Document: WT/DS379/R Page A-1 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
Document codes: WT/DS379/R
Complainant: China
Respondent: U.S.
Third parties: Argentina, Australia, Bahrain, Brazil, Canada, EU, India, Japan, Kuwait, the State of, Mexico, Norway, Saudi Arabia, Taiwan, Turkey
Dispute stage: Appellate Body
Agreements cited: Art. I, VI  GATT 1994Art. 1, 2, 10, 12, 13, 14, 19, 32  Subsidies and Countervailing Measures (SCM)Art. 1, 2, 6, 9, 18, Annex II  Anti-dumpingArt. 15  Protocol of Accession

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 the U.S. Request for Preliminary Rulings A-20

ANNEX A-1

EXECUTIVE SUMMARY OF THE FIRST
WRITTEN SUBMISSION OF CHINA

(27 April 2009)

I. INTRODUCTION

1. This dispute presents fundamental issues re garding the proper interp retation and application
of the Agreement on Subsidies and Countervailin g Measures (the "SCM Agreement") and other
covered agreements. The four sets of anti-dum ping duty ("AD") and countervailing duty ("CVD")
determinations at issue are Circular Welded Carbon Quality Steel Pi pe from the People's Republic of
China ("CWP") , investigations A-570-910 and C-570-911; Light – Walled Rectangular Pipe and
Tube from the People's Republic of China ("LWR") , investigations A-570-914 and C-570-915;
Laminated Woven Sacks from the Pe ople's Republic of China ("LWS") , investigations A-570-916 and
C-570-917; and Certain New Pneumatic Off-the-Road Tires from the People's Republic of China
("OTR"), investigations A-570-912 and C- 570-913. In each of these determinations the United States
Department of Commerce ("Commerce" ) made findings and conclusions that were inconsistent with
multiple provisions of the SCM Agreement. Co mmerce's conduct of the unde rlying investigations
was likewise unlawful, leading to frequent denials of the due process and procedural rights of China
and other interested parties in these investigations.

II. LEGAL ARGUMENT

A. COMMERCE'S INPUT SUBSIDY DETERMINATIONS IN EACH OF THE FOUR CVD
INVESTIGATIONS WERE BASED ON FINDINGS OF "FINANCIAL CONTRIBUTION"
INCONSISTENT WITH ARTICLE 1 OF THE SCM AGREEMENT

2. In each of the four CVD investigations under challenge, Commerce concluded that the
Government of China bestowed countervailable subs idies without any legitimate basis for finding the
requisite financial contributions by a "government " within the meaning of Article 1.1 of the SCM
Agreement. None of the financial contributions d eemed to confer countervailable input subsidies in
these investigations was provided by the Government of China or any of its official agencies. Rather,
all of the allegedly subsidized inputs were sold by corporate entities with se parate legal personalities,
owned in part or in whole by China (so-called Stat e Owned Enterprises ("SOEs")), and in some cases,
by private trading companies.

3. The Appellate Body recognized in US –DRAMS that under well-established principles of
customary international law, the actions of state-owned corporate entities are prima facie private, and
thus presumptively are not attributable to a Member under Article 1.1 of the SCM Agreement.
1 Their
ordinary commercial sales thus cannot be deemed financial contributions unless they have been
"entrusted or directed" within the meaning of Artic le 1.1.(a)(1)(iv) to provide the goods in question.
Commerce made no such inquiry in any of the four CVD investigations. The record before the Panel
is therefore devoid of any findings that the Govern ment of China entrusted or directed SOEs to
provide inputs to respondent producers.

1 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 112 & n.179.

4. Commerce sought to avoid the burden of maki ng an entrustment or direction showing by
concluding that the SOEs were "public bodies" with in the meaning of Article 1.1(a)(1). Commerce
reached this conclusion solely on the basis of what it characterized as a "rule of majority ownership,"
i.e., if an SOE were majority-owned by the Governme nt of China or a state-owned entity, Commerce
treated that entity as a "public body" with no furthe r inquiry or analysis. China submits that the
conclusion that an entity is a "public body" solely because it is majority-owned by the government
cannot be reconciled with the meaning of that te rm, as properly interpreted in accordance with the
principles of Article 31 of the Vienna Convention on the Law of Treaties ("Vienna Convention").

5. The ordinary meaning of "public body," read in light of the immediate context of
Article 1.1(a)(i) and the SCM Agreement's object a nd purpose, establishes that it is an entity that
exercises powers and authority vested in it by th e State for the purpose of performing governmental
functions. That conclusion is fully supported by the context provided by other WTO Agreements,
particularly the GATS, as well as by "relevant rule s of international law app licable in the relations
between the parties," both of which must be examin ed under the interpretative framework set forth in
Article 31 of the Vienna Convention.

6. Both the Appellate Body and Panels alik e repeatedly have acknowledged that the ILC
Articles
2 reflect a codification of customary internati onal law and thus constitute "relevant rules of
international law" for purposes of interpreting th e WTO Agreements. Most relevant for present
purposes is the Appellate Body's express endorsement of the principles set forth in the ILC 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). In US – DRAMS , the Appellate Body favourably cited the
Commentary to ILC Article 8, which recognizes that "[s]ince corporate entities, although owned by
and in that sense subject to the control of the State, are considered to be separate, prima facie their
conduct in carrying out their activities is not attri butable to the State unless they are exercising
elements of governmental authority [within the meaning of Article 5]."
3 Thus, mere state ownership
is insufficient, as a matter of international law, 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.
Thus, in the typical case, the conduct of state-owned corporate entities is not to be attributed to a State
unless they are acting on the instructions of, or und er the direction or control of the government
within the meaning of Article 8, which is cl osely analogous to the standard enshrined in
Article 1.1(a)(1)(iv), as the Appellate Body recognized in US – DRAMS.

7. The only other basis recognized under interna tional law for attributing the conduct of state-
owned corporate entities to a State is if they are "exercising elements of governmental authority"
within the meaning of Article 5 of the ILC Ar ticles, as the Appellate Body recognized in US –
DRAMS. Article 5 of the ILC Articles addresses the conduct of entities that are "empowered by the
law of the State to exercise functions of a public character normally exercised by State organs."
Article 5 encompasses within its scope the type of entity that the SCM Agreement characterizes as a
"public body" in Article 1.1. Accordingly, th e standards it establishes for attributing State
responsibility are directly relevant to interpreting th e proper scope of that term. The key lesson they
offer is that government ownership per se has little to do with attributing responsibility under
Article 5, and by extension, w ith determining whether an entity is a public body for purposes of
Article 1.1. As the Commentary to ILC Article 5 emphasizes, the "decisive criteria" for purposes of
attribution with respect to such entities is not the degree of government ownership or control over
them, but rather the fact that they are empowered to exercise governmental authority.
4

2 Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries ,
adopted by the International Law Commission at its Fifty- third Session (2001) [hereinafter ILC Articles] (CHI-
102).
3 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 112 and n.179
4 ILC Articles, p. 43, Commentary to Article 5, para. 3 (CHI-102).

8. In none of the CVD inves tigations did Commerce establish that any of the multiple SOEs
alleged to have provided financial contributions were empowered under Chinese law to sell inputs at
below-market prices in support of governmental policies, or that they in fact exercised such authority
when making sales of inputs to the respondent producers or their trading company suppliers.
Accordingly, all of the financial contribution findi ngs in relation to inputs provided by SOEs were
inconsistent with Article 1.1 of the SCM Agreement.

9. With respect to the sale of inputs by pr ivate trading companies, Commerce's financial
contribution analysis was even more flawed. Commerce made no inquiry into whether China
"entrusted or directed" these entities to provide i nputs to the respondent producers, the only basis for
finding that these entities made a financial contributi on within the meaning of Article 1. Commerce
asserted that no such findings were necessary b ecause the trading companies sold inputs they
purchased from SOEs, which Commerce had conclude d (unlawfully) to be public bodies. In
Commerce's view, because the trading companies had thus received a financial contribution, there was
no need to determine whether they, in turn, had made a financial contribution to the respondent
producers that purchased their goods.

10. The SCM Agreement requires a finding of a fi nancial contribution by a government for every
transaction or series of transactions that an inves tigating authority determin es to be an actionable
subsidy. It necessarily follows that when a respondent producer purchases goods from a private
trading company, a financial contribution may be deemed to exist only if the evidence supports a
finding that the trading company itself was entrusted or directed by the government to provide such
goods to the respondent producer. However, in none of the CVD investigations did Commerce
establish that any of the many private trading companies alleged to ha ve provided financial
contributions had been entrusted or directed to do so. Commerce thus failed to discharge its burden to
establish through actual evidence the existence of a financial contribution by a government.

B. COMMERCE'S FINDINGS THAT SOEs AND PRIVATE TRADING COMPANIES
PROVIDED INPUTS FOR LESS THAN ADEQUATE REMUNERATION WERE
INCONSISTENT WITH THE SCM AGREEMENT

11. Commerce's benefit analysis, like its financial contribution analysis, failed to conform to the
standards established in the SCM Agreement. Commerce (1) unlawfully presumed that Chinese
private prices were distorted when selecting benc hmarks to measure the adequacy of remuneration,
(2) unlawfully presumed that trading companies rece ived benefits in their purchases of inputs from
SOEs, and (3) unlawfully found a benefit where none existed by including in its calculations only
those purchases made for less than the benchmark pri ce, while excluding all purchases made for more
than the benchmark price.

12. The Appellate Body has made clear that "the possibility under Article 14(d) for investigating
authorities to consider a benchmark other than private prices in the country of provision is very
limited."
5 The records in the CWP, LWR, and LWS inv estigations contained evidence of the prices at
which private suppliers in China sold the same i nputs alleged to be provided by SOEs for less than
adequate remuneration. As th e Appellate Body recognized in US – Softwood Lumber IV , those
private prices should have been the "primary benchmark" for determining the adequacy of
remuneration under Article 14(d) of the SCM Agreement. Instead, Commerce rejected them solely on
the basis that they were presumptively distorted by virtue of the degree of state ownership of the
industries producing the relevant inputs.

13. Commerce's exclusive focus on the degree of government ownership of input suppliers to
conclude that private prices were distorted cannot be reconciled with the Appellate Body's recognition
that "an allegation that a government is a significant supplier would not, on its own, prove distortion

5 Appellate Body Report, US – Softwood Lumber IV, para. 102 (emphasis added).

and allow an investigating authority to choose a benc hmark other than private prices in the country of
provision."6 It also is inconsistent with Commerc e's obligation to undertake the "case-by-case"
factual analysis that Article 14(d) requires before a finding of distortion lawfully can be made.
Commerce's reliance on alternative benchmarks for me asuring adequate remuneration with respect to
the provision of inputs in the CWP, LWR and LW S investigations, both from SOEs and from private
trading companies, was predicated exclusively on its invalid findings that private prices were
distorted. Accordingly, all of Commerce's be nefit calculations relying on those alternative
benchmarks are invalid.

14. In the CWP, LWR and OTR CVD investig ations, Commerce countervailed the purchases of
inputs not only from the SOEs, but from the private trading companies as well. Commerce's
determinations were flawed, because Commerce neve r established that the private trading companies
themselves received subsidies by virtue of their purchases of hot-rolled steel ("HRS") and rubber
inputs from SOEs. Although Commerce concluded that the trading companies had received financial
contributions from the SOEs (unlawfully, as explai ned above), it never investigated whether such
purchases conferred a benefit. Therefore, when Comme rce concluded that "all or some portion of the
benefit" purportedly received by the trading companies was conferred on the producers who
purchased inputs from these companies, Commerce presu med the "pass through" of a benefit that had
not been found to exist in the first place.

15. Finally, Commerce unlawfully created a benefit where none existed by including in its benefit
calculations in the OTR investigation only those transactions that produced a positive benefit, while
excluding transactions that yielded no benefit. Commerce's calculati on methodology cannot be
reconciled with Article VI:3 of the GATT 1994 a nd relevant provisions of the SCM Agreement,
which make clear that a countervailing duty is to be imposed in respect of the " product" under
investigation "as a whole ". When goods were purchased frequen tly over the period of investigation,
determining whether remuneration was "a dequate" thus necessarily required an aggregate analysis
that took into account all of the respondents' purchases over the entire period of investigation,
including those that were made fo r more than the benchmark price, and not merely those that were
made for less than the benchmark price.

C. COMMERCE'S IMPOSITION OF COUN TERVAILING DUTIES BASED ON ALLEGED
"POLICY LENDING" PROGRAMMES WAS CONTRARY TO THE SCM AGREEMENT

16. In the OTR, CWP, and LWS determinati ons, Commerce imposed countervailing duties based
on its finding that state-owned commercial banks ("SOCBs") provided preferential, below-market
loans to respondent producers pursuant to what Commerce characterized as "policy lending"
programmes. China challenges Commerce's findings of financial contribution, specificity, and benefit
as they pertain to the OTR determination, and Comme rce's findings of benefit as they pertain to the
CWP and LWS determinations.

17. The alleged "policy lending" programme that Commerce identified in the OTR investigation
does not exist. The basic path of reasoning that underlies Commerce's "policy lending" construct,
while difficult to discern, seems to be as follows: (1) Various economic planning documents in China
contain general statements that encourage the deve lopment of different industries in China, including
the industries in which the respondent producers allege dly operate; (2) the Government of China has
ownership interests in SOCBs; (3) therefore, a ll loans by SOCBs to respondent producers must be
"preferential, non-commercial" loans that the SOCBs made "pursuant to" the alleged "policy" defined
by the economic planning documents, even thoug h these planning documen ts do not refer to
preferential loans by SOCBs, and do not in any way target the relevant industries for the provision of
such loans.

6 Appellate Body Report, US – Softwood Lumber IV, para. 102 (emphasis added).

18. Commerce rejected Chinese interest rates for RMB-denominated loans as the applicable
benchmark under Article 14(b) of the SCM Agreemen t, on the grounds that these interest rates are
"distorted" by "government interv entions", and instead used fictiti ous interest rates to evaluate
whether the loans were "preferential". In this way, the "policy lending" construct became self-
fulfilling: because Chinese interest rates were lowe r than the fictitious benchmarks, the loans to
respondent producers must have been "preferential" , the "policy lending" programmes must therefore
exist, and the SOCBs must have made these loans "pursuant to" the alleged "policies". Commerce's
"policy lending" construct is a circular form of reasoning that brings the "subsidy" into creation
through its own internal logic.

19. It is undisputed that all of the loans in ques tion in OTR were made not by the Government of
China, but by commercial banks in which the gove rnment has ownership interests. Commerce based
its financial contribution finding on the theory that the SOCBs are "public bodies", but made no
finding that the SOCBs made loans in the exercise of governmental authority, an essential prerequisite
to a "public body" finding. Nor would any such finding have been possible on the OTR record,
because the Government of China has not bestowed authority on SOCBs to provide preferential loans
to tyre producers, either through the national and provincial planning documents on which Commerce
relied, or through any other means.

20. The same economic planning documents upon which Commerce relied to find a financial
contribution provided the cornerstone of Commerc e's specificity analysis, and once again these
documents were unsupportive of the conclusions that Commerce reached. The "legislation" on which
Commerce relied for its finding of de jure specificity did not, as Article 2.1(a) of the SCM Agreement
requires, define the elements of the subsidy that Commerce countervailed. It therefore could not
provide the basis for Commerce's finding that the alleged "policy lending" subsidy was de jure
specific to the tyre industry. In addition, Comme rce did not find that the "subsidy" it purported to
identify in these measures was "explicitly limited" to the tyre industry. Nor could Commerce
plausibly have reached this conclusion, because the "subsidy" that Commerce identified for RMB-
denominated loans, even assuming it existed, was av ailable to virtually every borrower in China and
therefore could not be specific under Article 2.

21. Finally, in all three of the "policy lendi ng" determinations, Commerce was able to find an
alleged "benefit" for RMB-denominated loans only by resorting to a fictitious benchmark based on
interest rates that it derived fro m 33 different countries. This fi ctitious interest rate was not a
"comparable commercial loan which the firm c ould actually obtain on the market", and was
inconsistent with Article 14(b) for this reason al one. Nor does Commerce's rationale for rejecting the
applicable benchmark under Article 14(b) – that interest rates in China are "distorted" by "government
interventions" – withstand analysis. Interest rate s are a tool of monetary policy and are directly
influenced by government intervention. These in terventions, which are an ordinary feature of
monetary policy all over the world, cannot provide a basis to disregard the plainly applicable
requirements of Article 14(b).

D. COMMERCE'S IDENTIFICATION OF A "LAND-USE" SUBSIDY IN THE LWS
INVESTIGATION WAS INCONSISTENT WITH THE SCM AGREEMENT

22. In the LWS investigation, Commerce found that the Huantai County Land Bureau provided
land-use rights in the New Century Industrial Park to Aifudi, a respondent producer, for less than
adequate remuneration. Commerce's finding that the alleged subsidy was "regionally specific" under
Article 2.2 of the SCM Agreement was deficient on its face. A finding of specificity under Article 2.2
requires a finding that the subsidy is " limited to certain enterprises located within a designated
geographical region within the jurisdiction of the granting authority …". Pursuant to Article 2.4 of
the SCM Agreement, any determination of specificity under Article 2.2 must be "clearly substantiated
on the basis of positive evidence." Commerce failed to make the necessary finding that the alleged
provision of land use rights for less than adequate remuneration was limited according to the terms of

Article 2.2, and an investigating authority cannot rely upon Article 2.2 as the basis for a finding of
specificity in the absence of the required finding of limitation.

23. Even if Commerce had evaluated the evid ence on the record, it could not possibly have
determined that the alleged subsidy was limited under the terms of Article 2.2. First, if a subsidy is
available to all enterprises within the designated geographi cal region, then it is not limited to certain
enterprises within the region. Evidence on the record demonstrated that all companies inside New
Century Industrial Park, including Aifudi, paid the same lease rate, except for a few companies that
negotiated earlier leases. Second, if a s ubsidy is available to enterprises located outside the
designated geographical region, it is likewise not sp ecific under Article 2.2. The record established
that commercial leaseholders located elsewh ere in Huantai County paid the same or lower lease rates
than those leaseholders inside the industrial park . Therefore, it would have been impossible for
Commerce to make the required finding that the alleged subsidy was specific, even had Commerce
undertaken the necessary evaluation of the record evidence.

24. Further, Commerce's finding of benefit was inconsistent with Article 14 of the SCM
Agreement. As it did with respect to the allege d input subsidies and "policy lending" programmes,
Commerce rejected the use of land prices in China as the applicable benchmark under Article 14(d) of
the SCM Agreement. Commerce determined that Huantai County provided land-use rights for less
than adequate remuneration based on a comparis on to prices for certain industrial property in
Bangkok, Thailand, over 3,000 kilometres away.
 In Softwood Lumber, the Appellate Body cautioned
that, even in the "very limited" circumstances in which an investig ating authority can resort to a
benchmark other than private prices in the count ry of provision, "the benchmark chosen must,
nevertheless, relate or refer to, or be connected w ith, the 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)." 7 Commerce's use of a Thai land
benchmark to value land-use rights in China do es not satisfy the Appellate Body's standard . L a n d
prices in Thailand (or in any other country) do not "relate or refer to … prevailing market conditions"
for land-use rights in China.

E. THE SIMULTANEOUS IMPOSITION OF COUNTERVAILING DUTIES AND ANTI-
DUMPING DUTIES CALCULATED UNDER THE U.S. NME METHODOLOGY
RESULTS IN AN IMPERMISSIBLE DOUBLE REMEDY FOR THE SAME ALLEGED
ACTS OF SUBSIDIZATION

25. In August 2006, Commerce c oncluded that "market forces in China are not yet sufficiently
developed to permit the use of prices and costs in that country for purposes of the Department's
dumping analysis."
8 Accordingly, Commerce continues to designate China as a non-market economy
("NME"), and to reject Chinese producers' actual costs and prices for the purpose of determining
normal value. In March 2007, seven months after Commerce elected to contin ue to designate China
as an NME, Commerce found that "market forces now de termine the prices of more than 90 per cent
of products traded in China" and these market for ces are sufficiently developed to evaluate whether a
particular alleged subsidy "constitutes a distortion in the normal allocation of resources."9

26. This paradoxical set of findings led Comme rce, for the first time, to apply its NME
methodology in AD investigations simultaneously with the application of countervailing duties to the
same categories of imports. This is contrary to Commerce's stated position, over the course of nearly
25 years, that it is "impossible" to identify subsid ies in a country that Commerce has designated as an

7 Appellate Body Report, US – Softwood Lumber IV, para. 103.
8 PRC Lined Paper Memo, p. 4 (30 Aug. 2006) (Final Loan Benchmark and Discount Rate
Memorandum, Attachment 2 (7 July 2008) (OTR)) (CHI-88).
9 Georgetown Steel Memo, p. 5 (29 Mar. 2007) (CHI-89).

NME, "because the concept that the receipt of a subsidy constitutes a distortion in the normal
allocation of resources has no meaning in such an economy."
10

27. The rationale for designating a country as an NM E is that prices and costs within an NME are
not determined by market forces and, therefore, are not considered an appropriate basis for
determining normal value. It is this determination that allows an investigating authority to replace the
producer's actual costs and prices with what it considers to be market-determined costs and prices, and
to calculate a dumping margin from this market-determined position.

28. Likewise, the rationale for imposing counter vailing duties is that a government has provided
productive resources to a company on terms that were not market-determined. The Appellate Body
has repeatedly emphasized that a subsidy "benefit" exists if a company has received a financial
contribution on terms more favourable than those availa ble to the recipient in the market. It is the
market-determined outcome that provides the basel ine for determining whether a company is better
off than it would have been in the absence of the government financial contribution. The purpose of a
countervailing duty is to offset the competitive advantage that the producer thereby obtains.

29. And therein lies the problem of imposing two remedies for the same alleged acts of
subsidization. Fundamentally, the rationale fo r using an NME methodology to determine normal
value in an anti-dumping investigation subsumes the rationale for imposing countervailing duties on
imported products. By applying both remedies simultaneously, Commerce necessarily will offset any
alleged subsidies twice – once when it calculates an anti-dumping margin on the basis of a "surrogate"
market-determined cost of production, and again wh en it calculates a countervailing duty on the basis
that the producer obtained its productive resources on market-determined terms. Prior to its
determination in CFS Paper, Commerce had consistently maintained that, with respect to a particular
country or industry, it could either apply its NME methodology in an anti-dumping investigation or it
could apply countervailing duties, but it could not apply both simultaneously. This understanding was
affirmed by the U.S. courts, endorsed by the U.S. Congress, and directly reflected in Commerce's
CVD regulations. In CFS Paper, however, Commerce abandoned this principle – at least as it relates
to China.

30. Commerce does not deny that the concurrent application of the NME methodology and
countervailing duties could give rise to a double remedy, but Commerce has taken the seemingly
contradictory positions that: (a) it lacks authorit y under U.S. law to avoid the imposition of double
remedies in the case of imports from NME countries; but (b) to the extent that it actually has some
unspecified authority to address this problem, the existence of a double remedy is a factual question
for which the respondent producer bears the burden of presenting "evidence" that "domestic subsidies
automatically lower prices (including export prices) pro rata…."
11

31. First, to the extent that Commerce lacks authority to avoid the imposition of double remedies
in the case of imports from NME countries, U.S. law is inconsistent with the covered agreements,
both as such and as applied in the present investig ations. According to the SCM Agreement, the
purpose of a countervailing duty is to "offset[] 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." Article 19.4 of the SCM Agreement st ates that "[n]o countervailing duty shall be
levied on any imported product in excess of the amount of the subsidy found to exist, calculated in
terms of subsidization per unit of the subsidized and exported product." And Article 19.3 of the SCM
Agreement states that "[w]hen 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 …." When the United States imposes an anti-dumping duty on an
imported product, calculated in accordance with its NME methodology, and simultaneously imposes a

10 CFS Paper I&D Memo, pp. 23-24 (internal citations omitted).
11 CFS Paper I&D Memo (AD), p. 13.

countervailing duty on the same produc t, it has necessarily levied a countervailing duty that is "in
excess of the subsidy found to exist" and is not "i n the appropriate amounts", in violation of the SCM
Agreement.

32. China considers that a double remedy arises in all cases in which Commerce applies its NME
methodology in conjunction with countervailing duties, while Commerce appears to consider that a
double remedy arises only where there is "evidence" that "subsidies pass through, pro rata, to U.S.
prices". In either event, U.S. law is inconsistent with the covered agreements if Commerce lacks legal
authority to address the problem of double remedies in NME investigations under any circumstance.
In addition, without regard to whether Commerce h as any legal authority to avoid the imposition of
double remedies, its imposition of double remedies for the same alleged acts of subsidization in the
investigations at issue in this dispute was incons istent with the United States' obligations under the
covered agreements.

33. Second, to the extent that Commerce has le gal authority to avoid the imposition of double
remedies in parallel AD/CVD investigations of NME imports only if producers present "evidence"
that "subsidies pass through, pro rata, to U.S. prices" , U.S. law is again inconsistent with the covered
agreements, both as such and as applied. Contrary to Commerce's assertions in CFS Paper and in the
subsequent determinations at issue in this dispute, the existence of a double remedy is not a factual
issue for which the respondent producer bears the burden of presenting "evidence". Rather, as
Commerce correctly understood for nearly 25 years prior to CFS Paper, the use of an NME
methodology in an anti-dumping investigation and the application of countervailing duties to the same
products are mutually exclusive of each other, in thei r entirety. To the extent that some unspecified
provision of U.S. anti-dumping law allows Commerce to avoid the imposition of double remedies, but
only if the respondent producer presents "evidence" on the irrelevant issue of whether "subsidies pass
through, pro rata, to U.S. prices", this provision of law, what ever it might be, is inconsistent with the
United States' obligations under the covered agreements.

34. This inconsistency is both as such and as a pplied. For the reasons set forth above, the
imposition of double remedies for the same alleged acts of subsidization is inconsistent with the SCM
Agreement and Article VI of the GATT 1994. To the extent that U.S. law conditions the avoidance of
a double remedy for the same alleged acts of subsidiz ation upon the presentation of "evidence" that is
irrelevant to the occurrence of a double remedy, this provision of law is and will be inconsistent with
the United States' obligations under the covered ag reements in all cases in which it is applied.
Without regard to whether there is, in fact, any pr ovision of U.S. law that requires "evidence" that
"subsidies pass through, pro rata, to U.S. prices", Commerce's insistence upon such "evidence" in the
present investigations as a condition to the avoida nce of a double remedy was likewise inconsistent
with the United States' obligations under the covered agreements.

35. Finally, separate and apart from the unlawfu l imposition of double remedies for the same
alleged subsidies, the United States has denied imports from China most-favoured nation treatment
under Article I:1 of the GATT 1994 by failing to extend to these imports the same unconditional
entitlement to the avoidance of double remedies th at it extends to imports from countries that it
designates as market economies. Commerce has mainta ined a consistent set of policies and practices
to avoid offsetting the same subsidies twice thr ough the manner in which it calculates anti-dumping
duties, at least in investigations involving imports from countries that the United States has designated
as market economies. In the case of imports from China, Commerce ha s stood these policies and
practices on their head. This treatment not only deprives Chinese imports of most-favoured nation
treatment under Article I:1 of the GATT, but it al so serves to underscore Commerce's consistent
recognition of the impermissibility of offsetting the same subsidies twice.

F. COMMERCE'S CONDUCT OF THE FOUR CVD INVESTIGATIONS UNDER REVIEW
FAILED TO COMPLY WITH THE DUE PROCESS AND PROCEDURAL
REQUIREMENTS OF THE SCM AGREEMENT

36. Commerce violated Article 13.1 of the SCM Agreement when it failed to invite China for
consultations prior to the initiation of investigations into so-called "new subs idy allegations". Long
after a countervailing duty investigation is initiated, U.S. law permits petitioners effectively to start an
entirely new investigation by submitting subsidy alle gations not presented in their original petition.
This occurred in each of the four determinations at issue, and twice each in the CWP and OTR
investigations. In total, Commerce initiated six sep arate investigations into new subsidy allegations,
without once inviting China for consultations. Commerce also failed to comply with Article 12.1.1 of
the SCM Agreement by refusing to give China and the respondent producers at least 30 days to
respond to all questionnaires issued in the CVD in vestigations, including questionnaires issued in
response to new subsidy allegations, as well as so -called "supplemental" questionnaires. Finally, in
connection with its determinations in CWP a nd LWR that producers obtained a countervailable
subsidy whenever the HRS they purchased from privat e trading companies had been produced by an
SOE, Commerce failed to give China and the res pondent producers notice of the information it
required, in violation of Article 12.1 of the SCM Agreement. Having failed to give such notice,
Commerce improperly resorted to "facts availabl e" in order to determine the amount of SOE-
produced hot-rolled steel that respondent produ cers had purchased from trading companies, in
violation of Article 12.7 of the SCM Agreement.

III. CONCLUSION

37. For the reasons set forth in China's Firs t Written Submission, as summarized herein, China
respectfully requests that the Panel recommend that the United States bring the challenged measures
into conformity with its obligations under the relevant covered agreements.

ANNEX A-2

EXECUTIVE SUMMARY OF THE FIRST WRITTEN
SUBMISSION OF THE UNITED STATES

(8 June 2009)

I. INTRODUCTION

1. In this dispute, China urges the Pane l to accept unsupported interpretations of WTO
provisions so as to limit the effective applicab ility of the anti-dumping (AD) and countervailing duty
(CVD) disciplines, and to ignore the particular features of China's economy, well documented on the
records of the investigations at issue, that substan tiate the determinations made by the Department of
Commerce (Commerce) in those investigations.

II. REQUEST FOR PRELIMINARY RULINGS

2. The alleged "failure of the United States to provide legal authority for [Commerce] to avoid
the imposition of a double remedy" is not a "specific measure at issue" in this dispute and,
accordingly, is not within the Panel's terms of refe rence. China's complaint is not about the absence
of any "legal authority," but a requirement it believes to exist under U.S. law to apply AD and CVD
measures in a way that results in the alleged "doubl e remedy." By failing to identify the U.S. legal
provisions underlying this alleged requirement, China denied the United States and third parties
notice, to which they were entitled under Article 6.2 of the DSU, of the measure that give rise to the
alleged impairment of benefits at issue in this dispute.

3. In addition, by introducing this alleged "measu re" for the first time in its panel request – and
not in its request for consultations – China seeks to expand the scope of the dispute and enlarge the
Panel's terms of reference. In its consultations request, China explicitly limited the matter at issue to
determinations and orders issued in connection with eight specific investigations by Commerce.
Notwithstanding this clear limitation of the scope of the dispute, in its panel request China went
beyond those specific, identified in vestigations to add claims agai nst this wholly new "measure."
China's addition of this new "measure" converted the dispute from one limited to a series of "as
applied" claims to a dispute that now includes a "measure" challenged "as such."

III. COMMERCE'S FINANCIAL CONTRIBUTION DETERMINATIONS ARE
CONSISTENT WITH THE SCM AGREEMENT

4. Commerce's determinations in the challenged CVD investigations that certain Chinese state-
owned enterprises (SOEs) and state-owned comme rcial banks (SOCBs) were public bodies were
based on a proper interpretation of the term "public b ody" in Article 1.1(a)(1) of the SCM Agreement.
The ordinary meaning of the term "public body", read in its context and in light of the object and
purpose of the SCM Agreement, indicates that a pub lic body is an entity that is owned by the
government, but not necessarily authorized to exercise, or in fact exercising, government functions.

5. The ordinary meaning of the term "public" in cludes the following: "belonging to, affecting,
or concerning the community or nation"; "[r]elating or belonging to an entire community, state, or
nation"; "of or relating to the people as a whole; that belongs to, affects or concerns the community or
the nation"; and "[i]n general, and in most of the senses, the opposite of private." However one

examines the term "public," the ordinary meaning of that term includes the notion of belonging to, or
owned by, the state. If an entity is owned by the state, the ordinary meaning of the term "public"
indicates that such entity can be a "public body".

6. The context of the term "public body" supports this interpretation. The SCM Agreement uses
two different terms in referring to the types of entity that can provide a financial contribution,
"government" and "public body." Thus the terms " government" and "public body" must have distinct
and different meanings. China mistakenly conf lates these two terms, suggesting that they are
"functional equivalents". This cannot be the case, or there would have been no need to use two
different terms in Article 1.1(a)(1) of the SCM Agreement.

7. China's reliance on the definition of the term "public entity" in the GATS as context for the
interpretation of "public body" is also inappropr iate, as the terms are different, and the two
agreements relate to different subject matter. The Working Party Report on China's accession,
however, is relevant context and provides a recognition by China that its state-owned enterprises are
public bodies that provide financial contributions and a commitment by China to this effect.

8. China's interpretation of "public body" also cannot be reconciled with the object and purpose
of the SCM Agreement, which the Appellate Body has explained includes the right of WTO Members
to "fully offset, by applying countervailing duti es, the effect of the subsidy as permitted by the
Agreement." Consistent with this object and purpose, and the need to prevent circumvention of the
SCM Agreement, the term "public body" should be interpreted so that subsidizing governments
cannot use SOEs to avoid the reach of the SCM Agreement.

9. The meaning of the term "public body" was at issue in the Korea – Commercial Vessels
dispute. The panel there concluded that "an entity will constitute a ‘public body' if it is controlled by
the government (or other public bodies)." That pa nel's 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. Majority government ownership can demonstrate control.

10. Commerce's determinations that certain stat e-owned enterprise producers of hot-rolled steel,
rubber, and petrochemicals are "public bodies" are consistent with Article 1.1(a)(1) of the SCM
Agreement. Commerce applied a rule of majority ownership to determine whether an entity was a
public body. Because Commerce properly determined that certain SOEs and SOCBs were public
bodies, no entrustment or direction analysis was required.

11. In addition, Commerce's treatment of sales made through private trading companies was
proper and fulfilled the requirements of Article 1 of the SCM Agreement. China argues that
Commerce was required to find that public bodies "e ntrusted or directed" the trading companies to
sell goods to the respondents. China ignores the fact that the SCM Agreement contemplates situations
in which the benefit might be received by differe nt recipients. China appears to assume that
Article 1.1 of the SCM Agreement requires there to be only one recipient, and that this recipient must
receive both the financial contribution and the entir e amount of the benefit. China has offered no
basis for this assumption. In this case, the fi nancial contribution occurred with the sale of goods
(whether hot-rolled steel or rubber) by the public body SOEs to the intermediary trading companies.
This government provision of goods then conferre d benefits upon the respondent producers of CWP,
LWRP, and OTR Tires, when the trading compan ies sold the goods to these respondents. Although
the intermediary trading companies received the fina ncial contribution and perhaps some benefit, this
possibility does not preclude the respondent subject merchandise producers from receiving a benefit.

12. Commerce's finding in the OTR Tires CVD determination that SOCBs are "public bodies" is
consistent with Article 1.1(a)(1) of the SCM Ag reement. Commerce found that the Government of
China holds dominant ownership stakes in the SOCBs. Outside commentators have remarked that the

government's ownership of banks is "exceptional." China does not dispute this. Given China's
ownership of its banks, these banks are "public bodies."

13. China's argument that Commerce's benefit an alysis undermines its public body determination
conflates the "public body" question with the ques tion of benefit. This is the same mistaken
interpretation of Article 1.1 of the SC M Agreement rejected by the panel in Korea – Commercial
Vessels.

IV. COMMERCE'S BENCHMARK DETERMI NATIONS ARE CONSISTENT WITH
THE SCM AGREEMENT

14. The Appellate Body has previously acknow ledged that Article 14 of the SCM Agreement
provides flexibility, should not be interpreted or app lied in an overly restrictive manner, and permits
the use of out-of-country benchmarks in certain situ ations. In addition, pa ragraph 15(b) of China's
Accession Protocol and paragraph 150 of the Work ing Party Report confirm the permissibility of
using out-of-country benchmarks to measure any be nefit in CVD investigations concerning imports
from China. Paragraph 15(b) expressly recognizes that "prevailing terms and conditions in China
may not always be available as appropriate benchmarks."

15. Commerce's determinations to use external benchmarks were based on findings that the
dominant role of the Chinese government in various markets distorted prices and interest rates in
China. Commerce used Chinese pr ices whenever they were available and appropriate as market
benchmarks. Where the facts demonstrated that Chinese prices were distorted by the government's
predominant role in a market and unsuita ble as commercial benchmarks, Commerce used
market-derived prices from outside of China.

16. China alleges that Commerce applied a " per se rule" that only considered the degree of state
ownership of the industries. China mischaracter izes Commerce's decisions and ignores the detailed
rationale Commerce provided for each of its factual conclusions. Commerce reviewed all record
evidence and determined appropriate benchmarks on a case-by-case basis in each of the challenged
investigations. Indeed, in the OTR Tires CVD investigation, based on record evidence, Commerce
did not find government distortion of the PRC rubber markets, and used actual import prices and
domestic purchase prices from private producers as be nchmarks, even where the government owned
the majority of the domestic production.

17. In the case of the government provision of hot -rolled steel, petrochemicals, policy loans, and
land-use rights, however, Commerce determined, based on all of the evidence on the record of the
investigations, that domestic prices and interest rates in China were distorted because of the
predominant role of the Chinese government in th e markets, rendering those domestic prices and
interest rates unsuitable as benchmarks. Consequently, Commerce determined that it was necessary to
use out-of-country benchmarks to measure benefit.

18. Furthermore, China's assertion that Commerce di d not "make any effort whatsoever to ensure
that these benchmarks related to prevailing market conditions in China" is without foundation. For
input subsidies, Commerce relied upon world mark et prices and made adjustments to account for
"prevailing market conditions," consistent with Article 14(d) of the SCM Agreement.

19. In evaluating the benefit of government-pr ovided loans, after Commerce established that it
would not be possible to use RMB-denominated lo ans provided in China, it developed an out-of-
country benchmark interest rate to measure benef it. To do so, Commerce used a group of interest
rates, rather than just one out-of-country interest rate, because various factors can impact national
averages for interest rates. Commerce's benchmark accounted for the maturity of the loans, adjusted
for exchange rate expectations through an infla tion adjustment accounting for currency differences,
matched lending during the same time periods, a nd factored in the quality of the countries'

institutions, a known influence on interest rat es. Through these means, Commerce calculated
comparison interest rates that were tailored to a pproximate a "comparable commercial loan which the
firm could actually obtain on the market," as required by Article 14(b) of the SCM Agreement.

20. China's argument that Commerce was re quired to use RMB-denominated loans as
benchmarks, which would mean that Commerce was required to use in-country benchmarks because
RMB-denominated loans are not available outside China, is untenable. China's position is
inconsistent with the Appellate Body's interpretation of Article 14 of the SCM Agreement and the
commitments China made in its Accession Protoc ol. Moreover, under China's interpretation,
assuming the absence of any commercial loans in a particular currency, if a government provides
loans in that currency, it would not be possible for another Member to measure benefit at all. Not
only does the text of Article 14 not require that interpretation, but such an outcome would be
incongruous with the flexible nature of the guidelin es in Article 14 and the object and purpose of the
SCM Agreement to permit Members to fully offset the benefit of injurious subsidies.

21. China's argument that Commerce improperl y used a yearly average LIBOR rate as a
benchmark is without support. Article 14(b) of the SCM Agreement contains no preference for a
daily rate over a yearly average. The benchmark developed by Commerce for these loans matched the
duration and the currency denomination, and was structured on the sam e basis as GTC's loans
(LIBOR plus a spread). In light of the flexibility afforded by Article 14, Commerce's comparison was
consistent with the guideline in Article 14(b) of the SCM Agreement.

22. Similar to its position on RMB lending, China argues that Article 14(d) of the SCM
Agreement prevents Members from ever using an out -of-country benchmark to measure the benefit of
land-use rights provided by a government. China's pos ition is inconsistent with the Appellate Body's
interpretation of Article 14 of the SCM Agreement and the commitments China made in its Accession
Protocol.

23. Based on record information, Commerce de termined to measure benefit by comparing
respondents' land-use rights to the sales of certain industrial land in industrial estates, parks, and zones
in Thailand. By selecting land 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 comparison prices reas onably reflected the "prevailing market conditions
for the good or service in question," while at the same time ensuring that the benefit calculation did
not contain distortions caused by China's predominant role in the market.

V. COMMERCE WAS NOT REQUIRED TO PROVIDE A CREDIT IN THE BENEFIT
CALCULATIONS FOR INSTANCES IN WHICH CHINA PROVIDED RUBBER
PRODUCTS FOR ADEQUATE REMUNERATION IN THE OTR TIRES CVD
INVESTIGATION

24. Commerce was under no obligation to provide a cr edit in its benefit calculations for instances
in which China provided rubber for adequate remuneration, i.e., when China did not provide a
subsidy, in the OTR Tires CVD investigation. China's argument to the contrary is based on a
misreading of the SCM Agreement and the GATT 1994, coupled with a misapplication of the
reasoning in Appellate Body reports.

25. Article 14 of the SCM Agreement provides investigating authorities flexibility in the
methodology applied to calculate the benefit of a subsidy. Article 14 does not prescribe any particular
level of aggregation at which the calculation of subsidy benefit must be conducted, but instead
permits investigating authorities to apply methodologi es that account for different factual situations
and the conditions under which the subsidy was provi ded. Additionally, the text of Article 14
explicitly pertains to the calculation of the "benefit" to the recipient. The concept of "benefit" relates
only to situations in which a firm receives a "favour able or helpful factor or circumstance" or "an

advantage," rather than a detriment or disadvant age. Article 14 imposes no obligation on Members to
conduct an "aggregate" analysis nor to provide credit in the benefit calculation when a government
provides goods for adequate remuneration. Indeed, China does not argue that such a requirement is
even contained in Article 14.

26. Rather, China argues that the use of the term "product" in Article VI:3 of the GATT 1994 and
Articles 10, 19.3, and 19.4 of the SCM Agreemen t required Commerce to provide a credit in the
benefit calculation for those instances in which China sold rubber for adequate remuneration. China
mistakenly relies on the Appellate Body's zeroing repor ts to support its argument. However, the legal
provisions on which those decisions are based apply solely to AD determinations and do not apply to
CVD determinations. Accepting China's argument would mean that the mere use of the term
"product" in other provisions of the SCM Agre ement and the GATT 1994 overrides the "latitude" and
"leeway" that panels and the Appellate Body have found in the guidelines set forth in Article 14 of the
SCM Agreement.

27. Moreover, China's argument cannot be reconcile d with the definition of a subsidy in Article 1
of the SCM Agreement. Any time a government pr ovides a financial contribution and a benefit is
thereby conferred, a subsidy is "deemed to exis t." Instances of non-subsidies cannot eliminate or
diminish the benefits conferred when a government provides a financial contribution.

28. In addition, China ignores the troubling implica tions of its argument. If China's interpretation
were accepted, it would necessarily apply to all of Article 14 and would require that credit be
provided whenever an investigating authority foun d that a financial contribution did not provide a
benefit. Thus, Members would be required to prov ide credit across different types of input products
and even different types of subsidies. China's in terpretation would result in a benefit calculation that
is artificially low, or even zero, preventing th e United States from fully offsetting the effect of
subsidies found to exist. China's interpretation of Artic le 14 thus fails to read that article in light of
the object and purpose of the SCM Agreement, and for that reason as well, China's interpretation must
be rejected.

VI. COMMERCE PROPERLY MEASURED THE BENEFIT CONFERRED UPON
PRODUCERS OF SUBJECT MERCHANDISE IN INSTANCES WHERE
PRODUCTION INPUTS WERE PURCHASED FROM TRADING COMPANIES

29. China fails to identify any provision of the SCM Agreement or GATT 1994 with which
Commerce's benefit determinations are purportedly inconsistent. China merely asserts that
Commerce was required to determine the benefit conferred upon trading companies engaged in
buying and selling an input product, in addition to determining the benef it conferred upon producers
of the merchandise that was the subject of Commerce's CVD investigations. However, it was not
necessary to measure any benefit that may have b een received by the trading companies. The amount
or portion of any benefit receive d by the trading companies is irrelevant for the purpose of
determining the benefit conferred upon the subject merchandise producers.

30. To the extent that a trading company may have received a benefit from the financial
contribution provided by an SOE, and some portion of the benefit of that financial contribution, in
effect, passed through the trading company to a producer of subject merchandise, Commerce
accounted for this and properly calculated the be nefit conferred upon the producer of subject
merchandise. To do so, Commerce compared the pr ice the producer of subject merchandise paid for
the input product with an appropriate benchmark pr ice. As a result, Commerce's analysis identified
only the amount of benefit that effectively "passed through" the trading companies and was conferred
upon producers of subject merchandise.

VII. COMMERCE'S SPECIFICITY DETERMINATIONS IN THE OTR TIRES AND LWS
CVD INVESTIGATIONS WERE CONSISTENT WITH ARTICLE 2 OF THE SCM
AGREEMENT

31. China challenges Commerce's specificity determ ination for policy lending with respect to the
OTR Tires CVD investigation, though not with respect to the other CVD investigations in which
Commerce made similar specificity findings for similar policy lending subsidies. Commerce found
policy lending in the OTR Tires CVD investigation specific because the loans were provided as part
of government programmes guiding financial institutions to lend to tire producers. This finding was
based on evidence in the record of the OTR Tires CVD investigation, which contains central,
provincial, and municipal-level government plan s and policies that guided lending to a group of
industries, including the tire industry.

32. China argues that none of the measures re lied upon by Commerce "defines a subsidy," none
of the measures "explicitly limits" access to the subsid y to "certain enterprises," and none of the loans
were "made pursuant to the measures" identified by Commerce. The three points that China asks the
Panel to examine are not the elements that Article 2.1(a) of the SCM Agreement contains, and on that
basis alone, China's argumentation should be rejected.

33. Article 2.1(a) of the SCM Agreement requi res an investigating authority to determine
whether: (i) the granting authority explicitly limits ac cess to a subsidy to "certain enterprises;" or (ii)
the legislation pursuant to which the granting authority operates explicitly limits access to a subsidy to
"certain enterprises." Nothing in Article 2.1(a) re quires Members to identify legislation that defines
the elements of a subsidy (i.e., financial contribution and benefit).

34. The central, provincial, and municipal policy documents each clearly substantiate that the
various levels of govern ment guided lending to a group of industries, which included the OTR tire
industry. The policies focus on stimulating the quantit y of credit, or the availability of credit at all,
rather than reducing the price of credit. The polic ies target certain industries for the direction of
credit, and prohibit credit to other industries. Article 2.1 of the SCM Agreement defines "certain
enterprises" to include a group of industries and permits a specificity determination based on a
subsidy that is specific to a group of industries.

35. Evidence on the record of the OTR Tires CVD investigation showed that the SOCBs acted
pursuant to the central, regional, and municipal government policies in making their lending
decisions. Thus, contrary to China's arguments, Commerce correctly determined that SOCBs do, in
fact, act pursuant to industrial policies in making loans.

36. China also challenges Commerce's specificity determination for land-use rights in the LWS
CVD investigation. Pursuant to Article 2.2 of the SCM Agreement, a subsidy is specific if it is
limited to certain enterprises located within a designated geographical region within the jurisdiction of
the granting authority. Commerce determined th at Huantai County created New Century Industry
Park for the purpose of providing selected companies, including Aifudi, with land-use rights. Thus,
Huantai County limited this land-use rights subsidy to enterprises located in a designated geographical
region.

37. New Century Industry Park meets the ordinary meaning of a designated geographical region.
There is no basis in the SCM Agreement for the na rrower definition for which China argues, and, in
any event, the New Century Industry Park meets the requirements of China's narrower definition.

38. China argues that if a subsidy is available to all enterprises within a designated geographical
region, it is not specific pursuant to Article 2.2 of the SCM Agreement. Following China's reasoning,
the only difference between Articles 2.1(a) and 2.2 of the SCM Agreement is that, pursuant to the
latter, the "certain enterprises" to which a subsidy is explicitly limited happen to be located within a

designated geographical region within the jurisdiction of the granting authority. However, even if
they were not located within a designated geograp hical region, the subsidy granted to them would
nevertheless be specific pursuant to Article 2.1(a) by virtue of the explicit limitation. China's
interpretation of Article 2.2 would render that pr ovision redundant, which is incompatible with the
rules of treaty interpretation. Furthermore, China's interpretation of Article 2.2 is also contrary to
Article 8.1(b) and 8.2(b) of the SCM Agreement.

39. As demonstrated in the record, the land-use ri ghts subsidy at issue was used as an incentive to
relocate producers to the New Century Industry Park and was tied to the level of investment within
the park. Therefore, the subsidy is unique and only availa ble to enterprises investing within the park.
The fact that Huantai County granted other types of land-use rights to other leaseholders for other
purposes outside the industrial park is irrelevant to determining whether the particular subsidy at issue
was only accessible to enterprises within the industria l park. Interpreting Article 2.2 of the SCM
Agreement as requiring an investigating authority to find that the benefit was not available to any
enterprise outside of the designated geographical re gion would be too restrictive and would enable
circumvention of the subsidies disciplines.

VIII. THE UNITED STATES DID NOT ACT INCONSISTENTLY WITH THE SCM
AGREEMENT OR THE GATT 1994 IN TH E CONCURRENT APPLICATION OF
CVD AND AD MEASURES TO CERTAIN PRODUCTS FROM CHINA

40. The WTO agreements and th eir predecessors have always recognized that the dumping and
subsidization of imports are distinct unfair trad e practices, to which, where they cause injury,
Members are entitled to apply separate remedies. Be ginning with the signing of the GATT in 1947,
separate rules have generally governed the conduct of AD and CVD proceedings. The separate nature
of the two remedies was recognized in the separate Tokyo Round AD Code and Subsidies Code, and
subsequently in the Uruguay Round AD Agreement and SCM Agreement.

41. The GATT Contracting Parties reinforced the separate nature of the remedies available from
AD and CVD proceedings by pr oviding for only one instance – set forth in Article VI:5 of the GATT
1994 – in which both remedies may not be applied to th e full amount provided for in Article VI of the
GATT 1994. As the only provision linking the reme dy in an AD proceeding with the remedy in a
CVD proceeding, Article VI:5 reveals that Member s considered when it would be appropriate to
constrain Members' resort to the concurrent app lication of AD and CVD remedies, and agreed that it
would be appropriate only where imposing AD duties together with CVDs would compensate for "the
same situation of dumping or export subsidization."

42. Article 15 of the Tokyo Round Subsidies Code provides further evidence that parties to the
Code considered that no other provision in th e GATT 1947 contained such a requirement. The
addition of Article 15 would not have been necessary if there had been any other restriction on the
concurrent application of AD and CVD measures to exports from non-market economy (NME)
countries. The disappearance of that provision in the successor SCM Agreement reinforces the
presumption, created by the express limitation in Article VI:5 itself, that WTO Members never agreed
on such a prohibition.

43. China's Accession Protocol makes clear that Members, including China, contemplated the
concurrent application of CVD and AD measures to China, in full, notwithstanding China's continued
treatment as a non-market economy country. In pa ragraph 15(a) of its Accession Protocol, China
agreed that Members, when determining price comparability in AD proceedings involving imports
from China, have the right to u se special measurement methodologies that are not based on a strict
comparison with domestic prices or costs in China. In other words, Members may apply AD duties to
offset the full dumping margins, while treatin g China as a non-market economy country.
Paragraph 15(b) makes clear that Members also ha ve the right to apply the WTO's CVD rules to

imports from China. Nothing in paragraph 15 limit s a Member's right to c oncurrently apply both
remedies.

44. China argues that the AD duties imposed by Commerce are, in fact, really CVDs, and
therefore the duties should be added together when examining their consistency with the provisions of
the SCM Agreement that limit the level of CVDs th at may be imposed. Based on this theory, China
argues that the United States acted inconsistently (i) with Article 19.4 of the SCM Agreement because
the AD duties and CVDs, taken together, are in exce ss of the amount of subsidy found to exist, and
(ii) with Article 19.3 of the SCM Agreement becau se the AD duties and CVDs, taken together, are in
excess of the "appropriate amounts" of the CVDs. However, the GATT 1994 and the SCM
Agreement define a CVD as a duty "levied for the pur pose of offsetting" any subsidy. The AD duties
calculated on the basis of Commerce's non-market methodology cannot be e quated with CVDs, as
China suggests, because the AD du ties are levied to offset dumping of imported products that have
caused injury. Commerce's use of the methodolog y expressly provided for in China's Accession
Protocol to calculate dumping margins in the inv estigations at issue does not somehow transform the
AD duty itself into a CVD. China does not contest th e fact that the duties imposed pursuant to the
four CVD investigations at issue in this dispute are themselves not in excess of the levels permitted
under Articles 19.3 and 19.4.

45. In respect of Article I:1 of the GATT 1994, the United States notes, as a threshold matter, that
China makes "as such" and "as applie d" claims of inconsistency. With regard to the "as applied"
claims, China has failed to substantiate this clai m because it has not identified "like products"
to which the alleged "advantage" is applied. In any event, with respect to the two aspects of the
calculation of the dumping margin discussed by China, Commerce treats products from China no
differently than it treats products from other Me mbers. Just as it would in an AD proceeding
involving a product from a market economy, Commerc e did not deduct CVDs in calculating the
export price of a product in any of the four AD proceedings at issue in this dispute. Similarly,
Commerce did not add the amount of subsidies actua lly received to the cost of production of any
Chinese producer in the four AD investigations at issue in this dispute.

46. Moreover, China fails to recognize that a number of WTO rules explicitly recognize that, in
the context of AD and CVD proceedings, a Memb er may—and in some circumstances must—accord
certain treatment to products from one Member that may not be accorded to like products from
another Member. These include Paragraph 2 of the Ad Note to Article VI:1 of the GATT 1994,
Article 2.2 of the AD Agreement, Article 14(d) of the SCM Agreement, and paragraph 15 of China's
Protocol. Given the explicit authorization for such actions, it is clear that, as in the present dispute,
these actions, where they conform to the requirements of these other WTO provisions, are not
inconsistent with Article I:1.

47. Finally, China has failed to demonstrate the theoretical premise of each of its "as such" and
"as applied" claims, namely, that a so-called double remedy inheres in the concurrent application of
AD duties calculated using a methodology not based on a strict comparison of domestic costs and
prices in China and CVDs. For example, first, Ch ina's theory fails to account for the fact that
subsidies may easily reduce the normal value de termined pursuant to the NME methodology by
reducing the quantity of factors consumed by the NME producer in manufacturing the product at
issue. Under Commerce's methodology, multiplying the surrogate factor values by lower factor
quantities results in lower normal values and, hence, lower dumping margins. Second, one of the
premises underlying China's argu ment–that subsidies reduce costs pro rata –is unsubstantiated and
inconsistent with how many subsidies may be offere d and used in the real world. Other weaknesses
in China's theory reinforce the failed premise of its claims.

IX. THE UNITED STATES REMAINED AVAILABLE FOR CONSULTATIONS WITH
THE GOVERNMENT OF CHINA BEFORE INITIATION AND THROUGHOUT
EACH INVESTIGATION, AND AFFORDED INTERESTED PARTIES AMPLE
TIME AND NUMEROUS OPPORTUNITIES TO SUBMIT RELEVANT
INFORMATION IN THE INVESTIGATIONS

48. China claims that the United States did not co mply with its obligati on under Article 13.1 of
the SCM Agreement because the United States did not fo rmally invite China for consultations before
examining, within the same investigation, informa tion received about new subsidies that had not been
identified in the application under Article 11. Contrary to China's reading, the only "investigation"
referred to in Article 13.1 is the investigation triggered by the filing of a duly substantiated application
as provided for in Article 11, and not by the filing of information on newly-reported subsidies. This is
confirmed by additional provisions in the SCM Agreem ent that clarify that the procedural focus for
purposes of consultations is whether the investigation covers a product that is alleged to have been
subsidized and imports of which are causing injury, so that the examination of additional subsidies on
a product already subject to investigation would not constitute a new "investigation."

49. China similarly argues that the United Stat es did not comply with its obligation under
Article 12.1.1 of the SCM Agreement by failing to provide 30 days for reply not only to the
questionnaire issued at the outset of an investiga tion, but to subsequent requests for information as
well. Understood in its proper context, including Annex VI of the SCM Agreement, the obligation in
Article 12.1.1 to provide thirty days for reply appli es only to the former, and not to the latter. China's
reliance on the Appellate Body's statement in Mexico – Rice that Article 12 of the SCM Agreement
"as a whole" provides for evidentiary rules and due process rights that apply "throughout" an
investigation is misplaced. Not only does this statement fail to address the particular text of
Article 12.1.1, but China's argument overl ooks the Appellate Body's recognition in US – Hot-Rolled
Steel that Article 6.1.1, a parallel provision in the AD Agreement, "prescribes an absolute minimum
of 30 days for the initial response to a questionnaire."

50. China argues that, by failing to request certa in necessary information from respondents in the
CWP and LWRP CVD investigations and consequently relying on facts available, the United States
acted inconsistently with Articles 12.1 and 12.7 of th e SCM Agreement. It was not until a very late
stage in these investigations that Commerce was made aware that information about the amount of
steel purchased through trading companies that came from SOEs was necessary to determine the
existence of a benefit conferred on producers of the product subject to investigation. Commerce
relied on evidence from the records of the investigations in order to make these determinations.
Before any definitive rate of CV D is levied, respondents in the CWP and LWRP CVD investigations
would be provided the opportunity to present eviden ce with respect to the amount of hot-rolled steel
purchased from trading companies that was produced through SOEs.

X. CONCLUSION

51. For the foregoing reasons, the United States resp ectfully requests that the Panel grant the U.S.
requests for a preliminary ruling and reject the remainder of China's claims.

TABLE OF REPORTS CITED IN THIS SUBMISSION

Short Title

Full Report Title and Citation
Brazil – Aircraft Appellate Body Report, Brazil – Export Financing Programme for Aircraft ,
WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, 1161
Canada – Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft ,
WT/DS70/R, adopted 20 August 1999, as upheld by Appellate Body Report
WT/DS70/AB/R, DSR 1999:IV, 1443
Columbia – Ports of Entry Panel Report, Colombia - Indicative Prices and Restrictions on Ports of Entry ,
WT/DS366/R, circulated to WTO members on 27 April 2009
EC – Customs Matters Appellate Body Report, European Communities - Selected Customs
Matters, WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX,
3791Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of
Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR
2000:I, 3
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application
 of Zeroing Methodology, WT/DS350/AB/R, circulated to WTO Members on
 4 February 2009
US – Continued Zeroing Panel Report, United States – Continued Existence and Application of Zeroing
Methodology, WT/DS350/R, circulated to WTO Members 1 October 2008
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 – Customs Bond Directive
(India)
Appellate Body Report, United States – Customs Bond Directive for
Merchandise Subject to Anti-dumping/Countervailing Duties ,
WT/DS345/AB/R, adopted 1 August 2008
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 – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton,
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3

1. In accordance with paragra ph 12 of the Panel's working procedures for this dispute, China
hereby responds to the request by the United States for certain preliminary ruli ngs, as set forth in the
United States' first written submission to the Panel.

2. The requests for preliminary rulings by the Un ited States relate to the identification by China
in its panel request of a specific measure, namely, th e failure of the United States to provide the U.S.
Department of Commerce ("Commerce") with le gal authority to avoid the imposition of a double
remedy for the same alleged subsidies when it imposes anti-dumping duties determined pursuant to
the U.S. non-market economy ("NME") methodol ogy simultaneously with the imposition of
countervailing duties on the same product. The United States contends that this is not a "specific
measure at issue" within the meaning of Article 6.2 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes ("DSU"), and is outside the Panel's terms of reference because it
was not identified in China's request for consulta tions under Article 4 of the DSU. As China will
demonstrate, both of these requests for preliminary rulings are unfounded and should be rejected.

3. Before turning to the merits of the U.S. re quests for preliminary rulings, China considers that
it is important to place the U.S. arguments in thei r proper context. As China will demonstrate, from
the very beginning of its consideration of whethe r to apply the U.S. countervailing duty laws to
imports from countries that it designates as NMEs, Commerce has been vague and evasive as to
whether it possesses legal authority to address the question of double remedies. The United States has
continued to pursue this strategy of obfuscation into the present dispute, refusing to identify in its first
submission to the Panel whether Commerce has legal authority to avoid the imposition of double
remedies that arise from the simultaneous app lication of countervailing duties and its NME
methodology, and what the nature and extent of that legal authority might be.

4. Against this backdrop, it is surprising that the United States should now accuse China of an
alleged lack of clarity in specifying the measures at issue in this dispute. Not only are these
accusations legally baseless, but they fail to refl ect the fact that it is the United States' own conduct
that is the origin of whatever uncertainty exists as to the provisions of U.S. law – or their absence –
that relate to the problem of double remedies. Ha ving refused to provide any indication to respondent
producers, the Government of China, and now this Panel of the legal framework in which Commerce
would address the double remedy problem – a probl em that Commerce has acknowledged to exist and
claims to be "determined to prevent … from arising"
1 – the United States simply is not in a position to
fault China for the manner in which it has chosen to define the measures at issue in this dispute.

I. BACKGROUND

5. Beginning with its anti-dumping and countervailing duty investigations of Coated Free Sheet
Paper ("CFS Paper "), Commerce has recognized the problem of double remedies that arises from
simultaneous AD and CVD investigations of imports from NME countries. In March 2007,
Commerce issued a press release to accompany its preliminary dete rmination in the countervailing
duty investigation of CFS Paper, in which Commerce stated that "the possibility of double counting
result[s] from simultaneous anti-dumping and counte rvailing duty investigations" of imports from
NME countries.
2 In June 2007, Commerce released its prel iminary determination in the parallel anti-
dumping investigation of CFS Paper. There, it stated that "the question of whether a double remedy
has been or could be applied, or whether the Department has the authority to adjust for such a
situation, involves complex factual, methodological and legal issues that will require additional time

1 CFS Paper I&D Memo (AD), p. 13 (CHI-94).
2 U.S. Department of Commerce, Office of Public Affairs, "Commerce Applies Anti- Subsidy Law to
China", press release dated 30 March 2007 (CHI-135) (emphasis added). In an official Department of
Commerce newsletter published the next month, Commerce reiterated that "[a] possibility of double counting
results from simultaneous antidumping and CVD investigations" of imports from NME countries. U.S.
Department of Commerce, International Trade Administration, International Trade Update , April 2007, p. 4
(CHI-136).

to analyze."3 Commerce stated that it would "analyze comments regarding the double remedy that are
submitted by interested parties during the course of this investigation, and may seek additional
information on the topic."4

6. Commerce's statements in connection with CFS Paper unambiguously acknowledge that "[a]
possibility of double counting results from simult aneous antidumping and CVD investigations" of
imports from countries that Commerce designates as NM Es and that "whether the Department has the
authority to adjust for such a situation, involves complex … legal issues". Commerce also made clear
that it would "have to respond" to issues and evid ence that interested parties identified during the
course of the investigations concerning the existe nce and extent of a double remedy for the same
alleged acts of subsidization.
5

7. Notwithstanding Commerce's clear recognitio n of the problem of double remedies, and
notwithstanding its concession in the CFS Paper preliminary determination regarding the uncertain
nature of its legal authority to address the pr oblem, Commerce never identified for the interested
parties in the CFS Paper investigations: (1) the legal framew ork in which it would evaluate the
unidentified "specific facts" it considered relevant to determine whether a double remedy would arise;
or (2) the specific steps it would take within that legal framework to avoid the imposition of a double
remedy.

8. As China documented in its first written submis sion to the Panel, to this day Commerce still
has not identified the legal framework in which it would analyze the double remedy issue. Beginning
with the final determinations in CFS Paper , and continuing into the investigations at issue in this
dispute, Commerce has adopted an internally contradictory, two-pronged position on the question of
double remedies. As China explained in its submissi on, Commerce has (1) proclaimed that it has no
legal authority to address the problem of double reme dies in the context of NME investigations; while
(2) blaming the respondents for allegedly failing to present "data" or "evidence" relevant to the
question of double remedies, even though Commerce has never identified what this "data" or
"evidence" might be.
6

9. Remarkably, the United States has continued to pursue this strategy of evasion in its first
submission to the Panel. China has plainly challe nged the United States in this dispute to identify
whether Commerce has legal authority to address th e imposition of double remedies, what the nature
of this authority might be, what types of evidence are required within this legal framework, and why
this evidence is relevant to the ex istence or extent of a double remedy. In its first written submission
to the Panel, the United States says literally nothing in response. In fact, the United States more or
less abandons Commerce's theory that the releva nt issue is whether "subsidies pass through, pro rata,
to U.S. prices", leaving China – and now the Panel – even more in the dark as to when the
United States considers that a double remedy would arise, and under what legal authority it would
fulfil its "determin[ation] to prevent any doubl e remedies from arising" in these unspecified
circumstances.
7

3 Preliminary Determination of Sales at Less Th an Fair Value and Postponement of Final
Determination: Coated Free Sheet Paper from the People 's Republic of China, 72 Fed. Reg. 30758, 30760
(4 June 2007) (CHI-137) (emphasis added).
4 Preliminary Determination of Sales at Less Th an Fair Value and Postponement of Final
Determination: Coated Free Sheet Paper from the People's Republic of China, 72 Fed. Reg. 30758, 30760
(4 June 2007) (CHI-137).
5 U.S. Department of Commerce, Office of Public Affairs, "Commerce Applies Anti- Subsidy Law to
China", press release dated 30 March 2007 (CHI-135).
6 See China First Written Submission, paras. 359-361.
 7 CFS Paper I&D Memo (AD), p. 13 (CHI-94), As Ch ina will demonstrate in its rebuttal submission,
the United States' attempt to dismiss Commerce's " pro rata " theory as one that the respondents invented is
patently disingenuous. See U.S. First Written Submission, n.607. Commerce stated in the OTR AD

10. As China will proceed to demonstrate, Ch ina has done nothing more than take Commerce's
own statements at face value for the purpose of de fining the relevant measur es and claims in this
dispute. There is no respect in which China's id entification of the absence of legal authority as a
measure at issue in this dispute failed to comport with the requirements of Article 6.2 of the DSU.

II. THE FAILURE OF THE UNITED STATES TO PROVIDE LEGAL AUTHORITY
FOR COMMERCE TO AVOID THE IMPOSITION OF DOUBLE REMEDIES IS A
SPECIFIC MEASURE AT ISSUE IN THIS DISPUTE

11. In its request for establishment of a panel, China specified as a measure at issue in this
dispute, as an omission, "the failure of the Unite d States to provide legal authority for the U.S.
Department of Commerce to avoid the imposition of a double remedy when it imposes anti- dumping
duties determined pursuant to the U.S. NME me thodology simultaneously with the imposition of
countervailing duties on the same product."
8 The United States contends that this is not a "specific
measure at issue" within the meaning of Article 6. 2 of the DSU. This contention is entirely without
basis.

12. The Appellate Body has observed that Artic le 6.2 requires the complaining Member to
"identify the specific measures at issue" and to "p rovide a brief summary of the legal basis of the
complaint sufficient to present the problem clearly." 9 These requirements serve two purposes. First,
"as a panel's terms of reference are established by the claims raised in panel requests, the conditions of
Article 6.2 serve to define the jurisdiction of the panel." 10 Secondly, these requirements "serve the
due process objective of notifying respondents and potential third parties of the nature of the
dispute".11

13. The Appellate Body has stated that "the identification of a measure within the meaning of
Article 6.2 need be framed only with sufficient particularity so as to indicate the nature of the measure
and the gist of what is at issue."
12 An examination of the sufficiency of a panel request under
Article 6.2 "does not entail substa ntive consideration as to what typ es of measures are susceptible to
challenge in WTO dispute settlement." 13 The relevant inquiry is whet her the complaining Member
has "present[ed] the problem clearly" so as to define the scope of the dispute and advise other
Members as to the nature of the dispute.

14. As China will proceed to demonstrate, the Un ited States does not even remotely establish that
China failed to "present the problem clearly" when it identified Commerce's lack of legal authority to
avoid the imposition of double remedies as a measure at issue in this dispute.

determination, for example, that "[t]he GOC and the responding parties have not demonstrated that a double
remedy will result from this investigation because they have failed to present any data showing that the
benefits received from any domestic subsidy lowers U.S. prices, pro rata …" OTR I&D Memo (AD), p. 12-
13 (emphasis added). This was Commerce's articulation of what it considered to be the relevant factual issue,
not the respondents'.
8 Request for the Establis hment of a Panel by China (WT/DS379/ 2) (12 December 2008), p. 3. As
discussed below, this measure follows directly from Commerce's own statements in the final anti-dumping and
countervailing duty determinations that China also specified as measures at issue in this dispute.
9 Appellate Body Report, Korea – Dairy, para. 120.
10 Appellate Body Report, US – Continued Zeroing, para. 161.
11 Appellate Body Report, US – Continued Zeroing, para. 161.
12 Appellate Body Report, US – Continued Zeroing, para. 169.
13 Appellate Body Report, US – Continued Zeroing, para. 169.

A. THE UNITED STATES' ARGUMENT IS PREMISED ON A MISCHARACTERIZATION
OF CHINA'S CLAIMS CONCERNING THE ISSUE OF DOUBLE REMEDIES

15. The United States' argument concerning the measu re identified by China in its panel request is
inextricably bound up with its erroneous contentio n that China's claims are based on a "supposed
requirement in U.S. law to impose a double remedy" ( i.e., to apply concurrent AD and CVD
measures)".
14 This is a false characterization of China' s claims. Contrary to the United States'
argument, China's complaint does not relate to any provision of U.S. law that requires Commerce to
apply countervailing duties concurrently with anti- dumping duties determined in accordance with its
NME methodology. Any such claim would be absurd in light of Commerce's two-decade long history
of taking the position that it could not apply the U.S. countervailing duty laws concurrently with its
NME anti-dumping methodology.

16. Contrary to the United States' attempt to re-c haracterize China's claims, China's contention is
that when
 Commerce chooses to apply countervailing duties concu rrently with anti- dumping duties
determined in accordance with its NME methodology, as it has done in the four investigations at issue
in this dispute, a necessary consequence of that choice is the imposition of a double remedy for the
same alleged acts of subsidization. This is becau se, as Commerce itself has stated, it lacks authority
under U.S. law to account for the double remedies that arise in these circumstances, and therefore has
"no choice but to apply both duties without making any adjustments" for double remedies. 15 The
double remedy arises as a necessary result of the opera tion of the two remedies whenever they are
used in conjunction with each other, not from any "requirement" of U.S. law to impose double
remedies or to apply the two remedies concurrently.

17. This is precisely why it is the absence of legal authority to avoid the imposition of double
remedies that is the gravamen of China's compla int. As China documented in its first written
submission to the Panel, and as discussed in more detail below, the United States – including
Commerce – has repeatedly recognized the problem of double remedies arising from the simultaneous
application of countervailing duties and its NME methodology. While China and the United States
appear to differ on the circumstances in which a do uble remedy will arise, the existence of the double
remedy problem cannot seriously be in doubt. Commerce has repeatedly invoked the absence of legal
authority as a reason why it cannot take steps to avoid the imposition of double remedies in the case
of parallel AD/CVD investigations of imports from NME countries. Clearly, then, it is the absence of
legal authority to avoid the imposition of double remedies that is among the sources of China's
complaint.
16

18. Accordingly, the only remaining question unde r Article 6.2 of the DSU is whether China has
"present[ed] the problem clearly". As China will demonstrate next, its request for establishment of a
panel easily meets that test.

B. CHINA'S DESCRIPTION OF THE ABSENCE OF LEGAL AUTHORITY PRESENTS THE
PROBLEM CLEARLY

19. The omission that China has identified in its request for establishment of a panel is the failure
of the United States to give Commerce legal author ity to avoid the imposition of double remedies for

14 U.S. First Written Submission, para. 70.
15 GAO Report, p. 29 (CHI-121).
 16 The Appellate Body has stated that "a 'nexus' mu st exist between the resp onding Member and the
'measure', such that the 'measure' – whether an act or omission – must be 'attributable' to that Member", and "the
'measure' must be the source of the alleged impairment …". Appellate Body Report, US – Gambling, para. 121
(emphasis original). Based on Commerce's own words and actions, it is clear that the absence of legal authority
– an omission – is the source of the impairment of which China complains in this dispute in respect of double
remedies.

the same alleged subsidies in those instances in which Commerce applies countervailing duties
simultaneously with the application of anti-dumpi ng duties determined in accordance with its NME
methodology. In the investigations at issue in th is dispute, Commerce identified this lack of legal
authority as at least one justification for its failure to avoid the imposition of double remedies for the
same alleged subsidies.

20. While "an examination regarding the specificity of a panel request does not entail substantive
consideration as to what types of measures are susceptible to challenge in WTO dispute settlement"
17 ,
there is no question that China may properly cha llenge under the DSU the absence of legal authority
for Commerce to avoid the imposition of double re medies in parallel AD/CVD investigations of
imports from NME countries. The Appellate Body has repeatedly stated that "[i]n principle, any act
or omission attributable to a WTO Member can be a measure of that Member for purposes of dispute
settlement proceedings." 18 The failure of a Member to enact legislation that would permit its
investigating authority to avoid acting inconsistently with the covered agreements is certainly a type
of "omission" that is cognizable within WTO dispute settlement.

21. In its first written submission to the Panel, China has exhaustively documented the facts and
circumstances that demonstrate this omission by the United States. In particular, China has
demonstrated that:

• The U.S. Government Accountability Office ("GAO") found that "U.S. law does not provide
Commerce with any specific authority to avoid double counting" when it imposes
countervailing duties simultaneously with anti- dumping duties determined in accordance
with its NME methodology;

• The Department of Commerce informed the GAO that, for this reason, Commerce "would
have no choice but to apply both duties without making any adjustments" for double
remedies;

• The GAO recommended that the U.S. Congress "consider adopting legislation to provide
Commerce clear authority to … make correcti ons to avoid double counting domestic subsidy
benefits when applying both CVDs and antidumping duties to the same products from NME
countries …";

• The U.S. House of Representatives did, in fact, pass a bill that would have given Commerce
authority to avoid the imposition of double remedies in the case of imports from NME
countries, but this bill was never enacted into U.S. law; and

• In CFS Paper , and continuing into the investigations at issue in this dispute, Commerce
repeatedly referred to the absence of legal aut hority as a reason why it could not take steps to
avoid the imposition of double remedies for the same alleged subsidies.
19

22. The fact that the U.S. House of Representa tives considered it necessary to pass a bill that
would have given Commerce the authority to avoid double remedies in the ca se of parallel AD/CVD
investigations of NME imports is strongly indica tive of the possibility that Commerce lacks such
authority. The fact that this bill never became a law is even more indicativ e of the possibility that
Commerce continues to lack such authority, and that this l ack of authority explains its failure to
account for double remedies in the investigations at issue in this dispute. Most importantly, the fact

17 Appellate Body Report, US – Continued Zeroing, para. 169.
18 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81 (emphasis added);
see also Appellate Body Report, EC – Customs Matters, para. 133; Appellate Body Report, US – Continued
Zeroing, para. 176.
19 See China First Written Submission, paras. 357-359.

that Commerce invoked the absence of legal authority in these investigations as a justification for its
inaction confirms that it is, in fact, the absence of legal authority that is the origin of the
impermissible double remedies of which China complains.

23. In sum, it is hard to imagine how China coul d have been any more precise in describing and
documenting: (1) the omission of the United States in failing to provide legal authority for Commerce
to avoid the imposition of double remedies when it imposes anti-dumping duties determined pursuant
to the U.S. NME methodology simultaneously with the imposition of countervailing duties; and (2)
the relationship between this omission and the legal claims that China advances in this dispute. China
has clearly demonstrated, based on Commerce's own wo rds, that the absence of legal authority is one
possible explanation for Commerce's imposition of doubl e remedies in the investigations at issue, and
has further demonstrated that this imposition of double remedies for the same alleged subsidies
impairs benefits that accrue to China under the covered agreements.

24. In light of these considerations, it is difficu lt to understand the basis for the United States'
suggestion that China's request for establishment of a panel failed to "present the problem clearly" for
the purposes of Article 6.2 of the DSU.
20 There can be no doubt that China's panel request goes well
beyond the minimal requirement of identifying the rele vant measures "with sufficient particularity so
as to indicate the nature of the measure and the gist of what is at issue". 21 The "gist of what is at
issue" is whether Commerce has authority under U.S. law to avoid the problem of double remedies in
parallel AD/CVD investigations of NME imports – a problem that Commerce itself has acknowledged
and purports to be determined to prevent.

25. Moreover, the United States has not even suggest ed, let alone demonstrated, that its ability to
defend its interests in this dispute has been impaired by the manner in which China chose to define the
measure at issue. There is no plausible prejudice to the United States arising from the identification as
a measure of a legal deficiency that has been th e subject of extensive discussion within the U.S.
Government, and that Commerce specifically identified in the investigations at issue. In point of fact,
it is entirely within the power of the United Stat es to resolve this matte r by indicating whether
Commerce does or does not have authority under U.S. law to avoid the imposition of double remedies
in parallel AD/CVD investigations of NME imports, and, if Commerce does have such authority, to
describe what this authority is. In the absence of any prejudice to the United States, the due process
concerns of Article 6.2 of the DSU simply are not implicated in this case.

26. For these reasons, the Panel should reject the United States' claim that the failure to provide
legal authority is not a specific measure at issue in this dispute.

III. THE ADDITIONAL MEASURE IDENTIFIED BY CHINA IN ITS PANEL REQUEST
IS WITHIN THE TERMS OF REFERENCE

27. In its request for preliminary rulings, the Un ited States claims that the one additional measure
that China set forth in its request for establishment of a panel is outside the terms of reference because
it was not the subject of consultations. The U.S. argument wholly disregards the direct relationship
between the one additional measure that China incl uded in its panel request and the measures that
were the subject of consultations, and ignores the Appellate Body's jurisprudence on the relationship
between consultations requests and panel requests.

20 Indeed, China suspects that the problem is all too clear to the United States – after repeatedly
acknowledging the problem of double remedies in the context of NME investigations, the United States
would prefer to avoid any discussion of why it has been unable to specify the legal framework in which it
would evaluate this issue, or to explain why Commerce failed to avoid the imposition of double remedies in
the investigations at issue.
21 Appellate Body Report, US – Continued Zeroing, para. 169.

28. It is well-established that Articles 4 and 6 of the DSU do not "require 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."
22 The Appellate Body has stated that, "[a]s
long as the complaining party does not expand the scope of the dispute," it would "hesitate to impose
too rigid a standard for the 'precise and exact iden tity' between the scope of consultations and the
request for establishment of a panel, as this would substitute the request for consultations for the panel
request."
23

29. The Appellate Body recently re-emphasized this point, explaining that a complaining Member
may add measures to a panel request so long as the additional measures "relate to essentially the same
dispute" that was the subject of consultations. 24 In evaluating this issue, the Appellate Body
examined whether the additional measures "relate" to the measures identified in the consultations
request, 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.25

30. The one additional measure that the United St ates challenges in its request for preliminary
rulings easily satisfies both of these standards, a nd unquestionably "relate[s] to essentially the same
dispute" as the dispute that was the subject of c onsultations. The one additional measure that the
United States challenges states as follows:

In certain of the investigations specified above, the U.S. Department of Commerce
stated that U.S. 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 practic e, where such a double remedy arises from
the use of the U.S. non-market economy (NME) methodology to impose anti-
dumping duties simultaneously with the imposition of countervailing duties on the
same product. The measures therefore incl ude, as an omission, the failure of the
United States to provide legal authority for the U.S. Department of Commerce to
avoid the imposition of a double remedy when it imposes anti-dumping duties
determined pursuant to the U.S. NME methodology simultaneously with the
imposition of countervailing duties on the same product.
26
31. This additional measure clearly "relates" to the measures that were the subject of
consultations. The paragraph begins by noting that "in certain of the investigations specified above" –
i.e., the measures that were the subject of consultations – Commerce stated that it lacks legal authority
to avoid the imposition of double remedies in th e context of parallel AD/CVD investigations of
imports from NME countries. Thus, Commerce's lack of legal authority to avoid the imposition of
double remedies in parallel NME investigations was already evident on the face of the measures that
were the subject of consultations. 27 China's panel request does nothing more than identify this

22 Appellate Body Report, Brazil – Aircraft, para. 132 (original emphasis).
23 Appellate Body Report, US – Upland Cotton, para. 293.
 24 Appellate Body Report, US – Continued Zeroing, para. 235. The United States' failure to address
this recent jurisprudence on the re lationship between consultation reques ts and panel requests is a telling
omission. The argument that the United States advances in the present dispute concerning the one additional
measure that China included in its panel request is at least as tenuous as the argument that the United States
advanced in US – Continued Zeroing in respect of the 14 additional measures at issue in that dispute. Both the
panel and Appellate Body rejected the U.S. argument that the additional measures were outside the terms of
reference.
25 Appellate Body Report, US – Continued Zeroing, para. 228.
 26 Request for the Establishment of a Panel by China (WT/DS379/2) (12 December 2008), p. 3.
27 See First Written Submission of China, para. 359.

absence of legal authority as a distinct measure, in the form of an omission by the United States in
failing to provide Commerce with legal authority to avoid the imposition of double remedies.28

32. In its request for preliminary rulings, the Un ited States makes no attempt to demonstrate that
this one additional measure is unrelated to the measu res that were the subject of consultations. The
United States baldly asserts that the additional measure is "wholly new", but ignores the fact that the
description of the measure in China's panel request establishes a direct connection to the measures that
were the subject of consultations.
29 The United States likewise disregar ds the fact that China's first
written submission clearly establishes the relationship between the measures that were the subject of
consultations and the omission that China specified as an additional measure in its panel request. 30
The United States simply pretends that Commerce never made the statements that it actually made in
the underlying determinations.

33. Even if Commerce had not specifically refe rred to the absence of legal authority in the
underlying determinations, the omission that China h as specified in its panel request relates to the
measures that were the subject of consultations b ecause the absence of legal authority is one possible
explanation for Commerce's failure to avoid the imposition of double remedies in the investigations at
issue. China has demonstrated th at there has been extensive consideration by different parts of the
U.S. Government as to whether Commerce has lega l authority to avoid double remedies in parallel
NME investigations.
31 That Commerce may lack such authority plainly relates to Commerce's failure
to avoid the imposition of double remedies in the measures that were the subject of consultations.

34. It is equally clear that the legal basis for Chin a's claims in respect of the additional measure is
identical to the legal basis for Ch ina's claims in respect of the me asures that were the subject of
consultations. Fundamentally, th e legal issue with respect to all of these measures is whether the
imposition of double remedies for the same alleged act s of subsidization is inconsistent with the
covered agreements. In particular:

• With respect to the measures that were the subj ect of consultations, China's claim is that the
United States acted inconsistently with speci fied provisions of the covered agreements,
because it applied both anti-dumping and countervailing duties to the same products without

 28 For this reason, the United States' reliance upon US – Customs Bond Directive (India) (AB) is
misplaced. See U.S. First Written Submission, n. 79. China has not expanded the scope of the dispute to
include a broader set of legal authorities, as was the case in US – Customs Bond Directive. It is only by
mischaracterizing the nature of China's claims that the United States can argue that the additional measure
identified by China in its panel request "derive[s] from an unspecified set of statutory provisions that …
operate jointly so as to deprive Commerce of certain legal authority that China believes it should have." U.S.
First Written Submission, para. 84. As discussed above, this re-characterization of China's claims is entirely
misguided. China's claims in respect of double remedies do not arise from an "unspecified set of statutory
provisions"; they arise from Commerce's stated lack of legal authority to avoid the imposition of double
remedies when it decides to apply anti-dumping dutie s determined in accordance with its NME methodology
simultaneously with the imposition of countervailing duties. This absence of legal authority was evident on
the face of the determinations that were the subject of consultations and was specifically invoked by
Commerce as a rationale for its inaction. China has iden tified this aspect of Commerce's determinations as a
distinct measure in its panel request merely to highlight the apparent importance of the absence of legal
authority as an explanation for why Commerce failed to avoid the imposition of double remedies in these
determinations.
29 U.S. First Written Submission, para. 81.
30 See, e.g., China First Written Submission, para. 395 ("Commerce stated, unequivocally, that the U.S.
countervailing duty laws do not give it authority to avoid the imposition of double remedies in this instance. In
respect of the U.S. anti-dumping laws , Commerce continued to make statements that are consistent with its
previous position that it lacks authority to avoid double remedies in NME investigations.").
31 See China First Written Submission, paras. 347-354.

accounting for the fact that its anti-dumping me thodology necessarily offset the same alleged
subsidies for which it imposed countervailing duties.

• With respect to the omission that China iden tified as an additional measure in its panel
request, China's claim is that the United States acts inconsistently with the identical provisions
of the covered agreements, because the absen ce of legal authority for Commerce to account
for double remedies in the context of NME inv estigations ensures that the United States will
act inconsistently with the same provisions of the covered agreements in all cases in which
Commerce applies the two remedies simultaneously.

35. In short, the legal issues relating to these measures are identical. Just as the 14 additional
measures at issue in US – Continued Zeroing concerned the same zeroing methodology that
Commerce had used in the 38 measures that were the subject of consultations, the measures that
China identified in its consultations request and th e one additional measure that it identified in its
panel request relate to the same basic question: whether the United States may impose countervailing
duties to offset subsidies that it necessarily offsets through the use of its NME methodology in a
parallel anti-dumping investigation. Hence, it is clea r that China's consultations request and its panel
request refer to the same subject matter and constitu te the same dispute. China has not expanded the
scope of this dispute, and therefore the one additi onal measure that China included in its panel request
is within the terms of reference of this Panel.

36. It is evident from the U.S. submission that its actual grievance is that China has challenged
"as such" the failure of the United States to prov ide legal authority to Commerce to avoid the
imposition of double remedies in parallel AD/CVD inv estigations of imports from NME countries.
The United States appears to suggest that China' s "as such" claims have some bearing upon the
measures that China was required to identify in its consultations request.
32 But as the Appellate Body
has recently observed, "the distinction between 'as such' and 'as applied' claims does not govern the
definition of a measure for purposes of WTO dispute settlement." 33 This distinction is no more than a
"heuristic device" that provides "an analytical tool to facilitate the understanding of the nature of a
measure at issue."34 The fact that China has challenged a measure "as such" is not relevant to whether
that measure relates to the dispute that was th e subject of consultations. As China has just
demonstrated, the additional measure in its panel request clearly relates to the same dispute that was
the subject of consultations, and is therefore within the terms of reference without regard to whether
China raises "as applied" or "as such" claims, or both, in respect of this additional measure.

37. For these reasons, China respectfully requests th e Panel to find that the omission specified by
China in its panel request is within the Panel's terms of reference.

IV. CONCLUSION

38. As China has demonstrated, the United States h as steadfastly refused to identify (1) when, if
ever, it would consider a double remedy to arise; (2 ) the legal authority under which it would evaluate
the existence and extent of a double remedy; (3) the types of "facts" or "evidence" that would be
relevant to its analysis; (4) why these "facts" or "e vidence" are relevant to determining the existence
or extent of a double remedy; (5) the specific step s that it would take to avoid the imposition of
double remedies, if the relevant "facts" or "evidence" were presented; and (6) whether it considers that

32 U.S. First Written Submission, para. 82.
 33 Appellate Body Report, US – Continued Zeroing, para. 179. See also Panel Report, US – Continued
Zeroing, para. 7.46 ("In our view, the distinction between 'as such' and 'as applied' claims does not govern the
definition of a measure for purposes of WTO dispute settlement, nor is this distinction intended to replace or
override the requirements of Article 6.2 of the DSU as to how measures have to be identified in a panel
request.").
34 Appellate Body Report, US – Continued Zeroing, para. 179.

it has any legal obligation, either under U.S. la w or under the covered agreements, to avoid the
imposition of double remedies in the context of parallel AD/CVD investigations of NME imports.

39. China considers that the United States' request for preliminary rulings is merely a
continuation of the U.S. strategy of avoiding any response to these questions. Ironically, if the
United States wanted to respond to China's "as su ch" claims with respect to the issue of double
remedies, it would need to do nothing more than identify the specific authority that Commerce
possesses under U.S. law to identify and avoid the imposition of double remedies in the context of
NME investigations. If the United States were to come forward with this authority, the parties could
then debate before the Pane l whether this authority is sufficient to address the problem of double
remedies, and the United States could explain why Commerce did not apply this authority in the
investigations at issue in this dispute. Havi ng failed to do so, however, the United States should not
be heard to criticize China for the manner in which it has chosen to specify the measures at issue in
this dispute.

40. For the reasons stated herein, China resp ectfully requests that the Panel reject the
United States' requests for preliminary rulings.
35

Columbia – Ports of Entry, para. 7.14; Panel Report, Canada – Aircraft, para. 9.15. Among other
considerations, the Panel will then be in a position to assess whether the United States' due process rights were
prejudiced by the alleged deficiencies in China's panel request.