certain enterprises".  This does not mean that a single enterprise is the 
functional equivalent of, or synonym ous with, a group of industries.  No r must this be the case for the 
term "certain enterprises" to make sense in the text  of the Agreement.  In the same way, while the 
drafting of the phrase that we are examining does not  on its face exclude an interpretation of the terms 
"any public body" and "a govern ment" as "functional equivalents" , the latter referring to entities 
vested with and exercising governmental authority,  such an interpretation is certainly not necessary 
for the collective term "government" to make sens e in the text of the SCM Agreement.  To the 
contrary, entities of whatever type controlled by governments, along with formal governmental 
organs, could all be encompassed by the collective term "government" as that term subsequently is 
used throughout the Agreement. WT/DS379/R 
Page 42  
 
 8.67 The phrase "within the territory of a Member" that also appears in the same phrase in 
Article 1.1(a)(1) of the SCM Agreement provides ad ditional immediate context, as a further modifier 
to the collective term "government" that appear s in parentheses and that encompasses both "a 
government" and "any public body".  Again, the entire phrase in Article 1.1(a)(1) reads "by a 
government or any public body within the territory of a Member  (referred to in this Agreement as 
'government')".  This phrase seems to say, in es sence, that where the author of the financial 
contribution is either an executive organ of any level of government, or a public body of any kind at any level of government, within the territory of a Member, the Agreement considers the financial 
contribution to have been made by the "government" of  that "Member" (directly).  In other words, the 
drafting "a government […] within the territory of  a Member" seems to connote a broad reading of the 
term "a government" to cover whatev er forms and organs of government , be they national, provincial, 
municipal, etc., that may be present within the territory of a given Member.  Similarly, the word "any" before "public body" also conveys a broad sense of that term, particularly when coupled with the phrase "within the territory of a Member", reinforc ing that the word "or" means that "any public 
body" is something other than "a government" as such.  Seen in its totality, th erefore, in our view the 
collective term "government" – which equates to "a government within the territory of a Member, or 
any public body within the territory of a Memb er" – conveys breadth, suggesting a wide range of 
different possible types of entities whether formally part of, or owned by, or controlled by, any level 
of government. 
8.68 Perhaps the most important contextual element in  Article 1.1(a)(1) is the term "private body" 
in Article 1.1(a)(1)(iv), and its relationship with th e terms "a government" and "any public body".  In 
particular, we note that Article 1.1(a)(1) describes three kinds of potential providers of subsidies for 
purposes of the SCM Agreement, namely "government s", "public bodies" and "private bodies".  From 
the standpoint of pure logic, this is a complete  universe of all potential actors:  every entity 
(individual, corporation, association, agency, Mi nistry, etc.) must fall into one of these three 
categories.  In other words, the SCM Agreement does not a priori  rule out any
 entity from potentially  
coming within its scope.  The specific question raised in this dispute is whether wholly or majority 
government-owned enterprises that produce and sell goods and services are more appropriately categorized as "governments", "public bodies" or  "private bodies" for purposes of the SCM 
Agreement.  Neither party argues, and we do not co nsider, that such enterprises could in any way be 
termed "government" as such.  Rather, China's argumen t is that such enterpri ses are, as a matter of 
law, presumptively "private bodies", whose actions would be covered by the SCM Agreement only to 
the extent that those actions were the result of "ent rustment or direction" by a government.  Thus, the 
question is the correct basis on which to distinguish between "public" and "private" bodies. 
8.69 We find the dictionary definitions of the terms "private enterprise" ("a business etc. that is 
privately owned and not
 under State control ")170, and "public sector" ("that part of an economy, 
industry etc. controlled  by the State")171 helpful in understanding the relationship between the terms 
"private body" and "public  body".  In particular, these definiti ons taken together suggest that a 
"public" body is any entity that is under State c ontrol, while a "private" body is an entity not 
controlled by the State, and that ownership is highly relevant to the question of control, a point which 
we address below.  This is fully in keeping with the everyday notions of "private" meaning unrelated 
to the government, and "public" meaning governmental in  some sense.  It also is consistent with the 
usage of the term "public body" (and its French a nd Spanish equivalents) by  various governments, as 
discussed above.  If we were nonetheless to interpre t the term "public body" narrowly, as meaning 
government agencies and other entities vested with and exercising governmental authority, and as 
presumptively excluding government-owned and/or gove rnment-controlled enterprises, by default this 
                                                      
170 Shorter Oxford English Dictionary, Vol. II, p. 2359.  (emphasis added). 
171 Id.  (emphasis added).  WT/DS379/R  
 Page 43 
 
 
 would mean that such entities would be "private bodies".172  In our view, such a reading would 
constitute a complete reversal of the ordinary me aning of the term "priva te body", and we find no 
support for in the text of the SCM Agreement for such a reversal. 
8.70 A further contextual element informing the mean ing of the term "any public body" is the list 
of types of financial contributions in Article 1.1(a)(1)(i)-(iii), i.e.: 
"(i) a government practice involves a direct transfer of funds (e.g. grants, loans,  
and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees); 
(ii) government revenue that is otherwi se due is foregone or not collected (e.g. 
fiscal incentives such as tax credits) [footnote omitted]; 
(iii) a government provides goods or service s other than general infrastructure, or 
purchases goods". 
In particular, pursuant to the chapeau of Article 1. 1(a)(1), these are the functions that "a government" 
or "any public body" might in the first instance perf orm directly (i.e., rather than by entrustment or 
direction of a private body in the sense of s ubparagraph (iv)).  Among these functions are the 
provision of loans and loan guarantees, as well as th e provision of goods or services, functions that are 
typically carried out by, indeed in  the first instance are the core business of, firms or corporations 
rather than governments.  Thus, to read the term "any public body" as presumptively excluding government-owned or -controlled corporations or an y other types of public entities engaging in these 
sorts of typical business functions (absent specific ev idence in a particular cas e that they are vested 
with and exercising governmental authority), would appear largely to deprive these provisions of their 
common sense meaning and role. 
8.71 We also note the reasoning of the panel in Korea – Commercial Vessels , in respect of a 
similar issue raised before it.  In that case, Kore a had argued that for an entity to be a public body, it 
must be acting in an official capacity, or pursuing a public policy purpose, and that if in a particular 
instance or overall it was behaving commercially, it would not be a public body in that instance, or 
overall.  The panel rejected that argument, in part  because it introduced the concept of benefit (i.e., 
whether the entity was behaving commercially in a particular instance or overall) into the 
determination of whether the entity in question w as a public body, while, as has been confirmed by 
the Appellate Body, the SCM Agreement treats "fin ancial contribution" (where the question of 
"public body" arises) as a separate, independent concept from "benefit".
173  The panel noted in this 
                                                      
172 This is China's legal interpretation of the Agr eement.  For instance, at  the second substantive 
meeting with the Panel, China stated:   
 
"China is not arguing that government-owned entities can never be public bodies within the meaning of Article 1.1(a)(1).  Our position is only that their conduct should be deemed 
presumptively private […].  Consistent with that presumption, their conduct ordinarily should 
be examined under the entrustment or direction standard of Article 1.1(a)(1)(iv).  If the evidence in a particular case established th at a government-owned entity was exercising 
delegated authority to perform functions of a governmental character, then it would be 
appropriate to conclude that it was a public body and that subparagraph (iv) was inapplicable.  But absent such evidence, subparagraph (iv) shou ld apply […]".  (China oral statement at the 
second substantive meeting, paras. 30-31). 
 
173 The Korea – Commercial Vessels panel stated in this regard: 
 WT/DS379/R 
Page 44  
 
 regard that if the test advanced by Korea was a pplied, a given entity potentially could be a "public 
body" on one day and a "private body" the next, sole ly on the basis of its behaviour on those days, a 
result that the panel did not accept because it woul d make the public/priva te body determination 
entirely dependent on the existence of a benefit in particular transactions.
174 
8.72 We share the concern of the Korea – Commercial Vessels panel in respect of China's 
argument that "public bodies" are limited to "enti ties which exercise powers or authority vested in 
them by a 'government' for the purpose of performing f unctions of a 'governmental' character".  In this 
regard, we note that China argues that only if, in  a particular case, a government-owned or -controlled 
firm were actually exercising governmental authorit y to carry out governmental functions would such 
an entity, in that particular instance, be a "public body".  We consider that such an approach would 
suffer from the same flaw of mixing considerations of benefit (behaviour in a particular instance) with 
determining the nature of the entity (without regard  for its behaviour in a particular instance).  
Contrary to China's argument, under the SCM Agreemen t the question of the nature of the entity (i.e., 
whether it is "a government or any public body") is  entirely separate from the behaviour of that entity 
in a given instance (i.e., whether there is a fina ncial contribution, whether a benefit is thereby 
conferred, and whether there is specificity). 
8.73 To us, the foregoing detailed examination of the text of Article 1.1(a)(1) of the SCM 
Agreement in its context strongly suggests that a "public body" extends to entities controlled by 
governments, and is not limited to government agen cies and other entities vested with and exercising 
governmental authority.  We now consider this reading in the light of the object and purpose of the SCM Agreement. 
8.74 This object and purpose has been characterized  by the Appellate Body as "to strengthen and 
improve GATT disciplines relating to the use of bot h subsidies and counterva iling measures, while 
recognizing at the same time, the right of Me mbers to impose such measures under certain 
conditions"
175, and by various panels as, inter alia , "to impose multilateral disciplines on subsidies 
which distort international trade"176 and to "disciplin[e] trade-distorting subsidies in a way that 
provides legally binding security of expectations to Members".177  As these statements indicate, 
subsidies are certain types of government interven tions in markets on non-commercial terms, which 
interventions can distort trade to the de triment of other Members' interests. 
8.75 In their discussions of the object and purpose of  the SCM Agreement, including in respect of 
predictability and certainty, the Appellate Body a nd various panels have emphasized the importance 
of avoiding overly-narrow interpretations of th e Agreement that would create loopholes by which 
Members could largely, if not entirely, escape th e reach of these disciplines.  For example, the 
Appellate Body stated in US – Softwood Lumber IV that: 
"It is in furtherance of [the Agreement' s] object and purpose [of strengthening GATT 
disciplines] that Article 1.1(a)(1)(iii) rec ognizes that subsidies may be conferred, not 
                                                                                                                                                                     
"The Appellate Body ruled in Brazil – Aircraft that 'the issues – and the respective definitions – of a 
'financial contribution' and a 'benefit' [are] [...] two sepa rate legal elements'.  (footno te omitted)  Likewise, we 
consider that the concepts of 'public body' and 'benefit' should also be treated as separate legal elements.  Thus, 
the question whether an entity is a public  body should not depend on an ex amination of whether that entity acts 
pursuant to commercial principles.  Rather, it is the fact that a financial contribution is provided by a public 
body (or pursuant to entrustment or direction by a public body) that gives rise to the possibility  that the financial 
contribution might be provided on below-market terms in order to advance public policy goals."  (Panel Report on Korea – Commercial Vessels, para. 7.44 (quoting Appellate Body  Report on Brazil – Aircraft , para.157)). 
174 Panel Report on Korea – Commercial Vessels , para. 7.45. 
175 Appellate Body Report on US – Softwood Lumber IV , para. 64. 
176 Panel Report on Brazil – Aircraft , para. 7.26. 
177 Panel Report on US – FSC (Article 21.5 – EC) , para. 8.39.  WT/DS379/R  
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 only through monetary transfers, but also by the provision of non-monetary inputs. 
Thus, to interpret the term 'goods' in Arti cle 1.1(a)(1)(iii) narrowly, as Canada would 
have us do, would permit the circumvention of subsidy disciplines in cases of 
financial contributions granted in  a form other than money[...]".178 
Similarly, the panel in US – FSC (Article 21.5 – EC) stated that: 
"[I]t is evident that the interpretation [of 'revenue foregone'] advanced by the 
United States would be irreconcilable with th[e] object and purpose [of disciplining trade distorting subsidies in a way that pr ovides security to Members], given that it 
would offer governments ' carte-blanche ' to evade any effective disciplines, thereby 
creating fundamental uncertainty and unpredic tability.  In short, such an approach 
would eviscerate the subsidies di sciplines in the SCM Agreement".
179  (emphasis 
original) 
8.76 In keeping with this object and purpose, we consid er it important to read Article 1.1(a)(1) in a 
manner that does not allow avoidance of the SCM Agreement's disciplines by excluding whole 
categories of government non-commercial behaviour  undertaken by government-controlled entities.  
In this regard, we note that the categorization of  a given entity as a government, a public body or a 
private body under Article 1.1(a)(1) is simply the fi rst filter in a multi-part analysis to determine 
whether a given measure is covered by the SCM Agre ement.  That first filter does not look at the 
behaviour (i.e., the measure), but rather is c oncerned with whether the entity undertaking the 
behaviour is or is not the WTO Member, i.e., the entity covered by the WTO Agreement.  In this 
sense, the juxtaposition of "a government or any p ublic body" with the term "private body" makes 
clear that the SCM Agreement  does not cover and thus does not disci pline, in any way, any purely 
private "subsidies" or other purely private transac tions, in which the government has no involvement 
(direct or via entrustment or direction). 
8.77 In this connection, we agree with the following statement by the Korea – Commercial Vessels 
panel: 
"We do not accept Korea's argument that there is  only a 'financial contribution' in the 
meaning of Article 1.1(a)(1(i) if the relevant government or  public body is engaged in 
'government practice' such as regulation or  taxation.  Article 1.1(a)(1) states in 
relevant part that the term 'government' refe rs to both 'government' and 'public body'.  
Since the phrase 'government practice' in Article 1.1(a)(1)(i) therefore refers to the practice of both governments and public bodies, the practice at issue need not 
necessarily be purely 'governmental' in the narrow sense advocated by  Korea.  In this 
regard, we consider that the concept of 'fin ancial contribution' is writ broadly to cover 
government and public body actions that mi ght involve subsidization.  Whether the 
government or public body action in fact gi ves rise to subsidization will depend on 
whether it gives rise to a 'benefit'.  Since the concept of 'benefit' acts as a screen to 
filter out commercial conduct, it is not necess ary to introduce such a screen into the 
concept of 'financial contribution'".
180 
8.78 Thus, to say that an entity is part of the SC M Agreement's collective te rm "government" is not 
to condemn that entity, or otherwise to cast it in  a negative light.  Rather, such a characterization 
simply allows a further analysis to be conducted as to whether the entity's behaviour in particular 
instances is covered by the SCM Agreement.  (O bviously, much "government" behaviour has nothing 
                                                      
178 Appellate Body Report on US – Softwood Lumber IV , para. 64. 
179 Panel Report on US – FSC (Article 21.5 – EC) , para. 8.39. 
180 Panel Report on Korea – Commercial Vessels , para. 7.28. WT/DS379/R 
Page 46  
 
 to do with "financial contributions" and thus subsidiza tion).  Similarly, to say that certain behaviour of 
an entity is covered by the SCM Agreement (i.e., is  a specific subsidy) in itself carries no negative 
connotation.  Only in the particular, narrow instan ce of a prohibited subsidy does the existence of the 
subsidy give rise to such a connotation, and otherwis e the existence of specific subsidies is a neutral 
event under the Agreement, actionable only where it cau ses, in particular instances, defined forms of 
adverse effects on another Member's interests. 
8.79 In this sense, we consider that interpreting "a ny public body" to mean any entity that is 
controlled by the government best serves the obj ect and purpose of the SCM Agreement.  This 
reading ensures that whatever form a public entity takes (whether agency, Ministry, board, 
corporation, etc.) the government that controls it is di rectly responsible for those of its actions that are 
relevant under the Agreement.  In our view, th e particular form of government-controlled entity 
intervening in a market cannot be determinative of  whether a government fina ncial contribution (and 
hence potentially a subsidy) exists .  To read "any public body" in Article 1.1(a)(1) as excusing from a 
Member government's direct responsibility a wide swathe of government-controlled entities engaging 
in exactly the sorts of transactions listed in Ar ticle 1.1(a)(1)(i)-(iii) of the SCM Agreement would 
fundamentally undermine the Agreement's logic, cohe rence and effectiveness, and thus would be at 
odds with its object and purpose. 
8.80 Here, we agree with the finding of the panel in Korea – Commercial Vessels that a public 
body is an entity controlled by  a government.  In terms of the object and purpose of the SCM 
Agreement, we consider particularly relevant that pa nel's statement that "it is the fact that a financial 
contribution is provided by a public body (or pursuant to entrustment or direction by a public body) 
that gives rise to the possibility  that the financial contribution might be provided on below-market 
terms in order to advance public policy goals".
181  In our view, it is the government's control of an 
entity that gives that entity the potential to intervene in markets so as to advance public policy goals, 
by providing financial contributi ons on better-than-market terms. 
8.81 In short, the systemic implications for Memb ers of interpreting "any public body" to mean 
any government-controlled entity are fully in line with the object and purpose of the SCM Agreement 
of effectively disciplining trade distorting subs idies provided by Member governments.  These 
implications fall very far from disciplining, let al one condemning, every act of such entities.  This 
interpretation simply means that the actions of a government-controlled entity are, for purposes of the 
SCM Agreement, directly attributable to the gove rnment itself – no more, no less.  Finding that a 
given entity is a public body does not speak to the na ture of its actions, including whether they are 
even covered by the Agreement. 
8.82 By contrast, the systemic implications of interpreting "any public body" as limited to 
government agencies or other entities vested with a nd exercising governmental authority would be to 
seriously undermine the entire SCM Agreement, something that cannot be reconciled with the 
Agreement's object and purpose.  Large numbers  of government-controlled entities whose very raison 
d'être is to engage in the kinds of transactions identif ied in Article 1.1(a)(1)(i)-(iii) would be legally 
presumed to be unrelated to the government (i.e., effectively "private bodies").  Governments could 
easily hide behind the presumptively "private" natu re of such entities, even while running those 
entities so as deliberately to provide trade-distorting subsidies.  Yet, before the SCM Agreement could 
even apply to any such entity, such that an inquiry  could be started into the possible existence of a 
subsidy and specificity, a particular instance of  "entrustment or direction" in the sense of 
Article 1.1(a)(1)(iv) would need to be established.  In our view, this  would be equivalent to inquiring 
whether the government "entrusted or directed" itself to do something, and would turning the "entrustment or direction of a private body" provision on its head. 
                                                     
 
181 Panel Report on Korea – Commercial Vessels, para. 7.44.  (emphasis added).  WT/DS379/R  
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 8.83 The foregoing analysis of the ordinary meaning of the terms of the treaty at issue, in their 
context and in the light of the object and purpose of  the treaty, leads us to conclude that for the 
purposes of the SCM Agreement, "any public b ody" is any government-controlled entity.  By 
contrast, in our view, the narrow reading advanced by  China is not supported either by the context of 
this term or by the object and purpose of the SC M Agreement and, to the contrary, would seriously 
weaken the integrity and effec tiveness of the SCM Agreement. 
8.84 We recall that China's arguments are not limited to the foregoing elements based on the SCM 
Agreement itself.  Rather, China also has adva nced arguments based on other international 
instruments that it considers relevant context fo r interpreting the term "any public body".  The 
question we now turn to is whether any of these ot her instruments would override our analysis and 
conclusions based on the text of the SCM Agreement itself. 
8.85 The first of the other instruments cited by China is the Draft Articles.  China argues that these 
Draft Articles constitute "relevant rules of interna tional law applicable in the relations between the 
parties" in the sense of Article 31(3)(c) of the Vienna Convention, and that they thus must be "taken into account" in the analysis of the term "public body ".  In particular, China considers that the Draft 
Articles codify customary international law with resp ect to certain principles of state responsibility, a 
proposition that in China's view has repeatedly b een recognized by panels and the Appellate Body.
182 
8.86 As such, China argues, the term "public body" must be interpreted in a manner analogous to 
Article 5 of the Draft Articles such that the actions of state-owned corporate entities will be attributed to the State only when "empowered by the law of th at State to exercise elements of the governmental 
authority [...] provided the person or entity is acti ng in that capacity in the particular instance").
183  
China considers that the Appellate Body "expressly endorsed" the principles of the Draft Articles with 
respect to when the conduct of state-owned entities may constitute a financial contribution within the 
meaning of Article 1.1(a)(1) of the SCM Agreement.184 
8.87 Before we address the substance of this argument, we consider the status of the Draft Articles, 
and in particular whether as China argues we must  as a matter of law interpret the provisions of the 
SCM Agreement at issue in conformity with language  and concepts in certain  provisions of the Draft 
Articles.  In this regard, the first question is wh ether the Draft Articles are recognized in the WTO as 
"rules of international law applicable in the relatio ns between the parties" to the dispute, and the 
second question is whether they are "relevant" to this dispute.  On the first question, in our view, China significantly overstates the status that has b een accorded to the Draft Articles where they have 
been referred to by panels and th e Appellate Body.  Indeed, in not a single instance of such citations 
identified by China has a panel or the Appellate Bo dy identified the Draft Articles as "relevant rules 
of international law applicable in the relations betw een the parties" in the sense of Article 31(3)(c) of 
the Vienna Convention, such that they should be "t aken into account together with the context" when 
interpreting the treaty.  Rather, in our view, the va rious citations to the Draft Articles have been as 
conceptual guidance only to supplement or confirm, but not to replace
185, the analyses based on the 
ordinary meaning, context and object and purpose of the relevant covered Agre ements.  In particular, 
while in some cases the Draft Articles have been cited as containing similar provisions to those in 
certain areas of the WTO Agreement, in others they  have been cited by way of contrast with the 
                                                      
182 See, e.g.,  China response to Panel question 15(a) (first meeting). 
183 See., e.g.,  China first written submission, paras. 75-79. 
184 Id., para. 72. 
185 Indeed, in at least one prior proceeding, one of the parties strenuously obj ected to preferring the 
meaning of the term "countermeasures" in the Draft Article s over dictionary definitions advanced by the parties, 
on the grounds that the Draft Articles are not "relevant rules of international law applicable to the relations between the parties" within the meaning of Article 31(3)(c) of the Vienna Convention.  (Decision by the 
Arbitrators on Brazil – Aircraft (Article 22.6 – Brazil) , para. 3.44 and footnote 48). WT/DS379/R 
Page 48  
 
 provisions of the WTO Agreement, as a way to  better understand the possible meaning of the 
provisions of the WTO Agreement.  In all cases,  however, the exercise undertaken by these panels 
and the Appellate Body has been to interpret the WTO Agreement on its own terms, i.e., on the basis 
of the ordinary meaning of the terms of the treaty in  their context and in the light of the object and 
purpose of the treaty. 
8.88 We note that this is true of the Appellate Body's reference to the Draft Articles in US – 
Countervailing Duty Investigation on DRAMS , the instance at the heart of China's arguments before 
us concerning the Draft Articles.  In particular, th at reference – which appears in a footnote making 
the observation, in the context of the issue of "entru stment or direction" of a "private body", that the 
conduct of private bodies is presumptively not attributable to the state – does not state that the Draft 
Articles constitute relevant rules of international la w in the sense of Article 31(3)(c) of the Vienna 
Convention for purposes of interpreting language in the SCM Agreement.  Indeed, the footnote says 
nothing whatsoever about the status of the Draft Articles vis-à-vis the WTO Agreement.
186 
8.89 Furthermore, in some cases, panels and the A ppellate Body have made explicit that the Draft 
Articles are not binding.187  We thus find no basis for the assertion that as a general matter the 
Appellate Body and panels have found that the Draf t Articles must be "taken into account" as "rules 
of international law applicable in the relations  between the parties" in interpreting the WTO 
Agreement, and we note that in the present disput e, the United States has e xplicitly rejected this 
proposition.188 
8.90 In any event, even by their ow n terms, the Draft Articles "do not attempt to define the content 
of the international obligations the breach of which gives rise to responsibility"189, i.e., they are not 
concerned with the substance of the underlying in ternational obligations, but are rather concerned 
with determining whether a state is or is not re sponsible for a given action that may constitute a 
substantive breach of such an obligatio n.  In this regard, of particular relevance to the issue before us, 
the Draft Articles contain a provision on lex specialis :  "These articles do not apply where and to the 
extent that the conditions for an internationally wr ongful act or the content or implementation of the 
international responsibility of a State are govern ed by special rules of international law".190  We view 
the taxonomy set forth in Article 1.1 of the SCM Agreem ent at heart as an attri bution rule in the sense 
that it identifies what sorts of entities are and are not part of "government" for purposes of the 
Agreement, as well as when "private" actors may be said to be acting on behalf of "government".  
This has precisely to do with "the content or im plementation of the intern ational responsibility of a 
State"191 for purposes of the SCM Agreement, a furthe r indication that the Draft Articles are not 
                                                      
186 We recall that in another footnote in the US – Countervailing Duty Investigation on DRAMS  report, 
the Appellate Body also noted the statement of the panel that the USDOC might have been entitled to treat 
wholly-government owned entities as "public" rather th an "private" bodies.  (Appellate Body Report on US – 
Countervailing Duty Investigation on DRAMS , footnote 225). 
187 See, e.g., Appellate Body Report on US – Line Pipe , para. 259; Panel Report on US – Gambling , 
para. 6.128. 
188 The United States argues, for exam ple, that even if certain parts of the Draft Articles may have the 
status of customary international law, this does not mean that the Draft Articles in their entirety, and in their full 
detail have that status, a question which the United States characterizes as "open" and "contested".  
(United States second written submission, para. 58). 
189 General Commentary, para. 1 of the Draft Articles. 
190 Article 55 of the Draft Articles. 
191 We emphasize that here we express no view as to other possible parts of the WTO Agreement that 
might also fall within the scope of the lex specialis  provision of the Draft Articles.   The issue before us is the 
interpretation of Article 1.1 of the SCM Agreement, and our analysis thus is limited to that provision.  We do 
note, however, that the Commentary to this provision of the Draft Articles refers at length to the WTO Dispute 
Settlement Understanding as an example of a treaty whose text makes clear "that only the consequences 
specified [therein] are to flow ".  (Commentary (3) to Article  55 of the Draft Articles).  WT/DS379/R  
 Page 49 
 
 
 relevant to interpreting Artic le 1.1 of the SCM Agreement.192  In this connection, we recall that the 
panel in Korea – Commercial Vessels , presented with virtually the same argument by Korea that 
China makes before us, declined to rely on the Draft Articles.  In that panel's view, Korea's entire line 
of argumentation concerning the meaning of "public  body" (which included its arguments based on 
the Draft Articles) conflated the concept of  "benefit" with the nature of the actor. 
8.91 On the basis of the foregoing considerations , we do not find that the Draft Articles are 
"relevant rules of international la w applicable to the relations betw een the parties", such that we 
should "take them into account, together with the context" in the sense of Article 31(3)(c) of the 
Vienna Convention.  Given this, we do not need to  take up the other issues that would need to be 
resolved in that situation, not least of which is  the meaning of "take into account" for that purpose. 
8.92 The second instrument invoked by China as contex t is the GATS, in particular its Annex on 
Financial Services.  This Annex contains the term  "public entity", and China argues that this term 
must inform the meaning of the term "public body " in the SCM Agreement.  We note that China's 
argument is the same as one raised by Korea in Korea – Commercial Vessels:  That panel rejected this 
argument, on the grounds that the argument conti nued to conflate the c oncepts of financial 
contribution and benefit.  The pane l also questioned the relevance of the GATS to the interpretation of 
different language in an entirely different agreement,  and finally noted that even the text of the GATS 
Financial Services Annex itself seemed to imply that , in the absence of the clarification in the cited 
provision, "an entity principally engaged in supplying financial services on commercial terms" might 
be treated as a "public entity", a fact that in the vi ew of the panel undermined Korea's argument that a 
public entity acting on commercial terms could not be treated as a "public body".193  We, like the 
panel in Korea – Commercial Vessels , do not see the relevance for th e interpretation of the term 
"public body" in Article 1.1 of the SCM Agreement, of the different term "public entity" in a different 
Agreement, and in particular we see nothing to requi re us to equate these terms or to give them the 
same interpretation.194  Nor do we consider the term "non-gove rnmental bodies" in Article I:3 of the 
GATS, which China invokes, to be re levant to the interpretation of " public body" in Article 1.1(a)(1) 
of the SCM Agreement.  These are very different terms in separate Agreements, and we find no 
indication in either Agreement of any conceptual or other link between them. 
8.93 Finally, in terms of other instruments, we r ecall that the United States points to the discussion 
in paragraph 172 of the Working Party Report on Ch ina's accession as relevant context making clear 
                                                      
192 The panel in EC – Commercial Vessels  reached a similar conclusion th at it was unwarranted to read 
public international law concepts including elements  of the Draft Articles into the WTO Agreement to 
determine the meaning of Article 23.1 of the DSU.  In this regard, that panel stated: 
 
"The Panel recalls that it has concluded, based on an interpretation of Article 23.1 of the DSU 
in accordance with the ordinary m eaning of its terms and in light of the object and purpose of 
the provision, that measures not involving a suspension of WTO concessions or other 
obligations are not excluded from its scope.  While the Panel realizes that in a number of 
WTO dispute settlement and arbitration cases reference has been made to the public 
international law concepts invoked by the European Communities, the Panel can see no basis 
for using these concepts to read into Artic le 23.1 a limitation that is unsupported by an 
interpretation based on its text, context and object and purpose.".  (footnotes omitted)  (Panel Report on Korea – Commercial – Vessels , para. 7.205). 
 
Similarly to that panel, we can see no basis to re ad into Article 1.1 of th e SCM Agreement any concept 
from public international law that is unsupported by an interpretation based on that Article's text, context and 
object and purpose. 
 
193 Panel Report on Korea – Commercial Vessels , footnote 42. 
194 Id., para. 7.47. WT/DS379/R 
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 that China accepted that its stat e-owned enterprises (including banks ) are government actors, or at 
least public bodies, within the meaning of the SCM Agreement.
195  We note that the United States 
does not rely directly on this language, and does not argue that it constitutes a commitment by China 
as to any particular interpretation of Article 1.1(a)(1 ) of the Agreement.  In light of our conclusions 
based on the text of that provision, we do not cons ider it necessary to analyze the cited language of 
the Working Party Report. 
8.94 For the foregoing reasons, we conclude that a "pub lic body", as that term is used in Article 1.1 
of the SCM Agreement, is any entity controlled by a government.  In our view, this is the correct 
interpretation, which emerges from an analysis of th e ordinary meaning of the term in its context and 
in the light of the object and purpose of the provision and of the SCM Agreement. 
2. The USDOC's determinations that certain SOEs and SOCBs were "public bodies" 
8.95 Having interpreted the term "public body", we now  turn to the USDOC determinations in the 
four countervailing duty investigations  before us that certain entities were public bodies, and that their 
respective provisions of inputs and loans thus were financial contributions by the government, in the 
sense of Article 1.1(a)(1) of the SCM Agreement. 
(a) Background 
8.96 The USDOC made "public body" and "financial c ontribution" determinations in respect of (i) 
state-owned suppliers of inputs, including some tr ansactions made through private trading companies 
(government provision of goods); and (ii) state- owned commercial banks (government provision of 
loans).  
8.97 In the four investigations at issue, the US DOC determined that China's provision of inputs 
through state-owned producers (SOEs) constituted c ountervailable subsidies.  It particular, the 
USDOC determined that the SOEs were "public bodi es" that provided financial contributions in the 
form of certain goods – HRS, rubber, and petroche micals – to investigated producers of, respectively, 
CWP, LWR, OTR, and LWS, for less than adequate  remuneration thus confe rring benefits to those 
producers, and that these subsidies were specific.
196  Before us, China challenges all of these public 
body determinations.  
                                                     
 
195 The passage of paragraph 172 of the Working Party Report reads as follows: 
  "Some members of the Working Party, in view  of the special characteristics of China's 
economy, sought to clarify that when state-owned enterprises (including banks) provided financial 
contributions, they were doing so as government actors within the scope of Article 1.1(a) of the SCM Agreement.  The repres entative of China noted, however, that such financial contributions would not 
necessarily give rise to a benefit within the meaning of  Article 1.1(b) of the SCM Agreement.  He pointed out 
that China's objective was that state- owned enterprises, including banks, should be run on a commercial basis 
and be responsible for their own profits and losses.  The Working Party took note of this commitment." 
 
196 In the CWP and LWR investigations , the USDOC determined that the government provision of 
HRS through SOE producers for less than adequate rem uneration was a financial contribution which conferred a 
benefit to CWP and LWR investigated producers.  ( See, e.g.,  Exhibits CHI-1, p. 9 and CHI-2 p. 8). 
In the LWS investigation , the USDOC determined that the government provision of petrochemicals – 
BOPP – through SOE producers for less than adequate remuneration was a financial contribution which 
conferred a benefit to LWS investigated producers.  ( See, e.g.,  Exhibit CHI-3, p. 18). 
In the OTR investigation , the USDOC determined that the government provision of natural and 
synthetic rubber  through SOE producers for less than adequate remuneration was a financial contribution which 
conferred a benefit to OTR in vestigated producers.  ( See, e.g.,  Exhibit CHI-4, pp. 9-10).  WT/DS379/R  
 Page 51 
 
 
 8.98 In three of the four investigations at issue (CWP, OTR and LWS), the USDOC also 
determined that loans provided by SOCBs to i nvestigated producers constituted countervailable 
subsidies.197  In particular, the USDOC found that the SOCBs were "public bodies" providing 
financial contributions in the form of loans, that  the loans were on terms more favourable than the 
market, and that these subsidies were specific.  In the present dispute, China only challenges the 
USDOC's "public body" determination rega rding SOCBs in the OTR investigation.198 
 (b) USDOC public body determinations in respect of government-owned input suppliers (SOEs) 
8.99 In all of the investigations at issue, the USDOC  determined that the SOE input suppliers were 
"public bodies" (referred to as "authorities" in the U.S. statute and thus in the USDOC's 
determinations
199) by applying a rule of majority government-ownership.  Under this approach, the 
USDOC treated as a public body any input producer in which the government held a majority ownership share.
200  Where the parties presented additional arguments and evidence related to this 
issue, the USDOC also referred to these in its dete rminations.  The analysis conducted in each of the 
investigations is summarized below. 
 
(i) CWP investigation 
8.100  In its final determination in the CWP inv estigation, the USDOC determined that SOE 
producer-suppliers of HRS were public bodies ("authorities").  In  particular, any producer-supplier in 
which a government entity held a majority ownership share was treated as a public body.201  In this 
regard the determination indicates, and China do es not contest, that the Government of China 
provided ownership information only in respect of some of the investigated producer-suppliers of 
HRS.  The USDOC treated the entities in respect of which the Government of China failed to provide 
the requested ownership information as public bodi es (on the basis of applying facts available or 
adverse facts available).202  
8.101  During the course of the investigation, the Government of China contested the USDOC's 
majority-ownership approach to its public body de terminations, which also had been used in the 
preliminary determination.  China argued that the USDOC should conduct the factual five-factor 
analysis it had applied in certain pr ior investigations, in particular Korea – DRAMS , to determine 
whether entities were public bodies.  The five fact ors that the USDOC had examined in that case 
were:  (i) government ownership; (ii) government pr esence on the board of directors; (iii) government 
                                                      
197 In the LWR investigation, the USDOC concluded that any government programme to provide loans 
to the steel industry was "not used" by the respondents.  (Exhibit CHI-2, p. 47). 
198 China first written submission, footnote 132.  As discussed in Section X, infra , China challenges the 
USDOC's determinations of benefit from these loans in a ll three of the investigations in which producers were 
found to have received countervailable subsidie s in the form of government-provided loans. 
199 According to the United States, under its domestic statute the definition of the term "authority" 
includes the term "public entity", and this latter term  means "public body".  (United States first written 
submission, footnote 87).  There is no disagreement between the parties as to the equivalence of the terms 
"public entity" under U.S. law and "public body" in Article 1.1(a)(1) of the SCM Agreement. 
200 Exhibits CHI-1, p. 63; CHI-2, pp. 29-30; CHI-3, p. 67; and CHI-4, p. 77. 
201 Exhibit CHI-1, pp. 62-63. 
202 Id., pp. 10-11.  With regard to other specific su ppliers for which petitioners had claimed SOE status, 
the USDOC noted that the identities of those suppliers were proprietary and therefore addressed petitioners' 
comments in a "BPI Memorandum".  (Id., p. 63).  This document is not on the record of the present dispute. WT/DS379/R 
Page 52  
 
 control over activities; (iv) pursuit of governmental  policies/interests; and (v) whether the entity was 
created by statute.
203 
8.102  The USDOC acknowledged that it had used such a five-factor test in prior investigations204 
but stated that there was insuffici ent evidence on the record to do so in the CWP investigation.  In 
particular, the USDOC noted that other than th e levels of government ownership of certain 
companies, the Government of China had not provide d the information that was needed to consider 
the five-factor analysis, and that therefore the USDOC had applied a rule of majority ownership.205  
The USDOC noted, however, that it would reconsider the feasibility of applying the five-factor test 
during an administrative review, should a counter vailing duty order result from the investigation.206 
8.103  Finally, the USDOC stated that because it had de termined that the SOEs were public bodies, 
it did not reach the issue of whether they were priv ate entities entrusted or directed by the government 
to provide financial contributions.207 
(ii) LWR investigation 
8.104  In its final determination in the LWR investig ation, the USDOC determined on the basis of 
majority government ownership that SOE producer-supp liers of HRS were public bodies, pursuant to 
an essentially identical analysis to that  performed in the CWP investigation.208 
8.105  During the course of the investigation, the Government of China and an investigated 
producer/exporter contested the USDOC's "public body" preliminary determ inations, which were 
made on the same basis.  They asserted that govern ment ownership was insufficient grounds for an 
entity to be a public body, and that not every g overnment entity is a public body, as the USDOC had 
recognized in the Preamble to its countervailing dut y regulations.  (The Preamble states that the 
USDOC would continue to treat "most" government -owned corporations as the government itself).209  
These respondents further argued that the USDOC should have applied the five-factor factual analysis 
that it had used in Korea – DRAMS (as described above in respect of the CWP investigation).210  They 
noted that in Korea – DRAMS , the USDOC itself had found that cer tain wholly government-owned 
companies should not be treated as government entiti es.  For these respondents, the "real question" 
under the approach taken in DRAMS was whether an entity exercised governmental authority. 
8.106  The USDOC acknowledged that it had used such a fi ve-factor test in some, but not all, prior 
investigations211, but determined that there was insuffi cient evidence on the record of the LWR 
investigation to perform such an analysis because,  beyond the levels of govern ment ownership of the 
companies involved, the Government of China ha d not provided the information needed to conduct 
                                                      
203 Exhibit CHI-1, p. 62.  In addition to contesting the basis for the public body determination, the 
Government of China also asserted that the USDOC had not established that the Government of China had 
"entrusted" or "directed" those companies to provide the financial contributions at issue.  (Id.). 
204 Specifically, the USDOC noted that it had used the five-factor test in DRAMS from Korea  and 
Magnesium from Canada .  (Id., p. 62). 
205 Exhibit CHI-1, pp. 62-63. 
206 Id., p. 63. 
207 Id. 
208 Exhibit CHI-2, pp. 28-30. 
209 Id., pp. 26-27. 
210 Id., p. 27. 
211 The USDOC noted that it had previously used the five-factor test in DRAMS from Korea  and 
Magnesium from Canada , but also noted that in other investigations it had not applied this test where a 
government-owned entity provided a financial contribution to a respondent.  (Id., p. 28 and footnote 103).  WT/DS379/R  
 Page 53 
 
 
 the analysis.212  The USDOC noted that it would reconsider  the necessity and feasibility of applying 
the five-factor test during an administrative review.213 
8.107  The USDOC nevertheless specifically discussed in  its final determination China's arguments 
in support of the five-factor analysis in respect of one input supplier, Baosteel.  In so doing, however, 
the USDOC stated that it was not making a finding as to whether it was required to apply the five-
factor test in respect of Baosteel. 
8.108  Concerning the five factors as applied to Baosteel, the USDOC stated that although the 
Government of China had cited record information rela ted to each of the five factors, the information 
was not sufficient for the USDOC to conclude that Ba osteel was not an "'authority'".  Further, because 
Baosteel was majority-owned by the government, the first of the five factors clearly supported that it 
was a public body.214  On the other four factors, the USDOC's analysis was as follows: 
• With respect to government presence on the Boar d of Directors, the USDOC stated that the 
Government of China had contended that there was no evidence that any member of 
Baosteel's board of directors was a government  official.  The USDOC referred to record 
evidence suggesting that some members of  the board had ties to the government.215 
• Concerning government control over activities, the USDOC stated that the Government of 
China had argued that there was no evidence of government control over Baosteel's activities, 
including production or pricing, and in suppor t had contended that no government authority 
regulated steel producers or set prices.  The USDOC noted, however, that the Government of 
China had cited no information specific to the activities of Baosteel.216 
• With respect to pursuit of government po licies or interests, the USDOC noted the 
Government of China's argument that Baosteel di d not pursue government interests because it 
had a duty under Chinese law to protect share holders and maximize profitability.  The 
USDOC stated that these facts did not demonstrate that Baosteel did not pursue government 
interests.  In this regard, the USDOC cite d statements from Baosteel's 2005 and 2006 annual 
reports referring, inter alia , to implementation of the government's five year plan, and the 
government's steel industry policy.  The US DOC noted that although these were general 
statements, they suggested that the govern ment might pursue government policies and 
interests through its ownership of Baosteel.217 
                                                      
212 Exhibit CHI-2, pp. 28-29. 
213 Id., p. 29. 
214 According to China, Baosteel's private ownership amounted to 27 per cent.  (Exhibit CHI-2, p. 27). 
215 Id., p. 29.  The USDOC noted that according to the Baosteel's 2006 Annual Report ("2006 Annual 
Report"), one of the members of the board of directors during the period of investigation "has been trusted by 
the State-Owned Assets Supervision and Administra tion Commission of the State Council as the outside 
director of Baosteel Group as well as director of the Company".  Moreover, it noted that the Baosteel's 2005 
Annual Report ("2005 Annual Report") indicated that at least one independent director was also a director of 
state-owned China Minmetals Corp. Ltd.  (Id.). 
216 Id., p. 30. 
217 Id., p. 30.  The USDOC noted that the 2005 Annu al Report indicated that "China has strengthened 
macroeconomic control over steel industry since 2004 and issued the first Steel Industry Development Policies in 2005 […] The Steel industry will undergo strategic restructuring" and that "one of the Major Tasks of 
Baosteel's 2006 Business Plan is to Speed up the implementation of the 11
th Five Year Projects".  It further 
noted that the 2006 Annual Report also referred to China's steel industry policy and indicated that "Baosteel Group Corporation, the controlling shareholder [of Baosteel ], mainly deals with state-owned assets within the 
authorized scope set by the State Council".  (Id.). WT/DS379/R 
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 • Concerning creation by statute, the USDOC noted the Government of China's argument that 
Baosteel operated under the same Chinese law as private enterprises, but stated that this 
information was not sufficient to determine that  Baosteel was not created by statute.  The 
USDOC indicated that China had provided no in formation on Baosteel's ultimate controlling 
shareholder, the State-owned Assets Supervis ion and Administration Commission of the State 
Council ("SASAC").
218 
8.109  Overall, the USDOC found that the information on the record was not sufficient to conclude 
that Baosteel was not an "'authority'", noting th at the Government of China had presented general 
information on each of the five factors, which was contradicted by other ge neral information on the 
record.  The USDOC stated that it therefore had used  the same rule of majority ownership applied to 
other producer-suppliers to determin e whether Baosteel was an "'authority'".  The USDOC noted that 
because it determined that the SO Es at issue were public bodies, it did not reach the issue of 
entrustment or direction.219 
(iii) LWS investigation 
8.110  In the LWS investigation, the USDOC determ ined that the state-owned petrochemical 
producers under consideration were public bodies on th e basis of majority government ownership.  
The USDOC stated that this was consistent with its approach in the CWP investigation, as well as 
with the Preamble to its countervailing duty regulati ons ("we intend to cont inue our longstanding 
practice of treating most government-owned corporations as the government itself […]").220 
8.111  During the investigation, the Government of  China contested the public body preliminary 
determinations, arguing, inter alia , that the USDOC should have applied the five-factor test, and that 
the respondents had provided sufficient information for the test to be applied.221 
8.112  Although the USDOC acknowledged that it had used such a five-factor test in some prior 
investigations222, it rejected the Government of China's argument on the grounds that there was 
insufficient evidence on the record , as beyond the levels of government ownership of the companies 
in question, the Government of China had not  provided the information necessary to conduct a 
complete analysis.  Nevertheless, the USDOC res ponded to the Government of China's arguments and 
"limited" evidence on this issue as follows: 
• Concerning government ownership, the USDOC stated that the Government of China had 
simply relied on the fact that the companies were not wholly government-owned (one being a joint venture with a publicly listed corporation,  and the other being a publicly listed company 
with shares traded on foreign and Chinese stock exchanges), but had not demonstrated that 
the companies had significant private ownership.  Rather, the record evidence was "clear" that 
the SOE suppliers were majority government-owned.
223 
• Concerning government presence on the Board of Directors and pursuit of governmental 
interests, the USDOC stated th at China's argument simply rested on the fact that the 
companies were listed on domestic and foreign stock exchanges, and that this argument 
                                                      
218 Exhibit CHI-2, p. 30. 
219 Id. 
220 Exhibit CHI-3, p. 67. 
221 Id., p. 65. 
222 Id., pp. 66-67.  The USDOC noted that it had used the five-factor test in the following prior 
investigations:  DRAMS from Korea  and Magnesium from Canada .  (Id., p. 67). 
223 Id. p. 67.  The USDOC cites the February 1, 2008 submission of verification exhibits, which are not 
on the record of the present dispute.  (Id.)  Ch ina does not contest this point before the Panel.  WT/DS379/R  
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 reflected the unsubstantiated assumption that  being listed on these exchanges somehow 
showed that the directors of the companies acted independently in pursuing only commercial 
and not governmental interests.224 
• Concerning government control over the activities of the companies relating to pricing and 
production decisions, the USDOC stated that th e Government of China failed to acknowledge 
the role that the SASAC exercised over managi ng SOEs "based on 'the rights attendant to the 
ownership of shares'" (citing to the Governme nt of China's questionnaire response).  The 
USDOC considered that this management w ould be substantial based on the government's 
majority ownership of the SOEs in question.225 
8.113  The USDOC concluded that it had therefore a pplied a rule of majority ownership to 
determine whether a government-owned petrochemical  input supplier was an "authority" (a public 
body).  It further concluded that because it had found these SOEs to be public bodies, it did not reach 
the issue of entrustment or direction.226 
(iv) OTR investigation 
8.114  In the OTR investigation, the USDOC determin ed that majority government ownership of a 
rubber producer qualified it as a public body, and that this was consistent with the Preamble to its 
countervailing duty regulations and with past prac tice (namely, the CWP and LWS investigations, 
Hot-Rolled Steel from India , and Stainless Steel from Korea ).227  While respondents argued that the 
USDOC was required to apply the five-factor test, the USDOC found that "conducting such a test is not necessary absent information that calls into question whether government ownership does not 
mean government control".
228  In this respect, it cited other inv estigations where it had not applied the 
five-factor test, but had made a public body dete rmination purely on the basis of government 
ownership.229  The USDOC noted that it would, if appr opriate, reconsider the necessity of applying 
the test if there were a countervailing duty order,  and an administrative review were required.230 
8.115  Finally, the USDOC found that because it had dete rmined that SOEs were public bodies, it 
was not necessary to evaluate the question of entrustment or direction.231 
 
(c) USDOC public body determination in respect of SOCBs 
8.116  As discussed above, concerning loans by SOCBs  China challenges the USDOC's public body 
determinations only in the OTR investigati on, although it challenges the USDOC's benefit 
                                                      
224 Exhibit CHI-3, p. 67.  The Government of China's arguments were (i) that several directors were 
independent non-executive directors and that some were officers of the company with no outside government 
positions, and that these companies pursued only commerci al interests based on their stock exchange listings; 
(ii) that by law they were required to protect the intere st of shareholders and to maximize profits; (iii) that one 
was listed on the New York Stock Exchange and thus was subject to US corporate governance requirements; 
and (iv) that SOEs in China operate under the same co mpany law as private enterprises and they do not exist by 
virtue of any special statute.  (Id., pp. 65-66). 
225 Exhibit CHI-3, p. 67.  The cited questionnaire response is not on the record of this dispute, but 
China does not contest the USDOC 's characterization thereof. 
226 Id. 
227 Exhibit CHI-4, pp. 10 and 77. 
228 Id., p. 10. 
229 The USDOC cited, for example, its prior investigation in Hot-Rolled Steel from India , where it had 
countervailed the provision of iron ore from a mostly government-owned mine without any reference to the 
five-factor test.  (Id., pp. 10 and 77). 
230 Id., p. 10. 
231 Id., p. 77. WT/DS379/R 
Page 56  
 
 determinations in respect of loans by SOCBs in three of the four countervailing duty investigations 
before us.  (The claims concerning these bene fit determinations are addressed in Section X,  infra ). 
8.117  In the OTR investigation, the USDOC found that the Government of China provided 
subsidies to the tire industry in the form of pr eferential lending by state-owned commercial banks.
232  
It determined that the SOCBs were "authorities" (i.e., public bodies) on the basis of its previous 
finding in the CFS Paper investigation , where it had concluded that Chinese policy banks and SOCBs 
constituted such "authorities".  In the OTR investig ation, the USDOC stated that the parties in the 
investigation had not demonstrated that the Ch inese banking sector had significantly changed such 
that reconsideration of the CFS decision was warranted.233  The USDOC also cited scholarly 
publications on the record that reported that SO CBs were required to support the government's 
industrial policies.234 
8.118  In the CFS Paper  investigation, in turn, the USDOC stat ed that in its general practice, loans 
provided in any given country by state-owned comme rcial banks are not necessarily, or in all cases, 
treated as government loans, since these banks may operate on a commercial basis.235  However, it 
determined that in respect of China, treatment of SOCBs as commercial banks was not warranted.  
The USDOC found that the record evidence did not  indicate that China's banking sector operated on a 
commercial basis, as it was subject to significant di stortions, mainly from the continued dominant role 
of the government in that sector and the legacies associated with the sector's longstanding pursuit of 
government policy objectives.236  Therefore, while stating that government control over SOCBs in 
China had been changing and that the record ev idence in that regard was mixed, the USDOC 
nevertheless determined that the reforms were still  in transition and that the government's influence 
remained a significant factor in the operation of China's banking sector.237 
8.119  In the CFS Paper investigation, the USDOC first stated that the central government had been 
very cautious on completely reforming the banking system; and that as a result, and because banks in China had never operated on a commercial basis, th e government was still very involved in the 
banking sector.
238  The USDOC found this view, to vary ing degrees, confirmed by independent 
experts.  It reported some experts stating that "recent trends have moved away from local government 
influence over bank operations" and "[t]here still is some local gove rnment control over the bank 
branches, but [while] this has lessened in recent years […] it is  still an ongoing process".  Other 
experts stated that "the banking law prohibited go vernment interference […] but […] this prohibition 
was not very effective in decreasing local governme nt influence [...] [howev er] the creation of the 
                                                      
232 According to China, there are four principal state-owned commercial banks in China (i.e., the so-
called "Big Four" banks): the China Construction Bank ("CCB"); the Industrial and Construction Bank of China 
("ICBC"); the Bank of China ("BOC"); and the Agricultu ral Bank of China ("ABC").  (China first written 
submission, para. 164; second written submission, para. 116). 
233 Exhibit CHI-4, p. 101.  For example, the USDOC noted that at verification, an official from the 
Tianjin municipal government confirmed that SOCBs are supervised by the Tianjin State-Owned Assets 
Supervision and Administration Commission ("Tianjin SASAC").  Tianjin is the city where an investigated 
OTR producer (TUTRIC) was located.  (Id.). 
234 As an example, the USDOC cites the IMF Wo rking Paper on China's Banking System Reform 
(Exhibit US-52), which states that "it is difficult to find clear evidence that SCBs have changed their behavior 
and became commercially oriented" and that governments should avoid "interferen ce for policy purposes".  
(Exhibit CHI-4, footnote 45). 
235 Issues and Decision Memorandum for the Fina l Determination in the Countervailing Duty 
Investigation of Coated Free Sheet from the People's Republic of China  ("CFS Paper Countervailing Duty I&D 
Memo"), Exhibit CHI-93, p. 55.  As an exampl e, the USDOC cites its previous findings in DRAMS from Korea .  
(Id.). 
236 Id., p. 55. 
237 Id., pp. 58, 60-61. 
238 Id., p. 56.  WT/DS379/R  
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 [Chinese Banking Regulatory Commission] [has led] to  significant decreases in the extent of local 
government interference […] [although it] continu es to lack the enforcement powers it needs to 
properly implement its regulations a nd fulfill its mandate" and "there is  still a control perspective, as 
banks continue to be dominated by government and are exposed to outside political influences".239 
8.120  Second, the USDOC determined that China' s banking system still operated in accordance 
with governmental planning policies.240  For example, the Chinese Commercial Banking Law required 
banks to carry out their loan activities consistently with "the needs of national economy and the social 
development and under the guidance of State industrial policies".241  Further, the USDOC found that 
while SOCBs were improving their risk management  capacities, they still lacked adequate risk 
management and analysis skills.  It also stated that  interest rates remained generally undifferentiated – 
interest rates were quite close to the benchm ark set by the People's Bank of China ("PBOC").242 
8.121  Furthermore in this context, in addition to its  findings as to inadequate risk management and 
analysis, and as to SOCBs' lending in pursuance of  government economic plans, the USDOC pointed 
to government ownership in the banking sector.  In particular, the USDOC determined that China's 
banking sector remained almost entirely state-owned243 and that even if the largest SOCBs had 
undergone some reorganization to become formal corporate entities – limited initial public offerings, 
and sale of minority stakes to foreign interests – th e Government of China as the majority shareholder 
continued to exert control over the largest commercial banks.244  The USDOC noted in this regard that 
foreign investment in Chinese banks was tightly cons trained, with total fore ign ownership limited to 
25 per cent in SOCBs.245 
8.122  According to the USDOC's OTR Countervailing Duty I&D Memo, the Government of China 
argued in that case that the SOCBs' specific actions  should be analyzed to determine whether "a 
financial contribution was provided through preferentia l lending".  TUTRIC (one of the investigated 
producers), is cited as arguing that the SOCBs we re not necessarily government authorities, as they 
had undergone significant reorganizati ons to become formal corporate entities operating under market 
                                                      
239 Exhibit CHI-93, pp. 56-57. 
240 Id., pp. 57-58. 
241 Id., p. 58.  Similarly, it noted that the Bank of China Offering states that "Commercial Banking Law 
requires commercial banks to take into consideratio n government macroeconomic policies in making lending 
decisions. [They] are encour aged to restrict their lend ing to borrowers in certain industries in accordance with 
relevant government policies".  (Id.)  The USDOC also noted that, at verification, officials from the People's 
Bank of China stated that "it may be necessary for banks to heed industrial policies; banks may be taking on 
great risk if their customers use loans in a way that  is inconsistent with industrial policies".  (Id.). 
242 Id., p. 59.  For example, the USDOC  noted that at verification, the PBOC explained that interest rate 
spreads are close to the PBOC-set benchmark rate becaus e "the Big Four [(the largest SOCBs in China)] attract 
the largest borrowers [...] [which] are creditworthy [...] and have long-term relationship with the banks".  (Id.). 
243 The USDOC's examination of the SOCBs' ownership appears in the section of the Issues and 
Decision Memorandum covering "benchmarks" for SOCB lending, which is cross-referenced in the section of 
the Memorandum addressing "policy lending".  The analys es in these two sections overlap substantively to a 
considerable extent. 
244 The USDOC noted that according to the data provided by the OECD ("Economic Survey of China, 
Paris:  Organization for Economic Cooperation and Development" (2005)) the state ownership in the Chinese 
banking sector is much more widespread than in any other major world economy.  The OECD report states that the "extent of ownership in China's financial system is exceptional.  All but one of the major commercial banks 
are controlled by the central or local government […] the four largest banks […] known as the state owned 
commercial banks (SOCBs), still account for almost three- quarters of commercial bank assets".  (Exhibit CHI-
93, p. 67; and OECD Economic Surveys:  China (2005) , Exhibit US-54, p. 140).  In its first written submission, 
China acknowledges that at the end of 2006, China's ownership in the Big Four was as follows: 75 per cent in 
the ICBC; 74 per cent in the CCB; 68 per cent in the BOC; and 100 per cent in the ABC.  (China first written submission, para. 165). 
245 Exhibit CHI-93, p. 67. WT/DS379/R 
Page 58  
 
 conditions, and that the USDOC had in previous  cases found that wholly government-owned banks 
were not government authorities.  Starbright (anothe r investigated producer), is cited as arguing that 
its loan from the Bank of China was not counterva ilable as the USDOC had incorrectly determined 
that SOCBs in China were government authorities.  The Memorandum also indicates that Bridgestone 
(a domestic interested party in the investigation) disagreed with the Government of China that the 
banks were private entities not controlled by th e government, arguing that record evidence and 
scholarly publications demonstrated that the Govern ment of China owned almost all banks in China, 
and that Chinese law required that the banks suppo rt government industrial policies.  Bridgestone 
contended that trends such as decreasing governme nt ownership did not contradict the record 
evidence that during the period of investigation the government "maintained a strong hold on both 
bank ownership and lending", such that in Bridg estone's view the USDOC should find that SOCB 
lending and debt forgiveness to the tire producers were financial contributions.
246 
8.123  The final determination in the OTR investig ation summarizes the USDOC's finding that the 
SOCBs were public bodies as being based on the facts:  (i) that national, provincial and municipal government authorities effectuated policies to provi de countervailable loans to OTR producers, and 
that the loans at issue were provided pursuant to these policies; (ii) that the parties in the OTR 
investigation had not demonstrat ed that conditions in the Chin ese banking sector had significantly 
changed since the CFS Paper  determination, such that a reconsideration was warranted, citing in this 
regard the verification report of the Tianjin G overnment, where a Tianjin municipal government 
authority had confirmed that SOCBs were under Tian jin SASAC supervision; and (iii) that scholarly 
publications on the record reported that SOCBs were  required to support the government's industrial 
policies.
247 
(d) Assessment by the Panel 
8.124  We recall our finding above that the meaning of "public body" in Article 1.1 of the SCM 
Agreement is an entity controlled by a government .  We note that China's claim concerning the 
USDOC's determinations that the SOEs and SOCBs at issue were public bodies is based not only on 
its own, different, legal interpreta tion of the term "public body", but also on the public body analysis 
and conclusions of the USDOC in the four investig ations.  In particular, China claims that these 
determinations by the USDOC were  based on the application of a " per se  majority ownership test", 
and that the USDOC did not conduct the "five-factor  analysis" that it had applied in some prior cases, 
which China holds up as evidence that the USDOC had recognized that a "fact-intensive" inquiry 
(including an entity's pursuit of governmental policies or interests, and whether an entity is created by 
statute), was necessary to establish that an entity is  a public body in the sense of Article 1.1 of the 
SCM Agreement.  More generally, China considers th at the USDOC failed to meet its investigatory 
burden by improperly basing its public body determ inations on a presumption that government-owned 
entities are public bodies, rather than gathering a nd analyzing the factual information necessary for 
the five-factor test. 
8.125  We start by considering China's statements concerning the five-factor test.  While we note 
China's disclaimer that it is not arguing about the consis tency of the five-factor test with Article 1.1 of 
the SCM Agreement, we view China's statements about the test as implying (as China had argued during the investigations), that the USDOC was ob ligated to have applied that test, in which 
government ownership is just one factor.  For exam ple, citing the USDOC's statements regarding the 
non-application of the test in the investigations, that it would "reconsider the feasibility of applying 
the five-factor test during an administrative revi ew", China states that it "takes no solace in this 
response".
248  Thus, for the sake of the completeness of our analysis, we examine the potential 
                                                      
246 Exhibit CHI-4, pp. 100-101. 
247 Id., p. 101. 
248 China first written submission, para. 100.  See also footnote 94, supra .  WT/DS379/R  
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 relevance of the five-factor test to the concept of "public body" in Article 1.1 of the SCM Agreement.  
In this regard, we recall China's argument that the "key" question regardi ng whether an entity is a 
public body is whether it exercises governmental aut hority, and China appears to consider that the 
five-factor test addresses that question.249  Given our finding that a public body is an entity controlled 
by a government, however, the legal question is  whether under the SCM Agreement it would be 
necessary to examine the five factors to establish th at an entity is government-controlled.  We recall 
that the factors are (i) government ownership; (ii)  the government's presence on the entity's board of 
directors; (iii) the government's control over th e entity's activities; (iv) the entity's pursuit of 
governmental policies or interests; and (v) whether th e entity is created by statute.  While these factors 
appear generally to be related to the issue of c ontrol, we see no basis in the SCM Agreement on which 
to conclude that consideration of these particular fi ve factors (or any other specific factors) is a legal 
prerequisite for a valid finding that an entity is c ontrolled by a government and thus a public body in 
the sense of the Article 1.1 of the SCM Agreemen t.  Put another way, even if under U.S. law 
application of the five-factor test were mandatory  for a finding that an entity is a "government 
authority" (which the evidence before us suggests is  not the case), the failure to conduct that test in a 
given investigation would be a matter for the U.S. judicial review system, not the WTO. 
8.126  This brings us to the analyses that the USDO C did conduct in the four investigations in 
respect of the SOE input suppliers, and in the OTR investigation in respect of SOCBs.  The question 
for the Panel is whether these analyses were reasoned and were based on adequate evidence of government control of the entities in question. 
(i) SOE input suppliers as public bodies 
8.127  Concerning the SOE input suppliers in the f our investigations, as described above the 
USDOC's public body determinations were principa lly based on the uncontested fact that these 
entities were majority government-owned.  China characterizes this as a simple per se  majority 
ownership test.  We read the USDOC's determinati ons differently, however.  In particular, we do not 
see the USDOC's determinations as depicting the mech anical application of a per cent-of-ownership 
test, without regard for any other evidence or argume nts.  To the contrary, these determinations show 
that the USDOC examined all of the evidence and arguments that were before it in reaching its 
conclusions that the SOEs were public bodies. 
8.128  In particular, in the CWP investigation, the USDOC noted that other than the levels of 
government ownership of certain companies produ cing HRS, the Government of China had not 
provided the information that was needed to consider  the five-factor analysis, and that therefore the 
USDOC had applied a rule of majority ownership.
250  In this context, where ownership information 
was not available for certain HRS producers, th e USDOC found them to be government-owned, and 
thus public bodies, on the basis of facts available. 
8.129  In the LWR investigation, the USDOC determin ed that there was insufficient evidence on the 
record to perform the five-factor analysis in resp ect of HRS producers, because the Government of 
China had not provided such evidence.  Rather, it had provided only ownershi p information, and only 
for some companies, but otherwise had not furnis hed information necessary to conduct the five-factor 
analysis.251  Despite this, the USDOC did include a sp ecific, detailed discussion of the arguments 
advanced by the Government of China concerning the five factors in respect of one trading company, 
Baosteel, while stating that it made no finding as to  whether a five-factor test was required.  As 
described supra , the USDOC found that the evidence was insu fficient to conclude that Baosteel was 
                                                      
249 See, e.g.,  China first written submission, paras. 90-102. 
250 Exhibit CHI-1, pp. 62-63. 
251 Exhibit CHI-2, pp. 28-29. WT/DS379/R 
Page 60  
 
 not a public body, and/or that the evidence contradi cted the factual assertion in support of which it 
was advanced.
252 
8.130  In the LWS investigation, the USDOC again f ound that there was insufficient evidence on the 
record for it to be able to conduct a five-f actor analysis, as beyond the levels of government 
ownership of the companies in question, the Gove rnment of China had not provided the information 
necessary to conduct a complete analysis.  The USDOC nevertheless conducted a detailed discussion 
of the Government of China's arguments and "limite d" evidence on the five factors, concluding that 
either that evidence was not apposite to the ques tions examined, or disproved the Government of 
China's argument.  Of particular relevance in this  regard was the statement in the Government of 
China's questionnaire response that the State- Owned Assets Supervision and Administration 
Commission of the State Council played a role in managing SOEs "based on 'the rights attendant to 
the ownership of shares'".253 
8.131  In the OTR investigation, the USDOC found that  a five factor test is not necessary in the 
absence of evidence calling into question whether government ownership does not mean government control.
254  The record documents before us make no mention of any party submitting evidence 
suggesting an absence of government control, and before us China points to none.  Rather, the 
USDOC's OTR Countervailing Duty I&D Memo indi cates that the Government of China and the 
respondent parties focused most of their argum entation on the USDOCs' failure to conduct an 
entrustment or direction analysis.  Thus, it appears that there was no evidence other than that of the 
government's share of ownership of the input supplie rs before the USDOC in respect of whether these 
SOEs were public bodies. 
8.132  On the basis of our review of the USDOC's public body determinations, we find sufficient 
discussion and analysis to explain the basis for tho se determinations and the reasons therefore.  In 
other words, it is clear to us from these determin ations what evidence was before the USDOC and, 
where there were gaps, the reasons for those gaps , and how the USDOC addressed them.  It also is 
clear to us from the determinations what specifi c arguments and evidence were presented to the 
USDOC and how the USDOC took them into considerati on.  In particular, we note the statements of 
the USDOC that in a number of instances, fa ctual assertions were made without any supporting 
evidence, or with evidence that contradicted the assertions.  We further note that the USDOC 
explained why it considered that it was not legally required to conduct the five-factor test, in particular that in making its public body findings, it relied on the evidence of record that the input suppliers in question were majority government-owned. 
8.133  This then brings us to the legal question of whether the evidence of government ownership of 
the SOE input producers was a sufficient basis on which to conclude that they were government 
controlled and thus public bodies.  Here, the United St ates argues extensively before us that majority 
ownership indicates control, and indeed China also acknowledges that ownership can indicate control.  
The difference is that for China, government contro l is the wrong legal test for determining whether 
an entity is a public body.
255 
8.134  We recall, however, our conclusion that a public body is any entity controlled by a 
government, and in this regard we  consider government ownership to be highly relevant (indeed 
potentially dispositive) evidence of government contro l.  Here we note in particular the everyday 
                                                      
252 See summary at para. 8.109,  supra .  See also Exhibit CHI-2, pp. 29-30. 
253 Exhibit CHI-3, p. 67. 
254 In this investigation, a petitioner had argued that "treating Chinese SOEs as public entities is 
consistent with China's commitments to the WTO" (c iting paragraph 172 of the WTO Working Party Report).  
(Exhibit CHI-4, p. 76).  The USDOC, however, did not address this argument in its "public body" analysis. 
255 See, e.g.,  China first written submission, para. 61.  WT/DS379/R  
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 financial concept of a "controlling interest" in a comp any.  The technical definition of what is needed 
for a controlling interest is a maximum  of 50 per cent plus one share of the voting stock of a company, 
with the possibility that a much smaller  voting block can be controlling, depending on how dispersed 
the ownership of the remaining shares is, and the exte nt to which the other shareholders participate in 
voting.256 
                                                      
256 "Controlling interest" is defined as:   
"Strictly speaking, an ownership stake of any business which is 50% or more. In practice it 
means a sufficiently large stake in a company by an individual shareholder  to allow effective 
control. In principle, a stake of 50% plus one share gives a blocking majority, but in practice effective control can be had with a smaller holding. Key holding levels are 25%, which can 
block changes in the articles of the company, 51%, which gives voting control, and 76%, 
which permits changes to the articles. In a company setting it usually means holding a 
majority of the voting rights  which usually comes from the ownership of equity . The ability 
to capture ownership, or acceptances or pledges, of around this percentage of the voting 
equity in a company can be crucial in such situations as contested takeovers ".  (The 
Handbook of International Financial Terms, P. Moles (ed.) (Oxford University Press, 1999), 
p. 110).  (emphasis original)   
 See also the following online dictionaries:   
 
• From Investment Dictionary :  "When one shareholder or a group acting in kind holds a high 
enough percentage of ownership in a company to  enact changes at the highest level.  By 
definition, this figure is 50 per cent of the outstanding shares or voting shares, plus one.  However, controlling interest can be achieved with less than 50 per cent ownership of the 
stock if that person/group owns  a significant proportion of the voting shares, because in many 
cases, not every share carries a vo te in shareholder meetings." 
 
• From Financial & Investment Dictionary  and Business Dictionary :  "Ownership of more than 
50 per cent of a corporation's voting shares.  A much smaller interest, owned individually or by a group in combination, can be controlling if the other shares are widely dispersed and not 
actively voted." 
 
• From Wikipedia :  "Controlling interest in a corporation means to have control of a large 
enough block of voting stock shares in a company such that no one stock holder or coalition of 
stock holders can successfully oppose a motion.   In theory this normally means that 
controlling interest would be 50 per cent of the voting shares plus one. 
 
 In practice, though, controlling interest can be far less than that, as it is rare that 100 per cent 
of a company's voting shareholders actively vote. 
  In addition, a company that requires a 2/3 s uper-majority of shares to vote in favour of a 
motion, can grant, in effect, veto power to a minority shareholder or block of shareholders that 
own essentially 1/3 of the shares.  Thus in some cases, a single entity can essentially maintain control, with only 33.4 per cent of the outstanding shares.  Ford Motor Company's former 33.9 
per cent ownership of Mazda is an example of a controlling interest with minority 
shareholding." 
 
• From Investopedia :  "For the majority of large public companies (such as those that belong to 
the S&P 500), a shareholder with much less than 50 per cent of the outstanding shares can still 
cause a lot of shake-up at the company.  Single shareholders with as little as 5-10 per cent 
ownership can push for their own seats on the board, or enact changes at shareholder meetings 
by publicly lobbying for them." 
 
(Answers.com (accessed 28 April 2010) <http://w ww.answers.com/topic/c ontrolling-interest>). WT/DS379/R 
Page 62  
 
 8.135  We see no reason to consider that the concept th at "control" of a company resides with its 
majority owner, which is uncontested in the priv ate sector, would be inapplicable to government-
owned companies.  Logically, quite the reverse should be true, given the generalized power of 
governments over economic affairs within their territori es.  As such, we consider that, on its own, 
majority government ownership is clear and highl y indicative evidence of government control, and 
thus of whether an entity is a public bo dy for purposes of the SCM Agreement. 
8.136  We find no legal error, in analyzing whether an  entity is a public body, in giving primacy to 
evidence of majority government-o wnership.  Of course, public body determinations are to be made 
case-by-case, on the basis of the evidence of record in a given investigation, and the authority's 
determination must explain its analysis based on the evidence before it, in order for that determination 
to be reasoned and adequate and thus  consistent with the SCM Agreement.
257  We note in this regard 
that there could be cases (however rare in pr actice) in which a government-owned entity was 
completely insulated (e.g., by law) from any gove rnment involvement in, or influence over, its 
operations, such that the entity was not controlled by the government and thus fell outside the scope 
of the term "public body".  In such a situation, it would be the entity and the government in question 
that would have in their possession the information as to the absence of government control, and in 
our view it would be incumbent upon them, and certain ly it would be in their interest, to bring that 
information to the attention of the investigating au thority.  To the extent that such evidence were 
placed on the record, the investigating authority woul d be required to include its analysis of that 
evidence in its determination as to whethe r the entity was or was not a public body. 
8.137  In the investigations at issue in this dis pute, as noted above, respondents advanced certain 
information and/or arguments regarding the ques tion of public body in respect of SOE input 
producers – mainly based on the five-factor test that the respondents considered the USDOC was 
legally required to perform, and some of which went to the issue of control – and in all such instances 
the USDOC in its determinations discussed and resp onded to that information and those arguments.  
In no case does it appear that the USDOC refused to  consider, or dismissed summarily, any such 
information or arguments, and China does not allege  any such instances.  The USDOC did not find in 
any case that there was record eviden ce to indicate that in spite of  being owned by the government, 
the SOEs in question were not public bodies.  Furthe rmore, it is not the USDOC's factual findings as 
to the extent of government ownership or control of input suppliers that is the focus of China's 
challenge, but rather the legal relevance thereof as de terminative of whether an entity is a public body.  
In particular, China advances the same argument that the respondents advanced in the investigations, 
namely that the USDOC – as a matter of law – shou ld have treated the SOEs as private bodies, and 
thus conducted an entrustment or direction analysis. 
8.138  We have rejected this legal argument, as well as the legal test advanced by China, in respect 
of "public body".  We also have concluded that  the USDOC's determinations that the SOE input 
suppliers were public bodies were ba sed on relevant evidence of government control (which in these 
cases was principally evidence of government owners hip), and that the dete rminations acknowledge 
and come to reasoned conclusions in respect of all of the additional evidence and arguments before it, 
including in particular those advanced by res pondents, as to the question of public body.  We 
therefore find that China has failed to establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 1.1(a) (1) of the SCM Agreement in determining in the 
four countervailing investigations at issue in this  dispute that the SOE input producers were public 
bodies.258 
                                                      
257 See, Section VII.A.2,  supra . 
258 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra .  WT/DS379/R  
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 (ii) SOCBs as public bodies 
8.139  We turn now to the USDOC's determination in  the OTR investigation that the SOCBs were 
public bodies.  In that case, the undisputed reco rd evidence shows that the government owned the 
large majority share of the SOCBs, and exercised si gnificant control over their operations.  Before us 
China does not contest these factual findings but instead argues that government ownership and 
control are not relevant to whether the banks in question are public bodies. 
8.140  In particular, in the OTR investigation, the USDOC's determination that SOCBs were public 
bodies is based on, and incorporates by reference, the en tirety of its analysis of the same issue in the 
earlier CFS Paper  investigation .  In the OTR investigation, th e USDOC maintained the same 
conclusions that it had reached in CFS Paper on this issue, stating that the parties in the investigation 
had not demonstrated that the Chinese banking sector had significantly changed such that 
reconsideration of the CFS Paper  decision was warranted.  We find no indication in the USDOC's 
determination in the OTR investigation that the respondents provided evidence or arguments seeking 
to establish that the USDOC's factual findings from the CFS Paper case were no longer valid, nor did 
they challenge the USDOC's characterization in th e OTR investigation that the situation in the 
banking sector had not signi ficantly changed since the CFS Paper investigation.  In particular, the 
respondents in the OTR investigation did not contest  any of the information or analysis from the CFS 
Paper  investigation either as to the degree of governme nt ownership of these banks or the extent to 
which they were controlled by the government.  In this regard, we note the uncontested statement on 
the record of the OTR investigation, by a Tianjin  government official, that the SOCBs were under 
government supervision.  Rather, the respondents adva nced legal arguments as to the interpretation of 
the term "public body" and as to the kind of analysis  they considered that the USDOC was required to 
conduct. 
8.141  Before us China does not challenge either th e factual evidence or the conclusions drawn 
therefrom by the USDOC as to the extent of government ownership of the SOCBs or the 
government's involvement in their operations.  Rath er, China argues that the USDOC's analysis was 
based on the legally incorrect and irrelevant elemen t of government ownership and control, i.e., the 
same legal argument that it advances in respect of the SOE input suppliers. 
8.142  For the same reasons as discussed supra  in the context of the SOE input producers, we reject 
China's arguments as to the interpretation of the term "public body", and as to the necessity of 
applying the five factor test or any other specific t est to determine whether an entity is a public body.  
Rather, we have found that the determinant of wh ether an entity is a public body is government 
control, and that majority government ownership is strong evidence of control. 
8.143  We have reviewed the determination in the OTR investigation, and the cross-referenced 
determination from the CFS Paper  investigation, that the SOCBs are public bodies.  We note the 
lengthy discussion in the CFS Paper  determination of the evidence that the SOCBs during the period 
of investigation were either wholly or majority  government-owned, and that there was extensive 
government involvement in and control over their operations.  As noted, China does not challenge 
these factual findings.  We consider that the USDOC 's findings constitute a sufficient basis for its 
public body determination in respect of the SOCBs.  We therefore conclude that China has failed to 
establish that the USDOC acted inconsistently with the obligations of the United States under 
Article 1.1(a)(1) of the SCM Agreement in de termining that the SOCBs were public bodies.259 
                                                      
259 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . WT/DS379/R 
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 (iii) Concluding remark 
8.144  Having found that China has failed to establish that the United States acted inconsistently 
with its obligations in so far as its  determinations of "public body" in  the investigations before us in 
this dispute, we recall, as we have already emphasize d, that a finding that an entity is a public body is 
simply the first step in a multi-part analysis.  This  finding, on its own, does not mean in any way that 
the entity in question acted in a non-commercial manne r, by conferring a benefit, nor that any such 
benefit was specific.  Those elements are independent  and as such each must established in order for a 
valid basis to exist for the imposition of a countervailing measure. 
IX. CHINA'S CLAIMS PERTAINING TO SPECIFICITY 
A. D
E JURE  SPECIFICITY OF SOCB  LENDING TO THE TIRE INDUSTRY  
1. Claims of China 
9.1 China claims that the USDOC acted inconsistent ly with the obligations of the United States 
under Article 2.1(a) of the SCM Agreement, by finding in the OTR  investigation that preferential 
lending by SOCBs to the tire industry was de jure  specific.  China further claims that, as a 
consequence, the United States acted inconsistently  with Articles 10 and 32.1 of the SCM Agreement 
and Article VI:3 of the GATT 1994.260 
2. Main arguments of the Parties 
(a) China 
9.2 China submits that the legislation upon which the USDOC relied as the basis for this finding 
of de jure  specificity neither refers to the alleged s ubsidy, nor explicitly limits access to the alleged 
subsidy to the tire industry.261  China further argues that the SO CB loans were not made pursuant to 
the legislation in question.262 
9.3 According to China, a valid determination unde r Article 2.1(a) of the SCM Agreement that 
certain legislation confers a subsidy that is  de jure  specific requires the establishment of three 
elements:  (i) that the legislation define or refer to  all of the elements of a subsidy (i.e., the financial 
contribution and the benefits that w ill be conferred thereby); (ii) that the legislation explicitly limit the 
access to the subsidy to certain enterprises (i.e., th at it must clearly and unambiguously provide that 
the relevant subsidy – the financia l contribution and benef it – is only available to "certain enterprises", 
to the exclusion of other "certain enterprises"); a nd (iii) that the countervailed transaction must have 
been made pursuant to the subject legislation (i .e., must be an instance of the subsidy that the 
legislation defines, and the recipient must be among the "certain enterprises" to which the subsidy is 
explicitly limited).263 
9.4 China notes in addition that pursuant to Article  2.4 of the SCM Agreement, any specificity 
determination must be "clearly s ubstantiated on the basis of positive evidence", and argues that "clear 
substantiation" is an even higher standard than "p ositive evidence" as that term  was interpreted by the 
                                                      
260 Paragraphs B.1(c)(iii) and B.1( e)(i)-(iii) of the "as applied" claims in China request for 
establishment of a Panel; China first written submission, para. 468 (d); second written submission, para. 315 (e). 
261 China first written submission, paras. 208 and 214. 
262 Id., paras. 223 and 225. 
263 Id., para. 209.  WT/DS379/R  
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 Appellate Body in US – Hot-Rolled Steel .264  In this regard, China submits that evidence showing that 
a particular subsidy is broadly available throughout an economy is inconsistent with a valid finding of 
specificity.265 
9.5 China argues that the USDOC's specificity determination in respect of SOCB lending to the 
tire industry is deficient in respect of all three of the elements it considers to be necessary.  First, 
China asserts, the USDOC relied on broad statemen ts in various planning documents and then 
implicitly linked these statements to other statements  in the same planning documents that refer to 
providing support to various industries.266  China submits that none of these statements refers to 
preferential lending by SOCBs to the tire industry – the subsidy that the USDOC actually countervailed – and that the only statement in wh ich SOCBs are mentioned does not indicate that 
SOCBs provide loans at preferential interest rates.
267  For example, China argues that the USDOC 
misinterpreted the statement in the "Hebei Provin ce 9th Five-Year Plan" that the "'automobile and 
components industry' would, among other industries,  be 'developed greatly and stronger'" as requiring 
SOCBs (which are not even mentioned) to provide preferential loans (which also are not mentioned) 
to companies in the "automobile and components industry".268  In China's view, these documents do 
not explicitly refer to the allege d subsidy, and therefore (on that  basis alone) cannot constitute the 
basis for a finding of de jure  specificity within the meaning of Article 2.1(a) of the SCM 
Agreement.269 
9.6 Second, China submits, even assuming that the legislation at issue referred to the alleged 
subsidy, the USDOC's final determ ination provided no analysis of and made no findings as to whether 
the alleged subsidy was explicitly limited to companies in the tire industry.270  China considers that 
the USDOC's statement that "there are no discrete policy plans for the tire industry, per se , [but] the 
totality of the information on this record […] shows that the government is directing policy lending to 
the tire industry or to specific enterprises in the tir e industry" does not support the conclusion that the 
alleged subsidy was explicitly limited to the tire industry.271  China argues that no statements in the 
planning documents indicate that the alleged subsid ies were "explicitly limited" to the tire industry.  
In this connection, China asserts th at if the SOCBs were required to support China's industrial policies 
as the USDOC contended, this would mean that the SOCBs were required to support all of the 
Chinese industrial policies that concerned the vast  array of industries covered by the planning 
documents.  In this regard, China notes that the " GOC Catalogue" (one of the documents on which the 
USDOC based its specificity determination) identif ies 539 "encouraged national projects" in 26 broad 
categories.  China contends that if the "subsid y" inferred from this document applied to the tire 
industry, then it should apply to all of th e industries identified in the GOC Catalogue.272  I n  t h i s  
regard, China considers that the list of encouraged national projects is both so  long (539) and so broad 
(in 26 diverse categories) that it could not, as a legal matter, form the basis for a specificity finding.  China considers that the findings of the panel in US – Upland Cotton , in particular its statement that 
"a subsidy would cease to be specific because it is  sufficiently broadly available throughout an 
                                                     
 
264 China first written submission, paras. 210-211, citing to Appellate Body Report on US – Hot-Rolled 
Steel , para. 192.  China contends in this regard that any determination of specificity must be based upon a 
thorough examination of all relevant evidence.  (Id., para. 212). 
265 Id., para. 213. 
266 China first written submission, para. 215. 
267 Id., paras. 214, 216-217; oral statement at the first meeting of the Panel, para. 61. 
268 China first written submission, footnote 184 (referring to Exhibit CHI-4, p. 14). 
269 Id., para. 217. 
270 Id., para. 219. 
271 Id., para 219 and footnote 185 (referring to Exhibit CHI-4, p. 98). 
272 Id., para. 221 and footnote 186 (referring to the Guiding Catalogue of the Industrial Restructuring 
(2005),  promulgated by the National Deve lopment and Reform Commission (the "GOC Catalogue"), Exhibit 
CHI-70). WT/DS379/R 
Page 66  
 
 economy as not to benefit a particular lim ited group of producers of certain products"  supports its 
view.
273 
9.7 China further argues in this context that cont rary to the USDOC's finding, the preferential 
loans by SOCBs are available to any borrower in China that borrows money from SOCBs at 
prevailing interest rates.274  For China, given the broad availability  and use of this financing, it cannot 
be considered specific.275 
9.8 Finally, China asserts that the USDOC failed to  demonstrate that the SOCB loans were made 
pursuant to the legislation on which the USDOC re lied.  China submits that the USDOC merely 
"presumed" that all of the loans that SOCBs exte nded to GTC were made pursuant to the legislation 
identified by the USDOC.  According to China,  such a presumption does not meet the stringent 
requirements for a finding of specificity under Article 2.1(a) of the SCM Agreement.276  Furthermore, 
China submits, the evidence on the record does not support this presumption.  China asserts that the 
interest rates that GTC paid on RMB-denominated loans from SOCBs were entirely in the range of 
interest rates paid by borrowers across all other indu stry sectors in China, and that the interest rates 
that GTC paid on dollar-denominated loans were  consistent with the USDOC's own benchmark.277 
9.9 For these reasons, China contends that the USDOC did not clearly substantiate, based on 
positive evidence, its de jure  specificity determination in the OTR investigation.278 
(b) United States 9.10 The United States argues that the USDOC's de jure specificity finding in respect of SOCB 
loans to the tire industry was consistent with Ar ticle 2 of the SCM Agreement.  According to the 
United States, the USDOC found the "policy lending"  in question to be specific because the loans 
were provided as part of government programmes guiding financial institutions to lend to tire 
producers.
279   
9.11 The United States notes that Article 2.1 of the SCM Agreement provides that a subsidy is de 
jure specific if the granting authority, or the legislation pursuant to which that authority operates, 
explicitly limits access to the subsidy to certain ente rprises.  The United States points to Article 2.4, 
which requires that any determination of specificity  must be "clearly substantiated on the basis of 
positive evidence", and notes the Appellate Body's finding that such evidence must be of "an 
affirmative, objective and verifiable character", which is "credible".280  The United States argues that 
where an investigating authority clearly substan tiates on the basis of positive evidence that access to a 
subsidy is explicitly limited, then a finding of speci ficity is consistent with Article 2 of the SCM 
Agreement; and the USDOC's finding of de jure  specificity in respect of SOCB lending to the tire 
industry met this test.281 
                                                      
273 China response to Panel question 56 (first meeting), citing to Panel Report on US – Upland Cotton , 
para. 7.1142. 
274 China first written submission, para.228.  China refers, in this connection, to record evidence that 
borrowers in the OTR tires industry obtained loans from SOCBs at interest rates that were not materially 
different from the interest rates on loans that SOCBs pr ovided to borrowers in other industries.  (China first 
written submission, paras. 168-173; response  to Panel question 62 (first meeting)). 
275 Id., para. 229. 
276 China first written submission, para. 223. 
277 Id., para. 224. 
278 See, e.g.,  China first written submission, paras. 217 and 219; second written submission, para. 191. 
279 United States first written submission, paras. 330-332. 
280 Id., paras. 333-334, citing to Appellate Body Report on US – Hot-Rolled Steel , para. 192. 
281 Id., para. 335.  WT/DS379/R  
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 9.12 The United States argues that the USDOC found th at the Chinese laws, plans and policies – 
which operated at central, provincia l and municipal levels of governme nt – limited access to policy 
lending to a group of industries that explicitly incl uded the OTR tires industry.  Furthermore, the 
USDOC found that the provincial and municipal policies and plans were designed to implement central government plans and were inte nded to be consistent with those.
282 
9.13 According to the United States, a catalogue of  encouraged projects, which formed "an 
important basis for guiding investment directions" and for government investment and fiscal policies, 
inter alia,  pursuant to the central government's 11th Five-Year Plan, included "advanced belt tires" and 
related materials and equipment.  The 10th Five-Year Plan had referred to "meridian radial tires" as a 
national security priority, to which the contribution of funds should be "reasonably directed".  The 
United States asserts that the provincial and muni cipal governments closely coordinated their own 
plans with those in the central plans.283 
9.14 Regarding the interpretation of Article 2 of th e SCM Agreement, the United States argues that 
this provision does not require the identification of le gislation that defines the elements of a subsidy, 
as this would conflate the determination of sp ecificity and benefit with that of financial 
contribution.284  The United States also disagrees with China that the range of projects in the planning 
documents was so broad as to render policy lending non-specific.  In the view of the United States, 
the referenced projects concerned a "group of indust ries" (the terminology of Article 2.1 of the SCM 
Agreement).  The United States also notes that the USDOC found that the planning documents 
prohibited policy lending to projects in the "restricted" and "to be abolished" categories.285 
9.15 The United States further argues that the questi on of specificity in respect of the SOCB 
lending is different from that of benefit (i.e., the terms of the lending):  specificity has to do with 
making credit available to certain enterprises, including tire companies.286  In this regard, the 
United States argues that the USDOC found that SO CBs acted pursuant to Chinese laws, policies and 
plans in providing policy loans to the OTR tire industr y.  The United States considers that the primary 
means of differentiating among borrowers from th e SOCBs was not lending rates (most borrowers 
paid rates near government-set benchmarks ) but the availability of credit at all.287 
3. Main arguments of the Third Parties 
(a) Australia 
9.16 Australia disagrees with China's contention that for a de jure  specificity finding the legislation 
must specify a subsidy, that the legislation must  explicitly limit access to the subsidy to certain 
enterprises "to the exclusion of other enterprises", and that the specific transaction must be made 
pursuant to the legislation forming the basis of the de jure  specificity finding.  According to Australia, 
this argument conflates elements of Article 1 with Article 2.1, whereas de jure specificity does not 
require legislation identifying the elements of a subsid y.  Rather, Australia considers that the tests for 
the existence of a subsidy, and for specificity, are sep arate, and that this approach is consistent with 
that taken by previous panels.  Australia consider s that statements of government policies, plans and 
intentions are highly relevant in determining, inter alia , that subsidies are targeted to certain 
enterprises.  Quoting Article 2.1 of the SCM Agreem ent, Australia argues that for a finding that policy 
                                                      
282 United States first written submission, para. 336; response to Panel question 61 (first meeting). 
283 United States first written submission, paras. 337-338. 
284 Id., paras. 346-347; opening statement at the first meeting of the Panel, para. 43. 
285 United States first written submission, paras. 348 and 351-353; opening statement at the first 
meeting of the Panel, para. 33. 
286 United States first written submission, paras. 354-356. 
287 Id., paras. 357-360. WT/DS379/R 
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 lending is de jure  specific, the policy statement that fo rms the basis of the programme must  
"'explicitly limit access to certain enterprises'".  Au stralia sees nothing in this language requiring that 
such limitation be explicitly to the exclusion of others.  Australia adds that the test for de jure  
specificity does not require a direction from the government on "what the benefit will be" and "who it 
will go to". Australia also argues that once the exis tence of a subsidy, and specificity, are established 
in accordance with Articles 1 and 2 of the SCM Ag reement, there is no need to impose the third 
requirement advanced by China that the individual transactions be made pursuant to the legislation in 
question.
288 
(b) European Communities 
9.17 Without prejudice to the determination of specificity in the present dispute, the European 
Communities submits that a subsidy that reaches a wide number of beneficiaries and industries may 
call into question the specificity of the measure.  Recalling the panel report on US – FSC (Article 21.5 
– EC) , the European Communities notes that it is unlikely that a subsidy in the form of a loan could be 
either de jure  or de facto  specific under Article 2 of the SCM Agreement  if the loan can be obtained 
by companies of all sizes (as long as they are suff iciently credit-worthy) with respect to projects 
across all sectors of the economy.  The European  Communities also submits that the specificity 
analysis should focus on the characteristics of the measure at issue rather than merely on the 
disbursements made thereunder, b ecause it is the subsidy itself that de jure  or de facto  limits access to 
an "enterprise or industry or group of enterprises or  industries".  The European Communities adds that 
the Panel must determine "financial contributi on" and "benefit" as a matter independent from 
"specificity" since these elements must be identif ied and examined separately in order to find the 
existence of specific subsidies with in the meaning of the Agreement.289 
(c) Saudi Arabia 
9.18 Saudi Arabia considers that specificity is a separate and independent condition from financial 
contribution and benefit, c onsistent with previous panels' decisions .  Saudi Arabia is also of the view 
that specificity must be found with regard to the subsidy as a whole, i.e., financial contribution and 
benefit.  To illustrate its point, Saudi Arabia argues that the provision of low-interest loans to a limited 
group of enterprises or industries does not fulfil th e specificity criterion if the preferential lending 
rates do not differ materially from the rates that all enterprises in the country of provision may receive 
for similar loans.290 
4. Assessment by the Panel 
9.19 The issues presented by this claim are:  what th e required analytical elements are for a valid 
finding of de jure  specificity under Article 2.1(a) of the SCM Agreement; in this regard whether the 
three-part test advanced by China is required by that provision; and finally, on the basis of both the 
facts of the OTR  investigation and applicable legal requirements, whether the USDOC's de jure  
specificity determination in respect of SOCB lendi ng to the OTR tire industry was inconsistent with 
the United States' obligations under the SCM Agreemen t.  Concerning the analytical elements for a 
valid finding of de jure  specificity, China's claim raises both how the limitation of access to a subsidy 
must be structured, and the meaning of the term "certain enterprises". 
                                                      
288 Australia third-party submission, paras. 26-30 and 32; third-party response to Panel questions 10 
and 11. 
289 European Communities third-party submission, paras.  41-44; third-party response to Panel questions 
10 and 11. 
290 Saudi Arabia third-party response to Panel questions 10 and 11.  WT/DS379/R  
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 (a) Interpretation of Article 2.1 of the SCM Agreement 
9.20 We start by considering the text of Article 2.1 of the SCM Agreement: 
"Article 2  
 
Specificity  
 
2.1 In order to determine whether a s ubsidy, as defined in paragraph 1 of 
Article 1, is specific to an enterprise or industry or group of enterprises or industries 
(referred to in this Agreement as "certain en terprises") within the jurisdiction of the 
granting authority, the following principles shall apply: 
(a) Where the granting authority, or the legislation pursuant to 
which the granting authority opera tes, explicitly limits access to a 
subsidy to certain enterprises, su ch subsidy shall be specific. 
(b) Where the granting authority, or the legislation pursuant to 
which the granting authority operates,  establishes objective criteria or 
conditions2 governing the eligibility for, and the amount of, a 
subsidy, specificity shall not exist, provided that the eligibility is automatic and that such criteria and conditions are strictly adhered to.  The criteria or conditions must be clearly spelled out in law, regulation, or other official document, so as to be capable of verification. 
(c) If, notwithstanding any appearance of non-specificity 
resulting from the application of the principles laid down in subparagraphs (a) and (b), there are reasons to believe that the 
subsidy may in fact be specific, other factors may be considered.  
Such factors are:  use of a subsidy programme by a limited number of 
certain enterprises, predominant use by certain enterprises, the 
granting of disproportionately large amounts of subsidy to certain enterprises, and the manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy.
3  In applying 
this  subparagraph, account sha ll be taken of the extent of 
diversification of economic activiti es within the jurisdiction of the 
granting authority, as well as of the length of time during which the 
subsidy programme has been in operation". 
  _________________________ 
2 Objective criteria or conditions, as used herein, mean criteria or conditions which are neutral, 
which do not favour certain enterprises over others, and which are economic in nature and 
horizontal in application, such as numb er of employees or size of enterprise. 
3 In this regard, in particular, information on the frequency with which applications for a 
subsidy are refused or approved and the reasons for such decisions shall be considered. 
(i) Limitation of access 
9.21 We begin our analysis of this claim by noting the general role in the SCM Agreement of the 
specificity requirement, which is related to the overall object and purpose of the SCM Agreement to WT/DS379/R 
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 discipline trade-distorting subsidies.  In partic ular, the specificity provisions establish that the 
subsidies deemed under the Agreement to be potentially  trade distortive are those that are targeted in 
some way to particular beneficiaries, rather than  being broadly available throughout the economy of a 
Member.  In other words, the specificity requirement is not about the existence of a subsidy, which is 
dealt with in Article 1.1, but rather about access thereto.  Article 2 of the SCM Agreement makes 
clear that specificity can take a number of different  forms (enterprise, industry, regional, as well as 
deemed specificity in the case of prohibited subsid ies), and that the superficial appearance of non-
specificity is not sufficient for a subsidy to avoid c overage by the SCM Agreement.  In short, the issue 
under Article 2 of the Agreement is the limitation, on some basis, of access to the subsidy.  Subsidies 
to which access is limited in any of the ways referred to in that provision are specific and thus covered 
by the SCM Agreement. 
9.22 Furthermore, the limitation can be "explicit" (commonly referred to as " de jure ") as per 
Article 2.1(a), or can be determined on the basi s of how, in practice, an apparently non-specific 
subsidy is allocated (commonly referred to as " de facto ") as per Article 2.1(c) of the SCM Agreement.  
In this regard, we note the balance struck in Ar ticle 2 of the SCM Agreement – a subsidy to which 
access is automatic based on neutral, horizontally-a pplicable economic criteria is not specific, and 
thus falls outside the scope of the SCM Agreemen t, but the appearance of non-specificity can be 
overridden by the facts of how the subsidy is allocate d in practice.  We thus must guard against both 
an overly-broad reading of the specificity requireme nt which would sweep within the coverage of the 
SCM Agreement non-specific subsidies, and an overly-rigid or restrictive reading which would subvert the purpose of the specificity requirement , and thus undermine the effectiveness of the SCM 
Agreement. 
9.23 In the provision at issue, Article 2.1(a) of the SCM Agreement, the text requires, and the 
parties do not dispute, that the limitation in questio n must be explicit.  Where the parties disagree is 
with respect to how that explicit limitation must be st ructured for a measure to fall within the scope of 
Article 2.1(a) of the SCM Agreement. 
9.24 We recall that the text of Article 2.1(a) of the SCM Agreement establishes two bases on 
which de jure  specificity can be established:  either the granting authority, or the legislation pursuant 
to which it operates, "explicitly limits access to a subs idy to certain enterprises".  We recall that the 
first element of the test advanced by China is th at the granting authority, or the legislation setting 
forth the measure in question, must identify or sp ecify the elements of a subsidy, i.e., financial 
contribution and benefit.  We understand that China bases th is contention on the words "explicitly" 
and "subsidy" in Article 2.1(a), i.e., that the grantin g authority, or the legislation pursuant to which it 
operates, must explicitly limit access to a subsidy .  For China, this means that if the granting authority 
or the legislation in question does not explicitly set forth both the financial contribution and the 
benefit elements, the measure cannot be a de jure  specific subsidy.
291  (China does not rule out that 
such a measure could, in particular instances, be a de facto  specific subsidy).292 
9.25 The first issue raised by this claim is whethe r, to explicitly limit access to a subsidy, a 
granting authority or a legislation must specify al l of the elements of a subsidy, i.e., financial 
contribution and benefit.  As noted, for China, this  is first and foremost a textual question following 
from the definition of "subsidy" in Article 1 of th e SCM Agreement, i.e., that the use of the word 
"subsidy" in Article 2.1(a) requires that both the financial contribution and the benefit be explicitly 
                                                      
291 For instance, in response to a question from the Panel, China states:  "[T]he necessary consequence 
of the use of the defined term 'subsidy' in Article 2 of the SCM Agreement is that the investigating authority 
must find that the subsidy is 'explicitly li mited' [...] It is [ ] inadequate, as a matter of law, for an investigating 
authority to find that only a financial contribution or a benefit is de jure specific".  (China response to Panel 
question 55 (first meeting)). 
292 Id.  WT/DS379/R  
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 identified by the granting authority or the law.  A nother way to look at this issue, however, is from a 
functional standpoint.  That is, f unctionally, could a granting authority  or a legislation explicitly limit 
access to a "subsidy" without identifying both the financial contribution and the benefit flowing 
therefrom?  Or put another way, would the only way for a granting authority or a legislation to 
explicitly limit access to a subsidy be  to explicitly identify both th e financial contribution and the 
benefit, and explicitly limit access to both? 
9.26 We consider that there are many ways in which access to a subsidy could be explicitly 
limited, and we do not see that both the financial co ntribution and the benefit necessarily would have 
to be set forth explicitly to effect such a limitation.   In particular, if access is explicitly limited to a 
particular type of financial cont ribution, which sometimes but not always gives rise to benefits, the 
particular cases in which the benefits existed would be de jure  specific subsidies.  This is because the 
explicit limitation of access to the financial contribu tion would have the effect of also limiting any 
benefits resulting from the financial contribution, w ithout the limitation of access to the benefits itself 
needing to be explicit.  Similarly, access could be e xplicitly limited to a par ticular set of benefits 
without the access to the underlying financial contribu tions also needing to be explicitly limited, and 
again, in our view, the access to the "subsidy", th e combination of the financial contribution and the 
benefit, would be explicitly limited. 
9.27 Hypothetical examples help to illustrate this point.  Suppose that a law established a 
government credit facility exclusively for the cardbo ard box industry, but was silent concerning the 
terms and conditions on which the financ ing was to be provided.  In this example, it is clear that while 
access to the financial contribution would be explicitl y limited to a particular industry, there would be 
no explicit limitation of any benefits that might aris e therefrom.  Suppose that some of the financing 
under this facility were provided on be tter-than-market terms, i.e., that benefits were conferred.  In 
this scenario, because by law only the cardboard box industry could obtain any financial contributions 
(the loans) under the programme, any benefits flowi ng therefrom necessarily also would be limited to 
the cardboard box industry, meaning that any subsidies under this programme would be de jure  
specific to that industry.  Alternatively, suppo se that a law established a government credit facility 
accessible to all enterprises in all industries, and further provided that companies in the cardboard box 
industry (and only that industry) would get loans unde r this facility on better-than-market terms.  In 
this second example, access to the financial contribu tion (the loans) would not be limited, but access 
to the benefits flowing therefrom would be – to a sing le industry.  By virtue of this explicit limitation 
on access to the benefits, this  subsidy also would be de jure  specific. 
9.28 We consider that a reading of Article 2.1( a) of the SCM Agreement that would require 
explicit limitation of both the financial contribution and the benefit, such as China advocates, is not 
supported by the text of that provision.  In our view, it would limit de jure  specificity to a single, 
narrow set of circumstances, in which a single piece of  legislation (or perhaps more than one formally 
interrelated pieces of legislation) or some action by the granting authority, would explicitly set forth, 
in the form of a formal programme, the financial contribution and benefit elements (including the 
form they would take and how th ey would operate) and would then specify the particular eligible 
beneficiaries (and possibly also would state explicitly that only those beneficiaries were eligible).  We 
cannot agree with such a reading, which in our vi ew would exclude many situations in which access 
to a given subsidy was explicitly limited, by virtue of a limitation of access to either the financial 
contribution or the benefit. 
9.29 We note that a wide variety of possible forms of  subsidization falls within the definition in 
Article 1 of the SCM Agreement, and we see not hing in Article 2 that would narrow down those 
forms, in a scenario of either de jure  or de facto  specificity.  In this regard, Article 1.2 of the SCM 
Agreement treats the concepts of subsidy and specifi city as separate.  In particular, that provision 
establishes that subsidies in the sense of Article 1 are subject to the SCM Agreement only if they are 
specific in the sense of Article 2.  Indeed, financ ial contribution, benefit and specificity are three WT/DS379/R 
Page 72  
 
 independent and cumulative elements, all of which must be present for a measure to be covered by the 
SCM Agreement.  Concerning financ ial contribution and benefit in th is regard, we recall the findings 
of the Appellate Body in Brazil – Aircraft , that these are independent concepts, both of which must be 
present for a measure to be a subsidy in the sense of the SCM Agreement.
293  Similarly, we agree with 
the approach taken by the panels in EC – Countervailing Measures on DRAM Chips, US – 
Countervailing Duty Investigation on DRAMS,  and Korea – Commercial Vessels , all of which 
analyzed the question of specificity separately from financial contributi on and benefit.  In EC – 
Countervailing Measures on DRAM Chips , the panel overturned some of the European Communities' 
determinations as to the existence of financial c ontributions and the amounts of benefits pursuant to 
the measures at issue, but nevertheless as a sep arate matter considered, and upheld, the European 
Communities' specificity finding in respect of the measures as a whole.294  The US – Countervailing 
Duty Investigation on DRAMS panel followed the same approach , affirming the investigating 
authority's finding of de jure specificity of the measures at issue while overturning some of the 
investigating authority's findings of  financial contribution and benefit.295  The panel in Korea – 
Commercial Vessels likewise separately evaluated the existence of specificity of the measures before 
it from the questions of financial contribution and benefit.296 
9.30 While ultimately all three elements (financial c ontribution, benefit and specificity) must be 
present for a given measure to be covered by th e SCM Agreement, a formalistic reading of the 
specificity provisions as implying a particular conjunc tion of these elements, or a particular order of 
analysis, might have the effect of omitting from coverage measures which viewed in their entirety 
have all three necessary elements to be covered by the SCM Agreement.  As we noted above, in the 
particular case of de jure  specificity, to require that a given legi slation or granting authority lay out all 
elements of a specific subsidy, explicitly lim iting access to both the financial contribution and the 
benefit, would have the effect of treating as non- de jure  specific a wide variety of subsidies to which 
access was explicitly limited.  This would mean th at the only basis on which specificity could be 
found for such subsidies would be on a de facto  basis, a fact-intensive, case-by-case inquiry that 
would be both illogical and entir ely superfluous under the described scenarios where an explicit 
limitation of access to a subsidy existed.  Furtherm ore, where the details as to the actual distribution 
of the subsidy could not be obtained, the subsid y would be left outside the scope of the SCM 
Agreement in spite of its undeniably being explicitly lim ited to particular beneficiaries.  We consider 
that such a reading would frustrate the purpose of the specificity provisions, and would open 
considerable scope for circumvention of the SCM Ag reement, based on a distinction in form but not 
substance. 
9.31 By the same token, we see no potential that being able to establish de jure  specificity on the 
basis of an explicit limitation of access either  to a financial contribution or to a set of benefits could 
improperly bring within the scope of the SCM Ag reement measures that in fact are not specific 
subsidies.  In whatever order the analysis is c onducted, and regardless of whether access is explicitly 
limited in respect of the financial contribution or th e benefit or both, the three elements of financial 
contribution, benefit and explic it limitation of access would be present, and the measure thus would 
be a de jure  specific subsidy and hence covered by the SCM Agreement. 
9.32 For the same reasons, we disagree with the third pa rt of China's three-part test, i.e., that the 
specific transaction under investigation must be an inst ance of the subsidy that the legislation defines.  
We consider that this is largely a restatement of China's argument that the de jure  specificity provision 
                                                      
293 Appellate Body Report on Brazil – Aircraft , para. 157. 
294 Panel Report on EC – Countervailing Measures on DRAM Chips , paras. 7.110, 7.186, 7.215 and 
7.230-7.232. 
295 Panel Report on US – Countervailing Duty Investigation on DRAMS , paras. 7.206-7.208.  See also 
Japan – DRAMs (Korea) , paras. 7.253-7-254, 7-316, 7-361 and 7.375. 
296 Panel Report on Korea – Commercial Vessels , para. 7.192.  WT/DS379/R  
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 requires the granting authority or the relevant legi slation to identify both the financial contribution 
and the benefit.  We see no limitation in the text  to such a specific scenario, and thus no such 
requirement.  Again, we note that subsidies can take many forms and can be provided through many 
different kinds of mechanisms, some more and some  less explicit.  Of course, where a countervailing 
measure is applied in respect of de jure  specific subsidies, the limitation to "certain enterprises" must 
be explicit, but again we consider that the limitatio n to those recipients could be in respect of the 
financial contribution, or the benefit, or both.  Furthermore, for the application of a countervailing 
measure, there must be evidence that the subsidy that  has been provided and is  being countervailed is 
the subsidy that has been found to be specific, but  this would be the case for any sort of specific 
subsidy, not just a de jure  specific subsidy. 
(ii) "Certain enterprises" 
9.33 China's claim also raises the meaning of the term  "certain enterprises" in Article 2.1 of the 
SCM Agreement.  In particular, the second element of  China's three-part test is that the legislation 
pursuant to which the subsidy is provided must cl early provide that the subsidy (the financial 
contribution and benefit) is only available to "certa in enterprises" to the exclusion of other "certain 
enterprises".  We understand that what China is em phasizing in this element is the explicit limitation 
to "certain enterprises".  While Article 2.1(a) of the SCM Agreement requires such an explicit 
limitation, that provision does not address the related but separate question of the breadth or narrowness of the term "certain enterprises". 
9.34 The relevant text of Article 2.1 of the SCM Agreement reads: 
"In order to determine whether a subsidy [...] is  specific to an enterprise or industry or group 
of enterprises or industries (referred to in th is Agreement as "certain enterprises"), the 
following principles shall apply:" 
9.35 Concerning the meaning of the term "certain  enterprises", China cites with approval the 
statement of the panel in US – Upland Cotton that: 
"'[a]t some point that is not made precise in the text of the agreement, and which may 
modulate according to the particular circumstances of a given case, a subsidy would 
cease to be specific because it is sufficiently broadly available throughout an 
economy as not to benefit a particular limited group of producers of certain 
products'".
297  (emphasis added by China) 
China argues on the basis of this statement that "a  'group of enterprises or industries' within the 
meaning of Article 2 of the SCM Agreement must be  'sufficiently discrete' so that the 'group of 
enterprises or industries' represents no more than a 'limited group of producers of certain products'".298  
China acknowledges that there is a certain amount of  "indeterminacy" in the concept of specificity, 
but argues that the "539 'encouraged' industries in China spanning 26 broad sectors of economic 
activity" identified in the GOC Catalogue ( one of the documents on which the USDOC's de jure  
specificity determination was based), are too br oad to be "specific" for purposes of the SCM 
Agreement.299 
 9.36 We see China's argument as pointing to two different  elements of the availability of a subsidy:  
the diversity of the recipients, and the breadth of av ailability of the subsidy.  Concerning diversity, we 
                                                     
 
297 China response to Panel question 56 (first meeting), citing to Panel Report on US – Upland Cotton , 
para. 7.1142. 
298 Id. 
299 China response to Panel question 54 (first meeting). WT/DS379/R 
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 understand China's argument to mean that the sheer diversity of the "encouraged" projects or 
industries, and of the economic sectors from which they come, as identified in the documents relied 
on by the USDOC, is too great to support a finding of specificity. 
9.37 Starting with the text of the definition of "certain enterprises" we see nothing that addresses 
the question of diversity of the "certain enterprises" .  The text simply says that "certain enterprises" 
can be single enterprises or industries, or groups th ereof, but in our view does not imply that there 
needs to be any similarity among them in order fo r them to constitute "cer tain enterprises".  If 
anything, the context suggests the contrary.  Article  2.1(b) of the SCM Agreement, on non-specificity, 
emphasizes entirely other factors, namely the non-sel ectivity of the eligibility criteria (economic in 
nature and horizontal in application) and the automaticity of eligibility, which speak to broad 
availability.  Article 2.1(c), on de facto  specificity, suggests that an apparently non-specific subsidy 
might be confirmed as non-specific even if the facts concerning its actual distribution show that it is 
being used by a narrow range of enterprises, agai n emphasizing the breadth of availability of a 
subsidy throughout an economy.  In particular, th is provision cautions that in examining whether de 
facto  specificity exists based on patterns of usage,  "account shall be taken of the extent of 
diversification of economic activities within the juri sdiction of the granting authority".  This suggests 
that where the extent of the underlying economic divers ification is low, lack of diversification in the 
distribution of benefits would not by itself give rise to a finding of de facto  specificity.  We note that 
the panel in US –  Upland Cotton based its analysis of specificity on how broadly available a subsidy 
is throughout an economy, and that the panel in US – Softwood Lumber IV  found that specificity has 
to do with subsidies that, either in law or in fact, "[are] not broadly available".
300  We consider the 
breadth of availability of a given subsidy in an ec onomy to be a fundamentally different concept from 
the diversity of activities of the subsidy's recipients. 
9.38 For these reasons, we do not consider that the sheer diversity of economic activities supported 
by a given subsidy is sufficient by itself to preclude  that subsidy from being specific, and we do not 
read US – Upland Cotton as standing for such a proposition.  To the contrary, the main emphasis of 
the panel in US – Upland Cotton was on the case-by-case nature of the analysis of the breadth of 
availability of a subsidy in the context of a specificity finding301, and we consider that if anything the 
panel was cautioning against interpreting the concept of specificity too narrowly.  For example, the 
panel emphasized that the SCM Agreement, as an ag reement covering trade in goods, is applicable to 
all goods, and that the concept of specificity must be understood from that perspective.302  We note as 
well in this context that the US – Upland Cotton panel found that a particular subsidy programme 
benefiting some 100 different agricultural commodities (crops as well as livestock) was a "sufficiently 
discrete" segment of the United States economy to qualify as specific for purposes of the SCM Agreement.
303  We take these as indications that that pane l did not consider the economic diversity of 
beneficiaries, by itself, necessarily to bar a finding of specificity. 
                                                      
300 Panel Report on US – Upland Cotton , paras. 7.1142-7.1152; and Panel Report on US – Softwood 
Lumber IV , para. 7.116. 
301 In this regard, we agree with the US – Upland Cotton panel that:  "The plain words of Article 2.1 
indicate that specificity is a general concept, and the breadth or narrowness of specificity is not susceptible to 
rigid quantitative definition.  Whether a subsidy is specific can only be assessed on a case-by-case basis".  
(Panel Report on US – Upland Cotton , para. 7.1142). 
302 The panel specifically stated that:  "the concept of specificity in Article 2 of the SCM Agreement  is 
germane to the disciplines imposed by the SCM Agreement .  The SCM Agreement  is an agreement on trade in 
goods, in Annex 1A of the WTO Agreement .  By its own terms, subject to considerations reflected in the text of 
some of its provisions, it applies in respect of all goods.  The concept of specific ity must be considered within 
the legal framework and frame of reference of that agreement as a whole".  (e mphasis original)  (Id., 
para. 7.1144).  The panel noted in this connection that the Agreement on Agriculture contains no specificity 
requirement.  (Id., footnote 1274). 
303 Id., paras. 7.1150-7.1151.  WT/DS379/R  
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 9.39 Indeed, we can imagine many examples of subs idies that could be specific in spite of 
benefiting very diverse recipients.  For instance, a subsidy might be limited to producers of oranges, 
producers of dental implants, producers of comput ers, producers of scuba diving equipment, and 
producers of certain parts for the space shuttle.  Th ere is no question that these are extremely diverse 
industries – their products are essentially totally unr elated, and come from five very different sectors 
of the economy.  Or a subsidy might  be explicitly limited to one pa rticular company in each of 200 
distinct and unrelated industries or sectors.  Again,  there would be no question that the recipients were 
economically very diverse.  Yet, (subject to the comp lete facts of the case), we consider that each of 
these subsidies could easily be specific, given its availability to only that particular "group of 
enterprises or industries". 
9.40 Thus, as a matter of legal interpretation, we do not consider that economic diversity of 
subsidy recipients, by itself, is suffi cient to prevent a subsidy from being de jure  specific. 
9.41 The second element of China's argument has to do with the breadth of availability of a 
subsidy which, as noted, is the question addressed by the US –  Upland Cotton panel.  We agree with 
that panel that the dividing line between a subsidy to which access is limited enough to be specific, as 
opposed to broadly enough available throughout an  economy to be non-specific, is not precisely 
defined in the SCM Agreement and can only be dete rmined on a case-by-case basis.  We therefore 
consider this question infra , in our analysis of the details of the USDOC's determination of de jure 
specificity in respect of lending by SOCBs to the OTR tire industry. 
9.42 We note, finally, that China also argues in regard  to "certain enterprises" that "the legislation 
must provide that the relevant subsidy [...] is only av ailable to 'certain enterprises', to the exclusion of 
other 'certain enterprises'".304  China does not make clear whether it is suggesting that Article 2.1(a) of 
the SCM Agreement requires the granting authority or  the legislation to identify explicitly both the 
"certain enterprises" that are and the "certain enterpri ses" that are not eligible for the subsidy.  To the 
extent that China is making this argument, we fi nd no such requirement in Article 2.1(a) of the SCM 
Agreement. 
9.43 To recall, the provision states that for de jure  specificity to exist, the granting authority or the 
legislation must explicitly limit access to certain recipients, i.e., it must in some manner identify or 
define the eligible or affected enterprises, and th ese enterprises must be "cer tain enterprises" in the 
sense of Article 2.1(a) of the SCM Agreement.  We see no requirement that in addition, the legislation 
must explicitly exclude from access the other "certain enterprises" that are not eligible. 
(b) USDOC de jure  specificity determination 
9.44 In the light of the foregoing considerations as to the interpretation of Article 2 of the SCM 
Agreement, we now take up China's arguments concerning the USDOC's determination that SOCB 
lending to the OTR tire industry was de jure  specific.  In particular, we examine whether the USDOC 
provided a "reasoned and adequate" explanation as to: (i) how the evidence on the record supported its 
factual findings; and (ii) how those factua l findings supported its determination of de jure  
specificity.305 
9.45 In the OTR investigation, the USDOC determined  that China provided subsidies in the form 
of preferential lending by SOCBs (referred to by the USDOC as "policy lending"306) to the tire 
                                                      
304 China first written submission, para. 209. 
305 Appellate Body Report on US – Countervailing Duty Investigation on DRAMS , para. 186. 
306 China contests this term, arguing that there is no programme known as "policy lending" by SOCBs 
in China, and that to the contra ry, the SOCBs are commercial banks operating on a commercial basis.  ( See, e.g.,  
China first written submission, paras. 155 and 165). WT/DS379/R 
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 industry, in particular to two companies, GTC and Starbright.
307  It determined that these subsidies 
were de jure  specific on the basis that relevant Chinese laws, plans and policies explicitly limited 
access to such "policy lending" by SOCBs to a group of industries that included the OTR tires 
industry. 
9.46 We turn to an assessment of this determinati on in the light of our interpretation, above, of 
Article 2.1(a) of the SCM Agreement regarding de jure  specificity.  In particular, we understand that 
the USDOC based this determination on a finding that  a number of central, provincial and municipal 
government planning documents provided for th e development of the OTR tire industry, inter alia , 
through the provision of loan financing by SOCBs (i .e., government financial contributions) to the tire 
producers, in some instances identified by name.  The USDOC's benefit determination in respect of 
this lending was made in a separate part of its de termination, not on the basis of these planning 
documents.  Given our interpretation of Article 2.1(a) , we find no legal error in this separate analysis 
of these two elements. 
9.47 The remaining question before us  in respect of the USDOC's de jure  specificity 
determination, therefore, is whether that determ ination is reasonably supported by the documents on 
which it was based.  We must consider, in par ticular whether the evidence before the USDOC 
supports its findings that the various planning do cuments identified "certain enterprises", which 
included the OTR tires industry, for development, inter alia , through the provision of loan financing, 
and whether documents on the record also support the USDOC's finding that that SOCBs were acting 
pursuant to the prescriptions of the planning documen ts when they provided loan financing to the 
OTR tire producers. 
9.48 Turning now to the USDOC's findings and the related record evidence, the USDOC found 
that at the central government level the Govern ment of China's Five-Year Plans set the overall 
economic policies for China, which policies then were implemented in de tail through subsidiary 
central government-level instruments (the Impl ementing Regulations, the GOC Catalogue, the SETC 
Circular).  The USDOC further found that the provi ncial and local governments implemented at their 
respective levels these national plans and policies.308  The USDOC stated, inter alia , that the record 
indicated that GTC had been a "key target for economic development by Guizhou province and 
Guiyang municipality", citing specific references to GTC in their respective provincial and municipal 
five-year plans, and indicating that the plans also st ated that lending should be allocated according to 
the plans, and that record evid ence showed that GTC had received numerous project development 
loans from SOCBs.309  Summarizing its view of how these policies at the various levels of 
government were related, the USDOC found that "cen tral level plans should be considered a central 
government policy or programme that local govern ments adopt and implement through their own 
five-year plans".310 
9.49 Via this statement, we consider that the US DOC made a finding that the "policy lending 
programme" was a central-government programme, i. e., a programme designed and mandated at the 
central government level, and that this central-level  policy then was implemented at the provincial and 
municipal levels.  This is significant as it defines th e level of analysis for our review of the USDOC's 
determination.  Thus our first a nd principal task is to analyze wh ether the central government-level 
planning documents could support the USDOC's finding of de jure  specificity.  Put another way, 
given the USDOC's determination that the programme  is a central level programme, we must analyze 
                                                      
307 The USDOC found that a third co mpany, TUTRIC, had received debt forgiveness with respect to 
certain of its outstanding loans, and the USDOC therefore did not calculate a benefit for this company in respect 
of government policy lending.  (Exhibit CHI-4, footnote 16). 
308 Exhibit CHI-4, pp.13 and 98. 
309 Id., p. 112. 
310 Id., pp. 13-14.  WT/DS379/R  
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 its specificity determination at the same level.  If we were to find that the specificity determination 
was not supported by the central government-level planning documents, such that the programme was non-specific, then provincial and/or municipal-leve l evidence of specific instances of implementation 
of the central-level programme (even if they refe rred explicitly to particular industries and/or 
enterprises) could not override the programme's non-specificity.  We thus begin our analysis by 
reviewing the USDOC's findings in respect of the central government-level planning documents. 
9.50 Here, we recall that specificity is an issue in respect of which an investigating authority has 
affirmative obligations under the SCM Agreement, even without any party raising arguments during 
an investigation.  We also recall that pursu ant to Article 2.4 of the SCM Agreement, any 
determination of specificity must be "clearly substantiated on the basis of positive evidence".
311  We 
thus cannot reach a conclusion on China's claim unde r Article 2.1(a) without considering in some 
detail the evidence relied upon, and the conclusions  drawn therefrom, by the USDOC, as well as the 
arguments raised both during the investigation and be fore us concerning that evidence.  In conducting 
this analysis, we are conscious of the need to avoid a de novo  review of the evidence, but we are 
equally mindful of the Appellate Body's admoniti on that it is the duty of a panel reviewing an 
investigating authority's determina tion to conduct a "critical and searching" examination, based on the 
information contained in the record and the expl anations given by the authority in its published 
report.312  We also recall the Appellate Body's finding that it is not necessary for an authority 
conducting a countervailing duty inves tigation to cite or discuss every  piece of supporting record 
evidence for each fact in the final determination.313  By the same reas oning, we consider a fortiori  that 
where a given piece of evidence forms an explicit part of a finding by an investigating authority, it can 
be presumed that that evidence has been fully examined even if the discussion in the determination is 
limited to certain of its aspects. 
9.51 These are admittedly fine lines, which can only be drawn on a case-by-case basis.  In this 
case, we consider that the most appropriate way to approach our consideration of the various planning 
documents referred to in the USDOC's specificity de termination is to examine them both on their own 
terms and in the light of the USDOC's actual dete rmination, with a view to seeing whether they 
constitute positive evidence on the basis of which a reasonable and objective administering authority 
could have found that these documents describe a "s ufficiently discrete segment of the economy" (in 
the words of the US – Upland Cotton panel) as to support a finding of de jure  specificity in respect of 
any subsidies provided thereunder to that segment of the economy. 
9.52 Finally, we note that by its own terms, the US DOC's specificity determination in respect of 
SOCB lending to the OTR tire industry was ba sed on the "totality" of the evidence.314  In this regard, 
we recall the Appellate Body's ruling that a panel re viewing a determination on a particular issue that 
is based on the "totality" of the evidence relevant to that issue must conduct its review on the same 
basis.  In particular, the Appellate Body held th at if an investigating authority relies on individual 
pieces of circumstantial evidence viewed together as support for a finding, a panel reviewing such a 
determination normally should consid er that evidence in its totali ty in order to assess its probative 
value with respect to the agency's determination, rather than assessing whether each piece on its own 
would be sufficient to support that determination.  Furthermore, to examine the evidence in the light 
of the investigating authority's methodology, a pa nel's analysis usually should seek to review the 
agency's decision on its own terms, in partic ular, by identifying the inference drawn by the agency  
from the evidence, and then by considering whether the evidence could sustain that inference.  In 
                                                      
311 We note that although China refers to Article 2.4 of the SCM Agreement in its arguments, it makes 
no claim pursuant to that provision.  Nonetheless, the standard in Article 2.4 must guide our evaluation of the 
USDOC's findings of specificity. 
312 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada) , para. 93. 
313 Appellate Body Report on US – Countervailing Duty Investigation on DRAMS,  para. 164. 
314 See para. 9.80,  infra . WT/DS379/R 
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 particular, where a piece of evidence led the investig ating authority to an intermediate inference, the 
panel should examine whether that evidence supports th at intermediate inference, rather than whether 
that evidence could directly lead to the ultimate conc lusion arrived at on the basis of the totality of the 
evidence.315  We will follow this approach in reviewing the USDOC's de jure  specificity finding in 
respect of SOCB lending to the OTR tire industry. 
(i) Central Government planning documents 
9.53 At the central government level, the USDOC de termined that through a number of related 
planning documents the Government of China enc ouraged the tire industry.  The USDOC noted in 
particular that:  (i) the 11th Five-Year Plan of the Government of China (the "GOC 11th Five-Year 
Plan") provided for increasing the development of important spare parts for the automobile 
industry316; (ii) the GOC Catalogue identified the "production of advanced belt tires" as an "an 
encouraged national project"317; (iii) the "Implementing Regulation"318 identified the GOC Catalogue 
as the "'important basis for funding investments directions, etc.'"319; and (iv) the "SETC Circular 
716"320 under the 10th Five-Year Plan identified the production of "meridian tyres" as a national 
priority and required that the contribution of public funds be reasonably directed in order to guarantee 
the realization of the target under the plan.321  In reviewing this determination, we examine in some 
detail the documents cited by the USDOC in the light  of its determination, with a view to seeing 
whether those documents support the inferences, and the ultimate conc lusion, drawn from them by the 
USDOC. 
(1) The GOC 11th Five-Year Plan322 (2006-2010 ) 
9.54 The USDOC determined that in general, under its 11th Five-Year Plan covering 2006-2010, 
the central government of China set goals regarding macroeconomic policies.  In this regard, the 
USDOC quotes a questionnaire response of the Govern ment of China as indicating that the plans 
"'provide a vision for economic development, market  and regulatory activities, social administration 
and the provision of public services".323  Concerning the GOC 11th Five-Year Plan in particular, the 
USDOC found that it calls for "increasing the development of important spare parts for the 
automobile industry".324 
9.55 We note that in its own words, the stated purpose of the GOC 11th Five-Year Plan is "to 
clarify the national strategic intention, define th e key emphasis in the government work and guide the 
                                                      
315 Appellate Body Report on US – Countervailing Duty Investigation on DRAMS,  paras. 150-151; 
Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada) , para. 94. 
316 The USDOC identifies the GOC 11th Five-Year Plan as the source document for this statement.  
(Exhibit CHI-4, p. 13).  We understand that this is the same document as that identified by China as the 
"Guidelines of the 11th Five-Year Plan for Economic and Social Development" in Exhibit CHI-69 (p. 3) on the 
Examination of the Measures identified by Commerce in the OTR Final Determination as the Basis for its 
Finding of De Jure Specificity in Respect of the Alleged "Policy Lending" Programme . The full text of the 
"Guidelines of the 11th Five-Year Plan for Economic and Social Development" is contained in Exhibit CHI-71. 
317 Exhibit CHI-4, p. 13.  The GOC Catalogue, as provided by the parties, is contained in Exhibits CHI-
70 and US-86. 
318 The Decision of the State Council on Promulgating the "Interim Provisions on Promoting Industrial 
Structure Adjustment" for Implementation  (the "Implementing Regulation"), Exhibit US-87. 
319 Exhibit CHI-4, p. 13. 
320 The Circular of the State Economy and Trade Commission on the Promulgation of the Guidance of 
Recent Development in the Industrial Sector  (2002) (the "SETC Circular 716"), Exhibit US-83. 
321 Exhibit CHI-4, p. 13. 
322 Exhibit CHI-71. 
323 Exhibit CHI-4, pp. 13 and 98. 
324 Id., p. 13.  WT/DS379/R  
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 behaviour of market subject".325  Given that it constitutes the guidance for the economy as a whole, its 
scope clearly is very broad.   In particular, the GOC 11th Five-Year Plan contains 14 Parts and 48 
Chapters.  The Parts refer in general terms to:  Guiding Principles and Development Objectives, 
Construction of Social Villages, Industrial Struct ure Optimization and Upgrading, Service Industry, 
Regional Development, Resource Efficiency and E nvironment, Science and Education, Structural 
Reform, Trade and Foreign Investment, Constructi on of Socialist Society, National Defence, and 
Mechanism for Implementation.326  That said, particular industries and sectors are mentioned 
explicitly as priorities for development.  One of these industries is the automobile industry:  in 
Chapter 11, "Vigorously Develop Equipment Manuf acturing Industry", Section 2 is devoted to 
"Promote Automobile Industry Level" and calls fo r "accelerat[ion of] the development of automobile 
engine, automobile electronics, key assemblies and parts and components  with independent 
intellectual property rights".  (emphasis added)  Th is section also "encourage[s] the development and 
use of energy saving and environmental protection and new type fuel automobiles".327  In addition, in 
Chapter 19, "Implement the Overall Regional Devel opment Strategy", both Section 2 ("Boom the Old 
Industrial Bases such as Northeast Region") and Section 3 ("Promote the Grow-Up of Central 
Region") refer to the automobile industry among the industries to be promoted/supported.328  Given 
these references, we consider that this document supports the USDOC's conclusion that this document 
identified automobile spare part s as a target for development. 
(2) The Implementing Regulation of the 11th Five-Year Plan329 
9.56 The Implementing Regulation, in its own wo rds, sets forth implementing provisions "to 
achieve the objective of the Eleventh Five-Year planning" (2006-2010) and to "propel the industrial 
structure adjustment" (among other goals).330  According to the USDOC, th is Regulation identifies the 
GOC Catalogue as the "'important basis for funding investments directions, etc.'".331 
9.57 The Implementing Regulation provides that:   
"[t]he people's governments of all provin ces, autonomous regions and municipalities 
directly under the Central Government [...] shall, in accordance w ith the [Regulation] 
and in light of the local situation on industrial development, formulate specific 
measures, rationally guide the investment  directions, encourage and support the 
development of advanced production capac ities, restrict and eliminate outdated 
production capacities, prevent blind i nvestments and low-level redundant 
construction, and effectively propel indust rial structure optimization and upgrading. 
All relevant administrative departme nts shall speed up the formulation and 
amendment of policies of public finance, taxation, credit, land, import and export, 
etc., effectively intensify the coordination and cooperation with industrial policies, 
and further improve and promote the policy system on industrial structure 
adjustment".332 
                                                      
325 Exhibit CHI-71, p. 1. 
326 Id. 
327 Exhibit CHI-71, pp. 13-14.  Chapter 11, Section 2 appears in Part 3 of the Guidelines, entitled "Push 
Forward Industrial Structure Optimization and Upgrading".  (Id., p. 12). 
328 Id., p. 23. 
329 Exhibits CHI-4, p. 13; and US-87. 
330 Exhibit US-87, p. 5. 
331 Exhibit CHI-4, pp. 13.  The text of the Implementing Regulation cited in the USDOC's 
determination refers to "guiding" rather than "funding" investment directions (Exhibit USA-87, p. 11). 
332 Exhibit US-87, p. 5. WT/DS379/R 
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 9.58 As indicated in the USDOC's determination, the Implementing Regulation states that the 
GOC Catalogue constitutes the "important basis for guiding investment directions".
333  It also 
indicates that the GOC Catalogue is the important  basis "for the [sub-central] governments to 
administer investment projects, to formulate and enforce policies on public finance [...] credit [...] 
import and export, etc.".334 
9.59 Of particular relevance to the present dispute,  the Implementing Regulation further describes 
the functions of the industry categories referred to in the GOC Catalogue (discussed in the next 
section) as follows: 
• Encouraged category :  The Regulation describes this category as covering investment projects 
that are to be encouraged and supported with policies and measures.  The Regulation further 
indicates that the category mainly includes ke y technologies, equipment, and products with 
important functions of economic and social development, resource saving, environmental 
protection, and industrial structure optimizati on and upgrading, and states that investment 
projects within this category must be examined , approved, ratified or archived according to 
the relevant provisions of the state on investment administration.  In addition, it indicates that 
"all financial institutions are required to provi de credit supports in compliance with economic 
principles".  Furthermore, it provides that equi pment imported in connection with encouraged 
projects shall be exempted from customs duties and import value added tax. 
 
• Restricted category :  The Regulation describes this category as covering production 
capacities, techniques, equipment and products w ith outdated techniques that do not meet the 
conditions for industry access, are unconducive to industrial structure optimization and 
upgrading, and thus need to be transformed or prohibited from being newly built.  The 
Regulation prohibits investments in projects in this category, and provides that no financial 
institution shall grant loans for such projects, and that no administrative departments, urban 
planning, construction, customs, etc. are permitte d to handle the procedures for such projects.  
Violations of any of these provisions are subject  to penalties.  The Regulation indicates that 
nevertheless, under certain circumstances, en terprises with existing production capacities in a 
restricted industry can be allowed to transf orm or upgrade themselves, and that in those 
circumstances, the financial institutions sha ll, in compliance with the credit principles, 
continue providing supports. 
 
• Eliminated category :  The Regulation describes this cate gory as covering outdated techniques, 
equipment and products that do not conform to the relevant laws and regulations, seriously 
waste resources, pollute the environment, do no t meet work safety conditions, and need to be 
eliminated.  Not only are financial institutions required to stop providing any form of credits 
in support of such projects, but those institutions  are instructed to take measures to recover 
previously granted loans.  Furthermore, the Regulation provides that all localities and 
departments "shall take powerful measures" to e liminate such projects, and that violations 
will be subject to penalties. 
  
• Non-listed projects :  Article 13 of the Regulation states that projects not belonging to the 
encouraged category, the restricted category or the eliminated category, but conforming to the 
relevant laws, regulations  and policies of the state, belong to  the "permitted" category, and are 
not listed in the catalogue.335 
 
                                                      
333 Exhibit USA-87, p. 11. 
334 Exhibit US-87, p. 10. 
335 Exhibit US-87, pp. 5 and 10-12.  WT/DS379/R  
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 9.60 In our view, the Implementing Regulation in its own words confirms the finding of the 
USDOC that the function of the GOC Catalogue whic h it cross-references is to form the basis for 
investment direction by the various levels of government.  It also appears from the mandatory 
wording of the Regulation, and its references to penalties for violati ng the restrictions on financing, 
investment, and business transactions relating to the categories, that the categories, and thus the GOC 
Catalogue elaborating the details thereof, are mandatory.  We further note that the Regulation 
explicitly provides that a principal function of the GOC Catalogue is the allo cation of loan financing 
by financial institutions – the categories are define d in large part in terms of whether funds are 
required to be provided, prohibited from being provided , and/or subject to recovery.  In other words, 
the Regulation indicates that the function of the GO C Catalogue is to provide  the details on how the 
investment priorities in the central government plan  are to be implemented by the lower levels of 
government.  We thus find the USDOC's character ization of the Implementing Regulation to be 
reasonable and supported by the record evidence. 
(3) The GOC Catalogue336 (11th Five-Year Plan ) 
9.61 This brings us to the GOC Catalogue itself.  Be fore considering its contents in detail, it is 
important to place this document into its contex t among the various central government planning 
documents.  In particular, we recall that the centr al government's five-year plan indicates certain 
priority industries and activities for investment, a nd that its Implementing Regulation both defines the 
encouraged, restricted and prohibited categories, and indicates that the GOC Catalogue contains the 
list of the particular projects that fall within each  of these categories.  Thus, the GOC Catalogue – in 
particular its encouraged category – identifies the universe of types of projects singled out as a matter 
of national policy for encouragement and investment.  Thus, in our view, this document is the central 
document in the USDOC's specificity determination:  our conclusion as to the de jure  specificity 
finding must necessarily hinge on whether the en couraged projects, taken as a whole, could 
reasonably be viewed as a sufficiently discrete segme nt of the economy as to constitute, collectively, 
"certain enterprises".  If so, then we must con tinue our analysis by examining the remaining 
documents relied upon by the USDOC.  If we find, by  contrast, that the universe of encouraged 
projects must be seen as so broad as to be non-specific, then our analysis necessarily would stop at that point, as no further references to particular instances of funding pursuant to this category would 
override the non-specificity of the programme as a whole. 
9.62 We recall that the USDOC in its determina tion cites the GOC Catalogue's listing as an 
"encouraged national project" of "the production of advanced belt tir e radial, its supporting materials 
and equipment production".
337  We note in this regard that the Catalogue lists types of projects, and 
not, for example, either whole industries or single enterprises. 
9.63 As discussed above in connection with the Implementing Regulation, the GOC Catalogue 
classifies projects into three categories, "encouraged ", "restricted" and "to be abolished", as follows: 
• Encouraged :  539 projects are listed, in the following  26 sectors:  Agriculture and Forestry; 
Irrigation and Water Conservancy; Coal; Electric Power; Nuclear Energy; Petroleum and 
Natural Gas; Steel; Nonferrous  Metals; Chemical Industry; Building Materials; Medicine; 
Machinery; Automobiles; Ships; Aerospace; Light Industry; Textile; Architecture/Construction; City Infrastructure and Real Estate; Railway; Highway; Shipping; 
Air Transport; Information Industry; Othe r Service Industry; and Combination of 
Environmental Protection and Resources Savings.  (As noted by the USDOC, the 
                                                     
 
336 Exhibits CHI-70 and US-86.  In this section,  we rely principally on the version of the GOC 
Catalogue submitted by the United Stat es (Exhibit US-86), as in many places  in the version submitted by China 
(Exhibit CHI-70), the English tr anslations are unintelligible. 
337 Exhibit CHI-4, p. 13. WT/DS379/R 
Page 82  
 
 "[p]roduction of advanced belt tyre radial, its  supporting materials and equipment production
" 
is identified as an encouraged project  within the Chemical Industry sector).338  (emphasis 
added) 
 
• Restricted :  190 projects are listed, in the following 17 sectors:  Agriculture and Forestry; 
Coal; Electric Power; Pe troleum, Natural Gas and Chemical  Industry; Information Industry; 
Steel; Non-ferrous Metals; Gold; Building Mate rials; Medicine; Machinery; Ships; Light 
Industry; Textile; Tobacco; Fire Fighting Equipment; Other. 
• To be abolished :  399 projects (subdivided into "Backwa rd Production Technique Equipment" 
and "Backward Products") are listed, in the fo llowing 17 sectors:  Agriculture and Forestry; 
Coal; Electric Power; Petroleum, Natural G as and Chemical Industry; Steel; Nonferrous 
Metals; Gold; Building Materials, Medicine; M achinery; Railway, Light Industry; Textiles; 
Printing; Fire Fighting; Other.339 
 9.64 The record documents before us do not contain any indication that either the parties to the 
investigation or the USDOC engaged in detailed discussion of the GOC Catalogue, in particular 
concerning the diversity or breadth of the "encouraged" projects listed therein, during the investigation.
340  Rather, this point has only been raised before us. 
9.65 In the present dispute China's main argument a bout the GOC Catalogue is that, even if this 
document referred to all elements of a subsidy, its coverage is too broad to give rise to a finding of 
specificity.  China points in this regard to both th e diversity and the breadth of the sectors covered by 
the "encouraged" category ("26 broad categories sp anning virtually the entire range of economic 
activity").341  Concerning diversity, as discussed above, as a legal matter we are not persuaded that the 
diversity of the listed sectors in the "encouraged" category by itself precludes a finding of de jure  
specificity based on the GOC Catalogue. 
9.66 Concerning the breadth of the sectors referred to  in the GOC Catalogue we note that, as China 
argues, the sectors or categories under which the en couraged projects are grouped do cover a wide 
swath of economic activity.  Nonethel ess, as a factual matter what is e ither "encouraged", "restricted", 
or "to be abolished" within a given sector pursuant to the GOC Catalogue is clearly not the entirety of 
that sector.  Indeed, there is considerable overlap  in the sectors identified in the three respective 
categories:  twelve sectors appear in all three lists342; and an additional five sectors appear in two of 
the lists.343  Purely as a matter of logic, it would be impossible for a given sector, in its entirety, to be 
                                                      
338 We note that the USDOC's determination refers to  the "production of advanced belt tires [...] and 
equipment production", which is how this item appears in the translation of the GOC Catalogue submitted by 
the United States (Id., p. 13 and US-86).  The translation of the same item in the version of the GOC Catalogue 
submitted to us by China reads:  "high-performance meridian tires and the special materials and equipment".  (Exhibit CHI-70, p. 7). 
339 Exhibit US-86. 
340 The arguments by the parties during the investigation, in particular those of the Government of 
China and the Chinese tire producers, were in the main that the planning documents were not binding, and that 
references to particular industries or companies did not mean that support for those industries was required.  
These respondent parties also raised arguments similar to those raised by China before us that the planning documents did not refer to, or require, prefer ential SOCB lending to the tire industry.  ( See, e.g.,  Exhibit CHI-4, 
pp. 93-94). 
341 See, e.g.,  China response to Panel question 54 (first meeting). 
342 That is, agriculture and forestry; coal; electric power; steel; non-ferrous me tals; chemical products; 
petroleum and natural gas; building materials; medicine; machinery; light industry; and textiles.  (In the 
"encouraged" category, chemical s is treated as a separate sector from petroleum and natural gas, while in the 
other two categories, chemicals, petroleum and natural gas are treated as a single sector). 
343 Ships; railway; information industry; gold; and fire fighting equipment.  WT/DS379/R  
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 simultaneously "encouraged", "restricted", and/or "t o be abolished".  Thus, to note that the sectors 
under which the encouraged projects are grouped co ver a broad spectrum of economic activity adds 
little to our analysis of the USDOC's de jure  specificity determination. 
9.67 We consider more relevant the characterization by the US – Upland Cotton panel that non-
specific subsidies are broadly available  throughout an economy, in contrast to specific subsidies to 
which access is limited to a "sufficiently discrete segment" of  an economy as to constitute "certain 
enterprises".  From this perspective, we cons ider whether the USDOC could reasonably have 
concluded on the basis of positive evidence before it  that the list of encouraged projects taken as a 
whole, in spite of being lengthy and diverse, c onstituted a "sufficiently discrete segment of the 
economy" as to constitute "certain enterprises". 
9.68 In this respect, we consider significant that the GOC Catalogue does not describe what is to 
be either encouraged, restricted or abolished in general, broad terms.  To the contrary, these are 
individual project types, described in very specifi c and narrowly-circumscribed terms.  To us, the 
impression given by the narrowness of the projects described within each of the listed sectors (in spite 
of the breadth of those sectors as a whole, indi vidually and collectively) , is not one of broad 
availability but rather of singling out of very particular types of projects.  Furthermore, as the 
Implementing Regulation makes clear, the express purpose of both the "restricted" and "eliminated"/"to be abolished" categories is to impose limitations on investment, provision of credit, 
etc., in respect of the projects in those categories. 
9.69 We note that in a number of cases, closely related projects appear in two or three of the 
categories, with one variant to be encouraged, a second to be restricted, and a third to be abolished.  
For example, among the "encouraged" projects in th e "chemical products" sector is "manufacture of 
PVC by oxychlorination means with the annua l yield no less than 200,000 tons"; while the 
"restricted" category lists "ethylene oxychlorinatio n PVC units with its annual yield no more than 
200,000 tons annually, calcium PVC units with  its annual yield no more than 120,000 tons".
344  In 
other words, it appears that in respect of th e PVC industry, the emph asis pursuant to the GOC 
Catalogue is to increase the size of production faciliti es, on the basis of detailed parameters.  A similar 
tendency appears in respect of electric power :  among the encouraged projects are "heat-supply 
machines with the concentrated integrated thermal power capacity no less than 300,000 kw [...]", 
whereas among the restricted projects are "normal coal-fuel thermal power generating units with the unit machine capacity no more than 300,000 kw [... ]", and among projects be abolished are "normal 
condenser coal-fueled thermal power generation units  with [...] single machine less than 10,000 kw 
within the range of large grid coverage".
345  Most significantly for the present dispute, tires of various 
kinds appear in all three lists, with an apparent tendency away from bias tires and toward radial tires.  
In particular, "production of advanced belt tyre  radial, its supporting materials and equipment 
production" is listed as an encouraged project, "bias ty[r]e"346 (not further described) appears as a 
restricted project, and "bias tyre or tyre productio n line with natural cotton flat chafer fabric as 
framework and with its annual yield no more than 500,000" is identified as a project to be 
abolished.347 
9.70 In addition, we recall that the Implementing Re gulation makes explicit that the "encouraged", 
"restricted" and "eliminated" projects, taken together , do not describe all economic activity in China.  
                                                      
344 Exhibit US-86, pp. 7 and 19. 
345 Id., pp. 4, 19 and 25. 
346 The English translation of the GOC Catalogue submitted by the United States contains a 
typographical error, i.e., for this entry it reads "bias typ e" (emphasis added)  (Exhibit US-86, p. 20).  We note, 
however, that the corresponding entry in the version of the Catalogue submitted by China refers to "Inclined tire item."  (Exhibit CHI-70, p. 24). 
347 Exhibit US-86, pp. 7 and 25. WT/DS379/R 
Page 84  
 
 Rather, as noted supra , there is a default "permitted" category, which covers all activities not 
specifically listed but otherwise in conformity with the relevant laws and regulations.  While there is 
no information on the record as to th e absolute or relative magnitude of  this category, or of the three 
listed categories, the existence of a "permitted" category by definition narrows the maximum possible 
scope of the "encouraged" category (as well as of the "restricted" and "eliminated" categories) relative 
to the economy as a whole. 
9.71 In this respect, we do not see that the documents of  record demonstrate that the list of projects 
in the "encouraged" category spans "virtually th e entire range of economic activity in China", as 
suggested by China.
348  We thus do not consider that these documents would compel a reasonable and 
objective investigating authority to conclude that any subsidies granted on the basis of that category 
were non-specific.  To the contrary, we consid er that a reasonable and objective investigating 
authority could conclude that any subsidies grante d on the basis of the "encouraged" category were to 
a sufficiently discrete segment of the economy as to be limited to "certain enterprises". 
9.72 For these reasons, we consider reasonable the USDOC's reliance, in reaching its de jure  
specificity determination in respect of SOCB lending to the OTR industry, on the reference in the 
GOC Catalogue to "'advanced belt tires […]"' as an "'encouraged"' project. 
(4) The GOC 10th Five-Year Plan (2001 – 2005) and the SETC Circular 716  
9.73 In addition to the central government planning documents pertaining to the 11th Five-Year 
Plan, the USDOC also examined and took into account  in its specificity analysis the SETC Circular 
716 349, which relates to China's 10th Five-Year Plan (2001-2005). 
9.74 The USDOC points to two particular statements in  the Circular; first, its reference to "the 
production of 'meridian tires' (i.e., radial tir es) as a national priority under the GOC 10th Five-Year 
Plan"350, and second, that the contribution of public f unds be reasonably directed "so as to [...] 
guarantee the realization of the target [...]".351 
9.75 We note, first, that the SETC Circular 716 is directed to: 
"The economy and trade commissions (economy commissions) of all provinces, 
autonomous regions, municipalities directly  under the Central Government and 
municipalities separately listed on the State plan and Xinjiang Army Corps of Production and Construction, all associations  directly under the State Economy and 
Trade Commission".
352 
We further note that in the preamble to the Circular, the SETC states that: 
"We have printed the Guidance of Recent Development in the Industrial Sector and 
hereby distribute it to you.  Please abide by  and implement  it".353  (emphasis added) 
9.76 The full passage partially quoted in the USDOC' s determination, which sets forth in general 
terms the orientation of the Circular, reads: 
                                                      
348 China response to Panel question 54 (first meeting). 
349 Exhibit US-83. 
350 Exhibit CHI-4, p. 13. 
351 Id.  According to the USDOC, "OTR tires" can be  "bias ply" tires, "merid ian tires" and "radial" 
tires.  (Id., pp. 14 and 99). 
352 Exhibit US-83, p. 1. 
353 Id.  WT/DS379/R  
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 "[W]e should, taking the enterprises as the ma in body, the market as the orientation, 
the development as the topic, the struct ural adjustment as the motif, and the 
improvement of the competitive power as the target, reasonably direct the contribution of public funds and foreign investments, adjust the public investment structure, improve the efficiency and bene fits of using funds, so as to promote the 
structural adjustment of the industrial sector, and guarantee the realization of the 
target under planning".
354 
The Circular goes on to say:  "The recent development orientation of th e industrial sector is hereby proposed 
pursuant to the industrial development dir ection clarified in the industry and sector 
planning of the Tenth Five-Year Plan for the sake of strengthening the macro-control, 
leading the acts of market subjects, and optimizing the allocation of resources".
355 
9.77 The Circular then identifies five "basic princi ples" – market orientation, highlighting key 
industries and products, technical progress, coordina tive development, and sustainable development – 
in accordance with which: 
"[W]e have proposed the recent development orientation for machinery, automobiles, 
metallurgy, non-ferrous metal, petroleum, petrochemical industry, chemical industry, 
medicine, coal, building materials light industr y, textiles, etc., which is offered to all 
investors and the financial, securities and public consulting departments for 
reference".356 
Following this introductory section, the Circular then  contains sections headed "Recent Development 
Orientation" for each of the sectors listed in the above-quoted passage.  These sections set forth in 
some detail (in similar fashion to the project  listings in the GOC Catalogue under the 11th Five-Year 
Plan), a series of priority projects or areas for investment. 
9.78 The section on "Recent Development Orientation for Chemical Industry" contains four 
subheadings, one of which is "Meridian Line Ti res".  The text of this subsection reads: 
"We should accelerate the product structural adjustment of tyre enterprise, and 
continue developing meridian line tyres.  We should accelerate the development of new varieties, and emphatically develop th e 65, 60, 55 and 50 series with the rim 
diameter at 15-17 inches, and meridian tyres of high-speed serial saloon cars and high-capacity meridian tyres of low section without inner tyres; we should enhance the technical renovations of a few major en terprises, and form 2 to 3 large tyre 
enterprise groups with the annual producti on capacity reaching 5 to 8 million (with 
the annual consumption of raw rubber at  40,000 tons or more).  We should 
appropriately support the backbone tire enterp rises in central and western regions, so 
as to enable the regional distribution of meridian tyre production to become more reasonable".
357 
9.79 We note that some of the language in the SETC  Circular 716 appears to be non-mandatory, 
and that before the USDOC the Government of China argued that the central government planning 
documents were "aspirational rec itations of general deve lopment goals", rather than "instruments 
                                                      
354 Exhibit US-83, p. 2. 
355 Id. 
356 Id., p. 3. 
357 Id., p. 15. WT/DS379/R 
Page 86  
 
 through which government policies are implemented" .  Likewise before us, China argues that the 
central planning documents are non-binding general policy orientations.  Given the detailed and 
precise descriptions, in respect of tire industry in vestments to be "encouraged" or "supported", 
however, and the fact that these encouraged investme nt projects are specifically addressed to all of the 
sub-central government entities, which are enjoined to "abide by and implement" the Circular, we 
consider that their own wording seems to suppor t the USDOC's finding that the SETC Circular 716 
conveyed policy directions, inter alia , concerning investment in the OTR tires industry, to those other 
levels of government. 
(ii) Provincial and municipal governments planning documents 
(1) General
 
9.80 We now take up the USDOC's analysis and conclu sions in respect of the sub-central planning 
documents, with a view to assessing whether they contain evidence, as the USDOC found, that the 
sub-central governments established and carried out  their own planning by implementing the central 
government plans.  Concerning these documents, the USDOC found that: 
"Information on the record shows that provincial and municipality goals and 
objectives conform with and implement th e central government policy goals and 
objectives with a focus more tailored to the particular interests and circumstances of 
that province or municipality.  Specifically, the central-level plans set goals regarding 
macroeconomic policies and [quoting a Government of China's questionnaire 
response] 'provide a vision for economic  development, market and regulatory 
activities, social administration, and the pr ovision of public services'. [citation to 
record omitted]  Information on the reco rd also shows that the provincial and 
municipal five-year plans are drafted based on the goals and objectives of the central-level plans. [citation to record omitted]  In other words, local governments (i.e., provinces and municipalities) align their policies with stated central government policies and carry out those policies to the extent that such measures affect their 
locality.  Therefore, central-level plans should be considered a central government 
policy or program that local governments adopt and implement through their own five-year plans.  [cross-reference omitted] 
[...] Although in this case there are no discrete policy plans for the tire industry, per 
se, the totality of the information on this r ecord […] shows that the government is 
directing policy lending to the tire industr y or to specific enterprises in the tire 
industry".
358 
9.81 In this respect, the USDOC indicated that it disag reed with the Governme nt of China that the 
plans were purely aspirational in nature, stating: 
"If [the plans] were simply aspirational r ecitations of general de velopment goals with 
no meaning, there would be little reason for the provinces and municipalities to 
develop plans in accordance with central gove rnment plans.  Nor would there be any 
reason for provinces or municipalities to ta ilor their plans to conditions and needs 
within their jurisdictions, and there certa inly would be no reason to single out 
companies, industries or specific developm ent projects (e.g., technology renovation) 
within those plans.  The fact that comp anies or tires or rubber are specifically 
mentioned in these plans or catalogues and the fact that these plans and catalogues 
                                                      
358 Exhibit CHI-4, p. 98.  WT/DS379/R  
 Page 87 
 
 
 discuss support, including loans for 'key' or  promoted projects demonstrates that 
government policy lending in the OTR tires industry is de jure specific".359 
(2) GTC  
(A) USDOC determination 
9.82 With respect to GTC, the USDOC examined r ecord evidence pertaining to Guizhou province, 
and within that province, Guiyang municipality where GTC was located.  The USDOC determination 
noted that:  (i) GTC had been explicitly targeted  as a key enterprise for economic development by 
Guizhou province and Guiyang municipality since earlier five-year plans; (ii) the number of enterprises specifically targeted was limited (in particular, that the Guizhou 10
th Five-Year Plan, 
besides singling out GTC for the project of technology renovation for two meridian tire lines, 
mentioned three other enterprises); (iii) the Guizhou 10th Five-Year Plan further required that policy 
bank loans and loans from abroad be allocated according to the plans; and (iv) the loans were actually 
provided to GTC by Guizhou province and Guiyang municipal policy lending.360  The USDOC 
further noted that the plans indicated that bot h the provincial and muni cipal governments were 
required to give priority to the 5-million-unit semi-steel radial tire project of GTC.361 
9.83 In this regard, the USDOC cited the Guizhou 11th Five-Year Plan as requiring that "under 'the 
leadership of Guizhou Tyre, [the rubber industry] sh all give priority to the 5-million-unit semi-steel 
radial tire project of Guizhou Tyre".362  The USDOC stated that Section 6 of the Guizhou 10th Five-
Year plan also singled out GTC, for the project of technology renovation for two meridian tire lines (i.e., "radial" tires), noting that OTR tires also can  be "bias ply" tires.  The USDOC noted that the 
number of enterprises specifically targeted in Se ction 6 was limited, in that only three other 
enterprises, in addition to GTC, were singled out  for the technology renovati on, and concluded that 
therefore section 6 was "clearly targeted rather than broad in its scope".
363  In addition, the USDOC 
stated that that plan indicated that policy bank lo ans and loans from abroad were to be allocated 
according to the plans.364  Finally, the USDOC stated that, at the municipal level, the Guiyang 10th 
Five-Year Plan also had given priority to GTC's 5-million-unit radial tire project.365 
(B) Guizhou and Guiyang planning documents 
9.84 We now examine the Guizhou (provincial) and Guiyang (municipal) plans relied upon by the 
USDOC, in the light of the USDOC's analysis and conclusions. 
9.85 At the provincial level, we note that the Guizhou Province 11th Special Industrial 
Development Plan (the "Guizhou 11th Five-Year Plan") makes very specific reference to GTC's five-
million unit tire project, stating that "under the lead ership of Guizhou Tyre, (the rubber industry shall) 
[...] reduce the production of bias tires, vigorously  develop radial tires and new high-speed low-
section tubeless and give priority to the 5-million- unit semi-steel radial tire project of Guizhou 
Tyre".366 
                                                      
359 Exhibit CHI-4, p. 99. 
360 Exhibit CHI-4, pp. 13-14 and 99. The USDOC noted that business proprietary information provided 
by GTC underlined GTC's importance in early five-year plans.  (Id., p. 14). 
361 Id., p. 112. 
362 Id. 
363 Id., pp. 14 and 99. 
364 Id., p. 112. 
365 Id. 
366 Exhibit CHI-77. It is not clear whether this document also refers to other industries/projects since 
the document (as presented) only contains the translation of this one paragraph. WT/DS379/R 
Page 88  
 
 9.86 The Tenth Five-Year Plan Outline For the Na tional Economic and Social Development of 
Guizhou Province (the "Guizhou 10
th Five-Year Plan"), in Section 6 ("Traditional industry shall be 
improved through high technology") of Chapter 7 ("I ndustry shall be optimized, industry with specific 
advantages shall be promoted"), states that the "r enovation of traditional indus try and development of 
high technology industry shall be combined to promote the whole industry's updating and continuous 
development".367  This Section states that the technolog y renovation of industries with chemistry 
advantages must be supported, and specifically refers  to the technology renovation project of meridian 
line tires of GTC as well as the renovation projects for three other enterprises.  The same plan also 
encourages support to, inter alia , automobile components, and states that by 2005, the renovation and 
updating of key equipment of enterprises of chemical s, machinery, etc., must be completed and the 
production base of automobile components established.368 
9.87 The Guizhou 9th Five-Year Plan states that "policy ba nks loans and loans from abroad should 
continue to be allocated according to the plans".369  Here we note that although in the USDOC's 
determination this statement is  attributed to the Guizhou 10th Five-Year Plan, before us it was clarified 
between the parties that this statem ent in fact appears in the Guizhou 9th Five-Year Plan.  According 
to the United States, this mistake was due to e rrors made by the Government of China in the 
information it submitted to the USDOC.370 
9.88 At the municipal level, the Guiyang Muni cipality Economic and Social Development 11th 
Five Year Plan (the "Guiyang 11th Five-Year Plan") states that th e automotive manufacturing industry 
must, inter alia , "develop auto parts, tires and other auto -use rubber products aimed at both domestic 
and world markets" as well as "facilitate the devel opment of new products [...] and foster famous 
products with intellectual property rights".371  This plan explicitly requires the government to give 
priority to GTC's 5-million-unit tire project.  The plan also calls for "loans from State policy banks" 
and strengthening the "public credit system, and increase credit loans".372  The plan also "encourage[s] 
financial institutions to provide funds to the project s in conformity with economic policies" and states 
that "cooperation between banks and enterprises" should be "enhanced".373 
9.89 Given the explicit references to GTC's tire project in the provincial and municipal planning 
documents cited by the USDOC, and the similarity of the priorities for the tire industry in these documents to the description in the GOC Catal ogue of the "encouraged" tire project, and the 
references to the provision of credit financing to th e projects targeted for development, and given the 
indications in the central-level documents that th e lower-level governments are to establish their own 
plans based on the central plans, we consider that it was reasonable for the USDOC to have 
concluded, in respect of GTC, that these provincia l and municipal plans implemented the central plans 
for development of the OTR tires industry, including in respect of the provision of credit financing. 
                                                     
 
367 Exhibit CHI-72, p. 2. 
368 Exhibit CHI-72, p.2. 
369 Exhibit US-82, p.41. 
370 In its first written submission, the United States notes that, as China has pointed out to the Panel, 
this statement was mistakenly cited to the 10th Five-Year Plan rather than the 9th Five-Year Plan.  The 
United States attributes this error to the fact that when it submitted the 9th and 10th Five-Year Plans to the 
USDOC, China had reversed all but the first pages of both documents, attaching the Chinese language version 
of the 10th Five-Year Plan to the English translation of the 9th Five-Year Plan and vice versa .  The United States 
further argues that China failed to provide the USDOC with an English translation of the portion of the 9th five-
year plan discussing the allocati on of loans, which the USDOC only became aware of because a domestic 
producer provided the USDOC with a partial translation of the Chinese language version.  (United States first written submission, footnote 518 (referring to Exhibits CH I-69, US-84 and US-82)).  China does not contest this 
representation by the United States. 
371 Exhibit CHI-78. 
372 Id. 
373 Id.  WT/DS379/R  
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 (3) Starbright  
(A) USDOC determination 
9.90 Concerning Starbright, the USDOC's determinati on states that, in contrast to the Guizhou and 
Guiyang five-year plans, the five-year plan of th e province of Hebei (where Starbright was located) 
identified as "key projects" for development certain industries, rather than individual enterprises or 
projects.  According to the USDOC's determination, the Hebei 11th Five-Year Plan for technology 
referred to "automobile parts and the rubber i ndustry as 'key projects'" and the Implementing 
Guidelines of this plan "direct[ed] comm ercial banks to support 'key projects'".374  The USDOC also 
found that the Hebei 10th Five-Year Plan stated that "'auto parts', among other industries, shall be 
supported'", and that the Hebei 9th Five-Year Plan stated that the "automobile and components" 
industry, among other industries, would be "developed greatly and stronger".375  According to the 
USDOC, tires were considered to be part of the automobile parts industry in China.376 
(B) Hebei planning documents 
9.91 Starting with the Hebei Province Science & Technology 11th Five Year Plan & 2020 Long 
Term Target (the "Hebei 11th Five-Year Plan for technology"), we note that this plan states that the 
"economic and social development of the Province heavily depends on the technology 
development".377  In this context, inter alia , the plan calls for arranging "a layout for the key 
industries" and developing "new products with in dependent intellectual property rights", referring 
specifically to the "development of key automobile parts".378  In addition, among "key technology 
projects", the plan identifies the establishment of industrial bases for several industries, including the 
"rubber industry" and the "rubber and plastics industry".379  The plan designates the automobile and 
automobile spare parts industries, among several others, as the priority industries for accomplishing 
the provincial "equipment manufacture industry" goal, a nd states that three to five leading enterprises 
will be involved in the provincial equipment manufacture industry scheme.380  Furthermore, the plan 
designates certain cities (including Xingtai City, where Starbright is located)381 as the bases for 
automobile development, and identifies automob ile spare parts as among the "supported products" for 
which the production base was to be developed.382 
9.92 The Guidelines for the Implementation of Hebei Province Science & Technology 11th Five 
Year Plan (the "Implementa tion Guidelines of the Hebei 11th Five-Year Plan") state that policy 
financial institutions "shall s upport" national and provincial key technology projects and key 
technology industrialization projects.  The Guidel ines further state that commercial banks "shall 
support" these projects through the granting of cred it loans in accordance with national investments 
and credit loan policies.383 
                                                      
374 Exhibit CHI-4, pp. 14 and 99. 
375 Id., p. 99-100. 
376 In this regard, the USDOC noted that the Guiyang 11th Five-Year Plan referred to the GTC 5-
million-unit tire project within the context of identifying automobile parts as a key industry, and that given the 
parallels among the central and provincial plans, the central, provincial and municipal governments appeared to consider radial tires to be part of the au tomobile parts industry.  (Id., footnote 17). 
377 Exhibit CHI-73. 
378 Id. 
379 Id. 
380 Exhibit US-88. 
381 United States first written submission, para. 342. 
382 Exhibit US-88. 
383 Exhibit CHI-74. WT/DS379/R 
Page 90  
 
 9.93 The Tenth Five-Year Plan Outline for the Na tional Economic and Social Development of 
Hebei Province (the "Hebei 10
th Five-Year Plan") requires that "the equipment industry such as 
environment protection, auto parts, packing, foodstuff, machinery shall be supported".384  Finally, the 
Ninth Five-Year Plan Outline for the National Econom ic and Social Developm ent of Hebei Province 
and Year 2010's Prospective Goals (the "Hebei 9th Five-Year Plan") identifies the automobile industry 
as one of the "mainstay" industries "which can ta ke the lead for the whole economic growth and 
structural upgrade.  The plan specifies that amo ng other "mainstay" industries, "the machinery 
industry which takes the automobile and its co mponents and large-scale complete plants and 
equipment as the dominance", "will be  developed greatly and stronger".385 
9.94 Given the explicit references in the Hebei pla nning documents to the rubber industry and the 
automobile parts industry, as well as to the provision of  credit financing in support of projects in these 
industries, we consider that it was reasonable for the USDOC to have concluded that these documents 
implemented the central-level plan in respect of the OTR tires industry, which included the provision of financing to that industry. 
(iii) Conclusion in respect of planning documents 
9.95 For the foregoing reasons, we conclude that a reasonable and objective investigating authority 
could have determined, on the basis of the evidence on the record, that the Government of China, at 
the central level, explicitly identified "certain ente rprises" in the sense of Article 2.1(a) of the SCM 
Agreement for encouragement and development (incl uding the tire industry), and instructed the sub-
central governments to implement this policy.  We  also conclude that a reasonable and objective 
investigating authority could have determined th at pursuant to these same  planning documents, 
SOCBs (among other financial institu tions) were instructed to provid e financing to the "encouraged" 
projects.  Thus, we find no legal error in the USDOC's determination on the basis of these documents that government authorities at all levels of governme nt in China (central, provincial and municipal) 
effectuated policies to ensure the provision of loans to the OTR tire industry. 
(iv) USDOC determination that SOCBs acted purs uant to government industrial policies in 
making loans to the tire industry 
9.96 The final element of the USDOC's de jure  specificity determination in respect of SOCB 
lending to both GTC and Starbright was its findi ng that both policy banks and SOCBs acted pursuant 
to the government policies set forth in the planni ng documents just discussed when they provided 
loans to tire producers.  We note in this regard that  there is no disagreement between the parties as to 
the existence of SOCB lending to the two tire produ cers.  Instead, the disagreement in the context of 
the de jure  specificity finding centres on whether the SOCBs  made these loans pursuant to the policies 
set forth in the planning documents. 
9.97 Concerning GTC, the USDOC's determination indicates that business confidential 
information on the record indicat ed that loans to GTC were policy lending by Guizhou and Guiyang, 
at the provincial and municipal levels, respectively.   The determination states in this regard:   
"The Department notes that both the provinc ial and municipal five-year plans discuss 
GTC.  Based on verification and the docu mentation on the on the record, we have 
determined that these loans were provided to GTC by Guizhou provincial and Guiyang municipal policy lending.  (A full discussion of our analysis concerning GTC's loans is only possible by means of  reference to business proprietary 
information.  [cross-reference omitted])  Ther efore, the Department continues to find 
                                                     
 
384 Exhibit CHI-76, p. 5. 
385 Exhibit CHI-75, p.4.  WT/DS379/R  
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 that all of the loans received by GTC and its cross-owned affiliates from SOCBs were 
made pursuant to a government policy to provide loans to the tire industry."386 
9.98 Concerning Starbright, the USDOC cited the He ibei Five-Year Plans and related documents 
just discussed, which identified automobile parts and the rubber industry as key projects, and called 
for financing support to these projects.  The USDOC then stated that "[t]herefore, the Department 
continues to find that the loans received by Starbright from SOCBs were made pursuant to a 
government policy to provide loans to the tire industry".387 
9.99 Concerning SOCBs' lending to the OTR tire produ cers in general, the USDOC stated that: 
"After examining all information on the reco rd, we continue to find that national, 
provincial and municipal government aut horities effectuate policies to provide 
countervailable loans to OTR tire producers.  Acting pursuant to these official 
policies, PRC policy banks and SOCBs provided loans to OTR tire producers".388 
The USDOC then cited its prior "public body" fi nding in respect of Chinese policy banks and SOCBs, 
in the investigation on CFS Paper, incorporating by reference that finding and analysis into the record 
of the OTR investigation.389  The USDOC stated that in the OT R investigation, parties "ha[d] not 
demonstrated that conditions within the Chinese ba nking sector ha[d] changed significantly since that 
previous decision such that a reconsideration of that decision is warranted".390  The USDOC also cited 
a statement at verification by an official from the Tianjin municipal government confirming that SOCBs there were supervised by the Tianjin SASAC, and noted that there were scholarly publications 
on the record reporting that SOCBs were required to support the Government of China's policies.
391 
 
9.100  One such publication cited by the USDOC in th is context was the IMF Working Paper.  The 
USDOC quoted that publication as stating that "it is  difficult to find clear evidence that SCBs have 
changed their behavior and become commercially oriented" and as recommending that governments 
should avoid "interference for policy purposes".392 
9.101  We note that in the CFS Paper  investigation, which formed pa rt of the record in the OTR 
investigation, the USDOC had determined that SO CBs followed government policies in making their 
lending decisions.393  First, the USDOC had found that the state ownership of the Chinese banking 
sector and the legacies associated with the longsta nding pursuit of govern ment policy objectives 
undermined the SOCBs' ability to act on a commercial basis.394  Second, the USDOC had examined 
the Chinese legal framework for banking, noting that the Chinese Commercial Banking Law required 
banks to carry out their loan activities consistently with "the needs of national economy and the social 
                                                      
386 Exhibit CHI-4, p. 99. 
387 Id., p. 100. 
388 Id., p. 101.  This statement appears in the section entitled "SOCBs and Financial Contribution". 
389 Id. 
390 Id. 
391 Id.  TUTRIC, the third investigated tire producer, was located in Tianjin.  The USDOC did not 
calculate a benefit to TUTRIC from policy lending, as it found that instead outstanding loans to TUTRIC had 
been forgiven.  (Id., footnote 16). 
392 Id., footnote 45 (quoting the IMF Working Paper, pp. 18-19). 
393 Exhibit CHI-93, pp. 49-58. 
394 Id., p. 55.  The USDOC noted that it had found evidence of reforms in al most all sectors of the 
economy in China, including the bankin g sector.  It stated that the cent ral government however had been very 
cautious in completely reforming the banking system, and that as a result, and because banks in China had never 
operated on a commercial basis, the government was still very involved in the sector. The USDOC noted that this view was to varying degrees confirmed by independent experts interviewed by the USDOC.  (Id., pp. 55-
58). WT/DS379/R 
Page 92  
 
 development and under the guidance of State industrial policies".
395  At the CFS Paper  verification, 
officials from the People's Bank of China had stated  that "it may be necessary for banks to heed 
industrial policies, banks may be taking on greater risk  if their customers use loans in a way that is 
inconsistent with industrial policies".396  Similarly, the Bank of China Offering had stated that 
"Commercial Banking Law requires commercial banks  to take into consideration government 
macroeconomic policies in making lending decisions. [T hey] are encouraged to restrict their lending 
to borrowers in certain industries in acco rdance with relevant government policies".397  T h i r d ,  t h e  
USDOC had determined that while SOCBs were im proving their risk management capacities, they 
still lacked adequate risk management and analysis skills.  The USDOC had stated that interest rates 
remained generally undifferentiated, and were cl ose to the benchmark set by the People's Bank of 
China.398 
9.102  In the OTR investigation, as noted, the USDOC determined that the respondent parties had 
not demonstrated that this situation had changed sufficiently to warrant a reconsideration of the 
analysis and conclusions concerning SOCBs from the CFS Paper investigation.  In this regard, the 
main specificity-related argument of the respondents in the OTR investigation was that the central 
government and provincial and m unicipal planning documents we re indicative only, and not 
mandatory.  It is not clear what evidence was put on the record of the investigation in support of this 
point, and before us China identifies none.  As not ed above, the USDOC determined in this regard 
that "central-level plans should be considered a central government policy or program that local 
governments adopt and implement through their own five-year plans".399  We recall in this context the 
USDOC's specific rejection of the respondents' argu ment that the plans were not binding, as described 
in paragraph  9.81,  supra . 
9.103  In addition, before us, the United States refers to a range of documents from the CFS Paper  
investigation, on the record of the OTR investig ation, which in the view of the United States 
demonstrates that the SOCBs lent in  accordance with government policies.400  These documents 
include annual reports and other publications of certain Chinese banks , verification reports, and other 
documents.  In particular, the United States cites to  the following statements by banks:  (i) the 
People's Bank of China "'guided financial in stitutions to grant loans at a proper pace'"401; (ii) the 
People's Bank of China briefs bank offi cers on "'how credit should be guided'"402; (iii) the Bank of 
China takes industrial policies into account "' in assessing a company' s total credit limit'"403; and (iv) 
"'commercial banks are encouraged to restrict th eir lending to borrowers in certain industries in 
accordance with relevant government policies'".404 
9.104  We note that China does not contest the accuracy of the United States' representations of these 
statements.  Nor does it point to any evidence contra dicting the USDOC's conclusion, from either the 
CFS Paper or OTR investigation. 
9.105  For the reasons described above, we consider that a reasonable and objective investigating 
authority could conclude on the basis of the record  evidence that the SOCBs followed the policies set 
forth in the planning documents in providing credit to GTC and Starbright.  We thus find no error in 
this conclusion by the USDOC. 
                                                      
395 Exhibit CHI-93, p. 58. 
396 Id. 
397 Exhibit CHI-4, p. 58. 
398 Id., p. 59. 
399 Id., p. 98. 
400 United States first written submission, paras. 357-358. 
401 Id., para. 358 (quoting the People's Bank of China 2006 Annual Report , p. 37, Exhibit US-93). 
402 Id., para. 358 (referring to the. CFS CVD GOC Verification Report , p. 5, Exhibit US-89). 
403 Id., (referring to Exhibit US-89, p. 17). 
404 Id., (referring to Exhibit CHI-93, p. 58).  WT/DS379/R  
 Page 93 
 
 
 (v) Conclusion by the Panel 
9.106  As discussed supra , we have found that a reasonable and objective investigating authority 
could have determined, on the basis of the evidence on the record, that the government of China, at 
the central level, explicitly identified "certain ente rprises" in the sense of Article 2.1(a) of the SCM 
Agreement for encouragement and development, and instructed the sub-central governments to 
implement this policy, and that among these "certain enterprises" were advanced radial tires, which all 
parties acknowledge include OTR tires.  We have found that a reasonable and objective investigating 
authority could have determined that pursuan t to these same planning documents, SOCBs (among 
other financial institutions) were instructed to provi de financing to the "encouraged" projects, and that 
SOCBs did lend to both GTC and Starbright's OTR tire facilities.  Finally, we have found that a 
reasonable and objective investigating authority coul d conclude on the basis of the record evidence 
that the SOCBs followed the policies set forth in th e planning documents when they lent to GTC and 
Starbright. 
9.107  For these reasons, we therefore conclude that China has failed to establish that the USDOC's 
finding in the OTR investigation, that lending by SOCBs to the OTR tire industry (in particular to 
GTC and Starbright) was de jure  specific, was inconsistent with th e obligations of the United States 
under Article 2.1(a) of the SCM Agreement.405 
B. REGIONAL SPECIFICITY OF LAND-USE RIGHTS  
1. Claims of China 
9.108  China challenges the USDOC's dete rmination in the LWS investigation that the provision of 
land-use rights to one company (Aifudi) located in the "New Century Industria l Park" (the "Industrial 
Park" or the "Park") was regionally specific.  China claims that this determination was inconsistent 
with Article 2 of the SCM Agreement and, as a consequence, Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994.406 
2. Main arguments of the Parties 
(a) China 
9.109  China argues that for a subsidy to be regionally sp ecific, it must be limited in three ways:  (i) 
it must be limited to certain enterprises within a d esignated geographical region within the jurisdiction 
of the granting authority; (ii) it must be limited to  "certain enterprises" as that term is defined in 
Article 2.1 of the SCM Agreement; and (iii) those certain enterprises must be located within the 
designated region.  China argues that it follows a contrario  from the limitations in Article 2.2, that if a 
subsidy is available to all enterprises within the designated region , then it is not regionally specific; 
and that if it is available to enterprises outside that region, it likewise is not regionally specific.407 
9.110  In respect of the provision of land-use right s in the New Century Industrial Park, China 
argues that it is implicit in its specificity analysis that the USDOC considered the industrial park to be 
the "designated geographical region" in the sense of  Article 2.2 of the SCM Agreement.  China 
considers, however, that the term  "designated geographical region" should be understood to mean an 
economic or administrative subdivision (region) with in a particular physical area of a country 
                                                      
405 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
406 Paragraphs B.1(b)(i) and B.1(e)(i)- (iii) of the "as applied" claims in China request for establishment 
of the Panel;  China first written submission, para. 468 (f); second written submission, para. 315 (g). 
407 China first written submission, paras. 283-284. WT/DS379/R 
Page 94  
 
 (geographical) that has been set apar t for some special purpose (designated).
408  China finds 
contextual support for this reading of the term  in Article 8.2(b) of the SCM Agreement (non-
actionable subsidies), which referred to  an eligible disadvantaged region, inter alia , as "a clearly 
designated contiguous geographical area with a de finable economic and administrative identity".  
China argues that the similarity of the phrasing in  Articles 2.2 and 8.2(b) means that the same 
concepts should apply to the term "designated ge ographical region" in Article 2.2 of the SCM 
Agreement.409 
9.111  China cites the negotiating history of Article 2.2 of the SCM Agreement in support of its 
position.  In particular, China recalls that the D unkel Draft of the SCM Agreement provided that "a 
subsidy which is available to all enterprises located within a designated geographical region shall be 
specific irrespective of the nature of the granti ng authority", but that the phrase "available to all 
enterprises" was changed to "limited to certain enterprises" in the final version of the SCM 
Agreement.410  For China this signifies that the drafte rs of the SCM Agreement considered – and 
rejected – the meaning that the United States now seek s to give to Article 2.2 of the SCM Agreement.  
By using the term "certain enterprises" in Article 2.2,  as it is used elsewhere in Article 2, the drafters 
clearly intended that a subsidy would be regionally specific if it were limited to " certain enterprises 
located within a designated geographical region".  This requires the same inquiry into whether the 
beneficiaries of the regional subsidy represent no more than a "discrete segment" of the economy, just as it does elsewhere in Article 2 of the SCM Agreement.
411 
9.112  In this regard, in response to a question from the Panel concerning the purpose of Article 2.2, 
in the light of this argument that for a subsidy to be specific under Article 2.2 it would need to be 
limited to only certain beneficiaries within the re gion, China states that this provision addresses the 
particular circumstance in which a subsidy is in fact  limited to certain enterp rises located within such 
a region.  China notes in this regard that unlike Artic le 2.1(a), Article 2.2 does not refer to an "explicit 
limitation" of access to the subsidy by the gran ting authority or the legislation in question.412 
9.113  China argues that the New Century Industrial Park  is not a designated geographical region in 
the sense of Article 2.2 of the SCM Agreement b ecause it did not have its own definable economic 
and administrative identity and had not been desi gnated for any purpose, let alone to provide 
subsidies.  Rather, it was simply an area of land that Huantai County had rezoned from agricultural to 
industrial use, and which it decided to call the "New Century Industrial Park".413  China considers that 
the United States' argument, under which provisi on of land to any single company for less than 
adequate remuneration would be regionally specific to  that land, would be "absurd".  In particular, 
under the logic of the USDOC's "r egional specificity" finding in respect of the Industrial Park, any 
parcel of land could be called "regionally specific".414 
9.114  China asserts that during the investigation, the USDOC made no finding that the alleged 
subsidy was limited to "certain" enterprises located "within" the Industrial Park (i.e., a subset of all 
enterprises in the Park), and thus that it was not limited in the manner required by Article 2.2 of the 
SCM Agreement.415  China further states that the USDOC did not find that the alleged subsidy was 
limited to enterprises obtaining land use rights in th e Industrial Park, to the exclusion of companies 
obtaining such rights elsewhere in th e county where the Park is located.416  Finally, China argues, the 
                                                      
408 China first written submission, paras. 286-287. 
409 Id., paras. 288-289. 
410 China response to Panel question 58 (first meeting); second written submission, para. 195. 
411 China second written submission, para. 195. 
412 China response to Panel question 58 (first meeting). 
413 China first written submission, para. 290. 
414 Id., para. 291. 
415 Id., paras. 293-294. 
416 Id., para. 295.  WT/DS379/R  
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 USDOC's specificity finding was that the provision of  land rights (i.e., the financial contribution) was 
limited to enterprises in an industrial park with in the county's jurisdiction, whereas the Agreement 
requires that for a valid finding of specificity, the USDOC would have needed to find that the subsidy  
was limited to certain enterprises within the Park, to the exclusion of others within the Park, and to the 
exclusion of others located elsewhere in the county.417 
9.115  Finally, China argues, even if the USDOC had applied the legal framework advanced by 
China, the evidence would not support a finding that  the alleged subsidy was limited to the Industrial 
Park.  According to China, th e evidence showed that all companies (with a small number of 
exceptions) within the Park paid the same lease rate, such that if there were a subsidy, it was not 
specific as all holders of the land-use rights paid th e same rate.  China stat es that the evidence also 
demonstrated that commercial leaseholders elsewher e in the county paid the same or lower rates than 
those within the Park.  Thus, any subsidy was not li mited to the Park, the area considered by USDOC 
as the "designated geographic region".418 
(b) United States 
9.116  The United States argues that the USDOC found that China's provision of land-use rights to 
Aifudi was regionally specific because it was limi ted by a county to enterprises located in an 
industrial park within the county's jurisdiction.419  The United States argues that pursuant to 
Article 2.2 of the SCM Agreement, a subsidy is speci fic if it is limited to certain enterprises located 
within a designated geographical region within the ju risdiction of the granting authority, and Huantai 
County limited the land rights to enterprises locat ed within a designated geographical region – the 
Industrial Park.420  The United States argues that China's interpretation − that a "designated 
geographical region" must have its own economic and administrative identity – is overly strict, as 
these requirements do not appear in Article 2.2 of th e SCM Agreement.  Nevertheless, even by this 
overly-restrictive definition, th e industrial park would qualify.421  For the United States, "designated" 
means "'specified'" or "'called by a name'".  Geographical means, inter alia , "'pertaining to, or of the 
nature of, geography'", with geography defined to in clude "'the features or arrangement of a region or 
a place, building, etc.'"; and "region" means, inter alia , "'[a] large tract of land; a country; a definable 
portion of the earth's surface".422  Thus, for the United States, a "designated geographical region" is a 
large tract of land, defined by the tract of land's fe ature or arrangement, called by a name or described.  
According to the United States, the Industrial Park met this definition.423 
9.117  The United States considers that it and China are of more or less the same view in terms of 
the meanings of "designated" and "geographical", but th at they differ in respect of "region", where the 
United States' reading is much broader than China' s "economic or administrative subdivision".  Here, 
the United States disagrees that Article 8.2(b) of  the SCM Agreement supports China's argument:  
among other things, if the drafters had meant "r egion" to connote "administrative or economic 
subdivision", they would not have had to include  in Article 8.2(b) of the SCM Agreement the 
modifier "a definable economic and administrative identity" to the term "disadvantaged region".424 
9.118  The United States takes further issue with China's argument that Article 2.2 of the SCM 
Agreement requires that a subsidy must be limited to "certain enterprises" (i.e., a subset of enterprises) 
                                                      
417 China first written submission, paras. 296-297. 
418 Id., paras. 299-301. 
419 United States first written submission, para. 364. 
420 Id., para. 366. 
421 Id., paras. 367-368. 
422 Id., para. 369. 
423 Id., para. 370. 
424 Id., paras. 371-372. WT/DS379/R 
Page 96  
 
 within the region in order to be regionally specific.  For the United States this would render 
Article 2.2 itself redundant, as in any case, even without any geographical limitation, the subsidy 
would be specific to "certain enterprises" pursuant to Article 2.1(a), and such an interpretation would 
be impermissible.
425  Furthermore, the United States considers that Article 8.2(b) of the SCM 
Agreement supports its, not China's view, as th at provision indicates that in order to be non-
actionable, the specified regional subsidies among other things would need to be "non-specific" 
within the regions.  Under China's interpretation,  this would be unnecessary to specify, as such non-
specific aid within a region would already fall outside the scope of the Agreement.426  T h e  
United States also points to Article 8.1(b) of the SCM Agreement which refers to the various non-actionable subsidies listed in Article 8.2 as specific,  including the regional subsidies referred to in 
Article 8.2(b) which are, by definition, non-specific w ithin the regions in question.  According to the 
United States, here again, the non-specificity requirement in Article 8.2(b) would be unnecessary if those subsidies already were, in general, non- specific pursuant to Article 2.2 of the SCM 
Agreement.
427 
9.119  Finally, the United States argues that the ava ilability of similar subsidies to enterprises 
outside the region does not invalidate a finding of regi onal specificity.  The United States asserts that 
if this were the case, governments could easily circumvent the SCM Agreement  by providing a given 
subsidy to one company outside the region.  According to the United States, the land-use rights subsidy at issue was used as an incentive to relocate producers to th e Industrial Park, and was tied to 
the level of investment within the Park.  The fact that the county granted other types of land-use rights 
to other leaseholders outside the Pa rk is irrelevant to the regional specificity of the land-use subsidy 
provided to enterprises in the Park.
428 
9.120  Concerning the facts of the investigation, the United States asserts that evidence on the record 
distinguished the way in which land-use rights we re provided by the government in the Industrial 
Park, in that only enterprises with a certain leve l of investment qualified, and the subsidy was 
available only to enterprises willing to physically lo cate in the Park.  In add ition, the record evidence 
indicated that land-use rights were not prov ided in accordance with government-established 
requirements, as the land in question had not been co nverted from agricultural to  industrial use at the 
time the land-use rights were provided to the ente rprises in the Park.  Furthermore, the local 
authorities had not conducted a formal appraisal of  the land, as was required.  In these ways, the 
United States argues, the provision by the county government of land-use rights in the Park was distinct from its provision of land-use rights outside the Park.
429 
3. Main arguments of the Third Parties 
(a) Australia 
9.121  Australia disagrees with China that a subsidy is non-specific if it is available to all enterprises 
located within a designated geographic region under th e jurisdiction of the granting authority.  Rather, 
regional specificity stems from the limitation based on regional locality.  Australia therefore disagrees 
with China that Article 2.2 of the SCM Agreement i nvolves a three-step test.  Australia considers that 
such a test would render the regional specificity prov ision (Article 2.2) redundant, as one of the other 
bases for specificity (2.1(a)-(c)) already would be  present under the three-step test.  Australia 
considers Articles 8.1(b) and 8.2(b) of the SCM Agre ement to be relevant c ontext, and also suggests 
                                                      
425 See, e.g.,  United States first written submission, paras.  374-376; opening statement at the first 
meeting of the Panel, para. 35; second written submission, para. 167. 
426 United States first written submission, para. 377. 
427 Id. 
428 Id., paras. 380-382. 
429 United States response to Panel question 8 (second meeting).  WT/DS379/R  
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 that the Panel consider whether the reference in Ar ticle 2.2 to "certain enterprises" is descriptive to 
distinguish between enterprises that are located with in the designated geographical regional and those 
that are outside.430 
(b) Canada 
9.122  Canada agrees with the United States that Artic le 2.2 of the SCM Agreement simply covers 
subsidies that are limited to a designated geogr aphical region.  According to Canada, reading 
Article 2.2 as also targeting subsidies that are limited to certain enterprises as provided for in 
Article 2.1, would allow all enterprises located  in a designated geographical region to escape the 
disciplines of the SCM Agreement, even if these subsidies are not broadly available within the 
country.431 
(c) European Communities 
9.123  The European Communities argues that subsidies destined to all enterprises in a geographical 
region are not considered specific under Article 2.2 of the SCM Agreement, noting that the text of this 
provision was changed from what was proposed in the Dunkel Draft of the SCM Agreement, which 
would have rendered all regional subsidies specific.   For the European Comm unities, such a change 
should have meaning.  The European Communities ar gues that the specificity of regional subsidies 
must be established by an integrated reading of Ar ticle 2 of the SCM Agreement.  In particular, the 
European Communities is of the view that if elig ible regions under a regional subsidy programme are 
chosen on the basis of objective criteria under Article  2.1(b), there would be no regional specificity.432 
4. Assessment by the Panel 
(a) Interpretation of Article 2.2 of the SCM Agreement 
9.124  We begin our analysis with the text of Artic le 2.2 of the SCM Agreement which reads as 
follows:   
"2.2 A subsidy which is limited to certa in enterprises located within a designated 
geographical region within the jurisdiction of the granting authority shall be specific.  
It is understood that the setting or change of generally applicable tax rates by all 
levels of government entitled to do so shall not  be deemed to be a specific subsidy for 
the purposes of this Agreement". 
9.125  The particular language in dispute between the par ties is the first sentence.  First, the parties 
disagree whether the reference to "certain enterp rises" means that for speci ficity in the sense of 
Article 2.2 of the SCM Agreement to exist, there mu st be a limitation of a subsidy to a subset of 
enterprises located within a designated geographical re gion, or instead whether limitation of a subsidy 
on a purely geographic basis, to part of the territory within the jurisdiction of the granting authority, is 
sufficient. 
9.126  The parties also disagree as to the meaning of "designated geographical region".  For China, 
this language refers to a formal administrative entity, whereas for the United States it refers to any 
specified, identified large piece of land (whether or  not it has a separate administrative identity or 
apparatus). 
                                                      
430 Australia third-party submission, paras. 33-36. 
431 Canada third-party submission, paras. 60-62. 
432 European Communities third-party submission, para. 46. WT/DS379/R 
Page 98  
 
  
(i) "Certain enterprises" as referred to in Article 2.2 of the SCM Agreement 
9.127  Beginning with the term "certain enterprises" we recall, as discussed supra  in the context of 
de jure  specificity, that the chapeau to Article 2.1 of  the SCM Agreement defines this term as follows: 
"In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is 
specific to an enterprise or industry or group of  enterprises or industries (referred to 
in this Agreement as "certain enterprises") within the jurisdiction of the granting 
authority, the following principles shall apply:".  (emphasis added) 
9.128  Thus, the first question concerning the meaning of the term "certain enterprises" in Article 2.2 
of the SCM Agreement is whether that phrase cove rs all enterprises located within the designated 
geographical region within the jurisdiction of the gr anting authority, or is limited to some subset 
thereof.  For China, this term should be understood to mean that only if a subsidy is limited to some 
subset of enterprises within the region is that su bsidy regionally specific.   For the United States, 
however, the reference to "certain  enterprises" in the particular context of Article 2.2 serves to 
distinguish those enterprises within the designated re gion from those outside it.  To try to answer this 
question, we first substitute into the text of Article  2.2 of the SCM Agreement the full phrase that is 
equivalent to the contraction "certain enterprises".  This would read, in pertinent part, "[a] subsidy 
which is limited to [ an enterprise or industry or group of enterprises or industries ] located within a 
designated geographical region within the jurisdiction"  of a granting authority.  We do not consider, 
however, that the text of the provision, in isolatio n, either with or without  this substitution, sheds 
particular light on the question at issue. 
9.129  We thus next turn to the context of the provisi on, the most relevant of which we find to be 
that afforded by Articles 8.1(b) and 8.2(b) of the SCM Agreement, as these Articles together shed 
considerable light on the question before us .  These provisions read, in relevant part: 
"8.1 The following subsidies sha ll be considered as non-actionable
 [footnote 
omitted]: 
(a) subsidies which are not specific within the meaning of 
Article 2; 
(b) subsidies which are specific within the meaning of Article 2 
but which meet all of the conditions provided for in paragraphs 2(a), 2(b) or 2(c) below. 
8.2 Notwithstanding the provisions of Pa rts III and V, the following subsidies 
shall be non-actionable: 
[...] (b) assistance to disadvantaged regi ons within the territory of a 
Member given pursuant to a general framework of regional development [footnote omitted] and non-specific (within the 
meaning of Article 2) within e ligible regions provided that: 
 (i) each disadvantaged region must be a clearly 
designated contiguous geographical area with a definable economic and administrative identity;  WT/DS379/R  
 Page 99 
 
 
  (ii) the region is considered as disadvantaged on the 
basis of neutral and objective criteria [footnote omitted], indicating that the region's difficulties arise out of more than temporary circumstances;  such criteria must be clearly spelled out in law, regulation, 
or other official document, so as to be capable of 
verification; 
 (iii) the criteria shall include a measurement of economic 
development which shall be based on at least one of the following factors: 
[...]". 
9.130  Before considering the exact wording of these provisions, we first recall that the overall 
purpose and effect of Article 8 of the SCM Agreement during the period when it was in force
433, as 
indicated in Article 8.1(b), was not to change the sp ecificity rule of Article 2 of the SCM Agreement.  
Rather, Article 8 gave a special non-actionable status to a limited subset of the universe of specific 
subsidies which, in the absence of that Article, would have been actionable by virtue of their 
specificity.  Upon the lapsing of Article 8, the form erly non-actionable subsidies simply reverted to 
the same (actionable) status as all other specific subsidies. 
9.131  Turning now to the text of Article 8.1(b) of the SCM Agreement, we note that this provision 
explicitly identifies as "specific" all of the subsid ies described in Article 8.2 as non-actionable.  In 
particular, this provision describes the non-acti onable subsidies as "subsidies which are specific 
within the meaning of Article 2 but which meet " the conditions provided for in the various sub-
paragraphs of Article 8.2, including Article 8.2(b) , covering assistance to disadvantaged regions.  In 
other words, Article 8.1(b) makes clear that the subsidies for disadvantaged regions described in 
Article 8.2(b), as well as the other subsidies described  in Article 8.2 are, by definition, "specific" 
within the meaning of the SCM Agreement.  This of course is logical, as if these subsidies were not 
specific, they would not be covered by, and th us would not be actionable pursuant to, the SCM 
Agreement.  Indeed, Article 8.1(a) of the SCM Agre ement makes this point explicitly, identifying as 
one of the two categories of non-actionable subsidies those "subsidies which are not specific within the meaning of Article 2". 
9.132  As for Article 8.2(b) of the SCM Agreement, the re levant point for this di spute is that in order 
for a subsidy to a disadvantaged region to ha ve had non-actionable status, that subsidy, inter alia , had 
to be " non-specific  [...] within  [an] eligible region [...]".  What this means is that a subsidy to a 
particular, disadvantaged region was defined by the SCM Agreement as specific in the sense of 
Article 2 of the Agreement, in spite of being non-specific within  the region in question.  Had the non-
specificity within the region been enough to render the subsidy non-specific in the sense of Article 2, 
this would have made Article 8.2(b) entirely re dundant given, as just noted, that non-specific 
subsidies are not covered by, and thus not acti onable in any way under, the SCM Agreement.  
Furthermore, in view of the fact that the regional aid in question, to be non-actionable, had to be non-
specific within the region in question, the only possi ble basis for such aid to  be specific pursuant to 
Article 2 was its geographical limi tation, i.e., on the basis of Article 2.2 of the SCM Agreement on 
regional specificity. 
                                                     
 
433 Pursuant to Article 31 of the SCM Agreement, Ar ticles 6.1, 8 and 9 applied provisionally for five 
years from the entry into force of th e WTO Agreement, and the period of a pplication could have been extended 
by consensus decision of the SCM Committee.  No such consensus was reached, however, and these provisions 
thus lapsed. WT/DS379/R 
Page 100  
 
 9.133  Finally, we consider the role of Article 2.2 with in Article 2, especially in relation to Article2.1 
of the SCM Agreement.  Here, we are concerned by the implications of China's argument that 
subsidies limited to a designated geographical regi on within the jurisdiction of a granting authority 
would have to be further  limited to a subset  of the enterprises located within that region in order to be 
specific in the sense of Article 2.2 of the SCM Agr eement.  In our view, such an interpretation would 
be inconsistent with the principle of effectiv e treaty interpretation:  it would entirely deprive 
Article 2.2 of meaning and purpose, as any such subsidy already would be specific pursuant to 
Article 2.1 of the SCM Agreement.  By the same toke n, to view Article 2.2 as a particular case of the 
specificity referred to in Article 2.1, i.e., where the "certain enterprises" in Article 2.2 are those 
located within the designated geographical region,  does not render Article 2.2 redundant.  This is 
particularly clear when Article 2.2 and Article 8.2(b)  are considered together, given that Article 8.2(b) 
defined and singled out for special treatment under the disciplines of the SCM Agreement a subset of 
the regionally specific subsidies covered by Article 2.2 of the SCM Agreement. 
9.134  We recall that in response to our question on this point, China argued that the purpose of 
Article 2.2 of the SCM Agreement is to address "the  particular circumstance in which a subsidy is in 
fact limited to certain enterprises located within" a designated geographical region, by which we 
understand China to argue that specificity in the sense of Article 2.2 can exist only in the de facto , and 
not in the de jure , sense.  In the first place, such an inte rpretation would not resolve the issue, as a 
subsidy such as the one described by China already w ould be specific pursuant to Article 2.1(c) of the 
Agreement.  Nor do we see any limitation to de facto specificity in the text of Article 2.2 of the SCM 
Agreement.  Indeed, the only textual basis that China offers in support of this argument is that, unlike 
Article 2.1(a), Article 2.2 does not refer to an "e xplicit limitation" of access to the subsidy by the 
granting authority or the legislation in question.  Given, however, that regional specificity appears in its own article (Article 2.2), separate from the gene ral provisions containing the respective definitions 
of de jure  and de facto  specificity, and given as well that Article 2.2 does not refer either to de jure  or 
de facto  specificity, we see no basis in the text for co ncluding that Article 2.2 would pertain only to a 
de facto  situation, and not a de jure  one, or vice versa .  In our view, such an interpretation not only is 
unsupported by the text, but also is considerably less plausible than one that would read Article 2.2 as 
a particular case of specificity, on the basis of ge ographic limitations, which could arise in either the 
de jure or the de facto sense. 
9.135  On the basis of the foregoing analysis we conc lude that the term "certain enterprises" in 
Article 2.2 of the SCM Agreement refers to those enterprises located within, as opposed to outside, 
the designated geographical region in question, wi th no further limitation within the region being 
required. 
9.136  Given that we find this meaning to be clear ba sed on the text of the provision in its context 
and in light of the object and purpose of the provision and the SCM Agreement, we see no need to 
resort to supplemental means of interpretation in r espect of this issue.  We note, however, that China 
has raised arguments based on the negotiating histor y of Article 2.2 of the SCM Agreement, and we 
thus now consider those arguments. 
9.137  In particular, China compares the adopted Uruguay Round text of Article 2.2 of the SCM 
Agreement with the counterpart provision in the "Dunkel Draft"434 of the Agreement.  China recalls 
that the Dunkel text read, in pertinent part: 
                                                      
434 China refers to the Draft Text on Subsidies and Countervailing Measures of 7 November 1990 
(MTN.GNG/NG10/23).  (China second written submission, foot note 160).  We note that this document is one of 
the so-called "Cartland drafts" of 1990 and that the "D unkel Draft" (20 December 1991) was circulated in 
document MTN.TNC/W/FA.  The relevant texts of both documents, however, contain the wording on regional 
specificity cited by China.  WT/DS379/R  
 Page 101 
 
 
 "A subsidy which is available to all en terprises located w ithin a designated 
geographical region shall be specific irr espective of the nature of the granting 
authority".  
while the adopted language in the SCM Agreement reads: 
"A subsidy which is limited to certain enterprises located within a designated 
geographical region within the jurisdiction of the granting authority shall be specific". 
For China, the change of the language from "avail able to all enterprises" in the Dunkel Draft to 
"limited to certain enterprises" in the final, adopt ed Agreement means that th e negotiators considered 
– and rejected – the meaning whereby a subsidy w ould be specific pursuant to Article 2.2 based on 
geographical limitation only. 
9.138  In considering this argument, we note that the changes between the Dunkel text and the 
adopted text of the SCM Agreement go beyond the substitution of the term "limited to certain 
enterprises" for "available to all enterprises", and that the meaning of this change can only be 
understood by looking at the entirety of the two senten ces.  In particular, the Dunkel text provided that 
even if  a subsidy granted within a region were comple tely generally available, to "all enterprises" 
within a designated geographical region, it would ha ve been specific, without regard to who the 
granting authority was or what its territorial reach was.   In practical terms, this would have meant that 
even a subsidy granted by a provincial government to all enterprises within the entirety  of its own 
territory would have been regionally specific. 
9.139  By contrast, Article 2.2 of the SCM Agreemen t changes the focus of the provision, to the 
granting authority in juxtaposition with its geographical  jurisdiction, such that only where a subsidy is 
limited  to a subpart  of the territory within the jurisdiction of the granting authority would specificity 
arise under this provision.  It is this change in orientation and focus between the Dunkel text and the 
SCM Agreement that explains the need, from the poi nt of view of technical drafting, to change 
"available to all" to "limited to certain".  The ne gotiating history of the provision thus certainly does 
not detract from, and if anything supports, the co nclusion that we have reached regarding the term 
"certain enterprises" in Article 2.2 of the SCM Agreement based on our analysis of that provision 
itself. 
(ii) "Designated geographical region" in Article 2.2 of the SCM Agreement 
9.140  A further question of legal interpretation rai sed by China's claim is whether a "designated 
geographical region" in the sense of Article 2.2 of  the SCM Agreement must necessarily have some 
sort of formal administrative or economic identity as China argues, or whether any identified tract of 
land within the territory of a granting authority can be a "designated geographical region" for the 
purposes of a specificity finding pursuant to Article 2. 2 of the Agreement.  Starting with the text of 
Article 2.2, we find no limitation of the kind advanced by China, nor does China point to one.  Thus, the text on its own would appear to allow any iden tified tract of land within the jurisdiction of a 
granting authority to be a "designated geographical region" in the sense of Article 2.2 of the SCM 
Agreement. 
9.141  We recall that China's main support for its argum ent is the context provided by Article 8.2(b) 
of the SCM Agreement.  In particular, China recalls that Article 8.2(b) required that a disadvantaged 
region in the sense of that provision, inter alia , had to be clearly designa ted and contiguous, and had 
to have a definable economic and administrative identit y.  China argues that due to the similarity of 
the language in Articles 2.2 and 8.2(b), the concepts  in the latter provision should also apply to the 
term "designated geographical region" in  Article 2.2 of the SCM Agreement. WT/DS379/R 
Page 102  
 
 9.142  We note first that in fact the texts of the two pr ovisions are different.  As an initial matter, we 
consider that if the drafters had intended for their meanings to be the same, they would have used the 
same language in both places. 
9.143  In addition, we recall that the purpose and func tion of Article 8 of the SCM Agreement was to 
confer non-actionable status on a certain subset of  the subsidies that are specific in the sense of 
Article 2 of the SCM Agreement.  Given this, we c onsider that the context provided by Article 8.2(b) 
in respect of the meaning of the term "designated ge ographical region" in Article 2.2 points rather to 
the opposite conclusion from that drawn by China.  In  particular, the requirements in Article 8.2(b) 
imposed special restrictions and conditions the purpo se of which was to define and circumscribe, from 
among the universe of subsidies that were specific on the basis of Article 2.2, those that were non-
actionable.  The need for these restrictions and cond itions thus is obvious, i.e., to ensure that the 
assistance was in reality limited to generalized economic  assistance to regions that were economically 
disadvantaged based on specified, quantifiable pa rameters, and to prevent the non-actionability 
provisions from being used to disguise what in fact were targeted, trade distortive subsidies.  Indeed, 
without the additional restriction that a disadvant aged region, to qualify under Article 8.2(b), among 
other things had to have a definable economic and administrative identity, it would have been possible 
for Members to define any parcel of land – incl uding, say, a particular, individual factory – as a 
"disadvantaged region" and on that basis to provi de non-actionable subsidies to that plant, thus 
entirely avoiding the disciplines of the SCM Agreemen t.  Similarly, if China's argument as to the 
meaning of "designated geographical region" in Artic le 2.2 were correct, it would become a simple 
matter to circumvent the SCM Agreement  by providing subsidies through industrial parks or similar 
geographical areas, without targeting particular enterprises within those areas. 
9.144  On the basis of the foregoing analysis, we conc lude that a "designated geographic region" in 
the sense of Article 2.2 of the SCM Agreement can encompass any identified tract of land within the 
jurisdiction of a granting authority. 
(b) USDOC regional specificity determination 
9.145  Having reached our conclusions regarding the le gal interpretation of Article 2.2 of the SCM 
Agreement, we now turn to the USDOC's regional sp ecificity determination in the LWS investigation, 
in respect of the provision of a llegedly subsidized land-use rights. 
(i) USDOC determination 
9.146  In the LWS investigation, the USDOC determined  that China's provision of land-use rights in 
the New Century Industrial Park to an investigated producer (Aifudi)
435 constituted a countervailable 
subsidy in the form of land-use rights for less th an adequate remuneration.  The USDOC first found 
that China's provision of land-use rights to Aifudi constituted a financial contribution by a government in the form of provision of goods or services.  The USDOC then found that this financial contribution was de jure  specific because the provision of the land-use rights within the Industrial 
Park was limited to an enterprise or industry lo cated within a designated geographical region.  
Furthermore, since the provision of land-use rights was found to be "regionally specific", the USDOC 
determined that factors such as the number of users a nd the types of industries were not relevant to its 
specificity analysis.
436  The USDOC then found, as a separat e step, that the land-use rights were 
                                                      
435 The USDOC's determination indicates that "Golden Moon" was the enterprise that actually obtained 
the land-use rights, that it shared the land with Aifudi in the Industrial Park, and th at the two enterprises were 
cross-owned.  The USDOC therefore referred to Aifudi as the buyer of the land-use rights.  (Exhibits CHI-3, p. 14 and CHI-34, p. 67906). 
436 Exhibit CHI-3, pp. 14 and 55.  WT/DS379/R  
 Page 103 
 
 
 provided for less than adequate remune ration and therefore conferred a benefit.437  W e  c o n s i d e r  
China's claims in respect of this benefit determination in Section X,  infra . 
9.147  Concerning specificity, the USDOC found that the provision of land-use rights was specific 
because the provision of those rights in an industrial park within the county's jurisdiction was limited to an enterprise or industry or group thereof located within a designated geographical region.
438  In 
particular, the USDOC found that Aifudi was situated in an industrial park that had been created by 
the Huantai County government for the purpose of providing industrial land-use rights to industries within that government's jurisdiction, i.e., that  the New Century Industrial Park was within the 
authority of Huantai County and thus that Aifudi re ceived land-use rights by virtue of its location in 
the Industrial Park.
439 
9.148  The USDOC indicated that at verification it ha d confirmed that the county had identified a 
specific, contiguous area of land within its jurisdic tion, designated that land as an industrial park, and 
controlled the granting of land-use rights within the industrial park.440  On the latter point, officials 
from the Huantai County Land Bureau had indicated at  verification that the county government gave 
the final approval to companies for land-use rights, and that all levels and all agencies of the county 
government had to approve land-use rights.441 
9.149  Thus, the USDOC's determination makes clear th at its regional specificity finding was in 
respect of the government financial contribution, i. e., the provision of land-use rights.  The USDOC's 
benefit determination was a separate step  in its analysis of this programme. 
9.150  As discussed supra , China's basic arguments against this approach are that regional specificity 
cannot be determined solely on the basis of geogra phic location but must involve a further selectivity, 
and that regional specificity can only exist in a de facto  but not in a de jure  sense.  China's general 
argument that de jure  specificity (on whatever basis) cannot  be found unless the law or regulation in 
question specifies all elements of a specific subsi dy (financial contribution and benefit, as well as 
specificity) also is relevant here. 
9.151  Part of China's specificity argument thus also concerns the benefit element of USDOC's 
finding regarding the provision of land-use rights.  That part of the finding was that the land prices 
within the park, the purpose of which was to provide  land-use rights, were below-market, as measured 
against an external market benchmark (certain land-use prices in Bangkok and adjacent provinces).  
China argues however that the evid ence on record showed that land pr ices within the Industrial Park 
were if anything higher than those outside the Park  in the same county, and that this comparison 
should have factored into both the specificity and be nefit determinations.  In particular, for China, 
even if regional specificity were determined on th e basis of geography alone, the price for land use 
inside the Industrial Park would need to be lowe r than land use prices elsewhere in the county for 
either a benefit or any possibility of regional specificity to exist. 
(ii) Assessment by the Panel 
9.152  The question before the Panel in respect of the LWS investigation is whether the USDOC's 
finding that the provision of land-use rights to Aifudi  was regionally-specific was consistent with the 
SCM Agreement.  The United States argues that th ere was a financial contribution by a government 
(provision of land-use rights which are totally cont rolled by the government), and that the particular 
                                                      
437 Exhibit CHI-3, p. 14. 
438 Id. 
439 Id., p. 55. 
440 Id. 
441 Id., pp.14 and 55. WT/DS379/R 
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 land-use rights in question – those to Aifudi, whic h were in the Industrial Park – were regionally 
specific because they were  available only to the companies operating in the Industrial Park.  The 
United States also argues that there was very little record evidence on prices of land-use outside the 
Park, and that even if there were some subsidies conferred to some land-users outside the Park that 
would not alter the fact that land-users in the Park were receiving land-use subsidies by virtue of their 
location (i.e., regionally-specific subsidies). 
9.153  China, in addition to its legal arguments that regional specificity cannot be determined on the 
basis of a geographic limitation alone, and that an industrial park cannot be  a designated geographic 
region, argues that the evidence of record did not sh ow that any benefit was enjoyed by Aifudi that 
was not also enjoyed by other companies inside th e Industrial Park and, moreover, showed that the 
price for land-use in the Industrial Park was if anyt hing higher than that outside the Park in Huantai 
County.
442  As such, according to China, being located  in the Industrial Park conferred no special 
advantage.443  China thus seems to be saying that ev en if any subsidy existed, it was generally 
available to purchasers of land-use rights in Huantai County.  China also argu es that by the USDOC's 
logic, the provision by a government of any piece of land would be regionally specific purely by 
virtue of the geographical nature of land; an outcome that China considers would be absurd. 
9.154  We note that there is no substantial disagreemen t between the parties as to the facts of the 
situation.  The record evidence indicates that a ll of the land in China ultimately was owned by the 
government, that before agricultural land could be put to industrial use it had to be converted by the 
relevant provincial government, and that the provision of land-use rights to particular enterprises was 
the responsibility of the relevant municipal (county)  government.  The record evidence also indicates, 
and the parties do not disagree, (i) that the Industria l Park was created through the conversion, by the 
Huantai County government, of a tract of agricultu ral land to industrial use, and (ii) that only 
sometime after the establishment of the Industrial Pa rk and the installation of a number of enterprises 
(including Aifudi) in the Park was that land conve rsion brought to the attention of, and approved by, 
the provincial government.  Finally, there is no disagre ement between the parties as to the price that 
Aifudi paid for the land, or as to the prices paid  under other land-use contracts on the record, for 
certain land both inside and outside of the Industria l Park.  Where the disagreement on the latter point 
lies is in respect of the relevance of such other la nd prices to the question of specificity, and in respect 
of the representativeness of this other pricing info rmation (the United States notes that only a few 
such contracts were produced by the responde nts in response to the USDOC's request). 
9.155  We recall our finding, supra , that it is not necessary for a granting authority or the relevant 
legislation to identify all elements of a specific subsidy for a valid finding of de jure  specificity.  We 
thus find no legal error in the USDOC having based its determination of regional specificity on the 
element of the financial contribution, i.e., on th e provision of land-use rights by Huantai County. 
9.156  We also recall our finding that an industrial pa rk, as a designated tract of land within the 
jurisdiction of a granting authority, would fall with in the scope of the term  "designated geographical 
area within the jurisdiction of the granting authority"  in Article 2.2 of the SCM Agreement.  We thus 
find no error in the USDOC's having found the Industr ial Park to be a "designated geographical area" 
within the jurisdiction of Huantai County. 
                                                      
442 China second written submission, para. 200. 
443 Id., para 202.  In particular, China argues that the subsidy that the USDOC determined to be 
countervailable was the provision of land by the governme nt at a price that the USDOC considered to represent 
less than adequate remuneration, but that the United States fails to identify any aspect of the alleged subsidy that 
was "only available" to companies lo cated within the New Century Industri al Park.  According to China, the 
same government – Huantai County – provided land to enterprises located outside of the "designated geographical region" at the same or lower prices, and the subsidy identified by the USDOC therefore was not 
"unique" or "only available" to companies located within the New Century Industrial Park.  (Id.).  WT/DS379/R  
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 9.157  Finally, we recall our finding that specificity in the sense of Article 2.2 of the SCM 
Agreement refers to limitation of access to a subs idy on the basis of geographic location alone, and 
that no further limitation to a subset of the enterpri ses in the region in question is necessary for such 
specificity to exist.  Thus, we find no error in the fact that the USDOC, in reaching its regional 
specificity determination, did not examine whether some of the companies in  the Industrial Park 
obtained their land-use rights on mo re favourable terms than others. 
9.158  We do not consider that these findings fully resolv e this claim, however.  In particular, we are 
troubled by the implications of the USDOC's analytical  approach in the context of the specific facts of 
the LWS investigation.  In this regard, we read  the USDOC's determination as meaning that the 
provision of the land-use rights to Aifudi was re gionally specific because the land was physically 
located in a designated area within the jurisdiction of  the granting authority, i.e., inside the Industrial 
Park.  In particular, the USDOC indicated in its de termination that the Industrial Park was created for 
the purpose of providing land-use rights to companies that were located there, and thus met the criteria for regional specificity.  We consider that  this reasoning is essentially circular, however, given 
that land itself is a location. 
9.159  Furthermore, we recall the undisputed fact of record that in China the government was the 
ultimate owner of all land.  This implies first that any time an enterprise obtained land-use rights anywhere in China it was receiving a financial contri bution by a government.  The further implication 
of the USDOC's approach would be that those land-u se rights, wherever in China they were provided, 
would be regionally specific, given that land is by  definition always limited by and to its geographic 
location.  Here, we note that in the investiga tion before us, while a perimeter was drawn around a 
particular tract of land within the jurisdiction of  the granting authority, which was labelled the New 
Century Industrial Park, and the USDOC considered th e Park, rather than Aifudi's particular piece of 
land within it, to be the "geographical region"  in question, we see no basis under the USDOC's 
analytical approach, and the United States points to no record evidence, to establish that the provision 
of land-use rights in the Industrial Park constituted a distinct regime for the provision of that financial 
contribution, compared with the provision of financ ial contributions in the form of land-use rights 
outside the Park. 
9.160  Nor has the United States pointed to anything in the record that shows that the creation of the 
Industrial Park went beyond the re-zoning of a par ticular tract of land from agricultural to industrial 
use.  While this re-zoning initially was undertaken  by the county government without the required 
provincial government authorization, that authoriza tion was subsequently obtained.  We note in this 
regard that the verification report indicates that th ere was no separate land po licy for land in industrial 
zones, and that as long as land was for industrial use,  it had to be in accordance with industrial land 
policy, which applied whether the land was inside or outside an industrial zone.
444  We further recall 
that the USDOC's determination and the evidence cited therein indicates that the county government 
set the industrial land-use prices both within and outside the Industrial Park, and the United States 
points to no record evidence showing that the i ndustrial land-use prices within the Park were 
uniform445, or that these prices had any clear distinctive identity compared with the prices outside the 
Park, indicating that the land-use regime for the Pa rk was a distinct financial contribution.  We 
emphasize that we refer here to land-use prices, a nd in particular to any indication on the record of 
differences in land-use prices within and outside th e Industrial Park, as possible factual evidence of 
the existence of a separate land-use regime for the Industrial Park.  We do not mean to imply that any 
such price differences would be indicative of the exis tence or amount of a benefit, which is a separate 
issue, addressed in Section X,  infra .  The ultimate implication of the USDOC approach to regional 
                                                      
444 Verification of the Questionnaire Responses Submitted by the Government of the People's Republic 
of China (GOC) – Provincial and Local Government  (the "Verification Report"), Exhibit US-79, p. 8. 
445 The Verification Report indicates th at there were at least two land-use  prices within the Park.  (Id., 
pp. 12-14). WT/DS379/R 
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 specificity in respect of the land-use rights at issue is  that if it was then determined (as was the case in 
the LWS investigation) that the particular land-use rights in question were provided for less than adequate remuneration, the result w ould be that a regionally specific subsidy would be provided.  This 
would be the case even if all purchasers of land-use rights throughout the jurisdiction of the granting 
authority paid exactly the same below-market price for land, because each individual purchase, due to 
its inherent geographical limitation,  would be regionally specific. 
9.161  We consider that such an outcome, and thus  the approach that generates it, cannot be 
reconciled with Article 2 of the SCM Agreement, th e purpose of which is to identify those subsidies 
that by virtue of being limited on some basis, are s ubject to the Agreement's disciplines.  We therefore 
find that the USDOC's determination of regional sp ecificity in respect of the provision of land-use 
rights to Aifudi is inconsistent with the obliga tions of the United States under Article 2 of the SCM 
Agreement. 
9.162  We emphasize here that our conclusion concer ning the USDOC's regional specificity finding 
in the LWS investigation is driven by the specific facts that were on th e record of that investigation.  
In particular, we emphasize that we are not saying that the intrinsic geographic nature of land-use 
rights would always preclude a regional specificity  finding in respect of the provision of land-use 
rights.  Nor, when we say that the United States ha s pointed to no record evidence that the Industrial 
Park constituted a unique land-use regime, as might have  been indicated by special rules or distinctive 
pricing or other elements that distinguished the pr ovision of land in the Park from the provision of 
land outside the Park, do we mean to imply any factual findings of our own that the Industrial Park was or was not such a regime, or that the terms a nd conditions for land-use inside the Park were or 
were not indistinguishable from those outside.  It is entirely possible that ev idence relevant to these 
points existed, and had such evidence been placed on the record, it might have resulted in a finding of 
regional specificity consistent with Article 2.2 of the SCM Agreement. 
9.163  It does not appear to us, however, that the USDOC pursued these or similar lines of inquiry 
assiduously.  Indeed, while before us the United Stat es argues that the record  evidence on land prices 
outside the Industrial Park was thin because Ch ina only supplied a few examples of such land-use 
contracts, and while in its determination the US DOC implies that those contracts were not fully 
relevant to its inquiry
446, we note that when it verified that information, the USDOC appears not to 
have requested any additional land-use contracts, but instead simply verified the ones it was given.447  
As for the nature of the Industrial Park, we see no indication in the record evidence that the USDOC 
examined whether it constituted a land-use regime th at was clearly distinguishable from the general 
provision of land-use rights by the county governme nt.  Instead, the USDOC appears to have focused 
principally on the process by which the Industrial Park was created, and the irregularities in that 
process, as well as on how the land-use prices were set both inside and outside the Industrial Park, but 
with no findings as to any clear basis on which the pr ovision of a financial contribution in the form of 
land-use rights differed as between land inside and ou tside the Park.  In short, had the USDOC made 
                                                      
446 On this point, the USDOC's determination reads:   
 "Although the Department was provided some documentation at verification showing the 
prices charged for land-use rights in an industrial park in another county, these two contracts 
were not contemporaneous with the original contracts negotiated for Aifudi's land-use rights [...] Similarly, our examination of two other co ntracts for industrial la nd located in Huantai 
county that is outside of the industrial park, did not provide us any information as to how 
these prices were determined".  (Exhibit CHI-3, p. 59).  
447 The Verification Report indicates that "we [...]  requested and the land bureau provided us with 
information on contracts for industrial land outside of the industrial zone".  (Exhibit US-79, p. 14).  There is no indication in the report either that the information in  the contracts was unable to be verified, or that any 
additional contracts were requested.  WT/DS379/R  
 Page 107 
 
 
 further inquiries into these or si milar issues, and depending on the outcome of those inquiries, our 
conclusions as to the WTO-consistency of the USDOC' s regional specificity finding in respect of the 
provision of land-use rights to Aifudi might have been different. 
9.164  For the foregoing reasons, we conclude th at the USDOC's determination of regional 
specificity in respect of the provision of land-use ri ghts to Aifudi was inconsistent with the obligations 
of the United States under Article 2 of the SCM Agreement.448 
X. CHINA'S CLAIMS PERTAINING TO BENCHMARKS 
A. CLAIMS OF CHINA  
10.1 China claims that, "in connection with each inst ance in which US authorities resorted to a 
benchmark outside of China for the purpose of de termining the existence and amount of any alleged 
subsidy benefit", the USDOC's "rejection of preva iling terms and conditions in China as the basis for 
determining whether, and to what extent, subj ect producers received a subsidy benefit under the 
methodologies set forth in Article 14" was inconsiste nt with that provision and, as a consequence, 
with Articles 10 and 32.1 of the SCM Agreement, and Article VI:3 of the GATT 1994.449  Under this 
generally-worded claim, China raises the following series of specific allegations. 
10.2 First, China alleges, in respect of SOE-produced inputs450 in the CWP, LWR and LWS 
investigations, that the USDOC unlawfully presumed th at Chinese private prices were distorted, based 
exclusively on the extent of government involvement in the market, and that it thus acted inconsistently with Article 14(d) of the SCM Agre ement when it rejected those prices as benchmarks 
and resorted instead to benchmarks based on out-o f-country prices, i.e., it failed to determine the 
adequacy of remuneration for the inputs in relation to prevailing market conditions in China.  China 
argues that the USDOC's reliance on these alte rnative benchmarks for measuring adequate 
remuneration with respect to the provision of input s in the three investigations "was predicated 
exclusively on its invalid findings that private prices  were distorted", and that "[a]ccordingly, all of 
[the USDOC's] benefit calculations  relying on those alternative benchmarks likewise are invalid".
451 
10.3 Also concerning these inputs, Ch ina notes that the alleged unlawfulness of the distortion 
findings and consequential rejection of Chinese pr ivate prices "makes it unnecessary for the Panel to 
inquire whether each alternative benchmark [ ...] satisfied the requirements set forth in 
Article 14(d)".452 
10.4 Second, China alleges, in respect of government provision of land-use rights in the LWS and 
OTR investigations, that the USDOC unlawfully pres umed that private pri ces for land-use in China 
were distorted due to the significant government role in the market, and that it thus acted 
inconsistently with Article 14(d) of the SCM Agre ement when it rejected those prices as benchmarks 
and resorted instead to benchmarks based on out-o f-country prices. i.e., it failed to determine the 
adequacy of remuneration for land-use rights in re lation to prevailing market conditions in China.453 
                                                      
448 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
449 Paragraphs B.1(d)(i) and B.1(e)(i)- (iii) of the "as applied" claims in China request for establishment 
of the Panel; China first written submission, para. 468 (b ) and (e)-(g); second writte n submission, para. 315 (c) 
and (f)-(h). 
450 Both sourced directly from SOEs and purchased from trading companies.  (China first written 
submission, para. 129). 
451 See, generally, China first written submission, paras. 113-130. 
452 Id., paras. 129-130. 
453 China first written submission, paras. 302-306. WT/DS379/R 
Page 108  
 
 10.5 Third, also in connection with land-use rights, China alleges that the USDOC failed to satisfy 
the requirements of Article 14(d) in respect of the particular benchmark that it used (certain land 
prices in Bangkok, Thailand), because Thai land pr ices (and foreign land prices more generally) do 
not relate or refer to prevailing market  conditions for land-use rights in China.
454 
10.6 Fourth, China alleges, in respect of SO CB loans denominated in RMB, the USDOC's 
rejection in the OTR, CWP and LWS investigations  of Chinese RMB interest rates as benchmarks 
was inconsistent with Article 14(b), as only Chinese RMB-denominated loans are "comparable commercial" loans that the borrowers "could actually obtain" in a lending market in which they were 
able to borrow in that currency.
455 
10.7 Fifth, also concerning SOCB loans denominated in RMB, China argues that the USDOC's 33-
country regression analysis used in the OTR, CWP and LWS investigati ons to generate the 
benchmark interest rates did not represent "compa rable commercial loans" that the borrower could 
"actually obtain on the market", as the fictitious loans were not denominated in the same currency 
and, being fictitious, no borrower could "actually  obtain" these loans in any commercial market.456 
10.8 Sixth, concerning SOCB loans denominated in U. S. dollars, China alleges that by using as a 
benchmark in the OTR investigation an average annual LIBOR rate, the USDOC used a benchmark 
that was inconsistent with Article 14(b), as it did not reflect what the tire producer at issue (GTC) 
"would pay on a commercial loan" that it "could actually  obtain on the market".  That is, GTC would 
not have paid an average annual LIBOR rate, but rather the correct daily LIBOR rates for a dollar-
denominated loan of the same maturity and th e same interest rate terms as the SOCB loans.457 
B. APPLICABLE PROVISIONS OF THE COVERED AGREEMENTS  
10.9 China's request for the establishment of the Pane l included claims under both Article 14 of the 
SCM Agreement as well as under Section 15, paragr aphs (b) and (c), of China's Protocol of 
Accession.  Section 15(b) of China's Protocol of Accession contains rules pertaining to the 
determination of the existence and amount of benefit in countervaili ng duty investigations on Chinese 
products.458  Section 15(c) imposes upon importing Members the obligation to notify, inter alia , the 
methodologies that it uses pursuant to Section 15(b). 
10.10  In its submissions to the Panel, China requ ested that the Panel only make findings with 
respect to the WTO-consistency of the USDOC benef it determinations at issue under the provisions of 
Article 14 of the SCM Agreement.459, 460  China reserved its right to present arguments under 
Sections 15(b) and (c) of its Protocol in the event that the United States invoked the disciplines 
                                                      
454 China first written submission, paras. 307-319. 
455 See, e.g.,  China first written submission, paras. 233 and 238-239. 
456 Id., para. 245. 
457 Id., para. 242. 
458 See Section VII.B,  supra . 
459 The main provision of the SCM Agreement cited by China is Article 14.  China's claims under 
Articles 10 and 32.1 of the SCM Agreement and Article VI :3 of the GATT 1994 are consequential to its claims 
under Article 14. 
460 China first written submission, paras. 29-30 and footnote 8; response to Panel question 25 (first 
meeting).  Essentially, China considers that in the in vestigations at issue, the USDOC did not rely upon 
Section 15(b) as a rationale for its use of non-Chines e benchmarks, or that the USDOC considered that the 
conditions for resorting to out-of country benchmarks unde r Section 15(b) do not differ from those that apply 
under Article of the SCM Agreement.  China argues that, as a consequence, the United States may not seek to 
defend its use of non-Chinese benchmarks on a basis other than Article 14 of the SCM Agreement.  (Id.)  China further notes that the USDOC did not use a methodology notified to the WTO as would have been required 
under Section 15(c) of the Protocol.  (China first written submission, footnote 10).  WT/DS379/R  
 Page 109 
 
 
 contained therein.461  The United States indicated that, in its view, the Panel did not need to make 
findings under Section 15(b) of the Protocol of Accession.462 
10.11  In response to a specific question from the Pa nel on the issue, the United States confirmed 
that even if we were to find that the determinations  at issue are inconsistent with its obligations under 
Article 14(b) and (d), we would not, in the view of  the United States, have to evaluate whether the 
USDOC determinations nevertheless were justified u nder China's Protocol of Accession.  Conversely, 
China indicated that it is not seeking findings from the Panel under its Protocol of Accession in the 
event that we find that the USDOC determinations  are consistent with the obligations of the 
United States under Article 14 SCM Agreement.463 
10.12  In sum, neither China nor the United States is invoking the specific provisions contained in 
Section 15(b) of China's Protocol of Accession pertai ning to the application of the disciplines set forth 
under the SCM Agreement and Article VI of the GATT in countervailing duty investigations on 
imports from China.  In addition, the application of  Section 15(b) of China's Protocol of Accession in 
specific factual circumstances raises a number of inte rpretative issues that have yet to be considered 
by a panel or by the Appellate Body, and th e parties have only provided us with limited 
argumentation as to how, in their view, the terms of th is provision should be interpreted.  In light of 
these considerations, we consider it appropriate to limit our analysis of the consistency with the 
covered agreements of the USDOC's  benefit determinations to the provisions of the SCM Agreement 
invoked by China, primarily Article 14 thereof.464 
C. ORDER OF ANALYSIS OF CLAIMS  
10.13  As indicated in the above summary, the issues ra ised by China in respect of benchmarks fall 
into two broad categories.  The first category conc erns the USDOC's rejection of internal Chinese 
input prices, land-use prices, and interest rates as the benchmarks used to measure the amount of the 
benefit from SOE-produced inputs, government-p rovided land-use rights, and SOCB loans, 
respectively.  The second category concerns the be nchmarks actually used by the USDOC to measure 
the benefits from land-use rights and SOCB loans.   (As indicated, China makes no allegations 
concerning the benchmarks actually used in respect of inputs). 
10.14  Because the two broad categories are con ceptually distinct, and because we address infra our 
doubts as to whether the second category of issues is covered by our terms of reference, we first 
analyze all of the issues related to the rejection of Chinese input prices, land-use prices and interest 
rates, in the light of the requirements of Articles 14(d) and 14(b) of the SCM Agreement, respectively, 
before turning to the issues related to the benc hmarks actually used by the USDOC in the three 
investigations at issue. 
                                                      
461 China first written submission, para. 31.  Later, China confirmed its understanding that the 
United States was not invoking Section 15.  (China response to Panel question 25 (first meeting); second written 
submission, para. 53). 
462 In essence, the United States argue s that its determinations were consistent with Article 14 of the 
SCM Agreement.  We note, however, that the Un ited States also argued that it was neither necessary nor 
appropriate for the USDOC to seek to justify its de terminations on other bases than U.S. law.  ( See, e.g.,  
United States response to Panel questions 25-27 and 29 (first meeting); second written submission, para. 67).  
Later, the United States argued that China had "aban doned" its claims und er Section 15 of its Protocol of 
Accession, having made no arguments in this respect.  (United States response to Panel questions 25-26 and 31 (first meeting)). 
463 United States and China responses to Panel question 10 (second meeting). 
464 To be clear, while we mention, in our summary of its position on the interpretation of Article 14(d) 
below, the United States' arguments referencing China's Protocol of Accession (see infra , paras. 10.26 and 
10.70), we do not take these arguments into account in  our analysis of China's claims on benchmarks.   WT/DS379/R 
Page 110  
 
 10.15  Before doing so, however, we note that there ha ve been two past, closely related disputes in 
which both of these categories of issues were addressed.  We consider that these disputes provide useful background for the analyses that we are called upon to make, and we therefore start by 
summarizing the pertinent parts of those findings. 
D. R
EJECTION OF IN-COUNTRY BENCHMARKS AND RESORT TO ALTERNATIVES – THE 
SOFTWOOD LUMBER DISPUTES  
10.16  The questions of whether it is possible to rej ect private benchmarks from within the country 
allegedly providing a subsidy, and to resort to  alternative benchmarks, including out-of-country 
benchmarks, first arose in the context of governme nt provision of goods in the disputes concerning 
the United States' countervailing duty investigati ons and measures on imports of softwood lumber 
from Canada.  In those investigations, the United States had found that private Canadian stumpage465 
prices were distorted by virtue of the fact that the government was the predominant owner of the forested land, and provider of stumpage contracts, in Canada.  On this basis, the United States rejected 
private stumpage prices in Canada as the benchmar k to compare with government stumpage prices, 
and instead used certain U.S. stumpage prices as th e benchmark.  On that basis, the USDOC found 
that Canada provided st umpage for less than adequate remu neration.  Canada challenged this 
approach on the grounds that it was inconsistent with the language in Article 14(d) of the SCM 
Agreement that adequacy of remuneration is to be determined in relation to prevailing market 
conditions for the good in question "in the country of  provision" of that good.  The panels in the 
disputes concerning both the USDOC's preliminary and final investigations and determinations agreed 
with Canada, finding that Article 14(d) of th e SCM Agreement (calculation of the benefit, inter alia , 
from government provision of goods) did not permit th e rejection of in-country private prices, because 
of the language requiring that the adequacy of  remuneration be determin ed in relation to the 
prevailing market conditions "in the country of provision" of the good in question. 
10.17  The United States appealed this panel ruling in the dispute concerning the final investigation 
and determination
466, and the Appellate Body reversed that panel on this point.  First, concerning 
whether any benchmark other than private prices in the country of provision of the good in question 
can be used, the Appellate Body found that Artic le 14(d) does not require in all cases the use of 
private prices in the country of provision; rather, it found that the requirement in that provision is that 
any benchmark used must "relate or refer to, or be connected with" the prevailing market conditions 
in that country. 
10.18  Second, concerning the "very limited" circum stances under which a benchmark other than 
private prices in the country of provision can be used, the Appellate Body found that such an 
alternative benchmark can be used "when it has been  established that the private prices are distorted, 
because of the predominant role of the government in the market as a provider of the same or similar goods".
467  This was the sole issue on appeal on this poi nt.  In particular, the question as framed by the 
United States, to which the Appellate Body thus limit ed its analysis, concerned the situation in which 
"the government has such a predominant role in th e market as a provider of the goods that private 
suppliers will align their prices with those of the government-provided goods".468 
                                                      
465 Stumpage refers to the right to harvest standing timber. 
466 The panel report was circulated in document WT/DS257/R.  There was no appeal of the panel report 
in respect of the preliminary investigation and determination (WT/DS236/R). 
467 Appellate Body Report on US – Softwood Lumber IV , para. 103. 
468 Id., para. 99.  The Appellate Body stated in particular that its examination was limited to "whether 
an investigating authority may use a benchmark other than  private prices in the country of provision in th[e] 
particular situation" of "government predominance in the market, as a provider of certain goods".  (Id.).  WT/DS379/R  
 Page 111 
 
 
 10.19  We note here, however, that the panel also had found that a benchmark other than private 
prices in the country of provision of a good would  be allowable in the situations where the 
government is the sole supplier in the country of the good in question, and where the government administratively controls all of the prices for that good in that country.  In considering the issue appealed by the United States, the Appellate Body expressed "some difficulty with the Panel's 
approach of treating a situation in which the government is the sole supplier of certain goods 
differently from a situation in which the government is the predominant supplier of those goods.  In 
terms of market distortions and effect on pri ces, there may be little difference between [these] 
situations".
469  We take this to mean that the Appellate  Body did not disagree with the panel that 
rejection of in-country prices was allowable where the government is the sole supplier of the good in 
question.  Furthermore, to us this statement indicates a fortiori  that the Appellate Body had no 
difficulty with the panel's conclu sion that rejection of in-country prices is allowed where the 
government administratively controls all of the prices for the good in question. 
10.20  Concerning the sole issue on appeal in US – Softwood Lumber IV on this point, i.e., "the 
situation of government predominance in the mark et, as a provider of certain goods", the Appellate 
Body distinguished the situations where the governme nt is a "significant" supplier from that where it 
is "the predominant" supplier, noting that  "an allegation that the government is a significant  supplier 
would not, on its own, prove distortion and allow an investigating authority to choose a benchmark 
other than private prices in the country of provision".470  Rather, the Appellate Body found, "[t]he 
determination of whether private prices are distorted because of the government's predominant  role in 
the market, as a provider of certain goods, must be  made on a case-by-case basis, according to the 
particular facts" of each investigation.471 
10.21  Third, concerning the alternative benchmarks that  could be available in such situations, the 
Appellate Body agreed with the participants and th ird participants in the dispute that "alternative 
methods for determining the adequacy of remunera tion could include proxies that take into account 
prices for similar goods quoted on world markets, or  proxies constructed on  the basis of production 
costs".472  The Appellate Body emphasized that in pr oceeding in this manner, an investigating 
authority "is under an obligation to ensure that th e resulting benchmark relates or refers to, or is 
connected with, prevailing market conditions in the country of provision, and must reflect price, 
quality, availability, marketability, transportation and other conditions of purchase or sale, as required by Article 14(d)".
473  The Appellate Body noted that it was not called upon in that appeal to suggest 
particular alternative methods, nor to assess the c onsistency with Article 14(d) of all alternative 
methods suggested by the participants and third pa rticipants in the appeal , as such an assessment 
would depend on how a given method was applied in a particular case, and could not be performed in 
the abstract.474 
10.22  Finally, concerning the specific alternative method used by the USDOC, which was to use 
certain stumpage prices in the United States as  the benchmark, although the Appellate Body 
emphasized the need for considerable caution when resorting to an out-of-country benchmark, it did 
not find that the benchmark used by the United States was inconsistent with Article 14(d) by virtue of 
being an out-of-country benchmark (or on any othe r basis).  Concerning the use of out-of-country 
benchmarks in general, the Appellate Body warned that: 
                                                      
469 Appellate Body Report on US – Softwood Lumber IV , para. 100.  (emphasis added). 
470 Id., para. 102.  (emphasis added). 
471 Id.  (emphasis added). 
472 Id., para. 106. 
473 Id. 
474 Id. WT/DS379/R 
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 "prices in the market of a WTO Member w ould be expected to reflect prevailing 
market conditions in that Member; they are unlikely to reflect conditions prevailing in 
another Member.  Therefore, it cannot be presumed that market conditions prevailing 
in one Member [...] relate or refer to, or are connected with, market conditions 
prevailing in another Member [...].  Indeed, it seems to us that it would be difficult, 
from a practical point of view, for inves tigating authorities to replicate reliably 
market conditions prevailing in one country on the basis of market conditions prevailing in another country.  First, there are numerous factors to be taken into account in making adjustments to market cond itions prevailing in one country so as to 
replicate those prevailing in another country; secondly, it would be difficult to ensure 
that all necessary adjustments are made to pr ices in one country in order to develop a 
benchmark that relates or refers to, or is  connected with, prevailing market conditions 
in another country, so as to reflect price, quality, availability, marketability, transportation and other conditions of purchase or sale in that other country".
475  
(footnote omitted) 
The Appellate Body then noted that different fact ors can result in one country having a comparative 
advantage over another with respect to the provisi on of certain goods, and that necessary adjustments 
would need to be made to any out-of-country benc hmark to ensure that any resulting countervailing 
duties were used only for the purpose of offsetting a subsidy, and not for offsetting the difference in comparative advantages between the countries involved.
476 
10.23  The Appellate Body made no finding in respect of the USDOC's particular finding of market 
distortion due to the predominant role of the government as the supplier of stumpage, because the 
panel had not reached that issue, but instead had stopped its analysis once it concluded that 
Article 14(d) did not allow use of any benchmark othe r than private prices in the country of provision 
of the good. 
E. CHINA 'S CLAIMS UNDER ARTICLE 14(D) OF THE SCM  AGREEMENT – SOE- PRODUCED INPUTS  
1. Claim of China 
10.24  China claims that the USDOC's determinations to reject private prices in China for HRS 
inputs in the CWP and LWS countervailing duty investigations, and for BOPP in the LWS 
countervailing duty investigation, we re inconsistent with Article 14( d) of the SCM Agreement, as 
interpreted by the Appellate Body in US − Softwood Lumber IV .477, 478 
2. Main arguments of the Parties 
(a) China  
10.25  China argues that the prices at which private s uppliers in China sold the same inputs alleged 
to be provided by SOEs should have been used as th e "primary benchmark" in order to determine the 
adequacy of remuneration under Artic le 14(d) of the SCM Agreement.479  In addition, China submits 
that the USDOC's rejection of Chinese private prices for HRS and BOPP was inconsistent with 
                                                      
475 Appellate Body Report on US – Softwood Lumber IV , para. 108. 
476 Id., para. 109. 
477 China first written submission, para. 123; opening oral statement at the first meeting of the Panel, 
para. 42. 
478 As indicated at para. 10.1,  supra , China also raises consequential cl aims pursuant to Articles 10 and 
32.1 of the SCM Agreement and Ar ticle VI:3 of the GATT 1994. 
479 China first written submission, para. 124, citing to Appellate Body Report on US – Softwood 
Lumber IV , para. 90.  WT/DS379/R  
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 Article 14(d).  Specifically, China argues that th e USDOC did not establish that such prices were 
distorted, but, rather, used a per se  rule under which it relied exclusively on the purported 
predominance of SOEs as suppliers of the inputs co ncerned to determine that private prices in China 
for HRS and BOPP were distorted.480  This, in China's view, disregar ds the Appellate Body's decision, 
in US – Softwood Lumber IV , that distortion cannot be "presumed" but rather must be "established" 
through a factual inquiry.481  China submits that the Appellate Body in that case established 
unequivocally that the predominant role of a government in the market does not, in any circumstances, suffice to establish distortion.
482  Accordingly, China ar gues that investigating 
authorities are obliged to establish th at the predominant role of the government in a market has, in 
fact, caused private suppliers to "align their prices"  with those of the government such that "the 
government effectively acts as a 'price-sette r'" and private suppliers as "price-takers".483  To this end, 
China submits that investigating authorities must conduct an analysis of the relevant market, and 
establish the conditions under which prices were established in that market.484  China asserts that the 
USDOC, however, disregarded the evidence on the reco rd that would have established that private 
prices of HRS and BOPP in China were not distorted.485 
(b) United States 
10.26  The United States rejects China's claims and submits that the USDOC's benefit 
determinations are consistent w ith Article 14(d) of the SCM Agreement.  In particular, the 
United States argues that the Appellate Body has recognized that Article 14 provides flexibility and 
permits the use of out-of-country be nchmarks in certain situations.486  In addition, the United States 
observes that Section 15(b) of China's Protocol of Accession and paragraph 150 of the Working Party 
                                                      
480 China first written submission, para. 124; second written submission, para. 48.  For instance, China 
notes that in the CWP and LWR investigations, the USDOC rejected China's arguments – that it had an 
obligation to "look beyond the degree of state-ownership" and consider the actual nature and structure of the 
HRS industry – solely on the basis that "the govern ment accounts for a significant portion of production" of the 
HRS market.  China also submits that the USDOC's determination that it would have found private prices of 
HRS to be distorted even if it would have relied on China's data rather than on facts available further indicates 
that the "level of government ownership" was the di spositive factor in the USDOC's distortion analysis.  ( See, 
e.g., China opening oral statement at the first meeting of the Panel, paras. 37-38; response to Panel Question 13 
(second meeting)). 
481 China opening oral statement at the first meeting of the Panel, para. 40.  According to China, the 
United States has effectively conceded that it resorted to out-of-country benchmarks without conducting any 
price distortion analysis.  (China second written submission, paras. 48, 54 and 61). 
482 China cites in this regard the Appellate Body's st atement that "an allegation that a government is a 
significant supplier would not, on its own, prove distortion and allow and investigating authority to choose a 
benchmark other than private prices in the country of provision", but rather, "[t]he determination of whether private prices are distorted because of  the government's predominant role in the market", must be made on a 
"case-by-case basis".  (emphasis omitted) ( See, e.g.,  China first written submission, para. 128; second written 
submission, paras. 55-58, citing to Appellate Body Report on US – Softwood Lumber IV , para. 102). 
483 China second written submission, para. 59, citing to Appellate Body Report on US – Softwood 
Lumber IV , para. 99. 
484 Id.  China argues that in US – Softwood Lumber IV , the Appellate Body declined to complete the 
analysis, though the undisputed facts demonstrated that a single governmen t supplier in each of the Canadian 
provinces set prices administratively and held market shares for the good in question ranging from 83 to 99 per 
cent.  (Id., para. 60, citing to Appellate Body Report on US – Softwood Lumber IV , para. 115 and footnote 141). 
485 China points, in particular, to the evidence it prov ided with respect to the structure and operation of 
the HRS and BOPP markets in China.  (China first written submission, paras. 125-127). 
486 United States first written submission, paras. 18 2, 184-185, 189-190 and 193; response to Panel 
question 30 (first meeting), citing to Appellate Body Reports on Japan – DRAMs (Korea) , para. 191 and US – 
Softwood Lumber IV , paras. 92-95, 100. WT/DS379/R 
Page 114  
 
 Report confirm the permissibility of using out-of-c ountry benchmarks to measure any benefit in 
countervailing duty investigations involving imports from China.
487 
10.27  The United States argues that, based on all of the evidence on the record, the USDOC 
determined that China had a predominant role in the HRS and BOPP markets, and therefore, resorted 
to out-of-country benchmarks to measure the benefits at issue.  Thus, the United States disagrees with 
China's assertion that the USDOC determined that pr ivate prices in China were distorted by applying 
a per se  rule that only considered the degree of govern ment ownership in the input markets at issue.488  
In respect of the LWR and CWP investigations, the United States submits that China failed to provide 
necessary information regarding its control of th e HRS market and that, as a result, the USDOC 
determined on the basis of facts available that over 96 per cent of HRS production in China was 
accounted for by SOEs.  In addition, the USDOC fou nd that the private prices of HRS in China (i.e., 
four per cent of the HRS market) reflected the predominant role of the government in the HRS 
market.  The USDOC also considered the role played  by imports in the market, but determined that 
they were small relative to the state-owned producti on of HRS, representing only three per cent of the 
total Chinese HRS production.  On that basis, th e USDOC concluded that the Government of China 
had a predominant role in the market of HRS.489  Similarly, in the LWS investigation, the 
United States submits that the USDOC's analysis wa s impaired by China's failure to supply requested 
information on the percentage of government produ ction of BOPP.  The USDOC therefore relied on 
facts available to determine that one government -owned producer accounted for 90 per cent of the 
petrochemical industry and, as a result, the USDOC c oncluded that the Government of China played a 
predominant role in the BOPP market.490 
10.28  The United States further submits that, contrary to China's assertions, neither the text of 
Article 14 nor the Appellate Body report in US – Softwood Lumber IV  requires Members to perform a 
separate "price distortion" analysis before resorting to out-of-country benchmarks.  In US – Softwood 
Lumber IV , according to the United States, the Appellate  Body did not find that the Agreement 
requires a "price distortion" analysis, but, instead, he ld that where the participation of the government 
in the market is "so predominant", "it effectively determines the price at wh ich private suppliers sell 
the same or similar goods, so that the compar ison contemplated by Article 14 would become 
circular", and therefore, investigating authorities do not act inconsistently with Article 14(d) by using 
out-of-country benchmarks where they have determined that a government plays such a role.491  The 
                                                      
487 See, e.g.,  United States first written submission, para.195. 
488 See, e.g.,  United States first written submission, para. 201-202; second written submission, 84, 88-
89; response to Panel question 37 (first meeting).  To illu strate its point, the United States also submits that in 
the OTR countervailing duty investigation, although China owned a significant portion of the natural and 
synthetic rubber produced domestically, the USDOC relied  upon the investigated producers' import prices and 
domestic purchase prices as a benchmarks.  Similarly, in the CWP investigation, the USDOC relied on import 
prices of HRS in addition to world market prices.  ( See, e.g.,  United States response to Panel question 16 
(second meeting); opening stat ement at the first meeting of the Panel, para. 33). 
489 United States first written submission, paras. 215-219; second written submission, para. 84-85; 
response to Panel question, 37 (first meeting); response to Panel question 14 (second meeting). 
490 See, e.g.,  United States first written submission, paras. 221-223; second written submission, 
paras. 84, 86, 89.  The United States further indicates that the USDOC could not assess the viability of the 
private BOPP sector in China because China failed to pr ovide requested information on the size of the private 
sector.  Moreover, there was no basis upon which the USDOC could assess import data with respect to BOPP.  The applicable Chinese tariff code fo r BOPP also covered another petrochemical product, and therefore, China 
could not provide imports figures for BOPP.  Likewise, China was unable to provide domestic consumption 
figures for BOPP.  (United States response to Panel question 37 (first meeting); response to Panel question 14 
(second meeting). 
491 See, e.g.,  United States second written submission, para s. 75-76, 79; response to Panel question 36 
(first meeting), citing to Appellate Body Report on US – Softwood Lumber IV , para. 93.  The United States 
further argues that the analysis of  the Appellate Body reflects the so- called "Dominant Firm Model" according 
to which price distortion is the "resu lt" of the predominant role of a dominant firm(s) that holds a dominant  WT/DS379/R  
 Page 115 
 
 
 United States asserts that the USDOC's determin ations in the underlying investigations were 
consistent with the reasoning of the Appellate Body in US – Softwood Lumber IV .  That is, the 
USDOC determined that private pri ces in China were not "sufficiently  free" from the effects of the 
government's distortions, and therefore, could not be considered as appropriate benchmarks.492  The 
United States further emphasizes that while China improperly conflates the terms "significant" and 
"predominant", the USDOC's determinations were based on the Government of China's 
"predominant" rather than "significan t" role in the markets at issue.493 
10.29  Finally, the United States argues that, alt hough China alleges that the USDOC applied a per 
se rule, China has cited no evidence on the record  contradicting the USDOC's findings that the 
government of China owns 96 per cent of the produc tion of HRS and 90 per cent of the production of 
BOPP.  Nor, it contends, has China explained wh at other factors should have been taken into 
consideration to determine whether the government ha s a predominant role and which record evidence 
was not assessed to that effect.  Instead, the Un ited States argues, China restates the arguments it 
made during the investigations, without addressing the USDOC's determinations that these arguments 
have no bearing on whether the government played  a predominant role in the markets at issue.494 
3. Main arguments of the Third Parties 
(a) Australia 
10.30  Australia recalls the Appellate Body's findings in US – Softwood Lumber IV  that Members 
have some flexibility in the use of methodologies  for calculating benefit, provided that such 
methodologies conform with the "mandatory" guidelin es provided for in Article 14.  In this regard, 
Australia further considers that the panel's statement in EC – Countervailing Measures on DRAM 
Chips  that "the investigating authority is entitled to  considerable leeway in adopting a reasonable 
methodology" is limited to the specific circumstanc es where, in the absence of  a comparable market 
benchmark, the text of Article 14 provides no guidance on how to determine the benefit (e.g., 
Article 14(b)).  With respect to Article 14(d), Aust ralia notes that this provision permits the use of 
out-of-country benchmarks so long as investigating au thorities calculate the benefit "'in relation to'" 
the prevailing market conditions in the country of provision.495 
(b) Canada 
10.31  Canada considers that the United States' r eading of the Appellate Body's decision in US – 
Softwood Lumber IV  is erroneous.  In particular, Canada c onsiders that according to the interpretation 
of Article 14(d) of the Appellate Body in that dispute, the predominance of the government as a 
provider of goods in the market is not sufficient, in  and of itself, to establish that private prices are 
distorted and therefore unusable as benchmarks.  In  Canada's view, distortion must actually be 
demonstrated.  In this respect, Canada consider s that in the CWP and LWR investigations, the 
USDOC's determinations to reject private pri ces in China do not satisfy the requirement, under US – 
                                                                                                                                                                     
position in a market.  (United States second written submis sion, para. 78; response to Panel question 12 (second 
meeting), citing to Appellate Body Report on US – Softwood Lumber IV , para. 101). 
492 See, e.g.,  United States second written submission, para. 80. 
493 United States second written submission, footnote 100; response to Panel question 12 (second 
meeting). 
494 United States second written submission, para. 87.  For instance, the United States notes that while 
the Government of China asserted that private producers of HRS and BOPP could set their own prices, the USDOC did not determine that the Government of China sets a country-wide price for HRS and BOPP, but 
rather, that the government's predominant role in these markets distorted prices for HRS and BOPP.  
(United States first written submission, paras. 209-210, citing to Appellate Body Report on US – Softwood 
Lumber IV , para. 101). 
495 Australia third-party oral statement, paras. 19 -20; third-party response to Panel question 6. WT/DS379/R 
Page 116  
 
 Softwood Lumber IV , to establish that government predominan ce has actually distorted private prices 
in the market of the country of provision.  Cana da considers that the USDO C's determinations were 
nevertheless consistent with Section 15( b) of China's Protocol of Accession.
496 
(c) European Communities 
10.32  The European Communities agrees with the panel statement in Korea – Commercial Vessels  
that public bodies "do not constitute a reliable market  benchmark with which to asses the existence of 
benefit".  Accordingly, the European Communities considers that prices set by public bodies may not 
be considered as a relevant market benchmark as those bodies are also involved as players in the 
market concerned.  The European  Communities also considers that the observations of the Appellate 
Body in US − Softwood Lumber IV  are pertinent to the present dispute.  In particular, the European 
Communities is of the view that the fact that the government plays a predominant role in the market 
as a supplier of certain goods is lik ely to be a determining factor in ascertaining whether private prices 
can be used as benchmarks.  In the investigations  at issue, the European Communities understands 
that the USDOC's rationale to use an external benchmark was primarily based on the preponderant 
share of SOEs in China.  The European Communities considers that if it is demonstrated that private 
prices are almost fully determined by SOEs repres enting public bodies and that such prices are highly 
distorted, then an investigating authority would have  sufficient grounds to depart from the general rule 
of prices in the country of provision.  The European Communities also notes that Section 15(b) of China's Protocol of Accession provides an additional set of rules which permit the use of a benchmark 
outside China in certain circumstances and subject to certain conditions.
497 
(d) India 
10.33  India considers that the United States' use of ex ternal benchmarks must be assessed in light of 
the limitations on the use of such benchm arks expressed by the Appellate Body in US −  Softwood 
Lumber IV , notably the Appellate Body's indications th at the circumstances in which a Member may 
use benchmarks other than the private prices in the country of provision are "very limited" and that 
the price distortion analysis "must be made on a case-by-case basis, according to the facts underlying 
each countervailing duty investigation".498 
(e) Japan 
10.34  Japan considers that, consistently with the findings of the Appellate Body in US − Softwood 
Lumber IV , the question before the Panel is whether the USDOC had sufficient evidence (including 
adverse inferences) to arrive at the conclusions th at private prices of inputs in China were distorted 
and thus unavailable as benchmarks unde r Article 14(d).  Japan is of th e view that where the evidence 
on the record shows such distortion, the investig ating authority has a certain discretion to find a 
reasonable methodology but that, as indicated by the Appellate Body, this discretion is not unlimited – 
Article 14 establishes mandatory guidelines within which a benefit must be calculated.  Japan 
therefore submits that the USDOC was required to fi nd benchmarks that "related or referred to, or 
were connected with" prevailing mark et conditions in China.  In this  regard, Japan further considers 
that requiring investigating authorities to replicate such market conditions "at a level practically too 
high to comply" would ignore the balance that Pa rt V of the SCM Agreement seeks to strike – 
between the right to impose countervailing duties to o ffset injurious subsidization, and the obligations 
that Members must respect in order to do so.  Finally, Japan is of the view that although the Appellate Body has determined that "Article 14 provides a WT O Member with some latit ude as to the method it 
chooses to calculate the amount of benefit", the A ppellate Body has also acknowledged that the terms 
                                                     
 
496 Canada third-party submission, paras. 22, 27 and 29-41. 
497 European Communities third-party submission, paras. 19-24. 
498 India third-party oral statement.  (this statement contains no paragraph numbering).  WT/DS379/R  
 Page 117 
 
 
 of Article 14 do not become completely inapplicab le.  For Japan, whether investigating authorities 
may deviate from the parameters set forth in Artic le 14 depends on the facts underlying the case under 
consideration and the Panel's task  is to determine whether the evidence on the record supports the 
"reasonableness" of the benchmarks selected by the USDOC in light of the latitude given to 
investigating authorities under Article 14.499 
(f) Mexico 
10.35  Mexico considers that a benefit determination must be consiste nt with the guidelines set forth 
in Article 14, regardless of whether the benchmark used  is internal or external to the country allegedly 
granting the subsidy.  Mexico agrees with th e standard provided by the Appellate Body in US − 
Softwood Lumber IV  according to which an investigating au thority can resort to the use of out-of-
country benchmarks where private prices are distor ted because of the government's predominant role 
in the relevant market.  Thus, Mexico considers th at in determining whether the benchmarks used by 
the USDOC are WTO-consistent, the essential factor to  be analyzed is the presence or absence of 
distortions caused by the role of the Government of  China.  In this regard, Mexico considers that 
China's arguments do not address the standa rd provided by the Appellate Body in US − Softwood 
Lumber IV  and that the Panel should confirm the USDOC's  use of external benchmarks, provided that 
there was evidence that the role of the Govern ment of China in the markets in question was 
"predominant".  Mexico does not however opine as to whether the alternative benchmarks used by the 
USDOC meet the requirements set out by the Appellate Body in that case.500 
(g) Saudi Arabia 
10.36  Saudi Arabia considers that, accordi ng to the Appellate Body report in US − Softwood 
Lumber IV , Article 14(d) only permits the use of out-o f-country benchmarks in very exceptional 
circumstances (i.e., when private ma rket prices are distorted by the government's predominant role as 
a provider) and only after actual distortion of the do mestic market has been established according to 
the facts of the investigation.  According to Saudi  Arabia, presumptions based on indirect evidence or 
on theoretical economic deductions, including presumptions of distortion based on the mere fact that the government is a significant supplier or has a majo r presence in the market, ar e insufficient to meet 
this requirement.  Saudi Arabia also considers that, consistent with the Appellate Body report in that 
case, the investigating authority's discretion to choose a benchmark is limited by the mandatory 
parameters set forth in Article 14, and that therefor e the benchmark used still must "relate or refer to, 
or be connected with" the prevailing market conditi ons in the country of provision and must not be 
used to "offset differences in comparative advant ages between countries".  Saudi Arabia further notes 
that while the Appellate Body indicated that ex ternal benchmarks are theoretically alternative 
benchmarks under Article 14(d), "in practice", thei r application in a manner consistent with the 
requirements of this provision is  virtually impossible, because of the nature and extent of the 
adjustments that would be required for the exte rnal benchmark to reflect in-country market 
conditions.  Thus, Saudi Arabia c onsiders that benchmarks based on the domestic cost of production 
of the goods or services in question are the most appropriate alternative benchmark where private 
prices have been found to be distorted, and th at these benchmarks have been endorsed by the 
Appellate Body in US 
− Softwood Lumber IV  and in Canada – Dairy (Article 21.5 – New Zealand and 
US).501 
                                                      
499 Japan third-party submission, paras. 27-31; third-party oral statement, paras. 7-9; third-party 
response to Panel questions 6 and 7. 
500 Mexico third-party submission, paras. 57-60; third-party oral statement, paras. 19-20; third-party 
response to Panel question 6. 
501 Saudi Arabia third-party submission, paras. 65-71 and 73-75; third-party response to Panel 
question 6; third-party oral statement, paras. 14-15. WT/DS379/R 
Page 118  
 
 (h) Turkey 
10.37  Turkey agrees with the findings of the Appellate Body in US 
− Softwood Lumber IV  that 
investigating authorities may use out-of-country benchm arks where they have established that private 
prices on the exporting country are distorted because of the predominant role of the government.  In 
Turkey's view, by accepting the terms and conditi ons in the Protocol of Accession, China has 
confirmed its predominant role in the Chinese economy.  In this regard, Turkey  notes that the findings 
of the Appellate Body on the use of external  benchmarks related to cases in market economy 
conditions, and considers it obvious th at an investigating authority may apply external benchmarks 
when dealing with non-market economy conditions.502 
4. Assessment by the Panel 
(a) Can evidence of government predominance al one suffice to establish market distortion? 
10.38  The central legal question raised by this set of  claims is whether record evidence that the 
government was the predominant supplier of a good can be sufficient, on its own, to establish market 
distortion such that rejection of in-country priv ate prices as benchmarks would be permissible under 
Article 14(d) of the SCM Agreement.  In this rega rd, given the findings of the Appellate Body in US –  
Softwood Lumber IV to the effect that market distortion due to government predominance must be 
established on a case-by-case basis for in-country priv ate prices to be rejected, would some evidence 
in addition to the government's share of the market for the good in question always be required before 
in-country private prices could be rejected? 
10.39  We note that China takes the latter position.  China argues that for rejection of in-country 
private prices to be valid, the inv estigating authority must have de termined that the government's 
predominant role in a market has, in fact, caused pr ivate suppliers to "align their prices" with those of 
the government-provided goods "such that the gove rnment effectively acts as a price-setter and 
private suppliers as price takers".503  According to China, before an investigating authority could make 
findings in this respect, it would have to conduct an analysis of th e relevant market, and evaluate 
conditions under which prices were established in that market.504 
10.40  For a number of reasons, we read the Appellate Body report in US − Softwood Lumber IV 
differently from China.  We wish to emphasize at th e outset, however, that we share China's view that 
that report does not envisage or countenance the application of a " per se " rule, whereby in every case 
and regardless of any other evidence, the fact th at a government was the predominant supplier of a 
particular good would be a sufficient basis for re jecting private in-country prices as the benchmark. 
10.41  That said, we consider that the Appellate Body report makes clear that evidence of 
government predominance as a supplier is the principal evidence relevant to this  question.  We note in 
this regard, in particular, the Appellate Body's indication that it sees no material difference between 
the situations where the government is the predomin ant as opposed to the sole supplier of a good, and 
its implicit endorsement in that context of the pane l's finding that the latter situation, without more, 
would justify looking elsewhere than private in-count ry prices for a benchmark (as such prices would 
not exist). 
10.42  Concerning the issue of government as the predom inant supplier of the input, we note that the 
analytical justification for the possibility to reject pr ivate in-country prices in that situation is identical 
for the other two cases of government in volvement that were identified in US – Softwood Lumber IV , 
                                                      
502 Turkey third-party submission, paras. 33-35; third-party oral statement, para. 12. 
503 China second written submission, para. 59. 
504 Id.  WT/DS379/R  
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 and indeed applies a fortiori  to both, i.e., where the government administratively controls all of the 
prices for the good in the country; and where the govern ment is the sole supplier of the good in the 
country.  In particular, the Appellate Body's analysis  was that to require that private prices in the 
country be used as the benchmark whenever they exis t could give rise to situations in which there is 
no way of telling whether the recipient is "bette r off" than it otherwise would be, absent the 
government financial contribution.  That is, the Appe llate Body said, where "the government's role in 
providing the financial contribution is so predominan t that it effectively determines the price at which 
private suppliers sell the sa me or similar goods, [...] the comparison contempl ated by Article 14  would 
become circular ".505 
10.43  By the same token, where the government is the sole supplier, i.e., where there are no private 
in-country suppliers and no or negligible imports506, there would be no private prices at all, and thus 
nothing to compare with the government prices for purposes of calculating benefits.  Similarly, where the government administratively controls all of th e prices, the private suppliers' prices would not 
reflect in any way their own pricing decisions, but instead would be those established and mandated by the government, such that again, effectively, there would be no "private" prices to compare with 
the government prices. 
10.44  Returning to the situation where the government  is the predominant supplier (the situation 
that the USDOC found to exist in the investigati ons at issue before us), the Appellate Body 
emphasized that to require an effec tively circular price comparison in  such a situation is not supported 
by the objective of Article 14 which, as indicated by its title, deals with the calculation of the amount 
of a subsidy in terms of the benefit to the recipi ent.  The Appellate Body recalled its statement in 
Canada – Aircraft that "there can be no 'benefit' to the r ecipient unless the 'financial contribution' 
makes the recipient 'better off' than it would otherwise have been, absent that contribution".
507  The 
circular comparison that would result if Article 14(d) required in-country private prices even where 
the government was the predominant supplier of the good would, in the words of the Appellate Body, 
"frustrate the purpose of Article 14", as well as, "[m] ore generally, [...] the object and purpose of the 
SCM Agreement, which includes disciplining the us e of subsidies and countervailing measures while, 
at the same time, enabling WTO Members whose domestic industries are harmed by subsidized imports to use such remedies".
508  The Appellate Body noted here that if the calculation of the benefit 
yielded a result that was artificially low or even zero, as could be the case from an overly-restrictive 
interpretation of Article 14(d), then a WTO Member could not fully offset, by applying countervailing 
duties, the effect of the subsidy as permitted by the SCM Agreement.509 
10.45  Thus, we view the Appellate Body's report as underscoring the many reasons why, where the 
government is the predominant supplier of a good, being forced nevertheless always to use private 
prices in the country of provision of the good as th e benchmark would "frustrate the purpose" of both 
Article 14 and the SCM Agreement more generally.  In our view, this indicat es that the evidence of 
the government's predominance as supplier of the good is the central fact that must be established for 
a decision to depart from private in-country prices to  be valid.  While this is of course not to the 
exclusion of other evidence that may be releva nt to the question of whether the government's 
predominance as a supplier would lead to a circular price comparison in a particular investigation, we 
see the Appellate Body's report as indicati ng that evidence of predominance is the sine qua non  for 
any such decision by an investigating authority.  Similarly, we see nothing in that report that would 
                                                      
505 Appellate Body Report on US − Softwood Lumber IV , para. 93.  (emphasis added). 
506 This is the scenario evoked by the panel in US – Softwood Lumber IV .  (Panel Report on US – 
Softwood Lumber IV , footnote 135). 
507 Appellate Body Report on US – Softwood Lumber IV , para. 93 (quoting Appellate Body Report on 
Canada – Aircraft , para. 157). 
508 Id., para. 95 (quoting Appellate Body Report on US – Carbon Steel , paras. 73-74). 
509 Id. WT/DS379/R 
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 prohibit, a priori , a finding of market distortion, and a decision to depart from in-country private 
prices, where the only relevant evidence was that the government is the predominant supplier of the 
good. 
10.46  In this regard, we disagree with China that th e Appellate Body used the terms "predominant" 
and "significant" interchangeably.  In our view, the se are distinct concepts and we read the Appellate 
Body's report as treating them as such.
510  In particular, " a significant" supplier, in our view, refers to 
something smaller than " the predominant" supplier.  Furthermore, to us it is clear that being the 
largest or even the only domestic supplier in the country in question is  not at all the same as being "the 
predominant" supplier of the good in question in  the country.  In particular, the concept of 
"predominance" is in relation to the domestic ma rket as a whole for the good in question, including 
imports.  Obviously, the larger the share of imports, the lower the possibility to find that a government 
is "the predominant" supplier of the good in the country in question. 
10.47  Ultimately, as the Appellate Body stated, the decision to reject in-country prices as the 
benchmark due to the role of the government in th e market for the good in question can only be made 
on a case-by-case basis, in accordance w ith the relevant evidence in the pa rticular investigation, rather 
than in the abstract.  We thus now turn to  the facts of the investigations before us. 
(b) USDOC determination with respect to HR S inputs (CWP and LWR investigations) 
10.48  The USDOC's determinations of market dist ortion due to government predominance as a 
supplier of HRS in the CWP and LWR investigations  are identical.  We thus  conduct a single, joint 
analysis of both. 
10.49  In its final determinations in these investiga tions, the USDOC determined that because of the 
Government of China's "overwhelming" involvement  in the HRS market, private prices of HRS in 
China were not an appropriate basis of comparison  for determining whether a benefit existed.  In 
particular, the USDOC relied on facts available a nd drew adverse inferences, on which basis it 
established that 96.1 per cent of Chinese HRS production was from SOEs.511 
10.50  The final determinations recall that in the prel iminary determinations in both investigations, 
the USDOC had not relied on observed HRS prices in  China because the Government of China had 
failed to provide any requested information with regard to the HRS industry as a whole.512  Instead, 
relying on "adverse facts available", the USDOC had used world market prices from a private 
publication, "Steel Benchmarker", to preliminar ily determine whether HRS from SOEs was provided 
for less than adequate remuneration.513  The final determinations indicate that following the 
                                                      
510 In particular, the Appellate Body contrasts an allegation that a government is a " significant " supplier 
(which would not be sufficient to establish distortion) to a finding of distortion based on the government's "predominant " role.  (Appellate Body Report on US – Softwood Lumber IV , para. 102).  (emphasis added). 
511 Exhibits CHI-1, p. 11 and CHI-2, p. 4.  The USDOC considered that the Government of China had 
failed to properly disclose information as regards the ownership of CISA (China Iron and Steel Association) 
members, and therefore considered that the Government of China did not act to the best of its ability.  As a 
result, the USDOC drew adverse inferences with respect to the ownership of HRS producers in China.  (Id.).  
We note that in the present dispute, China does no t challenge the USDOC's reliance on facts available and 
adverse inferences to establish this percentage of government ownership of HRS producers.  Rather, as 
discussed in Section XVI, infra , China's facts available claim is lim ited to the USDOC's reliance on the same 
percentage to estimate the amount of the HRS purchased from trading companies by CWP and LWR producers that had been produced by SOEs. 
512 Exhibits CHI-1, p. 64 and CHI-2, p. 35. 
513 Exhibits CHI-1, pp. 11-12 and 64; and CHI-2, p. 37.  In both investigations, the USDOC used Steel 
Benchmarker prices of "hot-rolled band" which is a type of HRS that is 5 mm thick x 1200-1500 mm wide.  In 
the LWR investigation the USDOC used these prices ev en though it acknowledged that hot-rolled band could  WT/DS379/R  
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 preliminary determinations, the Government of China provided so me information concerning the 
ownership structure of the Chinese HRS industry, so that the USDOC did not simply reject in-country prices, but instead examined reco rd evidence regarding "all potential benchmark prices" to determine 
the appropriate one under the hierarchy in the U. S. law (including whether it could use in-country 
private prices).
514 
10.51  The final determinations indicate that the par ties on both sides of the investigation presented 
arguments to the USDOC as to whet her private prices could and should be used as the benchmarks.  
The applicants presented, and made arguments base d on, record evidence, to  the effect that the 
government's dominant position in the HRS market dist orted private prices.  In particular, in the CWP 
investigation, the petitioners referre d to the high level of government  ownership of the industry, and 
the market power of SOEs, as well as record ev idence that the Government of China successfully 
carried out policies to suppress domestic prices, a nd the existence of industrial policies aimed at 
enhancing the output of downstream steel-using i ndustries.  The applicants also argued that 
"substantial" record evidence indicated that Chinese prices were distorted because SOEs had 
significant market power.  In this regard, they argue d that verified record evidence supported a private 
ownership share of only 2.5 per cent of the industry, meaning that the state could act as a monopolist; 
that documentation from government agencies515 indicated that the state controlled sectors it deemed 
important to national economic performance, including the steel industry, and that record evidence for specific companies demonstrated the government's "significant influence" over the operations of 
private producers.
516  In the LWR investigation, the final de termination indicates that the applicants 
argued that they had submitted evidence that made  clear that there was not a usable market-
determined price for HRS in China.517 
10.52  In both investigations, the Government of China and the respondent companies urged the 
USDOC to look beyond government ow nership and consider the actual nature and structure of the 
HRS market.  The Government of China argued in particular that certain aspects of the market 
demonstrated that government involvement did not distort the market.  In this regard, the Government 
of China argued that:  (i) there was no single or uniform government-set price for HRS in China, and 
that SOE producers competed with one another; ( ii) the HRS industry was highly fragmented (i.e., the 
44 large-and medium-sized steel producers that repo rted their production data to the China Iron and 
Steel Association, together accounted for only 52 per cent of HRS production in China; the single largest producer only accounted for 9.6 per cent; and the five largest producers combined accounted 
for less than 30 per cent of total production and one of the five largest producers was privately-
owned); (iii) the major SOE producers operated on the basis of the same laws as private producers, 
and thus had the duty to protect their shareholders and maximize profits (noting that some SOEs had 
                                                                                                                                                                    
 
not be used to produce LWR (i.e., the wall thickness of hot-rolled band was 5 mm thick, while the wall 
thickness for LWR was less than 4 mm).  While it noted that it was not able to find another world market price 
for HRS that could be used to produce LWR, the USDOC nevertheless considered that "additional rolling would be required to produce the thinner HRS used in LWR production and, therefore, the market price for thinner 
HRS would presumably be higher".  Therefore, relying on facts available, the USDOC  determined that Steel 
Benchmarker prices were appropriate to measure the adequacy of remunera tion for state-owned HRS.  (Exhibit 
CHI-2, p. 37). 
514 Exhibits CHI-1, p. 64 and CHI-2, p. 35.  U.S. law specifies a hierarchy of "market-determined" 
benchmarks in this regard:  "(1) market prices from actual transactions within th e country under investigation 
(e.g., actual sales, actual imports or competitively run gov ernment auctions) ('tier one'); (2) world market prices 
that would be available to purchasers in the country u nder investigation ('tier two'); or (3) an assessment of 
whether the government price is consistent with market principles ('tier three')".  (Exhibits CHI-1, p. 63 and 
CHI-2, p. 35). 
515 The determination indicates that the applicants re ferred in particular to the National Development 
and Reform Commission (the "NDRC"), an d the SASAC.  (Exhibit CHI-1, p. 60). 
516 Id., pp. 56-57 and 59-61. 
517 Exhibit CHI-2, p. 34. WT/DS379/R 
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 significant shares of private ownership); (iv) th e HRS industry had increasing levels of private 
investment and encompassed significant private pr oducers; (v) the SOEs were profitable, and thus 
were unlikely to be selling for less than adequate remuneration; and (vi) a functioning HRS market 
existed in China, as evidenced by prices fluctuating from day to day, and varying across regions, with 
no clear pattern of higher or lower prices being charged by private or SOE producers.
518  T h e  
Government of China also argued that available private pricing demonstrated that there was a 
functioning market, such that private prices for HRS were not distorted and could be used as a benchmark.
519  China also urged the USDOC, if it found that private prices could not be used, to 
assess whether the prices charged by SOEs were consistent with "'market principles'" as per the U.S. 
domestic legislation.520 
10.53  In both determinations, the USDOC considered  and rejected as unpersuasive these arguments 
by the respondents.  First, the USDOC considered that the Government of China's "assertions" that 
there was no single or uniform government-set price; that the HRS industry was highly fragmented; that the SOEs behaved like private producers; that private investment in the industry was growing; and that a functioning market existed, as prices fl uctuated from day to day and varied across regions, 
did not mitigate the fact that the government accounted for 96.1 per cent of Chinese HRS production.  
The USDOC stated that "in such instances, it is reasonable to conclude that domestic prices for 
comparable goods provided from privates sources are effectively determined by the government provided prices".
521  Second, the USDOC found, the profitability of state-owned HRS producers was 
irrelevant for determining whether HRS was provided for less than adequate remuneration.522 
10.54  Thus, in its final determinations the USDOC, as it did in the preliminary determinations, 
rejected private prices in China (both from dome stic producers and from imports into China) as 
benchmarks.  In this regard, the final determinations refer first to  the 96.1 per cent share of the HRS 
produced in China that was produced by SOEs (whi ch the USDOC characterized as "the government's 
overwhelming involvement" in the HRS market in China).523  The determinations indicate that 
because of this, using private producer prices in Chin a "would be akin to comparing the benchmark to 
itself, (i.e., such a benchmark would reflect the distortions of the government presence)".524  T h e  
determinations also indicate that trade statistics showed that the import quantities of HRS were small 
relative to the Chinese domestic production, such th at unit values of imports into China were not 
sufficient to serve as reliable benchmarks.525  The USDOC considered that where the government 
accounts for a significant portion of production, privat e prices for comparable goods effectively align 
with those set by the government.  The USDOC's a ssessment in respect of the government's 96.1 per 
cent share, as noted above, was that "in such inst ances, it is reasonable to conclude that domestic 
prices for comparable goods provided from privat e sources are effectively determined by the 
government provided prices".526  Overall, the USDOC thus concluded that "prices stemming from 
private transactions within China cannot give rise to a price that is sufficiently free from the effects of 
                                                      
518 Exhibits CHI-1,pp. 58-59 and CHI-2, pp. 32-33. 
519 Exhibits CHI-1, p. 58 and CHI-2, p. 33. 
520 Exhibits CHI-1, pp. 58-59 and CHI-2, p. 33. 
521 Exhibits CHI-1, p. 65 and CHI-2, p. 36. 
522 Id. 
523 Exhibits CHI-1, pp. 64-65 and CHI-2, p. 36. 
524 Exhibits CHI-1, p. 64 and CHI-2, p. 36.  In this  context, in both determinations the USDOC cited its 
determination in its investigation of Canadian Lumber , where it had noted that "[w]here the market for a 
particular good [...] is so dominated by the presence of the government, the remaining private prices in the 
country in question cannot be considered to be independent of the government price.  It is impossible to test the government price using another price that is entirely, or almost entirely, dependent upon it.  The analysis would 
become circular because the benchmark price would reflect the very market distortion which the comparison is 
designed to detect".  (Id.). 
525 Exhibits CHI-1, footnote 212 and CHI-2, p. 36. 
526 Exhibits CHI-1, p. 65 and CHI-2, p. 36.  WT/DS379/R  
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 the [Government of China's] actions, and therefore cannot be considered to meet the statutory and 
regulatory requirement [under U.S. law] for the use of market-determined prices to measure the 
adequacy of remuneration".527 
10.55  We recall that China's legal argument, essentially , is that in these investigations the USDOC 
applied an unlawful " per se " rule whereby evidence that the government was the majority supplier of 
a good led ipso facto  to the determinations that the Chinese ma rket prices for HRS were distorted such 
that they were not suitable as benchmarks.  On the basis of the determinations, as just summarized, we 
do not view the USDOC's determinations in the sa me way.  To the contrary, given the extensive 
summaries and discussion contained in the determina tions, it is clear that the USDOC received from 
parties on both sides of the investigation, and consid ered, arguments and evidence relevant to the role 
of the government in the Chinese HRS market.  In this regard, we note that because China did not 
provide complete, verifiable information regard ing the amount of domestically-produced HRS that 
was accounted for by SOEs, the USDOC relied on "fact s available" and drew adverse inferences in 
establishing this fact.  China does not argue before us , and there is no indication in the record, that the 
Government of China provided during the investiga tion any information that demonstrated that the 
government was not the predominant supplier, and indeed the various arguments raised by the 
Government of China (which the USDOC characteri zed as based on "assertions" rather than evidence) 
were found by the USDOC not to be relevant to the question of the government's predominance as a supplier or its ability effectively to  set the prices for HRS in China. 
10.56  In this regard, we disagree with China's inte rpretation of a statement in a footnote in these 
determinations, to the effect that even if the (unverifiable) figure of approximately 71 per cent 
advanced by China as the share of Chinese HRS pr oduced by SOEs were accepted, the USDOC still 
would have found that lower figure to be a reasonabl e basis on which to conclude that private prices 
in China were distorted and thus unusable as benchmar ks.  For China, this statement confirms that the 
USDOC applied a " per se " rule.  To us, however, this is simply an indication that the USDOC would 
have considered this percen tage to be a level that could  give rise to distortion.  We see nothing in the 
USDOC's determinations that indicates that the USDO C's analysis would have stopped at that point.  
Indeed, the determinations indicate the contrary in that, although the government's share as a domestic 
supplier actually found in the investigations was much  higher than 71 per cent, the record shows that 
the USDOC obtained and analyzed a range of other in formation, including information gathered on its 
own initiative (such as that on the volume and market  share of imports).  The fact that the USDOC 
ultimately did not find that that other information led to the conclusion that government predominance 
did not distort the market provides no indication, in our view, that a " per se " rule was applied in these 
investigations. 
10.57  Finally, we consider that the USDOC's analys is and conclusions in the OTR investigation 
provide strong circumstantial evidence that the USDO C's general approach to predominance is not a 
mechanical, per se  test under which, any time the government  is "a significant" supplier, the USDOC 
mechanically concludes that private in-country prices are unusable as benchmarks.  Rather, this 
investigation was clearly based on a case-by-case analysis  of the particular facts of the investigation, 
on the basis of which the USDOC found that the domestic prices were not distorted, in spite of SOEs 
being major producers of the rubber inputs in question. 
10.58  In particular, in the OTR investigation, the USDOC found that SOE producers accounted for 
a significant portion of Chinese production of natural and synthetic rubber inpu ts.  Nevertheless, the 
USDOC decided to use as benchmarks, for the tire producers' purchases of rubber from SOEs, both 
prices of their rubber purchases from private Chin ese producers, and prices that they paid for 
                                                      
527 Id.  We note in this regard that according to the USDOC's determination, under U.S. law, "market 
prices from actual transactions" include prices from "actual sales, actual imports or competitively run 
government auctions".  (Exhibits CHI-1, p. 63 and CHI-2, p. 35). WT/DS379/R 
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 imported rubber.  In other words, the USDOC consid ered that market prices (including import prices) 
within China constituted suitable be nchmarks.  The basis for this c onclusion was the record evidence 
demonstrating the high import penetration of the Ch inese markets for the relevant goods (50 per cent 
for natural rubber and 75 per cent for synthetic rubber), and the absence of any other evidence 
demonstrating government control or distortion of these markets.
528 
10.59  The USDOC found that while SOE producers acc ounted for "a significant portion" of the 
domestic production of both categories of rubber: 
"imports of natural rubber exceed the tota l domestic production of natural rubber as a 
percentage of natural rubber consumption in the PRC.  Imports of synthetic rubber 
exceed the total domestic production of synthe tic rubber as a percentage of synthetic 
rubber consumption in the PRC.  Thus, gi ven the large penetration of imports of 
natural rubber and synthetic rubber in the PRC rubber markets and the lack of other evidence on the record to show that SO Es or government agencies through other 
methods had control of, or otherwise distorted, these markets during the POI, we do not find government distortion of the PRC rubber markets".
529  (footnote omitted) 
10.60  Thus, to relate this finding back to the reasoning of the Appellate Body in US – Softwood 
Lumber IV , it is clear based on the import penetration figures in the OTR determination that there was 
no evidence that the government was "the predominan t supplier" or otherwise controlled prices.  The 
USDOC's determination recognized this and thus re lied on the observed prices (of private suppliers 
and imports) in China as benchmarks. 
10.61  For the foregoing reasons, we find that China has not established that the USDOC acted 
inconsistently with the obligations of the United States under Article 14(d) of the SCM Agreement by 
rejecting in-country private prices in China as be nchmarks for HRS in either the CWP or the LWR 
investigations.530 
(c) USDOC determination with respect to BOPP inputs (LWS investigation) 
10.62  In the LWS investigation, the USDOC determined  that SOE involvement in the petrochemical 
industry distorted the market, and that therefore it would be inappropriate to  rely on private domestic 
input prices in China as a benchmark.531  We note that these conclusions were the result of the 
USDOC's application of facts available and adver se inferences because the Government of China did 
not provide the requested information necessary fo r determining whether domestic prices could be 
used as benchmarks, and did not act to the best of its ability.532 
10.63  In particular, the USDOC found on this basis that SOEs accounted for 90 per cent of the 
BOPP production in China and distorted the market.  The final determination indicates in this regard 
that in spite of repeated requests to the Government  of China, including at verification, to provide 
information concerning the ownership of Chinese BOPP producers, no such information was provided.  The USDOC therefore stated that "because the [Government of China] failed to provide us 
with the necessary information, we are unable to ga uge the extent of government involvement in the 
petrochemical industry which produces these three input s.  Without such information, the Department 
is unable to analyze the nature and structure of the market in order to determine whether the level of 
                                                     
 
528 Exhibit CHI-4, pp. 79-80. 
529 Id., p. 11. 
530 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
531 Exhibit CHI-3, p. 19. 
532 Id.  WT/DS379/R  
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 government ownership significantly distorts the prices for these inputs in the PRC".533  In this regard, 
the USDOC stated that because th e Government of China had failed to provide the requested 
information: 
"we have no record evidence to contravene  petitioners' allegation that SOES such as 
China Petroleum and Chemical Corporation (Sinopec), which was alleged to control 
90 percent of the Chinese petrochemical industry and produces [...] BOPP, distort the 
market.  As such, we determine in this final determination that domestic private 
prices for these inputs are distorted and not usable as benchmarks".534 
10.64  On the basis of this determination, the US DOC concluded that "prices stemming from private 
transactions within China cannot give rise to a price that is sufficiently free from the effects of the 
[Government of China's] distortions" to be used as benchmarks.535  The USDOC noted that this 
approach was consistent with its decision in the CWP investigation, where it had determined that 
because of the government's overwhelming involvement in the market for the inputs, the use of private producer prices in China would be akin to comparing the benchmark to itself (i.e., such a 
benchmark would reflect the distortions of the government presence).
536  The USDOC also cited its 
regulations as providing that "where it is reasona ble to conclude that actual transaction prices are 
significantly distorted as a result of the government's  involvement in the market, we will resort to" 
sources other than in-country private prices for benc hmarks.  The USDOC also noted that there were 
no actual, company-specific import transactions that it could consider using as benchmarks, as Aifudi 
had not imported BOPP.537 
10.65  We note that here again, China's claim is th at the USDOC unlawfully based its decision to 
reject private in-country prices as the benchmark for BOPP on a per se  test based on the government's 
share as a producer of the product.  We disagree with this characterization.  It is clear from the record 
of the investigation that China did not cooperate  with the USDOC in respect of the information 
regarding the Chinese industry producing BOPP.  In deed, the USDOC found that the Government of 
China provided none of the requested information in this regard, and before us China makes no 
representation to the contrary.  In the words of the USDOC, this left it in the situation where it had 
before it "no record evidence to contravene" the alle gations of applicants that the SOE petrochemical 
producers accounted for 90 per cent of domestic production of BOPP and distorted the market.  In 
other words, the applicants had made these a llegations, and the USDOC had requested from the 
Government of China but had not received, informat ion on the structure and operation of the Chinese 
petrochemical industry.  The USDOC thus had no ev idence to rebut the allegations that had been 
made and in addition found that the Government of China had not cooperated such that the drawing of 
adverse inferences (concerning both the government's share of production, and government distortion 
of the market) was justified.  We do not consider  that this set of facts can be construed as the 
mechanical application of a per se  test, given that it was based on the failure by the Government of 
China and the respondent companies to provide request ed or other evidence to rebut the allegations as 
to both government ownership and market distortion.  Instead we consider that this conclusion is one 
which the USDOC could lawfully r each on the circumstances of the case. 
                                                      
533 Exhibit CHI-3, pp. 69-70. 
534 Id., pp. 19-20. 
535 Id., p. 72. 
536 Id., pp. 20. 
537 Id., pp. 20 and 72. WT/DS379/R 
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 10.66  For the foregoing reasons, we find that China has not established that the USDOC acted 
inconsistently with the obligations of the United States under Article 14(d) of the SCM Agreement by 
rejecting in-country private prices in China as benchmarks for BOPP in the LWS investigation.
538 
F. CHINA 'S CLAIMS UNDER ARTICLE 14(D) OF THE SCM  AGREEMENT – GOVERNMENT -
PROVIDED LAND -USE RIGHTS  
1. Claim of China 
10.67  We now take up China's challenge to the USDOC's  decision to reject in-country prices as the 
benchmark to use for the adequate remuneration determination with resp ect to subsidies in the form of 
the provision of land-use rights.539  China's claim is that the USDOC's decisions to reject land prices 
in China as the appropriate benchmark to determin e benefit in the LWS and OTR countervailing duty 
investigations was inconsistent with  Article 14(d) of the SCM Agreement.540, 541 
2. Main arguments of the Parties 
(a) China 
10.68  China argues that the USDOC's decisions to reject land prices in China as the appropriate 
benchmark disregarded the plain la nguage of Article 14(d), as interpre ted by the Appellate Body in 
US – Softwood Lumber IV .542 
10.69  In particular, China submits that, alt hough the USDOC acknowledged that there are 
secondary markets for land-use rights in China, th e USDOC rejected  these private prices on two 
grounds:  (i) the application of a per se  rule based on its finding that the government is the ultimate 
owner of all land in China; and (ii) its finding th at property rights in China "remain poorly defined 
and weakly enforced".543  Concerning what it considers to be the USDOC's application of a per se  
rule, China argues that in US − Softwood Lumber IV  the Appellate Body rejected the notion that a 
presumption of distortion could provide a sufficient basis for resorting to out-of-country benchmarks.
544  With regard to the USDOC's characterizati on of the legal status of property rights in 
China, China alleges that there is  no basis in Article 14(d) to reject "prevailing market conditions" 
merely because they do not accord with an investigating authority's conception of how markets should 
be structured and regulated, or b ecause they are insufficiently "pure".545  China emphasizes that the 
term "prevailing market conditions" in the country of  provision, as interpreted by the Appellate Body 
in US – Softwood Lumber IV , does not refer to a "pure market", a "market undistorted by government 
                                                      
538 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
539 China's related challenge, in respect of the benc hmark actually used, is addressed in Section X.I, 
infra . 
540 See, e.g.,  China first written submission, para. 304. 
541 As indicated at para. 10.1, supra , China also raises consequential claims pursuant to Articles 10 
and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. 
542 See, e.g.,  China second written submission, para. 64. 
543 China first written submission, paras. 303 and 305; response to Panel question 34 (first meeting). 
544 See, e.g., China second written submission, para. 49; response to Panel question 34 (first meeting), 
citing to Appellate Body Report on US – Softwood Lumber IV , para. 102. 
545 See, e.g.,  China response to Panel questions 34 and 43 (first meeting).  China also argues that the 
sources relied upon by the USDOC for its Thai benchmark prices provide no indication that prices in China are 
distorted or that China is a "special case" in this resp ect, and that these sources rather contradict the USDOC's 
finding that all land prices in China are distorted.  China notes that the reports relied on by the USDOC to this effect illustrate the wide variations for land prices within China, thus, confirming that China has a functioning 
market for land-use rights.  (China response to Panel question 34 (first meeting)).  WT/DS379/R  
 Page 127 
 
 
 intervention", or to a "fair market value".546  Moreover, China submits th at the Appellate Body limited 
the possibility of using benchmarks other than in-c ountry private prices to a single situation, that 
where distortion exists due to the "government's pr edominant role in the market as provider of the 
same or similar goods".547  Thus, China argues, investigating authorities do not have carte blanche  to 
reject private prices whenever they consider "prevailing market conditions" not quite "market 
enough".548 
(b) United States 
10.70  The United States argues that China's claim is unsupported by the text of the SCM Agreement 
and China's Protocol of Accession, and therefore, shoul d be rejected.  In particular, the United States 
submits that nothing in the text of Article 14(d) suggests that land-use rights are exceptional, or that 
they should be treated differently than other goods with respect to the use of external benchmarks.549  
The United States also argues that China's position is contradicted by the "flexibility" of Article 14, which the Appellate Body has e xplained permits the use of out-o f-country benchmarks, and by the 
terms of Section 15(b) of China's Protocol of  Accession, which provides no basis to exclude 
government-provided land-use rights, but rather co nfirms the permissibility of using out-of-country 
benchmarks in countervaili ng duty investigations concerning imports from China.
550  In addition, the 
United States submits that China's restrictive in terpretation, if accepted, would eliminate the 
possibility of countervailing the subsidized provision of land-use rights, contrary to the object and 
purpose of the SCM Agreement.551 
10.71  The United States submits that the USDOC's determination to use an out-of-country 
benchmark is consistent with  Article 14(d), as interpreted by the Appellate Body in US – Softwood 
Lumber IV .  Specifically, the United States argues that, based on all the evid ence on the record, the 
USDOC determined that due to China's predominan t role in the land market, it was necessary to use 
an out-of-country benchmark to measure the benefits at issue.552  Furthermore, the United States 
submits that the USDOC did not limit its distorti on analysis to the mere fact that the Chinese 
government owns all the land in China.  Rather, the United States argues that the USDOC also found 
that China retains and exercises significant control over the supply side of the entire land market in 
China, including land-use rights for private industria l use, so as to distort prices in the primary and 
                                                      
546 China response to Panel questions 34 and 43 (first meeting), citing to Appellate Body Report on US 
– Softwood Lumber IV , para. 87. 
547 In China's view, the Appellate Body did not even suggest that other situations, such as government 
intervention in markets generally, could justify the rejection of private prices.  ( See, e.g.,  China response to 
Panel question 32 (first meeting), citing to Appellate Body Report on US – Softwood Lumber IV , paras. 93 and 
106). 
548 China opening statement at the first meeting of the Panel, para. 46. 
549 United States first written submission, paras. 272- 273.  The United States emphasizes that it is not 
necessary that goods be tradable acr oss borders for them to be covered by the Agreement, arguing that in US – 
Softwood Lumber IV  the Appellate Body noted that excluding non-tradable goods would permit the 
circumvention of the WTO's subsidies disciplines.  (Id., para. 274, citing to Appellate Body Report on US – 
Softwood Lumber IV , paras. 57, 67, 64). 
550 See, e.g.  United States first written submission, para. 2 76; opening statement at the first meeting of 
the Panel, para. 32, citing to Appellate Body Report on US – Softwood Lumber IV , para. 103. 
551 United States first written submission, para. 275.  For instance, the United States argues, China's 
position would prevent Members from measuring the benefit of land-use rights provided by the government 
since the comparison of this financial contribution to the benchmark would become circular, i.e., prices for 
government-provided land would be compared to itself.  (United States opening statement at the first meeting of the Panel, para. 31, citing to Appellate Body Report on US – Softwood Lumber IV , para. 93). 
552 The United States argues that in US – Softwood Lumber IV  the Appellate Body considered that the 
government's predominant role in the market suffices to distort private prices and to justify the use of out-of-
country benchmarks.  ( See, e.g. , United States second written submission, para. 80; response to Panel 
question 44 (first meeting), citing to Appellate Body Report on US – Softwood Lumber IV , para. 93). WT/DS379/R 
Page 128  
 
 secondary markets.
553  Thus the United States submits that  contrary to China's assertions, the 
USDOC's determination was not based on a finding th at market conditions were insufficiently "pure", 
but rather on a finding that the land market in China had significant distortions from the government's predominant role in the market.
554  In addition, the United States rejects China's argument that, 
because there is a differentiation in pricing for land-use rights in China, it has an undistorted 
"functioning market".  The United States submits that uniform pricing in China was not a basis for the 
USDOC's findings that China had a predominant role in the land market.555 
3. Main arguments of the Third Parties 
(a) Australia 
10.72  Australia considers that nothing in the SCM Agreement supports the argument that the 
provision of land should be treated differently from the provision of other goods under Article 14(d).  
Consistently with the interpreta tion of the Appellate Body in US – Softwood Lumber IV , Australia 
notes that the term "goods" has been given a br oad meaning under Article 1.1(a)(1)(iii) of the 
Agreement to include immovable property.556 
(b) European Communities 
10.73  The European Communities recalls that, consiste nt with the observations of the Appellate 
Body in US − Softwood Lumber IV , investigating authorities may use out-of-country benchmarks if 
they find that prices in the relevant market are distorted.557 
(c) Mexico 
10.74  Mexico recalls that the Appellate Body found in US − Softwood Lumber IV  that resorting to 
out-of-country benchmarks in the case of the provis ion of land is consiste nt with Article 14(d) 
provided that benchmark used "relates or refers to, or is connected with" prevailing market conditions 
of the country of provision.558 
(d) Saudi Arabia 
10.75  Saudi Arabia agrees with China that the u se of external benchmarks is especially 
inappropriate with respect to financial contri butions in the form of the provision of land, inter alia , 
because the value of land is determined not only by its physical characteristics, but also by the legal 
system in which the land exists.559 
                                                      
553 See, e.g.,  United States second written submission, paras. 105-106; response to Panel question 42(b) 
(first meeting). 
554 The United States also disagrees with China's assertion that factors other than the government's 
predominant role in the market cannot justify rejecting in-country prices as benchm arks.  The United States 
submits that the Appellate Body in US – Softwood Lumber IV  did not address and, therefore, did not exclude the 
possibility that other types of government intervention w ould also distort the market so as to render private 
prices unreliable.  ( See, e.g.,  United States second written submission, paras. 81-82 and 107). 
555 The United States adds that the fact that prices differ is not dispositive of whether the government 
has a predominant role in the market.  (Unite d States second written submission, para. 108). 
556 Australia third-party oral statement, para. 21. 
557 European Communities third-party submission, para. 47. 
558 Mexico third-party response to Panel question 6. 
559 Saudi Arabia third-party submission, para. 77.  WT/DS379/R  
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 4. Assessment by the Panel 
10.76  In the LWS and OTR investigations, the USDOC determined that China's provision of land-
use rights to investigated producers (Aifudi and Starbright) for less than adequate remuneration 
constituted a countervailable subsidy.  In this context, the USDOC determined that it could not use an 
in-country benchmark for government-provided land-use rights because Chinese land prices were 
distorted by the significant government role in th e market that prohibited private land ownership in 
China and resulted in all land being owned by some  level of government.  The USDOC indicated in 
this regard that it had verified that all ur ban land was state-owned (owned by the national 
government), and that all rural land was collectivel y-owned (owned by the local government), i.e., 
that the government, either at the national or lo cal level, was the ultimate owner of all land in 
China.560 
10.77  We note here that, on the basis of the reas oning of the panel and the Appellate Body in US – 
Softwood Lumber IV , the USDOC's finding that the government was the sole supplier of the good in 
question might have been sufficient for a conclusi on by the USDOC that it could not use in-country 
prices for land as the benchmark.  We do not cons ider, however, that in fact the USDOC based any 
conclusion as to the availability of in-country benc hmarks directly on the government's degree of 
ownership of the land or the general fact that it was significantly involved in the market as a provider 
of land-use rights, as such.  To the contrary, these were cited as facts describing the nature of the 
government's significant involvement in the land- use market, which then was further analyzed. 
10.78  In particular, the USDOC did not stop with these statements but instead continued its 
analysis, gathering, assessing and verifying a wide variety of information as to land-use pricing in 
China, aimed at determining "whether the […] [G ]overnment [of China] exercises control over the 
supply side of the land market in China as a whole so as to distort prices in the primary and secondary 
markets".561  In this regard, the USDOC found that g overnment authorities controlled, albeit on a 
decentralized basis, the supply and allocation of  land that could be used by non-state-owned 
enterprises for non-agricultural purposes, and that the restrictions imposed extended the control by the 
government to the secondary in addition to the pr imary market.  The USDOC further found that this 
control significantly distorted the price paid fo r the granted land-use rights in both primary and 
secondary markets, and that land-use prices in China were not set in accordance with market principles.
562 
10.79  In this connection, the USDOC found that notw ithstanding the legal reforms implemented by 
China, agricultural land-use rights remained limite d in scope and were poorly defined and weakly 
enforced, such that land-use rights of farmers in Ch ina still were not secure and their right to alienate 
their land was severely restricted.  Local governments had often exercised broad and unrestricted powers to expropriate land from farmers and had given them only partial compensation for such 
expropriation.  Further, agricultural land could be so ld for non-agricultural use only if its legal status 
was first changed from "collective land" to "sta te-owned land", and the power to effect that 
conversion rested solely with local governments.
563  The supply of land for non-agricultural use in the 
                                                      
560 Exhibits CHI-3, p. 58 and CHI-50, pp. 71368-71369. 
561 See, e.g. , Exhibit CHI-3, p. 58. 
562 Id., pp. 15-17 and 58-59; and Exhibit CHI-50, p. 71369. 
563 Exhibits CHI-34 p. 67907 and CHI-50, p. 71369.  In the Antidumping Duty Investigation of Certain 
Lined Paper Products from the People's Republic of China  (the "Lined Paper investigation"), the USDOC noted 
that the status of agricultural land could only be chan ged after it had been expropriated.  Therefore, local 
governments acted in the dual roles of owners of the agri cultural land and as representatives of the state, and as 
such, could expropriate land from farmers, convert it in to state-owned land, and thereafter sell the land-use 
rights to private enterprises.  ( Antidumping Duty Investigation of Certain Lined Paper Products from the 
People’s Republic of China ("China") − China's status as a non-market economy ("NME") , Exhibit US-69, 
p. 42). WT/DS379/R 
Page 130  
 
 primary and secondary markets furt her depended, in part, on the "allocated" land-use rights which 
were provided to SOEs on a purely administrative b asis:  the government allocated land-use rights to 
SOEs for a nominal one-time charge  and annual fee.  "Allocated" land- use rights were transferable for 
commercial purposes only if they were first converted  into "granted" land-use rights.  The power to 
convert "allocated" land-use rights into "granted" land  use rights (and therefore, the land available to 
private enterprises for commercial use) rested solely with the government.
564  The USDOC also found 
that some SOEs illegally (without first converting their land-use rights as required) had used their 
allocated land-use rights in order to attract forei gn investments.  Consequently, the USDOC found, the 
conversion of land from "allocated" to "granted" was not a pro forma  process.565 
10.80  The USDOC further determined that China's gove rnment control of the land market distorted 
the prices of "granted" land-use rights in both the primary and secondary markets.566  Although noting 
that the Government of China had implemented certa in land reforms in order to increase transparency 
and competitive market conditions, the USDOC dete rmined that these reforms had not been fully 
implemented – i.e., that there was a wide divergence between the de jure  reforms and their de facto  
implementation.567  Specifically, it found that land-use right s were still transferred via "closed-door" 
negotiations and not via public auc tions, tenders or listings as required by law.  Therefore, the 
USDOC determined that the Government of China reta ined a predominant role in the land market and 
that this control distorted the supply and pricing of land-use rights in China, such that private prices in 
China were not an appropriate basis of compar ison for determining whether a benefit existed.568 
10.81  Given all of these findings, we also disagree w ith China that the USDOC's determinations 
were based simply on a finding that land-use right s were limited in scope and weakly enforced.  
While this was among the USDOC's characterizations  of certain aspects of the land-use market in 
China, it is by no means the entirety of the USDOC's analysis or determinations.  To the contrary, we 
are satisfied that the USDOC conducted an extensiv e analysis of the land-use market in China.  
Before us, the only specific record  evidence that China points to is the "existence" of a secondary 
market, which it argues the USDOC "rejected" as a source for benchmarks.569  We note, however, as 
indicated, that the USDOC's inquiry was not whether there was a secondary market, but whether the 
evidence showed that prices in th at market were distorted.  The USDOC found that the evidence 
indicated that those prices were distorted, and befo re us China points to no  record evidence to the 
contrary. 
10.82  For the foregoing reasons, we find that China has not established that the USDOC acted 
inconsistently with the obligations of the United States under Article 14(d) of the SCM Agreement by 
rejecting in-country land-use prices in China as be nchmarks for government-provided land-use rights 
in the LWS and OTR investigations.570 
                                                      
564 Further, the USDOC noted that enterprises could also purchase "granted" land-use rights directly 
from the government, and therefore determined that such purchases were government-controlled.  (Exhibit CHI-
34, p. 67907). 
565 Exhibit CHI-34, p. 67907. 
566 As an example, the USDOC noted that if farmer land-use rights were well-defined and effectively 
enforced, there would be less land available for non-agr icultural use and therefore higher prices for granted 
land-use rights.  (Id.). 
567 Exhibits CHI 3, p. 16 and CHI-50, pp. 71368-71369. 
568 Exhibits CHI-3, pp. 16 and 59; CHI-34, pp. 67907-67908; CHI-50 p. 71369. 
569 China response to Panel question 34 (first meeting). 
570 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra .  WT/DS379/R  
 Page 131 
 
 
 G. CHINA 'S CLAIMS UNDER ARTICLE 14(B) OF THE SCM  AGREEMENT – GOVERNMENT 
PROVISION OF PREFERENTIAL LENDING  
1. Claims of China 
10.83  In the CWP, LWS and OTR investigations, the USDOC determined that China provided 
subsidies to producers of the investigated produc ts in the form of RMB-denominated loans by 
SOCBs.  In addition, in the OTR investigation, th e USDOC determined that one of the investigated 
producers, GTC, received subsidies in the form of U.S. dollar-denominated loans from SOCBs. 
10.84  In the three investigations at issue, the USDOC found that lending rates in China were 
significantly distorted, and therefore unsuitable as market benchmarks.571  For this reason, the 
USDOC resorted to external benchmarks to determine whether loans from SOCBs conferred a 
benefit.572  According to the USDOC, the use of external benchmarks was consistent with its past 
practice.573 
10.85  Before us, China challenges, as inconsistent with Article 14(b) of the SCM Agreement, the 
USDOC's decision to reject Chinese in-country interest rates, and to resort to external benchmarks, for 
calculating the existence and amount of any be nefit from SOCB-provided loans denominated in 
RMB.574  China makes no such claim in respect of th e USDOC's decision to reject Chinese in-country 
interest rates and resort to external benchmar ks for calculating the exis tence and amount of any 
benefit from SOCB loans denominated in U.S. dollars .  In respect of both RMB- and U.S. dollar-
denominated loans, China also ch allenges the specific benchmarks u sed by the USDOC.  The issues 
concerning the specific loan benchmarks are discussed in Sections X.J and X.K,  infra . 
2. Main arguments of the Parties 
(a) China 
10.86  China argues that the USDOC's decision to reject  interest rates in China as benchmarks for 
the RMB loans was inconsistent with the requirement s in Article 14(b) of the SCM Agreement.  In 
particular, China alleges that under Article 14(b)  the benchmark for determining whether a loan 
provided by the government confers a benefit is a "comparable commercial loan that the firm could 
actually obtain on the market", and that a benchmar k can meet these criteria only if it is denominated 
in the same currency as the government-provided loan.575  China argues that because interest rates 
differ by currency, loans denominated in different currencies cannot be "comparable".  According to 
China, a comparison involving loans in different cu rrencies will necessarily measu re the "factors that 
cause interest rates to be different in different currenc ies", rather than the exte nt to which the recipient 
of the government-provided loan is "be tter off" as required by Article 14(b).576  In addition, China 
considers that the "market" in which a firm can "actually obtain" a "comparable" loan will depend 
                                                      
571 Exhibits CHI-1,p. 6; CHI-3,pp. 11 and 83; CHI-4, pp. 7 and 104. 
572 Exhibits CHI-1, pp. 6-7; CHI-3, p. 83; CHI-4, pp. 104-105. 
573 The USDOC cited its previous findings in Softwood Lumber from Canada ; CFS from the PRC ; and 
CFS from Indonesia , where it had resorted to out-of-country benchmarks.  ( See, e.g.,  Exhibits CHI-1, p. 7; CHI-
3, p. 83; and CHI-4, pp. 7 and 104-105). 
574 As indicated at para. 10.1,  supra , China also raises consequential cl aims pursuant to Articles 10 and 
32.1 of the SCM Agreement and Ar ticle VI:3 of the GATT 1994. 
575 China first written submission, para. 233; oral statement at the first meeting of the Panel, paras. 50-
51; second written submission, para. 77. 
576 China, second written submission, paras. 76-77, citing to Appellate Body Report on Canada – 
Aircraft , para. 157. WT/DS379/R 
Page 132  
 
 upon the characteristics of the loan, including the currency in which it is denominated.
577  Thus, China 
submits that because the RMB can only be borrowed in the Chinese market, the USDOC was required 
to identify "comparable commercial loans"  as benchmarks within this market.578  China argues that 
despite the existence of such lo ans in the Chinese market, the US DOC unlawfully rejected them on 
the ground that China's "predominant role in the banking sector results in significant distortions that 
render lending rates in [China] unsuitable as market benchmarks".579 
10.87  China disagrees with the United States that the Appellate Body's interpretation of 
Article 14(d) in US – Softwood Lumber IV  is relevant to the question of interest rates under 
Article 14(b).  Even accepting arguendo  that the concept of "distortion" as discussed by the Appellate 
Body in that case had some relevance in the c ontext of interest rates under Article 14(b), China 
submits that, consistently w ith the Appellate Body's findi ng, the benchmark selected under 
Article 14(b) would still need to be based on "a comparable commercial loan which the firm could 
actually obtain on the market".580  China also submits that none of the factors of government control 
and intervention on which the United States seems to  base its distortion rationale (i.e., government 
ownership of banks, government re gulation of deposit and lending ra tes, and government actions to 
influence the direction of interest rates) ca n plausibly support the USDOC's disregard of the 
requirements of Article 14(b).581 
10.88  China argues, first, that interest rates are a direct consequence of the monetary policies 
pursued by governments, and that as a consequence, the interest rates set by governments affect the 
commercial interest rates charged by all banks, regardless of their level of state ownership.582  In fact, 
China argues, the record evidence demonstrates that  all interest rates in China, including those 
charged by non-state owned banks, are affected by the efforts of the central bank to curb monetary 
expansion through the setting of interest rates, rather than by the extent of th e government's ownership 
of banks.583  Thus, in light of the direct relationship between interest rates and national monetary 
                                                      
577 China second written submission, para. 83; response to Panel question 18 (second meeting).  In 
support of its position, China relies on the Appellate Body's finding in US – Upland Cotton  that the geographic 
scope of the relevant "market" will "depend on the product  itself and its ability to be traded across distances". 
Consistently with this interpretation, China adds that  factors such as the curr ency in which a loan is 
denominated, the borrower's creditworthiness, and the re gulatory factors affecting the ability of borrowers and 
banks to operate across national borders are all relevant to determine the geographic "market" under Article 14(b).  China therefore disagrees with the United States that there is a "wor ld market" for lending, and 
adds that neither the United States, nor the USDOC have provided any evidence that the relevant "market" for 
RMB-denominated loans is anything "other" than China's lending market.  ( See, e.g.,  China first written 
submission, paras. 237-239; comments on the United States ' response to Panel question 17 (second meeting), 
citing to Appellate Body Report on US – Upland Cotton , para. 405). 
578 China first written submission, para. 239.  China fu rther submits that, as also acknowledged by the 
USDOC, the mere fact that a bank is wholly or partially owned by a government does not mean that loans by 
that bank are not "commercial".  That is, a benchmark loan is "commercial" if it is made by a bank in the ordinary course of commerce.  (Id, para. 235). 
579 See, e.g.,  China oral statement at the firs t meeting of the Panel, para. 51. 
580 China first written submission, paras. 247-248;  second written submission, paras. 88-92. 
581 See, e.g.,  China first written submission, paras. 249, 264, 273. 
582 Id., paras. 255-256, 261; second written submission, paras. 98-102; oral statement at the first 
meeting of the Panel, para. 54.  China refers in this co ntext to an expert report (which was prepared for and 
submitted in the CVD investigation), stating that government  intervention in credit markets to affect the level of 
interest rates is a widespread tool of monetary policy,  (China first written submission, para. 256, referring to 
Exhibit, CHI-81, para. 7). 
583 China explains that the main tool used by its centr al bank (the PBOC) to di rect commercial interest 
rates is a system of benchmark rates under which all commercial banks in China may not extend loans at less 
than 90 per cent of the prevailing benchmark rate applicable  to the loan in question, and that as the PBOC raises 
or lowers the benchmark rates, it affects the rates at which commercial banks lend to borrowers.  (China first 
written submission, para. 261).  WT/DS379/R  
 Page 133 
 
 
 policies, China submits that the United States' implicit analogy that government ownership of 
financial institutions is akin to the "'role of the go vernment in the market as a provider of the same or 
similar goods'" is unfounded.584  Moreover, China alleges that the USDOC's presumption that all 
loans by state-owned commercial banks in China are made on non-commercial terms, merely by 
virtue of state ownership, contradicts the USDOC finding of specificity in respect of the alleged 
subsidy.  In particular, China submits that by  rejecting all SOCB loans as benchmarks, the USDOC 
has implicitly found that "all" such loans were "made on non-commercial terms", and that therefore 
the alleged subsidy could not be specific because it would benefit every borrower in China.585 
10.89  Second, China disagrees with the United States ' assertions that China's banking regulatory 
system, particularly the fact that China maintains a deposit rate cap and a lending rate floor, distorts 
lending rates or that it is different from what are c onsidered "traditional" regulatory controls.  China 
submits that these are ordinary features of bank re gulatory systems and that the United States does not 
dispute this.  In addition, China argues that nothing in Article 14(b) allows investigating authorities to 
disregard the applicable benchmark set forth th erein based on the subjective understanding that a 
banking regulation system is "traditional" or "unt raditional", or to second-gu ess the correctness of 
banking regulations imposed by Members.586 
10.90  Third, in regard to the government intervention in  setting interest rates, China submits that it 
is undisputed that governments all over the world set  interest rates for thei r currencies, and that 
therefore the whole premise of the USDOC's rati onale for rejecting Chinese interest rates as 
"distorted" is invalid.  For China, there are no inte rest rates that are "undistorted" by government 
"control" and "intervention", and as such, government "distortion" of interest rates cannot provide a 
basis for disregarding the requirements of Article 14(b), even if there were any lawful basis to do 
so.587 
10.91  China disagrees with the United States' argument that given the lack of commercial loans in 
China the USDOC would have been unable to measure the benefit at issue had it applied Article 14(b)  
verbatim .  China submits that, according to the record  evidence, there are plenty of "comparable 
commercial loans" in China that provide an a ppropriate benchmark as required by Article 14(b).588  In 
addition, China considers that becau se prevailing interest rates are determined by government action, 
the problem of circularity referred to by the Appellate Body in US – Softwood Lumber IV does not 
arise in the case of interest rates.  Specifica lly, China argues that, unlike the situation in US – 
Softwood Lumber IV , it is the government's role "as a government" – rather than as a provider of the 
financial contribution – that affects prevailing inte rest rates and therefore the applicable benchmark 
                                                      
584 China first written submission, paras. 263-264; second written submission, para. 102.  China argues 
that even if such analogy had any basis, the United States' ownership argument would amount to the same per se  
test for "distortion" that the Appellate Body has already rejected in respect of Article 14(d).  China adds that 
such a per se  test is even more inappropriate in the context of  Article 14(b), since the government's role as a 
provider of a financial contribution is unrelated to the factors that determine interest rates, and the USDOC in fact identified no evidence indicating that state owne rship in commercial banks had any bearing upon the 
direction of interest rates.  (Id., paras. 270-271; second written submission, para. 102). 
585 China first written submission, footnote 223. 
586 Id., para. 272; second written submission, paras. 105-106, 110; response to Panel question 41 (first 
meeting). 
587 China second written submission, paras. 111-112. 
588 Id., para. 115.  For instance, China argues that the "big four" SOCBs are among the largest 
commercial banks in the world, are traded on international stock exchanges, and have attracted strategic 
investments from major international financial institutions.  China adds that other commercial banks in China, which have either minority state ownership or no state ownership, are also traded on stock exchanges and have 
domestic and overseas investors.  (Id., paras. 116-117). WT/DS379/R 
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 under Article 14(b).
589  Therefore, China submits, when an investigating authority compares the 
interest rate of a government-provided loan to preva iling national interest rates, it is not comparing the 
government-provided loan to itself, but rather, to the interest rate conditions that affect all commercial 
lenders in that market.  China also argues that this  comparison is consistent with the notion of benefit 
under Articles 1 and 14 of the SCM Agreement.  That  is, a borrower would be "better off" only if it 
obtains an interest rate on a government-provided loan th at is lower than the interest rate that it would 
have paid on a comparable commercial loan under prevailing interest rate conditions.590  Thus, 
according to China, it was entirely possible to appl y Article 14(b) to government-provided loans in 
China in order to determine whether the recipi ent was better off as a result of the financial 
contribution at issue.591 
10.92  China rejects the "access to credit" argumen t advanced by the United States during the 
proceedings in this dispute.  China argues that th e United States' argument – that the "benefit" of the 
alleged "policy lending" subsidy is  the mere "access to credit", even if the credit is provided at 
prevailing interest rates – amounts to an impermissible ex post  rationalization, since it bears no 
relationship with the "benefit" that the USDOC ac tually purported to measure, i.e., the difference 
between interest rates in China and the benchmarking interest rates.592  In any event, China submits 
that "access to credit", on its own, does not confer a benefit under Article 14(b).  For China, "access to 
credit" at ordinary commercial interest rates coul d provide a benefit only if the firm receiving the 
government-provided loan could not "actually obtain" a comparable loan from a commercial bank because of its credit status.  The record evidence does not indicate th at companies in China could not 
"actually obtain" loans from non-SOCBs in th e absence of the alleged "policy loans".
593 
10.93  Finally, China points to the broader systemic im plications of the issue before the Panel.  
According to China, the rationale used by the USDOC  to reject interest rates in China as benchmarks 
could open the way for WTO Members, through th eir countervailing duty laws, to judge other 
Members' sovereign monetary policy.594 
(b) United States 
10.94  The United States rejects China's arguments and submits that the USDOC's determination to 
use out-of-country interest rates was consistent with Article 14(b) of the SCM Agreement.  In 
particular, the United States argues that, based on all of the evidence on the record, the USDOC 
determined that not only did China have a predominan t role in the lending market as an owner of the 
                                                      
589 China notes that in US – Softwood Lumber IV  the Appellate Body was concerned with the situation 
in which "the government's role in providing the financial contribution  is so predominant that it effectively 
determines the price at which private suppliers sell the same or similar goods, so that the comparison contemplated by Article 14 would become circular".  (emphasis as added by China)  (China response to Panel 
question 34 (first meeting), citing to Appellate Body Report on US – Softwood Lumber IV , para. 93). 
590 China second written submission, para. 100; citing to Appellate Body Report on Canada – Aircraft , 
para. 157; response to Panel question 34 (first meeting). 
591 China second written submission, paras. 120-121.  In  particular, China submits that it is consistent 
with Article 14(b) to compar e the interest rate on a government-provided loan in China to the PBOC benchmark 
rate.  In China's view, there is nothing "circular" in this  comparison, as it is a comparison of the interest rate on 
the government-provided loan to the interest rate conditio ns that affect all borrowers of comparable commercial 
loans in the same market.  (Id.). 
592 Id., para. 122; oral statement at the first meeting of the Panel, paras. 11-12, citing to the Appellate 
Body Report on US – Softwood Lumber IV (Article 21.5 – Canada) , para. 93. 
593 China second written submission, paras. 125-130. 
594 China first written submission, paras. 273-275; oral statement at the second meeting of the Panel, 
para. 47.  WT/DS379/R  
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 majority of banks in China, it also directly cont rolled interest rates through its regulations of the 
market, thereby distorting loan rates in China.595 
10.95  The United States disagrees with China's argument that "[a]ll interest rates are distorted by 
government intervention", arguing that China's inte rvention in the lending market is significantly 
different from that of most other governments.  Fo r the United States, the mechanism of having both a 
floor on lending rates and a cap on deposit rates re nders China's regulation different from a typical 
government lending market regulation, and ensures that banks in China earn considerable profits 
through lending at or near the floor rate.596  Accordingly, the United  States argues, the USDOC's 
determination to reject in-country interest rat es as a benchmark was not based only on China's 
intervention in the banking sector, but also on the extent and nature of its intervention and the 
resulting distortion in the lending market.597  The United States therefor e rejects China's assertions 
that the USDOC rejected Chinese lo an rates because they were not "fully" market-based, or that the 
USDOC presumed that all loans by SOBCs were ma de on non-commercial terms, merely by virtue of 
state ownership.598 
10.96  Likewise, the United States maintains that th e USDOC's concern was not to judge China's 
monetary policies and/or to determine whether China's direct control over interest rates was 
traditional.  Rather, the United States submits, the USDOC determined, consistently with the 
reasoning of the Appellate Body in US − Softwood Lumber IV , whether such control created distortion 
in the Chinese lending market.599  In fact, the United States argues,  the USDOC evaluated the extent 
to which China's invasive control over interest rates distorted the lending market, such that it was 
inappropriate to rely upon any in-country interest rates as benchmarks.600  The United States also 
                                                      
595 United States first written submission, para. 230; second written submission, paras. 80-81; opening 
statement at the second meet ing of the Panel, para. 29.  The United States notes that in determining that the 
lending rates in China were unsuitable as market benc hmarks, the USDOC relied on the reasoning it had applied 
in the previous investigation of CFS Paper , where the USDOC concluded that China's intervention in the 
lending market distorted that market.  The USDOC's finding s relied largely upon three major factors:  (i) China's 
banking sector remained almo st entirely state-owned; (ii) there was ex tensive government regulation of interest 
rates; and (iii) foreign bank lending in China was subjected to the same distortions as domestic bank lending. 
(United States first written submission, para. 236).  The United States observes that China does not contest the 
facts upon which the USDOC relied, e.g., the fact that it ow ns the majority of the banking sector or the fact the 
Chinese banks are still operating on no n-commercial basis.  (United States second written submission, para. 91). 
596 United States first written submission, para. 240; second written submission, para. 92.  The 
United States indicates that China ensures that its banks earn a profit on "each" loan by (i) capping the deposit 
rate below the interest rate floor and (ii) preventing competition among banks for savers' capital.  The 
United States adds that China's policies further provide savers' few investment options beyond depositing their 
savings with the banking system.  (United States second written submission, para. 92). 
597 The United States observes that while China does not contest the USDOC's factual findings 
regarding its regulations in the lending market, its indication that "most commercial borrowers in China obtain interest rates of loans [...] that fall somewhere between the interest floor and the benchmark itself" confirms the 
distortion provoked by these regulations in the lending market.  For the United States, the marginal difference 
between such interest rates is due to the fact that bank s can lend at the floor rate and are still ensured a profit, 
and therefore, the interest rates are not at the level they otherwise would be absent these controls.  (Id., para. 93). 
598 United States first written submission, paras. 201-202, 235. 
599 United States second written submission, pa ra. 96, citing to Appellate Body Report on US – 
Softwood Lumber IV , para. 101; response to Panel question 41 (first meeting).  The United States indicates that 
in the OTR investigation the USDOC refrained from judging China's monetary policies as it rejected arguments 
made by domestic producers that "China had monetary policies that distorted the inflation rate and, therefore, Commerce should not adjust for inflation in its lending benchmark."  ( See, e.g.,  United States second written 
submission, footnote 161). 
600 Id., para. 96.  The United States rejects China's argument that the Appellate Body's recognition of 
the possibility of resorting to out-of-co untry benchmarks is limited to Article 14(d), arguing that the "Dominant 
Firm" theory applies equally to the lending market.  (Id., para. 95). WT/DS379/R 
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 submits that China's position would require the use of  loans distorted by the government's intervention 
as benchmarks and that this position is at odds with prior panel and Appellate Body findings.
601 
10.97  The United States also disagrees with China that the terms "comparable" and "actually obtain 
on the market" in Article 14(b) require that the benchmark be denominated in the currency of the 
government-provided loan.  The United States submits  that nothing in Article 14(b) requires the use 
of a benchmark loan denominated in any particular  currency, and that such an outcome would be 
incongruous with the flexible nature of Article 14 of the Agreement which, as the Appellate Body has 
explained, permits the use of  out-of-country benchmarks.602  The United States adds that while this 
flexibility is confirmed by China's Protocol of Accession, China's interpretation would exclude all 
RMB lending from the scope of that provision, and th ere is no basis in the text of the Accession 
Protocol for such an exclusion.603  According to the United States, China's interpretation is also 
inconsistent with the object and purpose of the SCM Agreement, since it would prevent Members 
from fully offsetting the effects of a subsidy.604 
10.98  The United States submits that the term "market" is not qualified in Article 14(b), and that the 
context of Article 14 suggests that the relevant "marke t" is not limited to the country of provision.  In 
this regard, the United States observes that while  Articles 14(a) and (d) refer to a geographical 
indicator, no geographic specification is reflected in  Article 14(b).  The United States also notes that 
although Article 14(d) contains a geographical indicat or, the Appellate Body found that Article 14(d) 
does not bind investigating authorities to select onl y in-country benchmarks when the government has 
a predominant role in the market.  Therefore,  the United States submits, there is no basis for 
interpreting Article 14(b) as imposing a more restrictive "geographical limitation" than 
Article 14(d).605  Nor does the term "market" in Article 14(b) require or exclude the possibility of a 
national market or a world market for lending.606 
10.99  Finally, the United States submits that the term "market" in Article 14(b) must not be read in 
such a way as to require the use of benchmark loan s distorted by government predominance and other 
interventions, as such an interpretation would eff ectively eliminate the word "commercial" from the 
term "comparable commercial loan", and would in some cases imply a circular benefit comparison.  
In addition, the United Sates argues that in EC – Countervailing Measures on DRAM Chips  the panel 
recognized the difficulties that investigating author ities face in measuring the benefit of government-
provided loans, finding that investigating authorities are "entitled to considerable leeway" in adopting 
reasonable methodologies to calculate the benefit.607 
3. Main arguments of the Third Parties 
(a) Australia 
10.100  Australia considers that there is no basis in Artic le 14(b) for the benchmark used to "relate or 
refer to, or be connected" with the conditions prevailing in the market of the country of provision.  Australia notes in this respect that loans are availa ble on an international financial market that is 
subject to international influences.  Furthermore, Au stralia considers that there is no basis in the text 
                                                     
 
601 United States response to Panel question 41 (first meeting), citing to, inter alia , Appellate Body 
Report on US – Softwood Lumber IV , para. 103. 
602 United States first written submission, paras. 249-2 53; opening statement at the first meeting of the 
Panel, para. 32. 
603 United States first written submission, para. 254. 
604 Id., para. 252. 
605 See, e.g. , United States response to Panel question 17 (second meeting), citing to Appellate Body 
Report on US – Softwood Lumber IV , para. 103. 
606 Id., citing to Appellate Body Report on US – Upland Cotton , para. 406. 
607 Id., citing to Panel Report on EC – Countervailing Measures on DRAM Chips , para. 7.213.  WT/DS379/R  
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 of Article 14(b) to limit the permissible benchmark to  loans in the same curren cy as that of the loans 
being investigated given that loans obtained in one  currency can be used to purchase any currency at 
rates determined by international markets.608 
(b) European Communities 
10.101  The European Communities consider s that the interpretation of Article 14(d) by the Appellate 
Body in US − Softwood Lumber IV  is relevant for clarifying the meaning of Article 14(b).  The 
European Communities notes that the Appellate Bo dy based its interpretation on the objective of 
Article 14 of the SCM Agreement ("Calculation of th e amount of a subsidy in terms of the benefit to 
the recipient").  The European Communities is of the view that in light of this objective, once it has 
been established that the relevant market conditions  are distorted, the comparison contemplated by 
Article 14 would become useless.  The European Co mmunities considers that if it has been shown that 
the "comparable commercial loan which the firm coul d actually obtain on the market" is also distorted 
because of the government intervention, then having  recourse to alternative benchmarks could be 
possible on a reasonable basis, and such other benchmarks might correspond to a "comparable 
commercial loan" as provided for by Article 14( b), which has no express territorial limitation.609 
(c) Japan 
10.102  Japan  considers that, consistent with the findings of the Appellate Body in Japan – DRAMs 
(Korea) , where the government dominates the relevant fi nancial market, an investigating authority has 
"some latitude as to the method it chooses to calculate  the amount of benefit", although it still has to 
identify a "comparable" and "commercial loan" as a be nchmark.  Therefore, Japan considers that the 
question before the Panel is whether sufficient ev idence supports the USDOC's conclusion that there 
was no benchmark within China that could be used, and should the Panel find that there were no such 
benchmarks, it should then examine the consistency with Article 14(b)  of the benchmark selected by 
the USDOC.610 
(d) Mexico 
10.103  Mexico  disagrees with China that the USDOC relied on China's monetary policy in order to 
reject the interest rates in China as a benchmark.   In Mexico's view, the USDOC's determinations 
were based on other considerations, which include d the predominant position of public bodies in the 
commercial banking sector and the extent to which this  situation distorted the interest rates fixed by 
China's central bank.611 
(e) Saudi Arabia 
10.104  Saudi Arabia considers that a benchmark loan mu st comply with the "cumulative" criteria set 
forth in Article 14(b) of the Agreement.  In this regard, Saudi Arabia is of the view that the term 
"comparable" suggests that the be nchmark loan should be a loan de nominated in the same currency, 
and subject to the same generally applicable fina ncial regulations of the country providing the 
government loan.  In addition, the word "commercial"  refers to any transaction that is made in the 
ordinary course of commerce, while the phrase "which  the firm could actually obtain on the market" 
imposes a requirement that the benchmark be based on the actual borrowing experience of the 
recipient firm.  Saudi Arabia argues that the use of constructed benchmarks  based on loans that are 
                                                      
608 Australia third-party submission paras. 37-40; third-party response to Panel question 7. 
609 European Communities third-party submission, paras. 39-40; third-party response to Panel 
question 7. 
610 Japan third-party submission, paras. 33-37. 
611 Mexico third-party response to Panel question 7. WT/DS379/R 
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 not actually available, but rather represent an aver age of a set of loans gathered in a discretionary 
manner to represent the "average commercial loan" ar e inconsistent with Artic le 14(b).  Saudi Arabia 
takes issue with the United St ates' argument that the reasoni ng of the Appellate Body in US 
− 
Softwood Lumber IV , although decided under Article 14( d), is "equally applicable" under 
Article 14(b).  Saudi Arabia argues, inter alia , that nothing in the Appellate Body's report indicates its 
application to Articles 14 (a), (b), and (c), nor to the "entirety of Article 14".  However, assuming 
arguendo  that the reasoning of the Appellate Body in that case applies to Article 14(b), Saudi Arabia 
considers that the clear admonitions made by the Appellate Body on the use of out-of-country 
benchmarks would apply as well.612 
4. Assessment by the Panel 
(a) Whether Article 14(b) permits rej ection of in-country interest ra tes as benchmarks, and if so, 
under what circumstances 
10.105  The central question of legal interpretation raised  by this claim is whether, and if so under 
what circumstances, Article 14(b) of the SCM Agreem ent permits the rejection of in-country interest 
rates as benchmarks for government-provided loans.  We recall here that China's claim and arguments 
in this regard are limited to SOCB loans denominated  in RMB, and in particular that RMB loans can 
only be obtained in China, and that to be "compa rable" in the words of Article 14(b), a benchmark 
loan must be denominated in the same currency as the one under investigation.  We note that China 
does not challenge the rejection of in-country inte rest rates as benchmarks in respect of SOCB U.S. 
dollar-denominated loans.613  That said, the USDOC's determinatio ns in the investigations at issue 
made no distinction on the basis of the currency of the loans as to whether or not in-country interest 
rates could be used.  To the contrary, the USDOC's analysis and conclusions were in respect of the 
Chinese banking sector, and lending market, in gene ral.  Thus, our analysis under Article 14(b) 
focuses on the general question of whet her, and if so when, rejection of  in-country interest rates is 
permissible. 
10.106  We turn first to the text of Article 14 of the SCM Agreement: 
"Article 14 
Calculation of the Amount of a Subsidy in Terms 
of the Benefit to the Recipient 
 For the purpose of Part V, any method used by the investigating authority to 
calculate the benefit to the recipient conf erred pursuant to paragraph 1 of Article 1 
shall be provided for in the national legisl ation or implementing regulations of the 
Member concerned and its application to each  particular case shall be transparent and 
adequately explained.  Furthermore, any such method shall be consistent with the 
following guidelines: 
 (a) government provision of equity capital shall not be considered as 
conferring a benefit, unless the investment decision can be regarded as 
                                                      
612 Saudi Arabia third-party submission, paras. 91-99. 
613 In fact, China appears to agree in principle with  the USDOC's choice of be nchmark for these loans, 
citing the USDOC's use in the OTR investigation of a LIBOR-based benchmark for U.S. dollar-denominated 
loans as indicative of the USDOC's "r ecognition" that a "comparable" loan must be denominated in the same 
currency as the loan under investigation, and that this is  consistent with a proper understanding of what it means 
for a loan to be "comparable".  (China first written submission, para. 234).  WT/DS379/R  
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 inconsistent with the usual investment practice (including for the provision of 
risk capital) of private investors in the territory of that Member; 
 (b) a loan by a government shall not be considered as conferring a 
benefit, unless there is a difference between the amount that the firm receiving the loan pays on the government loan and the amount the firm 
would pay on a comparable commercial loan which the firm could actually 
obtain on the market.  In this case the benefit shall be the difference between 
these two amounts; 
 (c) a loan guarantee by a government shall not be considered as 
conferring a benefit, unless there is a difference between the amount that the 
firm receiving the guarantee pays on a loan guaranteed by the government 
and the amount that the firm would pay on a comparable commercial loan absent the government guarantee.  In this case the benefit shall be the difference between these two amounts adju sted for any differences in fees; 
 (d) the provision of goods or services or purchase of goods by a 
government shall not be considered  as conferring a benefit unless the 
provision is made for less than adequate remuneration, or the purchase is made for more than adequate remunera tion.  The adequacy of remuneration 
shall be determined in relation to prev ailing market conditions for the good or 
service in question in the country of provision or purchase (including price, quality, availability, marketability, tr ansportation and other conditions of 
purchase or sale)". 
10.107  As discussed in Section XI.E.3, infra , the chapeau of Article 14 indicates that the provisions 
set forth in sub-paragraphs (a)-(d) of this provisi on are "guidelines", and that while investigating 
authorities must respect these guidelines in calculati ng the benefits from the particular kinds of 
financial contributions identified in the respective sub-paragraphs, they have flexibility as to the 
precise methodology that they use, so as to be able to take into account the particular facts of a given 
investigation. 
10.108  Concerning the specific provision at issue, Artic le 14(b) of the SCM Agreement provides that 
the relevant comparison for determining whether a government loan confers a benefit is with "a 
comparable commercial loan that the firm could actua lly obtain in the market".  In our view, the key 
concept in this phrase is the word "commercial".  In  particular, the basic task in calculating a benefit 
from a government loan is to determine whether, when an investigated entity borrows from the 
government, the terms are better-than-commercial, i. e., better than a commercial lender would charge 
for the same loan. 
10.109  This view of Article 14(b) is in keeping with  the general interpretation of the concept of 
benefit as an advantage that makes the recipient better off, by virtue of the government's provision of 
the financial contribution in question, than the r ecipient would be if it obtained the same financial 
contribution from the market (i.e., commercially).
614  Indeed, in broad terms this is the comparison 
required  by all of the subparagraphs of Article 14, namely, to compare the terms of the government 
financial contribution with the terms that would be offered through the commercial market for the 
same financial contribution. 
10.110  Furthermore, we consider that the chapeau of Article 14 establishes this comparison with 
commercial market terms as the general principle fo r the determination of the amount of benefit from 
                                                      
614 See, e.g.,  Panel Report on Canada – Aircraft , para. 9.113. WT/DS379/R 
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 any kind of government financial contribution (inc luding those not specifically referred to in the sub-
paragraphs of Article 14), via its ge nerally worded requirement that "any method used [...] to calculate 
the benefit to the recipient conferred pursuant to para graph 1 of Article 1 [...] be consistent with the 
guidelines" in the sub-paragraphs.
615  Our view in this regard is essentially the same as the general 
characterization of Article 14 by the panel in Canada – Aircraft , namely that the guidelines in 
Article 14 "employ a commercial  benchmark, whereby a financ ial contribution 'shall not be 
considered as conferring a benefit' unless that fina ncial contribution is made on terms that are more 
advantageous than would have been  available to the recipient on the commercial  market".616 
10.111  Thus, pursuant to Article 14(b) of the SCM Agreement, the comparator to be used to 
determine the existence and amount of any bene fit from a government loan must be, first and 
foremost, "commercial".  One possible interpretation of  this term could be that any loan made by a 
government would, ipso facto , not be "commercial", because to require otherwise would involve the 
comparison of the terms of one financial contribution by a government to those of another.  We are 
not, however, called upon in this dispute to definiti vely rule on this question, because in fact the 
USDOC did not reach its determination that interest  rates in China could not be used as benchmarks 
on the basis that the government was the predominan t supplier of credit in China, but instead looked 
at a number of other factors as well, as discussed in Section X.J,  infra . 
10.112  Second, Article 14(b) indicates that the benchmark loan must be "comparable".  That is, 
Article 14(b) indicates that not any "commercial" lo an can be used as a benchmark, but instead the 
particular benchmark loan selected must be "compa rable" to the investigated government loan.  We 
view the term "comparable" to mean, in general terms, that the benchmar k loan should have been 
established around the same time, shoul d have the same structure as (fixe d or floating interests rates) 
and similar maturity to the government loan, should be about the same size, and should be 
denominated in the same currency, as these are the fu ndamental elements used to describe loans, and 
thus the elements on the basis of which different loans can be compared. 
10.113  Finally, the benchmark loan should be one that the borrower "could actually obtain on the 
market".  We see this as a reference first and foremost to the individual characteristics of that 
particular borrower (essentially, its risk profile).   In other words, how would a commercial lender 
evaluate that borrower in deciding whether to make  the investigated loan?  Most importantly, what 
interest rate would the commercial lender charge, a nd what repayment terms, collateral, etc., would it 
require, for a loan of the same structure and matu rity as the government loan, based on its evaluation 
of the borrower's likelihood of defaulting? 
10.114  The guidelines thus would prevent, for instance, the amount paid on a one-year floating rate 
government loan from being directly compared to the amount that would be paid on a 10-year fixed 
rate commercial loan.  Similarly, the guidelines w ould prevent the amount paid on a government loan 
to a AAA-rated borrower from being compared with the amount that would be paid on a commercial 
loan to a B-rated borrower.  Furthermore, they would prevent the amount paid on a government loan 
denominated in Canadian dollars from being directly  compared to the amount that would be paid on a 
commercial loan denominated in Japanese yen, and so forth.  Ultimately, therefore, the guidelines of 
Article 14(b) provide that the benchmark interest ra te used to determine the existence and amount of 
                                                      
615 For example, in the case of grants, which are not listed in Article 14, the comparison with the 
market would give the result that the benefit amount is the full amount of the grant because grants are in essence 
gifts, and it is clear that the market does not give gifts.  Similarly, the amount of the benefit from a tax 
exemption or similar tax measure also would be the full amount of the taxes not paid, as the tax exemption or reduction also would be in essence a gift  from the government to the recipient. 
616 Panel Report on Canada – Aircraft , para. 9.113.  (emphasis added)  We recall that in Canada – 
Aircraft , the Appellate Body upheld the panel's analysis and in terpretation of the term "benefit" in Article 1.1(b) 
of the SCM Agreement, including its reliance on Article 14 as relevant context.  (Appellate Body Report on 
Canada – Aircraft , paras. 155 and 161).  WT/DS379/R  
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 benefit from a government loan reflect not only the basic features of the government loan, but also 
reflect the risk level of the borrower. 
10.115  On the basis of this analysis, it is clear that th e "ideal" benchmark in terms of Article 14(b) of 
the SCM Agreement would be an actual loan from a commercial lender of the same size, maturity, 
structure and currency, to the investigated entity , taken out on the same day as the investigated 
government loan.  It also is clear, however, that in  practice the existence of such an ideal benchmark 
loan will be extremely rare.  The commercial loan s actually held by a given borrower will almost 
inevitably have certain differences, whether in timi ng, size, maturity, structure, and/or currency from 
the investigated government loan, that would make  them not perfectly comparable, or even not 
comparable at all, to that government loan.  As  one example, in a given country there may be no 
commercial market for long-terms loans – all such loans may be government-provided.  In such a 
situation, the only commercial loans in existence in  that country would be short-term.  Similarly, a 
given borrower may have on its books a commercia l loan that is essentially identical to the 
government loan except for its origination date, a nd there may have been a very large generalized 
movement in interest rates during the interval that  would make these loans not directly comparable. 
10.116  The question then becomes how Article 14(b) addresses such situations, which will arise 
frequently, indeed probably in the large majority of cases.  In particular, where there are differences in 
existing commercial loans held by the borrower such th at in the strict sense of the term they are not 
"comparable" with the investigated government loan, does Article 14(b) require an investigating 
authority to conclude that there simply is no benc hmark, and that as a result no benefit amount can be 
determined (which would mean, in ef fect, that the benefit amount is zero) ?  In our view, this is not the 
case. 
10.117  We note, first, the phrase "the amount the firm would pay on a comparable commercial loan 
that which the firm could actually obtain on the market".  In our view, the use of the conditional mode 
here, in conjunction with the reference to the indi vidual borrower's situation, is an indication that 
where loans are concerned, the very individualized nature of borrowing, as discussed above, often will 
limit an investigating authority's ability to identify a fully comparable existing commercial loan held 
by the investigated borrower to use as a benchm ark for the investigated government loan, meaning 
that some degree of approximation will be inevita ble.  Often this approximation can be accomplished 
by making adjustments to a loan that is not comp arable in every respect, such that, following the 
adjustments, the resulting adjusted  loan's terms have been made comparable.  In this sense, an 
adjusted non-comparable loan would be a proxy fo r a theoretical "comparabl e commercial loan" that 
the borrower "could actually obtain on the market".  We  thus see that Article 14(b), by its own terms, 
makes allowance for the use of proxies when an identical or nearly-iden tical loan is not available as a 
benchmark.  The same terms, however ("comparable " and "could actually obtain on the market"), also 
require that, where adjustments and/or proxies are necessary due to the absence of an existing 
commercial loan that is comparable in every resp ect, the resulting benchmarks must be appropriate.617 
10.118  In this regard, we view the identification of a loan benchmark pursuant to Article 14(b) as a 
series of concentric circles.  The first best option,  as noted, is to find a commercial loan to the same 
borrower that is identical or nearly identical to th e investigated loan (in terms of timing, structure, 
maturity, size and currency).  If that borrower has no  such loan, then the next place to look logically 
would be the borrower's other existing commercial loan s, to see if any of them is sufficiently similar 
that its terms could be adjusted to reflect the basic characteristics of th e government loan.  Such 
                                                      
617 Of course, the SCM Agreement does not requ ire the imposition of countervailing measures, 
meaning that an investigating authority always has the option not to apply a countervailing measure in respect of 
a given subsidy.  In this sense, if an investigating au thority had difficulty in identifying a suitable benchmark for 
a given government financial contribution, it could choose not to perform a benefit calculation, and thus to omit 
the particular financial contribution from its overall calculation of subsidization of the investigated product. WT/DS379/R 
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 adjustments might reflect, for example, different dates of origination of the loans (to account for 
interest rate fluctuations that may have taken place in the market during the interval), different sizes, 
different maturities, different currencies, different  structures, changes in the borrower's credit risk 
(e.g., if a loan on the borrower's books was originated  at a time when the borrower had a high credit 
rating, but the rating had been downgraded by the ti me the government loan was made), etc.  There 
are many possible examples, and we do not mean here  to rule on all potential situations that might 
arise or to pronounce in any way as to what particular kinds of adjustments might or might not be acceptable under Article 14(b) in the circumstances of a given investigation.  These are questions that 
could only be resolved on a case-by-case basis, and our point here is, simply, that in many or most cases, certain adjustments will need to  be made to ensure that ultimatel y the amount of the benefit that 
is calculated is based on the amount that "would" be  paid on a "comparable commercial loan" that the 
borrower "could" actually have obtained on the market. 
10.119  There may be circumstances, however, where the actual differences between any of the 
commercial loans on a borrower's books and the inves tigated government loan are so significant that 
it is not realistically possible to address them through adjustments; or the investigated government 
loan might be the only loan on the borrower's books ; or the borrower's only other loans might also be 
from the government.  In these circumstances, the investigating authority would need to look beyond actual loans held by the investigat ed borrower, and use other sources of information.  One possibility 
in this regard could be a similar commercial loan  granted to another borro wer with a similar credit 
risk profile as the investigated borrower (if such  a loan could be identified).  If no appropriate 
commercial loan benchmark can be identified, then  the authority could construct a benchmark loan 
proxy.  While Article 14(b) contains no specific guidance as to how this would need to be done, we 
see no a priori  restriction to any geographical market (as exists, for example, in Articles 14(a) and 
14(d)), or any prohibition of any particular approach  to constructing a proxy.  Rather, the fundamental 
rule in Article 14(b) is that the measurement of th e benefit be based on what "would" have been paid 
on a comparable commercial loan that "could" act ually have been obtained by the investigated 
borrower, even if no such loan exists. 
10.120  We note in this regard that China invokes th e particular case of RMB-denominated loans as a 
situation in which it is impossible to use any inte rest rate other than one found inside China as a 
benchmark, due to the impossibility of borrowing RMB anywhere outside China.  We acknowledge 
that the currency in which a loan is  denominated is of course one of its most important characteristics, 
and that using as a benchmark a loan in another cu rrency poses particular challenges.  That said, in 
our view, currency differences do not necessarily po se the insurmountable hurdle that China posits.  
In particular, there are means to determine the equi valence of loans expressed in different currencies, 
notably the various forms of swap transactions that  are routinely used in international financial 
markets, whereby borrowers in different currenci es swap principal amounts and/or interest payment 
streams on their respective loans.  By definition,  these exchanges between willing partners express the 
equivalence of the values of the dissimilar things bein g exchanged.  We note that swap transactions of 
this type were originally devel oped to circumvent restrictions a nd limitations on borrowing in foreign 
currencies.
618  Thus, unlike China, we do not consider that the geographic restriction of lending in a 
particular currency precludes, as a matter of law, a comparison with a benchmark loan expressed in a 
different currency from that of the government loan.  Rather, this is a feature of a loan that can, at 
least in certain circumstances, be made to be "c omparable", in the sense of Article 14(b), to the 
investigated government loan. 
                                                      
618 See http://www.sjsu.edu/faculty/watkins/swaps.htm .  We further note that in 2005, the People's Bank 
of China reportedly allowed banks for the first time to engage in cross-currency swaps for forward foreign exchange contracts (although not interest).  (Risk  magazine, "China opens up renminbi swaps market", 
1 September 2005).  WT/DS379/R  
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 10.121  More generally, we see China's interpretation of the terms of Article 14(b) as excessively 
formalistic, in that it would effectively limit an  investigating authority's ability to identify an 
appropriate benchmark, forcing it instead to fall back on a choice from among inappropriate 
benchmarks.  In particular, in our view, the implication of China's argument is that even if all loans in 
a given country were made by the government, the investigating authority would have no choice but 
to identify as a benchmark for the investigated gove rnment loan another government loan, so long as 
the second loan was made in the "ordinary course of commerce"619 (a term for which China offers no 
explanation).620  In our view such a comparison would be entirely circular given that the point of the 
exercise under Article 14(b) is to compare the gove rnment loan in question to something that is not a 
government loan.  Similarly, we consider that pursuan t to China's argument, if a loan were made in a 
particular currency which was only lent in the country subject to the investigation, then even if all of 
the loans in that currency were government-provided lo ans, the fact of the currency restriction again 
would force the investigating authority to iden tify the benchmark from among the same-currency 
government loans, in spite of the circularity of th e resulting comparison.  To us, this is directly 
counter to the directives of Article 14 in general a nd Article 14(b) in particular, which are aimed at a 
meaningful comparison with the commercial market. 
10.122  In this respect, we see the logic of the Appellate Body's reasoning in US – Softwood 
Lumber IV in regard to Article 14(d) of the SCM Agreemen t to be equally applicable to Article 14(b), 
and indeed to Article 14 in its entirety.  Here we re call in particular the Appellate Body's analysis of 
the terms "in relation to prevailing ma rket conditions [...] in the country  of provision" in Article 14(d).  
The Appellate Body reversed the panel's interpretati on that this required the use of in-country prices 
as the benchmark even if distorted by the government's predominance as a supplier of the good.  The 
Appellate Body found that instead any benchmark, to be "in relation to" those market conditions, had 
to "relate or refer to, or be connected with" them .  In this regard, the Appellate Body specifically 
indicated that where in-country benchmarks were not available, "proxies" could be used so long as 
these related or referred to, or were connected with , the "prevailing market conditions in the country 
of provision". 
10.123  We recall in this context that the problem wh ere in-country benchmarks cannot be used to 
determine adequacy of remuneration for goods is th at the prevailing, observed conditions of purchase 
or sale in the country of provision of the good reflect  the government's role as predominant supplier or 
as controller of the prices.  As such, it is clear that  the appropriateness of any selected proxy in such a 
situation (in terms of how well it reflects the "pre vailing market conditions" for the good in that 
country) cannot be verified directly.  We thus unde rstand the Appellate Body, in these statements, to 
indicate that while proxies can be used in pl ace of the directly observed prices in certain 
circumstances, those proxies must be carefully sel ected and adjusted as n ecessary to as closely as 
possible represent the market conditions that wo uld prevail if the government was not the 
predominant supplier or did not control the prices.  Furthermore, given that the Appellate Body has 
found that the language in Article 14(d) referring to  the "country of provision" does not limit, in a 
formalistic way, the selection of a benchmark fro m among the observed prices in that country, we 
consider that the same is equally true where, as in Article 14(b), the term "market" is not 
geographically modified in any way. 
10.124  We note China's argument that its approach w ould not result in a circular comparison.  In 
particular, China views the United States' approa ch as based on a misplaced analogy between the 
Appellate Body's reasoning in US – Softwood Lumber IV in respect of the "role of the government in 
                                                      
619 See, e.g.,  China first written submission, para. 235. 
620 China only provides a dictionary definition of the term "commercial" and cites a paragraph of the 
Panel Report on China – Intellectual Property Rights  and a paragraph of the Panel Report on Canada – Wheat 
Exports and Grain Imports  in which the dictionary definition of the term "commercial" appears.  China provides 
no definition and/or explanation of its ow n phrase "ordinary course of commerce". WT/DS379/R 
Page 144  
 
 the market as a provider of the same or simi lar goods" under Article 14(d), and government 
ownership of financial institutions.  China states that implicit in this  argument is the suggestion that 
government ownership of financial institutions somehow "distorts" th e interest rates charged by all 
financial institutions within a country, such that natio nal interest rates are "unreliable" or "unsuitable" 
as a benchmark under Article 14(b).  China disagrees because, it argues, central banks set interest 
rates as a tool of monetary policy, which rates in  turn affect the interest rates on commercial loans 
charged by all banks, whether or not the latter are government-owned.  According to China, there is 
nothing "circular" about comparing the interest rate on a government-provided loan to the interest rate 
conditions that affect all borrowers in the same cu rrency, regardless of the source of the loan, because 
the effect that governments have on interest rates do es not result from whatever role they play in the 
market for commercial lending, i.e., from their "role in providing the financial contribution".  Rather, 
it arises from their role as a government in guiding monetary policy.
621 
10.125  We do not consider that this argument by Chin a resolves, or even squarely addresses, the 
legal issue before us.  In particular, China's argument presumes that all government control or 
regulation of or intervention in lending markets, of  whatever kind and degree, must be treated as the 
simple implementation of general monetary policy, which by definition cannot give rise to distortion 
of lending rates so as to make the observed interest  rates within the country unusable as benchmarks 
(even if all of those observed interest rates happene d to be for government-provided loans).  We see 
no such rule in Article 14(b) or anywhere else.  Indeed, we recall that the overall purpose of the SCM 
Agreement includes, precisely, to di scipline certain forms of market interventions by governments.  
We can see no logic, given this, to considering that a particular class of government market 
interventions (relating to interest rates) must be accepted "as is" as the underlying "market" condition, 
particularly where the question to be resolved is  exactly whether on a given loan transaction the 
interest rate charged by that sa me government is "below-market". 
10.126  Furthermore, we see no requirement that observed interest rates in the particular country or 
geographical market must simply be accepted as the "commercial" rates against which to measure the 
investigated government loan, even if the government 's interventions of whatever kind (as opposed to 
the operation of market forces) effectively dictate the levels of those interest rates.  Here, we see a 
clear distinction between, on the one hand, the go vernment as the setter and implementer of the 
general monetary policy of a country; and, on the ot her hand, the government participating as a lender 
and/or otherwise intervening in the lending market as su ch, in a way and to an extent that effectively it 
is the government, and not the market, that establishes the lending rates. 
10.127  We acknowledge, as China points out, that govern ment influence over interest rates is an 
important feature of monetary policy.  Indeed, ad justing their own lending rates up or down is one of 
the principal tools by which central banks influence the money supply.  It also is true that interest rate 
movements at the central bank level ripple throu gh the commercial lending market such that the 
different sorts of commercial lending rates (short- and long-term, fixed and floating, for borrowers of 
different risk levels, etc.) tend to m ove in parallel with the central bank rates.  This indeed is generally 
the goal of such central bank actions, as the loosen ing or tightening of commercial credit directly 
increases or decreases the money supply. 
10.128  This is a very different matter, however, from a hypothetical situation in which, for example, 
the government is the only lender in a country.  In su ch a situation, whatever its underlying monetary 
policy, the government itself would directly set all of the lending rates to all of the firms in the 
country.  Thus, there would be no commercial benchm ark interest rate in that country to which the 
interest rate on any government loan could be co mpared in the sense of Article 14(b).  Any in-country 
comparison would be inherently circular. 
                                                      
621 China second written submission, paras. 98-100; response to Panel question 34 (first meeting).  WT/DS379/R  
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 10.129  It also is very different from a hypothetical s ituation in which the government simply dictated 
the lending rates to be charged by "commercial" banks .  That is, even if the government itself was not 
a lender, and even if the banks were not govern ment-owned, and regardless of the underlying 
monetary policy, it would be the government, not market forces, that set the lending rates for commercial borrowers, by fiat.  Thus, here again there would be no commercial benchmark rate to 
which the interest rate on a government loan could be  compared in the sense of Article 14(b).  Again, 
any in-country comparison would be inherently circular. 
10.130  Similarly, some combination of a large govern ment role as a lender to commercial borrowers, 
and significant direct control over lending and in terest rates to commercial borrowers, also could 
result in a situation in which the interest rates to  commercial borrowers do not reflect the operation of 
market forces, but instead are distorted in the sense that they are effectively established by the 
government.  In this situation as well, we consider  that comparing the interest rate on a government 
loan to another loan in the same country would be a circular exercise.  We view such a situation as 
analogous to that analyzed by the Appellate Body in US – Softwood Lumber IV  (government 
predominance as a supplier of a good), and as discussed we consider that inherent in Article 14(b), as 
in Article 14(d), is sufficient flexibility to permit th e use of a proxy in place of observed rates in the 
country in question where no "comme rcial" benchmark can be found. 
(b) The USDOC determinations not to rely on inte rest rates in China as benchmarks for SOCB 
loans 
10.131  In the three investigations at issue, the US DOC stated that the benefit from a government-
provided loan normally is measured by comparison to  a "loan that the recipient could actually obtain 
on the market" and therefore "the benchmark should be  a market-based rate".  In these investigations, 
however, the USDOC determined that there was not  a functioning market for loans within China
622, 
and that therefore none of the sources of Chinese interest rates could be used as benchmarks, as 
follows: 
• SOCBs loans, which were found to be made under the "Government Policy Lending" 
program, could not used as benchmarks since these loans were the ve ry loans for which 
suitable benchmarks were needed623; 
• Chinese national interest rates were not reliable as benchmarks because of the pervasiveness 
of China's intervention in the banking sector – i.e., loans provided by Chinese banks reflected 
significant government intervention and did not reflect the rates that would be found in a 
functioning market624; and 
                                                      
622 Exhibits CHI-1, p. 6; CHI-3, p. 11; and CHI-4, p. 7.  The USDOC considered that while 
benchmarks must be comparable commercial loans – i.e. , they must be from a commercial lending institution, 
and similar in structure to government loans with respec t to whether they are fixed or variable, the date of 
maturity, and the currency in which th ey are granted – interest rates are un usable to measure the benefit from 
government loans where they are found to be distorted.  In the LWS and OTR investigations, citing to its 
previous findings in the CFS Paper  investigation, the USDOC further determined that these market distortions 
could not be adjusted.  It noted that for an adjustment to be practical, an underlyi ng market-based rate must 
exist; however, in China (where no underlying market-b ased rate exists), determining what the necessary 
adjustments would be in order to form a market-determined interest rate would be highly complex, speculative, and impracticable.  (Exhibits CHI-3, p. 83; CHI-4, p. 104; and CHI-93, p. 70). 
623 The USDOC noted that it does not treat comparable commercial loan s, which it normally uses for 
benchmarking purposes, as commercial loans where they were provided pursuant to a government programme.  (Exhibits CHI-1, p. 6; CHI-3, p. 11 and CHI-4, p. 7). 
624 Exhibits CHI-1, p. 6; CHI-4, pp. 7 and 104; and CHI-34, p. 67900. WT/DS379/R 
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 • Foreign bank lending in China was unsuitable as  a benchmark since China's involvement in 
the banking sector created significant distortions , restricting and influencing foreign banks 
operating within China.
625 
10.132  The USDOC's assessment and conclusions in the three investigations that Chinese interest 
rates were distorted and did not reflect the rates that would be established by a functioning market 
were based on its previous findings in the CFS Paper  investigation.  In that investigation, the USDOC 
had reviewed the role of the Government of Chin a in the banking sector and concluded that China's 
intervention in the lending market distorted the market.626  In the three investigations at issue before 
us, the USDOC determined that the respondents ha d not demonstrated that these findings no longer 
held.  The USDOC's determinations in the three inve stigations thus are based on, and cross-reference 
extensively, its determination in CFS Paper.  Given this, before we examine the USDOC's specific 
findings in the three investigations, we  summarize the relevant portions of the CFS Paper 
determination. 
(i) The CFS Paper determination relied upon by the USDOC in the OTR, CWP and LWS 
investigations 
10.133  In CFS Paper , China and investigated producers had generally argued that: 
• There was not a program in place to provide preferential lending :  The Government of China 
and Chinese producers argued that "policy banks" an d "policy lending" no longer existed as 
such in China.  They noted that the importa nce of both had decreased since the year 2000 
when the need for policy lending (and thus, for po licy banks) declined.  Since that time, the 
lending from policy banks had shifted from policy loans to commercial loans.  The 
respondents argued that record evidence – statements by the PBOC and the China Bank 
Regulatory Commission (the "CBRC") – demonstrated that both SOCBs and policy banks 
functioned essentially as commercial banks, indepe ndent from government influence, and that 
industrial policy was only one of the factors that  such banks considered in analyzing risk.  
Thus, they argued, these banks' decisions we re based on commercial considerations.627 
 
• SOCBs and Policy Banks opera ted on a commercial basis :  The respondents also argued that 
other characteristics of the banking system de monstrated that SOCBs as well as policy banks 
operated on a commercial basis and acted indepe ndently from the government:  (i) the loan 
application and approval processes were similar to those in the United States and other countries, and the government was not involved  in such processes (as demonstrated at 
verification); (ii) banks in China had adopted an d implemented risk analysis systems based on 
best practices, the implementation of which w as monitored by the CBRC (the effect of the 
adoption of these risk analysis systems was that the number of non-performing loans was 
declining); (iii) the refusal of loans to some of the companies under investigation proved that 
they did not enjoy preferential lending from SOCB s; and (iv) according to record evidence 
(verification), banks competed regarding inter est rates and customers were able to shop 
around for the best rates.
628 
                                                      
625 Exhibits CHI-1, p. 6; CHI-4, p. 105; and CHI-34, p. 67900. 
626 In its previous anti-dumping duty investigation in Lined Paper , (in which, consistent with its 
practice, it treated China as a non-ma rket economy), the USDOC determined that the banking sector in China 
did not operate on a commercial basis and that it was subject to significant distortions because of the continued dominant role of the government in the banking sector.  This finding was further elaborated in CFS Paper , 
where the USDOC found that the government of China continued to dominate the domestic banking sector and 
to prevent banks from operating on a fully commercial basis.  (Exhibits CHI-1, p. 7 and CHI-34, p. 67900). 
627 Exhibit CHI-93, pp. 42-43. 
628 Id., p. 44.  WT/DS379/R  
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 • The role of the government was similar to that of any other government :  The respondents 
submitted that the role of the government in  China was similar to that of any other 
government in allocating credit to specific industr ies:  (i) the main role of the PBOC, which 
was macroeconomic analysis and monetary policy (including issues such as interest rates and 
inflation), did not indicate that it was able to ensure that banks' lending decisions and credit 
allocations conformed to government policies; (ii) the provisions of the Commercial Banking 
Law were not internally-inconsistent (some pr ovisions prohibited govern ment interference in 
the banks while others encouraged lending cons istent with State industrial policy).  Taken 
together, they provided that lending should ta ke into consideration government policy and its 
effect on the borrower/project to be finan ced; (iii) banking reforms in China had been 
implemented, thus, the assumption that banks  based their lending decisions on industrial 
policy was entirely based on "policy statemen ts"; (iv) there was no evidence that bank 
officials appointed by the government were required to implement government industrial 
policies; (v) there was no "direct" record evid ence to support the proposition that lending and 
credit allocation in China was directed (i.e., the studies referred to by the applicants contained 
outdated data (before 2005) and were subject to an opposite interpretation from that of 
petitioners)629; and (vi) numerous studies, which showed that a significant amount of capital 
flowed into and out of China, demonstrated th at the Government of China could not constrain 
Chinese capital markets.630 
• Internal benchmark in China :  The respondents argued that there were appropriate 
benchmarks in China that the USDOC should use in its benefit calculation.631  Interest rates in 
China were like those in a functioning market since, although in the past there had been 
government intervention, there had not been in the recent past and during the period of investigation, and there had been a gradua l liberalization of the financial markets.
632  Interest 
rates for foreign currency loans633 and interest rates on loans received by investigated 
producers from privately-owned Chinese banks (which  were fully verified) were the rates that 
should be used for benchmarking purposes.634 
10.134  The USDOC rejected these arguments.  The USDOC stated that gove rnment influence was 
still present in the lending sector and that China's banking reforms had not been  fully implemented.  
Specifically, the USDOC determined that: 
                                                      
629 Respondents further argued that where information from secondary sources (e.g., articles, and 
commentaries) is in conflict with primary source informat ion, the USDOC should rely on the latter.  They noted 
that evidence from primary sources on the record indicated that SO CBs and policy banks functioned as 
commercial banks – i.e., statements by bank officials, bank loan approval documents, bank project guidelines as well as banking regulations and policies indicated that banks evaluated loans on a commercial basis and that 
government industrial policies were a minor factor in the lending decision making process.  (Exhibit CHI-93, 
p. 45). 
630 Id., p. 44-45. 
631 Id., p. 62. 
632 Similar to its arguments in the present dispute, the Government of China argued that its 
interventions on interest rates were not that different fr om those carried out by other countries around the world, 
and that the mechanisms applied by the government did not distort interest rates, rather it actually kept them too 
high (and not too low as asserted by petitioners).  (Id., p. 63). 
633 They argued that in fact, the USDOC found government control only of RMB-denominated lending 
and deposit rates, and not of foreign-currency lending in China.  Further, the USDOC did not determine that the 
Government of China controlled foreign-currency lending practices.  (Id., pp. 63-64). 
634 Id., p. 64.  The Government of China and Chines e investigated producers also made a number of 
arguments with respect to the out-of-country benchmark calculated by the USDOC:  they, inter alia , challenged 
the USDOC's reliance on gross national income (GNI) to determine the proper basket  of comparison countries 
(challenged as an outdated World Bank categorization), and argued that the rate of inflation should also be 
considered in determining the r eal cost of a loan.  (Id.). WT/DS379/R 
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 • China's banking system was still under state-control :  The USDOC found that China's 
banking system remained under state control and continued to suffer from legacies related to 
the longstanding pursuit of government policy objectives, undermining the SOCBs' ability to 
act on a commercial basis.635  While the scope and extent of  government control over SOCBs 
was changing and evidence on the record with resp ect to such control was mixed, the central 
government had been very cautious on completely  reforming the banking system; as a result, 
and since banks in China had never operated on a commercial basis, the government was still 
very involved in the sector.636  Further, the USDOC found that while banking reforms in 
China might be starting to take effect, the evid ence on the record indicated that they had not 
yet been fully implemented and that the infl uence from the government remained a significant 
factor in the operation of China's banking sector.637  The USDOC noted that although the 
largest SOCBs had undergone some reorganiza tion to become corporate entities (limited 
initial public offerings had been  conducted and minority stakes in SOCBs were sold to 
foreign banks) their primary shareholder remained the Chinese government.  Foreign 
investment in Chinese banks was tightly constrai ned, with total foreign ownership limited to 
25 per cent in SOCBs.638 
• China's banking system still operated in acco rdance with governmental planning-policies :  
The USDOC found that (i) the government owne rship of the banking sector in China was 
"one" factor in the legacy effects of government  control of the banking sector; (ii) the legal 
framework of China's banking sector contra dicted the argument that SOCBs operated 
independently from the government639; (iii) the Government of China had not demonstrated 
                                                      
635 The USDOC relied on statements from various reports as follows:  (i) the OECD Report  stated that 
"chief executives of the head offices of the SOCBs are government appointed and the party retains significant 
influence in their choice"; ( ii) the 2005 IMF Staff Report  stated that "[r]ooting out the legacy of government 
directed lending, and training banks to make lending decisions based on purely commercial considerations … 
remains a major reform challenge"; (iii) the 2005 PBOC Annual Report  stated that "[a]s the economic reform 
was not completed yet, investment was still orchestrated  to a large extent by government […]"; (iv) the 2004 
PBOC Annual Report  stated that "some local governments still seek to promote economic growth by expanding 
investment"; (v) the 2004 China Monetary Policy Report  stated that "[i]n 2004 the PBC under the guidance of 
the central government […] strengthening its window guidance and credit policy advi ce for commercial banks 
to follow the State industrial policy constrain credit to overheated industries and those inconsistent with the 
State industrial policy and to  increase financial support for development of agriculture small and medium-sized 
enterprises consumption employment education and non-state sector guided"; and (vi) the 2005 Monetary Policy 
Report  stated that "[t]he PBC implemented […] the m acroeconomic strategy mapped out by the central 
government which called for differentiated treatment to different sectors by timely conveying to financial 
institutions the governments policy intentions so as to guide the commercial banks in taking forward-looking 
approach to respond to changes of economic cycles and industrial development and to improve the credit structure".  (Exhibit CHI-93, pp. 55-57). 
636 The USDOC noted that this view was, at varying degrees, confirmed by independent experts.  (Id., 
pp. 56-57). 
637 Id., p. 58. 
638 Id., p. 67.  As we have noted, footnote 244, supra , China acknowledges that at the end of 2006, 
government ownership of the Big Four was as follows:  75 per cent in the ICBC; 74 per cent in the CCB; 68 per cent in the BOC; and 100 per cent in the ABC.  (China first written submission, para. 165). 
639 The USDOC noted that while the Chinese Commerc ial Banking Law states that "commercial banks 
are responsible for their own profits and losses, must protect the interests of their depositors, and are protected from government influence", it further requires banks to "carry out their loan business upon the needs of 
national economy and the social development and under the guidance of State industrial policies".  Similarly, 
the Bank of China Global Offering stated that "Commercial Banking Law requires commercial banks to take into consideration government macroeconomic policies in making lending decisions.  [They] are encouraged to 
restrict their lending to borrowers in certain industries in acco rdance with relevant government policies".  At 
verification, officials from the People's Bank of China stated that "it may be necessary for banks to heed industrial policies; banks may be taking on great risk if their customers use loans in a way that is inconsistent 
with industrial policies".  Further, the 2006 Repor t from State Council revealed that the reforms on  WT/DS379/R  
 Page 149 
 
 
 how or to what extent industrial policy was c onsidered in the loan approval process, although 
it had argued that industrial policies were only on e of the factors considered in this process; 
(iv) while SOCBs were improving their risk  management capacities, they still lacked 
adequate risk management640; (v) despite several requests, the USDOC had not been provided 
with sufficient evidence to examine the comple te loan-approval process, or with evidence 
necessary to show that the loans were made on a commercial basis641; and (vi) since the 
Chinese legal banking framework required banks  to take into consideration government 
macroeconomic policies in making lending deci sions, China's excess liquidity (or high 
volumes of loans) did not indicate that the Gove rnment of China could not have control over 
the SOCBs and guide their loan portfolios.642 
• Interest rates regulated by the government :  The USDOC found that the continued dominance 
of the State in Chinese banks as well as China's l ong history of using the banks to carry out its 
policy objectives, made uncertain the reliability of  interest rates in China and their suitability 
as commercial benchmarks.  Although the CBRC  had been established in 2003, it was 
supervised by the PBOC until 2004.  Thus , it was improbable that it could have 
revolutionized the operations of the banking sector only one year after taking on its 
supervisory role.643  Furthermore, while banks were  improving their risk management 
capacities, the way that interest rate formati on was regulated in China both distorted lending 
rates and proved that SOCBs were not fully able  to price their loans on a commercial basis.  
China maintained a system of both deposit rate  caps and lending floor rates in such as way to 
guarantee the banks a considerable profit margin on their loans.644  The lending rate floor was 
set so as to prevent the banks from pricing their loans at unsustainably low levels.  In fact, 
interest rates remained generally undifferentia ted – interest rates were quite close to the 
PBOC-set benchmark.  On the other hand, the cap  on deposit rates was set at a level slightly 
higher than inflation.  Therefore, savers in China, beyond being restricted by the government 
to access alternative forms of investment, were prevented (by law) from receiving more than a 
negligible real return on their savings.  As such, banks in China did not compete on deposit 
rates and almost had an unlimited access to  the savers' capital at very little cost.645 
                                                                                                                                                                     
"implementing a system that grants independence in investment coupled w ith responsibility for risk" were an 
ongoing process and were not complete in 2005.  (Exhibit CHI-93, p. 58). 
640 According to the USDOC, this was partially demons trated by the fact that interest rates in China 
remained generally undifferentiated.  At verification, an official from the PBOC explained that interest rates 
spreads were close to the PBOC-set be nchmark rate because "the Big Four attract the largest borrowers [which] 
are creditworthy [...] and have long-term relationship with  the banks".  (Id., pp. 59, 68-70).  The USDOC further 
noted that the risk analysis system of most of these banks was not fully implemented:  the PBOC stated that the 
ceiling on the deposit rate had been put in place "in orde r to afford banks time to restructure and a floor on 
lending rates to maintain order in th e market [...] these restrictions will eventually be eliminated when banks 
have fully developed risk management and cost controls"; the CBRC stated that it "ha[d] [...] established a 
framework for achieving an international level of risk management" but at the same time acknowledged that "[such a] framework does not necessarily indicate a high level of risk management in practice"; and the BOC 
stated that its risk management implementation "i s an on-going process [and that] there was not a 
comprehensive risk management system fully established in 2005".  (Exhibit CHI-93, pp. 59-60). 
641 Id., p. 60. 
642 Id. 
643 Id., p. 68. 
644 The USDOC noted that at verification "the PBOC conceded that this floor and cap system sets 
China apart from other countries and that it is necessary  because the banks have not yet fully implemented risk 
control".  (Id., p. 68). 
645 The USDOC noted that the cap on deposit rates was both binding in 2005 and set at a level that was 
barely higher than inflation.  Thus , according to the USDOC, savers were prevented from receiving more than a 
negligible real return on their savings and banks in China "do not compete on deposit rates and have access to 
savers' capital at very little cost".  Thus, given that the government directs China's savings to the banking sector, 
that only a low return on deposits is allowed, an d that banks cannot compete on deposit rates, the USDOC WT/DS379/R 
Page 150  
 
 Furthermore, the interest rates of the "issuan ce of commercial paper" or "corporate bills" – the 
equivalents for lending rates in China that we re not regulated by the government – were not 
market-based and therefore not useable as a benchmark.
646 
• Foreign-owned banks in China were subject to the same restrictions as SOCBs :  The USDOC 
determined that foreign-owne d banks operated in the same distorted environment as the 
Chinese banks.  It further found that these banks ' share of financial assets and lending activity 
was negligible compared with those of SOCBs.   While their participation in the domestic 
banking sector had increased, they provided only a very small share of credit in China and 
still operated mostly in niche markets.  Th ey did not compete directly with SOCBs.647 
• Foreign currency lending rates in China for m easuring the benefit of loans issued in RMB :  
While the rates for foreign-currency loans in Ch ina might follow international trends to some 
extent – being influenced by the monetary po licies of the foreign country's central bank – 
foreign currency lending in China formed a very small portion of the overall financial 
sector.648  Further, these rates did not provide any basis for a benchmark of what RMB rate 
would prevail in a market situation (as China's dominance of and intervention in the banking 
sector meant that such a benchmark did not exist in China).649 
10.135  As noted, in each of the investigations at issue in the present claim, the USDOC relied on 
these findings.  It determined that the market distortions it had found in the CFS Paper case were still 
present and that the Government of China and inte rested parties had not demonstrated that the 
Chinese banking sector had significantly change d such that reconsideration of the CFS Paper  decision 
was warranted.650  As a result, the USDOC determined in each of the investigations at issue that 
interest rates in China did not provide a suitabl e basis for assessing whether the loans provided to 
investigated producers conferred a benefit. 
10.136  The specific arguments of the respondents and the findings of the USDOC in these three 
investigations were as follows: 
(ii) OTR Investigation 
10.137  In the OTR investigation, the Government of China argued that according to the evidence on 
the record, banks in China operated on market princi ples, and that the government five-year plans and 
other policy documents did not instruct banks to  provide preferential financing to the OTR tire 
                                                                                                                                                                     
determined that "the concern about the banks driving interest rates down on their own to unsustainable levels 
[was] not surprising".  (Id., pp. 69-70). 
646 The USDOC found that even thou gh the Drazen Report (submitted by  the Government of China to 
the USDOC) was correct in stating that these instruments were similar to bank loans and that they constituted an 
exception to the usual regulatory framework on lending, this lending regulatory framework – which served to 
keep rates higher than they would be otherwise – made the rates of these financial instruments to be lower than 
that of standard bank loans.  The USDOC considered that this was not a genuine market outcome since these instruments constituted only a limited exception within the market.  It noted that, in fact, it was the PBOC's 
maintenance of lending rate floors – in order to avoid lending rates going down to a level that could endanger 
the whole financial system – that allowed these alternative financial instruments to constitute only a limited exception.  The USDOC noted in this respect that bank lo ans accounted for over 90 per cent of total financing in 
China in 2004, such that the alternative financial instruments proposed in the Drazen Report accounted for a 
very small share of total financing in China.   (Exhibit CHI-93, p. 69). 
647 Id., p. 70.  The USDOC's determination relied on the OECD Report. 
648 For example, CCB foreign currency loans only accounted for 5 per cent of their total loans.  (Id., 
p. 70). 
649 Id. 
650 Exhibits CHI-1, p. 7; CHI-4, p. 105; and CHI-34, p. 67900.  WT/DS379/R  
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 industry.  Further, the Government of China claimed that government influence over the operations of 
the SOCBs was little and that state ownership of  banks was diminishing and the state was not 
influencing competition among banks or influencing their lending decisions.651  The Government of 
China noted that it had eliminated control of inte r-bank lending, liberalized the ability of banks to 
determine lending and deposit rates,  and provided greater latitude to the banks in paying interest on 
consumer deposits by only setting a ceiling on deposit interest rates.  The Government of China 
argued that therefore domestic interest rates in  China should have been used as a benchmark.652  An 
investigated producer argued that interest rate s from foreign banks operating within China should 
have been considered as the internal benchmark since foreign banks were not controlled by the 
government and provided loans on commercial terms.653 
10.138  In its determination in the OTR investigati on, the USDOC stated that the government's 
predominant role in the banking sector resulted in  significant distortions that rendered the lending 
rates in the country unsuitable as benchmarks, cro ss-referencing its findings to this effect in CFS 
Paper .  The USDOC noted that pursuant to U.S. domestic law, benchmarks must be comparable 
commercial loans, i.e., they must come from a commer cial lending institution, they must be similar in 
structure (variable or fixed rate), date of matur ity, and currency.  Because of the distortion of the 
interest rates in China, howeve r, these interest rates were unusable to measure the benefit from 
government loans, and it was not possible to adjust  for those distortions, as such an endeavour would 
be "highly complex, specu lative, and impracticable".654 
10.139  The USDOC found that the government's intervention in the banking sector created 
significant distortions, restricting and influencing ev en foreign banks within China, such that the 
interest rates of neither Chinese nor foreign banks  could be used as benchmarks.  Concerning the 
government involvement in the banking sector, th e USDOC found that while there had been some 
positive developments in SOCBs' lending practices in respect of increased cr edit risk analysis and 
other scrutiny measures before making lending decisions, the government continued to play a predominant role with significant distortions in its commercial banking sector.
655  In this regard, the 
USDOC noted that it had been denied access to many loan documents that it n eeded for its analysis.  
The USDOC further found that parties in the inv estigation had not demonstrated that conditions 
within the banking sector had changed since its determination in CFS Paper that the Chinese credit 
market was distorted.  Although the period of inv estigation in the OTR investigation was one year 
later than that in the CFS Paper  investigation, the respondents had not pointed to specific changes that 
had occurred between those periods that would warrant  a reconsideration of the determination that the 
credit market was distorted.  The USDOC noted th at the government's guidance in assisting reform, 
and in moving the banking system toward a commerc ial footing, did not mean that the credit market 
was not distorted through the government's ownershi p and control of banks.  It also noted that 
                                                      
651 Exhibit CHI-4, p. 101.  The Government of China noted that banks in China, including the four 
largest SOCBs, made their lending de cisions according to commercial considerations and had in place written 
procedures for risk analysis and loan approval similar to those of United States' banks and other market 
economies.  At verification, BOC offi cials informed the USDOC that it cons idered all relevant factors when 
evaluating loan applications (including the company's operation and management, financial performance, competitive position, industrial risks, future prospects, the development cycle of the industry, changes in that 
cycle, information on the particular industry, and the structure of competition in the industry) and that its 
lending practices followed very detailed internal cr edit risk analysis guidel ines.  (Id., p. 102). 
652 Exhibit CHI-4, p. 102. 
653 Id., p. 104. 
654 Id. 
655 The USDOC's determination was based on the fact  that it was denied access to many of the loan 
documents that it deemed critical for its analysis.  In addition, the USDOC noted that the parties did not point to 
any specific changes that occurred between 2 005 (the period of investigation in the CFS Paper  investigation) 
and 2006 (the period of investigation in the OTR inves tigation) that would have warranted a reconsideration of 
the determination in CFS Paper  that the credit market in China was distorted.  (Id . p. 105). WT/DS379/R 
Page 152  
 
 although SOCBs were moving toward a more solid co mmercial focus, this did not preclude them from 
serving as the implementing arm of government policy lending.
656 
(iii) CWP Investigation 
10.140  In the CWP investigation, the Government of China argued that the record evidence 
demonstrated that:  (i) China had a commercially-o riented lending market; (ii) loan pricing was 
determined by market forces, with banks making lending decisions based upon commercial 
considerations, including proper risk assessment; and (iii) governmental industrial policy had a very 
limited role in lending decisions, and was only one factor that a bank might take into account in 
examining risk.657 
10.141  The USDOC rejected the Government of Chin a's arguments.  It recalled that in the Lined 
Paper  investigation it had found that China's banking  sector did not operate on commercial basis and 
was subject to significant distortions, primarily ar ising out of the continued dominant role of the 
government in the sector.  It also recalled its determination in CFS Paper  that the government still 
dominated the domestic Chinese banking sector a nd prevented banks fro m operating on a fully 
commercial basis.  In the CWP investigation, the USDOC found that these distortions were still 
present in the Chinese banking sector, and that theref ore the interest rates of the domestic Chinese 
banking sector did not provide a suitable b asis for benchmarking the loans in question.658  A l s o  
recalling the CFS Paper  determination, the USDOC found that  foreign-owned banks operating in 
China were subject to the same restrictions as the SOCBs, and that their share of assets and lending 
was negligible compared with those of the SOCBs.  Therefore, for the same reasons discussed in the 
CFS Paper  investigation, the USDOC determined that foreign bank lending did not provide a suitable 
benchmark.659 
(iv) LWS Investigation 
10.142  During the LWS investigation, the Governme nt of China argued that the USDOC had 
committed a legal error in the preliminary determinat ion when it used an out of country benchmark to 
determine whether the government loans at issue conferred benefits.  Th e Government of China 
argued that under U.S. domestic law, the benchmar k must be a comparable commercial loan that the 
borrower could actually obtain on the market, and th at the world-wide interest rates used did not 
represent loans that a recipi ent could obtain in China.660 
10.143  For its final determination in the LWS inves tigation, the USDOC relied on its preliminary 
determination as well as its pr evious findings in CWP and CFS Paper  to determine that interest rates 
in China were distorted and thus unusable as be nchmarks to measure the benefit from government 
loans.  The USDOC also had found that while fo reign-owned banks operated in China, they were 
subject to the same restrictions as the SOCBs an d their share of assets and lending was negligible 
compared with those banks.661  The USDOC stated in this regard  that no new information had been 
submitted subsequent to the preliminary determination to give a reason to revi sit that determination as 
                                                      
656 Exhibit CHI-4, pp. 104-105. 
657 China did not identify any specific evidence on the record.  (Exhibit CHI-1, p. 72). 
658 Id., p. 7.  In its overall benchmarking determination, the USDOC noted that "there is not a 
functioning market for loans within th e PRC.  Therefore, because of the sp ecial difficulties inherent in using a 
Chinese benchmark for loans, the Department is selecting [an out-of-country benchmark]".  (Id., p. 6). 
659 Id. 
660 Exhibit CHI-3, p. 82. 
661 Id., p. 11 and CHI-34, p. 67901.  WT/DS379/R  
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 to the benchmark issue.  The USDOC also noted th at it was not possible to adjust for the market 
distortions it had found, because to do so would be too complex, speculative and impracticable.662 
(c) Assessment by the Panel 
10.144  Having reached the legal conclusion that, where lending rates in a given market are distorted 
due to government involvement such that no commerc ial benchmark can be foun d, Article14(b) of the 
SCM Agreement permits resort to alternative s ources for benchmarks, we now analyze the USDOC's 
determinations not to rely on Chinese interest ra tes as benchmarks.  In particular, we consider 
whether, based on the evidence before the USDOC, a reasonable and objective investigating authority 
could have reached the conclusion reached by the US DOC, namely that rates in China were distorted 
by government involvement in and control over the lending market such that there were no 
commercial interest rates that could be used as benchmarks. 
10.145  We note that although the analysis as presented in  the determinations in the investigations 
before us in this claim is relatively brief, in each case there is a cross-reference to the determination in 
the CFS Paper  investigation.  That determination thus fo rmed the principal substantive basis for the 
USDOC's determinations, in the three investigations  before us, that Chinese interest rates were 
unusable as benchmarks.  We note, further, that th e descriptions in the determinations in the CWP, 
LWS and OTR investigations appear to indicat e that little new evidence in respect of the 
government's role in the banking sector was addu ced by respondent parties beyond what had been 
relied upon in the CFS Paper  investigation, and that what was submitted did not lead the USDOC to 
change its assessment of the government's role in  the banking sector.  Before us, China makes little 
reference to any new record evidence of this type having been submitted, instead raising legal issues 
as to the permissibility of disregarding the interest ra tes in China.  In other words, before us China 
does not argue that, contrary to the USDOC's determ ination, there had been a major change in the 
government's role in the banking sector between the determination in the CFS Paper  investigation and 
those in the CWP, LWS and OTR investigations. 
10.146  We thus now turn to the analysis and c onclusions from the determination in the CFS Paper  
investigation.  Here we note that the CFS Paper  determination makes extensive reference to 
publications by outside institutions (OECD and IMF) as well as internal documents including 
published reports of Chinese banks, laws, etc. in support of its basic finding that the Chinese 
government played a predominant role in the Chinese  banking sector and distorted interest rates.  The 
USDOC also conducted extensive verification at whic h various officials made statements indicating 
the same role and influence of the Chinese government.  Furthermore,  there was extensive discussion 
in the CFS Paper  determination to the effect that lending rates were largely undifferentiated, with 
most loans being made at rates close to the govern ment-set benchmark rate.  While before us, China 
refers to this as evidence of interest rate competiti on, and the operation of market forces, we consider 
that the USDOC was not unjustified in concluding that this was rather evid ence that market forces 
were not operating, in particular, that banks still lacked adequate risk management and analysis 
skills.663  We also note that China does not dispute the USDOC's factual findings that the foreign 
banks in China were subject to the same governme nt controls as domestic banks, and that privately-
owned Chinese banks accounted for a very  small percentage of total lending. 
10.147  In sum, on the basis of the record evidence be fore the USDOC, we find that a reasonable and 
objective investigating authority c ould have concluded that the government played a predominant role 
in the Chinese commercial lending market as both a lender and in terms of controlling the operation of 
                                                      
662 Exhibit CHI-3, p. 83.  From the record evidence be fore the Panel, it appears that the Government of 
China did not present arguments and/or evidence on the question of governmental control of the banking sector in the LWS investigation. 
663 Exhibit CHI-93, p. 59-60. WT/DS379/R 
Page 154  
 
 this market, and thus distorted interest rates, such that the observed rates were not suitable as 
benchmarks.  We also note the statements by the USDOC in the LWS and OTR investigations that it 
would not be possible to make the necessary adjustme nts to the observed rates to convert them into 
usable benchmarks.  It is not the role of a Panel to conduct a de novo  review of the evidence, and 
China has not objected to this conclusion of the USDOC.  We thus find no basis in the evidence 
before us to question this judgement by the USDOC. 
10.148  For the foregoing reasons we therefore find th at China has not establis hed that the USDOC's 
decision not to rely on Chinese interest rates as  benchmarks for SOCB loans denominated in RMB 
was inconsistent with the obligations of th e United States under Article 14(b) of the SCM 
Agreement.
664 
H. PANEL 'S TERMS OF REFERENCE – BENCHMARKS ACTUALLY USED BY THE USDOC 
1. Introduction 
10.149  WTO dispute settlement panels are under a duty to address and dispose of certain issues of a 
fundamental nature on their own motion if the parties to the dispute remain silent on those issues.  No 
doubt, the vesting of jurisdiction on a panel through its terms of reference constitutes such an issue of 
a fundamental nature.665  Because we wanted to ascertain the scope of our terms of reference in 
respect of China's claims under Article 14 of the SCM Agreement, at the second meeting of the Panel 
with the parties, we asked the parties' views on whether the text of China's request for the 
establishment of the Panel – in particular paragra ph B.1(d)(i) thereof – provides a sufficient basis for 
China's claims in respect of the benchmarks actually  used by the USDOC in its benefit determinations 
in respect of land-use rights and loans.666  The issue does not arise with  respect to subsidies in the 
form of inputs because for these, Chin a does not challenge the benchmarks  that were actually used by 
the USDOC.667 
2. Main arguments of the Parties 
(a) China668 
10.150  China argues that the language of paragraph B.1( d)(i) of its panel request provides a sufficient 
basis for its claims in respect of the benchmarks actually used by the USDOC  for land use rights and 
loans.  China first argues, in this  respect, that paragraph B.1(d)(i ) necessarily encompasses the use of 
benchmarks that are not based on prevailing terms and conditions in China.  Second, China submits 
that the USDOC's out-of-country benchmarks for la nd-use rights and loans are the embodiment of its 
decision to reject market conditions  in China as the basis for determining the existence and amount of 
the benefits in question.  Third, China argues th at it was only through the use of these benchmarks 
that the USDOC, in fact, rejected market conditions  in China as the basis for identifying the relevant 
benchmark under Article 14 of the SCM Agreement. 
10.151  China further argues that it liste d the articles that it alleged to have been violated (including 
Article 14 of the SCM Agreement), and that this, by  itself, is sufficient to encompass its claims 
against the benchmarks that the USDOC actually used  for land-use rights and loans.  China notes that 
panel requests have sometimes done nothing more than list the articles that are alleged to have been 
                                                      
664 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
665 Appellate Body Reports on Mexico – Corn Syrup (Article 21.5 – US) , para. 36 and US – Carbon 
Steel , para. 123. 
666 Panel question 5 to the Parties (second meeting). 
667 China response to Panel question 35 (first meeting). 
668 China response to Panel question 5 (second meeting).  WT/DS379/R  
 Page 155 
 
 
 violated.  Even in those instances, the Appellate Bo dy has found that the panel request satisfied the 
requirements of Article 6.2 of the DSU. 
10.152  Finally, China notes that there is no indication that the United States harboured any 
misunderstanding as to the scope of China's claims  or suffered any prejudice as a result of how China 
phrased its panel request.  (China notes that by c ontrast, the United States requested a preliminary 
ruling with respect to the measure challenged as part of China's "as such" claims on double remedies.)  
Thus, even if there were some ambiguity in paragr aph B.1(d)(i) of the panel request, China argues, it 
is clear from the course of the Panel proceedings that there has been no misunderstanding concerning 
China's claims against the benchmarks that the USDOC actually used for loans and land-use rights. 
(b) United States669 
10.153  The United States notes that the claim identified in China's request is directed at the "rejection 
of prevailing terms and conditions in China [...]" an d that nowhere in paragraph B.1(d)(i) or elsewhere 
in China's request for the establishment of the Pa nel, does China refer to the "benchmarks actually 
used" by the USDOC for land-use rights or loans. 
10.154  The United States notes that the panel request speci fies that China's claim relates only to "the 
following obligations of the United States" and lists certain aspects of the USDOC determinations in 
connection with Article 14 of the SCM Agreement, indi cating that this is the extent of China's claims 
with respect to the use of benchmarks.  Thus, the United States argues, to the extent that China is 
bringing a different claim, this claim would be outsi de the scope of its panel request.  In this regard, 
the United States notes that the China – Publications and Audiovisual Products panel found that by 
listing certain specific requirements under the Chines e measures at issue, the United States had only 
notified China of a claim in respect of these sp ecific requirements to the exclusion of other 
requirements contained in the measures at issue. 
10.155  The United States disagrees with China that the language in pa ragraph B.1(d)(i) of its panel 
request "necessarily encompasses the use of a benchm ark that is not based on prevailing terms and 
conditions in China".  The United States considers that the USDOC's rejection of prevailing terms and 
conditions in China and its selection of benchmar ks actually used are separate determinations. 
10.156  Likewise, the United States notes that China has discussed these issues separately throughout 
its submissions in this dispute, showing that in  China's view, the consistency with the covered 
agreements of the USDOC's determination to "rej ect prevailing terms and conditions in China" and 
the benchmark "actually used" are distinct analytical  questions.  That said, the United States considers 
it irrelevant whether China made it clear in its s ubmissions to the Panel that it was challenging the 
benchmarks actually used by the USDOC for land-u se rights and loans:  The question is whether a 
claim against the benchmarks "actually used" was in cluded in China's request for the establishment of 
the Panel.  Finally, the United States considers it irrelevant that it did not raise any objection to China's claims before the Panel posed a question on th e issue, noting that WTO panels have to address 
and dispose of certain issues of a fundamental nature, even if the parties to the dispute remain silent 
on those issues. 
3. Assessment by the Panel 
10.157  Article 6.2 of the DSU sets out the requirement s pertaining to a complaining party's request 
for the establishment of a panel.  It provides as follows: 
                                                     
 
669 United States response to Panel question 5 (second meeting); comments on China's response to 
Panel question 5 (second meeting). WT/DS379/R 
Page 156  
 
 "The request for establishment of the panel [...] shall indicate whether consultations 
were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint suffici ent to present the problem clearly". 
10.158  The requirement, in Article 6.2 of the DSU, to identify the measures at issue in a dispute and 
to provide a brief summary of the legal basis of th e complaint has been linked to the dual necessity of 
establishing the Panel's terms of reference and th e due process objective of notifying the responding 
party (and third parties) of the case it has to answer: 
"The requirements of precision in the requ est for the establishment of a panel flow 
from the two essential purposes of the terms of reference.  First, the terms of reference define the scope of the dispute.  Secondly, the terms of reference, and the 
request for the establishment of a panel on which they are based, serve the due 
process objective of notifying the parties and third parties of the nature of a complainant's case [...]".
670  (footnote omitted) 
10.159  Compliance with Article 6.2 must be demons trated on the face of the request for the 
establishment of a panel, and reading the panel request "as a whole".671  We agree with the Japan – 
DRAMs  (Korea)  panel's reasoning that the principles embodied in Article 6.2 of the DSU  may only 
properly be upheld if panels appl y that provision on the basis of the text of the panel request, i.e., 
without regard to whether or not the responding  party suffered a prejudice by considering what 
happened during the course of the panel proceedings.672 
10.160  In raising with the parties the question of our terms of reference, we sought to ascertain our 
jurisdiction by identifying the precise  claims at issue in the present dispute.  Specifically, we sought to 
ascertain whether the terms of China's panel request  were sufficiently broad to cover both aspects of 
China's "benchmarks" claims in respect of land- use rights and loans, i.e., concerning not only the 
USDOC's rejection of land-use prices and interest rates in China as benchmarks, but also the consistency with Article 14 of the benchmarks actually used by  the USDOC in each instance. 
10.161  The relevant part of China's panel re quest, section B.1.(d)(i), reads as follows: 
"B. Legal Basis of the Complaint 
[...] 1. As Applied Claims  China considers that the CWP, OTR, LWRP, and LWS anti-dumping and 
countervailing duty investiga tions, determinations and orders, the definitive anti-
dumping and countervailing duties imposed pursuant thereto, as well as the combined 
effect of the anti-dumping and countervaili ng duty determinations, orders, and duties 
in each such investigation, are inconsis tent, at a minimum, with the following 
obligations of the United States under the covered agreements 
                                                     
 
670 Appellate Body Report on US – Carbon Steel , para. 126. 
671 Appellate Body Report, US – Carbon Steel , para. 127, cited with approval in, inter alia , Appellate 
Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 169. 
672 Panel Report on  Japan – DRAMs (Korea) , paras. 7.5-7.10.  The panel, in its analysis, attached great 
importance to comments made by the Appellate Body in para. 126 of its Report in US – Carbon Steel .  The 
panel also noted the approach taken by the Canada – Wheat  Exports and Grain Imports  panel.  Given that the 
United States did not raise the issue we discuss here on its own initiative, we might in any case be hard pressed 
to conclude that the United States was prejudi ced by any defect in China's panel request.  WT/DS379/R  
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 [...] 
(d) in connection with each instance in which the US authorities resorted to a 
benchmark outside of China for the purpo se of determining the existence and amount 
of any alleged subsidy benefit –  
(i)  the US authorities' rejection of  prevailing terms and conditions in 
China as the basis for determining whether, and to what extent, subject 
producers received a subsidy benefit under the methodologies set forth in Article 14 of the SCM Agreement;". 
10.162  We are satisfied that read in its totality, China's panel request  provides a sufficient basis for 
China's claims in respect of the benchmarks actually  used by the USDOC.  We note in particular that 
the introductory sentence to paragraph B.1.(d) refe rs to the instances in which the USDOC relied on 
"benchmarks outside of China".  This, in our view , is a sufficient indication of China's intent to 
challenge before the Panel not onl y the consistency with Article 14 of the SCM Agreement of the 
USDOC's decision to reject terms and conditions prev ailing in China, but also the consistency with 
the same provision of the external benchm arks that the USDOC actually relied upon.  
10.163  For the foregoing reasons, we find that China's claims in respect of the benchmarks actually 
used by the USDOC with respect to loans and land- use rights fall within our terms of reference.  
Given this finding, we now turn to an assessment of these claims of China. 
I. C
ONSISTENCY WITH ARTICLE 14(D) OF THE SCM  AGREEMENT OF THE BENCHMARKS 
ACTUALLY USED BY THE USDOC  – LAND -USE RIGHTS  
1. Claim of China 
10.164  China claims that the benchmark relie d upon by the USDOC in the LWS and OTR 
investigations to determine the existence and amount  of benefit conferred by the provision of land-use 
rights on, respectively, Aifudi and Starbright, w as inconsistent with Article 14(d) of the SCM 
Agreement.673, 674 
2. Factual background 
10.165  In the LWS and OTR investigations, the USDOC  determined the existence and amount of 
benefit conferred by the provision of land-use rights by comparing the price paid by the investigated producers to prices for certain industrial prope rty in Bangkok and adjacent provinces in Thailand.
675, 
676  The USDOC considered Thailand to be comparab le to China in terms of its "prevailing market 
                                                      
673 See, generally, China first written submission, paras. 302-319. 
674 As indicated at para. 10.1, supra , China also raises consequential claims pursuant to Articles 10 
and 32.1 of the SCM Agreement and Article VI:3 of the GATT 1994. 
675 Exhibits CHI-3, p. 17; CHI-34, p. 67909; and CHI-50, p. 71369. 
676 The USDOC also considered, and rejected, two a dditional benchmarks:  First, the USDOC rejected 
the possibility of using world market prices as benchm ark because there is no "world market" for land (the 
USDOC reasoned that land being an in situ  property, it could not simultaneously be "available to an in-country 
purchaser" while located and sold out-of-country on the world market).  The US DOC also examined whether 
land prices in China were determined in accordance with  market principles.  The US DOC found that they were 
not, due to the government's involvement in the land-use rights market as well as the widespread and 
documented deviation from the authorized methods of pricing and allocating land.  In this context, the USDOC 
also rejected an argument of the Government of China that it should have applied the price discrimination test provided for in its "market-principles analysis"; the Government of China had argued that Chinese land-use 
rights prices were consistent with market-principles an alysis because (i) the investigated producer at issue did WT/DS379/R 
Page 158  
 
 conditions", taking into considera tion certain economic and demographic factors.  Specifically, the 
USDOC found that (i) China and Thailand had similar per capita  gross national income ("GNI") at 
$2,010 and $2,990, respectively and that (ii) popul ation density in China and Thailand were roughly 
comparable at 141 persons/km
2 in China and 127 persons/km2 in Thailand.677  The USDOC also 
found that producers consider a number of markets, including Thailand, as an option for diversifying 
production bases in Asia beyond China.678  In the LWS investigation, the USDOC further took into 
consideration that population density was higher than national averages in both Shandong province 
(where the investigated producer was located) and in  Zone 1 in Thailand (the benchmark used), at 
562/km2 and 908/ km2, respectively and that Shandong province had a per capita  GNI of 
approximately $2900, i.e., closer to that of Thailand than China's overall GNI.679 
10.166  In its price-comparison analysis, the USDOC relied on Thai land prices reported in 
independent real estate market reports.  In the LWS investigation, in which th e land-use rights at issue 
were "granted" land-use rights (rights which requi red a large up-front fee but no annual fees aside 
from taxes), the USDOC used a one-time purchase benchmar k in order to measure the benefit at issue.  
For this purpose, the USDOC selected industrial land  prices in one of three industrial promotion zones 
in Thailand (comprising Bangkok and adjacent pr ovinces) as reported in the market reports.680 
10.167  In the OTR investigation, in which the land-u se rights also included "allocated" rights (land-
use rights provided to SOEs for a nominal one-tim e charge and an annual land-use fee), the USDOC 
determined that these more closely resembled a lease or rental arrangement rather than a one-time purchase.
681  The USDOC therefore looked for an appropriate "property yield" for commercial land in 
Thailand, i.e., the annual cash flow from rent that a land owner in Thailand c ould expect to earn, and 
to that effect used dividend yields from real estat e investment trusts ("REITs"), as reported in market 
reports prepared by the same source that compiled the reports on which it relied to determine the 
industrial land prices.682 
                                                                                                                                                                     
not benefit from any price discrimination in acquiring its land-use rights; and (ii) the government's price covered 
its own costs and made profits for managing and selling land-use rights.  (Exhibits CHI-3, pp. 15-16 and 59; 
CHI-34, p. 67908; and CHI-50, p. 71369). 
677 Exhibits CHI-34, p. 67909 and CHI-50, p. 71369. 
678 The USDOC considered that the same produc ers could compare prices across borders when 
deciding what land to buy.  It noted that the market reports from which it obtained its benchmark prices 
compared real estate prices in China with other prices in Asia (including Thailand).  Further, the USDOC noted 
that studies by the Japan External Trade Organizatio n (JETRO) comparing Asian alternative investment 
destinations beyond China reported that "Thailand got the highest score as the best location for establishing a 
production base over the next five to 10 years" and that  "Thailand ranks as the second-best choice after China as 
a location for expanding both high and mid to low end production".  Finally, the USDOC took into 
consideration a statement contained in a market report that "[m]any foreign companies believe that Thailand is 
still a strategic choice for a Southeast Asian producti on base".  (Exhibits CHI-34, p. 67909 and CHI-50, 
p. 71369). 
679 Exhibit CHI-34, p. 67909. 
680 Id., p. 67909 and CHI-50, p. 71369. 
681 Exhibit CHI-50, pp. 71369-70. 
682 REITs "are trusts that are dedicated to owning and/or operating income-pr oducing real estate" and 
their dividends "are based on the income, often rent, generated from the real estate holdings".  The USDOC noted that REITs portfolios in Thailand held not only industrial but also non-industrial real estate and that there 
was a wide range of returns.  The USDOC considered that nothing on the record indicated that industrial land 
would yield a higher or lower income than other types of real estate in Thailand and on that basis concluded that dividend yields from REITs were a reasonable proxy for assessing the market-value an nual rent for industrial 
land in Thailand.  In order to calculate an annual rent , the USDOC calculated an annu al yield percentage (i.e., 
the average dividend yield of the REITs in Thailand in the period contemporaneous with the one-time purchase benchmark established in the LWS determination), which it multiplied by the up-front purchase price per square 
foot established in the LWS determination.  (Id., pp. 71369-70).  WT/DS379/R  
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 3. Main arguments of the Parties 
(a) China 
10.168  China submits that the benchmark actually used by  the USDOC in the investigations at issue, 
i.e., land prices in Bangkok, Thailand, is inconsiste nt with Article 14(d) of the SCM Agreement, as 
interpreted by the Appellate Body in US – Softwood Lumber IV .683 
10.169  China argues that land prices in Thailand (or any other country) do not "relate or refer to" the 
prevailing market conditions for land in China, and that the Thai benchmark, 3000 km away, bears no 
relationship to prevailing market conditions in China.684  China adds that the factors affecting the 
value of land (its physical and legal characteristics) are unique to a particular country and even often 
significantly vary within a country685 and questions whether it would ever be possible to make what 
the Appellate Body referred to as "all necessary adju stments" to undertake that sort of comparison 
with respect to land-use rights.686  In addition, China argues that the USDOC did not explain how the 
factors it considered relevant for choosing land prices in Thailand (e.g. the similar levels of per capita  
GNI) have any connection to prevailing market c onditions for land in a particular country or 
location.687  China also notes the admission by th e United States that the USDOC made no 
adjustments to its Thai benchmark to ensure that it would "relate or refer to, or be connected with" 
prices prevailing on the Chinese land-use rights market.688 
10.170  Further, China argues that the USDOC could ha ve used alternative benchmarks other than 
land prices in another country:  China argues that the USDOC has in the past resorted to methods, 
other than the use of external benchmarks for ev aluating the existence and amount of benefit in the 
case of land.  In particular, China notes that the USDOC has for instance, in the past, looked at 
whether land prices are determined in  accordance with market principles.689  This, in China's view, 
                                                      
683 See, e.g.,  China second written submission, para. 64; response to Panel question 43 (first meeting), 
citing to Appellate Body Report on US – Softwood Lumber IV , paras. 103 and 108. 
684 China first written submission, para. 324. 
685 Id., paras. 310 and 313-314.  According to China, land is a non-tradable good and its value is 
inherently locational, that is, the value of land cannot be  separated from its physical and legal characteristics, for 
instance, topography, transportation infrastructure, taxes, land-use restrictions, labour and environmental laws.  (Id., para. 308)  China submits that the sources relied upon by the USDOC for its Thai land price data confirm 
that national and local property factors affect the value of land and therefore that land values significantly vary 
among different countries, regions, and even within a single country.  (Id., paras. 311-313). 
686 Id., paras. 307 et seq.   China argues in this respect that while Article 14(d) makes clear that 
availability, marketability, and transportation form part of the "prevailing market conditions" for the good in question, land is an unmovable good so that it is impossible to "replicate reliably" the prevailing market 
conditions for land in China by referring to land prices in Thailand.  ( See, e.g.,  China first written submission, 
paras. 314-315, citing to Appellate Body Report on US – Softwood Lumber IV , para. 108). 
687 Id., para. 318. 
688 China second written submission, para. 50; opening statement at the first meeting of the Panel, 
para. 49. 
689 China argues that in previous investigations where the government was found to be the sole provider 
of the land in question, the USDOC determined the ex istence of the benefit by evaluating whether there was 
price discrimination among the users of such land, a method which China argues, the Preamble to the USDOC's countervailing duty regulations recognizes.  (China response to Panel Question 34 (first meeting) (quoting from 
comments made by the USDOC in the CWP investigation and USDOC determinations in Steel Wire Rod from 
Trinidad and Tobago  (Exhibit CHI-149) and Certain Cut-to-Length Carbon-Quality Steel Plate from the 
Republic of Korea  (Exhibit CHI-150)).  China argues that, had the USDOC applied a similar approach in the 
LWS investigation, there would have been no subsidy to the investigated producer concerned (Aifudi).  China 
also adds that in all thr ee of these instances, the USDO C recognized that land values are unique to particular 
locations, and therefore that any benchmark must be drawn from the same general location and take into account 
specific factors that affect land va lues at that location.  (Id.). WT/DS379/R 
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 belies the United States' argument that it would be im possible to calculate the benefit at all in certain 
circumstances if China's position were accepted.
690 
10.171  Finally, China does not consider sufficient the United States' defence of the benchmarks on 
the ground that "[t]here is not always a perfect set of data upon which to rely" and that it may 
consequently not always be possible to make all th e adjustments required by Article 14(d) of the SCM 
Agreement.  China argues that the mandatory la nguage of the Agreement cannot be disregarded on 
the ground that it was too difficult a standard to apply.  China also adds that the fact that it would be 
impractical to adjust for all the factors in Artic le 14(d) was precisely why the Appellate Body, in US –  
Softwood Lumber IV , seriously questioned whether out-of country  benchmarks could ever lawfully be 
used.  China also highlights the warning of the Appellate Body, in US − Softwood Lumber IV , that 
even in the limited circumstance in which out-of-c ountry benchmarks may be used, the benchmark 
must – without exception – "relate or refer to, or be connected with" the prevailing , i.e., existing 
market conditions in the country of provision.691 
(b) United States 
10.172  The United States defends the consistency with Article 14(d) of the Thai benchmark used by 
the USDOC in the LWS and OTR investigations.  
10.173  The United States argues that nothing in the text of Article 14(d) suggests that land-use rights 
are exceptional, or that they should be treated di fferently than other goods w ith respect to the use of 
external benchmarks.692  The United States considers that China's restrictive interpretation, if 
accepted, would eliminate the possibility of counterv ailing the subsidized provision of land-use rights, 
contrary to the object and purpose of the SCM Agreement.693 
10.174  The United States submits that by selecting la nd prices in a country with a comparable per 
capita  GNI and population density and by using prices for comparable types of land (e.g., industrial 
zones, allocated versus granted land-use rights) , the benchmark used by the USDOC reasonably 
reflected the "prevailing market cond itions for the good in question". 
10.175  Specifically, the United States argues that the Th ai prices used accounted for the prevailing 
market conditions, consistent with  Article 14(d) of the SCM Agreement.  The United States notes the 
factors that the USDOC took into consideration in selecting Thai prices as the benchmark ( per capita  
GNI, population density, and types of land transactions) to ensure that these prices would "relate or refer to or be connected with" China's prevailing market conditions.  The United States submits that 
                                                     
 
690 China response to Panel question 34 (first meeting). 
691 See, e.g.,  China opening statement at the first meeting of the Panel, para. 49; first written 
submission, para. 309. 
692 The United States notes that in US − Softwood Lumber IV , the Appellate Body rejected an argument 
similar to China's argument that land use-use rights sh ould be treated differently under Article 14(d):  the 
Appellate Body rejected an argument of Canada that stan ding timber is attached to the land and incapable of 
being traded across borders.  The Appellate Body explained that excluding non-tradable goods would permit the 
circumvention of the WTO's subsidies disciplines.  (U nited States first written submission, paras. 273-274, 
referring to Appellate Body Report on US − Softwood Lumber IV , paras. 57, 64 and 67). 
693 Id., para. 275.  In addition to its arguments based on Article 14(d) of the SCM Agreement, the 
United States also argues that China's position is contradicted by the terms of Section 15(b) of China's Protocol 
of Accession, which provides no basis to exclude government-provided land use rights, and which confirms the permissibility of using out-of-country benchmarks in countervailing duty investigations concerning imports 
from China.  (Id., para. 276).  B ecause, as explained in Section X.B, supra , the United States has clarified to the 
Panel that it is not relying on the Protocol of Accession in defending this or any of China's claims pursuant to Article 14 of the SCM Agreement, we do not take thes e arguments of the United St ates into account in our 
analysis.  WT/DS379/R  
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 Article 14(d) of the SCM Agreement lists several factors in relation to which the adequacy of 
remuneration should be determined, in cluding price, quality, availability, marketability, transportation 
and other conditions of purchase or sale.  The Un ited States considers that demand is typically the 
primary determinant of the price for urban land (becau se supply is considered to be fixed) and that 
demand in turn is a function of population dens ity and the level of economic development, as 
measured by per capita  GNI.  The United States also submits that quality and marketability of land-
use rights prices in China were taken into considerati on by the fact that producers, in general, consider 
a number of markets, including Thailand, as an option for diversifying production bases in Asia 
beyond China.  Moreover, the USDOC used prices for land in industrial zones, as the land-use rights 
in China were also located in in dustrial zones; the United States ar gues that use of similar types of 
land (i.e., land in industrial zones) would account for the quality and marketability of the land.  The 
USDOC also took into account whether the transaction involved allocated or granted land-use rights, 
which would impact the marketability of the land- use rights.  Availability was accounted for by 
selecting benchmark prices from an urban area, Ba ngkok, where population densities were higher than 
on average for Thailand, because the land-use rights at  issue in the OTR and LWS investigations were 
also from urban areas of China.694   Thus, the United States argues, the Thai prices selected by the 
USDOC reasonably reflected the "prevailing market  conditions" for the land-use rights in China.695 
10.176  The United States notes that China argues that  the USDOC should have taken into account 
other factors such as capital control measures limitin g foreign ownership of companies in Thailand or 
various incentives that governments provide to co mpanies, but does not point to any relevant 
information on the record that would have allowed the USDOC to make any such adjustments.  The 
United States submits that investigating authorities are restrained in their ability to adjust prices 
because of the limited information before them so th at it may not always be possible to adjust for all 
of the items listed in Article 14(d), but that this should not preclude a Member from selecting a comparison price.
696  The United States also argues that if the bar for selecting the out-of-country 
benchmark is set so high that it requires the use of  unavailable data, investig ating authorities will be 
required to use in-country prices even where they c ontain the very subsidy that they are trying to 
measure, and that such measurement, in turn, woul d not capture properly the benefit of the subsidy 
due to the predominant role of the government.697  The United States also argues that China's position 
ignores the inherent "flexibility" in the guid elines under Article 14 of the SCM Agreement.698 
10.177  In response to arguments of China, the United St ates argues that it considers benchmarks used 
in other USDOC investigations to be irrelevant to this dispute and that the other cases cited by China 
are not analogous to the land-use rights market in  China as the USDOC did not find in any of these 
cases that the land markets were distorted by the government's predominant role.699  The United States 
also argues that in the investiga tions at issue, the USDOC did in fact perform a "market principles 
analysis" and found that land-use rights in China are not priced in accordance w ith market principles.  
The United States adds that China's argument that a "price discrimination" analysis could have been 
                                                      
694 United States first written submission, para. 278-2 84; second written submission, paras. 115-119.  
The United States also argues that transportation is not a factor in valuing land as land is not transported 
695 See, e.g.,  United States first written submission, para. 293. 
696 Id., para. 286. 
697 United States response to Panel question 46 (first meeting), citing to Appellate Body Report on US – 
Softwood Lumber IV , para. 93. 
698 See, e.g. , United States first written submission, para. 286, citing to Panel Report on EC – 
Countervailing Measures on DRAM Chips , para. 7.213; response to Panel question 46 (first meeting). 
699 United States second written submission, paras. 110-112.  The United States submits that China 
misrepresents the USDOC's practice since the USDOC consistently relies on out-of-country benchmarks when it 
determines that the government plays a predominant role in the market.  In  addition, the United States submits 
that one of the cases cited by China did not even concern the provision of land, but, instead, pertained to an 
analysis of "revenue forgone" by the USDOC.  (Id.). WT/DS379/R 
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 applied is misleading because such an analysis is pa rt of the "market principles" analysis that the 
USDOC performed.
700 
4. Main arguments of the Third Parties 
(a) European Communities 
10.178  The European Communities considers that the me re fact that a piece of land is located 
3000 km away is not a sufficient reason alone to co nclude that a market benchmark is unreasonable.  
The European Communities also argues that any comparison must be adju sted in order to replicate the 
prevailing terms and conditions which woul d have existed absent price distortion.701 
(b) Saudi Arabia 
10.179  Saudi Arabia argues that the use of external benchmarks is especially inappropriate with 
respect to financial contributions in the form of the provision of land and that, as a result, the 
adjustments required under Article 14(d) ( as acknowledged by the Appellate Body in US − Softwood 
Lumber IV ) apply a fortiori  when the benchmarks concerns the provision of land.702 
5. Assessment by the Panel 
10.180  We recall our finding above that China has not established that the USDOC's decision not to 
rely on Chinese prices for land-use rights as benchmarks  was inconsistent with Article 14(d) of the 
SCM Agreement.  The remaining question before us  thus is whether China has established that the 
actual benchmarks used by the USDOC are inconsiste nt with Article 14(d) of the SCM Agreement. 
10.181  We recall that under the terms of Article 14(d)  of the SCM Agreement, the adequacy of 
remuneration for the government-provision of goods "s hall be determined in relation to prevailing 
market conditions for the good or service in question in the country of provision or purchase 
(including price, quality, availab ility, marketability, transportation a nd other conditions of purchase or 
sale)".  We further recall that the Appellate Body, in US − Softwood Lumber IV , cautioned that: 
"[w]hen an investigating authority resorts [...] to a benchmark other than private 
prices in the country of provision, the benchmark chosen must, nevertheless, relate or 
refer to, or be connected with, the preva iling market conditions in that country, and 
must reflect price, quality, availability, marketability, transportation and other conditions of purchase or sale, as required by Article 14(d)".
703 
10.182  The Appellate Body indicated that a range of factors would have to be taken into account 
when making adjustments to replicate conditions that would prevail in the country of provision (in the 
absence of the distortion caused by the government's role that led to the conclusion that in-country 
prices could not be used as benchmarks).  In the pa rticular situation of reliance on prices in another 
country as a proxy for the prices that would prevail in the country of provision of a good or service, the Appellate Body noted that "it would be difficult,  from a practical point of view, for investigating 
authorities to replicate reliably market conditions pr evailing in one country on the basis of market 
                                                     
 
700 The United States explains that, according to the Preamble to the USDOC's regulations, the USDOC 
"will assess whether the government price was in accordan ce with 'market principles'" in situations where the 
government is the only source available to consumers in  the country, and that, one factor which the USDOC 
"may" rely upon in that assessment, is "possible price discrimination".  (Id., paras. 113-114). 
701 European Communities third-party submission, para. 47. 
702 Saudi Arabia third-party submission, para. 77. 
703 Appellate Body Report on US − Softwood Lumber IV , para. 103.  WT/DS379/R  
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 conditions prevailing in another count ry", and that appropriate adjustments would need to be made to 
avoid in particular the counter vailing of comparative advantages.704 
10.183  Concerning the implications of these findings by  the Appellate Body for the use of cross-
border benchmarks for land-use rights, China argues fi rst that because land is by definition not traded 
across borders and because its value is significantly determined by its location and by the applicable 
legal regime, it is impossible to replicate reliably the prevailing market conditions for land in one 
country by referring to land values in another count ry, which has its own physical, social, political and 
economic environment.705 
10.184  In our view, the considerations identified by China certainly mean th at ensuring that any 
benchmark (especially any out-of-country benchmark) u sed for land-use rights "relate[s], refer[s] or is 
connected with" prevailing market conditions in th e country of provision of the land is a difficult 
exercise.  Yet, we do not consider that the terms of Article 14(d) exclude, a priori , the possibility of 
determining the existence and amount  of benefit for subsidies in the form of provision of land  on the 
basis of land prices in another country.  Further, accep ting that it would never be permissible to resort 
to land prices in other countries as benchmarks in situations such as were found to exist in the LWS 
and OTR investigations would mean that precisely because the land market in the country of 
provision is distorted, it would become impossible for the investigating authority to determine the 
existence and amount of any benefit.  Such a resu lt – that countervailing certain forms of subsidies 
would become impossible in certain situations706 – would, in our view, undermine the object and 
purpose of the SCM Agreement, "which is to stre ngthen and improve GATT disciplines relating to the 
use of both subsidies and countervailing measures, wh ile, recognizing at the same time, the right of 
Members to impose such measures under certain conditions".707 
10.185  The other principal argument of China focuses on what it perceives as a requirement under 
Article 14(d) of the SCM Agreement for the investiga ting authority to make adjustments, in all cases, 
to any alternative benchmark that may be selected , to ensure that that benchmark approximates 
prevailing conditions in the country of provision.  In other words, we see China as arguing that 
without "adjustments", an y proxy benchmark will be, ipso facto , inconsistent with Article 14(d).  In 
this regard, China argues, and the Un ited States does not contest, that in the investigations at issue, the 
USDOC performed no adjustments to the Thai land-use prices it used as benchmarks.  The 
United States' response to this argument of Chin a is that the USDOC ensured that it met the 
requirements of Article 14(d) through its selection of  the benchmark, such that it was not necessary to 
perform further adjustments. 
10.186  We recall that the ultimate goal in selecting a be nchmark is to ensure the comparability of that 
benchmark with the relevant market conditions, and this is particularly true where proxies are used 
                                                      
704 Appellate Body Report on US − Softwood Lumber IV , paras. 108-109. 
705 China first written submission, paras. 310 and 315. 
706 The claims before us are limited to the benchmar ks actually used by the USDOC.  Hence, we do not 
have to consider what benchmarks other than land-use prices in China or land-use prices in other countries the 
USDOC could possibly have resorted to .  Yet, we note China's arguments that in other instances in which it 
considered domestic land prices to be distorted, the USDOC relied on benchmarks such as whether the price 
paid for the land was consistent with market principles or the price paid by the investigated producer was 
different than that paid by other entities (price discrimi nation).  (China response to Panel question 34 (first 
meeting)).  The United States responds  that those other cases did not involve situations where the market was 
found to be distorted, and that in the investigations at  issue in this dispute, in fact the USDOC did conduct a 
market principles examination,  of which the price discrimination analysis is a part.  In our view, the facts of the 
investigations at issue underscore the inherent difficu lties that would arise from the use of benchmarks focusing 
on market distortions in a situation in which it has been found that the entire land-use rights market in the 
country of provision is distorted. 
707 Appellate Body Report on US − Softwood Lumber IV , para. 64. WT/DS379/R 
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 due to the unavailability of in-country prices.  In  turn, comparability can be achieved either through 
the selection of the particular benchmark to be used , or through application of adjustments to a price 
on which the benchmark price will be based, or  through some combination of selection and 
adjustment.  This is how we read the Appellate Body's discussion in US 
− Softwood Lumber IV  about 
the need to ensure that all necessary adjustment s are made.708  That is, rather than establishing a 
litmus test that in every case, "adjustments" must be made no matter how inherently comparable the 
selected benchmark is to the market conditions th at it is being used to approximate, we see the 
Appellate Body as highlighting the elements of comp arability that must be reflected in the benchmark 
ultimately applied.  That is, the inquiry under Article  14(d) is whether the benc hmark as actually used 
is one that "relates or refers to, or is connected with" the prevailing market conditions in the country 
of provision, in particular as to "price, quality,  availability, marketability, transportation and other 
conditions of purchase or sale".709 
10.187  While this is a demanding standard, we recall th at the use of a benchmark other than private 
prices in the country of provision is, in the first pla ce, made necessary by the fact that the (land-use) 
market in the country of provision is distorted.  It would in our view be incongruous to interpret 
Article 14(d) so as to effectively require the investig ating authority, confronted  with such a situation, 
nevertheless to choose between not performing the benefit calculation or calculating it on the basis of a benchmark based on distorted market conditions.  In sum, in such a situation, we see Article 14(d) 
as requiring an investigating authority to do its b est to identify a benchmark that approximates the 
market conditions that would  prevail in the absence of the dist ortion.  While inherently such a 
benchmark cannot be perfect as it will never be possible to take into account all of the myriad factors 
that establish market conditions, and it will never be possible to know with certainty the market 
conditions that would prevail in the absence of th e government-caused distortion, the authority must 
conduct a reasoned analysis based on factual informa tion, selected and adjusted  as necessary to be as 
comparable as possible to such market conditions.  In other words, whatever benchmark is selected 
and whatever methodology is used must be on es that a reasonable and objective investigating 
authority could use for that purpose. 
10.188  Turning now to the approach taken by the USDO C in selecting its land-use benchmarks in the 
LWS and OTR investigations, we are satisfied th at the method adopted by the USDOC meets these 
requirements.  We note in particular that when  selecting the benchmark to use for Chinese land-use 
prices, the USDOC took into consideration a number of factors such as per capita  GNI, population 
density (in the case of the LWS investigation, both for the countries and the provinces at issue), the types of land transactions, and the type of land at issue (land in industrial zones), with a view to 
approximating what the market conditions would be for the land-use rights at issue in China but for 
the market distortions.  We recall that we have de termined that China has not demonstrated that the 
USDOC was not justified in resorting to a benchmark other than land-use prices in China in the first 
place.  This being the case, the USDOC was faced with a situation in which it had to construct a 
benchmark to approach what essentially would be a counterfactual situation – what prices for land-use 
rights in China would be in the absence of distortion. 
10.189  Before us, China identifies various factors that, in  its view, may affect the value of land, such 
as the tax incentives that may be prov ided to investors or the quality of infrastructure (availability of 
schools, hospitals, public transportation, etc.).
710  In China's view, the USDOC's methodology was 
flawed, inter alia , because the USDOC did not "even attemp t to account for these factors" in its 
comparison of land prices in Bangkok to land prices in the Chinese industrial parks at issue.  Before 
us, as before the USDOC in the investigations at issue, the arguments of the Government of China and 
the other respondents have primarily focused on th e permissibility as such of using out-of-country 
                                                      
708 Appellate Body Report on US − Softwood Lumber IV , para. 108. 
709 Id., para. 103. 
710 China first written submission, paras. 313-314.  WT/DS379/R  
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 prices for land-use rights and on whether Thai prices could at all provide an appropriate proxy for 
Chinese land market prices, rather than on identifying specific  adjustments which the USDOC ought 
to have made to ensure the consistency of its benchmarks  with Article 14(d) of the SCM 
Agreement.711  We might add that while there can be  no question that the Thai land prices and 
constructed annual rents relied upon by the USDOC do not provide a perfect picture of what prices for 
land-use rights would be in China in the absence of the distortions that the USDOC found to exist, it 
nevertheless is not clear that the fact of adjusti ng those benchmarks, as such, would ensure a closer 
approximation of the counterfactual situation (an undi storted land use rights market in China).  In any 
case, China has not demonstrated that the USDOC fa iled to make any specific adjustment which it 
was required to make or which the Government of China or interested  parties had identified, before 
the USDOC or before us. 
10.190  Finally , we note that China's argument in respect of the USDOC's use of the Thai benchmark 
in the OTR investigation is limited to a footnote to its first written submission, in which it refers to its 
argument in respect of the USDOC's LWS determination.712  For this reason, our examination of the 
USDOC's Thai benchmarks in the OTR investigations is limited to the general arguments presented 
by China in respect of the USDOC's LWS determination. 
10.191  For the foregoing reasons, we find that China h as not established that the benchmarks relied 
upon by the USDOC for land-use rights in the LWS a nd OTR investigations were inconsistent with 
the obligations of the United States under Article 14(d) of the SCM Agreement.  In making this 
finding, we note that we are limiting ourselves to th e questions raised by China in connection with 
this claim.713   
J. CONSISTENCY WITH ARTICLE 14(B) OF THE SCM  AGREEMENT OF THE LOAN BENCHMARKS 
ACTUALLY USED BY THE USDOC  – RMB-D ENOMINATED LOANS  
1. Claim of China  
10.192  China claims, in respect of SOCB loans denomin ated in RMB, that the benchmarks used by 
the USDOC in its benefit calculations in the OTR,  CWP and LWS investigati ons were inconsistent 
with Article 14(b) of the SCM Agreement.714 
2. Factual background 
10.193  In the CWP, LWS and OTR investigations, having  determined that it could not use interest 
rates in China as benchmarks for RMB-denominated  loans from SOCBs, due to the distortion of the 
Chinese lending market as a whole, the USDOC constr ucted a proxy interest rate using a regression 
analysis of inflation-adjusted interest  rates in 33 lower-middle-income countries715, on the basis of a 
"broad inverse relationship" that it had f ound between income leve ls and lending rates.716  According 
to the USDOC, the inflation adjustments served as  a proxy for the adjustment for exchange rate 
expectations necessary when comparing interest ra tes across currencies.  Th e USDOC stated that a 
                                                      
711 While in the OTR investigation GTC argued that the USDOC should make adjustments to reflect 
market conditions in Guizhou Province – i.e. account for the fact that Guizhou Province is one of China's most 
impoverished provinces – ultimately, the USDOC did not countervail the provision of land-use rights to GTC and to TUTRIC.  (Exhibit CHI-4, pp. 187, 191). 
712 China first written submission, footnote 237. 
713 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
714 See, e.g.,  China first written submission, para. 273. 
715 As identified by the World Bank's classification of countries.  ( See, e.g.,  Exhibit CHI-1, p. 8). 
716 The USDOC cited its findings to this effect from the CFS Paper  investigation based on its analysis 
of IMF data.  (Exhibits CHI-1, pp. 7-8; CHI-3, p. 12; CHI-4, p. 8; and CHI-93, p. 71). WT/DS379/R 
Page 166  
 
 cross-country comparison of "real" interest rates is  a rough proxy for a comparison of exchange rate-
adjusted nominal rates because of the general link between inflation and (nominal) exchange rate 
expectations.  The regression analysis also took in to account the "quality of a country's institutions" 
(including political stability, government effectiveness and rule of law) which, the USDOC stated "is 
not directly tied to state-imposed significant dist ortions in the banking sector".  The USDOC stated 
that the governance factors facilitated cross-country  comparisons because they incorporated other 
important factors that can influence interest rate fo rmation, in particular because differences in these 
factors will give rise to differences in perceived ri sk associated with the particular country which will 
be reflected in a country's overall level of interest rates.
717 
3. Main arguments of the Parties 
(a) China 
10.194  China claims that the interest  rates derived from the USDOC's 33-country regression analysis 
are inconsistent with Article 14(b) of the SCM Agre ement.  In particular, China submits that these 
interest rates do not reflect "comparable commercial loans" that a borrower could "actually obtain in 
the market".718 
10.195  China argues that the benchmark loans are not  denominated in the same currency as the 
RMB-denominated loans under investigation and are therefore not comparable.  China rejects the 
United States' assertion that its benchmark loan was "comparable" because it was "based upon lending 
rates from countries with similar [ per capita  gross national incomes] and institutional quality as 
measured by World Bank governance indicators".  Ch ina asserts that neith er the USDOC nor the 
United States has provided any coherent e xplanation as to why these factors (i.e., per capita  GNI and 
institutional quality) somehow relate to whether loans are "comparable" within the meaning of 
Article 14(b).719  Moreover, China argues that the United States' notion of "comparability" fails to 
give any legally operative meaning to the term "c omparable" in Article 14(b), contrary to the 
fundamental principle of effectiveness in treaty interpretation.720 
10.196  China also alleges that no borrower could "act ually obtain" the USDOC's benchmark loans in 
"any" commercial lending market – whether in China or elsewhere.  For China, fictitious, non-existent 
loans cannot be obtained by anyone.721  China disagrees with the United States' assertion that the 
regression analysis it used was "tailored to approximat e" a comparable loan that a firm could "actually 
obtain on the market".  According to China, the USDOC's loan benchmark does not "approximate" a comparable commercial loan in China, nor is "ta ilored to approximate" the applicable standard under 
Article 14(b).  Rather, China argues, Article 14 es tablishes mandatory para meters with which any 
methodology used by investigating authorities must comply.
722  China also rejects the argument 
                                                      
717 Exhibits CHI-1, pp. 7-8 and 78; CHI-3, pp. 12-13; and CHI-4, p. 8 and 109-110. 
718 See, e.g. , China first written submission, para. 244.  According to China, whatever "flexibility" 
exists in the application of Article 14(b), any methodol ogy used by investigating authorities must refer to a 
"comparable commercial loan which the firm could actually  obtain on the market".  (China response to Panel 
question 30 (first meeting)). 
719 China first written submission, para. 245; second written submission, paras. 74 and 81.  China adds 
that the USDOC provided no explanation of how "governance indicators" such as government effectiveness, regulatory quality and political stability had any bearing upon the process of interest formation or the policy 
choices of monetary authorities as regards the direction of monetary conditions and interest rates.  (China first 
written submission, para. 266). 
720 China second written submission, para. 82. 
721 China first written submission, para. 245; second written submission, para. 84; oral statement at the 
first meeting of the Panel, para. 52. 
722 China second written submission, para. 85, citing to Appellate Body Report on US – Softwood 
Lumber IV , para. 92.  WT/DS379/R  
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 advanced by the United States that the benchmark loans were "from the ma rket" because they were 
"based on a regression of actual average lending rat es reported by each country".  China argues that 
there was no evidence that respondent borrowers coul d "actually obtain" loans in any of these lending 
markets, and no amount of regressing could overcome the lack of such evidence.723 
(b) United States 
10.197  The United States argues that, due to the governme nt's predominant role in the banking sector 
and other government interventions, the USDOC f ound that the lending "market" in China was so 
distorted that there were no comparable "commercia l" loans for benchmark purposes.  Therefore, the 
USDOC selected a benchmark lending rate that was both "commercial" and "c omparable", as required 
by Article 14(b) of the SCM Agreement.724 
10.198  The United States argues that the USDOC used an out-of-country benchmark derived from 
interest rates from a group of countries rather than a single country, because various factors can affect 
national interest rates.725  The United States also submits that  the USDOC controlled for the most 
significant factors affecting interest rates by sel ecting inflation-adjusted rates in countries with per 
capita  GNI similar to that of China, and then perform ed a regression of those rates, the GNI data and 
a range of World Bank governance indicators to de termine a yearly comparison interest rate.  
Countries in the same GNI category (lower middle income) as China that were found to be anomalously high or low in terms of their inter est rates, or were non- market economies, were 
excluded from the regression analysis.
726 
10.199  The United States indicates that the USDOC ad justed the interest rates of the included 
countries for inflation, because of the general link be tween inflation and exchange rate expectations.  
In addition, the United States argues that the factors related to the quality of the countries' institutions 
were included because banks take th ese into account when assessing risk of lending to businesses in a 
particular country, and because the Federal Rese rve Board had found a correlation between higher 
quality of institutions and lower real interest ra tes.  The United States further submits that the 
benchmark used took account of the maturity of th e loans and matched lending during the same time 
periods.  Thus, the benchmark was "tailored to a pproximate a 'comparable commercial loan which the 
firm could actually obtain on the market'".727 
10.200  The United States rejects China's contention that the benchmark in Article 14(b) must be an 
actual interest rate available to a borrower in China,  arguing that the regression analysis was, in fact, 
based on a regression of actual interest ra tes available to borrowers in China.728  The United States 
                                                      
723 China second written submission, para. 86. 
724 See, e.g. , United States response to Panel question 17 (second meeting).  The United States argues 
that investigating authorities are entitled to consid erable leeway in adopting reasonable methodologies, 
including the use of out-of-country benchmarks where alternatives are inappropriate.  (United States response to 
Panel question 39 (first meeting)). 
725 The United States submits that the USDOC could have chosen an out-of-country benchmark from 
one particular country, but that such an approach could have sacrif iced comparability.  Th at is, each country's 
lending rates may be affected by a variety of economic factors for which there may be insufficient information 
to permit an adjustment, and therefore, those rates individually would not provide sufficient comparability.  (United States response to Panel question 17 (second meeting)). 
726 United States first written submission, paras. 244-246; second written submission, para. 99. 
727 United States first written submission, paras.  247-248; second written submission, paras. 99 
and 102. 
728 See, e.g.,  United States second written submission, para. 101.  The United States adds that a 
regression analysis is essentially an average of interest rates that takes more factors into account than a simple 
average, and that China has not obj ected the USDOC's use of average pr ices in other instances (e.g. the 
USDOC's use of average world market prices for HRS and BOPP).  Furthermore, the United States argues that WT/DS379/R 
Page 168  
 
 also disagrees with China that a benchmark loan ca n meet the criteria of Article 14(b) only if it is 
denominated in the same currency as the government -provided loan.  The United States submits that 
although the use of such a benchmark may be prefer able, Article 14(b) contains no obligation to do 
so, and that China's restriction of its currency from  international lending markets cannot be interpreted 
as to require Members to use a lending benchmark within China's distorted banking market.
729 
4. Main arguments of the Third Parties 
(a) Australia 
10.201  Australia considers that there is no basis in Artic le 14(b) for the benchmark used to "relate or 
refer to, or be connected with" the conditions preva iling in the market of the country of provision.  
Australia notes in this respect that loans are availa ble on an international financial market that is 
subject to international influences.  Furthermore, Au stralia considers that there is no basis in the text 
of Article 14(b) to limit the permissible benchmark to  loans in the same curren cy as that of the loans 
being investigated given that loans obtained in one  currency can be used to purchase any currency at 
rates determined by international markets.730 
(b) Saudi Arabia 
10.202  Saudi Arabia considers that a benchmark loan mu st comply with the "cumulative" criteria set 
forth in Article 14(b) of the Agreement.  In this regard, Saudi Arabia is of the view that the term 
"comparable" suggests that the be nchmark loan should be a loan de nominated in the same currency, 
and subject to the same generally applicable fina ncial regulations of the country providing the 
government loan.  In addition, the word "commercial"  refers to any transaction that is made in the 
ordinary course of commerce, while the phrase "which  the firm could actually obtain on the market" 
imposes a requirement that the benchmark be based on the actual borrowing experience of the 
recipient firm.  Saudi Arabia argues that the use of constructed benchmarks  based on loans that are 
not actually available, but rather represent an aver age of a set of loans gathered in a discretionary 
manner to represent the "average commercial loan" ar e inconsistent with Artic le 14(b).  Saudi Arabia 
takes issue with the United States' argument that the reasoning of the Appellate Body in US-Softwood 
Lumber IV , although decided under Article 14(d), is "equa lly applicable" under Article 14(b).  Saudi 
Arabia argues, inter alia , that nothing in the Appellate Body's report indicates its application to 
Articles 14 (a), (b), and (c), nor to the "entirety of Article 14".  However, assuming arguendo  that the 
reasoning of the Appellate Body in that case applies to Article 14(b), Saudi Arabia considers that the 
clear admonitions made by the Appellate Body on the use of out-of-country benchmarks would apply 
as well.731 
5. Assessment by the Panel 
10.203  We have found above that where lending rates in  a country are distorted by the government's 
role in the lending market it is permissible under Article 14(b) of the SCM Agreement to rely on 
sources other than in-country interest rates as benc hmarks.  We have further found that in such cases 
it is permissible to use constructed proxies fo r what a borrower "would pay" on a comparable 
commercial loan that it "could actually obtain on the ma rket".  In other words, we have concluded that 
the terms "would pay" and "could actually obtain on the market" accommodate the use of proxies, and 
                                                                                                                                                                     
Article 14(b) does not state a preference for the use of one interest rate ra ther than an average of interest rates.  
(Id.). 
729 United States second written submission, para. 100.   Moreover, the United States recalls that the 
USDOC adjusted for inflation as a proxy for an adjustment for currency  exchange rate expectations.  (Id.). 
730 Australia third-party submission paras. 39-40; third-party response to Panel question 7. 
731 Saudi Arabia third-party submission, paras. 91-99.  WT/DS379/R  
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 do not mean that where an actual benchmark loan is not  available, the investigating authority is forced 
to conclude that it is impossible to calculate a bene fit (effectively meaning a benefit of zero).  We also 
recall our finding that China has not  established that the USDOC's determination that interest rates in 
China could not be used as benchmarks because of the distortion of the lending market due to the 
government's role was inconsistent  with Article 14(b).  The remain ing question before us thus is 
whether China has established that the actual benc hmark used by the USDOC is inconsistent with 
Article 14(b) of the SCM Agreement. 
10.204  In our view, the legal question in this regard  is whether the constructed proxy used as a 
benchmark by the USDOC sufficiently approximates wh at "would" have been paid on a comparable 
commercial loan that "could actually" have been  obtained on the market, in the particular 
circumstances of the CWP, LWS and OTR investigations, where it was found not only that no such 
specific loans existed, but that in fact it was not po ssible to identify any inte rest rates in China that 
could even be adjusted to approximate what would be  paid on such a commercial loan.  In this regard, 
we recall that the USDOC did consider the possibility of adjusting the observed interest rates to try to 
approximate what the commercial rates would be, but decided not do so because this would have been 
a highly complex, speculative, and impracticable exercise.732  We further note that before us China 
makes no arguments as to any such ad justments that should have been made, as its position is that the 
observed interest rates in China s hould have been used as benchmarks. 
10.205  We thus must determine on what basis to evalua te the proxy benchmark actually used.  In our 
view, the appropriate approach is to consider wh ether the methodology applied by the USDOC is one 
that a reasonable and objective investigating authorit y could use, in the particular situation found to 
exist in the CWP, LWS and OTR investigations, to ge nerate a proxy for the interest rate that "would" 
have been paid on a commercial RMB loan that th e borrower "could actually" have obtained if the 
Chinese lending market were not distorted.  We cons ider this approach appropriate because, in view 
of the USDOC's finding that there were no undistorted RMB interest rates in China that could be used 
as benchmarks, there is no point of reference in the record evidence on the basis of which we could 
judge the absolute value of the benchmark used.  We  also note in this context that China makes no 
arguments as to specific flaws in the USDOC' s methodology that could and should have been 
corrected733, as indeed its argument is that no such proxy methodology based on other countries' 
interest rates is permissible as a matter of law, a proposition that we have rejected. 
10.206  Given that constructing such a proxy is an exercise in estimation and approximation, in 
considering whether the USDOC's methodology is ai med at generating, in an unbiased and objective 
way, a proxy for commercial RMB interest rates that would exist (and thus "coul d" be obtained) in an 
undistorted market, we consider that our task is to evaluate the internal logic of the methodology 
employed, and the soundness and appropriateness of the data relied upon by the USDOC, in 
constructing the proxy. 
10.207  In this light, we first consider the USDOC's u se of a basket of other countries' currencies as 
the basic source for its proxy interest rate.  Under th e circumstances in the investigations, we find that 
this approach was permissible.  Further, the reliance on the World Bank grouping of countries in the 
same income category as China based on GNI per capita  also seems to us not unreasonable, as this is 
a pre-existing grouping, not one created for the inv estigations.  This appears to us to introduce a 
certain element of macroeconomic similarity among these "benchmark" countries, reflecting the 
                                                      
732 Exhibits CHI-3, p. 83 and CHI-4, p.104.  China makes no argument that this is what the USDOC 
should have done.  Rather, China's ar gument is that the USDOC should simply have used observed interest rates 
in China, directly, as the benchmarks. 
733 For example, China makes no argument that the wrong countries were included in or excluded from 
the basket of countries, or that the inflation adjustments we re incorrect or should not have been applied at all, or 
any other arguments as to any speci fic aspects of the methodology. WT/DS379/R 
Page 170  
 
 USDOC's identification of a broad inverse relationship between real interest rates and income levels.  
We accept that the USDOC's exclusion of countries whose interest rates it found to be anomalous, and 
of NME countries, enhances this macroeconomic sim ilarity.  The adjustment for inflation also seems 
appropriate, inter alia , as a way of accounting at least partially for exchange rate expectations, which 
are influenced by inflation, as noted by the US DOC.  Finally, we do not consider the USDOC's 
inclusion of factors related to the quality of the c ountries' institutions to be  unreasonable, as factors 
such as political stability, government effectiveness and rule of law are taken into account by lenders 
when assessing the riskiness of lendi ng to borrowers in a given country.  Nor has China argued that 
there was a mismatch in terms of either maturities or dates of the benchmark interest rates and the investigated government loans.  We thus do not find the methodology used by the USDOC to be 
unreasonable under the circumstances of th e three investigations at issue. 
10.208  In reaching this conclusion, we emphasize that the benchmark established by the USDOC was 
not perfect and could not literally represent the situation that wo uld have been faced by any given 
borrower in China in the ab sence of the distortions that were found to exist.  However, our conclusion 
reflects our view that the methodology seems to be  based on a reasoned and even-handed approach to 
the unusual situation with which the USDOC was con fronted, rather than appearing arbitrary, or 
biased.  In particular, as noted, the USDOC had the right under Article 14(b) of the SCM Agreement 
to approximate on a reasonable basis the RMB inter est rate that would have been available on 
"comparable commercial loans" that borrowers in China could "actually" have obtained if an 
undistorted market for such loans existed in Chin a.  We consider that a reasonable and objective 
investigating authority could have used the met hodology used by the USDOC, and relied on the data 
that it did, to make such an approximation.
734 
10.209  For the foregoing reasons, we thus find that China has not established that the benchmark 
actually used by the USDOC to calculate th e benefit from RMB-denominated SOCB loans was 
inconsistent with the obligations of the United States under Article 14(b) of the SCM Agreement.735 
K. CONSISTENCY WITH ARTICLE 14(B) OF THE SCM  AGREEMENT OF THE LOAN BENCHMARK 
ACTUALLY USED BY THE USDOC  – U.S.  DOLLAR -DENOMINATED LOANS  
1. Claim of China 
10.210  China claims that in the OTR investiga tion the USDOC acted inconsistently with 
Article 14(b) of the SCM Agreement when it app lied as a benchmark an annual average LIBOR-based 
                                                      
734 In making our findings related to SOCB lending, while we are mindful of the uniqueness of the 
situation in the investigations at issue, we do not consider that the findings imply that all lending in China ipso 
facto  confers subsidies covered by the SCM Agreement.  In particular, our findings are confined to the particular 
facts of the investigations at issue in this dispute.  In this regard, first, we do not mean to imply by our findings that all lending in China is a "financial contribution" in the sense of Article 1.1 of the SCM Agreement (i.e., that 
it is by the government, or a public body, or is made pursuant to government entrustment or direction of a 
private body).  Second, we do not mean to imply that all lending in China is made pursuant to the economic planning documents on the basis of which the USDOC found specificity.  Third, concerning the existence of a 
benefit, while record evidence indicated that the lending rates were in a narrow range during the period of 
investigation, there was some, albeit limited, differentiation of interest rates.  Finally, while we have not found that the benchmark used by the USDOC was inconsistent  with the provisions cited in China's claim, this 
certainly does not imply that this is the only possible benchmark that could have been or could be used, and 
another benchmark may have led to a different outcome in the investigations. 
735 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra .  WT/DS379/R  
 Page 171 
 
 
 interest rate, instead of the applicable daily ra tes, to U.S. dollar-denominated SOCB loans to 
GTC.736, 737 
2. Main arguments of the Parties 
(a) China 
10.211  China argues that the USDOC's benchmark me thodology for U.S. dollar-denominated loans 
was not based on a comparison of like terms.  Sp ecifically, China argues that GTC's U.S. dollar-
denominated loans were short-term (generally be tween 90 and 120 days) fixed-rate loans, with 
interest rates based on the applicable U.S. dollar inte rest rates in effect on the days that GTC received 
the loans.  China argues that becau se LIBOR is a rate that changes daily, the interest rate benchmark 
applied to each loan also should have varied accord ing to the date on which the loan was received.  
Thus, according to China, the correct method of de termining the existence and amount of the benefit 
at issue was to compare the interest rate on the allegedly government-provided loan to the 
corresponding benchmark rate in effect on the sam e date.  China argues that the annual average 
benchmark rate used does not represent what woul d be paid by GTC on a comparable commercial 
loan because GTC would not have paid an averag e annual LIBOR rate, something that can only be 
determined in retrospect given that LIBOR fl uctuates on a daily basis.  China submits that, 
alternatively, the USDOC could have applied an average-to-average comparison, i.e., compare an 
average annual LIBOR rate to GTC's average intere st rate on its dollar-denominated loans for the 
same year.738  China alleges that the USDOC, however, co mpared the actual interest rate on each loan 
to a retrospectively-determined average annual LI BOR rate, and that, as a result, it found "benefits" 
where, in fact, none existed.739 
10.212  China disagrees with the United States' argument th at nothing in Article 14(b) requires the use 
of daily rates over annual average rates.  China submits that Article 14(b) requires the use of 
"comparable" commercial loans as benchmarks, a nd that LIBOR interest rates change daily 
throughout the year, such that a loan taken out at one point in the year is not "comparable" to a loan taken out at another point in the year.  China adds that the USDOC's comparison did not measure 
whether the recipient of a government-provided loan  was "better off", but only the extent to which 
interest rates varied throughout the year.
740  China also rejects the United States' argument that no 
party provided the relevant information (i.e., daily in terest rate data) to the USDOC, arguing that it is 
the investigating authorities' obligation – not that of the interested parties – to identify and collect the 
"information which the authorities require" to ensu re that the imposition of countervailing duties is 
consistent with the requirements of the Agreement.741 
10.213  Finally, China submits that had the USDOC ma de a proper comparison, it would have found 
unequivocally that GTC did not obtain a benefit on its U.S. dollar-denominated loans; and that 
although this argument was not raised during the i nvestigation at issue, the Appellate Body has 
                                                      
736 See, generally, China first written submission, paras. 240-243. 
737 As indicated at para. 10.1, supra , China also raises consequential cl aims pursuant to Articles 10 and 
32.1 of the SCM Agreement and Ar ticle VI:3 of the GATT 1994. 
738 See, e.g.,  China response to Panel question 25 (secon d meeting).  According to China, the USDOC 
had the data on the record to unde rtake such comparison.  (Id.). 
739 Id. 
740 China second written submission, para. 132. 
741 Id., para. 134, citing Articles 10 and 12.1 of the SCM Agreement.  China further notes that daily 
LIBOR data are publicly availa ble on the Internet.  (Id.). WT/DS379/R 
Page 172  
 
 established that a WTO Member "is not confined mere ly to rehearsing arguments that were made [...] 
during the domestic investigation".
742 
(b) United States 
10.214  The United States argues that the benchmark developed by the USDOC for the U.S. dollar-
denominated loans was consistent with Article 14( b) of the SCM Agreement.  The United States 
explains that the USDOC used the one-year average of the daily interest rates for LIBOR, and that in 
order to adjust the LIBOR rate to one that a pr ivate company could receive, the USDOC determined 
the average spread between the LIBOR rate and the one-year U.S. corporate bond rates for companies 
with a BB rating.  The USDOC then added this av erage spread to the LIBO R rate to measure the 
benefit at issue.743 
10.215  The United States submits that this benchmark in terest rate was constructed on the same basis 
as GTC's loans, which were also based on LIBOR pl us a spread.  The United States submits that the 
benchmark also matched the dura tion and currency denomination of the underlying loans, and that 
therefore, it represented a "comparable commercial loan ".  In addition, the United States argues that 
the benchmark was from the "market" because it was based on an average of actual LIBOR interest 
rates.744 
10.216  The United States disagrees with China's argume nt that the USDOC was required to use daily 
rather than annual averages rates.  The United Stat es submits that daily LIBOR rates were not on the 
record of the investigation and that no party ar gued that the USDOC should depart from its usual 
practice of using annual rates.745  Furthermore, the United States argues that Article 14(b) contains no 
preference for daily over yearly average rates, and that in using an annual interest rate, the USDOC 
was within the flexibility afforded by Article 14(b).746 
3. Assessment by the Panel 
10.217  This claim raises a single legal issue:  th e comparability of loans due to, in essence, 
differences in timing.  In particular, the issue raised  by China is whether, to be comparable to the 
government loans provided to GTC, the commercia l benchmarks should have reflected the rates 
prevailing on the particular days on which those loans were taken out. 
10.218  We recall our discussion, supra , of the characteristics that make a loan comparable in the 
sense of Article 14(b) of the SCM Agreement.  Am ong these are the date, i.e., to be comparable, a 
benchmark loan should be established around the same date as the governme nt loan.  In this regard, as 
China points out, LIBOR changes on a daily basis.  While we agree with the United States that 
Article 14(b) affords certain flexibility to inves tigating authorities in the identification and/or 
construction of suitable benchmarks , particularly where no strictly comparable commercial loans are 
available, we do not consider that this is the situa tion before us.  In particular, there seems to be no 
dispute between the parties as to the basic suitability  of comparing the interest rate on GTC's U.S. 
                                                      
742 China second written submission, para. 134, citing to Appellate Body Reports on US – Lamb , 
para. 113; US – Corrosion-Resistant  Steel Sunset Review , para. 131; and Panel Report on Japan – DRAMs 
(Korea) , para. 7.304. 
743 See, e.g.,  United States first written submission, paras. 257-258. 
744 United States response to Panel question 39 (first meeting). 
745 The United States explains that the USDOC's regul ations generally provides for the use of annual 
averages to determine the benefit from government-provided loans. 
746 United States first written submission, paras. 260-261, citing to Panel Reports on EC – 
Countervailing Measu res on DRAM Chips , para. 7.213 and US – Countervailing Measures on Certain EC 
Products (Article 21.5 – EC) , paras. 7.121-7.122.  WT/DS379/R  
 Page 173 
 
 
 dollar-denominated fixed-rate loans to th e LIBOR-based rates used by the USDOC.747  T h u s ,  t h e  
availability of a suitable benchmark rate is not in  question.  Nor is there any dispute between the 
parties that daily LIBOR rates are publicly and easily available.  Given that over the course of a year, LIBOR, like any interest rate, can and does fluctuate,  sometimes considerably, we consider that by not 
making any attempt to match the LIBOR interest rate  benchmarks to the actual origination dates of 
GTC's U.S. dollar-denominated loans (which were the dates on which their respective interest rates 
were fixed), the USDOC did not sufficiently ensure that its benchmarks were "comparable" to the 
investigated loans, in the sense of Article 14(b) of the SCM Agreement. 
10.219  For the foregoing reasons, we find that Ch ina has established that the USDOC acted 
inconsistently with the obligations of the United States under Article 14(b) of the SCM Agreement by 
using average annual interest rates as benchmarks  for GTC's U.S. dollar-d enominated loans from 
SOCBs in the OTR investigation.
748 
XI. CHINA'S CLAIM PERTAINING TO "CREDIT" OR "OFFSET" FOR 
UNSUBSIDIZED TRANSACTIONS 
A. CLAIMS OF CHINA  
11.1 China claims that the USDOC's inclusion, in the OTR investigation, of only positive 
"benefits" (and its corresponding exclusion of negativ e "benefits") in its benefit calculations with 
respect to the provision of rubber inputs by SOE rubber producers was an arbitrary methodology inconsistent with Articles 10, 14, 19 .1, 19.4 and 32.1 of the SCM Agreement  and Article VI:3 of the 
GATT 1994.
749 
B. MAIN ARGUMENTS OF THE PARTIES  
1. China 
11.2 Based on the use of the word "p roduct" in Article VI:3 of the GATT and Articles 10, 19.3 and 
19.4 of the SCM Agreement, China submits that the SCM Agreement  establishes that a countervailing 
duty is to be imposed in respect of the "product" und er investigation.  Therefore, subsidization, like 
dumping, is to be defined in relation to a "product as a whole ", and "margins of subsidization", like 
"margins of dumping", can only be calculated fo r the product under investigation "as a whole".750  
Thus, China submits, paraphrasing the Appellate Bo dy's findings on zeroing in the anti-dumping 
context, while the USDOC could choose to undertake multiple comparisons at an intermediate stage 
to establish the margin of subsidi zation, it could only establish the margin of subsidization for each 
producer on the basis of aggregating all these "inter mediate values".  China adds that the Appellate 
Body's findings on zeroing in the anti-dumping context apply with even greater force in the 
countervailing duty context given that  subsidization is not investigated on an individual transaction 
basis but instead necessarily involves an aggreg ated inquiry focusing on the "manufacture" or 
"production" of a product over the entire period of i nvestigation.  In particular, China submits, the 
                                                      
747 As noted supra , China appears to consider the USDOC's  choice of a LIBOR-based benchmark to 
have been appropriate.  (China first written submission, para. 234). 
748 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . 
749 Paragraph B.1(a)(vi) of the "as applied" claims  in China request for establishment of the Panel; 
China first written submission, para. 468 (c); second written submission, para. 315 (d). 
750 China refers to the Appellate Body Reports on US – Softwood Lumber V , paras. 93 and 96, US – 
Zeroing (EC) , para. 126 and US – Zeroing (Japan) , para. 115.  (China first written submission, paras. 146-150). WT/DS379/R 
Page 174  
 
 principal policy justification advanced by the proponents of zeroing in the anti-dumping context – 
targeted dumping – does not arise in the countervailing duty context.
751 
11.3 Further, China argues, when goods are purchased  frequently over the peri od of investigation, 
determining whether remuneration was "adequate" necessarily requires an aggregate analysis that 
takes into account all purchases over that entire period.  China adds that because of the lack of perfect 
information and frequent fluctuations in market  conditions, buyers and sellers never know with 
certainty what the market price is on any given day.  As a consequence, the USDOC's approach 
implies that government suppliers would have to  sell at or above a retroactively-established 
benchmark price in every transaction to avoid a find ing of subsidization.  China submits that no 
market actor could ever meet this test, a nd that the drafters of the SCM Agreement  could not have had 
such an outcome in mind when they created the " adequate remuneration" standard in Article 14.752 
11.4 China argues that the use of the singular terms "a  benefit" and "the good" in Article 14(d) of 
the SCM Agreement limit an investigating author ity's discretion in selecting benefit calculation 
methodologies and mandate that for a lleged subsidies in the form of the provision of inputs, adequacy 
of remuneration be determined on an aggregated basis for that "good" over the entire period of 
investigation.753  China submits that under the plain text of Article 14(d), where the same good is 
purchased on multiple occasions over the period of inves tigation, the only way for "a subsidy" to exist 
in the form of the provision of "the good" for less than adequate remuneration is if the individual 
transactions are considered in the aggregate.  China considers that its interpretation of Article 14(d) is 
the only one compatible with the definition of a subs idy in Article 1.1 as interpreted by the Appellate 
Body in past jurisprudence:  a producer is not "be tter off" over a period of investigation if it ends up 
paying, on average, more than the market price for any "good" that it purchases from the 
government.754 
11.5 In this regard, China indicates that, contrary to  the United States' characterization, it is not 
arguing that the SCM Agreement requires that credit be  provided across different types of subsidies or 
across different types of inputs:  if more than one  input is provided, Article 14(d) requires a separate 
adequate remuneration analysis for each such "good".  China submits, however, that in the 
investigation at issue, the USDOC defined the programme under investigation as the provision of a 
single good – rubber – by the Chinese government  for less than adequate remuneration, 
notwithstanding the fact that rubber was purchased in various forms.755  China states that the USDOC 
then calculated a single, period-wide subsidy margin for rubber, regardless of the form in which it was 
purchased, rather than calculating five different peri od-wide subsidy margins for each separate type of 
input.756 
11.6 Concerning the other provisions of which it alle ges a violation, China argues that within the 
legal framework of Article VI:3, it is neither logical nor lawful to consider adequacy of remuneration 
on an individual transaction-by-transaction basis in the circumstance where multiple inputs are purchased over the period of investigation, since that provision makes clear that subsidization is to be 
investigated on an aggregate basis (i.e., on the "m anufacture" or "production" of a product, the 
investigation, in turn, l eads to the calculation of a single  subsidy margin for an entire  period of 
                                                     
 
751 China first written submission, para. 148. 
752 Id., para. 151. 
753 China response to Panel question 51 (first mee ting); second written submission, paras. 141-144. 
754 China second written submission, para. 145, citing to Appellate Body Reports on Canada – Aircraft , 
para. 157 and US – Softwood Lumber IV , para. 93. 
755 China response to Panel question 51 (first meeting). 
756 China second written submission, para. 144 and footnote 120.  China refers to the USDOC's 
description of the alleged subsidy programme as the "Government Provision of Rubber for Less than Adequate 
Remuneration", OTR Countervailing Duty I&D Memo, Exhibit CHI-4, pp. 9 and 69.  WT/DS379/R  
 Page 175 
 
 
 investigation).757  China submits that the Appellate Body, in US − Softwood Lumber IV , noted that the 
requirements of Article VI:3 of the GATT 1994 a nd of Articles 10 and 32.1 of the SCM Agreement 
"apply on a cumulative basis" and that, any incons istency with Article VI:3 would necessarily also 
render the countervailing measures inconsistent with  Articles 10 and 32.1 of the SCM Agreement.  
China also relies on the Appellate Body Reports in US – Countervailing Measures on Certain EC 
Products  and US − Softwood Lumber  IV as support for the propositions that to comply with the 
overarching obligations that these provisions impose,  investigating authori ties, before imposing 
countervailing duties, must ascertain the precise am ount of subsidy, and that to carry out this 
obligation in an original investigation, Article 19. 1 of the SCM Agreement, read in conjunction with 
Article 1, requires the investigating authority to ma ke a determination of th e existence of a benefit 
before  countervailing measures can be imposed.758  China also argues (relying on the panel report in 
US – Lead Bismuth II ) that Article VI of the GATT, and Articles 19.1 and 19.4 of the SCM 
Agreement collectively "establish[] a clear nexus be tween the imposition of a countervailing duty, and 
the existence of a (countervailable) subsidy", and are all based on the premise that no countervailing 
duty may be imposed absent (countervailable) subsidization.759  Concerning the United States' 
argument that Article 19.4 of the SCM Agreement do es not apply to original investigations, China 
replies that panels and the Appella te Body have determined that Article 19.4 of the SCM Agreement 
and Article VI:3 of GATT 1994 do impose obligations on the USDOC during original investigations 
under the United States' retrospective system.760 
11.7 In response to a question from the Panel con cerning Canada's third party argument that 
depending on the facts of a given case (for example, where there is an on-going contractual relationship) it may be necessary to examine more than one input transaction to determine whether 
government provision of a good is made for adequate remuneration
761, China considers that 
aggregation in countervailing duty investigations is  inevitable, and that the question therefore is not 
whether but how an investigating authority sh ould aggregate when calculating benefit under 
Article 14(d).762  China argues in particular in this regard  that subsidies are identified, investigated, 
and measured on a programme-specific basis in the first instance, and where the "programme" is the 
alleged provision of a "good" for less than adequate  remuneration, and there are multiple transactions 
during the period of investigation involving the pur chase of that "good", the investigating authority 
necessarily has to perform an aggregation in order to  arrive at a single, period-wide subsidy benefit 
amount for that programme.  For China, therefore, be cause the benefit from such  a "less than adequate 
remuneration" programme is ultimat ely determined on a period-wide basis, aggregation is simply the 
natural and inevitable by-product of the Article 14(d)  "benefit to the recipient" evaluation.  Only 
where there was a single transaction for the good in question during the period would aggregation not occur.
 763  
11.8 Regarding the specific example cited by Canada  of an "on-going contractual relationship", 
China agrees that in such an inst ance the adequate remuneration inqui ry would be legally required to 
examine all of the transactions during the period of in vestigation.  China considers, however, that it is 
not the nature of the contractual relationship betw een buyer and seller that compels that outcome, but 
instead the plain language of Article 14(d) , the Appellate Body's interpretation in Canada – Aircraft  
and in US – Softwood Lumber IV  of the circumstances in which a "benefit" may be deemed to exist, 
                                                      
757 China second written submission, paras. 146-147. 
758 Id., paras. 156-157, citing to Appellate Body Reports on US – Countervailing Measures on Certain 
EC Products , paras. 139 and 147; and US − Softwood Lumber  IV, paras. 134, 138 and 154 (quoting Panel Report 
on US – Countervailing Measures on Certain EC Products , para. 7.44). 
759 Id., para. 159, citing to Panel Report on US – Lead Bismuth II , paras. 6.52-6.53 and 6.56. 
760 China response to Panel question 52 (first meeting). 
761 See para. 11.28,  infra . 
762 China response to Panel question 6 (second meeting). 
763 Id. WT/DS379/R 
Page 176  
 
 and the requirement in Article VI:3 of the GATT 1994 that countervailing duties be imposed to offset 
subsidies bestowed on the "manufacture" or "produc tion" of "the product" over the entire period of 
investigation.
764  China argues in this regard that if a producer of subject merchandise purchases ten 
units of an input during the period of investigation, and pays on average at or above the market price for those inputs, it has not received the "good" for l ess than adequate remuneration, it is not "better 
off" for having made purchases from the government, and the "manufacture" and "production" of its 
merchandise can in no objective sense be considered subsidized.  For Ch ina, this is the case whether 
the ten purchases of inputs were made from the same  government supplier as part of an "on-going 
contractual relationship", or from ten different government suppliers in one-time only transactions.
765 
11.9 Finally, China argues that the USDOC used  "aggregate" monthly benchmarks, which it 
compared to individual transactions in performing its benefit analysis and, in some instances, used 
benchmark prices that were not contemporaneous to  the input transactions, such that the USDOC did 
not perform an "apples-to-apples" comparison.  In  response to a question from the Panel as to the 
relationship between this apples-to-apples argument  and its claim that the USDOC was required to 
include both positive and negative results from its "less-than adequate remuneration" calculations 
concerning rubber inputs, China asserts first that it is not raising a new issue, but showing that the 
USDOC used aggregations in its calculations, such  that the issue in the dispute was whether the 
method of aggregation used by the USDOC wa s consistent with the covered agreements.766 
11.10  China notes that the USDOC, in calculating be nchmarks where there was more than one 
transaction per month, aggregated by calculating a single, weighted-average monthly benchmark 
based on all of the transactions in that month.  China argues that the USDO C then aggregated the 
individual transactions involving the "good" that it was investigating – rubber – over the period of 
investigation whenever the purchase price was lower than the benchmark price to determine a single, 
period-wide benefit for that subcategory of rubber.  Finally, the USDOC conducted a further 
aggregation when it added each of the "benefits" for these subcategories together into a single, period-
wide benefit for the overall programme entitled "provision of rubber for less than adequate 
remuneration".767 
11.11  China argues that this method of aggregation, in which the USDOC included in its aggregate 
benefit calculation the 18 instances in which the tw o respondents paid less than the benchmark price 
for rubber inputs, but ignored the 55 transactions in which they paid more than the benchmark price,  
cannot plausibly be considered consistent with the covered agreements.  In particular, China submits 
that the USDOC's  aggregation methodology in the OTR investigation cannot pass the "basic 
reasonableness test" Article 14 imposes768, but instead produces manifestly arbitrary and punitive 
results, not reasonable ones.  China argues that the United States has not offered a single justification 
for its methodology based on market conditions, bu siness practices, commercial considerations or 
anything else.769 
11.12  China indicates that its second reason for referri ng to the USDOC's use of benchmark prices 
that were not contemporaneous to the transactions al leged to have been made for less than adequate 
remuneration was to underscore why China's legal arguments regarding the proper interpretation of 
Article 14(d) and the unreasonableness of the USDOC's methodology must be correct.770 
                                                      
764 China response to Panel question 6 (second meeting). 
765 Id. 
766 China response to Panel question 7 (second meeting). 
767 Id. 
768 Id., referring to Panel Report, EC – Countervailing Measures on DRAM Chips , para. 7.213. 
769 Id. 
770 Id.  WT/DS379/R  
 Page 177 
 
 
 11.13  China argues that for GTC's purchases of butadie ne rubber ("BR"), one of the subcategories 
of rubber examined, the USDOC used a single import transaction for the month of May 2006 as the 
benchmark for GTC's purchases of BR in January through May.  China states that during that period, prices for BR in China steadily incr eased.  China asserts that more than 90 per cent of the purported 
benefit that GTC obtained from its purchases of BR dur ing the period of investigation was due to the 
USDOC's use of the single May import transaction as a benchmark for GTC's January to April 
purchases.
771 
11.14  According to China, a similar situation occurre d for the other respondent, TUTRIC, where the 
USDOC used a single import transaction involving one category of synthetic rubber – SBR – as the benchmark for all of TUTRIC's purchases during the en tire period of investigation, not only of SBR, 
but of BR as well.  China states that the only in stances in which TUTRIC's purchase price for any 
category of rubber was found to be below the benc hmark resulted from this comparison of its actual 
purchase price to a single import price.
772 
11.15  According to China, the limitations in the be nchmarks that the USDOC developed, and their 
lack of contemporaneity with the transactions being investigated, underscore why the USDOC was 
legally required to aggregate the results of all of the comparisons during the period of investigation – 
not just those that yielded positive "benefits".  China asserts that doing so was the only means consistent with the Article 14(d) for determini ng if GTC and TUTRIC paid less than adequate 
remuneration for their purchases of the "good" the US DOC was investigating.  Only by aggregating 
all of the comparisons could the USDOC know wh ether GTC and TUTRIC were "better off" for 
having made purchases from SOEs, and whether the manufacture or production of their tires during 
the period of investigation benefited from subsidies.
773 
2. United States 
11.16  The United States argues that the USDOC was not required to provide a credit in the 
calculations for instances in which SOEs provided rubber inputs for adequate remuneration.  The 
United States submits, first, that  Article 14 of the SCM Agreement  affords Members a great deal of 
flexibility in calculating benefit in countervailing duty  investigations.774  Recalling the panel report in 
US – Countervailing Measures on Certain EC Products (Article 21.5 – EC) , the United States argues 
that Article 14 does not prescribe any particular leve l of aggregation at which the benefit calculation 
must be conducted, but instead permits investig ating authorities to apply methodologies that account 
for different factual situations and the c onditions under which th e subsidy was provided.775  T h e  
United States also argues that Article 14 contains  no obligation to consider instances in which a 
government provides no benefit or to provide a cred it for such instances when calculating the benefit 
conferred by a subsidy; the concept of "benefit" rela tes only to situations in which a firm received an 
                                                      
771 China response to Panel question 7 (second meeting). 
772 Id. 
773 Id. 
774 The United States refers, inter alia , to the Appellate Body Report on US – Softwood Lumber IV , 
para. 95.  (United States first written submission, para. 291). 
775 The United States notes that the panel in US – Countervailing Measures on Certain EC Products 
(Article 21.5 – EC)  found that it was consistent with the SCM Agreement  for an investigating authority to 
segment a share offering into four categories of trans actions in order to evaluate whether the change in 
ownership effected through the offering extinguished the benefit of prior subsidies, and that in particular, the panel found that there was no legal basis to require the inve stigating authority to conduct its analysis on either a 
segmented or a non-segmented basis, as long as the authority's methodology was transparent and "not 
unreasonable", adding that it could find no legal basis "to require the USDOC to conduct its analysis in  a particular manner".  (Id., para. 292, citing to Panel Report on US – Countervailing Measures on Certain EC 
Products (Article 21.5 – EC) , para. 7.121). WT/DS379/R 
Page 178  
 
 advantage.
776  The United States considers in this respect  that China's argument cannot be reconciled 
with the definition of a subsidy under Article 1 of the SCM Agreement:  any time a government 
provides a financial contribution and a benefit is thereb y conferred, a subsidy is "deemed to exist".  In 
the present case, each time China provided a rubber input for less than adequate remuneration, a 
benefit was conferred, and a subsid y was deemed to exist.  The fact that at other times, China may 
have provided rubber inputs to the investigated producer for adequate remuneration, and therefore that 
no subsidy existed in those instances, is irrele vant.  These non-subsidies could not eliminate or 
diminish the benefits conferred when China provided rubber inputs for less than adequate 
remuneration.777 
11.17  Overall, with respect to the various claims of inconsistencies put forward by China, the 
United States submits that:778  (i) China has failed to establish that the United States acted 
inconsistently with Article 14 of the SCM Agreemen t; (ii) it is not clear whether China is making a 
claim under Article 1 of the SCM Agreement , because although China ma kes an assertion that the 
United States acted inconsistently with that provi sion in the relevant section of its first written 
submission, it makes no request for panel finding in  this respect; (iii) Chin a provides no explanation 
in support of its claims that the United States acte d inconsistently with the other provisions it cites 
(Articles 10, 19.1, 19.4, 32.1 of the SCM Agreemen t, Article VI:3 of the GATT 1994 ).  With respect 
to the latter, the United States notes that China me rely points to the use of the term "product" in 
Articles 10 and 19.4 of the SCM Agreement  and Article VI:3 but does not otherwise explain how the 
United States acted inconsistently with these pr ovisions; and that China makes no reference 
whatsoever to Articles 19.1 and 32.1 of the SCM Agreement  in its arguments.  Finally, the 
United States submits that Ar ticles VI:3 of the GATT 1994 and 19.4 of the SCM Agreement  do not 
impose obligations with respect to countervailing duty investigations as they both pertain to the 
levying  of countervailing duties, i.e., the definitive or final legal assessment or collection of a duty or 
tax which, in the United States' retrospectiv e system, only occurs after the conclusion of 
administrative reviews. 
11.18  The United States further argues that China's reliance on the Appellate Body reports with 
respect to "zeroing" is misplaced as the legal provision on which those decisions are based applies solely to anti-dumping determinations.  The United Stat es also states that neither the term "margins of 
subsidization" used by China in its first written submission, nor the term "margin", appears in the 
SCM Agreement.  The United States submits that accepting China's argument would mean that the 
mere use of the term "product" in cer tain provisions of the SCM Agreement  or the GATT 1994 would 
override the flexibility afforded to i nvestigating authorities under Article 14.
779  The United States 
also submits that a necessary implication of China' s argument is that the obligation to provide a credit 
would apply to all of Article 14, such that an i nvestigating authority would have to provide a credit 
whenever it found that a financial contribution did not provide a benefit, including across different 
types of input products and even different types of subsidies.780  The United States notes in this 
respect that in the investigation at issue, the USDOC  investigated the provision of five different types 
of rubber inputs by SOEs, i.e., the provision of fi ve different goods and that, for one company, China 
only arrives at an overall "negative benefit" by offsetting the positive benefits in respect of one of the 
input products with negative benefits  in respect of another input product.781 
11.19  The United States also rejects China's argument based on the use of the term "good" (in the 
singular) in Article 14(d).  The United States cons iders it unlikely that the drafters of the SCM 
                                                      
776 United States first written submission, para. 294. 
777 Id., paras. 300-301. 
778 Id., paras. 310-315. 
779 United States first written submission, para. 299. 
780 Id., paras. 302-304. 
781 Id., para. 305.  WT/DS379/R  
 Page 179 
 
 
 Agreement would have sought, through the mere use of that term, to establish an obligation to 
aggregate the benefits of all transactions duri ng the entire period of investigation involving the 
provision of a good; and an obligation to provide credit in such an aggregate benefit calculation for transactions in which the good was sold for more than the established benchmark; while also limiting 
these obligations to the unique situation of government-provided goods or services.
782  F o r  t h e  
United States, the term "good" in the second sentence of Article 14(d) is in the singular, and 
associated with the terms "in question", because, wh ile a government may provide a variety of goods 
and services, the adequacy of remuneration for a particular good provided by the government must be determined at the "prevaili ng terms and conditions" for that good.  The United States notes that the 
investigating authority must look at the terms and co nditions prevailing at the time of the sale of the 
good, "including price, quality, availability, mark etability, transportation and other conditions of 
purchase or sale":  such terms and conditions would be  expected to vary over time and in many cases 
would be unique to each given transaction.  Hence, for the United States, the text of Article 14(d) supports the conclusion that the adequacy of remune ration, and the benefit, may be determined on a 
transaction-specific basis.
783 
11.20  According to the United States, the different typ es of inputs at issue in the OTR investigation 
constituted different types of goods.  The Unite d States notes that the respondents in the OTR 
investigation reported that SOEs pr ovided them with several distinct types of rubber, and that China 
itself, in its first written submission referred to "five separate types of rubber inputs".784 
11.21  The United States submits that under the SCM Agreement, investigating authorities are 
permitted to apply methodologies that account for diff erent factual situations, including the conditions 
under which the subsidy was provided.  In all case s, benefit determinations are made on a case-by-
case basis and depend on the particular facts of a given situation.785 
11.22  Indeed, the United States argues, the context of the SCM Agreement supports analyzing the 
benefit to the recipient on a disaggregated basi s.  The SCM Agreement defines a subsidy in the 
singular form, supporting the conclusion that invest igating authorities have the option of analyzing 
each subsidy on a transaction-by-transaction basis.786  Moreover, the United States asserts, even if an 
authority were to choose to conduct an analysis at  a particular level of aggregation in certain 
circumstances, nothing in the SCM Agreement requi res an authority to provide a credit for those 
transactions that do not provide a benef it when performing such an analysis.787 
11.23  Concerning China's "apples-to-apples" argument, the United States argues that it is not clear 
how this criticism of the USDOC methodology rela tes to China's countervailing duty credit/offset 
argument.  Additionally, the United States notes that th is argument appears to be a reversal of China's 
prior position that it was within the USDOC's discr etion under the covered agreements to compare 
financial contributions and benchmarks on a monthly basis.788 
                                                      
782 United States second written submission,  para. 127.  The United States notes, inter alia  that, by 
contrast, in paragraph 6 to Annex IV of the SCM Agreement (concerning the calculation of the overall rate of 
subsidization under Article 6.1 of the Agreement) the draf ters used the term "aggregated":  "In determining the 
overall rate of subsidization in a given year, subsidies given under different programmes and by different authorities in the territory of a Member shall be ag gregated".  (United States first written submission, 
footnote 227). 
783 United States second written submission, para. 128. 
784 Id., para. 133. 
785 United States response to Panel question 6 (second meeting). 
786 United States second written submission, paras. 129-131. 
787 United States response to Panel question 6 (second meeting). 
788 United States response to Panel question 7 (second meeting). WT/DS379/R 
Page 180  
 
 11.24  In any event, the United Stat es argues, China's arguments mi srepresent the facts.  The 
comparison the USDOC performed in evaluating the benefit conferred by the provision of rubber was 
an "apples-to-apples" comparison fully consistent w ith Article 14 of the SCM Agreement.  In the 
OTR investigation, the USDOC requested that the investigated producers report their purchases of 
each kind of rubber input by providing the "monthly, weighted-average price paid [...] to each of your 
suppliers".
789  The USDOC calculated benefits for the pr ovision of rubber for less than adequate 
remuneration by comparing the monthly price of each government-sourced input to a monthly benchmark based on the average price in a given mont h that the investigated producer paid to private 
input suppliers (i.e., private Chinese producers and/ or the price of the input imported from outside 
China).
790 
11.25  The United States argues that in most in stances, the USDOC compared the monthly 
benchmark to one monthly price for the government-sourced input as reported by the investigated 
Chinese producers.  However, in a number of instan ces, investigated producers reported two or three 
prices in a given month.791  Where this was the case, the US DOC accepted the data in the manner 
provided by the investigated producers and compar ed the monthly benchmark to each price reported 
for purchases of the rubber inputs in question.  In a ddition, the United States argues, in most instances 
the monthly benchmarks were based on private prices  from the same month in which the investigated 
producers reported purchases of the government produced  input.  However, for some rubber inputs, 
the USDOC employed monthly data from a proximate month because the investigated producer did not have private purchases of the input in the given month.
792 
11.26  The United States submits that the USDOC comp lied with the guidelines in Article 14(d) by 
employing benchmarks based on th e investigated producers' actual purchases of inputs from private 
suppliers during the period of investigation.  Acco rding to the United States, this provision does not 
require that an investigating aut hority measure the benefit on any particular temporal basis (i.e., daily, 
monthly, annually).  Thus, the USDOC's compar ison of the monthly government-sourced prices 
reported by the investigated producers to a monthly benchmark – whether it was one, two or three 
reported government prices in a given month – was not inconsistent with Article 14(d).  Nor, 
according to the United States, does this provi sion require that benchmarks be exactly 
contemporaneous with the purchase of goods, i.e.,  from the same month, same week or same day.  
Introducing such a requirement could make benefit calculations almost impossible in many situations.  
Thus, in the view of the United States, the USDOC 's use of benchmark data from a proximate month 
when data for the month of purchase was unavailable is  not inconsistent with the obligations of t he 
United States.793 
11.27  The United States considers that if China' s argument were accepted, authorities would 
effectively be required, in all cases, to compare th e average price paid in all transactions during the 
period of investigation against a single average benchm ark for the same period.  Nothing in the text of 
Article 14(d) of the SCM Agreement supports Chin a's view, and China's reading would have the 
perverse effect of prohibiting authorities from taking into account the market conditions that in fact 
prevailed at the time of each individual purchase when determining the adequacy of remuneration for 
the good in question.794 
                                                      
789 United States response to Panel question 7 (second meeting). 
790 Id. 
791 Id. 
792 Id. 
793 Id. 
794 United States comments on China's response to Panel question 6 (second meeting).  WT/DS379/R  
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 C. MAIN ARGUMENTS OF THE THIRD PARTIES  
1. Canada 
11.28  Canada sees no basis for extending the Appellate  Body's reasoning in the "zeroing" disputes 
to the interpretation of the SCM Agreement.  Sp ecifically, Canada notes that in a dumping context, 
the calculation of a dumping margin is made by examining various transactions that involve the 
product under investigation.  In a subsidy context,  although the focus of the investigation is on a 
product that is allegedly subsidized and causing in jury, the calculation of the amount of benefit does 
not necessarily involve directly that  product under investigation.  More generally, Canada considers 
that there is no provision in the SCM Agreement th at specifically requires the offsetting argued for by 
China.  However, under certain circumstances, th e examination of whether the provision of a good 
through one or more transactions is made for adequate remuneration ma y require that other 
transactions be examined; in particular, Canada c onsiders that where there is an on-going contractual 
relationship between a government supplier and a purchaser, it may be appropriate to take into 
account a range of transactions between the same  parties concerning the same goods in order to 
determine whether one or more transacti ons were made for ad equate remuneration.795 
2. European Communities 
11.29  The European Communities does not view the issue of "offsets" raised by China as 
comparable to the "zeroing" issue arising under the AD  Agreement:  (i) the AD Agreement contains 
specific provisions, which are not present in the SCM Agreement, and which when taken together 
preclude a dumping determination on a transaction-speci fic basis; and (ii) the calculation of benefit 
under the SCM Agreement is not conceptually comp arable to the calculation of a dumping margin.  
Generally, in comparing a particular price with  a benchmark under the SCM Agreement, the guiding 
principle is that like must be compared with like,  due adjustment being made where necessary, unless 
there is a justification for doing otherwise, and on a case-by-case basis.  If that is done, then the 
prevailing market conditions will take into account the normal fluctuations or variations in the price of 
the product in question within the selected period of time.796  On the other hand, the European 
Communities considers that injurious subsidisation is not investigated on an individual transaction 
basis; rather, Article VI:3 of the GATT a nd various provisions of the SCM Agreement  refer to 
"merchandise", "product" or "product under investig ation".  Thus, the calculation of the total amount 
of subsidisation granted to a particular product allo ws for the aggregation of "all" subsidies found to 
have been granted to that product during the peri od of investigation.  As to whether a similar 
aggregation can be done when calculating the amount of  subsidisation in a par ticular subsidy scheme, 
the European Communities is of the view that when  calculating the amount of subsidisation in a given 
case, the question is what amount of benefit has been given to a particular product through the 
specific subsidy scheme during the period of investig ation, and in that exercise, great importance 
should be given to how the investigating authority defines the relevant subsidy scheme and the period 
of investigation.  Once the subsidy scheme has been  defined and the period selected, the investigating 
authority must be "coherent" with its own selecti on throughout the investigation when calculating the 
"overall" benefit granted to the product concerne d through that subsidy practice in the selected 
period.797 
                                                      
795 Canada third-party response to the United States' question to Canada; third-party oral statement, 
paras. 22-23. 
796 The European Communities gives as example the is sue of whether the terms of the transaction are 
determined ex ante (at the time of the contract) or ex post  (at the time of the order) – the benchmark used must 
then correspond to prevailing market conditions either as of the date of contract or as of the date of the order. 
797 European Communities third-party submission, paras. 29-34; response to Panel questions 8 and 9. WT/DS379/R 
Page 182  
 
 3. India 
11.30  India submits that benefit must be calculated on the basis of an aggregate analysis of all 
transactions during the period of investigation, and not  by reference to isolated transactions or merely 
of those transactions which confer bene fit, disregarding other transactions.
798 
4. Japan 
11.31  Japan considers that the benefit should be examined on a subsidy-specific basis without 
zeroing and that China's argument on "zeroing" ma y have certain merit.  Japan notes that a 
countervailing duty may be imposed to offset the am ount of a subsidy, and that the question before 
the investigating authority (and this Pa nel) is to define the scope of " a subsidy".799  As regards benefit, 
Japan considers that the benchmark under Article 14( d) must be the prevailing market price for the 
sale of the goods at issue under comparable terms ava ilable at the time that the financial contribution 
was granted.  Whether normal fluctuations or vari ations in the price of a good or service should be 
reflected or taken into account to determine the be nchmark would depend on the terms of the financial 
contribution.  For example, a government might  sell input materials under certain terms and 
conditions for a certain period of time through multiple  shipments.  Japan considers that in such a 
case, the entire series of shipments could be cons idered to be a financial contribution and the 
calculation of the amount of the subsidy should be b ased on the total value of all shipments – rather 
than the assessment of the benefit for an individua l shipment based on the value of its shipment.  
Japan adds that it also may not be reasonable to  pick certain transactions and disregard other 
transactions to assess the amount of benefit conferred by the financial contribution.800 
5. Norway 
11.32  Norway considers that two elements support Chin a's claim that the use of "zeroing" in the 
benefit calculations to create a countervailable subsidy where none would otherwise exist is 
inconsistent with Article VI:3 of the GATT.  Fi rst, Article VI:3 makes clear that a countervailing 
measure is to be levied on a product, and any duty sha ll not be in excess of the benefit granted on the 
manufacture, production or export of "such" product.  For Norway, the use of the singular form makes 
clear that the calculation of benefit from inputs received from SOEs must be for all input transactions 
during the period of investigation; the reasoning that led the Appellate Body, in its "zeroing" 
jurisprudence, to find that similar words in Ar ticle VI:2 of the GATT precluded a finding of dumping 
for individual transactions applies with equal force to the calculation of benefits derived from single 
input transactions viewed separately.  Second, No rway states that the United States resorted to 
monthly external benchmarks, and thus that the "benefit" determination was not based on a 
calculation of the product cost for the SOEs providing  the five types of rubber, and took no account of 
factors that could have explained cyclical di fferences in product types of these enterprises as 
compared to the monthly variations in the benc hmark prices.  Using monthly benchmark prices in 
such a situation, and "zeroing" monthly results wh ich showed "no benefit" made a finding of benefit 
almost certain from the outset.  No rway considers that the applicati on of a methodology that is almost 
certain to lead to a conclusion of benefit in all cases, based on single transactions compared to a 
                                                      
798 India third-party oral statement (this statement contains no paragraph numbering).  India cites a 
number of provisions (Articles VI:3 of the GATT, Articles 19.2 and 19.4 of the SCM Agreement) in making its 
arguments with respect to "offset", but does not directly link these provisions to the obligation to take all 
transactions into consideration which it puts forward. 
799 Japan notes that Article 1.1(a)(1) and 2.1(c)  refer to the existence and specificity of " a subsidy". 
800 Japan third-party submission, paras. 40-44; response to Panel questions 8 and 9.  WT/DS379/R  
 Page 183 
 
 
 benchmark set by the investigating authorities, cannot  be said to comply with the requirements of 
Article 14(d) of the SCM Agreement  and Article VI:3 of the GATT.801 
D. FACTUAL BACKGROUND  
11.33  In the OTR investigation, the USDOC calculate d benefits to each investigated tire producer 
from its purchases of rubber inputs from SOEs) as follows.802  For each month in which rubber was 
purchased by a tire producer from an SOE, the USDOC  calculated, for each type of rubber input 
purchased (natural rubber, butadiene rubber (BR), styrene butadiene rubber ("SBR"), neoprene), whether a benefit was provided during that month, by comparing the purchase price of the rubber input in question to a monthly benchmark price for th at type of rubber.  The benchmark prices were 
constructed from the price paid by the tire producer in question for imported rubber of the same type 
and, where available, for domestically-produced rubber from private producers.
803  For any monthly 
comparison in which the purchase price for a given rubber input sourced from an SOE was less than 
the benchmark price, the USDOC calculated a monthly "benefit" in the amount of the difference.  For 
any month in which the purchase price was greater than the benchmark price, the USDOC concluded that no benefit had been provided. 
11.34  For each type of rubber input, the USDOC then aggregated all of the positive monthly 
"benefit" amounts, to arrive at a total benefit for that input for the entire period of investigation.  These total amounts then were further aggregated to  arrive at an overall benefit amount for the tire 
producer from its purchases from SOEs of all types of  rubber inputs combined.  In other words, for 
each tire producer, the USDOC aggregated all positive monthly comparisons for each type of rubber input, and then aggregated all of the resulting input- specific sub-totals to arrive at the total benefit 
amount for rubber inputs.  For two of the three producers (GTC and TUTRIC), the USDOC 
determined that there were positive overall benefit amounts.
804  For the third producer (Starbright) the 
USDOC determined that there was no benef it from purchases of rubber inputs from SOEs.805  
Therefore, the remainder of our discussion focuses only on GTC and TUTRIC. 
11.35  The following table illustrates th e approach taken by the USDOC to calculate the benefits 
from government provision of rubber inputs, and the approach that China argues should have been 
taken instead.  Here we note that the numbers in the table are fictitious and are used simply to 
illustrate the two approaches: 
                                                      
801 Norway third-party submission, paras. 34-37. 
802 See, Final Calculation Memorandum for Guizhou Tire Company Limited (GTC)  (the "USDOC 
Calculation Memorandum for GTC"), Exhibit CHI-56; Final Calculation Memorandum for Tianjin United Tire 
& Rubber International Co., Ltd. (TUTRIC)  (the "USDOC Calculation Memorandum for TUTRIC"), Exhibit 
CHI-57; China's Calculations with Offsets, Exhibit CHI-58; and CHI-4, p. 92. 
803 The USDOC requested, and the in vestigated producers reported, information on rubber purchases 
separately by type of rubber, on a monthly basis.  ( Attachment to the Supplementa l Questionnaire Concerning 
the Countervailing Duty Investigation of New Pneumatic  Off-The-Road Tires from the People's Republic of 
China – Government of the People's Republic of China , Exhibit US-107, part III(c)).  In some instances, an 
investigated producer reported a single volume and value of a given type of rubber input purchased from a given 
SOE during a particular month, in other instances the producer reported more than one volume and value of a given type of rubber purchased from a given SOE during a particular month.  The USDOC made comparisons to 
the monthly benchmarks on whatever basis the inves tigated producer reported their input purchases.  
(United States first written submission, footnote 477). 
804 Exhibit CHI-4, p. 12. 
805 Id. WT/DS379/R 
Page 184  
 
  
 SBR BR Neoprene Natural Rubber 
Month Bench-
mark  
Price  
Benefit Bench-
mark  
Price  
Benefit Bench-
mark  
Price  
Benefit Bench-
mark  
Price  
Benefit 
USDOC 
approach             
1 10 8 2 11 10 1 6 5 1 8 9 0 
2 9 9 0 11 11 0 5 6 0 8 9 0 
3 11 12 0 13 14 0 7 5 2 7 8 0 
4 10 9 1 12 11 1 8 9 0 9 12 0 
POI total   3   2   3   0 
 
POI total 
all rubber 8 
 
China 
approach             
1 10 8 2 11 10 1 6 5 1 8 9 -1 
2 9 9 0 11 11 0 5 6 -1 8 9 -1 
3 11 12 -1 13 14 -1 7 5 2 7 8 -1 
4 10 9 1 12 11 1 8 9 -1 9 12 -3 
POI total   2   1   1   -6 
 
POI total 
all rubber 
 -2 
 
11.36  We recall that, as illustrated above, China is challenging the fact that the USDOC did not 
"offset" the positive benefit amounts it found in certain months for certain types of rubber inputs with 
negative amounts in the other months, and for the othe r types of rubber.  In other words, in China's 
view, the USDOC was required by Article 14(d) of the SCM Agreement, Article VI:3 of the GATT 1994, and the other provisions cite d in this claim, to have summed these positive and negative 
amounts over the entire period of investigation and – the USDOC having defined the good at issue as 
"rubber" – all four kinds of rubber inputs.  In par ticular, China argues that the references to "product" 
in Article VI:3 of the GATT 1994, and Articles 10,  19.3 and 19.4 of the SCM Agreement require an 
aggregate analysis of the inputs in question over the entire period of investigation.
806  Furthermore, 
specifically in regard to Article 14(d) of the SCM Agreement, China argues that "in the context of a 
case like OTR, where the alleged government-provi ded goods were purchased frequently over the 
period of investigation, determining whether remuneration was 'adequate' [in the sense of 
Article 14(d)] necessarily required an aggregate  analysis that took into account all of the respondents' 
purchases over the entire period of investigation".807  For China, if the net effect of these transactions 
over the course of a year is that the average pr ice charged by the governme nt supplier equals or 
exceeds the average "market price" benchmark, it would be nonsensical to suggest that the 
government received insufficient remuneration for the goods it sold.808  China further argues that  if a 
purchaser of inputs pays on average at or above th e market price for those inputs, it has not received 
the "good" for less than adequate remuneration, it is not "better off" for having made purchases from 
the government, and the "manufacture" and "production" of its merchandise can in no objective sense be considered subsidized.
809  China's view is that there is  a legal obligation under the covered 
agreements, at least in some circumstances, to use a method of aggregation that takes into account the 
                                                      
806 China first written submission, paras. 145-149. 
807 Id., para. 149. 
808 Id., para. 151. 
809 China response to Panel question 6 (second meeting).  WT/DS379/R  
 Page 185 
 
 
 full range of transactions that occurred during the pe riod of investigation, not just some of them.810  In 
sum, China argues, the USDOC was obligated to conduct an aggregate analysis of all transactions 
involving the purchase of rubber inputs over the period, including those that were made for more than 
the benchmark price, and not merely those that  were made for less than the benchmark price.811 
11.37  The record shows that, as described above, th e USDOC calculated monthly benchmarks for 
each of four kinds of rubber inputs (SBR, BR812, natural rubber, and neoprene), and compared these 
with the monthly average unit values of the co rresponding kinds of rubber purchased by the tire 
producers from SOE suppliers.  We note here that Ch ina is not challenging the benchmarks that were 
applied813, but rather the fact that the USDOC did not calculate the amount of benefit on an average, 
net basis, aggregating positive and negative amount s from all transactions, for all types of rubber 
inputs combined, across the entire period of investigation. 
E. ASSESSMENT BY THE PANEL  
11.38  We recall that China's claim cites a number of provisions of the SCM Agreement, as well as 
Article VI:3 of the GATT 1994, and that China based  its initial arguments principally on this latter 
provision, in particular the word "product" in Artic le VI:3 of the GATT 1994.  This word is the basis 
for China's argument drawing on an analogy with the Appellate Body's findings in the anti-dumping 
"zeroing" disputes.  We address that argument infra . 
11.39  China's explanation, in response to an argumen t advanced by the United States, of the legal 
basis of this claim, however, focuses in detail on Article 14(d) as a source of the substantive 
obligations it asserts.814  China then explains that the USDOC's  benefit calculations relating to rubber 
inputs also were inconsistent with Article VI:3 of the GATT 1994 and Article 10, as well as 
Articles 19.1 and 19.4 of the SCM Agreement because the USDOC used a benefit methodology that 
resulted in an inflated benefit amount, or pr oduced a purported benefit where none existed.815  On the 
basis of this explanation, we understand that the a lleged violations of Article VI:3 of the GATT 1994 
and of Articles 10, 19.1 and 19.4 of the SCM Agreement in the context of this particular argument are 
consequential to the alleged substan tive violation of Article 14(d).  We thus begin our analysis with a 
consideration of Article 14(d) of the SCM Agreement. 
11.40  There is no disagreement between the parties that Article 14(d) of the SCM Agreement 
directly pertains to the calculation of benefit fro m government provision of goods.  This provision 
reads: 
"Article 14 
Calculation of the Amount of a Subsidy in Terms of the Benefit to the 
Recipient 
 For the purpose of Part V, any method used by the investigating authority to 
calculate the benefit to the recipient conf erred pursuant to paragraph 1 of Article 1 
shall be provided for in the national legisl ation or implementing regulations of the 
Member concerned and its application to each  particular case shall be transparent and 
                                                      
810 China response to Panel question 6 (second meeting). 
811 China first written submission, para. 152. 
812 SBR and BR are collectively referred in some of the record documents as "synthetic rubber". 
813 China response to Panel question 35 (first meeting). 
814 China second written submission, paras. 137-152. 
815 Id., paras. 153-160. WT/DS379/R 
Page 186  
 
 adequately explained.  Furthermore, any such method shall be consistent with the 
following guidelines: 
[...] (d) the provision of goods or services or purchase of goods by a 
government shall not be consid ered as conferring a benefit 
unless the provision is made for less than adequate 
remuneration, or the purchase is made for more than adequate remuneration.  The ad equacy of remuneration shall 
be determined in relation to prevailing market conditions for 
the good or service in question in the country of provision or 
purchase (including price, quality, availability, marketability, 
transportation and other conditions of purchase or sale)". 
11.41  The precise question before us is whether th e methodology used by the USDOC to determine 
that the provision of rubber inputs by SOEs confe rred benefits on OTR tire producers was inconsistent 
with Article 14(d).  We recall that China's argume nt based on the text is that because Article 14(d) 
refers to "the good [...] in question", and to "a be nefit", in the singular, and the USDOC identified the 
"good" in question as "rubber", the calculation re garding the adequacy of remuneration must be 
conducted on an aggregate basis in respect of all of the rubber inputs, combined.  China also argues 
that where a given good is purchased on multip le occasions over a period of investigation, 
Article 14(d) requires that those individual transacti ons be considered in the aggregate to determine 
whether a producer is "better off" over a period of i nvestigation.  In China's view, the producer is not 
better off if it ends up paying, on average, more than the market price for any "good" that it purchases 
from the government over that period.  China furthe r considers that pursuant to Article 14(d) some 
aggregation is inevitable, such that the question becomes not whether, but how, to aggregate in a 
WTO-consistent manner. 
11.42  We further recall China's argument that in th e OTR investigation, the USDOC identified as a 
"programme" the provision of rubber inputs by the government for less than adequate remuneration.  
China argues that the USDOC thus was required to a ggregate all of the different types of rubber (as 
"the good" in question) in pe rforming its benefit calculations. 
11.43  We thus see two main components to China's argument based on Article 14(d):  temporal (the 
period of investigation as a whole); and regarding th e meaning of "good" in this provision (how the 
input "programme" is defined by the investigating authority). 
1. Period of investigation 
11.44  Starting with the temporal element, we note that there is no direct reference to time in 
Article 14(d), or elsewhere in Article 14 of the SCM Agreement.  In fact, the only way in which 
Article 14(d) refers to time, albeit indirectly, is through its referenc e to "prevailing market 
conditions", which we understand to mean the conditions in the market prevailing at the time of the 
purchase of the good or service in question from the govern ment.  But this is a different issue from the 
one raised by China. 
11.45  From the practical point of view, we agree with China that countervailing duty investigations 
inherently have a temporal component, as alleged subsidies must be analyzed in relation to a 
particular period to ultimately arrive at an overall am ount of subsidization of the investigated product,  WT/DS379/R  
 Page 187 
 
 
 ad valorem  and/or per unit, as provided for in Articles 11.9 and 19.4 of the SCM Agreement.816  For 
this reason, an investigating authority will define a period of investigation and typically will need to 
perform a certain amount of aggregation and/or disaggregation of benefit amounts from different 
investigated subsidies to determine the total amount of subsidization of the product during that period. 
11.46  This observation, which is shared by China,  that benefit amounts from different subsidies 
need somehow to be aggregated over the period of in vestigation in order to arrive at the total amount 
of subsidization of the investigated product, does not however address the temporal issue raised by 
China.  In particular, China is arguing that Article 14( d) (via its references to  a "good" and "a benefit" 
in the singular) requires that the determination of whether purchases of inputs from government sources were for less than adequate remuneration mu st be calculated on an overall, net basis for the 
entire period of investigation for the good in questi on, using for each transaction the benchmark price 
identified by the investigating authority as the yardstic k.  In other words, China's argument is that if 
some purchases during the period of investigation are made for a higher-than-benchmark, or above-
market, price, the full amount of these "negativ e" benefit amounts, as measured against the 
benchmark price, must, as a matter of law, be o ffset against the "positive" benefit amounts, over the 
full period of investigation. 
11.47  In assessing this argument, we note first that Ar ticle 14(d) of the SCM Agreement contains no 
reference to any notion of offsetting, or "negativ e benefits" or of averaging across the period of 
investigation, for a particular good.  Indeed, in our  view, the language of the provision – especially the 
statement that "the provision of goods or services or purchase of goods by a government shall not be 
considered as conferring a benefit unless  the provision is made for less than adequate remuneration" – 
if anything suggests both a disaggregated analysis and a focus on instances where benefits are found 
to exist.  We note in particular the negative terms in which this sentence is drafted – a benefit "shall 
not" be conferred "unless" – which could be restated as there being no benefit, i.e., a benefit of zero, 
where the remuneration is at least "adequate". 
11.48  The fact that the comparison required by Article  14(d) is with "prevailing market conditions", 
in our view, also cuts against China's argument th at if on average over the period of investigation a 
purchaser of a good has not paid a below-market price,  there is no benefit.  In particular, given that 
"prevailing market conditions" can and do change over  time, an investigating authority would need to 
ensure that its benchmark price was updated as necessa ry to reflect any such changes that might occur 
during the period of investigation.  This suggests th at rather than viewing the period of investigation 
monolithically, an investigating authority shou ld be seeking to match the transactions under 
examination to contemporan eous benchmarks, and that  the existence or absence of a benefit in respect 
of one transaction or group of transactions is indepe ndent of the existence or absence of a benefit in 
other transactions. 
11.49  We also note that the approach advocated by China has a significant internal inconsistency 
which is most easily seen in a hypothetical situa tion where all of the purchases of a given good from a 
government are for prices above "prevailing market  conditions".  Under China's methodology, the 
benefit calculations would generate  "negative benefits", both indivi dually and overall.  China argues 
that it sees no requirement under the SCM Agreement to offset any such net negative benefits from 
provision of goods against positive benefits from any ot her kinds of subsidies.  Yet, we can find no 
basis in China's argument on which such a distin ction could be made be tween positive and negative 
benefit amounts from one given ki nd of subsidy and positive and negative benefit amounts across 
different kinds of subsidies.  We see no such requi rement in the SCM Agreement, and to the contrary 
                                                      
816 Article 11.9 of the SCM Agreement establishes that subsidization of less than 1 per cent ad valorem  
is de minimis  and must result in termination of an investiga tion.  Article 19.4 of the SCM Agreement refers to 
calculation of "the amount of the subsidy found to exist [...] in terms of subsidization per unit of the subsidized 
and exported product". WT/DS379/R 
Page 188  
 
 consider that the Agreement – starting with the ba sic definition in Article 1 – instead provides that 
each subsidy must be analyzed and assessed independently.
817  China's proposed methodology is 
inconsistent with this principle. 
11.50  For the foregoing reasons, we find no requirement  in Article 14(d) of the SCM Agreement 
that, as such, positive and "negative" benefits from government provision of a good must be offset 
over the period of investigation. 
2. "Good" in the sense of Article 14(d) of the SCM Agreement 
11.51  The second aspect of China's aggregation argument is that the USDOC should have treated all 
rubber inputs as a single "good" in the sense of Ar ticle 14(d), and that an overall net benefit amount 
(positive or negative) should have been calculated for "rubber" of all types together, for each tire 
producer.  China bases this argument on the fact that the USDOC notionally treated provision of 
"rubber inputs" for less than adequate remunera tion as a "programme" in its investigation. 
11.52  While this argument of China would at first sight appear to be a purely factual one, it raises a 
legal question, that of the breadth of the term "good"  in Article 14(d), and the extent to which what is 
considered to be a "good" for the benefit de termination pursuant to Article 14(d) should be 
determined by the way in which the investigating authority groups various alleged subsidies in the 
investigation. 
11.53  We consider that the text of Article 14(d) must be understood to refer to the intrinsic 
characteristics of the good itself, i.e., that the existe nce of a benefit must be determined based on how, 
in practice, the specific good in question is sold.  In  particular, this is the purpose of the language in 
that provision referring to "prevailing market conditions" as "including price, quality, availability, 
marketability, transportation, and other conditions of purchase or sale".  This means that any 
benchmark identified as representing the "prevailing market conditions" for the good provided by a 
government must reflect the price for that same good as it would be or is sold by private sources at that time and on comparable terms and conditions.  This language thus requires a careful matching of 
the transactions being examined with appropriate benchmarks, and militates against an aggregated, 
averaged approach across different kinds of goods. 
11.54  We thus consider that, like the temporal ques tion, Article 14(d) of the SCM Agreement points 
more to a disaggregated than an aggregate analysis  of the pricing of a government-provided "good" 
for purposes of benefit calculation.  Given this, we see no requirement in the text that simply because an investigating authority may refer to the provi sion of certain goods as a "programme" for purposes 
of its analysis, all of those goods must be treated as a bloc, on the basis of their average unit value, in 
the benefit calculations.  To the c ontrary, we see a clear requirement that the benchmark must in fact 
reflect the actual market conditions, starting with price, for any given good at issue. 
3. Degree of flexibility for investigating authorities under Article 14 of the SCM 
Agreement 
11.55  We note that while China argues that the met hodology it advances is required in all cases, the 
United States counters that Article 14 provides inves tigating authorities with considerable leeway to 
perform benefit calculations, with in the general framework mandated by Article 14 of the SCM 
Agreement.  We thus now turn to this question.  In this regard, we note first that the chapeau of 
Article 14 explicitly characterizes the rules set forth in the four subparagraphs of Article 14 as 
                                                     
 
817 For example, Article 1 of the SCM Agreement refers  to "a subsidy", "a financial contribution", and 
"a benefit"; and "countervailing duty" is defined in footnote 36 as a special duty to offset "any subsidy" 
bestowed upon the manufacture, production or export of any merchandise.  WT/DS379/R  
 Page 189 
 
 
 "guidelines".  In this respect, we agree with the findi ngs of past panels and the Appellate Body that as 
such, these "guidelines" establish the basic framework for the calculation of benefits from the kinds of 
financial contributions referred to in the various subparagraphs, but that they leave a considerable 
amount of leeway to investigating authorities as to precisely how those calculations are to be undertaken in any given case, depending on the specific facts under investigation.  We note in 
particular the following statements of the Appellate Body in US – Softwood Lumber IV : 
"[...] The chapeau of Article 14 requires that ' any' method used by investigating 
authorities to calculate the benefit to the recipient shall be provided for in a WTO Member's legislation or regulations, and it re quires that its application be transparent 
and adequately explained.  The reference to ' any' method in the chapeau clearly 
implies that more than one method consis tent with Article 14 is available to 
investigating authorities for purposes of calcula ting the benefit to the recipient.  [...] 
"[T]he term 'guidelines' suggests that Ar ticle 14 provides the 'framework within 
which this calculation is to be performed ', although the 'precise detailed method of 
calculation is not determined'.  [...] [T]hese terms establish mandatory parameters 
within which the benefit must be calculate d, but they do not require using only one 
methodology for determining the adequacy  of remuneration for the provision of 
goods by a government.  Thus, [...] the use of the term 'guidelines' in Article 14 suggests that paragraphs (a) through (d) shoul d not be interpreted as 'rigid rules that 
purport to contemplate every conceivable factual circumstance'".
818  (emphasis 
original) 
We further note the Appellate Body's similar statement in Japan – DRAMs (Korea) : 
 
"The chapeau of Article 14 provides a WTO Member with some latitude as to the method it chooses to calculate the amount of benefit.  Paragraphs (a)-(d) of Article 14 
contain general guidelines for the calculation of benefit that allow for the method 
provided for in the national legi slation or regulations  to be adapted to different factual 
situations".
819 
 11.56  We recall that we have found, above, no requireme nt in Article 14(d) for either the temporal 
or the product "offsetting" advocated by China.  The above findings of th e Appellate Body support 
this view, by indicating that no one specific methodol ogy (whether that put forward by China or any 
other) is required by Article 14(d) of the SCM Agreem ent.  We also have found that the language of 
Article 14(d) suggests more a disaggregated than an aggregate approach, both temporally and in 
respect of a "good" in the sense of that provision.  That said, as discussed above, we consider that the 
basic requirement of Article 14(d), as expressed by the phrase "prevailing market conditions for the good [...] in question [...] (includi ng price, quality, availability, mark etability, transportation and other 
conditions of purchase or sale)", is that the benchm ark used must correspond to the particular good at 
issue, as it is actually sold, at the time of the tran saction being analyzed (i.e., it must reflect the factual 
situation found to exist in respect of the govern ment-provided good).  It is within this basic 
"guideline" that an investigating authority can exercise the methodological flexibility accorded to it 
under Article 14 so as to appropriately take into account the specific facts of the investigation. 
11.57  Finally, we recall China's initial argument, based on an analogy with certain dispute 
settlement findings on the issue of "zeroing" in the context of anti-dumping, that Article VI:3 of the 
GATT 1994 as well as Articles 10, 19.3 and 19.4 of the SCM Agreement establish that a countervailing duty is to be imposed in respect of th e "product" under investigation, and that therefore 
                                                     
 
818 Appellate Body Report on US – Softwood Lumber IV , paras. 91-92. 
819 Appellate Body Report on Japan – DRAMs (Korea) , para. 191. WT/DS379/R 
Page 190  
 
 subsidization, like dumping, is to be  defined in relation to a "product as a whole ", and that "margins 
of subsidization", like "margins of dumping" , can only be calculated for the product under 
investigation "as a whole".  China submits therefor e that while the USDOC could choose to undertake 
multiple comparisons at an intermediate stage to establish the "margin of subsidization", it could only 
establish that "margin" for each producer on the basi s of aggregating all these "intermediate values", 
and that the Appellate Body's findings on zeroing in  the anti-dumping context apply with even greater 
force in the countervailing duty context given that s ubsidization is not inves tigated on an individual 
transaction basis but, rather, necessarily involves an aggregated inquiry focusing on the "manufacture" 
or "production" of a product over the entire period of investigation. 
11.58  As we have discussed above, we consider that  a countervailing duty analysis does inherently 
involve a certain amount of aggregation, of be nefits from distinct subsidies benefiting the 
manufacture, production or export of an investigated product, and of those benefits over the course of 
the period being investigated.  In our view, however, such aggregation of benefits to the investigated 
product from different subsidies is unrelated to Ch ina's contention that "negative" benefit amounts 
must offset "positive" benefit amounts in calcula tions pertaining to the government provision of a 
given good (one among several possible subsid ies affecting a given investigated product).
820  We 
recall here that in any case, China itself argues (and we  agree) that offsets of "positive" and "negative" 
benefit amounts across different subsidy programm es are not required, by Article 14 of the SCM 
Agreement or any other provision of the WTO Agreement.  We thus do not find China's zeroing analogy to be apposite to this claim. 
11.59  For these reasons, we do not find that, as a matter of law, Article 14(d) or any of the other 
provisions cited in China's claim requires the me thodology advanced by China, or any specific 
methodology, to be applied in calculating be nefits from the government provision of a good.
821  We 
have instead found that Article 14(d), the directly  applicable provision, requires that benefit be 
determined in a way that reflects the actual facts of the investigation.  We do not here exclude, a 
priori , the possibility that a given set of factual circ umstances (perhaps a hypo thetical scenario along 
the lines referred to in Canada's third party arguments) might dictate the methodology advocated by 
China in a specific case.  That said, the questi on remains whether the OTR investigation presented 
such a situation. 
4. The USDOC benefit determination in respect of rubber inputs 
11.60  Having considered the legal issues under Article  14(d) of the SCM Agreement and the other 
provisions cited by China, we now turn to the US DOC's analysis and determination of benefit from 
the government provision of rubber inputs to OTR tire  producers.  In particular, we consider whether 
the particular facts of the OTR investigation necessitated the methodology advocated by China. 
11.61  The record demonstrates that in the OTR inves tigation, the USDOC referred to the subsidy at 
issue as the provision of "rubber" for less than adequate remuneration.822  In its calculations, 
                                                      
820 We note further that the term "margin of subsidization" does not appear in the SCM Agreement. 
821 Nor do we consider that China has established the existence of a "basic reasonableness test" under 
Article 14 that would impart particular obligations that do not appear on the face of  that provision.  Indeed, 
China provides no discussion of what it means by the term  "basic reasonableness test", instead simply citing a 
paragraph of the report of the panel in EC – Countervailing Measures on DRAM Chips  in which that term 
appears. 
822 See, inter alia , Exhibit CHI-4 pp. 9 and 69 (title of the programme "determined to be 
countervailable" is the "Government Provision of Rubber for Less than Adequate Remuneration"); Exhibit CHI-
50, p. 71372-71374, ("Provision of Natural and Synthetic Rubber by SOEs for Less than Adequate 
remuneration"); Exhibit CHI-51 p. 40484, item D ("Gove rnment Provision of Rubber for Less than Adequate 
Remuneration"); Exhibits CHI-56 and CHI-57 (Final Calculation Memoranda for GTC and TUTRIC 
("Government Provision of Rubber for Less than Adequate Remuneration")).  WT/DS379/R  
 Page 191 
 
 
 consistent with the basis on which the informatio n was reported by investigated producers, the 
USDOC performed a separate calculation for each of the rubber inputs.823  GTC and TUTRIC both 
reported to the USDOC their purchases of rubber inputs from SOEs by month (sometimes reporting 
more than one transaction during a given month), separately for each of the types of rubber.  There is no indication in the record of the investigation or before us that this was at odds with how the tire 
producers maintained the record s of their rubber purchases. 
11.62  The USDOC calculated monthly market benchmar k prices for each type of rubber, based on 
the tire producers' actual purchases of rubber from  private sources, and used these monthly 
benchmarks to determine on a monthly basis whethe r a benefit had been conferred.  For each tire 
producer, the USDOC summed the positive benefit amounts thus calculated for each type of rubber, to 
arrive at a total benefit for the period of investiga tion to that tire producer from that type of rubber.  
These input-product-specific benefit totals then were adde d together to arrive at the total benefit to the 
tire producer from government provision of rubber inputs of all kinds during the period of investigation. 
11.63  We note first that China does not contend that all of the different types of rubber were sold for 
a single, undifferentiated price.  Nor does the record evidence indicate that this  was the case.  To the 
contrary, the record evidence shows that each type  of rubber was sold as a specific, separate product 
with its own pricing, and that the tire producers ma intained their purchase r ecords separately for each 
type.
824  Furthermore, we recall that China raises no cl aim in respect of the benchmarks used by the 
USDOC in these benefit calculations, or the matching of any particular benchm ark to any particular 
rubber purchase.  In other words, China does not claim that the benchmarks used by the USDOC 
failed to reflect "prevailing market conditions" either temporally or in terms of the characteristics or 
terms and conditions of sale of the particular kinds of rubber at issue. 
11.64  Instead, what China contends is that in spite of their differentiated pricing, all of the different 
rubber inputs were legally required to be treated as a single "good" in the sense of Article 14(d) 
because the USDOC treated the government provision of rubber inputs to the OTR tire producers as a 
"programme". 
11.65  In our view, China's characterization of th e USDOC's description of the measure places undue 
weight upon the title given by the USDOC to the progr amme at issue, and we are not convinced that 
the USDOC sought to define the "good" at issue as "rubber" in the aggregate, without distinction between various types of rubber inputs.  But in a ny case, even if we were to agree with China's 
characterization of the USDOC's description of the s ubsidy or good at issue, we find no basis in the 
SCM Agreement for China's arguments, nor do we c onsider that aggregating all "rubber" inputs, as 
China suggests was required, would reflect any market  reality.  Indeed, we note that there would be a 
considerable margin for inaccuracy  if investigating authorities were legally required to ignore the 
actual pricing of a given good in favour of an  average value across a range of goods with 
differentiated pricing.  Furthermor e, we consider that the guidelines of Article 14(d) mean that the 
level of aggregation or disaggregation of the anal ysis of a given "good" must correspond to how that 
good is marketed in reality.  Given the facts of the case before us, we thus c onsider it appropriate for 
the USDOC to have separately calculated benefit am ounts for the different kinds of rubber purchased 
by the tire producers. 
11.66  Turning to the USDOC's approach of analyzing the rubber transactions on a monthly basis 
and taking into account only the positive monthly am ounts, we recall that China contends that the 
USDOC should instead have calculated the overall positive or negative net benefit for the period of 
investigation as a whole, i.e., that it should have compared the average price paid for all forms of 
                                                     
 
823 See Exhibits CHI-56 and CHI-57 (Final Calculation Memoranda for GTC and TUTRIC). 
824 Exhibits CHI-56 and CHI-57. WT/DS379/R 
Page 192  
 
 rubber over that period with the average benchmark.
825  We consider that there could be certain 
situations in which some sort of grouping or aver aging of transactions might be necessary in order to 
arrive at a determination of the amount of the benefit.  Examples might include where a given set of transactions was made pursuant to a contract, or  possibly where the actual prices paid to the 
government fluctuated slightly around the market benchmark(s) over the entire period of 
investigation.  In the OTR investigation, howe ver, the positive benefits calculated by the USDOC 
were clustered in particular months of the period of  investigation and generall y were sizeable, rather 
than being small amounts above and below the benchm arks spread uniformly over that period.  This 
fact pattern, to us, does not mandate the kind of te mporal averaging advanced by China.  We thus 
consider that the USDOC acted within the limits of  the flexibility accorded to it by Article 14(d) of 
the SCM Agreement in performing as it did the benefit calculations on a monthly basis. 
11.67  Finally, we consider China's argument that the fact that the USDOC compared "aggregate" 
monthly benchmarks to individual transactions in performing its benefit analysis, and in some instances used benchmark prices that were not cont emporaneous to the input transactions, resulted in 
comparisons that were not "apples-to-apples".  We note that China reiterates, in making this 
argument, that it is not raising any new issues pertaining to non-contemporaneous (or non-like) 
benchmarks.  We consider, however , that the benchmarks used by the USDOC are in fact the precise 
focus of this argument, which we see as a different issue from the "offset" issue that is the subject of 
China's claim as set forth in its request for establi shment of the Panel.  We thus do not find this 
argument germane to our consideration of that claim. 
5. Conclusions 
11.68  For the foregoing reasons, we find that China has not established that the USDOC acted 
inconsistently with the obligations of the United States under Article 14(d) of the SCM Agreement by 
not "offsetting" positive benefit amounts with "nega tive" benefit amounts, either across different 
kinds of rubber or across different months of the pe riod of investigation, nor  that the United States 
also thereby acted inconsistently with its obligati ons under Articles 10, 19.1, 19.4 or 32.1 of the SCM 
Agreement, or Article VI:3 of the GATT 1994. 
11.69  We recall that we are called upon by this claim,  as by all others before us, to determine 
whether the United States has acted inconsistently w ith its obligations on the basis alleged by China.  
In finding that China has not established its claim we thus are not making a judgement as to the overall consistency or inc onsistency of the USDOC's benefit calcu lations in respect of rubber inputs 
with the United States' obligations, under th e cited provisions or any other provisions. 
XII. CHINA'S CLAIMS PERTAINING TO THE PROVISION OF SOE-PRODUCED 
INPUTS BY PRIVATE TRADING COMPANIES 
A. C
LAIMS BY CHINA  
12.1 China submits that even if the USDOC's finding that SOE input producers were public bodies 
were valid, in the CWP, LWR and OTR investig ations the USDOC acted inconsistently with 
Article 1.1 of the SCM Agreement (and as a c onsequence with Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994) by finding subsidies where inputs produced by SOEs 
were purchased from private trading companies by th e producers of the investigated products, as the 
                                                      
825 See para.11.36,  supra .  This is another way used by China to express its argument that the positive 
and negative subsidy amounts should have been "offset".  WT/DS379/R  
 Page 193 
 
 
 USDOC made no finding that the trading companies we re "entrusted" or "directed" in the sense of 
Article 1.1(a)(1)(iv) of the SCM Agreement to provide the goods.826 
12.2 China further submits that if the Panel were to  conclude that the USDOC was not obligated to 
make a finding that the trading companies themselv es provided a financial contribution, the benefit 
analysis in respect of the sale of inputs was nonetheless flawed because it was predicated on an 
unlawful presumption that the trading companies rece ived, and passed-through to the producers of the 
investigated products, counterva ilable benefits from their purchases of the inputs from SOEs.827 
12.3 Concerning the first issue (the entrustment or di rection issue), the relevant portion of China's 
request for establishment of the Panel (paragraph B.1(a)(iii)) reads as follows: 
"(iii) even assuming a valid determination that certain SOEs are public bodies, the 
US authorities' failure to make a determina tion that SOEs "entrust or direct" trading 
companies to provide goods to producers of subject merchandise, within the meaning of Article 1.1(a)(1)(iv) of the SCM Agreement;"  (footnote omitted) 
12.4 Concerning the second issue (the pass-through issue) , which China raises in the alternative to 
the financial contribution issue discussed supra , China, in response to a question from the Panel, 
identifies paragraphs B.1(a)(iv) and B.1(a)(v) of its request for establishment of the Panel as setting 
forth its claim(s) relative to the pass-through issue.
828  These paragraphs read: 
"(iv) the US authorities' determination that  the sale of goods by trading companies 
to producers of subject merchandise confers a countervailable subsidy within the meaning of Article 1 of the SCM Agreem ent and a benefit under the guidelines set 
forth in Article 14(d) of the SCM Agreement; 
(v) the US authorities' failure to determ ine whether the alleged benefit received 
by trading companies was passed through to producers of subject merchandise, in violation of Article VI:3 of the GATT 1994 and Articles 10, 14, 19.1, 19.4, and 32.1 of the SCM Agreement". 
B. M
AIN ARGUMENTS OF THE PARTIES  
1. China 
12.5 China argues that the USDOC had no basis to conclude that the respondents obtained 
"government-provided goods" when they purchased  inputs from the trading companies, since the 
USDOC made no findings that the private tradi ng companies themselves had made a financial 
contribution when selling SOE produced inputs, i.e., that they had been "entrusted or directed" to "provide goods" within the meaning of Article 1.1.  For China, this necessarily means that the 
subsidies at issues were countervailed unlawfully.
829 
12.6 China alleges that even if the Panel were to  disagree with this conclusion, the USDOC’s 
findings with respect to trading companies would still be unlawful, because  they are based on an 
erroneous benefit analysis as well.  In particul ar, China submits that the USDOC never established 
that the private trading companies themselves received subsidies, in particular that it did not examine 
                                                      
826 Paragraphs B.1(a)(iii) and B.1( e)(i)-(iii) of the "as applied" claims in China request for 
establishment of the Panel; China first written submission,  para. 132; second written submission, paras. 44 and 
315 (b). 
827 China first written submission, paras. 133-138. 
828 China response to Panel question 34 (second meeting). 
829 See, e.g.,  China first written submission, para. 132. WT/DS379/R 
Page 194  
 
 the price paid by the trading companies for th e inputs they purchased from SOEs in any of the 
investigations.  Rather, according to China, th e USDOC "presumed, without any investigation or 
analysis, that the purported financial contribution to  the trading companies – the provision of [inputs] 
by SOEs – conferred a benefit on the trading co mpanies".  By presuming, rather than actually 
determining, whether and to what extent a benefit was conferred in the transaction between the SOEs 
and the trading companies, the USDOC acted incons istently with Articles 1.1(b) and 14(d) of the 
SCM Agreement.
830 
12.7 China further argues that without a valid findi ng that the trading companies themselves had 
received a benefit, the USDOC had no legitimate basi s to conclude that "all or some portion of the 
benefit" they purportedly received was "confe rred on the […] producers who purchase the [inputs] 
from the trading company suppliers".  In other wo rds, China submits, the USDOC presumed the "pass 
through" of a benefit that had not been found to ex ist.  According to China,  the USDOC analysed the 
purchase of inputs from trading companies as if they were "indirect" subsidies, and although the USDOC did not expressly characterize it as such, its ra tionale for concluding that the investigated 
producers received a benefit was based on an assumption that some or all the subsidy conferred to the 
trading companies "passed through" to the inves tigated producers when they purchased inputs from 
the trading companies.
831  In China's view, the USDOC’s approach cannot be reconciled with the 
Appellate Body's jurisprudence on "pass through":  the USDOC could not lawfully establish that the 
SOEs had conveyed an indirect subsidy upon the investigated producers "via" their purchases from 
the trading companies unless it had first established that the trading companies themselves were the 
direct recipients of a subsidy.  China argues th at the USDOC had to examine both the transactions 
between the SOEs and the private trading companies and  the transactions between the private trading 
companies and the investigated producers.  By examining only the latter of these transactions, the 
USDOC's benefit determinations with respect to the trading companies transactions were inconsistent 
with Articles 10, 14, 19.1, 19.4, and 32.1 of the SCM Agreement and Article VI:3 of the GATT.832 
2. United States 
12.8 With respect to sales through trading compani es, the United States argues that the USDOC 
properly applied the SCM Agreement when it dete rmined that the public bodies (the SOEs) made 
financial contributions to the trading companies,  and that these financial contributions conferred 
benefits to the producers of investigated products.833 
12.9 Concerning the financial contribution issue, the United States argues that no entrustment or 
direction analysis was required, and that China has not substantiated its claim that the USDOC's 
analysis was improper.  According to the United States, the USDOC found that "'the [Government of 
China's] financial contribution (provision of a good [by an SOE]) is made to the trading company suppliers that purchase the [good], while all or some  portion of the benefit is  conferred on the OTR 
tire producers who purchase rubber from the trading companies'", and explained that the producer is the key link in the sales chain, su ch that when the producer is state-owned, there is a financial 
                                                     
 
830 China first written submission, para. 133-135; response to Panel question 34 (second meeting). 
831 China explains that under the USDOC’s approach, the "full difference" between its benchmark price 
and the price paid by investigated producers to trading companies would presumptively be considered a 
countervailable "benefit".  However, Ch ina argues, there is no basis for such a presumption:  there are a number 
of reasons (unrelated to subsidization) why the price between the trading companies and the investigated 
producers may be lower that the (unlawfully presumed ) subsidized price at which the trading companies 
originally purchased from SOEs.  For example, China notes, the market price for the inputs in question could have been lower at the time the trading company resold the inputs than when it purchased them from SOEs.  
(China first written submission, para. 136; resp onse to Panel question 34 (second meeting)). 
832 China response to Panel question 34 (second meeting), citing to Appellate Body Report on US – 
Softwood Lumber IV , paras. 129 and 140-146. 
833 United States first written submission, para. 147.  WT/DS379/R  
 Page 195 
 
 
 contribution by a public body.834  The United States argues that there is no indication in Article 1.1(a) 
of the SCM Agreement of who must receive a fina ncial contribution, as th at provision only addresses 
who grants a financial contribution.835 
12.10  In this regard, the United States submits that, although the financial contribution must confer 
a benefit, Article 1.1(b) does not specify upon  whom the benefit must be conferred.  The 
United States quotes the finding of the Appellate Body that "the 'benefit' of a financial contribution 
[...] [does not necessarily have to] be 'received and enjoyed' by the same person, or put differently, 
there is nothing indicating that the 'benefit' cannot be  'received and enjoyed' by two or more distinct 
persons".836  The United States recalls that in Mexico – Olive Oil, the panel interpreted the Appellate 
Body's findings as meaning that "a benefit might be received by different recipients, that the recipient 
of the benefit might be different from the recipient of  the financial contribution, and that a subsidy can 
be bestowed directly or indirectly, and in r espect of production, manufacture or export of a 
product".837 
12.11  According to the United States, China's clai m that the USDOC "presumed" a financial 
contribution from  the trading companies misses the point , as the USDOC instead found a financial 
contribution to the trading companies.  Fo r the United States, this argument by China assumes that 
Article 1.1 of the SCM Agreement requires there to  be only one recipient, which must receive both 
the financial contribution and the entire amount of  the benefit, an assumption for which China has 
offered no support.838 
12.12  The United States argues that in the investigations  at issue, the financial contribution occurred 
with the sale of goods by the SOE to the "intermedi ary" trading company, and that this government 
provision of goods then conferred benefits upon the respondent produ cers of investigated products, 
when the trading companies sold  the goods to those producers.  According to the United States, 
although the trading companies received "perhaps some  benefit" this did not preclude the producers of 
the investigated products from receiving a benefit, wh ich existed to the extent that the prices paid by 
those producers for the goods were less than the corresponding benchmark prices.839 
12.13  Concerning the pass-through issue, the United States disagrees that the USDOC presumed the 
pass-through of a benefit that had not been found to exist.  According to the United States, to the extent that a trading company received a benefit from the financial contribution provided by an SOE 
in the form of provision of goods, and some portion of that benefit in effect passed through the trading 
company to a producer of subject merchandise,  the USDOC accounted for this and properly 
calculated the benefit conferred upon the producer of the investigated product.  To do so, the 
United States submits, the USDOC compared the pri ce the producer of the investigated product paid 
for the goods in question with an appropriate benchmark price.
840  The United States cites the 
Appellate Body and the Olive Oil panel for the propositions that a pass-through analysis is not 
required every time there is an arms'-length transac tion between unrelated companies in the chain of 
                                                      
834 United States first written submission, paras. 148 and 156. 
835 Id., para. 150. 
836 Id., para. 152, citing to Appellate Body Report on US – Countervailing Measures on Certain EC 
Products , para. 110.  (emphasis original). 
837 Id., para. 154, citing to Panel Report on Mexico – Olive Oil , para. 7.152. 
838 Id., paras. 155-156. 
839 Id., para. 157. 
840 Id., para. 320. WT/DS379/R 
Page 196  
 
 production of an investigated product, and that the recipient of a benefit may be different from the 
recipient of the financial contribution.
841 
12.14  The United States further argues that in the transactions at issue, the USDOC accurately 
measured the benefit by comparing the price paid by the producer of the investigated product for the input with an appropriate benchmark price.  In particular, any differe nce between the price paid by the 
trading company to the SOE for the input and the pr ice paid to the trading company by the producer 
of the investigated product, e.g., the mark-up adde d by the trading company, was reflected in the 
benefit calculations.  Put another way, the United States argues, even if the USDOC had first determined the difference between the benchmark and the price paid by a trading company to an SOE 
for a government-provided good, and then also de termined the difference between the benchmark and 
the price paid by the producer of the investigat ed product to the trading company for the good, the 
resulting determination of be nefit would be the same.
842  The United States concludes that whether the 
trading company sells the goods for the price it pa id for them or with a mark-up, the benefit 
calculation properly determines the benefit confe rred on the last buyer, the producer of the 
investigated product.843 
C. MAIN ARGUMENTS OF THE THIRD PARTIES  
1. Australia 
12.15  Australia considers that when trading companies are mere inte rmediaries in a transaction, a 
complete pass-through analysis may not be necessary, and that this approach is consistent with the 
findings of the Appellate Body in US – Countervailing Measures on Certain EC Products  and US – 
Softwood Lumber IV .  Australia further notes that where intermediaries do not change the nature of 
the input, the benefit is most accurately calculated at  the level of the exporters concerned.  Australia 
suggests that the Panel examine what could cons titute a pass-through analysis, which could include 
establishing the existence of a subsidy to an input product, and the price paid by the producer of the investigated product for the input compared with an appropriate benchmark.
844 
2. Canada 
12.16  Canada argues that to impose a valid count ervailing duty on a product as a result of the 
successive sales at issue, the USDO C had to determine that the sales of inputs by the SOEs to the 
trading companies constituted a financial contribution that conferred a benefit both directly upon the 
trading companies and indirectly upon the respondent  producers, recalling that pursuant to Appellate 
Body findings, no separate financial contribution de termination would be required for the sale of 
inputs to those producers.  Concerning benefit, Ca nada submits that wher e the direct recipient 
purchases goods from a government or public body, and resells them without further processing them, 
the difference between the resale price paid by the indirect recipient and the benchmark price reflects 
the extent to which the be nefit has passed through.845 
3. European Communities 
12.17  The European Communities considers that provision of goods by trading companies is a mere 
intermediate act, that does not change the nature of  the financial contribution (i.e., the fact that the 
                                                      
841 See, e.g. , United States first written submission, para. 321; citing to Panel Report on Mexico – Olive 
Oil, paras. 7.143 and 7.152 (quoting Appellate Body Report on US – Countervailing Measures on Certain EC 
Products , paras. 110-113). 
842 United States first written submission, paras. 323-324. 
843 Id., para. 324. 
844 Australia third-party submission, para. 24; third-party oral statement paras. 16-18. 
845 Canada third-party oral statement, paras. 8-12 and 17.  WT/DS379/R  
 Page 197 
 
 
 suppliers of the goods are SOEs), and in such cases,  where there is no transformation of the product 
concerned, it would be unnecessary for the USDOC to have shown pass-through.846 
4. Mexico 
12.18  Mexico recalls the Appellate Body finding that a financial contribution may be granted to a 
company indirectly.  In the present dispute, becau se the private trading companies were only the 
vehicle through which the financ ial contribution reached the companies under investigation, the 
investigated companies received the contribution i ndirectly, and thus it was not necessary to make a 
finding of benefit to the trading companies.  Concer ning pass-through, such an analysis is only needed 
when the subsidies are given for the production of a good that is an input for the product under investigation (in other words, upstream), which was not the case in the investigations at issue.
847 
5. Saudi Arabia 
12.19  Saudi Arabia argues that in case of alleged subs idized inputs, a pass-through analysis should 
be conducted to determine if the downstream produ cer has received a benefit.  Saudi Arabia argues 
that a two steps analysis must be undertaken each  time the investigated product did not directly 
receive a subsidy from the government.  The investig ating authority must first determine whether a 
subsidy (financial contribution and benefit) was provided to the original recipient; second, it must 
determine whether all or part of the benefit from th e original subsidy passed through to the exporter of 
the investigated product by the sale of the input product.848 
6. Turkey 
12.20  Turkey, referring to the report of the panel in Mexico – Olive Oil , considers that the SCM 
Agreement  does not require the recipients of a benefit a nd a financial contribution to be the same.  
Acceptance of the opposite proposition would lead to the circumvention of the disciplines on 
subsidization simply by including a private party in the distribution chain.849 
D. ASSESSMENT BY THE PANEL  
12.21  We find a certain lack of clarity as to the exact  nature and basis of China's claims concerning 
the provision of SOE-produced inputs by private tr ading companies.  In respect of the first issue 
raised by China (the entrustment or direction i ssue), the relevant portion of China's request for 
establishment of the Panel (paragraph B.1(a)(iii)) reads as follows: 
"(iii) even assuming a valid determination that certain SOEs are public bodies, the 
US authorities' failure to make a determina tion that SOEs "entrust or direct" trading 
companies to provide goods to producers of subject merchandise, within the meaning of Article 1.1(a)(1)(iv) of the SCM Agreement".  (footnote omitted) 
This formulation indicates that the inconsistency alleged by China in its request for establishment 
focuses not only on the USDOC's failure
 to have made a determination that trading companies were 
entrusted or directed to provide goods to producers of the investigated product, but also that in the 
view of China that determination, to be valid, shou ld have been in respect of the SOE input producers 
(presumably as the public bodies that would have had to so entrust or direct the trading companies). 
                                                      
846 European Communities third-party submission, para. 27. 
847 Mexico third-party oral statement, para. 18; third-party submission, paras. 54-56. 
848 Saudi Arabia third-party submission, paras. 106-108, citing Appellate Body Report on US – 
Softwood Lumber IV . 
849 Turkey third-party submission paras. 36-40; third-party oral statement, para. 14. WT/DS379/R 
Page 198  
 
  
12.22  In its first written submission, China again argued that the USDOC erred by not finding
 that 
the trading companies made financial contributions , i.e., that the USDOC made no finding that the 
trading companies were entrusted or directed to  provide goods.  China makes no reference in the 
context of this argument to the role of the SOEs as entrusters or directors.850  In the same submission, 
China makes a generally-worded request for findings in  respect of the issue of financial contributions 
connected to the provision of goods, in particular  that the Panel find the USDOC's determination of 
financial contributions in respect of the allege d provision of goods to be inconsistent with the 
provisions referred to in paragraph 12.1,  supra .  There is no specific request for findings in respect of 
the transactions involving trading companies.851 
12.23  In its second written submission, China argues that  in the absence of a finding of entrustment 
or direction of the trading companies, the USDOC  had no basis for its conclusion that the producers 
of the investigated products purchased "governme nt-provided" as opposed to "government-produced" 
goods, so that the USDOC's failure  to make a finding that the trading companies provided financial 
contributions rendered its subsidy findings in resp ect of those transactions inconsistent with 
Article 1.1 of the SCM Agreement.852  In the same submission, however, the finding requested by 
China in respect of this claim is that the USDOC's "findings  [...] that private trading companies 
provided financial contributions [...]" was the sour ce of the inconsistency with the cited provisions.853  
Thus while the argument refers to the failure  to make the finding as the legal error, the ruling 
requested of the Panel identifies as the source of the legal error findings that were  made to the effect 
that private trading companies provided financial contributions. 
12.24  China's oral statements make no reference to this issue. 
12.25  In short, the arguments and requests for findi ngs made by China during the course of the 
present dispute in respect of the financial contributio n issue do not exactly match the claim as set forth 
in its request for establishment of the Panel. 
12.26  Concerning the second issue (the pass-through issue) , which China raises in the alternative to 
the financial contribution issue discussed supra , there also is a lack of clarity as to China's claims.  In 
the first place, it is not entirely clear on the face of the request for establishment of the Panel whether 
only paragraph B.1(a)(v) pertains to this claim, or wh ether paragraph B.1(a)(iv) al so is relevant to this 
issue.  We note that China, in responding to a question from the Panel, identifies both of these 
paragraphs as setting forth the claim(s) relative to the pass-through issue.  These paragraphs read: 
"(iv) the US authorities' determination that  the sale of goods by trading companies 
to producers of subject merchandise confers a countervailable subsidy within the 
meaning of Article 1 of the SCM Agreem ent and a benefit under the guidelines set 
forth in Article 14(d) of the SCM Agreement; 
(v) the US authorities' failure to determ ine whether the alleged benefit received 
by trading companies was passed through to producers of subject merchandise, in 
violation of Article VI:3 of the GATT 1994 and Articles 10, 14, 19.1, 19.4, and 32.1 
of the SCM Agreement". 
12.27  In its first submission, China argues in regard  to the pass-through issue that the USDOC never 
established that the trading companies received s ubsidies when they purchased inputs from SOEs.  
                                                      
850 China first written submission, paras. 103-110. 
851 Id., para. 468(a). 
852 China second written submission, para. 44. 
853 Id., para. 315(b).  WT/DS379/R  
 Page 199 
 
 
 Instead, according to China, although the USDOC f ound that the trading companies received financial 
contributions when they purchased inputs from th e SOEs, it never investigated whether the trading 
companies also received benefits therefrom.  Without a valid finding of benefit, China argues, there was no legitimate basis for the USDOC to conclude that benefits were conferred on the producers of 
the investigated products when they purchased input s from the trading companies; that is the USDOC 
presumed the pass-through of a benefit that had not been found to exist. 
12.28  We note that this argument in the first submi ssion makes no reference to any alleged violation 
of any provision, nor does it contain any cross-referen ce to any part of the request for establishment of 
the Panel.  Furthermore, in the list of requested findings contained in the first submission, China asks 
the Panel to make the generally-worded finding that the USDOC's benefit determinations in respect of 
the provision of goods are inconsistent with Artic le 14 and, as a consequence, with Articles 10 and 
32.1 of the SCM Agreement, and Article VI:3 of  the GATT 1994.  There is no request for a finding 
that the benefit determination in respect of the pr ovision of goods was inconsistent with Article 1 of 
the SCM Agreement.  We note that China's second written submission contains no arguments related 
to the pass-through issue, and China makes no speci fic request for findings on this issue in that 
submission.  Nor do China's oral statements refer to this issue. 
12.29  In response to a question from the Panel at th e second substantive meeting as to what, in 
particular, China was asking the Panel to do in resp ect of the pass-through issue as referred to in its 
first written submission, China stated that this issue corresponded to the claims in 
paragraphs B.1(a)(iv) and (v) of its request for establishment of the Panel, quoted above.  China 
argues that the USDOC presumed a pass-through of benefits by trading companies (an indirect 
subsidy) without first finding that the trading comp anies had received benefits (a direct subsidy).  
According to China, this result cannot be reconcile d with the Appellate Body's findings relating to 
pass-through of a subsidy from one transaction to anot her.  According to China, under the Appellate 
Body's reasoning in US – Softwood Lumber IV
854, the USDOC could not lawfully establish that the 
SOEs had conveyed an indirect subsidy upon the pr oducers of the subject goods via their purchases 
from trading companies without first establishing th at the trading companies were themselves the 
direct recipients of a subsidy via their purchases from SOEs.  According to China, the only way for 
the USDOC lawfully to find an indirect subsidy w ould be to examine both the transactions between 
the SOEs and the private trading companies, and t hose between the private trading companies and the 
investigated tire producers.  China argues that a number of reasons having nothing to do with subsidization might cause the price between the trad ing company and the subject producer to be lower 
than the (unlawfully presumed) subsidized price at  which the trading companies originally purchased 
from the SOE.  China cites as a po ssible example a situation where the market price of the input 
declines between the time the trading company pur chases and resells that input, which might occur 
where the trading company holds inventory.  China argues that presuming rather than determining a benefit in the transactions between SOEs and tradi ng companies was inconsistent with Articles 1.1(b) 
and 14(d) of the SCM Agreement, and that exam ining only the second transaction (between the 
trading companies and the producers of investigated  products) in making the benefit determination for 
these purchases was inconsistent with Article VI:3 of the GATT 1994 and Articles 10, 14, 19.1, 19.4, 
and 32.1 of the SCM Agreement. 
                                                     
 
854 Here, China argues that the Appellate Body found that a pass-through analysis is required where "a 
subsidy is received directly by an entity other than a producer of subject products, and that entity subsequently 
sells inputs to producers of subject products.  [...] In ot her words, it cannot be assumed that some or all of the 
indirect subsidy has passed through".  (China response to Panel question 34 (second meeting), citing Appellate 
Body Report on  US – Softwood Lumber IV , para. 129.  (emphasis original))  We note, however, that this passage 
does not reflect a statement of opinion or reasoning by the Appellate Body, but rather summarizes an argument 
by the United States. WT/DS379/R 
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 12.30  We note that this set of arguments explaining the legal basis of this claim does not exactly 
match the claim as set forth in the request for estab lishment of the Panel.  In particular, while the 
claim in paragraph B.1(a)(iv) of that request iden tifies the transactions between the trading companies 
and the tire producers as the source of the alleged in consistencies with Articles 1 and 14(d), in the 
arguments presented in support of this claim the source of these alleged inconsistencies are the 
transactions between the SOEs and the trading companies. 
12.31  As outlined above, we find a certain lack of clar ity concerning this set of claims, due to the 
somewhat variable way in which China characteriz ed the issues in its submissions, and due to the 
inconsistencies between the statement of the claims  in China's request for establishment of the Panel 
and China's descriptions of them in its submissions .  We thus have some doubts as to whether these 
claims are properly before us.  That said, we note th at the United States has raised no objection in this 
regard.  To the contrary, not only does the Un ited States appear to understand the claims, it has 
presented full and substantive rebuttals  to China's arguments, in spite of noting (at least in its first 
submission) that China's first submission makes no re ference, in respect of the pass-through issue, to 
any alleged inconsistency with an y provision of the WTO Agreement.  Thus, we have decided to 
analyze the substance of these claims in spite of our doubts. 
1. Financial contribution 
12.32  China's claim regarding the financial contributi on issue, as expressed in the arguments in its 
submissions, is that because the USDOC ma de no findings, in the CWP, LWR and OTR 
investigations, that the trading companies that supplied SOE-produ ced inputs were entrusted or 
directed to, in turn, make a financial contribution to the producers of the investigated product in the 
form of the inputs, the USDOC's finding that these transactions conferred subsidies on those 
producers was inconsistent with SCM Article 1.1 of the SCM Agreement. 
12.33  Article 1 of the SCM Agreement requires that, for a subsidy to exist, there must be a financial 
contribution, as defined, and a benefit conferred thereby.  That provision does not, however, specify 
who must be the recipient of the financial contri bution and the benefit.  In particular, it does not 
indicate that for a subsidy to exist, a single entit y must receive both the financial contribution and the 
benefit. 
12.34  This point was made by the Appellate Body in US – Countervailing Measures on Certain EC 
Products , and by the panel in Mexico 
− Olive Oil .  Furthermore, the analyses by both the panel and 
the Appellate Body in US – Softwood Lumber IV reflected the same understanding.  In particular, the 
issue in US – Softwood Lumber IV was whether the initial recipient of a subsidy (i.e., a financial 
contribution conferring a benefit) reta ined all of the benefits when it so ld an input to a producer of the 
investigated product, or instead whether some or all of the benefits from the subsidy were passed 
along to the producer of the investigated product.  That analysis thus was not premised on a series of 
government financial contributions at each successive transaction (i.e ., an initial financial contribution 
by the government itself, followed in each late r transaction by a passing along of the financial 
contribution via entrustment or direction in the sense of Article 1.1(a)(1)(iv) of the SCM Agreement).  
To the contrary, the initial financial contribution, to  the initial recipient, was sufficient for there to 
have been, for the purposes of the SCM Agreement, a financial contribution by a government.  (The 
issue of benefit was treated as a separate question). 
12.35  In all of the investigations at issue pursuan t to this claim (CWP, LWR and OTR), the USDOC 
found that there was a financial contribution by th e government to the trading companies in the form 
of the provision of goods (the inputs in question)  by SOE input producers.  The USDOC then found, 
as a separate matter, that the benefits from those fina ncial contributions were c onferred in whole or in  WT/DS379/R  
 Page 201 
 
 
 part on the producers of the investigated products when those producers purchased the inputs for less 
than the applicable benchmark prices.855 
12.36  While the factual situations in the prior dis putes just discussed were somewhat different from 
that before us, we consider that the basic prin ciples from those disputes apply here.  First, the 
recipient of the financial contribution can be someone other than the recipient of the benefit.  Second, 
where an initial government financial contribution ha s been made (under any of  the subparagraphs of 
Article 1.1(a)(1)), the SCM Agreement does not requi re, for a valid finding of the existence of a 
subsidy, that in any ensuing transactions involving  the proceeds of the financial contribution the 
government has entrusted or directed the initial recipi ent of the financial contribution itself to make a 
financial contribution.  In other words, if the govern ment makes a financial contribution in the form of 
a loan to a goods producer, the SCM Agreement does not require, for a valid finding of the existence 
of a subsidy to be possible, that the sale of goods pr oduced with the proceeds of that loan be the result 
of government entrustment or direction.  Again, the question of benefit is separate, and where the 
purported recipient of the benefit is someone other th an the recipient of the financial contribution, the 
recipient of the benefit must be connected somehow to the matter at issue (whether in a countervailing 
duty investigation or a subsidy dispute pursuant to  the SCM Agreement's multilateral disciplines), but 
again, the issue of benefit requires a separate analysis. 
12.37  We consider that if, instead, a chain of entrustment or direction by a government were 
required for every subsequent transaction involving th e proceeds of a financial contribution, in order 
for a valid finding of the existence of a subsidy to  be possible, the disciplines of the SCM Agreement 
could be easily circumvented.  This is particular ly evident in the case of government provision of 
goods. 
12.38  For these reasons, we find that China has not established that by not determining in the CWP, 
LWR and OTR investigations that the trading co mpanies were entrusted or directed by the 
government to make financial contri butions (in the form of provision of goods) to the producers of the 
investigated products, the USDOC acted inconsisten tly with the obligations of the United States under 
Article 1.1 of the SCM Agreement.856 
2. Pass-through of benefits 
12.39  China's claim in respect of the pass-through i ssue, as expressed in its arguments, is an 
argument in the alternative.  In particular, China mak es this claim in the event that the Panel finds that 
the USDOC was not required by Article 1.1 of th e SCM Agreement to determine that the trading 
companies were entrusted or directed by the governme nt to make financial contributions in the form 
of provision of goods to the producers of the investigated products in the CWP, LWR and OTR 
investigations.  Having made this finding, we now take up China's pass-through claim. 
12.40  In this regard, we note first that we find, infra , that in the CWP and LWR investigations, the 
United States acted inconsistently with its oblig ations under Article 12.7 of the SCM Agreement by 
resorting to facts available in determining the am ount of HRS produced by SOEs that was purchased 
by CWP and LWR producers.  Given this finding, there is no need for us to reach the pass-through 
issue in respect of the CWP and LWR investigations .  Our analysis and findings in respect of this 
claim thus are confined to the OTR investigation. 
                                                      
855 We recall here that we have found no inconsis tency in the USDOC's determination that the SOE 
input producers were public bodies, and as a consequence, no inconsistency in the USDOC's determination that 
the sales of inputs by the SOE producers to trading companies constituted financial contributions by the 
government in the form of government provision of goods.  See Section VIII,  supra . 
856 Concerning China's claims of consequential violations of Articles 10 and 32.1 of the SCM 
Agreement and Article VI:3 of the GATT 1994 in  connection with this claim see Section XIII,  infra . WT/DS379/R 
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 12.41  Unlike in the CWP and LWR investigations, in  the OTR investigation, GTC and TUTRIC 
(the tire producers found to have received subsidies in the form of government provision of goods)
857, 
reported the full details of their rubber purchases, by  producer, source and supplier (i.e., seller).  The 
USDOC thus based its analysis of rubber inputs (tho se sold directly by SOEs and those produced by 
SOEs and sold by trading companies) on verified info rmation gathered in the investigation, and not on 
facts available. 
12.42  This brings us to the substance of China's clai ms related to the pass-through issue, in respect 
of which we note that China presents no specific legal argumentation concerning the provisions it 
cites, or of how precisely it considers that these provi sions apply in this dispute.  For its claims under 
Articles 1.1 and 14(d) of the SCM Agreement, China' s legal reasoning seems to be, in essence, that no 
benefit, and thus no subsidy, to the trading compan ies was found to exist in the first place, meaning 
that Articles 1.1(b) and 14(d) of the Agreement were violated. 
12.43  Concerning the remaining provisions cited, China says only that because the USDOC's 
examination was limited to the transactions betw een the trading companies and the producers of 
investigated products, and did not also include an analysis of the transactions between the SOEs and 
the trading companies, the USDOC's benefit determin ations in respect of the purchases of inputs from 
trading companies were inconsistent with Articl es VI:3 of the GATT 1994 and Articles 10, 14, 19.1, 
19.4 and 32.1 of the SCM Agreement.  China's apparent  legal basis for this set of alleged violations is 
the Appellate Body's reasoning in US – Softwood Lumber IV , as China simply asserts that the 
USDOC's analytical approach cannot be reconciled with that reasoning. 
12.44  Turning in more detail to the particular provisions cited by China, starting with Articles 19.1 
and 19.4 of the SCM Agreement, we recall that neither the panel nor the Appellate Body in the US − 
Softwood Lumber IV dispute – the only prior dispute cited by Ch ina in support of its claims related to 
pass-through – made findings under any of these provisions, as the panel exercised judicial economy in respect of those claims.  Give n that China has provided no legal reasoning in support of its claims 
under these provisions, nor even identified any prior dispute settlement findings concerning those 
provisions
858, we find that China has not established that the USDOC's determination in respect of the 
provision of SOE-produced rubber inputs by private trading companies is inconsistent with the 
obligations of the United States under Article  19.1 or 19.4 of the SCM Agreement. 
12.45  Concerning China's citation of Article 14 of the SC M Agreement in this context, it is not clear 
to us whether this second citation is in addition to  the inconsistency allege d due to the absence of a 
finding that trading companies received a benefit described in paragraph 12.42,  supra .  To the extent 
that that allegation is the basis for this second refe rence to Article 14, we consider that argument by 
China, although brief, to be reasonably clear.  To  the extent, however, that China is making a second, 
different claim of violation of Article 14, in partic ular in connection with the issue of pass-through of 
benefits as such, it has made no argument whatsoever as to the legal basis for this claim, nor did either 
the panel or the Appellate Body in US – Softwood Lumber IV make any finding under Article 14 of 
the SCM Agreement in the context of pass-through, as Canada raised no such claim.  Therefore, to the 
extent that China is asserting that the absence of a finding by the USDOC that benefits received by 
trading companies selling rubber were passed through (as such) to producers of tires was inconsistent 
with Article 14 of the SCM Agreement, we fi nd that China has not established this claim. 
                                                      
857 We recall that the USDOC found that Starbright received no benefits from its purchases of rubber 
inputs from SOE producers. 
858 We do not here mean to imply that citing prior dispute settlement findings by itself would have been 
sufficient in terms of legal argumentation.  We simply wish to emphasize the entire absence of any legal basis, 
in China's representations to the Panel, for its claims  under Articles 19.1 and 19.4 of the SCM Agreement.  WT/DS379/R  
 Page 203 
 
 
 12.46  Concerning the remaining provisions cited by Ch ina in its claims related to pass-through, 
(Article VI:3 of the GATT 1994, and Articles 10 and 32.1 of the SCM Agreement), we note that these provisions formed the basis of the pass-through findings of the panel and Appellate Body in US – 
Softwood Lumber IV.  In particular, the substantive obligatio ns were found in Article 10 of the SCM 
Agreement and Article VI:3 of the GATT 1994, with  Article 32.1 of the SCM Agreement found also 
to have been violated as a consequence.  As not ed above, the only apparent legal basis for these 
claims advanced by China is its implication that the reasoning of the Appellate Body in that dispute 
directly applies to the situation at issue before us. 
12.47  We recall that in US – Softwood Lumber IV , the panel and the Appellate Body found that the 
United States had impermissibly presumed that be nefits from subsidies provided to input producers 
were passed through, in full, to producers of th e investigated products wh en the latter purchased the 
inputs.  The specific problem identified in that dispute was that, although the United States had calculated the amount of the subsidy benefits provided to  the producers of inputs (raw logs), it had not 
examined the extent to which the input producers pass ed along any of the benefits when they sold the 
inputs to the producers of the investigated products. 
12.48  The panel found in favour of Canada's claims  under Article 10 of the SCM Agreement, and 
consequentially Article 32 of the SCM Agreemen t, as well as Article VI:3 of the GATT 1994, in 
respect of the situations where producers of logs were unrelated to the sawmills that processed the 
logs into primary lumber, as well as where producers of remanufactured lumber were unrelated to the 
lumber manufacturers (sawmills) from which the rema nufacturers obtained their lumber inputs.  The 
panel found that no pass-through analysis was requi red where the producer of the inputs was related 
to the lumber producer (i.e., where the production w as vertically integrated).  The panel exercised 
judicial economy in respect of Canada's Article 19 claim.
859 
12.49  The Appellate Body upheld the panel's findings  that Article 10 of the SCM Agreement and 
Article VI:3 of the GATT 1994 require a pass-through an alysis in circumstances in which a subsidy is 
received by a producer  of an input product, and the inves tigated product is a different, downstream 
product produced by an unrelated producer using the subsidized input.  More specifically, the 
Appellate Body found that: 
"Where a  subsidy is conferred on input products , and the countervailing duty is 
imposed on processed products , the initial recipient of the subsidy and the producer 
of the eventually countervailed product, may not  be the same.  In su ch a case, there is 
a direct  recipient of the benefit—the producer of the input  product.  When the input is 
subsequently processed, the producer of the processed product is an indirect recipient 
of the benefit—provided it can be establishe d that the benefit flowing from the input 
subsidy is passed through, at least in part, to the processed product.  Where the input producers and producers of the processed products operate at arm's length , the pass-
through of input subsidy benefits from the direct recipients to the indirect recipients 
downstream cannot simply be presumed; it must be established by the investigating 
authority.  In the absence of such analysis, it cannot be shown that the essential 
elements of the subsidy definition in Article 1 are present in respect of the processed 
product ".
860  (Italic emphasis in original; underline emphasis added) 
12.50  We note and agree with the characterization by the panel in Mexico – Olive Oil that in US − 
Softwood Lumber IV  the Appellate Body "emphasized that not  every situation in which a subsidy is 
provided on the production of an input product gives rise to an obligation to conduct a pass-through 
analysis", and that the existence of such an obligation also depends on the relationship between the 
                                                      
859 Panel Report on US – Softwood Lumber IV , paras. 7.81-7.99. 
860 Appellate Body Report on US – Softwood Lumber IV , para. 143 . WT/DS379/R 
Page 204  
 
 producer of the input product and the producer of  the imported, processed product, as well as on the 
scope of the investigated product.  In the latter rega rd the Appellate Body, reve rsing one of the panel's 
pass-through findings, held that no pass-through analys is was required in respect of sales by lumber 
producers to unrelated lumber remanufacturers because both the lumber inputs and the remanufactured (further processed) lumber products were imported products covered by the 
countervailing duty investigation.
861 
12.51  In this regard, we note that the quotation that  China characterizes as an opinion or reasoning 
of the Appellate Body in US − Softwood Lumber IV (quoted at footnote 854,  supra ) in fact is the 
summary of an argument by the United States, an d that the Appellate Body's actual findings and 
reasoning are as quoted at paragraph 12.49,  supra .  We also note that the factual situation in the US − 
Softwood Lumber  IV dispute was quite different from that be fore us, in that the entities from which 
the producers of the investigated products purchased inputs were the producers of those inputs, and 
those input producers were the recipients of subsidies in respect of their production of the inputs.  The 
language in the Appellate Body's reasoning indeed refe rs only to that particular factual situation (i.e., 
the situation in which the immediate recipient of the s ubsidy is a producer of an input that is then sold 
to and used by a producer of an investigated produ ct).  We do not consider that a reference to a 
misattributed statement in the Appellate Body report from US − Softwood Lumber IV  is sufficient to 
establish China's claim that the USDOC's determinati on in the OTR investigation is inconsistent with 
Article VI:3 of the GATT 1994 and Articles 10 a nd 32.1 of the SCM Agreement because the USDOC 
did not conduct an analysis to determine whether an y subsidy benefits received by trading companies 
selling rubber inputs were passed through to the tire producers purchasing those inputs. 
12.52  This leaves us with China's claims that the USDOC's failure to establish that the trading 
companies  received  a benefit when they purchased the rubber inputs from the SOEs meant that the 
determination that the tire producers  received a benefit when they purchased the rubber inputs from 
the trading companies was inconsistent with Articl es 1.1 and 14(d) of the SCM Agreement.  While, as 
discussed above, the actual arguments presented by Ch ina, and its related requests for findings, are 
somewhat internally inconsistent; and there is an  apparent discrepancy between the arguments, which 
focus on the existence of a benefit to the trading companies, and the description of the claim in the 
request for establishment of the Panel, wh ich focuses on the existence of a benefit to the producers of 
the investigated products; we nevertheless consid er the essential legal basis of this claim to be 
relatively clear.  That is, China argues that the methodology used by the USDOC did not establish the existence  of a benefit (and thus of a subsidy) consiste ntly with the two cited provisions of the SCM 
Agreement. 
12.53  As noted above, in the OTR investigation, GTC and TUTRIC (the tire producers found to 
have received subsidies in the form  of government provision of goods)
862, reported the full details of 
their rubber purchases.  This included not only the dates, quantities, prices and delivery terms for these purchases, by type of rubber, but also the de tails as to the identity of the producer of each 
purchase of rubber.
863  GTC and TUTRIC also provided deta ils concerning which particular purchases 
were from trading companies and which were direc tly from producers.  Furthermore, these companies 
                                                      
861 Panel Report on Mexico – Olive Oil , para. 7.140 (quoting Appellate Body Report on US – Softwood 
Lumber IV , paras. 140-147, 156-159 and 163). 
862 We recall that the USDOC found that Starbright received no benefits from its purchases of rubber 
inputs from SOE producers. 
863 With respect to TUTRIC, see Final Calculation Memorandum for Tianjin United Tire & Rubber 
International Co., Ltd. (TUTRIC)  ("USDOC Calculation Memorandum for TUTRIC") as contained in Exhibit 
US-156; and Further Detail on Reported Rubber Prices , Exhibit US-157. As regards GTC, see Final 
Calculation Memorandum for Guizhou Tire Company Limited (GTC)  ("USDOC Calculation Memorandum for 
GTC"), Exhibit CHI-56; and GTC Minor Corrections and Supporting Documents, "Rubber Purchases" , Exhibit 
US-155.  WT/DS379/R  
 Page 205 
 
 
 provided information as to which of the producer s from which they purchased rubber inputs (whether 
directly or through trading companies) were SOEs.  Thus, the record evidence shows that in respect of 
every purchase of each type of rubber, including fr om trading companies, the two tire producers at 
issue had full knowledge both of the identity of the producer of the rubber that they were buying, and of whether that producer was an SOE.
864 
12.54  We recall that the methodology used by the USDOC to determine the existence of a benefit to 
the tire producers from the rubber purchased from trad ing companies was to calculate the difference 
between the price paid by those producers to the trading companies and the applicable benchmark 
price.  We note that the United States justifies b asing its analysis exclusively at this level of 
transaction, and not also performing such a calcu lation for the sales by SOE rubber producers to the 
trading companies, on the basis that any portion of the initial benefit retained by the trading 
companies would be reflected in their selling pr ice for the inputs.  By this we understand the 
United States to be arguing, for example, that if  the trading company received a benefit of 10 (based 
on the market benchmark) when it purchased rubber fr om an SOE, and it added a mark-up of 4 when 
it sold the rubber to a tire producer, the comparison of the price paid by the tire producer with the 
market benchmark would yield a benefit of 6 to the tire producer. 
12.55  We see a certain logic in this methodological a pproach to the extent that it could (at least 
under certain circumstances) accomp lish in a single step exactly the same result that otherwise would 
require a two-step calculation.  That is, this appro ach would not give rise to an inflated calculation of 
benefits, or a finding of benefits where there were  none, where the trading company acted as a simple 
logistical intermediary in individual transacti ons, for which services it charged a commission or a 
mark-up on the transaction (or was otherwise compensated), and did not itself purchase for and/or sell 
out of its own inventory, or hold title to the goods in question over an extended period.  Thus, in a 
situation where a producer of an investigated product nominally purchases from a trading company, 
but the trading company in turn places a specific order for that purchase with the producer of the 
input, and the merchandise is then shipped to the producer of the investigated product on the basis of 
that particular order, in our view the methodology used by the USDOC would not give rise to an 
inflated calculation of the amount of the benef it, and thus would not raise any concerns under 
Article 1 or 14(d) of the SCM Agreement.  This is  because in such a situation it would be perfectly 
reasonable to assume that the trading company, as a simple logistical intermediary, would always 
collect its commission or mark-up, such that the price it charged its customer (the producer of the 
investigated product) would always be higher by that amount than the price it paid to the input 
producer. 
12.56  We note, however, that this is one particular role that a trading company might play, but that 
trading companies in fact operate in a range of di fferent ways.  For example, some trading companies 
act as distributor/stockists, taking ownership and p hysical possession of goods and selling out of their 
own inventories.  Others might enter into contr acts to purchase in bulk (even if they never take 
physical possession), and then make individual sal es from their bulk purchases.  In these and similar 
circumstances, the methodology used by the United States would not be accurate.  Price fluctuations 
in the market between the time a trading company purchased inputs (whether or not it physically inventoried them) and the time it sold them to a pr oducer of an investigated product would inevitably 
give rise to situations where the benchmark price a pplicable to the trading company's purchase of the 
inputs was different from the benchmark price applicable  to its sale of those inputs to the producer of 
the investigated product, and this would require so me adjustments to the methodology, or the use of 
an entirely different methodology. 
12.57  This brings us to the facts of the OTR inves tigation, where, as described, the tire producers 
provided full details on all of their rubber purchases, including the precise identity of the producer of 
                                                     
 
864 Exhibits US-156-157 (TUTRIC) and CHI-56 and US-155 (GTC). WT/DS379/R 
Page 206  
 
 each reported purchase.  This fact suggests that the trading companies involved may well have been 
acting purely as intermediaries, on a transacti on-by-transaction basis, rather than as 
distributor/stockists or as bulk purchasers.  This is further suggested by the "ex-works" delivery terms 
of a number of purchases
865, a phrase generally synonymous with "ex-factory".  That said, there is no 
reference in the USDOC's determination in the OTR investigation to any evidence regarding the 
precise role played by the trading companies fro m which GTC and TUTRIC purchased rubber inputs, 
nor any indication that the USDOC made inquiries in that regard.  Before us, the United States makes 
no arguments in this respect.  We consider th at, for the reasons explained above, given the 
methodology that the USDOC chose to use to the esta blish the existence and amount of the benefit to 
the tire producers from their purchases of inputs fro m trading companies, it was incumbent on the 
USDOC to have investigated the precise role played by the trading companies, so as to ensure that its 
methodology did not calculate a benefit in excess of  that conferred by the government provision of 
SOE-produced inputs. 
12.58  The record evidence presented to us does not  indicate that the USDOC undertook any such 
inquiries.  Therefore, there is nothi ng before us that demonstrates that , under the particular facts of the 
investigation, the USDOC's methodology could not and di d not give rise to a ca lculation of benefit in 
excess of that conferred by the provision of the in puts.  We therefore find on this basis that the 
USDOC acted inconsistently with the United States ' obligations under Article 1.1 and Article 14 of 
the SCM Agreement. 
XIII.  CHINA'S CONSEQUENTIAL CLAIMS 
13.1 We now turn to various consequential claims  raised by China.  In particular, at 
paragraph B.1(e) of its request for establishment of the Panel, China alleges consequential violations 
of Articles 10 and 32.1 of the SCM Agreement, a nd of Article VI:3 of the GATT 1994, "in connection 
with all countervailing duty investig ations, determinations and orders specified above" (i.e., specified 
at paragraphs B.1(a)-(d) of the request for establis hment of the Panel).  China requests findings in 
respect of these consequential claims at paragraphs 468 (a), (b), (d), (e), (f), and (g) of its first written 
submission, and at paragraphs 315 (a), (b), (c), (e),  (f), (g), and (h) of its second written submission.  
We note that China has presented no argumentation in support of these consequential claims, but 
simply requests findings on them in the paragra phs just identified.  Particularly under these 
circumstances, in the light of the findings we have made supra , we see no need to rule on these 
consequential claims.  We therefore apply j udicial economy in respect of all of them. 
13.2 We recall, however, that in respect of its othe r allegations pursuant to Article 10 and 32.1 of 
the SCM Agreement and Article VI:3 of the GATT 1994 (specifically, those raised in connection with 
its claims addressed at Sections XI and XII.D.2 supra , and Section XIV, infra ) China did present 
argumentation.  As set forth in the respective sec tions and as summarized below at Section XVII, we 
have examined and made findings in respect of these allegations.   
XIV.  CHINA'S CLAIMS PERTAINING TO "DOUBLE REMEDIES" 
A. INTRODUCTION  
14.1 We now consider China's claims with respect to "double remedies".  China's claims in this 
respect arise from the concurrent imposition, by the United States, of countervailing duties and of 
                                                      
865 See Exhibit US-156.  Ex Works is defined as:  "An <Incoterm> whereby the seller is responsible 
only for having the ordered <goods> av ailable for pickup at the agreed pl ace, which is usually the seller's own 
premises.  The seller is also usually responsible for export packing to the extent that the transportation particulars are made available [...]".  (A to Z of international trade, F.  Reynolds (ICC Publishing S.A., 2002), 
p. 79).  WT/DS379/R  
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 anti-dumping duties calculated pursuant to the USDOC's NME methodology on products from China 
in the four sets of parallel anti-dumping and countervailing duty investigations at issue. 
1. Background 
14.2 In anti-dumping investigations involving pr oducts from countries it considers to be non-
market economies ("NMEs"), the US DOC calculates the normal value on the basis of surrogate values 
taken from countries which it considers to be "mar ket economies" rather than on the basis of the 
prices or costs of production actually incurred by the investigated producer.866  Specifically, under its 
NME methodology, the USDOC:  (i) determines the quantities of the factors of production (e.g. 
inputs, labour, energy) actually used by the respondent producer in producing the investigated good; (ii) multiplies those quantities by the prices of each of  those factors based on a "surrogate value" from 
a market economy country (or, where available, th e actual price paid for an input imported from a 
market economy country); and (iii) adds an amount for factory overhead, selling, general and administrative (SG&A) expenses, and profit, calcula ted on the basis of ratios of these costs to the 
costs of the other inputs in the surrogate country.
867 
14.3 The USDOC generally treats China as an NME in  anti-dumping investigations, and did so in 
the anti-dumping investigations at issue in this di spute.  As a result, the USDOC applied its NME 
methodology in calculating the normal value for th e investigated Chinese producers.  The normal 
value so constructed was then used to de termine these producers' dumping margins. 
14.4 As China points out, the four countervailing duty inve stigations at issue in this dispute mark a 
policy change on the part of the USDOC.  The USDOC had taken the position, in 1984, that its 
countervailing duty legislation did not apply to  imports from non-market economies:  In its 
investigations on Wire Rod from Poland and from Czechoslovakia , the USDOC determined that it was 
impossible to identify a "bounty" or "grant" within  the meaning of U.S. countervailing duty law in 
NMEs, because of the pervasive role played by the governments of such centrally-planned economies.  
This interpretation of the U.S. countervailing duty st atute was affirmed by the U.S. Court of Appeals 
for the Federal Circuit in Georgetown Steel .868  In March 2007, the United States reversed this 
longstanding policy of not applying U.S. count ervailing duty legislation to NMEs:  In the CFS Paper  
investigation, the USDOC considered that while  still not a market economy, China's economy had 
evolved sufficiently that it was possible to identify and countervail subsidies granted by China.869  At 
the same time, the USDOC maintained China's NM E status for purposes of applying the U.S. anti-
dumping regime.870  Ultimately, no duties were imposed in the CFS Paper  case.  Thus, the four 
                                                      
866 Section 773(c) of the U.S. Tariff Act of 1930 (codified at 19 U.S.C. 1677b(c)),  Exhibit  CHI-119 .  
The USDOC may, in anti-dumping inves tigations involving an NME country, determine that the industry being 
investigated operates on market prin ciples (market-oriented industry, or  "MOI").  China indicates that the 
USDOC has never found any industry in any country that it designates as an NME to be an MOI. 
867 United States first written submission, para. 450. 
868 Georgetown Steel Corporation v. United States , U.S. Court of Appeals for Federal Circuit, 
18 September 1986, Exhibit CHI-90.  This USDOC polic y was reaffirmed in the Preamble to the USDOC's 
countervailing duty Regulations, Countervailing Duties:  Final Rule, 63 Fed. Reg. 65348, Exhibit CHI-91, 
p. 65360. 
869 Countervailing Duty Investigation of Coated Free Sh eet Paper from the People's Republic of China 
– Whether the Analytical Elements of the Georgetown Steel Opinion are Applicable to China's Present-Day 
Economy  ("Georgetown Steel Memo"), Exhibit CHI-89, p. 5; and Issues and Decision Memorandum for the 
Antidumping Investigation of Certain Pneumatic Off-th e-Road Tires from the People's Republic of China  ("OTR 
Anti-Dumping Duty I&D Memo") , Exhibit CHI-53, pp. 5-10. 
870 In maintaining its qualification of China as an NME, the USDOC in August 2006 considered that 
"market forces in China are not yet sufficiently develope d" to allow it to rely on Chinese costs and prices in 
establishing normal value.  ( Final Affirmative Countervailing Duty Dete rmination: Certain New Pneumatic Off-WT/DS379/R 
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 countervailing duty investigations at issue in the present dispute constitute the first instances of 
imposition by the USDOC of countervailing duties on imports from an NME. 
14.5 China claims that this imposition by the US DOC of countervailing duties concurrently with 
anti-dumping duties calculated under the U.S. NME methodology results in the imposition of a "double remedy".  China explains that by "doubl e remedy" it means that the subsidies at issue are 
"offset" twice, once through the imposition of the countervailing duties, and once through the 
imposition of the anti-dumping duties, because of th e manner in which the latter are calculated. 
14.6 The Government of China and Ch inese interested parties raised  the issue of double remedies 
in each of the four countervailing duty investigations before us.  In its determinations in three of the 
investigations (LWS, LWR, and OTR), the USDOC i ndicated that it had no authority to address the 
issue of double remedies in the context of count ervailing duty investigations, and that if any 
adjustment to avoid a double remedy were possible, it would only be in the context of anti-dumping investigations.
871  Interested parties also raised th e issue in the CWP and OTR anti-dumping 
investigations.  In the CWP anti-dumping investigatio n, the USDOC declined to make adjustments for 
double remedies given that the interested party that ha d raised the issue had not received an individual 
company-specific margin.  The USDOC also indicated that "Congress provided no anti-dumping 
adjustment for CVDs imposed to offset s ubsidies that are not export subsidies".872  In the OTR anti-
dumping investigation, the USDOC considered th at interested parties had not established the 
existence of a double remedy, and in particular had not provided sufficient evidence in support of their arguments that domestic subsidies automati cally lower prices or that they "pass through", pro 
rata, to domestic prices.
873  The USDOC also considered that the Chinese interested parties had not 
demonstrated that they were "entitled to an ad justment under US AD law to prevent a presumed 
double remedy from arising".874 
                                                                                                                                                                     
the-Road Tires from the People's Republic of China – Final Loan Benchmark and Discount Rate , Exhibit CHI-
88, Attachment 2). 
871 For instance, in the LWR countervailing duty investigation, the USDOC addressed the double 
counting arguments presented by respondents as follows: 
 
"[...] The [Government of China and a respondent ] have not cited to any statutory authority 
that would allow us to terminate this countervailing duty investigation to avoid double 
counting and the CVD law provides no authority to make an adjustment to the CVD 
calculations to prevent double counting.  If any adjustment to avoid a double remedy is 
possible, it would only be in the context of an antidumping investigation and no party raised 
this claim in the companion antidumping inves tigation of LWR".  (Exh ibit CHI-2, p. 19). 
 
The USDOC made virtually identical statements in its determinations in the LWS and OTR 
countervailing duty investigations.  (Exhibits CHI-3, p. 40 and CHI-4, p. 53).  In the CWP countervailing duty investigation, the USDOC incorporated  by reference its treatment of the issue in the concurrent anti-dumping 
investigation.  (Exhibit CHI-1, p. 101). 
 
872 Exhibit CHI-9, pp. 21-22. 
873 Exhibit CHI-53, pp. 13-14.  The USDOC rejected the argu ments that it must assume that domestic 
subsidies necessarily resu lt in lower export prices and that it had rec ognized that domestic subsidies lower prices 
pro rata in both domestic or export markets, indicating that "when it has considered the issue, the Department 
has sometimes presumed that, whatever the effect, if an y, of domestic subsidies upon the prices subsequently 
charged by their recipients, that effect would be the same for domestic prices and export prices".  (Id., p. 14). 
874 In this respect, the USDOC stated that: 
 
"As we noted in [ CFS Paper ], 'despite addressing the issue of parallel AD duties and CVDs 
directly, and explicitly requiring that the amount of any CVDs to  offset export subsidies be 
added to U.S. price, Congress provided no adjustment for CVDs imposed by reason of  WT/DS379/R  
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 2. Claims of China 
14.7 China considers that the imposition of a "doubl e remedy" is incompatible with the United 
States' obligations under the covered agreements.  Ch ina makes "as such" and "as applied" claims in 
this respect. 
(a) China's "as applied" claims 
14.8 China's "as applied" claims concern the duties imposed as a result of the four sets of anti-
dumping and countervailing duty investiga tions at issue in this dispute.  China claims that in each of 
these four sets of determinations, the USDOC's use of its NME methodology to determine normal 
value in the anti-dumping determinations, concurre ntly with the imposition of countervailing duties 
on the same products, was inconsistent with Article s 10, 19.3, 19.4, and 32.1 of the SCM Agreement 
and with Article VI of the GATT 1994.875 
14.9 In addition, China claims that the United Stat es acted inconsistently with Article I:1 of the 
GATT 1994 in each of the four sets of anti-dumping and countervailing duty determinations at issue due to the failure of the USDOC to extend to im ports from China the same unconditional entitlement 
to the avoidance of a double remedy that it extends  to like products originating in other Members.
876 
14.10  China also claims that, in the determinations at issue, the United States acted inconsistently 
with:  (i) Article 12.1 of the SCM Agreement, due  to the USDOC's failure to provide interested 
parties notice of the information which the USDOC required to evaluate the existence of a double 
remedy; (ii) Article 12.8 of the SCM Agreement, due to the USDOC's failure to inform China and 
interested parties of the essential facts under cons ideration that would "form the basis" for the 
USDOC's determinations in respect of the issue of "double remedy".877 
(b) China's "as such" claims 
14.11  The measure that is the subject of China's "as su ch" claims is an alleged omission, defined by 
China as the "failure of the United States to provide  sufficient legal authority for Commerce to avoid 
the imposition of double remedies for the same alleged acts of subsidization when it imposes anti-
                                                                                                                                                                     
domestic subsidies in NME proceedings.'  In addition, the statutory and legislative history 
provides no basis for adjusting for domestic subsidies, or any presumption of their effect on export prices." 
 
"[...] the Department has determined that, absent  a statutory directive for an adjustment and 
underlying assumption similar to that regarding CVDs imposed to offset export subsidies, or 
evidence that domestic subsidies have lowered U.S. prices in a given case, any adjustment for 
an assumed or undetermined effect would be inappropriate."  (Exhibit CHI-53, pp. 14-16).  
875 Paragraphs B.1(f)(i)-(iv) of the "as applied" claims in China request for establishment of the Panel; 
China first written submission, para. 468 (h); second written submission, para. 315 (i). 
876 Paragraph B.1(f)(vii) of the "as applied" claims in China request for establishment of the Panel; 
China first written submission, para. 468 (j); second writte n submission, para. 315 (k).  In its panel request, 
China also made claims of violation of Articles 2.4, 9.2 and 9.3 of the AD Agreement, due to the alleged imposition of double remedies.  China did not pursue these claims before the Panel. 
877 Paragraphs B.1(g)(vi)-(vii) of the "as applied" claims in China request for establishment of the 
Panel; China second written submission, paras. 269-270. China did not include this claim in its requests for findings.  Further, China's panel request also included claims under Articles 2.4 and 6.1, as well as Annex II(1) 
of the AD  Agreement, which China did not pursue. WT/DS379/R 
Page 210  
 
 dumping duties determined pursuant to its NME me thodology simultaneously with the imposition of 
countervailing duties on the same product".
878, 879 
14.12  China contends that, as a result of this failure, U.S. law is inconsistent "as such" with (i) 
Articles 10, 19.3, 19.4, and 32.1 of the SCM Agre ement and Article VI of the GATT 1994; and (ii) 
Article I:1 of the GATT 1994 due to the absence of  legal authority to extend to imports from China 
the same unconditional entitlement to the avoidance of a double remedy that the United States extends 
to like products originating in other Members.880 
B. UNITED STATES REQUESTS FOR PRELIMINARY RULINGS  
14.13  The United States requests that we find that th e measure challenged as part of China's "as 
such" claims, as well as China's "as such" claims themselves, fall outside our terms of reference.881  
The United States requests that we make findings on two distinct grounds:  First, the United States 
submits that the alleged "failure [...] to provide  legal authority" was not among the measures included 
in China's request for consultations.  Second, the Un ited States submits that this alleged "failure" is 
not a "specific measure at issue" identified in China's panel request pursuant to Article 6.2 of the 
DSU. 
14.14  China asks us to reject these re quests for preliminary rulings.882 
1. Main arguments of the Parties 
(a) United States 
(i) U.S. request for ruling concerning China' s failure to consult on the "omission" 
14.15  The United States argues that the alleged "failure  [...] to provide legal authority" was not 
included in China's request for consultations and is therefore not within the Panel's terms of 
reference.883  The United States submits that the Appellate  Body has indicated that, in determining 
whether measures not included in the consultations re quest fall within a panel's terms of reference, a 
panel should compare the respective parameters of th e consultations request and of the panel request 
to determine whether the addition of measures in th e panel request expanded the scope or changed the 
essence of the dispute.884  The United States argues that the a ddition, by China, of the "omission" 
converted the dispute from one limited to a series of "as applied" claims to one which includes a 
                                                      
878 China first written submission, para. 468 (i) and (k); see also paragraph B.2 of the "as such" claims 
in China request for establishment of the Panel an d second written submission, para. 315 (j) and (l). 
879 China proceeds under alternative hypotheses  with respect to extent of the legal authority conferred 
on the USDOC to avoid the imposition of double remedies under U.S. law.  China argues that while the USDOC's position on "double remedies is "opaque and apparently contradictory", it is possible to draw the 
conclusions that:  (i) the USDOC has no authority to avoid the imposition of double remedies under the U.S. 
countervailing duty legislation; (ii) the USDOC "appears" to lack such le gal authority under U.S. anti-dumping 
laws, "but this is unclear", and to the extent that th e USDOC does possess authority under the U.S. anti-dumping 
laws to avoid imposing double remedies, "this legal authority whatever it might  be, places the burden on 
respondent producers to present 'evidence' that 'subsidies pass through, pro rata , to U.S. prices'".  (China first 
written submission, paras. 359-363 and footnote 1). 
880 In its panel request, China also made claims of violation under Articles 2.4, 9.2 and 9.3 of the AD  
Agreement.  China did not pursue these claims before the Panel. 
881 United States first written submission, paras. 65-86; second written submission, paras. 5-16. 
882 China response to the U.S. request for preliminary rulings, para. 40. 
883 United States first written submission, paras. 74-86. 
884 Id., para. 87, citing to Appellate Body Report on US – Shrimp (Thailand) / US – Customs Bond 
Directive , para. 294.  WT/DS379/R  
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 "measure" challenged "as such", resulting in an expa nsion of the scope and a change in the essence of 
the dispute.885 
14.16  The United States takes issue with the argument of  China that the alleged "failure" to provide 
legal authority to avoid the imposition of a dou ble remedy was evident on the face of the 
determinations at issue.  First, the United States  rejects China's suggestion that the USDOC made any 
broad pronouncement in those dete rminations as to whether it had legal authority to adjust the anti-
dumping duties to avoid any double remedy.886  The United States adds that even assuming that the 
alleged "absence of legal authority" were reflected in the determinations at issue, it would not follow 
that consulting on the specific investigations w ould have fulfilled the obligation to consult on the 
alleged "failure".  The United States submits in this respect that higher-order measures such as 
statutes and regulations are often referenced in ruli ngs and determinations that apply those measures; 
if such references were sufficient to place a re sponding Member on notice that they would be the 
subject of an "as such" challenge, consultations  on "as such" claims would almost never be 
required.887  Lastly, the United States reads China's argum ent as an admission that China was aware of 
the existence of the alleged measure before it re quested consultations, meaning that it consciously 
opted not to include the measure  in its consultations request.888 
(ii) U.S. request for ruling under Article 6.2 of the DSU 
14.17  The United States recalls that Article 6.2 of the DSU requires a complaining party to identify 
in its panel request the "specific measures" at issu e in the dispute.  The United States argues that the 
"failure" identified in China's panel request is not a "s pecific measure at issue" in this dispute and, as a 
result, is not within the Panel's terms of reference.   The United States considers that China's complaint 
is not about the absence of any "legal authority", but about a requirement that China believes exists 
under U.S. law to apply anti-dumping and countervailing measures in a way that results in the "double 
remedy" alleged by China.889  Thus, the United States argues, China is actually challenging a positive 
act, yet China's panel request fails to identify the sp ecific U.S. legal provisions underlying this alleged 
requirement (i.e., the aspects of U.S. law allegedly requiring or authorizing the concurrent application 
of anti-dumping duties and countervailing duties).  In  fact, the United States notes, China's panel 
request contain no references to any U.S. legal provision.890 
14.18  The United States further considers that an "omi ssion" or "failure" presents a special case for 
purposes of dispute settlement, and ma y only be considered to be a "m easure taken" if there is an 
affirmative  obligation on a Member to take the action that  it is accused of not having taken.  As China 
fails to identify any WTO requirement for the United States to enact legislation to provide particular 
authority to the USDOC with respect to doubl e remedies, and because no such WTO requirement 
actually exists, the United States considers that Ch ina has not established that the alleged "failure" 
constitutes an "omission" cognizable for purposes of WTO dispute settlement.891 
                                                      
885 United States first written submission, para. 85, citing to US – Oil Country Tubular Goods Sunset 
Reviews , paras. 172-173; oral statement regarding the U.S. preliminary ruling request at the first meeting of the 
Panel, para. 9; response to Panel question 8 (first meeting). 
886 United States oral statement regarding the U.S. preliminary ruling request at the first meeting of the 
Panel, para. 11. 
887 United States response to Panel question 7 (first meeting). 
888 United States oral statement regarding the U.S. preliminary ruling request at the first meeting of the 
Panel, paras. 12-13; first written submission, para. 84. 
889 United States first written submission, paras. 65-72. 
890 Id., paras. 65-72; second written submission, paras. 11-13; responses to Panel questions 1, 2 and 3 
(first meeting). 
891 United States oral statement regarding the U.S. preliminary ruling request at the first meeting of the 
Panel, paras. 4-5; responses to Panel questions 1 and 2 (first meeting); second written submission, para. 9. WT/DS379/R 
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 (b) China 
(i) U.S. request for ruling concerning China' s failure to consult on the "omission" 
14.19  China argues that it is well established in WTO jurisprudence that there need not be "a precise 
and exact  identity between the specific measures that were the subject of consultations and the 
specific measures identified in the request for the establishment of a panel"; rather, the relevant 
question is whether the addition of a measu re "expand[s] the scope of the dispute".
892  China notes 
that in the recent US – Continued Zeroing  dispute, the Appellate Body, in evaluating this issue, 
examined whether the additional me asures "relate" to th e measures identified in the request for 
consultations, and whether the "legal basis" of the claims raised in respect of the additional measures 
is the same as the legal basis of the claims set forth in the consultations request".893  China submits 
that the additional measure it added in its panel re quest easily meets both criteria as:  (i) the USDOC's 
lack of legal authority was already evident on the face of the measures that were the subject of 
consultations and the panel request does nothing more than identify this absence of legal authority as 
a distinct measure; (ii) the measures are "related " because the USDOC specifically referred to the 
absence of legal authority in the underlying determina tions, and even in the ab sence of such a specific 
reference, the absence of legal authority is one po ssible explanation for the USDOC's failure to avoid 
the imposition of double remedies in the investigations  at issue; and (iii) the legal basis for China's 
claims in respect of the additional measure is identic al to the legal basis for China's claims in respect 
of the measures that were the subject of consulta tions and the legal issue with respect to all these 
measures is the same (i.e., whether the impositi on of double remedies for the same alleged acts of 
subsidization is inconsistent with the covered agreements).894  China also considers that the 
complaining party's prior awareness of a measure has no relevance to whether that measure is 
sufficiently related to the measures that were consulted upon.895 
14.20  Finally, China submits that the fact that it is challenging a measure "as such" is not relevant to 
whether that measure relates to the dispute that w as the subject of consultations.  China notes in this 
respect that the Appellate Body observed in US – Continued Zeroing  that "the distinction between 'as 
such' and 'as applied' claims does not govern the definition of a measure fo r purposes of WTO dispute 
settlement".896 
(ii) U.S. request for ruling under Article 6.2 of the DSU 
14.21  China argues that it is the United States' own conduct that is at the origin of whatever 
uncertainty exists as to the provisions of U.S. law – or their absence – that re late to the problem of 
double remedies.  China considers that although th e USDOC acknowledges the existence of the issue 
of "double remedies", the USDOC has been vague and evasive as to whether it possesses legal 
authority to avoid the imposition of double reme dies, and under what legal framework it would 
analyze that issue.897  In any case, China notes, the Appellate Body has found that the identification of 
a measure under Article 6.2 need be framed only with sufficient particularity as to indicate the nature 
of the measure and the gist of what is at issue.   China considers that it has gone well beyond this 
minimal requirement and that it was not required to identify the entire body of U.S. trade remedy laws 
                                                      
892 China response to the U.S. request for preliminary rulings, paras. 27-28, citing Appellate Body 
Reports on Brazil – Aircraft , para. 132 and US – Upland Cotton , para. 293. 
893 Id., para. 29, citing to Appellate Body Report on US – Continued Zeroing , paras. 228 and 235. 
894 China response to the U.S. request for preliminary rulings, paras. 30 et seq. ; response to Panel 
question 7 (first meeting). 
895 China response to Panel question 6 (first meeting). 
896 China response to the U.S. request for preliminary rulings, para. 36, citing to Appellate Body Report 
on US − Continued Zeroing , para. 179; and Panel Report on US − Continued Zeroing , para. 7.46; response to 
Panel question 8 (first meeting). 
897 Id., paras. 3-10.  WT/DS379/R  
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 and regulations in its pane l request in order to apprise the United States of the nature of this dispute.898  
China also argues that is has exhaustively documen ted the facts and circumstances that demonstrate 
the omission by the United States899 and that the "absence of legal authority" identified in its panel 
request is the same omission that has been the subject of extensive consideration within the 
United States and that the USDOC itself identified as  the explanation for its failure to avoid double 
remedies in the investigations at issue.900 
14.22  In addition, China takes issue with the United States' characterization of its claims.  China 
submits that its complaint does not relate to any provision of U.S. law requiring the USDOC to apply 
AD duties calculated under the NME methodology concurrently with countervailing duties.  Rather, China's claim is that when the USDOC chooses to apply countervailing duties concurrently with anti-
dumping duties determined in accordance with its NME methodology, a necessary consequence of 
that choice is the imposition of a double remedy an d that this is because th e USDOC lacks authority 
under U.S. law to account for the double remedy that  arises in such circ umstances.  Thus, the 
impairment identified by China in this dispute fi nds its source in the fact that the USDOC lacks 
authority to avoid the imposition of double remedies whenever it applies anti-dumping and 
countervailing measures in respect of the same product from China.
901 
14.23  Finally, China notes that the Appellate Body has indicated that an examination of the 
sufficiency of a panel request does not entail a substa ntive consideration as to what types of measures 
are susceptible to challenge under the DSU902, and has made clear that any act or omission can be a 
measure for purposes of dispute settlement.903 
2. Assessment by the Panel 
(a) U.S. request for a preliminary ruling with resp ect to the alleged failure to consult on the 
"omission" 
14.24  We first consider the United States' argument that the "omission"904 identified by China in its 
request for the establishment of the panel does not fall within our terms of reference because it is a 
measure that was not included in China's request for consultations.905  The United States' request for a 
preliminary ruling in this respect raises the ques tion of the relationship between the measures included 
in a complaining party's request for consultatio ns and those included in its request for the 
establishment of a panel. 
                                                      
898 China response to the U.S. request for preliminary rulings, para. 24; response to Panel question 3 
(first meeting). 
899 China response to the U.S. request for preliminary rulings, paras. 21-23. 
900 China response to Panel question 4 (a) (first meeting). 
901 China response to the U.S. request for preliminary rulings, paras. 15-17; response to Panel 
question 3 (first meeting). 
902 China response to the U.S. request for preliminary rulings, paras. 13, 20; response to Panel 
question 4(b) (first meeting), all citing to Appellate Body Report on US – Continued Zeroing , para. 169. 
903 China response to the U.S. request for preliminary rulings, para. 20, citing to Appellate Body 
Reports on US – Corrosion-Resistant Steel Sunset Review , para. 81, EC – Selected Customs Matters , para. 133 
and US – Continued Zeroing , para. 176; response to Panel question 4(b) (first meeting). 
904 Our reference to the alleged "failure [...] to prov ide legal authority" as an "omission" or a "measure" 
in this section is for ease of reference only and is w ithout prejudice to the United States' argument that China's 
panel request does not identify the "sp ecific measure" at issue in the disput e in accordance with Article 6.2 of 
the DSU. 
905 We address the United States' request for preliminary ruling with respect to the absence of 
consultations on the "omission" before considering the United States' request concerning the identification of this measure in China's panel request.  In our view, proceeding in this order follows the logical sequence of 
events that determine a panel's terms of reference. WT/DS379/R 
Page 214  
 
 14.25  The "measure" the inclusion of which in the pa nel request is challenged by the United States 
is the following: 
"In certain of the investigations specifi ed above, the US Department of Commerce 
stated that US law provides no basis to make any adjustment to either the anti-
dumping or countervailing duty calculations  to avoid the imposition of a double 
remedy for the same unfair trade practice,  where such a double remedy arises from 
the use of the US non-market economy (NME) methodology to impose anti-dumping duties simultaneously with the impositi on of countervailing duties on the same 
product.  The measures therefore include, as an omission, the failure of the United 
States to provide legal authority  for the US Department of Commerce to avoid the 
imposition of a double remedy when it im poses anti-dumping duties determined 
pursuant to the US NME methodology simultaneously with the imposition of countervailing duties on the same product".
906  (emphasis added) 
14.26  Further, China's panel request contains a se ction entitled "As Such Claims" which indicates, 
inter alia , that: 
"[...] The United States has not provided the Department of Commerce with any legal 
authority to adjust either the anti-dumping or countervailing duty calculations to avoid the imposition of a double remedy when it imposes anti-dumping duties determined pursuant to its NME methodolog y simultaneously with the imposition of 
countervailing duties on the same product.   The Department of Commerce has 
acknowledged the absence of any such legal authority. 
China considers that the absence of any legal authority  for the Department of 
Commerce to avoid the imposition of a double remedy is an omission that, as such, is 
inconsistent  with the following obligations under the covered agreements" [follows a 
list of provisions of the covered agreem ents which, the request indicates, are 
contravened by the "absence of legal authority to avoid a double remedy]".
907 
[...] 
"To the extent that US law does not permit the Department of Commerce to avoid the 
imposition of a double remedy for the same unfair trade practice in parallel anti-dumping and countervailing duty investig ations involving imports from WTO 
Members that the United States has d esignated as non-market economies, China 
considers that US law is, as such, inc onsistent with Article I of the GATT 1994 
[...]".
908  (emphasis added) 
14.27  There is no disagreement between the parties th at China's request for consultations does not 
explicitly identify, as a "measure at issue", the om ission included by China in its request for the 
establishment of a panel.  China's request for cons ultations states that it "concerns definitive anti-
dumping and countervailing duties imposed by the Un ited States pursuant to the final anti-dumping 
and countervailing duty dete rminations and orders issued by the US Department of Commerce" in the 
four sets of anti-dumping and countervailing duty investig ations at issue in this dispute.  The request 
                                                      
906 China request for establishment of the Panel, Section A, p. 3. 
907 Id., Section B.2, p. 7. 
908 Id., Section B.2, p. 8.  WT/DS379/R  
 Page 215 
 
 
 concludes "China reserves the right to raise a dditional claims and legal matters regarding the above-
mentioned measures  during the course of the consultations".909 
14.28  Article 4 of the DSU, governing requests fo r consultations, and Article 6 of the same 
Agreement, governing requests for the establishment of a panel, are relevant to the issue before us.  
Article 4.4 of the DSU provides: 
"[...] Any request for consultations shall be submitted in writing and shall give the 
reasons for the request, including identifi cation of the measures at issue and an 
indication of the legal basis for the complaint". 
14.29  Article 6.2 of the DSU provides: 
"The request for establishment of the panel [...] shall indicate whether consultations 
were held, identify the specific measures at issue and provide a brief summary of the 
legal basis of the complaint suffici ent to present the problem clearly". 
14.30  A panel's terms of reference are determined by th e content of the request for its establishment.  
Yet, "as a general matter, consultations are a prerequisite to panel proceedings"910, and therefore to the 
inclusion of a measure in the request for the establis hment of a panel and (by consequence) the panel's 
terms of reference.  The Appellate Body has explaine d that "Articles 4 and 6 of the DSU [...] set forth 
a process by which a complaining party must request consultations, and consu ltations must be held, 
before a matter may be referred to the DSB for the establishment of a panel".911  The Appellate Body 
has also highlighted the importance of consultations, explaining that they "provide the parties an opportunity to define and delimit the scope of the dispute between them".
912 
14.31  Past panels and the Appellate Body have r ecognized a certain degree of latitude to the 
complaining party in terms of the correspondence be tween the request for consultations and the panel 
request:  there need not be "a precise and exact identity  between the specific measures that were the 
subject of consultations and the specific measures identified in the request for establishment of a 
panel".913  Where a complainant includes, in its panel request, a measure that was not part of the 
consultations request, it must be asked whether the co mplaining party, in so doing, expands the scope 
of the dispute914 or changes its essence.915 
14.32  In answering this question, panels and the Appe llate Body have, in prior disputes, focused on 
various aspects of the relationship between the me asures included in the panel request and those 
identified in the consultation request.  Notably, in  certain disputes, they considered whether the 
additional measures constituted "separate and lega lly distinct" measures from those which had been 
                                                      
909 China request for consultations, pp. 1 and 6.  (emphasis added). 
910 Appellate Body Report on Mexico – Corn Syrup (Article 21.5 – US) , para. 58, cited with approval in 
Appellate Body Report on US – Upland Cotton , para. 284. 
911 Appellate Body Report on Brazil – Aircraft , para. 131, cited with approval in Appellate Body 
Report on US – Upland Cotton , para. 285. 
912 Appellate Body Report on Mexico – Corn Syrup (Article 21.5 – US) , para. 54, cited with approval in 
Appellate Body Report on US – Continued Zeroing , para. 222. 
913 Appellate Body Report on  Brazil – Aircraft , para. 132, (emphasis original), cited with approval in 
e.g., Appellate Body Reports on US – Upland Cotton , para. 285 and US – Continued Zeroing , para. 222. 
914 Appellate Body Report, US – Upland Cotton , para. 293, cited with approval in Appellate Body 
Reports on US – Continued Zeroing , paras. 222, 224 and 228, and US – Shrimp (Thailand) / US – Customs Bond 
Directive , para. 293. 
915 Appellate Body Report on US – Shrimp (Thailand) / US – Customs Bond Directive , para. 293 
(quoting Appellate Body Report on Mexico – Anti-Dumping Measures on Rice , para. 137, (referring to 
Appellate Body Report on Brazil – Aircraft , para. 132)). WT/DS379/R 
Page 216  
 
 consulted upon, in view of the content of the measu res, their legal bases, the government agencies that 
issued them and/or the legal linkages between them.
916  In other, more recent disputes, they found that 
the measures added in the panel request fell within the panel's terms of reference because they were 
similar or sufficiently related to those that had b een consulted upon, and because the legal basis of the 
claims made in respect of the two different sets of measures were identical.917 
14.33  While this prior jurisprudence offers some gui dance on how to resolve the question identified 
above, we do not read it as establishing precise criteria that would apply in every instance, 
irrespective of the factual situation at issue.  This understanding is consis tent with the Appellate 
Body's indication that "whether a complaining party has 'expand[ed] the scope of the dispute' or changed the 'essence' of the dispute through the inclus ion of a measure in its panel request that was 
not part of its consultations request mu st be determined on a case-by-case basis".
918 
14.34  In any event, the present dispute involves factual circumstances which have not been 
considered in past WTO disputes.  In the present case, China's panel request added a new measure in 
the form of a rule or norm of general and prospectiv e application (albeit formulated in the negative) – 
the "omission" – whereas the request for consultatio ns had only included measures in the nature of 
individual instances of application of that rule  of general application – the eight USDOC anti-
dumping and countervailing dut y determinations.  Paralleling this expansion in the nature of the 
measures at issue was an expansion in the nature of the legal claims in respect of these measures 
which, as the United States points out, had the effect of transforming a dispute involving only "as applied" claims into one also  including "as such" challenges.
919 
14.35  In its argument that the "omission" falls within our terms of reference, China, relying on the 
findings of the Appellate Body in US – Continued Zeroing , argues that the measure added in the panel 
request "relates" to the measures id entified in the request for consulta tions and that the legal basis of 
the claims raised in respect of the additional measure  is the same as the legal basis of the claims set 
forth in the consultations request.  We consider that  the examination of the nature and extent of the 
relationship between these two sets of measures is a tool to help us understand whether including the 
additional measure "expands the scope of the disput e" or "changes its essence" and, we agree with 
China that, in the present dispute, the additional measure is significan tly related to the measures that 
were identified in China's request for consultations, albeit for reasons other than those put forward by 
                                                      
916 Appellate Body Report on US – Certain EC Products , paras. 60-82; Panel Report, US – Customs 
Bond Directive , paras. 7.173-7.204; Appellate Body Report on US – Shrimp (Thailand) / US – Customs Bond 
Directive , paras. 286-295. 
917 Panel Report on US – Continued Zeroing , paras. 7.16-7.29; Appellate Body Report on US – 
Continued Zeroing , paras. 213-236.  See also Appellate Body Report on Brazil – Aircraft , paras. 127-133, 
finding that the additional measures (regulatory instruments relating to the administration of the subsidy programme at issue) did not change the es sence of the measure consulted upon.  In US – Continued Zeroing , the 
Appellate Body qualified its findings in US – Certain EC Products (additional measure excluded on the basis 
that it was separate and legally distinct from the measur es consulted upon), indicating that the two measures at 
issue in US – Certain EC Products  were not only legally distinct, but "were entirely different and, as a 
consequence, the matters covered by the consultations requ est and the panel request were distinct".  (Appellate 
Body on US – Continued Zeroing , para. 230). 
918 Appellate Body Report on US – Shrimp (Thailand) / US – Customs Bond Directive , para. 293.  In 
the same case, the Appellate Body indicated that its  findings (which it referred to as a "dictum") in US – Certain 
EC Products  (considering whether the measures were "separate a nd legally distinct") were not to be treated "as 
creating an exclusive test  or precedent".  (Id., para. 295 and footnote 391). 
919 The Appellate Body has indicated that panels should limit their analysis to the request for 
consultations, and not whether consultations actually took place with respect  to the alleged measure.  (Appellate 
Body Report on US − Upland Cotton , para. 287).  In consequence, in determining whether the inclusion of the 
"omission" in China's panel request had the effect of expanding the scope of the dispute or changing its essence, 
we limit our analysis to the text of  China's request for consultations.  WT/DS379/R  
 Page 217 
 
 
 China.920  Yet, we do not consider the "relationship"  between the "omission" and the determinations 
identified in China's consultations request to be  comparable to that which existed between the 
measures at issue in US – Continued Zeroing .  In that case, the measures at issue were subsequent 
determinations taken in the context of the same  anti-dumping orders, and "derive[d] from the same 
underlying legal basis". 
14.36  By contrast, and as discussed above, the relations hip in this dispute is between specific 
behaviour in the first case and the norm of general or prospective application on which that specific 
behaviour is allegedly based on the other.  The m easures identified in China's consultations request 
constitute specific instances of application of the measures identified in its panel request.  For this 
reason, it comes as no surprise that the measures c ontained in each of these documents are closely 
connected.  For the same reason, one would expect in such circumstances that the complaining party 
would allege violation of similar pr ovisions of the covered agreements, as is the case here.  Yet, this 
close relationship between the measures included in each of the requests and the fact that the legal 
claims made in respect of these measures invoke th e same provisions of the covered agreements does 
not, in our view, outweigh the fact that the inclus ion of the "omission" by China had the effect of 
bringing a wholly new type of measure – norms of  general and prospective application – within the 
scope of the dispute and of adding "as such" claims  to the "as applied" ch allenges included in the 
request for consultations.  We consider that the a ddition of such new measures and claims in this case 
so broadens the scope of the present dispute, and changes its nature, as to place that measure outside 
of our terms of reference. 
14.37  In reaching this conclusion, we take into c onsideration the recognition by panels and the 
Appellate Body that "as such" challenges against la ws, regulations or other instruments that have 
general and prospective application are serious cha llenges that have more far-reaching implications 
than "as applied" challenges against individual inst ances of application of such norms of general and 
prospective application.921, 922 
14.38  Our conclusion that the inclusion of the "omission" by China significantly expands the scope 
of the dispute and therefore that this measure and th e claims made in its respect are outside our terms 
                                                      
920 In our view, the "relationship" between the measur es set out in the panel request and those identified 
in the request for consultations derives from their substan tive connection, not from the fact that the former may 
or may nor have been "evident" on the face of the latter.  See paragraph 14.39,  infra . 
921 See Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews, para. 172: 
 
"[...] 'as such' challenges against a Member's m easures in WTO dispute settlement proceedings 
are serious challenges.  By definition, an 'as such' claim challenges laws, regulations, or other 
instruments of a Member that have general an d prospective application, asserting that a 
Member's conduct—not only in a particular instan ce that has occurred, but in future situations 
as well—will necessarily be inco nsistent with that Member's WTO obligations.  In essence, 
complaining parties bringing 'as such' challenges seek to prevent Members ex ante  from 
engaging in certain conduct.  The implications of such challenges are obviously more far-reaching than 'as applied' claims".  
 
922 To be clear, we consider that taki ng into account the nature of the claims  at issue in examining the 
correspondence between the measures  listed in the request for consultations and those listed in the panel request 
is appropriate since they, together, determine the "matter" which is before a panel.  We note that in US – 
Continued Zeroing , the Appellate Body found that the panel had properly examined both components of the 
"matter" before it – claims and measures – when it took into account the fact that the legal nature of the 
European Communities' claims regarding the additional measures "[did] not in any way differ from that of the [...] measures identified in the [...] consultations request" in reaching its  conclusion that the consultations request 
and the panel request in that case referred to the same  subject-matter, and as a result, that the additional 
measures fell within the panel's terms of reference.  (Appellate Body Report on US 
− Continued Zeroing,  
para. 233). WT/DS379/R 
Page 218  
 
 of reference finds support in the findings of the Appellate Body in US – Shrimp (Thailand) / US 
− 
Customs Bond Directive.  In that dispute, the Appellat e Body was critical of the proposition that the 
inclusion, in the request for consultations, of a sp ecific measure would suffice to bring within the 
scope of the dispute any legal instrument providing a general authority or legal basis for that specific 
measure.923  The Appellate Body added that such an a pproach would imply that laws and regulations 
providing general authority – incl uding constitutional provisions – w ould automatically be implicated 
in a dispute even if they were not mentioned in a consultations request ".924 
14.39  We recall China's view that there is a relations hip between the determinations identified in the 
request for consultations and the alleged "omission" because those determinations "stated that U.S. 
law provides no basis to make any adjustment […] to avoid the imposition of a double remedy".925  
Leaving aside whether or not China's characterizat ion of the determinations is correct, we do not 
believe that such a reference, in and of itself, establishes a relationship sufficiently close as to bring 
the alleged omission within the scope of this disput e.  An applied measure ma y often refer, implicitly 
or explicitly, to the legal basis under which it is taken and measures of gene ral application will often 
be referenced in the specific instan ces in which they are applied.  We  agree with the United States that 
if China's arguments were followed, consultations on "as such" claims would almost never be required 
since consultations on related " as applied" matters would suffice.926  In sum, as previously explained, 
we consider that the addition to a dispute of "as such" claims regarding a norm of general and 
prospective application represents a significant expans ion of the scope of the dispute, and changes its 
nature, even if the norm is substa ntively related to the individual in stances of behaviour identified in 
the request for consultations. 
14.40  Further, unlike China, we do not read the Appellate Body Report in US – Continued Zeroing  
as suggesting that the distinction between "as such" a nd "as applied" claims is irrelevant to a panel's 
consideration of its terms of reference.927  The statement of the Appellate Body relied upon by China 
addresses the question of what constitutes a "mea sure" for purposes of WTO dispute settlement and 
what types of measures are susceptib le to WTO challenge, substantive questions that are not to be 
confused with the jurisdictional issues before us.  In essence, in that statem ent, the Appellate Body 
makes the narrow point that "[i]n order to be suscepti ble to challenge, a measure need not fit squarely 
within one of [the] two categories" of measures recognized in WTO jurisprudence.  The Appellate 
Body did not, in that case or elsewhere, suggest th at there is no significant difference between norms 
                                                      
923 Appellate Body Report on US – Shrimp (Thailand) / US – Customs Bond Directive , para. 294 . 
924 Id., footnote 390.  The parties debate the relevance of the panel and Appellate Body findings in US – 
Shrimp (Thailand) / US – Customs Bond Directive  in light of the differences between the facts of that dispute 
and those of the present one.  As noted above, the panel and Appellate Body reports in US – Customs Bond 
Directive  do not directly address the issue before us.  Consequently, we do not consider it necessary to examine 
in detail the factual differences between  that dispute and the present one. 
925 China response to U.S. request for preliminary rulings, paras. 30-32; response to Panel question 7 
(first meeting). 
926 United States response to Panel question 7 (first meeting). 
927 China relies on the following statement of the Appellate Body: 
 "We share the Panel's view that the distinction between 'as such' and 'as applied' claims does 
not govern the definition of a measure for purposes of WTO dispute settlement.  This 
distinction has been developed in the jurisprudence as an analytical tool to facilitate the understanding of the nature of a measure at issue.  This heuristic device, however useful, does 
not define exhaustively the types of measures  that may be subject to challenge in WTO 
dispute settlement.  In order to be susceptible to challenge, a measure need not fit squarely within one of these two categories, that is, eith er as a rule or norm of general and prospective 
application, or as an individual instance of the application of a rule or norm".  (China response 
to the U.S. request for preliminary rulings, para. 36 (quoting Appellate Body Report on US – 
Continued Zeroing , para. 179). 
  WT/DS379/R  
 Page 219 
 
 
 of general and prospective applica tion and individual instances of application of such norms, or that 
such difference is irrelevant in determining a pa nel's terms of reference.  To the contrary, the 
Appellate Body has repeatedly made it clear that challenges to the former not only entail a different 
legal analysis on the part of the panel, but also that "as such" challenges have systemic implications 
that go well beyond those of "as applied" claims.928 
14.41   Finally, the parties have debated the issue of the relevance of China's awareness of the 
existence of the additional measure at th e time of its request for consultations.929  Prior cases offer 
little guidance on whether a complaining party's prior knowledge of such an "additional" measure is a 
relevant consideration.  In any event, given our findi ngs above, this is an issue we need not decide in 
the present case. 
14.42  For the reasons set out above, we find that the "omission" challenged by China in its "as such" 
claims falls outside our terms of reference, and c onsequently, that China's "as such" claims equally 
fall outside our terms of reference. 
(b) United States request for a preliminary ruling under Article 6.2 of the DSU 
14.43  Having already determined that the measure ch allenged by China in the context of its "as 
such" claims and China's "as such" claims themsel ves are not properly before us because China did 
not identify them in its request for consultations , we do not need to address the second request for 
preliminary ruling presented by the United States, i.e., that these measure and claims fall outside our terms of reference due to China's failure to identify the "measure at issue" in the dispute pursuant to 
Article 6.2 of the DSU. 
C. C
HINA 'S "AS APPLIED " CLAIMS  
1. Introduction 
14.44  In the following sections, we address China' s "as applied" "double remedy" claims.  
Specifically, we consider China's claims that: 
(i) the United States imposed a "double remedy", inconsistent with Articles 10, 
19.3, 19.4 and 32.1 of the SCM Agreement and Article VI:3 of the GATT 
1994; 
(ii) the USDOC's treatment of the qu estion of "double remedy" in the 
investigations at issue was inconsiste nt with United States' obligations under 
Articles 12.1 and 12.8 of the SCM Agreement; 
(iii) the United States denied imports from China "most-favoured nation" 
treatment under Article I:1 of th e GATT 1994 by imposing double remedies 
in the investigations at issue. 
                                                      
928 In US – Oil Country Tubular Goods Sunset Reviews  the Appellate Body recognized that the 
distinction between "as such" and "as applied" challe nges may be relevant to issues affecting a panel's 
jurisdiction in making observations about the identification of "as such" claims in a panel request .  The 
Appellate Body in that case found that Argentina had sufficiently identified the measure at issue pursuant to 
Article 6.2 of the DSU but nonetheless opined that Argentina could have been clearer in setting out it claims.  It "urge[d] complaining parties to be especially diligent in setting out 'as such' claims in their panel requests as 
clearly as possible".  (Appellate Body Report on US – Oil Country Tubular Goods Sunset Reviews , paras. 172-
173).  (emphasis original). 
929 We do not understand China to contest that it was aware of the existence of the alleged omission at 
the time it submitted its request for consultations. WT/DS379/R 
Page 220  
 
 14.45  Also as a preliminary remark, we consider it a ppropriate to emphasize that the dispute before 
us is limited to the consiste ncy with the covered agreements
 of the USDOC's determinations in the 
four sets of investigations at issue; the consistency of double remedies with U.S. law  is not before us. 
2. General considerations with respect to the po tential for "double remedies" to arise from 
the simultaneous imposition of countervailing duties and of anti-dumping duties 
calculated pursuant to the U.S. NME methodology 
14.46  We first examine the parties' arguments with respect to whether the concurrent imposition of 
anti-dumping duties calculated under the U.S. NME methodology and of countervailing duties results 
in the imposition of double remedies. 
(a) Main arguments of the Parties (i) China 
14.47  China argues that where anti-dumping duties calculated pursuant to a methodology that relies 
on surrogate, market-determined, values (NME  methodology) and countervailing duties are 
simultaneously applied to imports of a same good, it necessarily results that any domestic subsidy 
bestowed upon the production of that good is offset twice, once through the calculation of the 
dumping margin, and once as a result of the imposition of the countervailing duties.
930 
14.48  By way of background, China notes that for a long time, the USDOC held the position that it 
could not apply countervailing duties to countries wh ich it determined to be non-market economies, a 
position which the USDOC reversed in the CFS Paper  case.931  The four investigations at issue in this 
dispute represent the first instances in which the USDOC simultaneously imposed anti-dumping 
duties calculated under its NME methodology and countervailing duties. 
14.49  China notes that the issue of double remedies has been the subject of extensive discussions in 
the United States and was acknowledged by all three branches of the Government of the United States, including the USDOC itself.
932  In addition, China argues that, more generally, the 
USDOC has consistently recognized that the manne r in which it calculates anti-dumping duties can 
offset subsidies, including domestic subsidies.  In particular, China argues that in numerous anti-
dumping investigations of imports from market economy countries, the USDOC has recognized that 
by (i) adding subsidies to the producer's cost of production; (ii) deducting countervailing duties from 
the export price; or (iii) using a producer's repor ted costs, if these costs do not reflect subsidies 
received (or otherwise using unsubsidized  costs) to determine constr ucted normal value; it would 
                                                      
930 See, e.g.,  China first written submission, para. 326. 
931 Id., paras. 328-346.  See paras. 14.2-14.4,  supra , for the Panel's discussion of the evolution of the 
USDOC's position on the applicability of the U.S. countervailing duty regime to NMEs. 
932 China oral statement at the first meeting of the Panel, para. 79; first written submission, paras. 347-
354; oral statement at the second mee ting of the Panel, para. 60.  China notably refers to a 2005 report of the 
U.S. Government Accountability Office (the "GAO"), in  which the GAO assessed whether it would be possible 
for the USDOC to apply countervailing duties to imports from China; to draft legislation (which was adopted by 
the U.S. House of Representatives but  not the U.S. Senate) to provide the USDOC with explicit authority to 
address the issue of double remedies, should it apply the U.S. countervailing duty legislation to NMEs; to the 
recent decision of the U.S. Co urt of International Trade in GPX , (discussed in more detail below); and to 
statements made by the USDOC in relation to the CFS Paper  case.  (Id., referring, inter alia , to U.S. 
Government Accountability Office, U.S. – China Trade:  Commerce Faces Practical and Legal Challenges in 
Applying Countervailing Duties , GAO-05-474 (June 2005) ("GAO Report"), Exhibit CHI-121; United States 
Trade Rights Enforcement Act , H.R. 3283, Exhibit CHI-122; and to United States Court of International Trade, 
GPX International Tire Corporation and Hebei Starbright Tire Co., Ltd., v. United States  ("GPX "), Exhibit 
CHI-169).  WT/DS379/R  
 Page 221 
 
 
 effectively collect countervailing duties a second time.933  China submits that the United States fails to 
explain how the double remedy that arises from the use of an NME methodology differs from these other forms of double remedies, which the US DOC has taken all necessary steps to avoid.
934 
14.50  In China's view, a double remedy arises in all instances of concurrent imposition of 
countervailing duties and of anti-dumping duties cal culated pursuant to a methodology relying on 
surrogate values.935  This, in China's view, results from th e overlapping rationales and effects of NME 
methodologies and of countervailing duties:  China explains that the rationale for using an NME 
methodology in an anti-dumping investigation su bsumes the rationale for imposing countervailing 
duties and that these are two different approaches fo r remedying the fact that a producer's costs and 
prices were not determined by market forces.  China argues that when it uses its NME methodology, 
the USDOC places the producer in the position of ha ving unsubsidized, market-determined costs of 
production,936 and calculates a dumping margin based on the difference between this market-
determined cost of production and the producer's expor t price.  China explains that in doing so, the 
USDOC necessarily captures any trade-distorting effects of alleged subsidies in the anti-dumping margin.  Thus, having brought the producer's costs of production "to the market", and having 
calculated a duty on this basis, the USDOC's NM E methodology necessarily offsets any benefit that 
the producer obtained by receiving financial c ontributions from the government on terms more 
favourable than those available in the market.  When the USDOC simulta neously calculates the 
amount of subsidization in a para llel countervailing duty investigati on – again by placing the producer 
in the position of having market-determined costs of production – it is repeating the same exercise 
undertaken in the anti-dumping NME calculation.  T hus, China explains, the same subsidy is offset 
twice. 
14.51  China notes the United States' arguments that  the use of an NME methodology may not 
constitute a complete  remedy for the subsidies.  Consistent with the explanation above, China argues 
that the existence of a double remedy occurs entirely on the cost side of the equation.  Accordingly, 
China rejects the United States' contention that the existence of a double remedy is a factual question 
and depends, in particular, on whether subsidies pass through, pro rata , to U.S. prices.
937  C h i n a  
provides a number of examples from the investigations at issue (with respect to subsidies in the form 
of the provision of inputs), as well as theoretical examples which it considers support its arguments in 
this respect.938  China also rejects the United States' ar gument that the existence of a double remedy 
                                                      
933 China second written submission, paras. 214 and 227, response to Panel question 74 (first meeting).  
China adds that in these investigations, the USDOC did not consider the existence of a double remedy to be 
"theoretical", required any "evidence" or "presumptions" about the effects of subsidies on a producer's costs or 
prices, or suggest that it had no legal obligation to avoid the double remedy that it had identified.  (China second 
written submission, para. 215).  See Section XIV.C.5,  infra , (Panel's consideration of China's claims under 
Article I:1 of the GATT 1994), for a more detailed review of China's arguments in this respect. 
934 China first written submission, para. 228. 
935 Id., para. 374. 
936 China argues that in calculating a constructed normal value, the USDOC seeks to ensure that the 
surrogate values that it uses are, in fact, market-determined values and avoids  the use of any surrogate value that 
may itself be subsidized.  (China first written submission para. 371 and footnote 315, inter alia  referring to 
Omnibus Trade and Competitiveness Act of 1988, Exhibit CHI-123). 
937 Id., paras. 330, 372 and 391-392; oral statement at the first meeting of the Panel, para. 81; second 
written submission, paras. 219, 233-238, response to Pa nel question 73 (first meeting).  China considers that 
whether subsidies pass through, pro rata , to U.S. prices, is entirely irrele vant.  But China argues that even 
assuming that the United States were correct and that the existence of a double remedy depends on the effects of 
subsidies on export prices, the only lawful basis on which an investigating authority could impose countervailing duties would be to presume that the subs idies had precisely that effect.  (China second written 
submission, para. 289 et seq .). 
938 China first written submission, para. 395; oral stat ement at the first meeting of the Panel, para. 81; 
second written submission, paras. 222-225, response to Pa nel question 73 (first meeting); response to Panel 
question 26 (second meeting); Exhibit CHI-142 ("Further Examples of Offsetting the Same 'Subsidies' Twice"); WT/DS379/R 
Page 222  
 
 can be ascertained from a "mathematical" comparis on between the dumping and countervailing duty 
margins.  China's response to the Un ited States' argument in this r espect is that the use of an NME 
methodology necessarily offsets any competitive advantage that the producer obtained from 
countervailable subsidies, but that this does not  mean that an anti-dumping margin determined 
pursuant to an NME methodology is mathematica lly comparable to a countervailing duty margin 
calculated in respect of the same product, because:  (i) the use of an NME methodology is meant to 
address a broader set of distortions (e.g. non-speci fic subsidies); and (ii) the dumping margin is 
dependent on the level of the producer's export price, a variable that plays no role in the 
countervailing duty calculation.  Further, for China,  the fact that, in a given instance, the USDOC 
could theoretically arrive at a zero dumping margin  does not alter the fact that in using an NME 
methodology, it necessarily offset the benefit of  any countervailable subsidies along the way.
939 
14.52  Overall, China considers that the theories put forward by the United States demonstrate that 
the United States does not deny the existence of  double remedies but rather, considers that the 
existence of double remedies is solely a matt er of degree that depends on certain factual 
circumstances.940  Yet, China notes, in the investigations at issue, the USDOC did not take any steps 
to determine the extent of the double remedy that may have arisen.941  In any event, China considers 
that it has demonstrated, at a minimum, that ther e was at least "some overlap" between the method by 
which the USDOC determined normal value in the an ti-dumping investigations and the subsidies that 
were identified and countervailed by the USDOC in the parallel countervailing duty investigations.942 
14.53  Finally, China draws the Panel's attention to the 2009 decision of the U.S. Court of 
International Trade ("CIT") in GPX International Tire v. United States , a judicial review of the 
determination in the OTR investigation at issue in the present dispute.  In GPX , the CIT held that the 
USDOC is obligated to avoid o ffsetting the same subsidies twic e when it uses its NME methodology 
in conjunction with countervailing duties.943  China notes that the CIT observed that the USDOC 
addresses subsidization of NME producers "t hrough the NME AD methodology" and that it is 
fundamentally incompatible with the purposes of the countervailing duty laws to offset the same 
subsidies twice; China also cites the CIT's conclusi on that the USDOC has an obligation to investigate 
and to avoid double remedies.  China posits that in GPX , the CIT rejected U.S. arguments that are 
similar to those the United States makes before this Panel.944 
                                                                                                                                                                     
and Exhibit CHI-170 (examples, in scenarios in which subsidies "pass through" or do not "pass through" to 
export prices). 
939 China response to Panel question 93 (a)-(b) (first meeting). 
940 See, e.g.,  China's second written submission, para. 305.  China also argues that  the United States has 
implicitly acknowledged before the Panel the potential for at least some degree of overlap between the two 
remedies.  In particular, China notes the United States ' statements that the use of an NME methodology to 
determine normal value may not constitute a complete re medy for any subsidies received by the producer, and 
that it will "not necessarily capture the full amount" of any subsidies.  China argues that th ese statements are 
consistent with the USDOC's statement, in CFS Paper  that "a possibility of double counting results from 
simultaneous antidumping and CVD investigations" of impo rts from NME countries and with the statement by 
the GAO that anti-dumping duties determined in accorda nce with the U.S. NME methodology "offset much of 
the value of both export subsidies and domestic subsidies".  (China response to Panel Question 92 (first 
meeting)). 
941 China oral statement at the first meeting of the Panel, para. 82; second written submission, 
para. 305. 
942 China response to Panel question 92 (first meeting). 
943 China oral statement at the second meeting of the Panel, paras. 56-73. 
944 Id.  WT/DS379/R  
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 (ii) United States 
14.54  The United States asks the Panel to reject Chin a's argument that a double remedy results from 
the imposition of countervailing duties concurren tly with the imposition of anti-dumping duties 
calculated under the U.S. NME methodology.  In pa rticular, the United States contests what in its 
view is an argument of China that every  calculation of a dumping margin using the NME 
methodology will be artificially inflated by the full amount of subsidies that are remedied by 
countervailing duties determined and imposed  simultaneously on the subject goods.  The 
United States argues that China has not provided ev idence to support its arguments in this respect.945 
14.55  The United States proffers that the theory adva nced by China suggests that surrogate values 
used to determine normal value under the U.S. NME methodology are the mathematical equivalent of 
what actual production costs would be if China we re a market economy plus the precise amount of 
subsidization.  The United States challenges wh at it sees as the theoretical premises and the 
assumptions underlying China's theory.  The Unite d States argues that it cannot be assumed that 
replacement of actual (subsidized) values of f actor inputs with surrogate values under the NME 
methodology results in an increase in the normal value by an amount that is equal to or greater than 
the amount of the subsidy.  The United States argue s that it cannot be assumed that the normal value 
arrived at using the NME calculation is, in every instance, completely insulated from any of the 
effects of the countervailed subsidy.  The United States posits that the subsidy could actually lower 
the normal value, for instance by increasing a reci pient's efficiency and reducing the quantity of 
factors used in production, or affect the surroga te (third-country) prices and/or profit and expense 
ratios.946  The United States further submits that another fundamental premise for China's arguments 
is that subsidies reduce costs of production, pro rata ; the United States contends that this would be a 
necessary basis for arguing that normal values dete rmined using the NME methodology are invariably 
inflated by an amount that fully remedies the subs idy.  The United States considers it far from clear 
that most subsidies achieve anything close to pro rata  reductions in cost.947 
14.56  The United States characterizes as  "self-serving" the illustrations offered by China using the 
investigations at issue in the current dispute, a nd asks the Panel not to consider that these establish 
that double remedies were imposed in these investig ations.  The United States disagrees with China's 
suggestion that similarities between the surrogate values used in the anti-dumping calculations and the 
benchmarks used in the countervailing duty investig ations prove that the resulting duties remedy the 
same economic "distortion".  In addition, the Un ited States submits counter-examples to demonstrate 
that in some instances, the surr ogate values used by the USDOC in  its dumping margin calculation 
were in fact lower than both the producer's actual co sts and the benchmarks used by the USDOC in its 
calculation of the amount of the subsidy.948 
14.57  Further, the United States argues that China incorrectly equates the normal value with the 
anti-dumping remedy , and notes that normal values are only one side of the anti-dumping equation.949  
The United States argues that even if it is assumed that a subsidy lowers the recipient's costs of 
production, it may not pass-through to prices.950 
                                                      
945 United States first written submission, paras. 445-4 62; opening statement at the first meeting of the 
Panel, para. 56; response to Panel question 73 (first meeting). 
946 United States first written submission, paras. 451-454 and footnote 612; response to Panel 
question 71 (first meeting); second written submission, paras. 203-207; response to Panel question 27 (second 
meeting). 
947 United States first written submission, paras. 455-459. 
948 United States comments on China's respons e to Panel question 26 (second meeting). 
949 United States second written submission, paras. 198-202. 
950 United States response to Panel questions 71 (a) and 72 (first meeting). WT/DS379/R 
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 14.58  The United States urges the Panel to reject the argument made by China that there are 
"overlapping rationales" for (i) the use of NME me thodologies in anti-dumping investigations and (ii) 
the imposition of countervailing duties.  In the view  of the United States, China mischaracterizes the 
relevant rationales and incorrectly assumes that subsidization is  among the market distortions that the 
NME methodology is "meant to counteract".  The United States argues that under the GATT, the AD 
Agreement, and China's Protocol of  Accession, subsidization is not re levant to the application of the 
NME methodology.  The United States submits in this regard that the USDOC does not and cannot ensure that the NME constructed normal value is "subs idy-free", and that in some instances, including 
in the investigations at issue, the surr ogate value exceeds the producer's actual costs.
951  T h e  
United States further submits that the effects  of subsidies on costs or prices is not, under the covered 
agreements, relevant to the calculation of the amount  of countervailing duties.  On the contrary, under 
Article VI:3 of the GATT and Article 19.2 of the SCM Agreement, countervailing duties may be 
imposed for the full amount  of the subsidy found to exist, irr espective of the effects these subsidies.952 
14.59  Finally, the United States argues that even if it is accepted at face value, the GAO Report does 
not support China's argument that double remedies are inherent in the concurrent application of 
countervailing duties to offset domestic subsidie s and of anti-dumping duties calculated under an 
NME methodology.  Rather, the United States argu es, "the report agrees with Commerce's stated 
position [that] the concurrent imposition of AD and CV duties c ould create some potential for 
overlapping rationales".953  The United States also asks the Pa nel not to rely on, or consider 
dispositive or even persuasive, the Opinion of the CIT in the GPX  case.  The United States argues that 
this decision represents the Court's ruling on U.S. law and results from other considerations than those 
focussed on by China in the current dispute.  Th e United States notes that the CIT concludes that 
some degree of double counting is likely and dir ects the USDOC to investig ate the issue and report 
back to the Court.  Further, the United States considers the CIT ruling to  be in error and notes that it is 
not final as it may be appealed.954 
(b) Main arguments of the Third Parties 
(i) Argentina 
14.60  Argentina argues that China incorrectly assumes that the use of an NME methodology in an 
anti-dumping investigation necessarily addresses any po tential subsidization.  On the contrary, 
Argentina argues, using analogue country prices a nd costs to mirror market economy conditions does 
not mean that such costs and prices have been adjust ed from subsidization.  Further, Argentina is of 
the view that the purpose of the NME methodology is to provide an alternative to obtain undistorted 
prices in circumstances where there are distortions in the economy, rather than to offset subsidies, and 
that even assuming arguendo that subsidies are the quintessence of distortions as China contends, they 
are not the only category of distortions affecting a market.  As a consequence, Argentina argues, the 
concurrent application of anti-dumping duties cal culated under a surrogate country methodology and 
of countervailing duties does not, in itself, imply the situation of duplication alleged by China.955 
                                                      
951 United States second written submission, paras. 180-190; opening statement at the second meeting 
of the Panel, para. 80. 
952 United States second written submission, paras. 191-195; response to Panel question 71(b) (first 
meeting). 
953 United States response to Panel question 80 (first  meeting).  The United States emphasizes that the 
GAO stated that "it appears  that some  double counting [...] could  occur [...]".  (Id.).  (emphasis added by the 
United States). 
954 United States opening statement at the second meeting of the Panel, paras. 85-88; response to Panel 
Question 32 (second meeting). 
955 Argentina third-party submission, para. 33; third-party oral statement, paras. 6-9.  WT/DS379/R  
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 (ii) Australia 
14.61  Australia  submits that anti-dumping and countervailing du ties are distinct trade remedies with 
different purposes and effects.  Australia considers that the use of a surrogate market in an anti-
dumping investigation and the calculation of an NM E normal value do not relate to an assessment of 
whether a subsidy exists or a calculation of the amount  of that subsidy, and notes that an anti-dumping 
investigation entails a price comparison betw een the normal value and the export price.956 
(iii) Brazil 
14.62  Brazil argues that the potential effects on pricing practices of subsidies to the "manufacture or 
production" of a product are normally much less direct  than is the case for export subsidies and that it 
is therefore inappropriate to apply the logi c behind Article VI:5 to domestic subsidies.957 
(iv) European Communities 
14.63  The European Communities expresses concern wi th China's allegation that there is an 
"inherent" double remedy in cases where normal value is established on the basis of a surrogate country and with China's apparent assumption that  domestic subsidies inevitably affect prices, 
including export prices.  The European Communitie s also posits that there may be cases where export 
subsidies have no measurable impact on export price,  or have no discernable impact on prices at all.
958 
(v) Japan 
14.64  Japan considers that in certain situations, the dumping margin calculation captures not only 
the dumping behaviour of exporters, but also the effe cts of governmental financial contributions; if in 
such a situation, the importing Member also im poses a countervailing duty, it would counteract the 
effects of the financial contribution by the governme nt twice.  Japan argues that a double remedy may 
or may not occur in situations other than situa tions of export subsidiza tion, depending on the method 
used in the calculation of the margin of dumping in a given case.  For example, if a subsidy is conferred on inputs and the final product is sold both in the home and export markets, both the home 
market price and the export price would be lowered by the same amount due to the effects of the subsidy, and in such a case, a double remedy ma y occur if the dumping margin is calculated by 
adjusting the home market price upward for the per-unit amount of the subsidy without an adjustment 
of the actual export price.  Japan also considers that a double remedy unavoidably occurs in the case 
of export subsidies.
959 
(vi) Mexico 
14.65  Mexico considers that China's argument th at the application of a surrogate country 
methodology in an anti-dumping investigation yields  a normal value free from distortions is without 
foundation.  Mexico is of the view that an NME methodology does not offset the effect of subsidies 
granted in the exporting country.  Further, Mexico argues that even assuming arguendo  that the 
normal value determined on the basis of a surrogate  country would reflect unsubsidized prices, these 
prices would be those in the surrogate country, not in China itself.960 
                                                      
956 Australia third-party submission, para. 42; third-party response to Panel questions 14 and 17. 
957 Brazil third-party submission, para. 17. 
958 European Communities third-party submission, paras. 53 and 56. 
959 Japan third-party submission, paras. 4-7; third-party oral statement, paras. 2-4. 
960 Mexico third-party submission, paras. 32-34; third- party oral statement paras. 6-8; response to Panel 
questions 21 and 23. WT/DS379/R 
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 (vii) Norway 
14.66  Norway considers that the choice of the methodology and the costs elements that go into the 
calculation of the normal value can have an important bearing on the issue of subsidization.  Where the normal value is constructed on the basis of th e producer's actual data for the inputs (i.e., 
subsidized input prices), the constructed normal value will be lower than for non-subsidized 
production.  In such cases, simultaneous anti-dumpi ng and countervailing duties may be applied.  If, 
on the other hand, the constructed normal value is calculated not with  subsidized prices, but with 
"non-distorted" or "benchmark" prices (including prices from a surrogate county) for the (otherwise subsidized) inputs, then the effect of any subsidy is "extinguished" in the constructed normal value 
calculation and applying an anti-dumping duty up to  the maximum permitted by the AD Agreement 
will provide a remedy for the subsidization at the sa me time.  Norway notes that China argues, and the 
United States does not appear to dispute, that in  calculating the constructed normal value based on a 
third country market benchmark, the USDOC avoids the use of any surrogate value that may itself be 
subsidized.  Thus, Norway submits, it appears th at the USDOC used a market-economy cost of 
production free from any dumping or subsidy distortion in the dumping margin calculation.  Norway 
submits that by applying the full anti-dumping duty up to this third-country market benchmark, all 
effects of the subsidization were extinguished.
961 
(c) Assessment by the Panel 
14.67  As we explain in more detail in the followi ng paragraphs, we have no difficulty accepting the 
general proposition that the use of an NME methodol ogy likely provides some form of remedy against 
subsidisation, and therefore, that the simulta neous imposition of anti-dumping duties calculated under 
an NME methodology and of countervailing duties likely results in any subsidy granted in respect of 
the good at issue being offset more than once. 
14.68  An "NME methodology" is a methodology for the calculation of dumping margins under 
which the export price is compared to a normal valu e that is based on "surrogate" costs or prices from 
a third country.  The rationale behind the use of such  an NME methodology is that prices and costs of 
production in the exporting country are distorted as a result of government intervention in the 
economy and therefore do not reflect market economy conditions.962  In such a situation, it is 
considered that neither the sales prices of the NME producer on its domestic market nor a normal value constructed on the basis of that producer's  actual costs of production would offer a reliable 
source of comparison to calculate a margin of dumping.   This is why the normal value is determined 
on the basis of costs or prices prevailing in a thir d country where market economy conditions prevail, 
and hence where prices and costs are regarded as "undistorted".  In practice, the investigating 
authority typically "constructs" the normal value on the basis of costs of production in the third country market economy, an approach which the U.S. NME methodology generally follows.
963 
14.69  It follows from this description of NM E methodologies that, conceptually, the dumping 
margin calculated under an NME methodology – i.e. , the difference between the constructed normal 
value and the export price – reflects not only price discrimination by the investigated producer 
between the domestic and export markets ("dumping"),  but also, in addition, the economic distortions 
that affect the producer's costs of production.  Sp ecific domestic subsidies granted to the producer of 
the good in question, in respect of that good – i.e., the same subsidies which are countervailed in the 
context of a countervailing duty investigation – are one of these economic distortions that are 
                                                      
961 Norway third-party submission, paras. 43-47. 
962 See second Ad Note to Article VI:1; Section 15(a ) of China's Protocol of Accession. 
963 See our description of the U.S. NME methodology, para. 14.2,  supra .  WT/DS379/R  
 Page 227 
 
 
 "captured" in the NME dumping margin calculation.964  Expressed differently, the dumping margin 
calculated under an NME methodology generally is higher than would be the case otherwise because 
it results from a comparison of the export price to market-determined, and hence unsubsidized , costs 
of production, rather than to the producer's actua l, subsidized (or distorted) costs of production.965 
14.70  To the extent that part of the dumping margin found to exist resulted from subsidies provided 
in respect of the exported good, the anti-dumping duties calculated under an NME methodology will 
remedy both dumping and subsidization.  In this sen se, it can be said that if countervailing duties are 
simultaneously applied to imports of the same good, the subsidy is likely to be "offset" more than 
once, i.e., once through the anti-dumping duty, and again at least partially through the countervailing 
duty.  For this reason, we consider that the concurrent imposition of anti-dumping duties calculated 
under an NME methodology and of countervailing duties creates the potential for imposition of a 
"double remedy", as China defines this term. 
14.71  We do not understand the United States to di spute the basic notion that double remedies may 
result from the concurrent use of its anti-dum ping and countervailing duty laws on imports from 
China.  In fact, as China points out, the US DOC itself has recognized the potential for double 
remedies to arise in such circumstances.966  Rather, the United States in its arguments before us 
focuses on whether a double remedy can be demonstrated on the facts of each specific instance of concurrent imposition.
967  One of the United States' arguments in this respect is that the existence of a 
"double remedy" depends on export prices (because , the United States argues, the normal value is 
only one half of the dumping margin equation) and in particular, on whether the subsidy leads to a 
reduction in the export price.968 
                                                      
964 That other distortions are also captured – for instance non-specific subsidies – is irrelevant; what 
matters is that those same distortions which are count ervailed under Part V of the SCM Agreement are also 
captured by the NME dumping margin calculation. 
965 It is noteworthy that the U.S. NME methodology takes into account the quantities of factors of 
production actually used by the investigated producer in the production of the investigated good (e.g. x tonne of 
input).  The USDOC then us es surrogate values (e.g. y dollar or renminbi/tonne of input) to calculate the costs 
for each of the various factors used in  the production of the investigated good by that investigated producer.  
That the U.S. NME methodology factors in the investigated producer's actual use of factors of production does not, in our view, fundamentally alter the conclusion that  using surrogate, market economy values presumptively 
puts the producer in the position of having unsubsidized costs of production. 
966 See, e.g. , the USDOC statement that:   
 
"Since the possibility of double counting resulting from simultaneous anti-dumping and countervailing duty investigations is dependent on the specific facts arising in such 
investigations, to the extent that the parties to these pro ceedings provide evidence on the 
record of these investigations, Commerce will have to respond to these concerns in the course 
of our investigations".  (USDOC – Office of Public Affairs, "Commerce Applies Anti-Subsidy 
Law to China", (30 March 2007), Exhibit CHI-135). 
  We also note that in response to a ques tion from the Panel, the United States states 
that the GAO Report "agrees with Commerce's stated position [that] the concurrent 
imposition of AD and CV duties could create some potential for overlapping remedies ."  
(United States response to Panel question 80 (a) (first meeting)).  (emphasis added). 
 
967 The USDOC seems to have taken a similar approach in the CFS Paper  case.  ( Coated Free Sheet 
Paper from the People's Republic of China:  Prelimin ary Determination of Sales at Less Than Fair Value and 
Postponement of Final Determination , CHI-137, p. 30760). 
968 We note the United States' insist ence that China must demonstrate that each countervailed subsidy 
"passes through", in full (pro rata ) to the export price, and that a double remedy for the full amount of the 
subsidy results from every instance of double imposition.  The parties' arguments concerning whether a subsidy WT/DS379/R 
Page 228  
 
 14.72  Taking both sides of the dumping margin equati on into consideration does not alter the 
conclusion that double remedies are likely to r esult from the concurrent imposition of anti-dumping 
duties calculated under an NME methodology and of  countervailing duties.  Viewed from this 
perspective, the use of an NME methodology l eads to an asymmetric dumping margin comparison 
between an unsubsidized  normal value and a subsidized  export price.
969  Thus, once again, the 
difference between the two finds its source not only in  price discrimination (dumping), but also in the 
subsidies that were granted to the investigated  producer.  This was, in essence, the reasoning 
underlying the conclusions of the U.S. Govern ment Accountability Office (GAO) in its 2005 report 
on the implications for the United States of appl ying countervailing duty laws to China.  The GAO 
explained that when an anti-dumping duty is calculated under the U.S. NME methodology, 
"the normal value of the product [...] is based not on Chinese prices (which might be 
artificially low as a result of domestic subsidies) but on information from a country where prices are determined by free markets.  Thus, when the normal value is compared with the export price, the difference will, at least in theory, reflect the price 
advantages that the exporting company h as obtained from both export and domestic 
subsidies".
970 
The GAO Report concludes, on this basis, that econom ic theory suggests that there is a substantial 
potential for domestic subsidies to be "double c ounted" in the event th at the USDOC applied 
countervailing duties to NME country products while continuing to use surrogate country values to 
calculate anti-dumping duties on those same products.971  The decision of the U.S. Court of 
International Trade in GPX is based on a similar theoretical foundation – in fact, the Court cites to the 
GAO Report in support of its finding that withou t some type of adjustment being made, the 
concurrent imposition of anti-dumpi ng duties and of countervailing duties with respect to Chinese 
products could very well result in a double remedy.972 
                                                                                                                                                                     
"passes through" to the export price concerns the question whether the subsidy leads to a reduction of the export 
price, in totality ( pro rata ) or in part.  The United States explains that a pro rata  "pass through" of the subsidy 
would be where one dollar or renminbi of subsidy reduces the export price by one dollar/renminbi, or where a 
ten dollar/renminbi subsidy bestowed upon a producer of ten widgets and expensed in one year would lower the 
price of each widget by one dollar/re nminbi.  (United States response to  Panel question 73 (first meeting), 
footnote 173).  Because the term "pass through" of subsidies is generally u nderstood to refer to another concept 
(see, for instance, Section XII.D.2, supra ) and to better reflect the meaning of the parties' arguments, in 
discussing this argument, we use the concept of the reduc tion in the export price that results from the subsidy, 
rather than the terms "pass through" used by the parties.  Also, we note that the United States argues that the 
USDOC only discussed the issue of "pass through" in its determinations in th e investigations at issue because of 
China's arguments before the USDOC.  (United States fi rst written submission, footnote 607; response to Panel 
question 73 (first meeting)).  Whether or not the question of the "pass through" of subsidies was first raised by 
China or by the USDOC, it is clear to us that the United St ates views this question as relevant to the existence of 
a double remedy. 
969 See Brian D. Kelly, "The Law and Economics of Simultaneous Countervailing Duty and Anti-
Dumping Proceedings", 3 Global Trade and Customs Journal , (2008), p. 41, Exhibit CHI-138, p. 48.  We note 
that this "theory" assumes that domestic subsidies lower both domestic prices and export prices. 
970 Exhibit CHI-121, p. 28.  (footnotes omitted). 
971 Id., pp. 27-28. 
972 Exhibit CHI-169, p. 17, citing to the excerpt of the GAO Report cited above.  Certain statements of 
the USDOC in market economy anti-dumping investigations  illustrate why a similar "double remedy" arises in 
the context of export subsidies, and why it generally does not in the context of domestic subsidies granted by 
market economies:  in Cold-Rolled Corrosion-Resistant Carbon Steel Flat Products from Korea  (quoted in LEU 
from France ), the USDOC wrote that "domestic subsidies presumably lower the price of the subject 
merchandise both in the home and th e U.S. markets, and therefore have no effect on the measurement of any 
dumping that might also occur".  The USDOC contrasted this situation with that of export subsidies, which, 
"benefit only exported merchandise" and therefore brings about "the potential for double remedies".  ( Notice of  WT/DS379/R  
 Page 229 
 
 
 14.73  The United States puts forward a number of scenarios under which it is plausible that the 
subsidy would not have a one-for-one impact on th e producer's costs of production or on export 
prices.  The United States also points out that the imposition of countervailing duties is not conditioned upon a demonstration of th e price effects of the subsidy
973; in other words, that a Member 
is allowed to countervail subsidies that have no effects on the price of subsidized imports. 974 
14.74  All else being equal, one would expect a domest ic subsidy to lower the recipient's production 
costs, allowing that producer to lower its prices in both the domestic and export markets.975  It would, 
in our view, be a rare case in  which a subsidy bestowed upon the producer of an exported good has no 
effect at all  on either the producer's costs of production or – assuming they are relevant – export 
prices, such that no portion of that subsidy wo uld be subject to a double remedy where both anti-
dumping duties based on an NME methodology, and countervailing duties, were imposed on imports 
of a given product. 
14.75  In sum, the United States' arguments raise the qu estion of the extent of a double remedy in 
specific factual circumstances – whether a complete  double remedy necessarily  results from all 
instances  of concurrent imposition of  anti-dumping duties calculated under an NME methodology and 
of countervailing duties.  They do not, however, invalidate the general proposition that at least some  
double remedy will likely  arise from the concurrent impositi on of countervailing duties and anti-
dumping duties calculated under an NME methodology.  If anything, the arguments put forward by the United States reinforce the idea that ascertaining the precise extent of double remedy in specific 
investigations would be a complex task, a fact which is highlighted by both the GAO, in its 2005 Report, and by the CIT in GPX .
976 
14.76  Because in the next section of our findings, we concl ude that China has not established that 
the imposition of "double remedies" is inconsistent with the provisions it cites, i.e., Articles 10, 19.3, 
19.4 and 32.1 of the SCM Agreement and Article VI:3  of the GATT, or with Article I:1 of the same 
Agreement, we do not need to examine further the extent to which the concurrent imposition of anti-
dumping duties determined under the USDOC's NME methodology and of  countervailing duties 
resulted in the imposition of "double remedies" in the f our investigations at issue.  For this reason, we 
do not decide whether China has conc lusively established that, in the investigations at issue, double 
remedies resulted from the concurrent imposition of anti-dumping duties calculated under the U.S. 
NME methodology and of countervailing duties.  We  therefore also do not consider the specific 
                                                                                                                                                                     
Final Results of Antidumping Duty Administrative Review:  Low Enriched Uranium From France  ("LEU from 
France "), Exhibit CHI-124, p. 46506).  In LEU from France , the USDOC reached a similar conclusion, and 
stated in passing that "domestic subsid ies are assumed not to affect dumping margins, because they lower prices 
in both the U.S. market and the domestic market of the exporting country equally".  While the question is not 
before us, it would seem that a double remedy could aris e in investigations involving market economy imports, 
depending on the costs that are used to calculate the normal value:  A doub le remedy may arise when the normal 
value of a market economy producer is constructed using costs that do not reflect the subsidies that this producer 
received. 
973 United States second written submission, para. 192. 
974 The United States also contests the notion that surrogate values ar e necessarily "unsubsidized". It 
notes in this respect that in some instances in the inves tigations at issue, the surrogate value was inferior to the 
producers' actual costs.  (United States response to Panel question 27 (second meeting); comments on China's 
response to Panel question 26 (second meeting).  That this would be the case does not, in our view, undermine 
the conclusions we reach above:  what we conclude is not that the totality of every dumping margin calculated under an NME methodology results from subsidization but, rather that where a margin of dumping is found to 
exist under such a methodology, it likely reflects not only dumping, but also subsidization.   
975 The USDOC itself seems to have made this assumption in the past.  See footnote 972,  supra . 
976 Exhibits CHI-121, p. 48; CHI-169, pp. 17-19.  We note that the GAO indicated that the experts it 
consulted agreed that in theory, the double remedy would be significant.  (Exhibit CHI-169, p. 28). WT/DS379/R 
Page 230  
 
 examples submitted by China from these investigations  in order to determine whether they support its 
arguments. 
3. Claims under Article VI of the GATT 1994 an d Articles 10, 19.3, 19.4 and 32.1 of the 
SCM Agreement 
(a) Main arguments of the Parties 
(i) China 
14.77   China argues that by virtue of the collective operation of Article VI:3 of the GATT and 
Articles 10 of the SCM Agreement, read in light of Articles 19.1, 19.3, and 19.4 of the SCM Agreement , the United States has an affirmative legal ob ligation to (i) ensure that it does not impose 
countervailing duties to offset subsidies that it simu ltaneously offsets through the methods by which it 
calculates anti-dumping duties; (ii) take "all necessary steps" to ensure that this does not occur; and 
(iii) ensure that investigating authorities investig ate and make a determination as to the "precise 
amount of a subsidy attributed to the imported prod ucts under investigation", taking into account that 
using simultaneously an NME anti-dumping methodol ogy has the effect of offsetting the same 
subsidies.
977  China submits that in the investigations at issue, the USDOC failed to investigate and 
avoid the imposition of double remedies, did not take  any steps to determine "whether, and in what 
amount" the use of market-determined costs of pro duction in the parallel anti-dumping investigations 
had the effect of offsetting the same subsid ies that it identified in the countervailing duty 
investigations978, and therefore, did not "ascertain the precise amount of a subsidy attributed to the 
imported products under investigation".979 
14.78  China makes an analogy with panel and Appe llate Body jurisprudence on extinction of 
subsidies in the context of privatization ( US – Countervailing Measures on Certain EC Products ), and 
on pass-through of subsidies to downstream producers ( US − Softwood Lumber IV ) and argues that, as 
in these cases, the calculation of a dumping marg in pursuant to the U.S. NME methodology is an 
event that calls into question whether any subsidy re mains to offset.  China fu rther considers that, like 
a situation of "privatization" at arm's length for fair market value, using an NME methodology to 
calculate anti-dumping duties places the investigat ed producer in a position of having market-
determined costs of production, such that there remains no benefit to be countervailed.980 
                                                      
977 China second written submission, paras. 243-247; response to Panel question  76 (first meeting).  
China notes that in US – Countervailing Measures on Certain EC Products , the Appellate Body held that these 
provisions define "the obligation of  Members to limit countervailing duties  to the amount and duration of the 
subsidy found to exist by the investigating authority".  China further argues that as  with arm's-length sales of 
subsidized input products, the use of an anti-dumping me thodology, which has the effect of offsetting subsidies, 
calls into question whether there remains a "subsidy" to "offset" through the imposition of countervailing duties 
and that in such circumstance it is the obligation of the investigating authority to "establish[] whether, and in 
what amount" there is still a su bsidy to offset in respect of the importe d product.  On this, China cites to the 
Appellate Body Report in US – Softwood Lumber IV .  (China response to Panel question 76 (first meeting), 
citing to Appellate Body Reports on US – Countervailing Measures on Certain EC Products , para. 139 and US 
– Softwood Lumber IV , para. 141). 
978 China second written submission, paras. 248-250. 
979 China response to Panel question 76 (first meeti ng); second written submission, paras. 245 and 249.  
China argues that given that the United States will already have offset the entire amount of the subsidy found to exist through the application of countervailing duties, the United States acts inconsistently with its obligations 
under the covered agreements to the extent that the simultaneous imposition of anti-dumping duties determined 
in accordance with its NME me thodology offsets any portion
 of these subsidies.  (China response to Panel 
question 92 (first meeting)). 
980 China second written submission, paras. 233-238.  WT/DS379/R  
 Page 231 
 
 
 14.79  China considers that the imposition of double remedi es is inconsistent with Article 19.4 of the 
SCM Agreement because any countervailing duty im posed in addition to the anti-dumping duty is in 
"excess of the subsidy found to exist" given that the United States has already offset the subsidy 
through the NME anti-dumping methodology.981  Further, China rejects th e United States' argument 
that the "amount of the subsidy" in Article 19.4 is not the amount that should have been properly 
determined under WTO rules.982 
14.80  China also claims that the imposition of double remedies in the investigations at issue was 
inconsistent with the obligation,  under Article 19.3 of the SCM Ag reement, to impose countervailing 
duties "in the appropriate amounts".983  Citing the panel report in EC – Salmon (Norway) , China 
argues that the "appropriateness" of the amount in Ar ticle 19.3 must be determined in light of the 
purpose of the duty.  Given that the purpose of countervailing duties is to "offset" subsidies, China 
argues that it is not "appropriate" to impose c ountervailing duties to offset subsidies that the 
investigating authority offsets through the method by which it calculates anti-dumping duties in respect of the same products.
984 
14.81  China also rejects the United States' suggestion that its claims under Articles 19.3 and 19.4 
are about whether "the sum" of the anti-dumping and countervailing duties is in excess of the 
"appropriate amounts" or that anti-dumping duties are "actually CVDs in disguise" as the United States asserts.  Rather, China submits, its cl aims are that the countervailing duties imposed by 
the USDOC are not "in the appropriate amounts" si nce they are in excess of the subsidy found to 
exist.
985  In addition, referring the Panel to prior decisions on the WTO-consistency of U.S. original 
investigations in which the panel and/or the Appella te Body made findings under Articles VI:3 of the 
GATT and 19.3 and 19.4 of the SCM Agreement or  referred to these provisions, China rejects the 
United States' argument that the use of the term "levy" indicates that these provisions do not apply to U.S. original investigations determinations.
986 
14.82  China also rejects the United St ates' characterization of its position as being that the importing 
Member must choose between the use of countervailing duties and the use of an NME methodology.  
China considers that the United States is free to enga ge in the concurrent a pplication of countervailing 
and anti-dumping duties determined in accordance w ith an NME methodology, and that the question 
before the Panel is not a questi on of "concurrent application" per se , but rather a question of whether 
the United States may impose countervailing duties without accounting for the fact that it offsets the same subsidies through the manner in which it calculates anti-dumping duties.
987  In other words, the 
USDOC is free to impose both remedies simultaneously, as long as it takes steps to ensure that no 
double remedy ensues.  China adds that in GPX , the U.S. Court of International Trade held that the 
USDOC may choose either to forego the imposition of countervailing duties on products to which it 
applies the NME methodology, or "adopt additiona l policies and procedures to adapt its NME AD and 
                                                      
981 China's first written submission, paras. 375-379; second written submission, paras. 255-257, citing 
to the Panel Report on US – Countervailing Measures on Certain EC Products , para. 8.1(a), and Appellate 
Body Report on US – Countervailing Measures on Certain EC Products , para. 161(a). 
982 China second written submission, footnote 218; response to Panel question 86 (first meeting). 
983 China first written submission, paras. 380-384. 
984 China second written submission, paras. 251-254; response to Panel question 89 (first meeting), 
citing to Panel Report on EC – Salmon (Norway) , paras. 7.704-7.705. 
985 China second written submission, paras. 253-254 and 258. 
986 China response to Panel question 52 (first meeting). 
987 China oral statement at the first meeting of the Panel, paras. 75-76; second written submission, 
paras. 208-209 and 212; response to Panel question 69; oral statement at the second meeting of the Panel, 
paras. 68-69. WT/DS379/R 
Page 232  
 
 CVD methodologies to account for the imposition of  countervailing duty remedies on merchandise 
from the PRC".
988 
14.83  China also considers that the United Stat es' position on the WTO-consistency of double 
remedies is based on a complete disregard for the object and purpose of the SCM Agreement.  China notes that the Appellate Body has observed that the object and pur pose of the SCM Agreement is "to 
strengthen and improve GATT disciplines relating to  the use of both subsidies and countervailing 
measures" and that Part V of the SCM Agreement, in particular, is meant to impose disciplines on the 
use of countervailing duties.  China considers that for a Member to obtain twice the remedy to which 
it is entitled is no discipline at all.
989 
14.84  China rejects the United States' suggestion th at the drafters of the GATT, of the SCM 
Agreement and of China's Protocol of Accession in tended to allow the imposition of double remedies 
resulting from the concurrent use of NME methodologies and of countervailing duties.  In this respect, 
China argues that the fact that Article VI:5 of  the GATT 1994 addresses one particular circumstance 
in which a double remedy could arise does not mean th at (i) there are no other circumstances in which 
a double remedy could arise (as the USDOC has in fact recognized), or (ii) all these other forms of 
double remedies are therefore permissi ble.  Nor does China believe that the absence of an express 
provision in the SCM Agreement and/or the GATT relating to the imposition of double remedies in 
the case of domestic subsidies means that double reme dies are permissible.  China notes that there are 
many issues – e.g. the WTO jurisprudence on "privati zation" (effect of a privatization of state-owned 
assets on previously-conferred subsidies) and "pass-th rough" (treatment of subsidies conferred upon 
upstream inputs) – relating to subsidies and counter vailing duties that the covered agreements do not 
expressly address.  This has not prevented panels  and the Appellate Body from finding that the 
covered agreements nonetheless impose disciplines on a Member's actions in respect of those issues. 
14.85  Further, China considers that the fact that Article 15 of the Tokyo Round Subsidies Code was 
not replicated in the SCM Agreement cannot be inte rpreted to mean that double remedies arising from 
the use of an NME methodology in conjunction with countervailing duties are permissible.  China 
argues in this regard that the circumstances surrounding the Uruguay Round negotiations strongly 
suggest that issues relating to these double remedies we re no longer considered relevant at the time:  
during the Uruguay Round, (i) no Contracting Party had a practice of applying an NME methodology 
concurrently with the application of countervaili ng duties to the same product; (ii) the United States – 
by far the largest user of countervailing duties – had taken a clear position at the beginning of the 
Uruguay Round that it would not apply countervailing duties to imports of NMEs; (iii) towards the 
end of the Uruguay Round, the USDOC's position was that it could apply countervailing duties to 
imports from NME countries, but only if it were to  find that the industry in question was a "market-
oriented industry"; (iv) under U.S. practice, the fo rmer Soviet bloc countries (which were in a process 
of transition to market economies) were subject  to the NME methodology, but not countervailing 
duties, until the United States classified them as market economies.  Against this backdrop, China 
considers that it is likely that the drafters of the SCM Agreement no longer considered the subject-
matter of Article 15 of the Tokyo Round Subsidies Code to be relevant. 990 
(ii) United States 
14.86  The United States takes the position that th e covered agreements  do not prohibit the 
imposition of double remedies in respect of domestic subsidies. 
                                                      
988 China oral statement at the second  meeting of the Panel, para. 68. 
989 Id., paras. 64-65. 
990 China second written submission, para. 211; response to Panel questions 69 and 70 (first meeting).  WT/DS379/R  
 Page 233 
 
 
 14.87  The United States argues that anti-dumping a nd countervailing duties are two distinct 
instruments, meant to address different kinds of harm , and that where the criteria for the imposition of 
each remedy are satisfied, duties may be imposed up to a level prescribed by the respective agreement.
991  The sole limitation in this respect is , the United States submits, the one found in 
Article VI:5 of the GATT 1994, which appli es only in the case of export subsidization.992  T h e  
United States infers from the absence of any similar provision with respect to domestic subsidies that 
Members did not agree that any other circumstances warranted a restriction on the concurrent application of the AD and CVD instruments.  The United States also attaches significance to the fact 
that Article 15 of the Tokyo Round Subsidies C ode (which provided that, for imports from NMEs, 
Members could resort to either anti-dumping or to countervailing duties) was not carried forward in 
the SCM Agreement.
   The United States further reads Article 15 as an indication that the parties to 
the Code considered that no other provision in  the GATT 1947 contained a similar requirement 
prohibiting the concurrent application of anti-dumpi ng and countervailing duties to NMEs, and infers 
from the non-inclusion of a similar provision in the SCM Agreement  that a prohibition on the 
concurrent use of anti-dumping and count ervailing duties to NMEs no longer exists.993  T h e  
United States, repeating an argument made by Argentina, also notes that the Tokyo Round Code 
contained provisions that were virtually identi cal to Articles 19.3 and 19.4 of the SCM Agreement; 
had these provisions prohibited the imposition of double remedies, as China contends, there would 
have been no need to include in the same Code  an express prohibition on concurrent anti-dumping 
and countervailing duty investigations.994  Finally, the United States submits that China's Protocol of 
Accession makes clear, at Section 15, that Member s contemplated the concurrent application of 
countervailing duties and of anti-dumping measures ca lculated on the basis of surrogate values, 
without any limitation on the use of countervailin g duties in such circumstances, and without any 
limitation on the concurrent a pplication of both remedies. 
14.88  Related to this, the United States argues th at the logic of China's argument necessarily 
imposes upon Members a choice between imposing anti-dumping duties on the basis of an NME 
methodology and imposing count ervailing duties; in other words, that  China is in fact challenging the 
concurrent application of countervailing duties a nd of anti-dumping duties calculated using the NME 
methodology.  The United States submits in this resp ect that while China suggests that the concurrent 
application of anti-dumping and countervailing duties would still be permissible where the 
investigating authority takes "steps" to ensure th at the NME normal value does not offset the same 
subsidies twice, China also considers that the NME normal value "necessarily" fully offsets the same 
subsidies "in all cases".995 
                                                      
991 United States first written submission, paras. 389-394. 
992 United States first written submission, paras. 388 and 395-409; opening statement at the first 
meeting of the Panel, para. 50 and 55; second written s ubmission, para. 208; response to Panel questions 75, 84 
and 85 (first meeting).  The United States also finds it not able that the inclusion in the GATT, in 1955, of the 
second Ad Note to Article VI:1 (which recognizes that, in certain cases, surrogate pr ices would be used to 
construct the normal value) was not accompanied by a broadening of Article VI:5.  The United States indicates that it was an NME Contracting Part y, Czechoslovakia, that proposed an  amendment to the GATT 1947 which 
resulted in the second Ad Note to Article VI.  The United States notes that subsidies were not mentioned as one 
of the reasons for the amendment; rather, the focus wa s on finding appropriate pr ice comparisons where the 
internal prices and costs of an NME were unreliable due to the State fixing prices or to State monopolization.  
(United States comments on China's response to Panel question 26(b)). 
993 United States first written submission, paras. 403-409, citing to Appellate Body Report on US – 
Underwear , pp. 14-15, DSR 1997:I, at 11. 
994 United States second written submission, para. 218; response to Panel question 28 (second meeting), 
referring to Articles 4.2 and 4.3 of the Tokyo Round Subsidies Code. 
995 United States second written submission, paras. 177-179; opening statement at the second meeting 
of the Panel, paras. 51-55. WT/DS379/R 
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 14.89  Responding to China's argument that at the time of the Uruguay Round, the concurrent 
application of anti-dumping and countervailing measures in respect of NMEs was no longer 
"relevant", the United States argues that regardless of their specific reason for doing so, the fact 
remains that Members did not include Article 15 of the Tokyo Round Subsidies Code in the SCM Agreement.
996  The United States further indicates that Ch ina's accession was negotiated against the 
backdrop of this provision, and that China's Prot ocol of Accession affirms Members' unqualified right 
to apply anti-dumping and countervailing duties in th e context of domestic subsidies while treating 
China as an NME.997 
14.90  Turning to China's arguments in support of its claims of violation, the United States submits 
that China's reliance on the privatization and pass-through jurisprudence is misplaced.  The 
United States notes China's argument that this ju risprudence concerned situations that the SCM 
Agreement did not explicitly address, and that pa nels and the Appellate Body nevertheless recognized 
the applicability of GATT and SCM provisions to those situations.  By contrast, the United States submits, the covered agreements are anything but silent on the issue before this Panel, that of the 
concurrent application of countervailing duties a nd of anti-dumping duties determined under an NME 
methodology.
998 
14.91  The United States also notes that the provisions cited by China (primarily Articles 19.3 and 
19.4 of the SCM Agreement) only impose disciplines with respect to countervailing duties and that China does not claim that the c ountervailing duties imposed by the USDOC in the investigations at 
issue exceeded the amounts of the subsidies found  to exist or that the USDOC did not properly 
calculate the subsidies amount.  Rather, in the view of the United States, China's claim under 
Article 19.4 is that the amount of the subsidy is exceeded by the sum of the anti-dumping duty in each 
anti-dumping investigation and of the countervailin g duty in each corresponding countervailing duty 
investigation, and as a result, China erroneously  implies that an anti-dumping duty calculated under 
the NME methodology must be understood to constitut e a countervailing duty within the meaning of 
the SCM Agreement, whereas those anti-dumping duti es are not "levied for the purpose of offsetting 
any subsidy".
999  According to the United States, the fact  that part of the methodology used to 
calculate the normal value rejects home market pr ices and costs due to broad distortions in a non-
market economy does not somehow transform the anti-dumping  duty itself into a countervailing 
duty.1000 
                                                      
996 United States opening statement at the first meeting of the Panel, para. 53; second written 
submission, paras. 210-211; response to Panel questions 70 and 75 (first meeting). 
997 United States opening statement at the first meeting of the Panel, para. 54; second written 
submission, para. 212.  The United St ates also notes that during the pe riod of China's accession negotiations, 
imports from China were the subject of 30 anti-dumping investigations conducted under the NME methodology, 
yet China's Protocol of Accession and Working Party Report do not reflect an y concerns China may have had in 
respect of that methodology, and in particular, any concerns China may have had that the methodology addressed not only price discrimination, but also subsidization.  The United States also infers from 
paragraph 151(a) of the Working Party Report that China sought to ensure that Members that had not yet 
developed NME methodologies would do so along the lines of the U.S. NME methodology.  (United States opening statement at the second meeting of the Panel, para. 58). 
998 United States opening statement at the s econd meeting of the Panel, paras. 60-61. 
999 United States opening statement at the first meet ing of the Panel, paras. 58 and 60-61; second 
written submission, paras. 216-217. 
1000 The United States also argues that  if China's view that the NME methodology is designed to offset 
subsidization is accepted, th en any anti-dumping duty calculated pursuant  to the NME methodology would fall 
squarely within the definition of "countervailing duty" contained in footnote 36 to the SCM Agreement.  Thus, 
the United States adds, as required by Article 10 of the SCM Agreement, such an anti-dumping duty could "only 
be imposed pursuant to [an] investigation[] initiated a nd conducted in accordance with [the SCM Agreement]", 
and that this would be the case whether or not a concurrent countervailing duty case were ongoing.  
(United States opening statement at the second meeting of the Panel, para. 77).  WT/DS379/R  
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 14.92  The United States further argues that Article 19.4 is limited to the question of whether the 
countervailing duties levied correspond to the am ount of the subsidy found to exist by the 
investigating authority and does not govern whet her that amount was properly determined in 
accordance with WTO rules (i.e., the amount that should have been found  had the investigating 
authority complied with other WTO rules).1001  For similar reasons – because China does not contest 
the fact that the duties imposed pursuant to the four  countervailing duty investigations at issue in this 
dispute do not exceed the amount of the subsidy bestowed upon each exporter – the United States 
submits that China's claim under Article 19.3 ha s no merit.  The United States argues that the 
"appropriateness" of the amounts of counterva iling duties under Article 19.3 relates to the 
subsidization rate calculated for each "source[] found to be subsidized and causing injury" and that 
China does not allege that the countervailing dut y amounts are not those that the USDOC found for 
"each source".1002 
14.93  In addition to these arguments, the United States takes the view that the reference to "levy" in 
Article VI:3 of the GATT and in Articles 19.3 and 19.4 of the SCM Agreement, in conjunction with 
footnote 51 of the SCM Agreement, means that th ese provisions impose no disciplines with respect to 
original investigations.  This is because, in the  view of the United States, under the U.S. retrospective 
duty assessment system, duties are not actually collect ed until an administrative review is conducted 
or the deadline for such review lapses.1003 
14.94  Finally, the United States submits that the Opini on of the U.S. Court of International Trade in 
GPX  should have no bearing on the Panel's considerati on of this dispute because it is an opinion of a 
U.S. court interpreting U.S. law, whereas this dispute concerns the interpretation of the WTO 
agreements, including provisions from China's Protocol  of Accession, that do not appear in U.S. law.  
In addition, the United States notes that the Court's decision in GPX  is still subject to appeal.1004 
(b) Main arguments of the Third Parties 
(i) Argentina 
14.95  Argentina considers that Article VI:5 of th e GATT 1994, the sole WTO provision expressly 
limiting the simultaneous imposition of both anti-dum ping and countervailing duties, is limited to 
situations of "export subsidization", and that the conc urrent application of both remedies in the case of 
actionable subsidies is therefore WTO-consistent.  In Argentina's view, had the drafters intended to 
prohibit the simultaneous imposition of anti-dumping and countervailing duties for situations other 
than export subsidization, they would have done so explicitly, as they did in Article VI:5.  Argentina 
also notes that China's Protocol of Accession r ecognizes not only the use of an NME methodology in 
anti-dumping investigations involving imports of Chin ese origin but also that  Chinese imports can be 
subject to countervailing duty investigations, and su bmits that to exempt China from the simultaneous 
imposition of anti-dumping and countervailing duties w ould give it preferential treatment compared to 
other Members.  Argentina considers that neither  of the provisions on which China bases it claims, 
Articles 19.3 and 19.4, address, directly or indir ectly, the issue of simultaneous imposition of anti-
dumping and countervailing duties or of double remedies.  Argentina also notes that the wording of 
Articles 19.4 is identical to the wording of Article 4.2 of the Tokyo Round Subsidies Code, and that Article 19.3 is almost identical to Article 4.3 of  the Tokyo Round Subsidies Code.  Thus, Argentina 
                                                     
 
1001 See, e.g.,  United States response to Panel questions 86 and 87 (first meeting). 
1002 United States first written submission, paras. 424-427; opening statement at the second meeting of 
the Panel, paras. 64-65. 
1003 See, e.g.,  United States second written submission, para. 215; response to Panel question 87 (first 
meeting). 
1004 See above, para.14.59, for the United States ' argument to the effect that the GPX  decision is in error 
and that, even on its own terms, it does not support the position taken by China in the present dispute. WT/DS379/R 
Page 236  
 
 argues, had the Tokyo Round Subsidies Code prohib ited the concurrent imposition of anti-dumping 
duties calculated under an NME methodology and of countervailing duties, Article 15.1 of the Tokyo 
Round Code would have been devoid of meaning.
1005 
(ii) Australia 
14.96  Australia considers that anti-dumping and countervailing duties are two distinct trade 
remedies and that nothing in Article VI of the GATT or elsewhere in the WTO Agreements prevents 
concurrent anti-dumping and countervailing duty inves tigations of the same product; in fact, Australia 
submits, the text of Article VI:5 reinforces the right  of Members to do both.  In Australia's view, the 
calculation of the normal value in an anti-dumping inv estigation is an inquiry that is separate from 
that the determination of the existence and amount of  a subsidy in a countervailing duty investigation.  
Australia also invites the Panel to clarify the mean ing of the terms "situation of export subsidization" 
in Article VI:5, which it considers to be unclear.  Australia argues that it cannot be assumed that these 
terms agreed to in 1947 can be equated with any me aning attributed to the categories of subsidies as 
agreed to in the SCM Agreement in 1994 and that  it is therefore conceivable that the expression 
"situation of export subsidisation" also cover cer tain situations in whic h a domestic subsidy is 
provided to a good which is exported.  Likewise, Au stralia submits that it is not clear whether the 
terms "same situation" of dumping or export subsidi zation in Article VI:5 refer to the existence of 
subsidization or dumping or to the injurious effects.1006 
(iii) Brazil 
14.97  Brazil argues that nothing in the AD and SC M Agreements suggests that parallel anti-
dumping and countervailing measures cannot be imposed , and notes that neither agreement contains 
any cross-reference conditioning the imposition of one remedy on the satisfaction of requirements 
established in relation to the other.  Brazil consid ers that Article VI:5 of the GATT 1994 contains the 
sole limitation on the concurrent application of an ti-dumping and countervailing measures.  Further, 
Brazil submits, this provision shows that Members were well aware that if they intended to impose 
any restrictions or conditions on the parallel app lication of anti-dumping a nd countervailing measures, 
they had to do so explicitly.  Brazil considers that the existence of an explicit ban with respect to 
export subsidies can be read contrario sensu  to allow for the concomitant application of both duties in 
all other situations.  Brazil also considers that th e fact that Article 15 of the Tokyo Round Subsides 
Code was not replicated in the SCM Agreement unde rscores the intention of its drafters not to 
prohibit the combined imposition of anti-dumping and countervailing duties on imports from Members, irrespective of their status  as market or non-market economies.  Brazil is of the view that 
the legal permissibility for the parallel applica tion of anti-dumping and countervailing measures, and 
its underlying logic, apply indistinctly to inves tigations conducted in relation to market economy 
Members and non-market economy Members.  Accepting the argument that methodological challenges arising from price comparability diffi culties in non-market economy Members somehow 
constrain the parallel application of anti-dumping and countervailing measures in relation to them 
would result in discrimination against "market economy" Members.
1007 
(iv) Canada 
14.98  Canada agrees with the United States that th e concurrent use of the NME methodology and 
countervailing duties is permissible under the SCM Ag reement.  Canada's view is that when an 
imported product is both dumpe d and subsidized, the importing Member may impose both anti-
dumping duties equal to the margin of dumping a nd countervailing duties equal to the amount of the 
                                                      
1005 Argentina third-party submission, paras. 8-29; third-party oral statement, paras. 3-5. 
1006 Australia third-party submission, paras. 41-51; third-party response to Panel questions 19 and 23. 
1007 Brazil third-party submission, paras. 14-18; third-party oral statement, paras. 8-9.  WT/DS379/R  
 Page 237 
 
 
 subsidy.  Canada submits that th is right is confirmed – and circum scribed – by Article VI:5 of the 
GATT 1994, such that (read a contrario ), this provision confirms the ability of WTO Members to 
impose concurrent anti-dumping and countervaili ng duties in circumstances other than export 
subsidization.  Canada further argues that if WT O Members had intended to prohibit the concurrent 
application of anti-dumping duties calculated on th e basis of subparagraph 15(a)(ii) of China's 
Protocol of Accession and countervailing duties, they c ould have stated that intention in the Protocol 
as they had done earlier in the Tokyo Round Subsidi es Code; instead, Sections 15(a) and 15(b) of 
China's Protocol of Accession enable an impor ting WTO Member to impose anti-dumping duties 
calculated on the basis of out-of-country prices or costs, and countervailing duties.  Finally, Canada 
rejects China's theory that the anti-dumping duty, by itself, compensates for both the dumping and the 
subsidization.  Canada considers that duties in the amount of the subsidy would not violate 
Article 19.3 and 19.4 and that the amount of a concurrent anti-dumping duty has no bearing on the 
amount of a countervailing duty, except as provided fo r in Article VI:5 , which is not the case here.1008 
(v) European Communities 
14.99  The European Communities considers that an ti-dumping and countervailing duties are two 
separate remedies to counter two different types of unfair trade practices under two distinct WTO 
agreements and that the only WTO provision expr essly limiting the right of Members to impose both 
types of duty is Article VI:5 of GATT 1994.  The European Commun ities agrees with the 
United States that by choosing not to include a provision similar to Article 15 of the Tokyo Round 
Subsidies Code in the SCM Agreement, WTO Memb ers recognised Article VI:5 as the only provision 
limiting the simultaneous imposition of both types of  remedies.  The European Communities also 
agrees with the United States that nothing in Chin a's Protocol of Accession expressly limits such a 
simultaneous imposition.  Further, the European Communities considers that there can be no breach 
of Article 19.4 if the duty imposed does not exceed  the amount of subsidy properly established under 
the rules of the SCM Agreement and that just because a measure taken under another agreement (in 
this case, an anti-dumping duty) may be alleged to in some way offset subsidisation does not create a 
violation of Article 19.4.  The European Communiti es further agrees with the United States that the 
limited scope of Article VI:5 is explained by the fact that, where the normal value is based on sales, a neutral subsidy may reasonably be considered to press down equally on both sides of the dumping 
calculation, and therefore the dumping calculation w ould remain unaffected by the subsidy analysis.  
Finally, the European Communiti es considers that the SCM Agreement does not require the showing 
of any causal link between subsidies and exports a nd/or that subsidies have caused export prices to 
decrease; the inquiry is limited to the effects of  the subsidised imports on prices in the importing 
country.
1009 
(vi) India 
14.100  India considers anti-dumping and countervailing dut ies to be two separate remedies to counter 
two different types of situations of trade distorti on.  India considers that the provision which expressly 
limits the right of WTO Members to impose both typ es of duty is Article VI:5 of GATT 1994.  India 
considers that the legal permissibility for the pa rallel application of an ti-dumping and countervailing 
measures, and its underlying logic, apply to invest igations conducted both in relation to market 
economy Members and non-market economy Members.1010 
                                                      
1008 Canada third-party submission, paras. 42-56; third-party response to Panel questions 12 and 14-16. 
1009 European Communities third-party oral statemen t, paras. 2-10; third-party response to Panel 
question 15. 
1010 India third-party oral statement.  (this statement contains no paragraph numbering). WT/DS379/R 
Page 238  
 
 (vii) Japan 
14.101  Japan submits that although Article VI:5 of  GATT 1994 does not prohibit the simultaneous 
imposition of anti-dumping and countervailing duties in situations other than "export subsidization", 
this provision is the expression of  an underlying principle that an importing Member may not impose 
a double remedy against the same subsidy, a princi ple to which Members should give due regard.  
Japan submits that Article VI:5 provides no explicit requirement on the prohibition of double 
remedies in situations other than export subsidi zation because a double remedy may or may not occur, 
depending on the method used in the calculation of the margin of dumping in a given case.  With respect to the legal bases for China' s claims, Japan considers that Article 19.4 is irrelevant to how an 
anti-dumping duty would be determined in the separ ate anti-dumping investigation in accordance with 
the provisions of the AD Agreement.  With respect  to Article 19.3, Japan notes that this provision 
accords the importing Member the discretion to impose a countervailing duty deemed as appropriate to the extent that the duty does not exceed the am ount of the subsidy found to exist, and that no 
further obligations are placed on the authoriti es' determination of the "appropriate amount".
1011 
(viii) Mexico 
14.102  Mexico takes the view that when counterva iling duties target domestic subsidies, the 
simultaneous application of anti-dumping and counterva iling duties is consistent with the rules of the 
WTO.1012  Mexico argues that when the negotiators of  the WTO Agreements considered it necessary 
to prohibit the simultaneous application of different  mechanisms, they did so expressly.  In this 
respect, Mexico notes in particular that a provi sion similar to Article 15 of the Tokyo Round 
Subsidies Code was not included in the SCM Agreement.  Mexico also notes that Section 15 of 
China's Protocol of Accession recognizes the su rrogate country methodology and acknowledges that 
Chinese imports may be subject to countervailing duty i nvestigations.  Mexico argues that if China, in 
negotiating its accession, had succeeded in negotiati ng a prohibition on the si multaneous application 
of anti-dumping and countervailing duties on its produc ts, this would have been specified in the 
Protocol.  Mexico considers that  neither Article 19.3 nor Article 19.4 of the SCM Agreement provides 
a basis for China's claim.  Finally, Mexico argu es that exempting China from the parallel imposition 
of anti-dumping duties and countervailing duties would give China preferential treatment relative to all other Members.
1013 
(ix) Norway 
14.103  Norway considers that where the normal value is  constructed on the basis of "non-distorted" 
or "benchmark" prices (including prices from a su rrogate county) for the (otherwise subsidized) 
inputs, then the effect of any subsidy is "exti nguished" in the constructed normal value calculation 
and that in such cases, applying an anti-dumping duty up to the maximum permitted under the AD  
Agreement will provide a remedy for the subsidizatio n at the same time.  Norway argues that applying 
a countervailing duty in such cases will be neith er appropriate under Article 19.3 of the SCM 
Agreement nor permissible under Ar ticle 19.4 of the SCM Agreement.1014 
                                                      
1011 Japan third-party submission, paras. 3-14; third-party oral statement, para. 5. 
1012 Mexico considers that it is for interested parties to explain and demonstrate the reasons why a 
"double remedy" could arise in contexts other than that of "export subsidies". 
1013 Mexico third-party submission, paras. 12-31; third-party oral statement, paras. 2-5; third-party 
response to Panel questions 19-21. 
1014 Norway third-party submission, paras. 38-47.  As noted above, para.14.66, Norway argues that in 
the investigations at issue, the USDOC appears to have used a market-economy cost of production free from any distortion and therefore that by applying the full anti-dump ing duty up to this third-country market benchmark, 
all effects of the subsidization would have been extinguished, such that applying a countervailing duty in such  WT/DS379/R  
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 (c) Assessment by the Panel 
(i) Introduction 
14.104  We understand the essence of China's argument to be that the imposition of anti-dumping 
duties calculated under the U.S. NME methodology in the four anti-dumping investigations at issue effectively "offset" any subsidy provided in respect of the goods concerned, such that there remained 
no subsidy left to countervail.  Thus, China's argu ment goes, when the Unite d States simultaneously 
imposed countervailing duties on the same products , it levied duties in excess of the amount of 
subsidy "found to exist", contrary to Article 19.4 of the SCM Agreement, and acted inconsistently 
with its obligation to levy duties "in the appropr iate amounts" pursuant to Article 19.3 of the SCM 
Agreement.  In addition, China cl aims that the USDOC failed to ta ke "all necessary steps" to ensure 
that it imposed countervailing duties for the purpose of  offsetting subsidies that continued to exist, 
thereby acting inconsistently with the requirements of Article VI of the GATT 1994 and of Article 10 
of the SCM Agreement. 
14.105  The USDOC's treatment of the issue of double remedi es in the investigations at issue is not in 
debate.  The parties agree that where interested parties raised "double remedy" arguments in the 
investigations at issue, the USDOC rejected them and that the USDOC did not take into consideration 
the anti-dumping duties imposed on the same product s when it imposed countervailing duties in the 
four countervailing duty investigations at issue:  it imposed countervailing duties corresponding to the 
full amount of subsidies found to have been  conferred on each investigated producer.
1015 
(ii) Claim under Article 19.4 of the SCM Agreement 
14.106  We first consider China's claim under Article 19. 4 of the SCM Agreement.  China's argument 
in this respect is that the United States levied  countervailing duties "in excess of the amount of 
subsidy found to exist" as a result of each of the countervailing duty orders at issue because it had 
already offset the subsidies at issue as a result of the concurrent imposition of anti-dumping duties 
calculated under the U.S. NME methodology. 
14.107  We begin our analysis by considering the text of Article 19.4 of the SCM Agreement: 
"No countervailing duty shall be levied51 on any imported product in excess of the 
amount of the subsidy found to exist, calcula ted in terms of subs idization per unit of 
the subsidized and exported product. 
_______________________________ 
 
51 As used in this Agreement "levy" shall mean the definitive or final legal assessment or 
collection of a duty or tax." 
14.108  By virtue of the ordinary meaning of its te xt, Article 19.4 of the SCM Agreement imposes a 
maximum limit on the amount of duties that may be "levied", corresponding to the amount of the 
subsidy that is found to exist.  By necessary implication, Article 19.4 also provides that no 
countervailing duties may be imposed on an imported product if no subsidy is  found to exist given 
that in such a case, the amount of su bsidy found to exist would be zero.1016 
                                                                                                                                                                     
cases will be neither appropria te under Article 19.3 of the SCM Agreement, nor permissible under Article 19.4 
of the SCM Agreement. 
1015 See above, para.14.6, and corresponding footnotes for a summary of the USDOC's treatment of the 
issue of double remedy in the anti-dumping and countervailing duty investigations at issue. 
1016 Panel Report on US – Lead and Bismuth II , para. 6.52. WT/DS379/R 
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 14.109  The parties disagree as to whether Article 19.4 is at all applicable to the situation before us:  
The United States argues that, by virtue of the use in Article 19.4 of the term "levy" and of the definition of this term in footnote 51 as "the de finitive or final legal asse ssment or collection of 
duties", Article 19.4 imposes obligations only with r espect to the final collection of duties.  The 
United States notes that no such final collection of duties has taken place as a result of the 
investigations at issue.  China rejects this interp retation.  The parties also disagree as to whether the 
terms "found to exist" in Article 19.4 refer to the amount of subsidy calculated by the investigating 
authority, regardless of whether that amount was cal culated consistently with the SCM Agreement.  
The distinction is important because China does not  argue that the countervailing duties imposed in 
each of the investigations at issue, in and of  themselves, exceeded the amount of the subsidy 
calculated  by the USDOC.
1017 
14.110  But a more fundamental disagreement between the parties is whether a subsidy existed in the 
first place, thereby allowing the USDOC to impos e countervailing duties.  China argues that the 
USDOC's use of its NME methodology in the paralle l anti-dumping investigations had the effect of 
offsetting subsidies, such that there remained no subsidy to "o ffset" through the imposition of 
countervailing duties. 
14.111  China likens the concurrent imposition of an  anti-dumping duty determined in accordance 
with an NME methodology to the factual situations  examined in prior panel and Appellate Body 
reports in which it was found that a subsidy granted to a state-owned producer may be extinguished by its arm's length acquisition for a fair market value in a context of privatization  (US – 
Countervailing Measures on Certain EC Products )
1018; or in which it was found that the benefit of a 
subsidy in respect of inputs may not "pass through"  to producers of downstream products processed 
from that input where the downstream producer purchases the input for a fair market value in an arms' 
length transaction ( US − Softwood Lumber IV ).1019  In each case, the Appellate Body found that these 
situations called into question whether a subsidy ha d been received by the investigated producer.  
Consequently, the Appellate Body found that the inve stigating authority had an obligation to establish 
whether and in what amount a subsidy existed in  respect of the imported product.  China sees the 
imposition of anti-dumping duties calculated under the U.S. NME methodology as a further situation of extinction of subsidy that was not exp licitly dealt with under the SCM Agreement. 
14.112  On its face, the terms of Article 19.4 of the SCM Agreement establish a limit to the amount of 
duties that may be "levied", and this limit is depe ndent only upon "the amount of the subsidy found to 
exist".  Thus, by its own terms, Article 19.4 of  the SCM Agreement is oblivious to any potential 
concurrent imposition of anti-dumping duties.  He nce, that an anti-dumping duty calculated under a 
methodology may have the effect of "offsetting" a subsidy in totality or in part has no effect on the existence of the subsidy which, under Article 1 of  the SCM Agreement, depends on the existence of a 
financial contribution and of a benefit; nor would it have an effect on the amount of the subsidy 
which, under Article 14 of the SCM Agreement, must be determined by reference to the 
marketplace.
1020  In sum, the narrowly-crafted discipline contained in Article 19.4 of the SCM 
Agreement does not address situations of "double remedies". 
                                                      
1017 China challenges the USDOC's benefit calculations, but these are separate claims of violations.  See 
Section X,  supra . 
1018 China second written submission, para. 233, citing to Appellate Body Report on US – 
Countervailing Measures on Certain EC Products , para. 102. 
1019 China response to Panel question 76, citing to Appellate Body Report on US – Softwood Lumber 
IV, para. 141. 
1020 Indeed, it is obvious that the mere issuance of an anti-dumping order cannot have the effect of 
changing the positio n of the recipient in the marketplace.  WT/DS379/R  
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 14.113  Further, we do not consider that there is a pe rtinent analogy to be made between the facts of 
the present dispute and those in the pass-through  and privatization  decisions cited by China.  These 
decisions recognize that certain events related to th e life of a subsidy may extinguish it or at least call 
into question whether it benefits the manufacture, production or export of the investigated product.  
By contrast, the arguments that China makes before  us pertain to the effects of parallel anti-dumping 
duties (i.e., remedies ) that are imposed concurrently with the countervailing duties, which effects 
derive from the calculations that lead to the impositi on of these remedies.  Again, we consider that the 
fact that an anti-dumping duty calculated under a me thodology may have the effect of "offsetting" a 
subsidy in totality or in part in no way means th at it extinguishes that subsidy.  Likewise, China's 
argument that the use of an NME methodology is tantamount to a "privatization" of the producer1021 is 
inapposite.  China's argument concerns a calculation,  more specifically, the use by an investigating 
authority of figures replicating the situation the pro ducer would be in but for government distortions, 
in calculating a margin of dumping.  This situat ion bears no analogy to the real world events 
examined in the privatization  jurisprudence cited by China. 
14.114  It further appears that through its arguments , China seeks to draw an analogy between the 
situation before us and a situation in which more than one countervailing duty is imposed with respect 
to a given subsidy or group of subsidies.  It may very well be that in such a situation of multiple 
countervailing duty investigations on a given imported product, Artic le 19.4 of the SCM Agreement 
would preclude the cumulative levying of duties in excess of the amount of the subsidy found to exist 
in each of the investigations.  But this is not the s ituation before us.  By its terms, Article 19.4 only 
imposes disciplines with respect to the levying of countervailing duties , which the covered 
agreements define as special duties levied "for the purpose  of offsetting" subsidies pursuant to 
investigations initiated and conduc ted in accordance with the prov isions of the SCM Agreement.1022  
The facts that anti-dumping duties are calculated under an NME methodology and thus may be affected by subsidization, and/or that, as a result,  the duties may effectively "offset" subsidies granted 
in respect of the product, change neither the purpose , nor the nature  of these duties as anti-dumping, 
as opposed to countervailing, duties. 
14.115  In sum, notwithstanding China's efforts to demons trate otherwise, the terms of Article 19.4 of 
the SCM Agreement do not provide the necessary le gal basis for its "double remedy" claim.  Our 
interpretation of Article 19.4 is confirmed by the c ontext to Article 19.4 provided by other relevant 
provisions of the covered agreements .  This context confirms that the common intention of the parties 
to the SCM Agreement was not to address or prohi bit, in Article 19.4, the imposition of "double 
remedies" in respect of domestic subsidies. 
14.116  We note, first that the anti-dumping and count ervailing duty instruments are provided for and 
addressed under two distinct agreements and are,  with the notable exception of Article VI:5, 
addressed under distinct paragraphs of Article VI of the GATT 1994.  Article VI:5, which precisely 
addresses the issue of double remedies, is the only provision under which any limitations are 
explicitly imposed on the concurrent use of the two remedies.  It reads: 
"No product of the territory of any contracti ng party imported into the territory of any 
other contracting party shall be subject  to both anti-dumping and countervailing 
duties to compensate for the same  situation of dumping or export subsidization". 
14.117  Thus, by its very terms, Article VI:5 of th e GATT 1994 is limited to "situation[s] of [...] 
export subsidization".  In our view, these terms ar e self-explanatory in their intention to limit the 
scope of the prohibition in Article  VI:5 to situations involving export subsidies , to the exclusion of 
situations in which domestic subsidies are granted on exported goods.  Such a narrow reading of the 
                                                     
 
1021 See, e.g.,  China second written submission, paras. 233-235. 
1022 Article 10 and footnote 36 of the SCM Agreement; Article VI:3 of the GATT 1994. WT/DS379/R 
Page 242  
 
 terms "situation of [...] export s ubsidization" is supported by the context to Article VI:5, and in 
particular by the distincti on made between domestic vs. export subsidies in Article VI:3 of the 
GATT 1994, which deals with countervailing duties, and by the separate treatment accorded to export 
subsidies under Article XVI of the GATT 1994.  Th ese provisions demonstrate that the drafters 
intended to make a distinction between subsidi es granted with respect to the production or 
manufacture of goods (i.e., domestic subsidies) and subsidies granted in respect of the export of goods 
(i.e., export subsidies).  Further, we consider that this interpretation is confirmed by the principle of 
effet utile :  since only imported  goods are subject to anti-dumping or countervailing duties, reading 
Article VI:5 as encompassing situations in which domestic subsidies grante d to exported goods are 
countervailed would effectively read the term "export" out of the relevant sentence of that provision.  
Finally, we note the use of terms equivalent to the expression "export subsidies" in both the French 
and the Spanish texts of Article VI:5.
1023 
14.118  Not only is Article VI:5 limited to potential doubl e remedies in respect of export subsidies, 
but the explicit terms in which the drafters addressed  the issue in that provision makes it all the more 
unlikely that they sought to prohibit the imposition of double remedies in respect of other types of 
subsidies through Article 19.4 of the SCM Agreement gi ven, again, that Article 19.4 on its face makes 
no reference to that issue.1024 
14.119  We also consider it significant that the pr edecessor to the SCM Agreement – the Tokyo 
Round Subsidies Code – contained a provision that  explicitly addressed the concurrent use of NME 
methodologies in anti-dumping investigations, and of  countervailing duties, in respect of imports from 
NMEs.  Where imports from non-market economies we re at issue, Article 15 of that Code imposed 
upon the importing Member a choice between the use of anti-dumping measures or of countervailing 
duties.  At the very least1025, the existence of a provision explicitly addressing the issue of the 
concurrent imposition of anti-dumping and counterv ailing duties on NME imports in the predecessor 
to the SCM Agreement would seem, once again, to lend support to our interpretation of Article 19.4 
of the SCM Agreement as not addressing or encomp assing the question of the permissibility of double 
remedies.1026 
                                                      
1023 The French text reads "à une même situation résultant du dumping ou de subventions à 
l'exportation ", whereas the Spanish text reads: "una misma situación resultante del dumping o de las 
subvenciones a la exportación " (our emphasis). 
1024 This is a further difference between the present dispute and the privatization and pass-through 
jurisprudence relied upon by China:  neither of these two issues is addressed explicitly under any of the 
provisions of the covered agreements. 
1025 The parties have not identified any documentary evidence from the Uruguay Round negotiations 
that would cast light on why Article 15 of the Tokyo Round Subsidies Code was not carried forward in the SCM 
Agreement. 
1026 We consider it likely that the rationale for the inclusion of Article 15 of the Tokyo Round Subsidies 
Code was the potential for double remedies to result from the concurrent imposition of NME methodologies in 
calculating anti-dumping duties and of countervailing duties, or at least the recognition that the use of an NME methodology would capture price differences resulting fr om subsidies granted on the product subject to anti-
dumping duties.  Furthermore, we note the argument of Argentina, Mexico and the United States that Article 15 
of the Tokyo Round Subsidies Code would have been redundant had double remedies been prohibited under the provisions of the Code imposing a limit on the amount of countervailing duties (i.e., the precursors to 
Articles 19.3 and 19.4 of the SCM Agreement).  WT/DS379/R  
 Page 243 
 
 
 14.120  In sum, these two elements from the context1027 to Article 19.4 of the SCM Agreement 
suggest that the Contracting Parties to the GATT, now WTO Members, were aware of the fact that certain difficulties, e.g. double remedies, could arise from the concurrent imposition of anti-dumping and countervailing duties, and that where they wanted  to address issues arising from the concurrent 
imposition of anti-dumping and counterva iling duties, they did so in explicit terms.  This makes it all 
the more unlikely that the terms of Article 19.4 of  the SCM Agreement reflect an implicit intent on 
the part of the drafters to prohibit the impos ition of double remedies with respect to domestic 
subsidies.  
14.121  Finally we note that by contrast, China's Protocol of Accession contains no provision 
explicitly addressing the issue of double remedies ev en though it appears to allow for the use of 
countervailing duties while China remains an NME.
1028  We do not need to decide whether, as the 
United States argues, China effectively seeks to impose a choice between the use of NME 
methodologies and of countervailing duties where imports from NMEs are concerned.1029  I n  o u r  
view, the relevant question is that of the drafters' intent, not the intent behind China's arguments.  In 
addition, the thrust of the United States' argu ments on double remedies would suggest that the 
United States itself does not consider the issue to  be so clear cut:  the practical import of the 
United States' arguments is that the existence of double remedies is an evidentiary one, and therefore 
that the overlap between the two remedies may only be  partial.  In any event, we need not decide 
whether the text of Section 15, viewed in isolati on, allows the concurrent imposition of anti-dumping 
duties and countervailing duties in all circumstances without any limitation , thereby imposing no 
constraint  on the imposition of double remedies.  Rather, we merely note the absence of any provision 
addressing the question of "double remedy" in China's Protocol of Accession.  In our view, such an 
absence again suggests that the drafters of Arti cle 19.4 of the SCM Agreement did not intend this 
provision to address the issue of double remedies.  
14.122  Finally, we note China's argument that for a Member to obtain twice the remedy would 
frustrate the object and purpose of the SCM Agreem ent which, the Appellate Body indicated, is "to 
strengthen and improve GATT disciplines relating to  the use of both subsidies and countervailing 
measures".  We view China's argument as implyi ng that it is the object and purpose of the SCM 
Agreement to impose disciplines not only with respect to the use of countervailing duties, but also of 
anti-dumping duties.  As explained above, we are of the view that the object and purpose of Part V of 
the SCM Agreement is limited to imposition of  disciplines with respect to the former.  
                                                      
1027 The fact that a provision addre ssing the issue in dispute was former ly in place but disappeared in a 
successor agreement would seem to fall more properly un der the heading of "context " to the treaty provision 
being interpreted (and therefore fall under Article 31 of  the Vienna Convention) rath er than under the category 
of "supplementary means of interpretation, including the preparatory work of the treat y and the circumstances of 
its conclusion".  This is how the Appellate Body characterized the "prior existence and demise" of a provision of a predecessor agreement in US – Underwear , where the Appellate Body charac terized this as an "another 
element of the context" of the provision that it was interpreting.  (Appellate Body Report on US – Underwear , p. 
16 DSR 1997:I, at 11). 
1028 China concedes that its Protocol of Accession permits the concurrent imposition of anti-dumping 
duties calculated under an NME methodology and of countervailing duties.  (China response to Panel 
questions 77 and 85 (first meeting)). 
1029 See United States opening statement at the fi rst meeting of the Panel, para. 38:   
 
"China said that it 'does not contend that the United States must 'choose' between the use of 
countervailing duties and the use of an NME methodology,' only that when applying both, 'it must do so in a 
manner that takes into account the fact that it offsets the same alleged subsidies through the manner in which it 
calculates antidumping duties.'  This is simply a distin ction without a difference.  … the logic of China's 
argument necessarily suggests th at the United States must choose  between the use of countervailing duties and 
the use of an NME methodology".  (emphasis original). WT/DS379/R 
Page 244  
 
 14.123  For these reasons, we find that China has failed to establish that the USDOC's use of its NME 
methodology in the anti-dumping determinations at i ssue, concurrently with its determination of 
subsidization and the imposition of countervaili ng duties on the same products in the four 
countervailing duty determinations at issue, wa s inconsistent with Article 19.4 of the SCM 
Agreement.  In light of this finding, we do not need to address the other arguments of the parties with 
respect to the scope of application of Article 19. 4 of the SCM Agreement, notably the United States' 
argument that this provision, as well as Articles VI:3 of the GATT 1994 and Article 19.3 of the SCM 
Agreement, cannot form the basis of a claim with resp ect to the investigations at issue since no duties 
were actually levied as a result of these investigations. 
(iii) China's claim under Article 19.3 of the SCM Agreement 
14.124  Article 19.3 of the SCM Agreement provides, in relevant parts: 
"When a countervailing duty is imposed in respect of any product, such 
countervailing duty shall be levied, in the appropriate amounts in each case , on a 
non-discriminatory basis on imports of such product from all sources found to be subsidized and causing injury, except as to  imports from those sources which have 
renounced any subsidies in question or fro m which undertakings under the terms of 
this Agreement have been accepted. [...]".  (emphasis added) 
14.125  On its face, Article 19.3 of the SCM Agreement imposes upon the authorities of the importing 
Member the obligation to levy duties (i) on a non-discriminatory basis on imports from all sources found to be subsidized and causing injury and (ii) in "the appropriate amounts" in each case. 
14.126  China's arguments raise the question of the m eaning to be given to the terms "appropriate 
amounts" in this provision.  Similar to its argume nts under Article 19.4 of the SCM Agreement, China 
submits that the imposition of anti-dumping du ties calculated under an NME methodology is a 
relevant consideration in assessing the appropriateness of the amount of duties levied.  China relies on 
the interpretation of Article 19.3 by the panel in EC – Salmon (Norway) .  Specifically, China notes 
that the  EC – Salmon (Norway)  panel found that the "appropriate" am ount of a duty is the amount that 
is "proper" or "fitting" in light of the purpose of the duty.
1030  China argues, that, applying the same 
reasoning, the "appropriate" amount of a counter vailing duty can be no greater than the amount 
necessary to offset the subsidy1031, such that the countervailing duty measures at issue are not "in the 
appropriate amounts" because they offset alleged subsidies that the United States has also offset 
through the manner in which it calculates anti-dumping duties under its NME methodology.1032  China 
also considers that it is not "appropriate" to of fset a subsidy that the investigating authority 
simultaneously offsets through the manner in which it calculates anti-dumping duties in respect of the 
same products".1033 
14.127  The panel in EC – Salmon (Norway)  considered a claim under Article 9.2 of the AD  
Agreement  – which, aside from its reference to anti-dumping duties rather than to countervailing 
duties, is worded in terms that are virtually identical to those of Article 19.3 of the SCM 
                                                      
1030 China second written submission, para. 254, citing to Panel Report on EC – Salmon (Norway) , 
paras. 7.704-7.705. 
1031 China argues, on the basis of Article VI:3 and foot note 36 to the SCM Agr eement, that the purpose 
of a countervailing duty is to "offset" the amount of any subsidy bestowed upon the product.  (China first 
written submission, para. 383). 
1032 Id., paras. 380-384. 
1033 China second written submission, para. 254.  WT/DS379/R  
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 Agreement.1034  In light of dictionary definitions of the te rm "appropriate", the panel considered that it 
was reasonable to interpret this term in Artic le 9.2 of the AD Agreement to mean that the 
"appropriate" amount of the duty is one which is "proper" or "fitting" in the context of an anti-
dumping investigation, and that what is "proper" or  "fitting" should be determined in relation to the 
object and purpose of the collection and imposition of anti-dumping duties.  Consequently, the panel, 
in light of Article VI:2 of the GATT 1994 and of Article 9.1 of the AD Agreement, determined that 
the "appropriate" amount of anti-dumping duty must be an amount that results in offsetting or 
preventing dumping, when all other requirements for the imposition of anti-dumping duties have been 
fulfilled.  On this basis, and because dumping is de fined in the agreements as the introduction of a 
product into the commerce of another country at a price which is "less than its normal value", the 
panel found that an anti-dumping duty may only be collected when the price of the imported product 
is less than its normal value, adding that "norma l value constitutes a point of reference for 
determining when anti-dumping duties may or may not be imposed and collected".1035 
14.128  We fail to see how the EC – Salmon (Norway)  panel's interpretation of the terms "appropriate 
amounts" could support China's claim under Article 19.3 of the SCM Agreement.  We recall that 
countervailing duties are special duties that are coll ected for the purpose of "offsetting" subsidies.  
This suggests that, applying the reasoning of the EC – Salmon (Norway)  panel, countervailing duties 
are collected in the appropriate amounts insofar as the amount collected does not exceed the amount 
of subsidy found to exist.  We further recall our conclusions above that the manner in which the 
dumping margin is calculated – through an NME methodology or otherwise – has no impact on the existence of subsidies, which may be found to "exi st" in a parallel countervailing duty investigation; 
and that the fact that a "double remedy" may result from the imposition of anti-dumping duties does 
not transform these duties into countervailing duties u nder the covered agreements.  For these reasons, 
the imposition of anti-dumping duties calculated under an NME methodology has no impact on whether the amount of the concurrent counterva iling duty collected is "appropriate" or not.  
14.129  Furthermore, we recall our conclusion that the context of Article 19.4 of the SCM Agreement 
confirms our interpretation that that provision does not address the issue of double remedies.  The 
same considerations likewise suggest that it w as not the intention of the drafters to the SCM 
Agreement to address the question of double reme dies in Article 19.3 of the SCM Agreement.  
14.130  We therefore find that China has failed to establish that the USDOC's use of its NME 
methodology in the anti-dumping determinations at i ssue in this dispute, concurrently with its 
determination of subsidization a nd the imposition of countervailing du ties on the same products in the 
four countervailing duty determinations at issue,  was inconsistent with Article 19.3 of the SCM 
Agreement.  Given these findings, we need not addr ess the United States' argument that Article 19.3 
of the SCM Agreement finds no application in th e present case given that no duties were actually 
levied  as a result of the determinations at issue.  
(iv) China's claims under Article 10 of the SCM Ag reement and Article VI:3 of the GATT 1994 
14.131  China argues that the United States had, under Articles 10 of the SCM Agreement and VI:3 of 
the GATT 1994, an affirmative legal obligation to  (i) ensure that it did not impose countervailing 
duties to offset subsidies that it simultaneously o ffset through the methods by which it calculated anti-
dumping duties; (ii) take "all necessary steps" to ensure that this did not occur; and (iii) ensure that the 
USDOC investigated and made a determination as to the "precise amount of a subsidy attributed to 
the imported products under investigation", taking  into account that using simultaneously an anti-
                                                     
 
1034 The one notable difference between the terms of Article 9.2 of the AD Agreement and those of 
Article 19.3 of the SCM Agreement is that the former us es the term "collected" whereas the latter uses the term 
"levied". 
1035 Panel Report on EC – Salmon (Norway) , paras. 7.704-7.705. WT/DS379/R 
Page 246  
 
 dumping methodology had the effect of  offsetting the same subsidies.
1036  China considers that in the 
investigations at issue, the USDOC failed to meet these obligations.  Ch ina notes in particular that the 
USDOC did not take any steps to determine "whether, and in what amount" the use of market-determined costs of production in the parallel anti- dumping investigations had the effect of offsetting 
the same subsidies that it identified in the countervailing duty investigations
1037, and therefore, did not 
"ascertain the precise amount of a subsidy attributed  to the imported products under investigation".1038 
14.132  Article 10 of the SCM Agreement and footnote 36 thereto provide: 
"Application of Article VI of GATT 1994  
Members shall take all necessary steps to ensure that the imposition of a 
countervailing duty36 on any product of the territory of any Member imported into the 
territory of another Member is in accordance with the provisions of Article VI of 
GATT 1994 and the terms of this Agreemen t.  Countervailing duties may only be 
imposed pursuant to investigations initi ated and conducted in accordance with the 
provisions of this Agreement and the Ag reement on Agriculture. [footnotes omitted 
in part] 
________________________________ 
36. The term "countervailing duty" shall be understood to mean a special duty levied for the 
purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, 
production or export of any merchandise, as provided for in paragraph 3 of Article VI of 
GATT 1994".  
14.133  Article VI: 3 of the GATT 1994 provides that: 
"No countervailing duty shall be levied on  any product of the territory of any 
contracting party imported into the territory  of another contracting party in excess of 
an amount equal to the estimated bounty or s ubsidy determined to have been granted, 
directly or indirectly, on the manufacture, production or export of such product in the country of origin or exportation, including any special subsidy to the transportation of a particular product. The term "counterva iling duty" shall be understood to mean a 
special duty levied for the purpose of offsetting any bounty or subsidy bestowed, 
directly, or indirectly, upon the manufacture, production or export of any merchandise." 
14.134  China does not make clear whether it intends its claims to pertain to the collective operation 
of Articles 10 of the SCM Agreement and VI:3 of the GATT 1994, and whether it intends them to be 
                                                     
 
1036 China second written submission, paras. 243-247, response to Panel question 76.  China argues, 
referring to the findings of the Appellate Body in US – Countervailing Measures on Certain EC Products  and in 
US – Softwood Lumber IV , that, collectively, Articles 10, 19.1, 19.3 , 19.4 of the SCM Agreement and 21.1 of 
the SCM Agreement and Article VI:3 of the GATT 1994 impose upon investigating authorities an affirmative 
legal obligation to take "all necessary steps" to ensure  that they limit counterva iling duties to the amount and 
duration of the subsidy. 
1037 China notes that the USDOC stated unequivocally that "it has no authority under U.S. law to 
examine in the context of a countervailing duty investigation whether the use of an NME methodology in a 
parallel anti-dumping investigation has the effect of offsetting the same alleged subsidies". 
1038 China second written submission, paras. 245 and 248-250; response to Panel question 76 (first 
meeting).  We address here China's claims as pres ented in its second written submission and subsequent 
submissions.  In its first written submission, China presented its claims under Articles VI:3 of the GATT and 10 of the SCM Agreement and under Article 32.1 of the SCM Agreement as purely consequential to its claims of 
violation under Articles 19.3 and 19.4 of the SCM Agr eement.  (China first written submission, para. 385).  WT/DS379/R  
 Page 247 
 
 
 in the nature of consequential claims as one woul d expect to be the case for a claim under Article 10 
of the SCM Agreement.  In any case, implicit in Ch ina's arguments is a claim that the levying of 
countervailing duties in an amount exceeding the amount  of the subsidy "determined to have been 
granted" is inconsistent with Article VI:3 of the GATT 1994.  For this reason, we first consider 
whether China has established a violation of Ar ticle VI:3 of the GATT 1994 before considering 
whether China has established a violation of Article 10 of the SCM Agreement, taken in isolation, or a 
violation of Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement collectively. 
14.135  Of relevance to China's claims, Article VI:3 of the GATT 1994 provides that countervailing 
duties are to be levied in amounts not exceeding th e "subsidy determined to have been granted".  
Thus, the pertinent obligation under Article VI:3 is very similar to that under Article 19.4 of the SCM 
Agreement.  Similar to Article 19.4, Article VI:3 is limited in scope:  it only establishes a limit with 
respect to the imposition of countervailing duties . 
14.136  For the same reasons that we have found that China has not established a violation of 
Article 19.4 of the SCM Agreement, we also c onsider that China has not established that the 
United States imposed duties in excess of the subs idy "determined to have been granted" in the 
investigations at issue inconsistently  with Article VI:3 of the GATT 1994. 
14.137  Turning to the second provision cited by China, we note that Article 10 of the SCM 
Agreement establishes that countervailing duti es may only be imposed in accordance with the 
procedural and substantive obliga tions contained in the SCM Agreement, indicating that a claim of 
violation of Article 10 of the SCM Agreement must  necessarily be consequential to a claim of 
violation of other provisions of the covered ag reements.  We also note China's argument that 
Article VI:3 of the GATT and Article 10 of the SCM Agreement imposed on the USDOC an 
obligation to investigate the amount of subsidy that  remained to be offset  due to the concurrent 
imposition of anti-dumping duties calculated under an NME methodology.1039 
14.138  We have already concluded that China has fa iled to establish that the imposition of anti-
dumping duties calculated under an NME methodology is an event that affects the existence of a 
subsidy or the amount of subsidy conferred on a product in the cont ext of a concurrent countervailing 
duty investigation.  As a consequence, we also  find that the USDOC was under no obligation to 
investigate whether the use of an NME methodolog y in a parallel anti-dumping investigation had the 
"effect" of offsetting the same alleged subsidies.  China advances no other argument in support of its 
claims under Articles 10 of the SCM Agreement and VI:3 of the GATT.  Hence, we find that China has not demonstrated that the United States acted in consistently with Articles VI:3 of the GATT 1994 
and 10 of the SCM Agreement as a result of the concurrent imposition of anti-dumping duties 
calculated under the U.S. NME methodology and of countervailing duties in the investigations at 
issue.
1040 
(v) China's claim under Article 32.1 of the SCM Agreement 
14.139  China makes it clear that its claim under Article 32.1 of the SCM Agreement  is purely 
consequential to its claims under Articles 10, 19.3 and 19.4 of the SCM Agreement and Article VI:3 
of the GATT of the 1994.1041  As we have found that China has failed to establish a violation of these 
provisions, we also find that China failed to establis h that the United States acted inconsistently with 
Article 32.1 of the SCM Agreement. 
                                                      
1039 China second written submission, paras. 248-250. 
1040 Given these findings, we need not address the United States' argument that Article VI:3 does not 
apply to the measures at issue given that no duties were actually levied as a result of these measures. 
1041 China second written submission, para. 259. WT/DS379/R 
Page 248  
 
 14.140  In addition, we note that our findings set forth in sections (ii)-(iv) concerning China's double 
remedy claims of necessity are limited to the provisi ons cited by China in that regard.  We have no 
mandate to, and thus do not, consider whether a ny other provisions of the WTO Agreement might 
prohibit any double remedies of the type referred to by China. 
4. Claims under Articles 12.1 and 12.8 of the SCM Agreement 
14.141  We now examine China's claims in respect of Articles 12.1 and 12.8 of the SCM Agreement.  
We do so under the assumption that China intends these claims to be independent of its other claims 
of violation. 
(a) Main arguments of the Parties 
(i) China 
14.142  China claims that, in the investigations at issu e, the USDOC did not provide interested parties 
with "notice of the information which [it] require [d]" to evaluate the existence of a double remedy, 
and therefore acted inconsistently with its obliga tions under Article 12.1 of the SCM Agreement.  In 
support of this argument, China submits that the Un ited States, in response to certain Panel questions, 
"appears to suggest that the USDOC might have ta ken steps to avoid imposing double remedies in the 
investigations at issue, had the interested par ties presented supporting evidence that a double remedy 
would occur".  China further argues that the USDOC did not inform interested parties of the essential 
facts under consideration that would "form the ba sis" for its determination in respect of double 
remedies and, as a result, acted inconsisten tly with Article 12.8 of the SCM Agreement.
1042 
(ii) United States 
14.143  The United States argues that China's claims mu st fail because (i) they are premised on the 
existence of an inherent double remedy in the co ncurrent application of countervailing duties and 
NME anti-dumping duties; and (ii) even if a double re medy could be shown to exist, the USDOC did 
not "require" information to "evaluate the exis tence of a double remedy" as China argues and such 
information did not form part of the "essential facts under consideration" that the USDOC was 
required to disclose.  In addition, the United States argues that providing a continuing opportunity for 
demonstration of an alleged double remedy is an a ppropriate position for an investigating authority, 
even where there is no basis for the claim and the investigating authority does not consider and has 
not found that such a double remedy exists.  The Un ited States adds that it is for interested parties 
who seek to alter the application of counterva iling  and anti-dumping duties to explain, with 
supporting evidence, why their proposed course of action is appropriate.1043 
(b) Assessment by the Panel 
14.144  Article 12.1 of the SCM Agreement provides: 
"Interested Members and all interested pa rties in a countervailing duty investigation 
shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question". 
14.145  Article 12.8 of the SCM Agreement provides: 
                                                     
 
1042 China second written submission, paras. 268-270. 
1043 United States opening statement at the s econd meeting of the Panel, paras. 66-69.  WT/DS379/R  
 Page 249 
 
 
 "The authorities shall, before a final dete rmination is made, inform all interested 
Members and interested parties of the essen tial facts under consideration which form 
the basis for the decision whether to appl y definitive measures. Such disclosure 
should take place in sufficient time for the parties to defend their interests". 
14.146  China claims a violation of the obligation unde r Article 12.1 of the SCM Agreement for the 
investigating authorities to give notice "of the information which the authorities require ".  (emphasis 
added)  Thus, to succeed in its claim, China must demonstrate that the USDOC "required" the 
submission of certain evidence in order to demonstr ate that a double remedy existed.  China's sole 
allegation in this respect is that the United States,  in response to certain Panel questions, "appears to 
suggest that the USDOC might have taken st eps to avoid imposing double remedies in the 
investigations at issue, had the interested par ties presented supporting evidence that a double remedy 
would occur".  China has not explained why th e responses provided by the delegation of the 
importing Member to panel questions should be re levant in determining what information the 
authority "required" in the investigation.1044  Thus, we are not convinced that the USDOC " required " 
the submission of any information with respect to double remedies in the investigations at issue. 
14.147  In any event, it seems that China effectively seeks a finding that would require the USDOC to 
adopt a set of criteria under which to assess the o ccurrence of double remedies, in the event that it 
considered that it possesses the legal authority to take  action to avoid such an occurrence.  We recall 
that we have already found that the USDOC is not, under the provisions cited by China, under a legal 
obligation to avoid the imposition of double remedi es.  While it is certainly desirable that 
investigating authorities adopt clear positions on certain legal issues that have the potential to arise in 
the investigations they conduct, we are not c onvinced that Article 12.1 of the SCM Agreement 
requires them to do so with respect to any and all such issues.  We have sympathy for the 
United States' argument that it is for interested par ties who seek to convince an investigating authority 
to modify its application of its trade remedy laws  (especially where that application has not been 
shown to be WTO-inconsistent) to bring relevant evidence to the investigating authority. 
14.148  Turning to Article 12.8 of the SCM Agreement, we  note that this provision, on its face, relates 
to the obligation for the investigating authority to ma ke a disclosure, prior to the issuance of a final 
determination, "of the essential facts under consideration which form  the basis for the decision 
whether to apply definitive measures".  (emphasis adde d)  In other terms, Article 12.8 pertains to the 
disclosure that an investigating authority must make prior to the issuance of its final determination, in 
which it must set out the essential facts on which that  determination is based.  While China's treatment 
of its Article 12.8 claim in its submissions is too succinct to achieve any certainty in this respect, it 
seems that China's argument is not that the US DOC failed to disclose the evidence on which its 
determinations were based, but ra ther that it failed to indicate what evidence the USDOC would have 
accepted – if any – to establish the existence of a double remedy.  Again, China seems to seek a 
finding that pertains to the legal framework th at the USDOC would apply to the issue of double 
remedies, but does not explain how the terms of Article 12.8 of the SCM Agreement can 
accommodate such a claim. 
14.149  For these reasons, we find that China has fail ed to establish that the United States acted 
inconsistently with its obligations under Ar ticles 12.1 and 12.8 of the SCM Agreement. 
5. Claims under Article I:1 of the GATT 1994 
14.150  The last claim of China in respect of "double remedies" is its claim under Article I:1 of the 
GATT, which embodies the "most favoured-nation" (MFN) principle. 
                                                      
1044 China devotes less than half a page of its submissions (paras. 268-270 of its second written 
submission) to its arguments in support of its Articles 12.1 and 12.8 claims. WT/DS379/R 
Page 250  
 
 (a) Main arguments of the Parties 
(i) China 
14.151  China claims that in the four sets of anti- dumping and countervailing dut y investigations at 
issue, the United States denied imports from Ch ina MFN treatment under Article I:1 of the GATT 
1994 by failing to extend to these imports the sa me unconditional entitlement to the avoidance of 
double remedies that it extends to imports from market economy countries.  In these investigations, 
China argues, the USDOC either did not avoid the imposition of a double remedy, or imposed a condition upon the avoidance of a double remedy th at it does not impose upon products originating in 
the territory of other Members.
1045 
14.152  China directs the Panel to a number of USDOC  determinations and U.S. court decisions 
which, it argues, demonstrate that the USDOC has re peatedly recognized that the manner in which it 
calculates anti-dumping duties can offset subsidies (including domestic subsidies) and that in 
circumstances where a potential for double remedies arose, the USDOC took steps to ensure that no 
double remedy would occur. 
14.153  China argues, first, citing to the USDOC determination in LEU from France , that the USDOC 
refuses to deduct countervailing duties from the export price in calculating margins of dumping in 
anti-dumping investigations involving market economy countries.  China adds that the USDOC has recognized that to make such a deduction wo uld impermissibly coll ect countervailing duties 
twice.
1046, 1047 
14.154  Second, China argues, since at least 1986  and its determination in Tool Steel from Germany , 
the USDOC has considered that it would be inappropr iate to add subsidies to producers' costs of 
production (i.e., to the actual expenses recorded in producers' books and records) in calculating the 
margin of dumping, because doing so would effectively collect countervailing duties twice, thereby blurring the distinction between anti-dumping and countervailing duties.  China argues that making 
such an addition would be equiva lent to deducting subsidies from the export price and that from the 
standpoint of a potential double remedy, the USDOC 's NME methodology has the same effect as 
adding subsidies to a producer's costs in a market  economy investigation:  both approaches place the 
producer in the position of having market-determined costs of production.
1048  China notes that in Tool 
Steel from Germany , the USDOC decided that it would use the producer's actual costs, even if they 
reflected the effect of subsidies.  This determina tion was appealed to the U.S. Court of International 
Trade in Al Tech Speciality Steel Corp .  In this decision, China argu es, the Court found considerable 
support in U.S. law for the plaintiff's argument that  the costs used to determine constructed normal 
value should be based on unsubsidized costs.  Ch ina indicates that while the Court considered it a 
close issue, it was ultimately persuaded by th e USDOC's argument that adding subsidies to the 
producer's costs would improperly "blur[] the di stinction between anti dumping and countervailing 
duty law".  China adds that the USDOC has also recognized (in its determination in Certain Steel 
                                                      
1045 China first written submission, paras. 403-427. 
1046 China first written submission, paras. 405-406; second written submission, para. 214; response to 
Panel question 74 (first meeting).  China also quotes the USDOC as saying, in LEU from France  that "in the 
most general terms, the [Tariff Act of 1930] stands for the proposition that dumping margins should not be 
calculated so as to double-collect CVDs". 
1047 Similarly, China submits, the USDOC has recognized that the deduction of safeguard duties from 
the export price in anti-dumping investigations would re sult in an unwarranted double remedy.  China cites to 
the USDOC determination in Steel Wire Rod from Korea  and the decision of the Federal Court of Appeals, 
Federal Circuit, in Wheatland Tube Co. v United States .  (China first written submission, footnote 332). 
1048 Id., para. 409; second written submission, paras. 21 4 and 227; response to Panel question 74 (first 
meeting).  WT/DS379/R  
 Page 251 
 
 
 Products from the Netherlands )1049, that using a producer's unsubsidized costs to determine 
constructed normal value would have  the effect of offsetting the subsidies through both anti-dumping 
and countervailing duties, and that in numerous ot her anti-dumping investigations of imports from 
market economy countries, the USDOC has allowe d respondents to deduct subsidies from their 
reported costs of production, where these reported co sts did not accurately reflect the cost-reducing 
effects of the subsidies ( Certain Pasta from Italy, Live Swine from Canada , Red Raspberries from 
Canada ).1050  China argues that in determining the cons tructed normal value based on costs that do not 
reflect the subsidies found to be received by  the producer, the USDOC's NME methodology is 
indistinguishable from adding subsidies to the producer's costs in a market economy investigation, or from using the producer's reported costs when those co sts do not reflect the subsidies received by the 
producer.
1051 
14.155  China submits that by, on the one hand, maintain ing a consistent set of  policies and practices 
to avoid the imposition of a double remedy when establishing margins of dumping for producers from market economy countries, without precondition a nd without imposing any evidentiary burden on 
respondents (i.e., "unconditionally") and, on the other hand, refusing to avoid imposing double 
remedies and/or requiring that respondents dem onstrate the existence of a double remedy (e.g. by 
showing that domestic subsidies pass through, pro rata , to export prices) when imports from China 
were concerned, the United States acted incons istently with the MFN obligation contained in 
Article I:1 of the GATT 1994.  Referring to the terms of that provision, China argues that: 
(i) anti-dumping and countervailing duties are "charges of any kind imposed on 
or in connection with importation"; 
(ii) the methods by which the United States calculates such duties (including its 
policies and practices to avoid the imposition of a double remedy, as well as the assumptions and burdens of proofs a pplied in evaluating the issue) are 
either "methods of levying such charges", "rules or formalities in connection with importation", or both
1052; 
(iii) the USDOC's policy of avoiding the imposition of a double remedy is an 
"advantage, favour [or] privilege" that  the United States extends to these 
imports.1053 
14.156  In response to an argument of the United St ates, China argues that it does not need to 
establish that products from China are disadvantaged as compared to "like products" from other Members in order to succeed in its "as applied" claims  under Article I:1.  China submits in this respect 
that prior WTO panels have recognized that a vi olation of Article I:1 occurs when an importing 
Member applies a discriminatory standard that rela tes only to the origin of the product at issue, and 
not to its characteristics, without having to  demonstrate the presence of "like products".
1054 
                                                      
1049 China second written submission, paras. 214 and 227 ; response to Panel question 74 (first meeting). 
1050 China response to Panel question 74 (first meeting). 
1051 China response to Panel question 26 (second meeting). 
1052 China cites to the GATT panel in US – MFN Footwear , which considered that "the rules and 
formalities applicable to countervailing duties [...] ar e rules and formalities imposed in connection with 
importation, within the meaning of Article I:1".  (China first written submission, footnote 337, citing to GATT Panel Report on US – MFN Footwear , para. 6.8). 
1053 See, generally, China first written submission, paras. 413-427; second written submission, 
paras. 271-277. 
1054 China response to Panel question 94, citing to Panel Reports on US – Certain EC Products , 
para. 6.54 and Indonesia – Autos , para. 14.147. WT/DS379/R 
Page 252  
 
 14.157  Finally, China rejects the United States' argume nt that the difference in treatment could be 
justified by its Protocol of Accession since nothi ng in the Protocol allows Members to impose double 
remedies.
1055  Likewise, China rejects the suggestion th at it is seeking "special treatment" from the 
United States with respect to the concurrent imposition of anti- dumping and countervailing duties, 
indicating that it is only asking the United States to  apply to imports from China the same standard 
that it has applied to imports from other Members in other circumstances in which the problem of 
double remedies has had the potential to arise.1056 
(ii) United States 
14.158  The United States argues that the USDOC treats imports from China no differently than it 
treats imports from other Members with respect to it s refusal to deduct subsidies from the export price 
and its refusal to add subsidies to costs of produc tion.  The United States indicates that the USDOC 
does not make such adjustments in investiga tions against Chinese products, including in the 
investigations at issue.1057  The United States considers that China has not demonstrated otherwise, 
which in its view may explain why China formul ates its claim under Article I:1 more generally as 
pertaining to the United States' "avoidance of the imposition of a double remedy".  In any case, the 
United States argues, referring to China's argu ment that the USDOC's NME methodology has the 
same effect as adding subsidies to a producer's co st of production, having the "same effect" is 
different from actually making the adjustment at issue.1058 
14.159  The United States makes the following comment s with respect to the specific USDOC 
determinations and U.S. court cases cited by China in support of its assertion that the USDOC avoids 
imposing double remedies in anti-dumping investigati ons on imports from market economies:  First, 
the United States considers that the analogy draw n by China between the present dispute and the 
USDOC determinations in LEU from France , Tool Steel from Germany  and Certain Steel Products 
from the Netherlands  is inapposite, as these determinations were not based on subsidies being 
captured by the normal value, but involved the lite ral counting of countervailing duties twice – once 
in the actual levying of countervailing duties and once by either adding the countervailing duties to 
cost or subtracting countervailing duties from export price.1059  The United States argues that these 
mathematical certainties cannot be compared to China's theoretical arguments about overlapping 
economic distortions or overlapping rationales.  Specifically, with respect to LEU from France , the 
United States explains that the USDOC considered that subtracting the CVDs  from the export price 
had exactly the same effect as would have adding the same CVDs to the dumping margin after it had 
been calculated. Therefore, the requested adju stment would have literally collected the CVDs 
twice.1060  In Tool Steel from Germany , the USDOC refused to add subsidies to the normal value.  Had 
it added them, the dumping margin would have automatically increased by the amount of the 
countervailable subsidies found in the compani on countervailing duty case, thus indisputably 
collecting countervailing duties twice.  The Unite d States argues that the crux of the USDOC's 
determination in that case was that subsidies ar e not costs; the USDOC's determination does not 
contain any discussion of the issue of double remedies.1061  With respect to Certain Steel from the 
Netherlands , the United States submits that the USDOC's  determination was not based on assertions 
about the alleged effects of subsidies on normal va lue, but was simply an instance in which the 
                                                      
1055 China second written submission, paras. 211 and 2 74; response to Panel questions 77 and 85 (first 
meeting); oral statement at the sec ond meeting of the Panel, para. 70. 
1056 China second written submission, para. 275. 
1057 United States second written submission, paras. 219-220. 
1058 United States first written submission, footnote 597. 
1059 See, e.g.,  United States comments on China's response to Panel question 33. 
1060 United States second written submission, footnote 350; response to Panel question 79; comments 
on China's response to Panel question 32 (second meeting). 
1061 United States second written submission, footnote 350; response to Panel question 79 (first 
meeting).  WT/DS379/R  
 Page 253 
 
 
 USDOC reduced the respondent's cost of capital by the amount of capital received from the 
government as a grant.  Thus, the producer's ac tual cost of capital was the reduced amount.1062  
Further, the United States argues that the USDOC de termination cited to by China is a preliminary 
determination – the anti-dumping a nd countervailing duty investigations  were terminated before the 
USDOC issued a final determination – and therefor e cannot be considered a final opinion on the 
matter.1063 
14.160  The United States finally notes that in Live Swine from Canada , the USDOC included 
government grants as offsets to respondents' reporte d general and administrative (G&A) costs.  The 
United States argues that rather than being d esigned to "deduct subsidies from cost" to avoid 
offsetting any advantage from subsidization, th is approach reflects the USDOC's long-standing 
practice of treating as an offset to cost any income that is received as a result of producing the subject 
merchandise, irrespective of source, and that is  duly recorded in the respondents' books.  The 
United States adds that the USDOC routinely ap plies similar offsets to both G&A expenses and 
financial expenses and that this is merely an aspect  of the calculation of the dumping margin, rather 
than a tool to "deduct subsidies from cost" to avoi d offsetting any advantage from subsidization, as is 
evidenced by the fact that the US DOC applies such offsets independently of whether there is a 
parallel countervailing duty investiga tion or, in event of such parallel investigation, even if this 
investigation does not result in the imposition of countervailing duties.1064 
14.161  The United States also notes that a number of WTO rules explicitly recognize that, in the 
context of anti-dumping and countervailing duty proceedings, a Member may – and in some 
circumstances must – accord differential treatme nt to products from certain Members.  Such 
differential treatment takes the form , for example, of the level of duties, the method of calculating 
normal value in anti-dumping investigations, or  the method of determining the benefit in 
countervailing duty investigations.1065  The United States argues that given the explicit authorization 
for such actions, where they conform to the require ments of these other WTO provisions, they are not 
inconsistent with Article I:1 of the GATT 1994, as any other approach would render every application 
of certain provisions of the covered agreements  or of China's Protocol of Accession an MFN 
violation.  The United States also submits that, because of the nature of China's economy, investigations involving Chinese products pose methodological challenges which do not arise with respect to market economies, and which require i nvestigating authorities to develop mechanisms to 
allow them to make the necessary determinations, as recognized in China's Protocol of Accession.
1066  
In any case, the United States argues that Article I: 1 is inapposite because of the explicit recognition 
of Members' right to use the NME methodology in r espect of China in its Protocol of Accession, with 
no corresponding prohibition on the concurrent a pplication of countervailing duties, which the 
United States reads as reflecting the judgment of Members that no double remedy results from the 
application of that methodology in conjunction with countervailing duties.1067  I n  s u m ,  f o r  t h e  
United States, China's MFN complaint focuses on th e application of the NME methodology, yet the 
                                                      
1062 United States second written submission, footnote 350. 
1063 United States comments on China's respons e to Panel question 33 (second meeting). 
1064 Id.  The United States notes that Live Swine from Canada  is an example of an investigation where 
the USDOC applied such an  offset to costs even where the fina l determination in the corresponding 
countervailing duty investigation was negative. 
1065 The United States refers the following provisions  as examples:  Articles VI:2 and VI:3 of the 
GATT 1994; the second Ad Note to Article VI:1 of the GATT 1994; Ar ticle 2.2 of the AD Agreement;  Article 
14(d) of the SCM Agreement; Article 27.10 of the SCM Agreement; paragraphs 15 (a) and (b) of China's 
Protocol of Accession. 
1066 United States first written submission, paras. 438-442. 
1067 Id., paras. 443-444. WT/DS379/R 
Page 254  
 
 application of that methodology is expressly author ized by paragraph 15(a) of China's Protocol of 
Accession and hence, does not violate Article I:1 of the GATT 1994.
1068 
14.162  Finally, the United States considers that Chin a has failed to substantiate its claim of 
inconsistency with Article I:1 of the GATT because it does not identify the "like products" to which 
the alleged advantage is applied.1069 
(b) Main arguments of the Third Parties 
(i) Canada  
14.163  Canada considers that neither the use of th e NME methodology nor the concurrent imposition 
of anti-dumping duties calculated using that methodology and of countervailing duties on Chinese products is inconsistent with Artic le I:1 of the GATT 1994.  Like the United States, Canada notes that 
the calculation of the normal value using the NME methodology is specifically allowed under China's 
Protocol of Accession.
1070 
(c) Assessment by the Panel 
14.164   We now consider whether, notwithstanding ou r findings above that China has not established 
the inconsistency of the determinations at issue with Article VI:3 of the GATT 1994 and Articles 10, 
12.1, 12.8, 19.3, 19.4 and 32.1 of the SCM Ag reement, those determinations contravened the 
obligations of the United States under Article I:1 of the GATT.1071 
14.165  Article I:1 of the GATT 1994 embodies the "Most-Favoured Nation" (MFN) principle, "a 
cornerstone of the GATT and [...] one of the pillars of the WTO trading system".1072  The object and 
purpose of Article I:1 is, inter alia , "to prohibit discrimination among li ke products originating in or 
destined for different countries".1073  Article I:1 of the GATT provides as follows: 
"With respect to customs duties and charges of any kind imposed on or in connection 
with importation or exportation or imposed on the international transfer of payments 
for imports or exports, and with respect to the method of levying such duties and 
charges, and with respect to all rules a nd formalities in connection with importation 
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of 
Article III, any advantage, favour, privilege or immunity granted by any contracting 
party to any product originating in or destin ed for any other country shall be accorded 
immediately and unconditionally to the like pr oduct originating in or destined for the 
territories of all other contracting parties". 
                                                      
1068 United States opening statement at the first meeting of the Panel, para. 59; second written 
submission, para. 219. 
1069 United States first written submission, para. 431.  The United States notes in this respect that the 
panel in US – MFN Footwear  did not consider Brazil's "as applied" claims in that case since Brazil had not 
established the "like products" condition.  (United States  response to Panel question 94 (first meeting), citing to 
GATT Panel Report on US – MFN Footwear , paras. 6.11-6.12). 
1070 Canada third-party oral statement, paras. 29-30. 
1071 China claims a violation of Article I:1 of the GA TT 1994 "separate and apart" from the violations 
of the covered agreements discussed above.  (China first written submission, para. 403). 
1072 Appellate Body Report on Canada – Autos , para. 69. 
1073 Id., para. 84.  WT/DS379/R  
 Page 255 
 
 
 14.166  By its terms, three elements must be demonstrated  to establish a violation of Article I:1:  there 
must be an "advantage ", (of the type covered by that provisi on) which is not accorded to all "like 
products " of all WTO Members, "unconditionally ".1074 
14.167  Thus, to succeed in its Article I:1 claim, China n eeds to establish, first, that the United States 
grants an "advantage, favour, privilege or immuni ty" of the type covered by Article I:1 of the 
GATT 1994 to products originating in other Members which it did not accord to the investigated 
products from China in the investigations at issu e.  The scope of Article I:1 of the GATT 1994 has 
been interpreted broadly by GATT panels as well as  by the Appellate Body and WTO panels.  Of 
particular relevance to the present dispute, the GATT panel in US – MFN Footwear  considered that 
rules and formalities applicable in the context of  countervailing duty investigations were "rules and 
formalities in connection with im portation", within the meaning of Article I:1.  At issue in US − MFN 
Footwear  were certain procedural advantages pertai ning to the revocation of countervailing duty 
orders conferred upon certain cat egories of imported products.1075  Before us, the United States does 
not contest that advantages pertaining to the admini stration of countervailing duty laws fall within the 
scope of Article I:1 of the GATT 1994, and we see no reason to depart from the approach adopted by 
the US − MFN Footwear GATT panel.  Further, for the same reasons, we determine that rules and 
formalities applicable in the context of anti-dumpi ng investigations also fall within the scope of 
Article I:1 of the GATT 1994. 
14.168  In the present dispute, China identifies as th e relevant "advantage" under Article I:1 the 
USDOC "policies and practices to avoid the impos ition of a double remedy for the same act of 
subsidisation" whenever "there is a risk that th e calculation of an anti-dumping margin could result in 
the imposition of [such] a double remedy".1076  China argues that it is likewise an "advantage, favour 
[or] privilege" to permit investigated market econo my producers to avoid the potential imposition of a 
double remedy without any requirement to produce "evidence" concerning the existence or extent of a 
double remedy in general, or in a particular instance.1077  China argues that in the four sets of anti-
dumping and countervailing duty investigations at issue (i) the USDOC did not take any steps to avoid the imposition of double remedies and that it do es not in any event have the authority to take 
such steps, or (ii) alternatively, that the US DOC imposed a condition – the presentation of evidence 
demonstrating the existence of a double remedy and in  particular, evidence that the subsidies at issue 
had the effect of reducing the export price – upon the avoidance of a double remedy for the same 
alleged acts of subsidization that it does not impose upon products originating in the territory of other 
Members.
1078 
14.169  As support for its argument, China refers to a number of USDOC determinations (and U.S. 
court decisions reviewing these determinations) in which the USDOC made or refused to make 
certain adjustments.  China argues that in th ese determinations in which a potential double remedy 
arose, the USDOC did not consider the existence of a double remedy to be "theoretical" or to require 
any evidence or presumptions about the effects of subsidies on a producer's costs or prices.1079  
Rather, China argues, in each of these circum stances, the USDOC took all necessary steps to 
                                                      
1074 Panel Report on Indonesia – Autos , para. 14.138, citing to Appellate Body Report on EC – 
Bananas III . 
1075 GATT Panel Report, US – MFN Footwear , para. 6.9. 
1076 For instance, in its first written submission, China states:  "In every circumstance in which the issue 
has arisen the United States has consistently taken th e position that it will avoid the imposition of a double 
remedy through the manner in which it calculates anti-dumping and countervailing duties".  (China first written 
submission, para. 404).  See also China first written submission, para. 413. 
1077 Id., para. 420.  (emphasis added). 
1078 Id., para. 427. 
1079 For some of the prior determinations, China also argues that with respect to the imposition of 
double remedies, making (or not making) the adjustments at  issue "has the same eff ect" as the calculation of a 
dumping margin under the NME methodology. WT/DS379/R 
Page 256  
 
 investigate and ensure that the manner in whic h it calculated anti-dumping duties did not have the 
effect of offsetting subsidies that it simultaneous ly offset through the imposition of countervailing 
duties.
1080 
14.170  The first step in our analysis is to examin e the USDOC determinations and court decisions 
cited by China to determine whethe r they support these allegations.1081 
14.171  First, China cites to the USDOC determination in LEU from France , an administrative review 
in an anti-dumping investigation.  In LEU from France , U.S. interested parties requested the USDOC, 
in calculating the margin of dumping, to deduct from the export price an amount corresponding to countervailing duties that had already been imposed  on the same product.  The USDOC, consistent 
with its established practice, rejected this requ est.  The USDOC reasoned th at (i) countervailing duties 
are neither "import duties" nor "selling expenses" unde r the U.S. Tariff Act, such that the Act does not 
require that they be deducted from the export price,  and (ii) that deducting countervailing duties from 
the export price "effectively would collect the CVDs a second time".  The USDOC added in this 
respect that "in the most general terms, the US Tariff Act stands for the proposition that dumping 
margins should not be calculated so as to double-collect CVDs".
1082  We note that in Steel Wire Rod 
from Korea , also cited by China, the USDOC examined the similar question of whether U.S. anti-
dumping law requires the deduction of safeguard duti es from the export price, and reached the same 
conclusion, i.e., that it does not.1083 
14.172  China also refers us to Tool Steel from Germany , a 1986 USDOC anti-dumping 
determination.1084  In this determination, the USDOC rejected  a request of U.S. interested parties that 
in computing the cost of production and constructed value of an investigated producer, it include an 
amount for subsidies which the producer had received from the German federal and state 
governments.  The USDOC took the position that it woul d be inappropriate to add the subsidies to the 
producer's actual expenses, in other words, that it was appropriate to calculate the costs of production 
on the basis of producers' reported costs of produc tion, even if those costs reflected the subsidies 
received.  The USDOC's determination makes no refe rence to the issue of double remedy:  the sole 
rationale provided for the USDOC's decision is that  "the purpose of [U.S. anti-dumping law] is to 
determine whether a company is selling at less than  the cost of production, based on actual costs".  
The USDOC determination in Tool Steel  was appealed to the U.S. Court of International Trade ( Al 
                                                      
1080 China second written submission para. 215. 
1081 In certain instances, China submitted only excerpts from the relevant determinations and we had to 
retrieve the full text of the relevant decisions in order to properly understand the context in which the USDOC 
decisions or statements cited by China were made.  We re call that China bears the burd en of proof in respect of 
factual assertions it makes, and therefor e that it is, in the first place, Chin a's responsibility to  provide the Panel 
with sufficient explanations and evidence to allo w the Panel to make the required factual findings. 
1082 The USDOC seems to have derived this "rationale" from the amendments the U.S. Congress made 
to the Tariff Act to prevent the imposition of double remedi es with respect to export su bsidies in the context of 
concurrent anti-dumping and countervailing duty investigations.  The USDOC also noted prior U.S. court 
decisions that relied on the same rationale for not deducting countervailing duties from U.S. prices in calculating margins of dumping. 
1083 Stainless Steel Wire Rod from the Republic of Korea:  Final Results of Antidumping Duty 
Administrative Review  ("Steel Wire Rod from Korea"), Exhibit CHI-125, p. 19160.  The Court of Appeals for 
the Federal Circuit upheld the USDOC's interpretation of the statute as not requiring the deduction of safeguard 
duties from the export price in Wheatland Tube Co. v United States .  In its findings, the Court, inter alia , finds 
"reasonable" the USDOC's conclusion that deducting safeguard duties from the export price would improperly lead it to collect a double remedy.  ( Wheatland Tube Company and Allied Rube & Counduit Corporation. v 
United States ("Wheatland Tube"), Exhibit CHI-126, p. 1366).  China's discussion of these two decisions is 
limited to a sentence in footnote 332 of its first written submission. 
1084 Tool Steel From the Federal Republic of Ge rmany; Correction to Early Determination of 
Antidumping Duty , Exhibit CHI-127, pp. 10071-10072.  WT/DS379/R  
 Page 257 
 
 
 Tech Specialty Steel Corp. v. US )1085, which upheld it.  The Court found that the USDOC's 
interpretation of the U.S. Tariff Act was not unr easonable:  the Court noted that administrative 
practice and judicial precedent were inconsistent on th e issue but ultimately, it considered that to add 
subsidies to a producer's costs of production woul d improperly blur the distinction between anti-
dumping and countervailing duty remedies by allo wing the USDOC to counteract subsidization 
without complying with the requirement s of the countervailing duty statute.1086 
14.173  China also cites to the USDOC's  preliminary determination in Certain Steel Products from 
the Netherlands .1087  In this determination, "to avoid possible double-counting", the USDOC 
subtracted from a respondent's production cost s the amount of subsidies received from the 
government in the form of a grant, which had been  preliminarily determined to be a subsidy in a 
parallel countervailing duty case.  The USDOC added that  it considered this result to be consistent 
with past practice and with a prior ruling of the U.S. Court of International Trade (in Connors Steel) , 
but provided no further explanations in this resp ect.  The USDOC invited comments on its treatment 
of this issue, but ultimately, the investigations were rescinded prior to the issuance of the USDOC's 
final determination.1088  Finally, China refers to the USDOC determinations in Certain Pasta from 
Italy, Live Swine from Canada , and Red Raspberries from Canada1089, as examples of instances in 
which the USDOC allowed investigated producers to reduce their reported costs of production by the 
amount of subsidies received.  The USDOC's de terminations in these three cases contain no 
discussion of the issue of double remedies; rather, the adjustments were seemingly made in application of the USDOC's normal practice of allowing, as offsets to producers' G&A costs, deduction of subsidies "attributable directly" to the production of the subject merchandise. 
14.174  China characterizes these different cases as all pertaining to a single situation or issue, the 
avoidance of a double remedy in respect  of a particular act of subsidiza tion.  We disagree.  We see the 
determinations cited by China as pertaining to three distinct factual situations, and we do not consider 
that they stand for the proposition that as a factual ma tter the United States takes all necessary steps to 
avoid the imposition of double remedies in situations  in which such double remedies are likely to 
arise, or that it maintains a policy or practice of taking such steps. 
14.175  The first situation, that in LEU from France a nd Steel Wire Rod from Korea, pertains to the 
adjustments that should be made to the export price to arrive at an ex-factory price as a basis from 
which to calculate a dumping margin.  Specifically , in these investigations, the USDOC considered 
whether other trade remedies (countervailing duties and safeguards, respectively) that already applied 
to the product at issue were normal "customs duti es" (which would be deducted from the export price 
in the course of the ex-factory calculation) or othe rwise were relevant to the determination of the 
export price.  The USDOC's conclusion was that making a deduction for these remedies would not be 
appropriate as it would result directly and literally in collecting those other trade remedies twice.  That 
these past investigations do not pertain at all to th e issue of double remedies raised by China in this 
claim is confirmed by the fact that the USDOC applied the same approach to the deduction of 
                                                     
 
1085 Al Tech Specialty Steel Corp. v. US  ("Al Tech"), 651 F. Supp. 1421 (Ct. Int’l Trade, 1986) (no 
exhibit provided by China). 
1086 U.S. interested parties had argued that not taking subsidies into account would allow foreign 
producers to evade anti-dumping disciplines. 
1087 Preliminary Determination of Sales Not Less Than Fair Value:  Certain Steel Products from the 
Netherlands , Exhibit CHI-156. 
1088 Certain Steel Products From Belgium, France, the Federal Republic of Germany, Italy, 
Luxembourg, the Netherlands and the United Kingdom; Termination of Countervailing Duty and Antidumping 
Investigations , Exhibit US-177, p. 49059. 
1089 Notice of Final Determination of Sales at Less Than Fair Value:  Certain Pasta from Italy , Exhibit 
CHI-157; Issues and Decision Memorandum for the Final De termination in the Antiduping Duty Investigation 
of Live Swine from Canada , Exhibit CHI-158; and Red Raspberries from Canada; Final Determination of Sales 
at less Than Fair Value , Exhibit CHI-159. WT/DS379/R 
Page 258  
 
 safeguard duties as it did with respect to countervail ing duties.  Instead, the determinations cited by 
China stand for the narrower proposition that in  performing dumping calculations, the USDOC does 
not deduct existing countervailing duties or safeguard duties from export price.  Further, we note that 
China does not allege that the USDOC made de ductions for existing duties in the anti-dumping 
investigations at issue in this dispute and thus treated imports from China differently than it treats 
imports from market economies. 
14.176  The other determinations cited by China pert ain to the question of the basis upon which the 
USDOC calculates costs of production in anti-dumpi ng investigations on market economy imports:  
The concern of the Court in Al Tech and – to the extent that it can be discerned from its determination 
– that of USDOC in Tool Steel from Germany , seems to have been primarily that a producer's actual 
costs  should serve as the basis of dumping calculations – even if they reflect subsidization – and that 
any subsidization allegatio ns should be addressed not by an anti-du mping investigation but rather by a 
countervailing duty investigation.  Not only is the issue of double remedy per se  not raised, but the 
Court's concerns about the nature of the remedi es at issue and the need to avoid using the anti-
dumping statute to address questions of subsidization would be equally applicable in the absence of a 
parallel countervailing duty investigation; in fact, there is no reference in either decision to the 
USDOC conducting a concurrent countervailing duty inv estigation in that case, or to a countervailing 
duty measure already being in place. 
14.177  The remaining determinations address the same  issue, on the basis of the same underlying 
premise (the calculation of the normal value on the basis of actual costs), as in the USDOC determination in Tool Steel  and the court decision in Al Tech , but pertain to a different factual 
situation, i.e., where a producer's reported costs of  production do not reflect the subsidies that it has 
received.  The only case in which avoidance of a double remedy was mentioned by the USDOC, Certain Steel Products from the Netherlands , is a preliminary determina tion and never resulted in the 
imposition of a measure or collection of any duties.
1090  In the other cases (in which measures were 
imposed) referred to by China in which deductions  of subsidies from costs were allowed, those 
allowances were treated as "offsets", a type of ad justment used in certain instances in U.S. anti-
dumping calculations.  China has not demonstrated that  this type of adjustment, pertaining to a known 
amount of subsidy received by an investigated firm , is related to the question of avoidance of double 
remedies.  Hence, we conclude from these determinations that where the USDOC has allowed the deduction of subsidies received by  a firm from its reported costs of  production, and imposed measures 
on the basis of a methodology that allowed such de ductions, it did so on another basis than to avoid 
the imposition of a double remedy. 
14.178  In sum, the USDOC determina tions and court decisions in Tool Steel from Germany /Al Tech , 
Certain  Steel Products from the Netherlands , Certain Pasta from Italy,  Live Swine from Canada , and 
Red Raspberries from Canada  are all instances of application, in two different factual circumstances, 
of a USDOC policy to use a producer's actual  costs in the calculation of costs of production and of 
constructed normal values in anti-dumping investig ations of market economy imports.  A similar 
situation does not present itself in the context of  USDOC anti-dumping investigations involving 
imports from China:  For imports from China, the USDOC uses surrogate costs which, by definition, 
are not the producer's actual  costs.  Hence, the issue of adjusting reported  costs to ensure that they 
represent actual  costs simply does not arise.  Further, the USDOC methodology follows, in this 
respect, the second Ad Note to Article VI:1 of the GATT 1994 (incorporated by reference in the AD 
Agreement through Article 2.7) and Section 15(a) of  China's Protocol of Accession, which recognize 
that market-economy and NME imports are in diffe rent factual situations  and for this reason, 
explicitly allow the use of different methodologies – based on surrogate costs and prices – to calculate 
dumping margins in respect of NME imports. 
                                                     
 
1090 See, e.g.,  Exhibit CHI-156, p.3.  WT/DS379/R  
 Page 259 
 
 
 14.179  For the foregoing reasons, we consider that none  of the cases cited by China establishes as a 
factual matter that the USDOC takes all necessary step s to avoid the risk of imposing a double remedy 
in respect of a single act of subsidization whenever  such a risk exists, or that the United States 
maintains a policy or practice of taking such steps.   Rather, as explained above, these determinations 
establish narrower points:  that in calculating dumping margins:  (i) the USDOC does not deduct 
countervailing duties or safeguard duties from the export price; and (ii) in the case of market economy 
investigations, the USDOC constructs normal value and calculates costs of production on the basis of 
a producer's actual  costs of production. 
14.180  Further, even if the determinations cited by Ch ina were considered rele vant in establishing the 
existence of the policy or practice alleged by China, it  is significant that in all of the instances cited by 
China, the existence of double remedies was a matte r of mathematical equivalency.  In those 
investigations, there was no question as to the amounts of subsidies received by the investigated firms.  That is, there was clear, verified record evidence of those amounts.  By contrast, while we have found 
above that the use of a surrogate value in principle reflects the use of unsubsidized costs, we also have 
indicated that the precise extent to which the NME calculation captures any subsidization is a factual 
issue which it could be difficult to ascertain.  Fo r these reasons, we consider misleading China's 
characterization of one aspect of the alleged "advantage" at issue as being that the USDOC does not, in the case of investigations on imports from market  economies, require any evidence of the existence 
of a double remedy. 
14.181  For the foregoing reasons, we consider that China fails to establish as a factual matter that, in 
the context of certain anti-dumping investigations  of market economy imports, the USDOC has taken 
steps to ensure that it does not offset, through  the calculation of anti-dumping duties, the same 
subsidies that it simultaneously offsets through th e imposition of countervailing duties, or that the 
USDOC has done so without requiring evidence of the existence of a double remedy.  As a consequence, China also fails to establish that the USDOC maintains a consistent "policy" or 
"practice" of taking all necessary steps to avoid the imposition of double remedies in circumstances in 
which there is a risk that one would arise.  T hus, we find that China has failed to establish the 
existence of the "advantage, favour, pr ivilege, or immunity" which it alleges.
1091 
14.182  The foregoing reasons suffice, in our view, to  find that China has not established that the 
United States acted inconsistently with the MFN obligation contained in Article I:1 of the GATT 1994 
when, as a result of the investigations at issue, it concurrently imposed anti-dumping duties calculated 
under the U.S. NME methodology and countervailing duties.1092 
                                                      
1091 In addition, we note that the "advantage" alleged by China is not the specific course of action (e.g. 
adjustment or non-adjustment) taken by the USDOC in  a specific instance.  That  is, China is asserting 
discrimination in terms of the effects  of certain behaviours (making adjustment "x" in anti-dumping calculation 
results in a double remedy), rather than asserting discrimination in respect of the behaviours themselves 
(USDOC makes adjustment "x" in market-economy calculations but not in NME calculations).  In this sense, China's claim would seem to depart from the typical claim of violation under Article I:1 of the GATT.  In light 
of our findings above, we need not determine whether the terms of Article I:1 of the GATT 1994 are broad 
enough to allow a claim of this nature. 
1092 Given these findings, we do not consider whether China had to demonstrate discrimination as 
between "like products" in the context of its "as applied" claims under Article I:1 of the GATT 1994. WT/DS379/R 
Page 260  
 
 XV. CHINA'S CLAIM PERTAINING TO THE USDOC'S FAILURE TO PROVIDE AT 
LEAST 30 DAYS TO REPLY TO  THE NEW ALLEGATIONS AND 
SUPPLEMENTAL QUESTIONNAIRES 
A. C
LAIM OF CHINA  
15.1 China claims that the USDOC failed to give Chin a and other interested parties at least 30 days 
to respond to the "supplemental" and "new allega tions" questionnaires issued by the USDOC in the 
four countervailing duty investigations at issue, contrary to Article 12.1.1 of the SCM Agreement.1093 
B. MAIN ARGUMENTS OF THE PARTIES  
1. China 
15.2 China submits that the term "questionnaires" in  Article 12.1.1 of the SCM Agreement refers 
not only to the first questionnaire issued in a countervailing duty investigation, but to "all" 
questionnaires, without qualification.  Therefore, China claims, the United St ates acted inconsistently 
with this provision by failing to give China and inv estigated producers at least 30 days to reply to the 
"supplemental" and "new allegations" questionnaires i ssued by the USDOC in the four investigations 
at issue.1094 
15.3 China considers its interpretation of Article 12. 1.1 to be the only one consistent with the 
ordinary meaning of that provision, read in the c ontext of Article 12 as a whole.  China submits that 
the ordinary meaning of the word "questionnaire" is "[a] formulated serie s of questions by which 
information is sought from a selected group, usually  for statistical analysis; a document containing 
these", and asserts that both the "supplemental"  and "new allegations" questionnaires qualify as 
"questionnaires" under the ordinary meaning of this term.1095  China adds that the term 
"questionnaires" in the plural form in Article 12. 1.1 should be given its ordinary meaning.  If the 
drafters had intended to refer to the issuance of a single questionnaire, they would have so indicated 
explicitly by using phrases such as "a questionnaire"  or "the initial questionnaire".  China therefore 
contends that the minimum 30 days for reply appli es to all questionnaires used in an investigation.1096  
China further considers that read in context, Ar ticle 12.1.1 gives content to the "ample opportunity" 
requirement in Article 12.1 by requiring that interest ed parties be given at least 30 days to reply to 
questionnaires, and that given that it has no caveats, this entitlement applies to all questionnaires used 
in a countervailing duty investigation.  This right , China argues, constitutes one of the due process 
rights in Article 12 of the SCM Agreement that the Appellate Body has held "are enjoyed by 
interested parties throug hout an investigation".1097 
15.4 On this basis, China submits that the reasoning of the unappealed panel report in Egypt – Steel 
Rebar , which concluded that in anti-dumping investiga tions the only questionnaire to which the 30-
                                                      
1093 Paragraph B.1(g)(ii) of the "as applied" claims  in China request for establishment of the Panel; 
China first written submission, para. 468 (m);  second written submission, para. 315 (m). 
1094 China first written submission, paras. 444 and 447. 
1095 Id., para. 445.  China argues that "questionnaires" in Article 12.1.1 should be interpreted in 
accordance with this ordinary meaning su ch that if a document represents "a formulated series of questions by 
which information is sought", then it is a questionnaire, and if it is used in a countervailing duty investigation, 
then the 30-day requirement under Article 12.1.1 must be provided.  China submits that the inquiry under 
Article 12.1.1 is whether (i ) the document received by an interested party is a questionnaire; and (ii) whether 
this questionnaire was used in a countervailing duty inves tigation.  (China response to Panel question 107 (first 
meeting) and question 36 (second meeting)). 
1096 China first written submission, para. 447. 
1097 Id., paras. 448-449, citing to Appellate Body Report on Mexico – Anti Dumping Measures on Rice , 
para. 292.  WT/DS379/R  
 Page 261 
 
 
 day requirement applies is the initial questionnaire,  is not persuasive and therefore should not be 
followed in the present dispute.  More specifically, China argues, inter alia , that that panel did not 
have the benefit of the Appellate Body's decisi ons which collectively have emphasized that the 
procedural and due process obliga tions under Article 12 apply "through out an investigation", and that 
the panel's interpretation disregarde d the ordinary meaning of the term  "questionnaires", as well as the 
balance that the AD and SCM Agreements seek to achieve.1098 
15.5 According to China, its interpretation of Ar ticle 12.1.1 of the SCM Agreement is also 
consistent with the balance that Article 12 of the SCM Agreement strikes between, on the one hand, 
the due process rights of interested parties and, on th e other hand, the right of investigating authorities 
to proceed expeditiously.  A different interpretati on of Article 12.1.1, Chin a alleges, would give 
investigating authorities an "unfettered discretion" as, inter alia , in the name of completing their 
investigations expeditiously, they could issue any number of extensive questionnaires with short 
periods for reply, for example, the far less than 30 days granted by the USDOC for replies to the 
various supplemental and new allegatio ns questionnaires issued in the investigations at issue in the 
present dispute.1099  In China's view, the 30-day period to respond to all questionnaires used in an 
investigation ensures that investigating authoriti es comply with their deadlines for completing the 
investigations without imposing unrealistic and inappropriate burdens on questionnaire recipients.1100 
15.6 China submits that even accepting  arguendo  that the 30-day requirement in Article 12.1.1 
applies only to the "full initial questionnaire", the US DOC failed to give at le ast 30 days to respond to 
the "first" new allegations questionnaires issued in the investigations.  China argues that the "first" 
new allegation questionnaires issued by the USDOC in the investigations at issue qualify as the first 
questionnaire in the newly initiated "investigations " with respect to new subsidy allegations.  
According to China, the USDOC opens up an entirel y new avenue of inquiry when it initiates an 
investigation into new subsidy allegations, and the questionnaires it uses neither supplement a 
previous inquiry nor are related in any way to prio r questionnaires.  China explains that therefore 
"new allegations questionnair es" are indistinguishable fro m "full initial questionnaires".1101  C h i n a  
adds that the similarity between those questionnaires li es in the nature of the questions and the level of 
detail required from respondents.1102 
2. United States 
15.7 The United States considers that there is no obligation under Article 12.1.1 of the SCM 
Agreement to provide the minimum 30-day period for reply to supplemental and new allegations 
                                                      
1098 China first written submission, para. 451; response to Panel question 107 (first meeting). 
1099 China first written submission, paras. 450 and 452 .  China points, in particular, to the LWS and 
OTR countervailing duty investigations, where the new allegations questionnaires issued by the USDOC 
contained questions about twelve and ten new subsidy programmes, respectively. As regards supplemental questionnaires, China indicates that these were not only quite extensive but also did not include mere "follow-
up" inquiries.  (China first written submission, paras. 453-456). 
1100 Id., paras. 450.  According to China, providing the minimum 30-day period for reply to all 
questionnaires would not prevent investigating authorities from finishing their investigations within the 
timeframes allowed under the SCM Agreement, but rather, doing so would ensure that investigating authorities 
consider carefully the information th ey require and draft their questionnaires accordingly.  For instance, if 
allowing 30 days for reply to new allegations questionnaires would impede the USDOC's completion of its 
investigations, the United States should reconsider its  policy of allowing petitioners to file new subsidy 
allegations during the course of the investigations.  (Id.; response to Panel question 36 (second meeting)). 
1101 For example, China submits that in virtually every case, the new allegations questionnaires 
included the so called Appendix 1, i.e., a list of "Stand ard Questions", which respondents must fill out with 
respect to the subsidy programmes initiated at the outset of the investigation.  (China first written submission, footnote 364; second written submission, paras. 311-313). 
1102 China response to Panel question 105 (first meeting). WT/DS379/R 
Page 262  
 
 questionnaires.  According to the United States, "questionnaires" in Article 12.1.1, for which 
investigating authorities must provide at least 30 days  for reply, refers to the questionnaire issued at 
the outset of an investigation, and not to subsequent requests for information.
1103 
15.8 First, the United States submits that the ordinary meaning of the word "questionnaire" is "[a] 
formulated series of questions by which informatio n is sought from a selected group, usu[ally] for 
statistical analysis", and that this meaning enco mpasses only "formal requests for information" by an 
investigating authority in the form of a "series of questions".  Second, the Un ited States argues that 
the context of Article 12.1.1, namely paragraphs  6 and 7 of Annex VI to the SCM Agreement, 
clarifies that a "questionnaire" in the sense of Artic le 12.1.1 only refers to the questionnaire issued at 
the outset of an investigation, and not to every s ubsequent request for information by investigating 
authorities, even if such subsequent requests take th e form of a "series of questions".  According to 
the United States, paragraphs 6 and 7 of Annex VI cl early show that not every request for information 
constitutes a "questionnaire" to which the minimum 30-day requirement for response applies, and that 
by referring to the term "the questionnaire" in th e singular in Annex VI, Members contemplated the 
existence of only one document to be consider ed "the questionnaire" for purposes of the SCM 
Agreement.1104  According to the United States, the exp licit reference to "the questionnaire" in 
Annex VI further supports its view that the term " questionnaires" in the plural form in Article 12.1.1 
refers to the recipients in the plural; that is, Me mbers, foreign producers, exporters.  While it agrees 
with China that Members could have used words lik e "the initial questionnaire" instead of the term 
"questionnaires", it further argues that had the draf ters of the Agreement intended the interpretation 
advanced by China, they could have done so by sa ying "[a]ny exporter, foreign producer or interested 
Member receiving questionnaires".1105 
15.9 In the view of the United States, the single doc ument referred to in Annex VI could only be 
the questionnaire issued at the outset of an investig ation.  Given that this questionnaire requires more 
extensive information than subsequent requests for information, it is thus logical that the 30-day 
requirement for reply in Article 12.1.1 only refers to the questionnaire issued at the outset of the 
investigation.1106  The United States also notes that if all re quests for information were subject to the 
30-day requirement under Article 12.1.1, investig ating authorities would be prevented from seeking 
supplemental information from interested parties1107; from completing investigations within the 
timeframes established in Article 11.111108; and/or from granting any extensions of time for replies as 
encouraged by Article 12.1.1.1109 
                                                      
1103 United States first written submission, paras. 47 5 and 482; second written submission, para. 226; 
response to Panel question 36 (second meeting).  The Un ited States argues that the Government of China and 
respondents were given at least 30 days to reply to the questionnaire that the USDOC issued at the outset of the 
investigations at issue, and ther efore, the USDOC complied with Article 12.1.1 of the SCM Agreement.  
(United States first written submission, para. 484). 
1104 Id., paras. 476-478; response to Panel question 36 (second meeting). 
1105 United States first written submission, para. 486. 
1106 Id., para. 479.  The United States notes in this rega rd that in each of the investigations at issue, the 
questionnaire issued by the USDOC at the outset of the investigations posed far more questions than any 
subsequent request for information.  (Id., footnote 632). 
1107 In particular, the United States observes that subsequent requests for information are (i) one means 
by which investigating authorities "give notice of the information" that they require and (ii) a mechanism by 
which interested parties are provided with the "opportun ity" to submit evidence, and that China's interpretation 
would therefore prevent investigating authorities from ma king such requests for information, thereby denying 
interested parties some of the very "notice" and "oppor tunity" mandated in Article 12.1 of the SCM Agreement.  
(Id., paras. 475 and 488). 
1108 According to the United States, meeting the ti meframes imposed by the SCM Agreement becomes 
even more difficult when a re spondent fails to answer questions posed in the initial questionnaire; for instance, 
if a 30-day period would have been required for each of the follow-up requests for additional information made  WT/DS379/R  
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 15.10  The United States also considers that China's interpretation of Article 12.1.1 ignores the other 
provisions of the SCM Agreement that ensure th e due process rights of interested parties in 
proceedings before investigating authorities.  In particular, the United States observes that 
Article 12.1, which provides that interested par ties "be given notice of the information which the 
authorities require and ample opportunity to present in writing all evidence which they consider 
relevant", ensures that subsequent requests fo r information are not subject to unreasonable time 
constraints that would prevent interested par ties from adequately defending their interests.1110  T h e  
United States argues that in light of this, its interpretation of Article 12.1.1 would not give 
investigating authorities some sort of "unfettered di scretion" as China contends, but rather, would give 
interested parties a meaningful amount of time to  reply to the most comprehensive questionnaire 
issued in an investigation, i.e., the questionnaire at the outset of the investigation, while providing 
interested parties with sufficient opportunities to be  informed of the additional information needed in 
an investigation and therefore to be bett er positioned to provide relevant evidence.1111 
15.11  Lastly, the United States rejects China's argument that new allegations questionnaires are 
indistinguishable from initial questionnaires.  Ac cording to the United St ates, China's contention 
overlooks the conceptual difference between the two types of questionnaires, i.e., an initial 
questionnaire is issued at the outset of an inves tigation and includes not only questions about specific 
programmes but also general (non-programme specific) questions, while a new allegation 
questionnaire is issued in the course of an investig ation and includes questions only with respect to a 
specific programme (or programmes).  In any case, the United States contends that China has not 
demonstrated that these questionnaires are indistinguishable.1112 
C. MAIN ARGUMENTS OF THE THIRD PARTIES  
1. Argentina 
15.12  Argentina agrees with China that the minimum 30- day period for reply in Article 12.1.1 of the 
SCM Agreement applies to all "questionnaires" i ssued in an investigation, including the "new 
allegation" questionnaires.  According to Argentina,  this interpretation is consistent with the due 
process principle of "ample opportunity" in Article 12.1 of the Agreement.1113 
                                                                                                                                                                     
in the course of the investigations at issue, the USDOC would have required between 240 and 540 days only for 
the collection of most of the relevant factual information with respect to subsidization.  In this light, China's 
interpretation of Article 12.1.1 would compel investigatin g authorities to resort to facts available, rather than 
giving interested parties multiple opportunities to provide information that they have failed to submit in previous 
questionnaires.  (United States first written submission,  paras. 480-481; response to Panel question 36 (second 
meeting); comments on China's response to Panel question 36 (second meeting)). 
1109 United States first written submission, para. 484.  The United States finds support for its 
interpretation in the Panel Report in the Egypt –Steel Rebar  case in which the panel arrived at the same 
conclusion with regard to the term "questionnaires" in Article 6.1.1 of the AD Agreement by noting, inter alia , 
the use of the term "the questionnaire" in Annex I to the AD Agreement and the practical difficulties that would 
result if Article 6.1.1 were to cover requests for information other than the questionnaire issued at the outset of 
an investigation.  (Id., para. 483, citing to Panel Report on Egypt – Steel Rebar , paras. 7.276-7.277). 
1110 According to the United States, had China considered that it was denied such an opportunity in 
respect of the new allegations questionnaires, it could have raised that claim. 
1111 United States first written submission, para. 489; second written submission paras. 234-235; 
comments on China's response to Panel question 36 (second meeting). 
1112 In particular, the United States argues that China's reliance on questions from only two of the four 
investigations at issue as well as its narrow focus on the "nature" and "level of detail" of questions do not show 
that new allegations and initial questionnaires are indis tinguishable.  (United States first written submission, 
footnote 633; second written submission paras. 228-233; comments on China's response to Panel question 36 (second meeting)). 
1113 Argentina third-party submission, paras. 63-64. WT/DS379/R 
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 2. Canada 
15.13  Canada, recalling the findings of the panel in Egypt – Steel Rebar , considers that the 30-day 
requirement in Article 12.1.1 of the SCM Agreement only applies to the initial questionnaire issued in 
an investigation.  Canada considers that this inte rpretation is supported by the context of Articles 12.1 
and 12.1.1 of the Agreement.  Canada notes, inter alia , the implications for respondents of a broader 
interpretation of Article 12.1.1:  investigating au thorities required to respect the timeframes imposed 
by Articles 11.11 and 12.12 might refrain from ask ing follow-up questions or pursuing new lines of 
questioning, and rely instead on facts available.  Ca nada is also of the view that while the "ample 
opportunity" requirement in Article 12.1 applies throughout the course of an investigation, 
Article 12.1.1 deals only with one particular instan ce during the investigation (i.e., the issuance of the 
initial questionnaire) where "ample" means at least 30 days, and that other questions arising during 
the investigation are subject to the general "ample opportunity" requirement.
1114 
3. European Communities 
15.14  The European Communities considers that Artic le 12.1.1 of the SCM Agreement should be 
interpreted in light of the chapeau provided by Ar ticle 12.1, and notes, in this regard, that the 
Appellate Body has highlighted that interested parties must be afforded "ample opportunity" for 
presentation of evidence, but that it does not imply that  interested parties have "indefinite" rights so as 
enable them to submit relevant evidence as and when they choose.  Therefore, the European 
Communities is of the view that Article 12.1 requir es an "adequate balance" between the rights given 
to interested parties, on the one hand, and the obligation for the authorities to conclude their 
investigations in a timely manner, on the other ha nd.  According to the Eu ropean Communities, this 
analysis should be made on a case-by-case basis a nd on reasonable grounds, i.e., deadlines to reply to 
questions should be proportionate to the amount and complexity of the information requested.1115 
D. ASSESSMENT BY THE PANEL  
15.15  This claim by China raises two main issues.   The first is the meaning of the term 
"questionnaires" in Article 12.1.1, to which the 30-day minimum period for reply applies.  The second 
is whether the "supplemental" and/ or "new allegation" questionnaires issued in the four countervailing 
duty investigations before the Panel are "questionn aires" in the sense of Article 12.1.1, and thus 
should have been subject to that provision's 30-da y minimum reply period.  We take these issues up in 
turn. 
1. Interpretation of the term "questionnai res" in Article 12.1.1 of the SCM Agreement 
15.16  Concerning the meaning of the term "ques tionnaires" in Article 12.1.1 of the SCM 
Agreement, we note at the outset that China does not  dispute that the United States complied with its 
obligation under Article12.1.1 to give to the Govern ment of China and investigated producers at least 
30 days to respond to the initial questionnair es used in the investigations at issue.1116  Rather, what 
China challenges is that the United States failed to provide China and investigated producers at least 
30 days to reply to the so-called "supplemental" and "new allegation" questionnaires issued during the 
course of the investigations. 
15.17  For the purpose of this dispute, we understand the parties to be referring to the following 
terms in accordance with the following meanings:  (i) "initial " questionnaire or "questionnaire issued 
at the outset of an investigation" as the firs t comprehensive questionnaire issued once the 
                                                      
1114 Canada third-party submission, paras. 65-70. 
1115 European Communities third-party submission, paras. 65-69. 
1116 China first written submission, para. 444.  WT/DS379/R  
 Page 265 
 
 
 investigation has been initiated; (ii) "supplemental " questionnaire as a questionnaire containing 
follow-up inquiries to questions posed in a pr ior questionnaire; and (iii) "new allegation " 
questionnaire as the first  questionnaire issued in respect of each new subsidy allegation filed during 
the course of an investigation.1117 
15.18  For China the term "questionnaires", and thus the 30-day rule, in Article 12.1.1 applies not 
only to the initial questionnaire issued at the outset of an investigation, but to "all" questionnaires, 
including supplemental and new alle gations questionnaires.  For the United States, on the other hand, 
the 30-day rule applies only to the comprehensive questionnaire issued at the outset of an investigation and not to any subsequent requests for information, even if these are in the form of a 
formulated series of questions. 
15.19  We first consider the relevant text of Article 12.1 of the SCM Agreement: 
"12.1 Interested Members and all inte rested parties in a countervailing duty 
investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing a ll evidence which they consider relevant 
in respect of the investigation in question.  
12.1.1 Exporters, foreign producers or interested Members 
receiving questionnaires used in a co untervailing duty investigation 
shall be given at least 30 days for reply.
40 Due consideration should 
be given to any request for an extension of the 30-day period and, upon cause shown, such an extension should be granted whenever practicable".  
_____________________ 
40 As a general rule, the time-limit for exporter s shall be counted from the date of receipt of 
the questionnaire, which for this purpose shall be deemed to have been received one week 
from the date on which it was sent to the respondent or transmitted to the appropriate 
diplomatic representatives of the exporting Me mber or, in the case of a separate customs 
territory Member of the WTO, an official  representative of the exporting territory. " 
15.20  The first sentence of Article 12.1.1 on its face compels investigating authorities to grant at 
least 30 days for replies to "questionnaires".  This sentence does not, however, qualify the term 
"questionnaires" except to require that the 30-day period be provided to "exporters, foreign producers 
or interested Members receiving questionnaires".  Nor does the SCM Agreement define the term 
"questionnaires".  We thus turn to an examination of the ordinary meaning of this term in its context, 
and in the light of the object and purpose of the provision and the SCM Agreement. 
15.21  We recall that the parties submit that the dicti onary definition of the word "questionnaire" is 
"a formulated series of questions by which inform ation is sought from a selected group, usu[ally] for 
statistical analysis", and we find this definition to be appropriate.1118  For China, this dictionary 
definition should be directly ascribed to the term " questionnaires" in Article 12.1.1, in the sense that 
any "formulated series of questions" from an investig ating authority is a "questionnaire" to which the 
30-day rule applies.  For the United States, how ever, various contextual elements in the SCM 
Agreement mean that not every "formal request for in formation in the form of a series of questions" is 
a "questionnaire" in the sense of Article 12.1.1. 
                                                      
1117 We note that under U.S. law, the applicant or other domestic interested party in a countervailing 
duty investigation may file a "new subsidy allegation" no later than 40 days before the scheduled date of the 
preliminary determination.  (Exhibit CHI-130). 
1118 The parties refer to The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press, 
1993), Vol. II, p. 2447.  (Exhibits CHI-134 and US-95). WT/DS379/R 
Page 266  
 
 15.22  We note that the above dictionary definitio n of "questionnaire" contains no limits or 
qualifications, such that on its face it would encompass any
 request for information in the form of a 
formulated series of questions.  Th is definition on its own thus w ould not exclude "supplemental" and 
"new allegation" questionnaires.  In our view, howeve r, this definition by itself is not sufficient to 
ascertain the meaning of "questionnaires" as used in Article 12.1.1 of the SCM Agreement.  In 
general, we consider that dictionary definitions, while useful, are not dispositive of the meaning of 
terms that appear in the WTO Agreements.1119  Rather, the meaning of such terms can only be 
discerned by reference to their context and in the light of the object and purpose of the agreement in question.
1120  We thus now turn to this further analysis. 
15.23  A number of provisions of the SCM Agreement, starting with Article 12 including its overall 
structure, provide relevant context for interpreting the term "questionnaires" in Article 12.1.1 of the 
SCM Agreement.  In the first place, Article 12, en titled "Evidence", contains a series of evidentiary 
rules, including as to the requesting, receipt and ha ndling of evidence by investigating authorities, the 
particular subject of Article 12.1 of the SCM Agreem ent.  In this regard, the chapeau of Article 12.1 
establishes two overarching re quirements:  that interested Member s and parties be given (i) "notice" 
of the information required of them by the auth orities; and (ii) "ample opportunity to present in 
writing all evidence which they consider relevant".  Neither of these requirements is circumscribed in 
any way, in terms of form or time period.  In particular, the notice requirement places no limits on how, precisely, an investigating authority must requ est the information it requires, and thus seems to 
envisage different possible types of information requests.  The ample opportunity requirement also contains no specific limits, and indeed extends  beyond responses to requests from investigating 
authorities, to encompass the provision of informati on by an interested Member or party at its own 
initiative.  Where an information request from an inv estigating authority is concerned, in our view the 
word "ample" must be understood to mean "ample" in the light of the specific nature and scope of that 
request, something that by its very nature can only be determined on a case-by-case basis. 
15.24  Turning to Article 12.1.1, in our view, the te rm "questionnaires" in that provision represents 
one specific case within the overarching "notice" re quirement in the chapeau.  Similarly, the 30-day 
rule for response to questionnaires represents one  specific case within the overarching "ample 
opportunity" requirement.  That is, in the particular case of "questionnaires" the "ample opportunity" is explicitly defined as the "minimum of 30 days", with an additional mandatory period of one week 
for questionnaires to exporters, per footnote 40, accompanied by a general encouragement for the 
granting of extensions of these periods upon cause show n.  Thus, while the chapeau of Article 12.1 in 
conjunction with Article 12.1.1 do not  directly address the meaning of the term "questionnaires" in 
Article 12.1.1, in our view the fact that the " questionnaires" subject to the specific 30-day "ample 
opportunity" rule are only one of the possible means of providing notice to interested parties of the information required suggests that not every re quest for information falls within the term 
"questionnaires" in Article 12.1.1 of the SCM Agreement. 
15.25  Footnote 40 to Article 12.1.1 of the SCM Agre ement provides further indications in this 
direction.  As noted, this footnote lengthens the 30-day rule by one week for questionnaires to exporters, providing generally th at "the time-limit for exporters
 shall be counted from the date of 
receipt of the  questionnaire, which for this purpose shall be  deemed to have been received one week 
                                                      
1119 See, e.g.,  Appellate Body Report on US – Offset Act (Byrd Amendment) , para. 248; cited with 
approval in Appellate Body Report on China – Publications and Audiovisual Products , para. 348. 
1120 We recall that Article 31(1) of the Vienna Convention provides in relevant part that:  
 
"A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be 
given to the terms of the treaty in their context and in the light of its object and purpose".    
See also Appellate Body Report on China – Publications and Audiovisual Products , para. 348.  WT/DS379/R  
 Page 267 
 
 
 from the date on which it was sent to the respondent".  Most relevant to our inquiry is the formulation 
in the singular of the reference to "the questionnaire"  for "exporters".  That is, this provision seems to 
envisage one particular kind of questionnaire destined  to all of the exporters.  The formulation in 
Article 12.1.1 of "exporters, foreign producers or interested Members receiving questionnaires" seems 
to be an extended version of the formulation in fo otnote 40, suggesting that the term "questionnaires" 
(plural) in this Article refers to the different ki nds of questionnaires sent to the different kinds of 
recipients referred to (exporters, foreign producers, and interested Members).  In other words, this 
phrase in Article 12.1.1 could be seen as a collective reference to the questionnaire for the exporters, 
the questionnaire for the foreign producers, and th e questionnaire for the interested Members.  This 
view finds further support in the use of the definite article "the" before "questionnaire" in footnote 40.  
Had the drafters intended the term "questionnair es" in Article 12.1.1 to refer to any and all 
information requests in the form of a series of qu estions, one might more naturally expect either a 
plural formulation, or an indefinite formulation su ch as "any" or "a" "questionnaire", in footnote 40. 
15.26  The same singular, definite formulation ("the qu estionnaire") appears in the other references 
to "questionnaire" in the provisions of the SC M Agreement pertaining to countervailing measures1121, 
i.e., paragraphs 6 and 7 of Annex VI.  In particular, paragraph 6 re fers to "[v]isits to explain the  
questionnaire".  Paragraph 7 provides that a veri fication visit "should be carried out after the  response 
to the  questionnaire has been received".  These provisions  do not refer to the term "questionnaire" as 
"a questionnaire" or "any questionnaire" or "ques tionnaires" in the abstract, although any of these 
formulations would have been grammatically correct. 
15.27  To us, these contextual elements suggest that th e term "questionnaires" in Article 12.1.1 refers 
to one kind of document in an investigation th at constitutes "the" questionnaire for each kind of 
questionnaire recipient referred to (exporters, foreign producers, and interested Members).  This, in 
turn, suggests that not every formulated series of questions from an investigating authority during the 
course of an investigation is subject to the 30-day minimum period for reply required by Article 12.1.1 of the Agreement. 
15.28  We now consider which particul ar documents constitute the "questionnaires" to which the 30-
day rule applies.  In our view, the same contextu al elements discussed above aid in answering this 
question.  In particular, the reference in para graph 6 of Annex VI to "visits to explain the 
questionnaire" suggests that such a questionnaire is  a substantial information request (to warrant a 
possible on-the-spot visit by the investigating author ity to a foreign country purely for the purpose of 
explaining it).  This provision further suggests that the questionnaire is sent to the respondent entity 
relatively early in the investigation (logically, an e xplanatory visit would only take place upon or after 
receipt of the questionnaire, and to be useful pr esumably it would need to take place well in advance 
of the due date for the response, and well in adva nce of any verification visit as referred to in 
paragraph 7).  The provision in pa ragraph 7 of Annex VI that, because the main purpose of the on-the 
spot investigation is to "verify information provi ded or obtain further details" normally that visit 
should take place "after the
 response to the  questionnaire has been received", provides a further 
indication both that "the questionnaire" is a substa ntial and significant enough information request to 
warrant a verification visit, and that it is sent ear ly in the investigation.  The reference to the 
verification visit in the singular ("the  on-the-spot investigation"), and the advance notice and 
agreement requirements related to such a visit, refe rred to in Article 12.6 of the SCM Agreement, and 
paragraphs 2, 3, 4, 5, and 7 of Annex VI, indicat e, similarly, that the verification visit itself is 
substantial and significant, not something that can be  done lightly, or that is likely to occur frequently 
                                                      
1121 The "questionnaire" referred to in Article 25 of the SCM Agreement is the "questionnaire on 
subsidies" to be used by Members to notify their subs idies to the SCM Committee, and thus is not related to 
countervailing measures. WT/DS379/R 
Page 268  
 
 over the course of an investigation.
1122  These textual signals of the weightiness of a verification visit 
provide a further indication that "the response to the questionnaire" which paragraph 7 identifies as a 
main focus of the visit also is substantial and si gnificant, as otherwise such a visit would not be 
warranted. 
15.29  While the SCM Agreement does not explicitly  indicate which document constitutes the  
substantial and significant information request  referred to in the SCM Agreement as "the 
questionnaire", we consider that the above elements  taken together suggest that this is the initial 
comprehensive countervailing duty questionnaire issued  to an interested Member and each of the 
different kinds of interested parties by an inves tigating authority at or following the initiation of an 
investigation, which questionnaire seeks information as to all relevant issues pertaining to the main 
questions that will need to be decided (subsidizati on of the product, injury and causation).  Of course, 
as discussed above, the Agreement recognizes th at there will be variations in the initial 
comprehensive questionnaires sent to the different kinds of questionnaire recipients (including exporters, foreign producers, and interested Member s), reflecting these parties' different natures, 
activities and roles.  Furthermore, depending on how a Member organizes its own conduct of 
countervailing duty investigations, there may be  separate initial comp rehensive questionnaires 
covering the subsidy-related issues and the injury and causation-related issues, and we consider that 
the initial comprehensive document or set of docum ents covering all of these issues are encompassed 
by the term "questionnaires" in Article 12.1.1.
1123 
15.30  Furthermore, we recall that Members are require d under the chapeau of Article 12.1 to give 
interested parties notice of the in formation required for the conduct of the investigation, and Members 
also are generally required (as set forth in the va rious provisions of the SC M Agreement) to conduct 
their investigations and reach their determinations on the basis of verified "evidence", and within a 
maximum overall timeframe.  The amount and comple xity of the information needed to conduct a 
countervailing duty investigation in accordance with the multilateral rules, and the need for that 
information ultimately to be subject to some sort of verification process (through a visit or otherwise) 
before it can be relied upon1124, implies the use of a comprehensive questionnaire (or set of such 
questionnaires for the different ki nds of questionnaire respondents)1125 at the outset of an investigation 
as the basis for gathering the necessary information.1126 
                                                      
1122 We do not mean to imply that the SCM Agreement prohibits multiple verification visits to a given 
entity during the course of an investig ation, but rather to emphasize that due to the weightiness of the exercise 
an investigating authority would be unlikely to conduct multiple visits. 
1123 This would likely be the case, for example, where separate agencies are responsible for the 
subsidization and injury/causation sides of an investigation. 
1124 While the SCM Agreement does not require verification visits as such, Article 12.5 requires that 
investigating authorities "shall during the course of an in vestigation satisfy themselves as to the accuracy of the 
information supplied by interested Members or intere sted parties upon which their findings are based". 
1125 We emphasize that it is the comprehensive nature of the questionnaire(s) issued at the outset of an 
investigation and not necessarily its exact timing that we find determina tive here.  In particular, different 
Members may circulate other kinds of "questionnaires" with a very narrow focus (aimed, for example, at determining whether sampling will be necessary) at the very outset of an investigation.  Such narrow requests 
for information would not, in our view, fall within the m eaning of the term "questionnaires" in Article 12.1.1. 
1126 We note that the use of a questionnaire at the very outset of an investigation is more explicitly 
provided for in the AD Agreement (in paragraph 1 of Annex II, concerning "Best Information Available"):  "As 
soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the 
information required from any interested party and the manner in which that information should be structured by the interested party in its response".  We recognize th at the SCM Agreement contains no analog to Annex II of 
the AD Agreement, but recall the stat ement by the Appellate Body in Mexico – Anti Dumping Measures on Rice 
that conditions relative to the use of facts available si milar to those in Annex II to the AD Agreement apply 
under the SCM Agreement.  While the issue decided by the Appellate Body was different from the one before 
us, we consider the general indication in Annex II of th e AD Agreement that at the very outset the investigating  WT/DS379/R  
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 15.31  Our reading of the term "questionnaires" based on the text and context of Article 12.1.1 is 
identical to that reached by the panel in Egypt – Steel Rebar in respect of the same term, 
"questionnaires", in Article 6.1.1 of the AD Agr eement (the analog to Article 12.1.1 of the SCM 
Agreement).1127  In that case, the panel rejected Turkey's claim that follow-up questions to the original 
questionnaire responses and requests for new inform ation constituted "questionnaires" within the 
meaning of Article 6.1.1 of the AD Agreement.   The panel found strong contextual support in 
paragraphs 6 and 7 of Annex I of the AD Agreement for concluding that  the term "questionnaires" in 
Article 6.1.1 refers only to the original questionnair e sent to interested parties at the outset of an 
investigation.1128  The panel also noted that if only some, but not all, other requests for information 
were considered "questionnaires", investigating authorities would be unable to determine which of 
their further requests for information were subject to  the 30-day rule in Article 6.1.1.  On the other 
hand, the panel considered that if all requests for information were to be considered "questionnaires" 
in the sense of Article 6.1.1, it could be impossible for an investigation to be completed within the 
maximum time limits imposed by the Agreement.1129 
15.32  We consider that the last tw o points made by the panel in Egypt – Steel Rebar  (with which we 
agree) speak to the object and purpose of the provi sion, and more generally, of the countervailing duty 
rules (the counterpart to the anti-dumping rules that were the subject of that dispute).  Starting with the first point, we note that the SCM Agreement c ontains no guidance as to how to determine which 
requests for information other than the initial comp rehensive questionnaire or set of questionnaires 
would be subject to the 30-day rule in Article 12.1. 1 of the SCM Agreement.  Thus, to treat some but 
not all such further requests for information (i.e., other than the initial comprehensive questionnaire or 
set of questionnaires) as subject to the 30-day rule in Article 12.1.1 would introduce enormous 
procedural uncertainty for both investigating author ities and interested parties and Members.  This 
would be inconsistent with the Agreement's ge neral emphasis on due process, in Article 12 and 
elsewhere.
1130  As for the second point, if all requests fo r information by investigating authorities were 
                                                                                                                                                                     
authority should present to interest parties its deta iled request for information is equally pertinent to 
countervailing duty investigations, and is important for due process.  (Appellate Body Report on Mexico – Anti 
Dumping Measures on Rice  , paras. 290-295). 
1127 In light of the almost identical wording of Article  6.1.1 of the AD Agreemen t with Article 12.1.1 of 
the SCM Agreement, we  consider that the Egypt – Steel Rebar  panel's reasoning is fully applicable to the issue 
before us. 
1128 Panel Report on Egypt – Steel Rebar , paras. 7.275-7.276. 
1129 The Egypt – Steel Rebar  panel stated:  
 
"If any requests for information other than the initial questionnaire were to be considered 'questionnaires' in the sense of Article 6.1.1, a number of operational and logistical problems 
would arise in respect of other obligations under the AD Agreement. First, there is no basis in 
the AD Agreement on which to determine that so me, but not all, information requests other 
than the initial questionnaire also would constitute 'questionnaires'. Thus, even if an 
investigating authority was not obligated to provide the minimum time-period in Article 6.1.1 
in respect of every request for information, it would not be able to determine from the Agreement which of its requests were and were not subject to that time-period. On the other 
hand, if all requests for information in an inves tigation were 'questionnaires' in the sense of 
Article 6.1.1, this could make it impossible for an investigation to be completed within the maximum one year (or exceptionally, 18 months) allowed by the AD Agreement in 
Article 5.10.  Moreover, a 30- or 37-day deadline for requests for information made in the 
context of an on-the-spot verification -- i.e., the 'obtain[ing of] further details' explicitly referred to in Article 6.7 [...] as one of the purposes of such verifications -- obviously would 
be completely illogical as well as unworkable."  (Id., at para. 7.277). 
 
1130 See, for example, Appellate Body Report in Mexico – Anti Dumping Measures on Rice  :  "[...] 
Article 12 of the SCM Agreement as a whole 'set[s] out evidentiary rules that apply throughout the course of the WT/DS379/R 
Page 270  
 
 "questionnaires" within the meaning of Article 12.1.1, and thus subject to the 30-day minimum 
response period, investigating authorities often would find themselves having to choose between 
seeking the most accurate and complete informat ion, so as to ensure a sound basis for their 
determinations at the risk of exceeding the allo wed timeframe in Article 11.11 for completing their 
investigations, on the one hand, or completing their investigations within the allowed timeframe, but 
on the basis of poor quality and/or incomplete in formation, on the other hand.  Neither alternative 
would be in the interest of investigating authorities or interested Members and parties.
1131 
15.33  In this regard, we recall that in consider ing similar questions, the Appellate Body has 
consistently taken into account the balance of the du e process rights of interested parties contained in 
Article 12 of the SCM Agreement against the need of investigating authorities to control the conduct 
of the investigation and to carry out the multiple steps required to reach a timely completion of the 
investigation.  For example, in Mexico – Anti-dumping Measures on Rice,  the Appellate Body stated 
that: 
"[T]he due process rights in Article 6 of the AD Agreement [the analogous provision 
to Article 12 of the SCM Agreement]—which include the right to 30 days for reply to 
a questionnaire—'cannot extend indefin itely' but, instead, are limited by the 
investigating authority's need 'to 'control th e conduct' of its inquiry and to 'carry out 
the multiple steps' required to reach a timely completion' of the proceeding".1132 
15.34  We note the specific elements of the balance stru ck in Article 12 in this regard.  From the 
point of view of the investigating authority, first,  an interpretation of the term "questionnaires" in 
Article 12.1.1 as going beyond the initial comprehensive questionnaire or set of questionnaires in an 
investigation is difficult to reconcile with the ex tension requirement under the second sentence of that 
provision.1133  In particular, if a minimum 30-day period applied to all requests for information, any 
extensions of this time-limit pursuant to Article 12.1.1 would compromise the possibility to complete 
an investigation within the required timeframes.  Si milarly, as noted, pursuant to Article 12.5 of the 
SCM Agreement investigating authorities must " satisfy themselves as to the accuracy of the 
information supplied" upon whic h their findings will be based.  One means by which investigating 
authorities may satisfy this "accuracy" requirement is  by requesting clarifications and/or additional 
information.  If all such requests were questionnair es within the meaning of Article 12.1.1, and thus 
subject to the 30-day rule, this again would impede  the timely completion of the investigation.  
Furthermore, applying the 30-day rule to all re quests for information would be at odds with 
Article 12.12 of the SCM Agreement, which gene rally provides that the procedures set out in 
Article 12 are not intended to prevent investiga ting authorities from "proceeding expeditiously" to 
reach a preliminary or final determination. 
                                                                                                                                                                     
[...] investigation, and provide[s] also for due process rights that are enjoyed by 'interested parties' throughout 
[...] an investigation'".  (Appellate Body Report on Mexico – Anti Dumping Measures on Rice , para. 292). 
1131 The United States emphasises this point, arguing that meeting the timeframes imposed by 
Article 11.11 becomes even more difficult where respondents fail to answer questions posed in the initial 
questionnaire; for instance, if the 30-day rule would have applied to each of the follow-up requests for additional information made in the investigations at issue, the USDOC would have required between 240 and 
540 days only for the collection of most of the relevant factual information with respect to subsidization, and 
given the subsequent phases of the proceeding, the USDOC w ould have been unlikely to meet the timeframes 
established in Article 11.11.  (United States first wr itten submission, paras. 480-481)  China does not contest 
this. 
1132 Appellate Body Report on Mexico – Antidumping Measures on Rice , para. 282 (quoting Appellate 
Body Report on US – Oil Country Tubular Goods Sunset Reviews , para. 242, in turn quoting Appellate Body 
Report on US – Hot Rolled Steel , para. 73., in turn quoting Panel Report on US – Hot Rolled Steel , para. 7.54). 
1133 The second sentence of Article 12.1.1 states, "Due consideration should be given to any request for 
an extension of the 30-day period and, upon cause shown, such an extension should be granted whenever 
practicable".  WT/DS379/R  
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 15.35  On the other hand, we do not see that interpreti ng the term "questionnaires" in Article 12.1.1, 
as the initial comprehensive (set of) questionnaire(s) in an investigation, would leave the interested 
Members and parties with inadequate due pro cess protections against unreasonable and overly 
burdensome information requests with unduly short dead lines, and the resultant risk of resort to facts 
available, as China argues.  In particular, the pro cedural rules for collecting and handling evidence in 
Article 12 contain a number of provisions preventin g investigating authorities from behaving in such 
a manner.  First, Article 12.7 of the SCM Agr eement, governing the use of "facts available" by 
investigating authorities, addresses China's con cern by precluding investigating authorities from 
resorting to facts available where, inter alia , information is provided "w ithin a reasonable period".  
Thus, even if information is submitted after a dead line, but within a reasonable period, investigating 
authorities are not entitled to apply facts available.1134  In addition, the "ample opportunity" 
requirement in Article 12.1 of the Agreement ensu res that requests for information that are not 
questionnaires, and thus are not subject to th e 30-day rule, nevertheless are protected from 
unreasonable deadlines that would prevent the s ubmitters of the information from adequately 
defending their interests.1135  Furthermore, we note that pursuant to Article 12.11 of the Agreement, 
investigating authorities are required to take " due account" of any difficulties experienced by 
interested parties in supplying information requested .  Therefore, we do not see that an interpretation 
of "questionnaires" in Article 12.1.1 as the initial comprehensive questionnaire or set of 
questionnaires in an investigation would deprive respondents of due process rights or would give 
investigating authorities unfettered license in regard  to information requests.  More generally, as 
noted, it is in the ultimate due process interests of respondent parties in countervailing duty 
investigations that the investigating authorities ha ve the possibility, within the timeframes and other 
constraints imposed by the SCM Agreement, to obt ain the information necessary for them to render 
well-founded determinations. 
15.36  Thus, in our view, interpreting the term " questionnaires" in Article 12.1.1 of the SCM 
Agreement as referring only to the comprehensive (set  of) questionnaire(s) issued at the outset of the 
investigation is supported by the object and purpose of the countervailing duty provisions, in that it 
effectively strikes the balance that Article 12 requires between, on the one hand, the due process 
rights of interested parties and, on the other hand , the right of investigating authorities to obtain the 
information they need to conduct their inves tigations in the manner prescribed in the SCM 
Agreement. 
15.37  For the foregoing reasons, we conclude that the term "questionnaires", as used in 
Article 12.1.1 of the SCM Agreement, refers to the initial comprehensive questionnaire (or set of 
questionnaires)1136 issued by an investigating authorit y at or following the initiation of a 
                                                      
1134 In this regard, we note that the Appellate Body in US – Hot-Rolled Steel  held that while 
investigating authorities may impose deadlines for the submission of information in order to allow the timely 
completion of the investigations, investigating authorities are not entitled, under Article 6.8 of the AD Agreement (the analogous provision of Article 12.7 of the SCM Agreement), to reject information provided by 
interested parties for the "sole reason" that it was submitted beyond the deadlines for responses to 
questionnaires.  According to the Appellate Body, investig ating authorities must consider whether, in light of all 
the facts and circumstances of the cas e, the information was however submi tted within a reasonable period of 
time.  The Appellate Body went on to explain that the determination of whether information is submitted within 
a reasonable period of time must be defined on a case-by -case basis, "consistently with the notions of flexibility 
and balance that are inherent in the concept of 'r easonableness'" and in light of the specific facts and 
circumstances of each case.  (Appellate Body Report on US – Hot-Rolled Steel , paras. 84 and 89). 
1135 We recall that China has made no claim pursuant to Article 12.1 that the USDOC failed to give it 
"ample opportunity" to provide its responses to the suppl emental and new allegations questionnaires that are the 
subject of this claim. 
1136 Whether in one or several documents, as issued to each interested Member, and to each kind of 
interested party.  We note here the definition of "inter ested parties" in Article 12.9 :  an exporter or foreign 
producer or the importer of a product subject to investiga tion, or a trade or business as sociation a majority of the WT/DS379/R 
Page 272  
 
 countervailing duty investiga tion covering the spectrum of issues on which the investigating authority 
will have to make determinations in  relation to subsidization of the investigated product, injury and 
causation. 
2. The questionnaires and subsequent requests for information issued by the USDOC
1137 
15.38  Having interpreted the term "questionnair es" in Article 12.1.1 as referring to the 
comprehensive questionnaire(s) issued at or followi ng the initiation of the investigation, the question 
becomes whether any or all of the "supplemental" or  "new allegation" questionnaires issued by the 
USDOC in the investigations at issue before us c onstituted "questionnaires" of  this type.  We thus 
now examine the evidence concerning the nature of these questionnaires. 
15.39  We recall that the "supplemental" and "n ew allegation" questionnaires are the only 
information requests subject to this claim, i.e., that there is no claim concerning the amount of time 
allowed for responses to the initial questionnaires issued  at the outset of each investigation, or in 
respect of any other information requests that may ha ve been made.  We also note that the parties do 
not disagree that the USDOC allowed less than 30 da ys for responses to all of the "supplemental" and 
"new allegation" questionnaires. 
15.40  In all of the investigations at  issue, the questionnaire issued to the Government of China by 
the USDOC at the outset of the investigations included the following questions:  (i) "general 
questions" including on the tariff classification of the products concerned, and their official descriptions, as well as requests for Annual reports of the People's Bank of China; (ii) "program-
specific questions", requesting specific informati on with respect to individual alleged subsidy 
programmes; (iii) "Appendix 1", containing a standard  series of questions to  be answered for each 
alleged subsidy programme, incl uding: description, purpose and date of establishment of the 
programme; identification of authorities administerin g the programme; relevant  laws, regulations and 
reports; application process and eligibility criteria; id entification of applicants and beneficiaries; and 
(iv) "Appendix 2", containing a standard informat ion request to be answered for each programme 
involving "grants", including the date of approval and disbursement of the grant(s) and the amount of 
the grant(s) approved and actually authorized.
1138 
15.41  The questionnaires issued to the exporters and/or producers ("Chinese respondents") by the 
USDOC at the outset of the investigations incl uded the following requests for information:  (i) 
"Affiliated Companies", requesting information on affiliations among firms in the industry; 
(ii) "general questions", requesting information on, inter alia , ownership, legal structure and financial 
data of the firm(s) concerned; process of produc tion of the product(s) concerned, marketing and 
                                                                                                                                                                     
members of which are producers, exporters or importers of such product; and a producer of the like product in 
the importing Member or a trade and bu siness association a majority of th e members of which produce the like 
product in the territory of the importing Member. 
1137 We note here that in U.S. countervailing duty investigations, the USDOC's questionnaires address 
only the issues related to subsidization, and do not addres s injury or causation.  These latter issues are handled 
by a separate agency which issues its own questionnai res on these matters.  China has raised no claims 
concerning injury or causation in respect of any of the investigations before us. 
1138 CWP Initial Questionnaire to the Government of China; Initial Questionnaire to Respondent 
Producers; First Supplemental Questionnaire to the Gove rnment of China; and First Supplemental Questionnaire 
to Kingland (Exhibit US-104); LWS Initial Counterva iling Duty Questionnaire to the Government of China; 
Initial Questionnaire to Respondent Producers; and First Supplemental Questionnaire to the Government of China (Exhibit US-105); LW R Initial Questionnaire to the Government  of China; Initial Questionnaire to 
Respondent Producers; First Supplemental Questionnaire to the Government of China; and First Supplemental 
Questionnaire to Aifudi (Exhibit US-106); OTR Initial Questionnaire to the Government of China; Initial Questionnaire to Respondent Producers; First Supplement al Questionnaire to the Go vernment of China; and 
First Supplemental Questionnaire to TUTRIC (Exhibit US-107).  WT/DS379/R  
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 channels of distribution; sales and export data; ( iii) "program-specific questions", requesting specific 
information with respect to individual alleged subsidy programmes; (iv) "Appendix 1", containing a 
standard series of questions to be answered  for each alleged subsidy programme, including: 
application and approval process; eligibility criteria;  benefits received; identification of merchandise 
benefited; and (v) "Appendix 2", containing a standa rd information request to be answered for each 
programme involving "grants", including the am ount authorized and received from all grants 
authorized, date of approval and receipt of the grant.1139 
15.42  In each investigation, in addition to these initial questionnaires, the USDOC issued both 
"supplemental" questionnaires and "new allegation"  questionnaires.  Concerning the supplemental 
questionnaires issued to the Government of Ch ina and the Chinese respondents in all of the 
investigations1140, the record evidence shows that the questions  they contained were in the nature of 
follow-up to the initial questionnaire responses, i.e ., requests for additional information related to 
questions previously posed, clarifications, e xplanations, details, conf irmations, provision of 
documentation and/or translations, responses to qu estions that had not been answered or been 
answered incompletely, and sour ces for the information provided.1141 
15.43  Concerning the new allegation questionnaires, we  note that these mainly contained the same 
standard information requests as in Appendices 1 and/ or 2 of the questionnaires issued at the outset of 
the investigations.1142  For a limited number of subsidy programmes, however, the new allegation 
questionnaires omitted the Appendix 1 and 2 information requests and contained only questions 
related to the specific programmes concerned.1143 
15.44  We recall our finding above that the term "qu estionnaires" to which the 30-day rule applies 
pursuant to Article 12.1.1 of the SCM Agreement refers to the (set of) initial comprehensive 
questionnaire(s) issued by an investigating author ity at or following the initiation of a countervailing 
duty investigation.  As discussed, the fact that su ch initial questionnaires by nature are comprehensive 
is a main reason why, in our view, the SCM Ag reement establishes a specified minimum period to 
respond to them. 
15.45  Considering the "supplemental" questionnaires from this perspective, in our view, the record 
evidence demonstrates that these were not compre hensive questionnaires covering the spectrum of 
issues on which the USDOC needed information, but instead were requests for information generated 
by and directly related to the responses provided by the various interested parties to the initial 
questionnaires including, in a number of instances, restatements of questions not answered or only 
                                                      
1139 Exhibits US-104-107. 
1140 In each investigation, the USDOC issued a series of three to five supplemental questionnaires.  
Before us, the parties have provided evidence only in respect of the first supplemental questionnaire in each 
investigation.  The United States submits, and China does not contest, that the second and subsequent supplemental questionnaires contained considerably fewer questions and covered fewer programmes than did 
the first. 
1141 Exhibits US-104-107. 
1142 See, e.g.,  CWP First New Allegations Questionnaire to the Government of China (Exhibit US-130); 
CWP First New Allegations Questionnaire to King land (Exhibit US-131); CWP First New Allegations 
Questionnaire to Shuangjie (Exhibit US-132); CWP Se cond New Allegations Questionnaire to East Pipe 
(Exhibit US-133); CWP Second New Allegations Questionn aire to the Government of China (Exhibit US-134); 
LWR First New Allegations Questionnaire to the Government of China (Exhibit US-136); LWR First New 
Allegations Questionnaire to East Pipe (Exhibit US-1 37); LWS First New Allegations Questionnaire to the 
Government of China (Exhibit US-139); LWS First Ne w Allegations Questionnaire to SSJ (Exhibit US-141); 
LWS First New Allegations Questionnaire to Aifudi (Exhibit US-143); OTR First New Allegations 
Questionnaire to GTC (Exhibit US-144); OTR First Ne w Allegations Questionnaire to TUTRIC (Exhibit US-
145); OTR First New Allegations Questionnaire to  the Government of China (Exhibit US-146). 
1143 See, e.g.,  CWP Second New Allegations Questionnaire to Kingland (Exhibit US-135). WT/DS379/R 
Page 274  
 
 partially answered in the initial questionnaire respon se.  Thus, we find that none of the supplemental 
questionnaires was a "questionnaire" in the sense of Article 12.1.1 subject to the 30-day rule for response. 
15.46  Concerning the "new allegation" questionna ires, China argues that even accepting, arguendo , 
that the 30-day rule in Article 12.1.1 applies only to  the "full initial questionnaire", the "first" round of 
new allegation questionnaires issued by the USDOC in  the investigations at issue qualifies as the 
initial questionnaire in the newly initiated "investiga tions" with respect to new subsidy allegations.  
China submits in this regard that  the "first new allegation questi onnaires" are indistinguishable from 
the "full initial questionnaires" issued at the outset of the investigation, because they neither 
supplement nor are related in any way to the initia l questionnaires or other prior questionnaires; and 
because the nature of the questions and the le vel of detail requested in the new allegation 
questionnaires are similar to those of th e questions in the initial questionnaires.
1144  
15.47  In our view this is a closer question than that  in respect of the supplemental questionnaires.  
As the parties both recognize, the new allegation questionnaires concern newly-alleged subsidies, 
which were not referred to in the application for the investigation or in the initial questionnaires.  As 
such, the kinds of information requested in the ne w allegation questionnaires, regarding these alleged 
subsidies,  is essentially the same as that  regarding the alleged subsidies referred to in the initial 
questionnaires.  In other words, the kinds of in formation requested concerning the alleged subsidy 
programmes are indistinguishable as between the initial and new allegation questionnaires.1145 
15.48  That said, the new allegation questionnaires did not include the full range of questions 
contained in the initial questionnaires (i.e., they  contained no questions about the product under 
investigation, about company aff iliations, ownership, legal struct ure and financial data, production 
processes, marketing, channels of distribution, sal es and export data, etc.).  To the contrary, the 
questions were limited to standardized informa tion requests and/or programme-specific questions 
concerning the newly-alleged subsidies.1146  While these newly-alleged subsidies were unrelated to the 
alleged subsidies covered by the initial questionnaires,  all of the newly-alleged subsidies, like those 
covered by the initial questionnaires, were alleged to be benefiting the same products that were the 
subjects of the ongoing investigations.  This indicates  to us that these questionnaires, which pertained 
                                                      
1144 See, e.g., China first written submission, footnote 364; second written submission, paras. 311-313; 
response to Panel question 105 (first meeting). 
1145 In fact, as we noted in para. 15.43, supra , the majority of "new allegation" questionnaires mainly 
contained the same standard information requests as in Appendix 1 and/or Appendix 2 of the questionnaires 
issued by the USDOC at the outset of the investigations. 
1146 Furthermore, our examination of  the evidence on the record in dicates that the new allegation 
questionnaires were far less extensive than the questionnaire issued by the USDOC at the outset of the 
investigations.  For instance, the United States submits, and China does not argue to the contrary, that:  (i) in the 
CWP investigation, the initial questionnaire covered 28 su bsidy programmes, containing at least 93 questions 
for the Government of China and at least 85 questions for the respondent producer, while the first new allegation 
questionnaire issued to these respondents covered only 1 subsidy programme and contained fewer questions 
than the initial questionnaire; (ii) in the LWR investigation, the initial questionnaire covered 27 subsidy programmes, containing at least 81 questions for the Government of China and 87 questions for the respondent 
concerned, while the new allegation questionnaire issued to all these respondents covered only 1 programme 
and contained fewer questions than the initial questio nnaire; (iii) in the LWS investigation, the initial 
questionnaire covered 23 subsidy programmes, containing 66 questions for the Government of China and 63 
questions for the respondent concerned, while the new allegation questionnaire issued to all these respondents 
covered between 7-12 subsidy programmes and contained fe wer questions than the initial questionnaire; and (iv) 
in the OTR investigation, the initial questionnaire covered 21 subsidy programmes, containing 76 questions for 
the Government of China and 81 questions for the respondent concerned, while the first new allegation 
questionnaire issued to all these respondents covered 8-10 programmes and contained fewer questions than the 
initial questionnaires.  (United States first written s ubmission, footnote 632; second written submission, 
footnotes 411 and 413-415).  WT/DS379/R  
 Page 275 
 
 
 to the same allegedly subsidized products as, but whose scope was considerably more limited than, 
the initial questionnaires, did not pertain to entirel y new countervailing duty inv estigations, but rather 
to the ongoing investigations, and thus did not consti tute "questionnaires" to which the 30-day rule of 
Article 12.1.1 applies.  We note in this regard th at China raises no claim, and we make no finding, as 
to the WTO-consistency of adding ne w subsidy allegations to an inv estigation subsequent to initiation 
and the issuance of the initial (set of) questionnaire(s). 
15.49  For the foregoing reasons, we find that China has not established that the USDOC acted 
inconsistently with the obligations of the United States under Article 12.1.1 of the SCM Agreement in 
providing less than 30 days for responses to the "s upplemental" questionnair es and "new allegation" 
questionnaires in the four countervailing duty investigations at issue in the present dispute. 
XVI.  CHINA'S CLAIM PERTAINING TO THE USDOC'S APPLICATION OF "FACTS 
AVAILABLE" 
A. CLAIMS OF CHINA  
16.1 In respect of the provision of goods (HRS) thr ough transactions involving trading companies, 
China claims that the USDOC's use of facts available in the LWR and CWP countervailing duty 
investigations to determine the be nefit allegedly conferre d on investigated producers with respect to 
these transactions was inconsistent with Articles 12.1 and 12.7 of the SCM Agreement.1147 
B. MAIN ARGUMENTS OF THE PARTIES  
1. China  
16.2 China argues that the USDOC failed to give inv estigated producers notice of the information 
that was necessary for the subsidy calculations at i ssue, because it did not ask investigated producers 
about the amount and origin of the HRS they pu rchased from trading companies that had been 
produced by SOEs.  Moreover, China contends, th e USDOC did not give the investigated producers 
the opportunity to present any evidence that they would have consid ered relevant to the investigations, 
in particular, the opportunity to demonstrate that they had purchased greater percentages of privately-
produced HRS from trading companies than the per centages determined by the USDOC.  Therefore, 
China submits, the USDOC failed to comply with  the "procedural and due process obligations" under 
Article 12.1 of the SCM Agreement.  China furthe r submits that the USDOC's failure to request 
investigated producers to provide such information, and the USDOC's resort instead to facts available 
and adverse inferences, unfairly penalized investigat ed producers, contrary to Article 12.1 of the SCM 
Agreement.1148 
16.3 China also considers that the United States' us e of facts available was inconsistent with 
Article 12.7 of the SCM Agreement.  According to China, this provision limits the use of facts 
available to situations in which a party "refuses access to, or otherwise does not provide" necessary 
information and, as observed by previous panels, in vestigating authorities are required to request the 
"necessary information" before resorting to facts available.1149  China submits that the investigated 
                                                      
1147 Paragraph B.1(g)(viii) of the "as applied" claims in China request for establishment of the Panel; 
China first written submission, para. 468 (n); second written submission, para. 315 (n). 
1148 China first written submission, paras. 461-463, citing to Panel Report on Argentina – Ceramic 
Titles , para. 6.54. 
1149 Id., para. 464, citing to Panel Report on EC – Countervailing Measures on DRAM Chips , 
para. 7.60; Panel Report on Japan DRAMs (Korea) , para. 7.381. WT/DS379/R 
Page 276  
 
 producers neither refused access to nor otherwise faile d to provide information pertaining to the origin 
of the HRS they purchased from trading companies.
1150 
16.4 In China's view, the United States has essentia lly conceded that the USDOC's use of facts 
available was, in fact, inconsistent with  Articles 12.1 and 12.7 of the SCM Agreement.1151 
2. United States 
16.5 The United States submits that the USDOC resort ed to the use of facts available because, 
until a very late stage of the investigations, the USDOC was not presented evidence that indicated the 
need for information about the amount of HRS produced by SOEs that investigated producers had purchased from trading companies.
1152  Thus, in order to determin e the benefit conferred on the 
investigated producers with respect to these tran sactions, the USDOC relied on evidence from the 
records of the underlying investigations; specifica lly, the USDOC relied on information submitted by 
China.  The United States adds that, before any de finitive countervailing duty is levied, investigated 
producers would be provided the opportunity, in  an assessment review, to present evidence with 
respect to the amount of the HRS they purchased fro m trading companies that was produced by SOEs.  
In response to questioning from the Panel, the Unite d States clarified that it does not claim that the 
alleged violations of Articles 12.1 and 12.7 of the SCM Agreement would be "cured" by this 
subsequent collection of additiona l information.  Rather, the United States indicates, should the Panel 
find that it acted inconsistently with Articles 12.1 and 12.7 of the SCM Agreement, it "would 
determine during implementation how to bring its m easures into conformity with those obligations 
and take any appropria te action accordingly".1153 
C. ASSESSMENT BY THE PANEL  
16.6 The United States does not explicitly assert that th e USDOC's resort to facts available in the 
investigations at issue was WTO-consistent.  Nor does the United States directly contest China's claim 
that the USDOC's use of facts available was inc onsistent with Articles 12.1 and 12.7 of the SCM 
Agreement.  Rather, the United States indicates, the USDOC's basis to rely on facts available was that 
the USDOC "was not presented eviden ce that indicated the need for information about the amount of 
[HRS] purchased through trading companies that ca me from SOEs until a very late stage of the 
investigations".1154 
16.7 We start our consideration of this claim by recalling that "a prima facie  case is one which, in 
the absence of effective refutation by the defending part y, requires a panel, as a matter of law, to rule 
in favour of the complaining party presenting the prima facie  case".1155  Thus, notwithstanding the 
fact that the United States appears not to contest  China's claims, we must, consistent with the 
approach adopted by previous panels, satis fy ourselves that China has established a prima facie  case 
                                                      
1150 China first written submission, paras. 464-466. China also argues that Article 6.8 of the AD 
Agreement provides further context for interpreting Article 12.7 of the SCM Agreement. 
1151 China second written submission, para. 43. 
1152 The United States further indicates that given the time-limits for completing the investigations, the 
USDOC could not request investigated producers to provide additional clarifying information with respect to 
this issue.  (United States response to Panel question 109 (first meeting)). 
1153 United States first written submission, paras. 493-494; response to Panel questions 108 and 109 
(first meeting). 
1154 See, e.g.,  United States response to Panel question 109 (first meeting). 
1155 Appellate Body Report on EC − Hormones , para. 104 (quoting Appellate Body Report on US – 
Wool Shirts and Blouses , p. 14).  In order to establish a prima facie  case, a complaining party must adduce 
evidence sufficient to raise a presumption that what is  claimed is true.  However, precisely how much and 
precisely what kind of evidence will be required to estab lish a presumption that a claim is valid will necessarily 
vary from case to case.  (Appellate Body Report on US – Wool Shirts and Blouses , p. 14, DSR 1997:I, at 323).  WT/DS379/R  
 Page 277 
 
 
 of violation.1156  We will therefore examine the arguments and evidence presented by China, in order 
to determine whether it has established a prima facie  case of inconsistency w ith Articles 12.1 and 12.7 
of the SCM Agreement. 
16.8 We first examine China's claim concerning the in consistency of the United States' use of facts 
available with Article 12.7 of the SCM Agreement, which governs the use of facts available by an 
investigating authority in a countervailing duty investigation, and provides as follows: 
"In cases in which any interested Member or  interested party refuses access to, or 
otherwise does not provide, necessary info rmation within a reasonable period or 
significantly impedes the investigation, preliminary and final determinations, 
affirmative or negative, may be made on the basis of the facts available". 
16.9 Thus, pursuant to the plain language of Article 12.7 of the SCM Agreement, recourse to facts 
available is permissible only under the limited circumstances where an interested Member or 
interested party:  (i) refuses access to necessary info rmation within a reasonable period; (ii) otherwise 
fails to provide such information within a reaso nable period; or (iii) significantly impedes the 
investigation.  Both parties agree with our reading of Article 12.7 of the SCM Agreement.1157  Our 
interpretation is also consistent with that of prior panels and Appellate Body th at have considered this 
provision.1158 
16.10  China argues that, in the LWR and CWP countervailing duty investigations, investigated 
producers neither refused access to nor otherwise failed to provide information regarding the origin of 
the HRS they purchased from trading companies, and therefore, the United States' resort to facts 
available was inconsistent with Ar ticle 12.7 of the SCM Agreement. 
16.11  Before addressing China's claim, we will examin e the relevant facts relating to the USDOC's 
resort to facts available in the underlying investigations, as set forth in the USDOC's 
determinations.1159 
16.12  In its Issues and Decision Memoranda in both in vestigations, the USDOC explained that, in a 
"change" from its preliminary determination, it decided to treat purchases of HRS from privately-
owned trading companies that in turn purchased  HRS from state-owned producers/suppliers as 
countervailable subsidies.  The USDOC also indicated that it did not, during the course of the investigation, seek information from the responde nts regarding the amount of the HRS they had 
purchased from trading company suppliers that was pr oduced by SOEs, and therefore that it examined 
the information on the record "t o determine what information [was ] available to calculate this 
amount".
1160  In addition, in the LWR investigation,  the USDOC added that it would seek this 
information in any future administrative review in the event that the investigation resulted in a 
countervailing duty order.1161 
16.13  In both investigations, the USDOC relied on in formation submitted by the Government of 
China with respect to the production of HRS by  SOE members of China Iron Steel Association 
                                                      
1156 See, e.g., Panel Reports on US – Shrimp (Ecuador) , para. 7.11; US – Stainless Steel (Mexico) , 
para. 7.52; and US – Anti-Dumping Measures on PET Bags (Thailand) , para. 7.7. 
1157 See, e.g.,  United States response to Panel question 108 (first meeting); China first written 
submission, para. 464. 
1158 Appellate Body Reports on Japan – DRAMs (Korea) , para. 235 and Mexico – Anti-Dumping 
Measures on Rice , para. 291; Panel Reports on Japan – DRAMs (Korea) , para. 7.383 and EC – Countervailing 
Measures on DRAM Chips , para. 7.245. 
1159 We note that the parties do not dispute the facts on the record. 
1160 Exhibits CHI-1, p. 10 and CHI-2, pp. 8-9. 
1161 Exhibit CHI-2, p. 9. WT/DS379/R 
Page 278  
 
 ("CISA") to determine the amount of the HRS pur chased by investigated producers through trading 
companies.  In the CWP countervailing duty investig ation, the USDOC noted that the Government of 
China had reported that SOE members of CISA accounted for approximately 71 per cent of HRS 
production in China in 2006.  In the LWR counter vailing duty investigation, China's ownership 
information was updated at verification:  The Government of China reported that CISA members 
accounted for 70.81 per cent of HRS production in China in 2006.  Subsequently, however, the 
USDOC determined that the ownership categorizati on of HRS producers reported by the Government 
of China had been developed by China's legal c ounsel through public sources and not collected by 
CISA itself as the Government of China had reported.   On this basis, the USDOC considered that the 
Government of China had not properly disclosed  how the reported ownership structures of CISA 
members were obtained, and as a consequence, the USDOC determined that the Government of China 
did not act to the best of its ability.  Thus, the US DOC drew an adverse inference with respect to the 
ownership of HRS producers in China, and concl uded on that basis that 96.1 per cent of HRS 
production in China was by SOEs.
1162 
16.14  In the CWP investigation, the USDOC relied on this figure to determine the amount of SOE-
sourced HRS that investigated producers had purchased from private trading companies, and 
therefore, to calculate the benefit investigat ed producers received from these transactions.1163, 1164  In 
the LWR investigation, however, the USDOC deci ded to use the production figure reported by the 
Government of China – that is, 70.81 per cent – to calculate the benef it allegedly conferred on 
investigated producers from such  trading company transactions.1165, 1166 
                                                      
1162 In both investigations, the USDOC, rather than relying on the ownership characterization of CISA's 
producers provided by the Government of China, instead categorized HRS producers as state-owned where (i) the evidence on the record in dicated that the producer was state-owned or (ii) where the Government of China 
had failed to provide factual evidence supporting the classification of the company. 
1163 Exhibit CHI-1, p. 11; and Final Determination Calculation Memorandum for Zhejiang Kingland 
Pipeline and Technologies Co., Ltd.; Kingland Group Co., Ltd., Beijing Kingland Century Technologies Co.; 
Zhejiang Kingland Pipeline Industry Co., Ltd.; and Shanxi Kingland Pipeline Co., Ltd ., Exhibit US-75, p. 3. 
1164 The record indicates that, in both investigations, the USDOC also relied on this figure to determine 
the appropriate benchmark for establishing whether the government provision of HRS conferred a benefit.  ( See, 
e.g., Exhibits CHI-1, p. 65 and CHI-2, p. 4).  We note, however, that China is not challenging this particular use 
of facts available by the USDOC.  As we understand it, China is only challenging the USDOC's resort to facts available in order to calculate the proportion of the pr oducers' purchases of HRS from trading companies that 
originated from SOEs. 
1165 Exhibit CHI-2, pp. 9 and 25-26; Final Determination Calculation Memorandum for Kunshan Lets 
Win Steel Machinery Co., Ltd ., Exhibit US-76, p. 3; and Final Determination Calculation Memorandum for 
Zhangjiagang Zhongyuan Pipe Making Co., Ltd.; Jiangsu Qiyuan Group Co., Ltd.; Jiangsu Zhongjia Steel Co., Ltd.; Zhangjiagang Zhongxin Steel Product Co., Ltd.; and Zhangjiagang Baoshuiqu Jiaqi International 
Business Co., Ltd ., Exhibit US-77, p. 5. 
1166 In its determination, the USDOC stated as follows: 
 
"[...] we agree with the GOC and GWSP that we  never asked the respondent companies to 
report these amounts. Thus, the respondents have not failed to provide requested information and no adverse inference is warranted [...] Similarl y, [...] we do not find that ZZ Pipe withheld 
information [...] Nonetheless, in light of our decision that purchases of SOE-produced HRS 
from trading companies provide a countervailable subsidy, we need to quantify the amount of 
such HRS [...] As explained above, we are not applying [adverse facts available] to the 
respondent companies for their purchases through trading companies because we did not ask 
them to report such information. Instead, we have reviewed other non-adverse information on the record to use as a basis for determining the amount of HRS purchased from trading 
companies that was produced by SOEs. [Thus] we are relying on the GOC reported SOE 
production figure for CISA memb ers (i.e., 70.81 per cent). Because the GOC supplied this 
information, we do not believe that using this amount is adverse to the respondent 
companies."  (Exhibit CHI-2, pp. 25-26).  WT/DS379/R  
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 16.15  Thus, our analysis of the evidence indicates th at the USDOC's basis for resorting to facts 
available in both investigations was the same:  th e USDOC applied facts available for the sole reason 
that, during the course of the investigations, it did not request information from the investigated producers regarding the amount of SOE-sourced HRS they purchased from trading companies.  
Nothing on the record indi cates that the investigated producers re fused access to or failed to provide 
information about the amount of the HRS they had purchased from trading companies that was 
produced by SOEs.  To the contrary, it is clear to  us that, notwithstanding the fact that this 
information was deemed "necessary" to determine th e benefit that investigated producers allegedly 
received from such trading company transactions
1167, the USDOC never requested investigated 
producers to provide the information.  Furthermore, there is no indication on the record, nor does the 
United States argue, that the USDOC considered that  investigated producers "significantly impede[d]" 
the investigations at issue. 
16.16  We have determined above that  Article 12.7 of the SCM Agreement limits the circumstances 
under which an investigating authority may resort to facts available to those wh ere an interested party 
"refuses access to, or otherwise does not provide, necessary information within a reasonable period or 
significantly impedes the investigation".  The SC M Agreement contemplates no other possibilities; 
for instance, where an investigating authority, until a very late stage of the investigation, learns the 
need for information which it did not request duri ng the course of the investigation and that is 
necessary to its final subsidization or injury de terminations.  As the USDOC's reliance on facts 
available in the present instance does not fall within the situations contemplated in Article 12.7, we 
find that the USDOC's use of facts available in the CWP and LWR investiga tions was inconsistent 
with Article 12.7 of the SCM Agreement. 
16.17  For the reasons set forth above, we conclude th at the USDOC acted inconsistently with the 
obligations of the United States under Article 12.7 of  the SCM Agreement in applying facts available 
to determine the amount of the HRS investigated  producers purchased from trading companies that 
originated from SOEs. 
16.18  In the light of our findings under Article 12.7, it would not be necessary to examine, or to 
make additional findings concerning, China's allega tion that the USDOC also acted inconsistently 
with the obligations of the United States under Ar ticle 12.1 of the SCM Agreement by failing to 
request information on the amount of HRS purch ased by investigated producers from trading 
companies that originated from SOEs, were such a cl aim properly before us.  We do not consider this 
to be the case, however, as the only  references to Article 12.1 in Ch ina's request for establishment of 
                                                                                                                                                                     
 
 We observe that there is no explanation on the record as to why, in contrast to the 
LWR investigation, the USDOC in the CWP investigation calculated the amount of SOE-
sourced HRS purchased from trading companies by using the figure of HRS production it derived from the adverse inference it drew with respect to the ownership of HRS in China.  In 
any event, whether the USDOC merely relied on facts available or, in addition, drew adverse 
inferences is not germane to our resolution of China's claim.  The e ssence of China's claim 
concerns the USDOC's application of facts available itself and not which information from the 
record the USDOC actually sel ected as "facts available". 
 
1167 It is undisputed that the information regarding the amount of HRS that investigated producers 
purchased from trading companies that was produced by SOEs was deemed "necessary" for purposes of 
determining the benefits at issue.  For instance, in the LWR investigation, the USDOC stated that:  "[…] in light 
of our decision that purchases of SOE-produced HRS fr om trading companies provide a countervailing subsidy, 
we need to quantify the amount of such HRS ".  (Exhibit CHI-2, p. 25).  (emphasis added)  In its first written 
submission, the United States  also confirmed that " such information was necessary  to determine the existence of 
a benefit conferred on producers of the product subj ect to investigation."  (United States first written 
submission, para. 493.  (emphasis added)). WT/DS379/R 
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 the Panel concern (i) the alleged "failure to provide  notice to interested parties of the information 
which the US authorities required to make a determin ation with respect to whether certain entities are 
'public bodies'", an entirely separate issue, which Ch ina did not pursue in this dispute; and (ii) the 
alleged "failure to provide notice to interested parties of the information which the US authorities 
required to determine whether the simultaneous a pplication of anti-dumping and countervailing duties 
results in a double remedy", addressed supra , at Section XIV.C.4. 
XVII.  CONCLUSIONS AND RECOMMENDATIONS 
17.1 For the reasons set out above, we conclude: 
(a) in respect of China's claims concerni ng the USDOC's determin ations of financial 
contributions  in the countervailing duty investigations at issue, that: 
 (i) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 1.1(a)(1) of the SCM 
Agreement in determining in the relevant  investigations at issue that SOEs 
and SOCBs constituted "public bodies"; 
 (ii) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 1.1 of the SCM Agreement by 
failing to determine, in the LWR, CWP, and OTR investigations, that trading companies were "entrusted" or "directed" by the government to make financial contributions to producers of the investigated products, in the form 
of the provision of goods; 
(b)  in respect of China's claims  concerning the USDOC's specificity
 determinations in the 
countervailing duty investigations at issue, that: 
(i) China did not establish that the US DOC acted inconsistently with the 
obligations of the United States under Article 2.1(a) of the SCM Agreement by determining in the OTR investigation that lending by SOCBs to the OTR tire industry was de jure  specific; 
(ii) The USDOC acted inconsistently with  the obligations of the United States 
under Article 2 of the SCM Agreement by determining that the government provision of land-use rights, in the LWS investigation, was regionally-specific; 
(c)  in respect of China's claims concerning the USDOC's benefit
 determinations in the 
countervailing duty investigations at issue, that:  
(i) China did not establish that the US DOC acted inconsistently with the 
obligations of the United States under Articles 10, 14, 19.1, 19.4 or 32.1 of the SCM Agreement or Article VI:3 of the GATT 1994 by failing to conduct 
a pass-through analysis in the OTR inv estigation to determine whether any 
subsidy benefits received by tradi ng companies selling rubber inputs were 
passed through to the OTR producers purchasing those inputs; 
(ii) The USDOC acted inconsistently with  the obligations of the United States 
under Articles 1.1 and 14 of the SCM Agre ement by failing to ensure in the 
OTR investigation that the methodology it used to establish the existence and amount of benefit to tire producers from their purchases of SOE-produced  WT/DS379/R  
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 inputs from trading companies did not calculate a benefit amount in excess of 
that conferred by the government provision of those inputs; 
(iii) In the light of our findings in respect of China's claims on facts available 
(paragraph 17.1(f)(ii), infra ), we apply judicial economy in respect of China's 
claims concerning the USDOC's benefit determinations in the LWR and CWP 
investigations regarding the provision of HRS by trading companies; 
(iv) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 14(d) of the SCM Agreement 
by not "offsetting" positive benefit amo unts with "negative" benefit amounts, 
either across different kinds of rubber or across different months of the period 
of investigation, in the OTR investiga tion; and that China thus also did not 
establish that the United States also th ereby acted inconsistently with its 
obligations under Articles 10, 19.1, 19.4,  or 32.1 of the SCM Agreement, or 
Article VI:3 of the GATT 1994; 
(v) China's claims in respect of the be nchmarks actually used by the USDOC to 
calculate the benefit from the provision of loans and land-use rights by China 
in the LWS, OTR and CWP investigations , respectively, fall within our terms 
of reference; 
(vi) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 14(d) of the SCM Agreement 
by rejecting in-country private prices in China as benchmarks for HRS in the 
CWP and LWR investigations and fo r BOPP in the LWS investigation; 
(vii) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 14(b) of the SCM Agreement 
by rejecting interest rates in China as benchmarks for calculating the benefit from RMB-denominated loans from SOCBs, in the CWP, LWS and OTR 
investigations, or that the benchmarks  actually used in respect of the RMB-
denominated loans were inconsis tent with those obligations; 
(viii) The USDOC acted inconsistently with  the obligations of the United States 
under Article 14(b) of the SCM Agreem ent by using average annual interest 
rates as benchmarks for GTC's U.S. do llar-denominated loans from SOCBs in 
the OTR investigation; 
(ix) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Article 14(d) of the SCM Agreement 
by rejecting land-use prices in China as benchmarks for go vernment-provided 
land-use rights in the LWS and OTR inv estigations, or that the benchmarks 
actually used were inconsistent with those obligations; 
(d)  In respect of China's claims of consequential violations
 of Articles 10 and 32.1 of the 
SCM Agreement and Article VI:3 of the GATT 1994 in connection with its claims 
referred to at paragraphs 17.1 (a)(i) and (ii), (b)(i) and (ii), and (c)(ii), (iv), (vi), (vii), 
(viii) and (ix):  as indicated at paragraph 13.1, we apply judicial economy.  
(e) in respect of China's double remedy  claims, that: WT/DS379/R 
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 (i) The "omission" challenged by China as part of its "as such" claims with 
respect to double remedies falls outside our terms of reference; consequently, 
we also find that China's "as such" claims under Articles 10, 19.3, 19.4 and 
32.1 of the SCM Agreement and Articles VI and I:1 of the GATT 1994 equally fall outside our terms of reference; 
(ii) China did not establish that the United States acted inconsistently with its 
obligations under Articles 10, 19.3, 19.4, and 32.1 of the SCM Agreement or under Article VI:3 of GATT 1994 by reason of the USDOC's use of its NME methodology in the four anti-dumping investigations at issue and the imposition of anti-dumping duties on that basis concurrently with the 
imposition of countervailing duties on the same products in the four 
countervailing duty investigations at issue;  
(iii) China did not establish that the USDOC acted inconsistently with the 
obligations of the United States under Articles 12.1 and 12.8 of the SCM Agreement by failing to give the Govern ment of China and interested parties 
"notice" of the information it required to evaluate the existence of a double 
remedy, and to inform them of the essential facts under consideration that would "form the basis" for its determination in respect of double remedies, in the four countervailing duty investigations at issue; 
(iv) China did not establish that the United States acted inconsistently with its 
obligations under Article I:1 of GATT 1994 when, as a result of the 
investigations at issue, it concurrent ly imposed anti-dumping duties calculated 
under the U.S. NME methodology and countervailing duties; 
(f) in respect of China's claims of procedural
 violations in the countervailing duty 
investigations at issue, that: 
(i) China did not establish that the US DOC acted inconsistently with the 
obligations of the United States under Article 12.1.1 of the SCM Agreement 
by failing to provide the Government of China and investigated producers at least 30 days to respond to the "supplemental" questionnaires and "new allegation" questionnaires used in the four countervailing duty investigations 
at issue; 
(ii) The USDOC acted inconsistently with  the obligations of the United States 
under Article 12.7 of the SCM Agreement by applying facts available in the 
LWR and CWP investigations to determ ine the amount of HRS investigated 
producers purchased from trading compani es that originated from SOEs; and 
(iii) China's claim of violation of Article 12.1 is outside our te rms of reference as 
it is not included in China's requ est for establishment of the Panel. 
17.2 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie to cons titute a case of nullification or 
impairment of benefits under that agreement.  Acco rdingly, we conclude that to the extent that the 
United States has acted inconsistently with certa in provisions of the SCM Agreement and of the 
GATT 1994, it has nullified or impaired benefits accruing to China under these agreements. 
  WT/DS379/R  
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 17.3 Pursuant to Article 19.1 of the DSU, having found that the United States has acted 
inconsistently with provisions of the SCM Ag reement and of the GATT 1994 as set out above, we 
recommend that the United States bring its measures in to conformity with its obligations under those 
Agreements. 
 
_______________