U.S. Challenges China’s Non-Compliance With WTO Ruling Against Grain-Oriented Electrical Steel Duties
January 29, 2014

The United States recently announced that it is continuing with its dispute at the World Trade Organization (WTO) on China’s continued imposition of antidumping (AD) and countervailing (CVD) duties on U.S. exports to China of grain-oriented electrical steel (GOES).  This marks the first time the United States has challenged a claim by China that it has complied with a WTO ruling and suggests that the United States is prepared to bring similar challenges in other cases in the future when it believes the circumstances warrant doing so.

The original WTO ruling, which was issued in 2012, found China’s determination that U.S. exports of GOES caused adverse price effects (either price suppression or depression) in the Chinese market and material injury to its domestic industry was inconsistent with WTO rules.  Specifically, the WTO ruled that China had failed to prove a causal link between imports of GOES from the United States and the adverse price effects on Chinese producers of GOES in the Chinese market.

In response to the adverse WTO ruling, China issued a re-determination in July 2013 that lowered some of the margins against the two U.S. GOES producers (AK Steel Corporation and ATI Allegheny Ludlum Corporation).  The United States, however, considers China’s move to be insufficient to bring its measures into compliance with WTO rules, given that the Chinese duties were based on a faulty injury determination.  In fact, China’s injury investigations have also been criticized by the WTO in several other disputes, such as those involving chicken broiler parts and automobiles from the United States.  Thus, the formal challenge by the United States at the WTO to China’s claim of compliance in the GOES case reflects a long-standing frustration by the United States with China and a resolve by the United States to insist that China meaningfully meet its obligations under the WTO’s rules.  At this juncture, it seems unlikely that consultations will settle the U.S.-China differences and quite possible that the United States will request a panel at the WTO to address the question of whether China has complied with the WTO’s initial ruling against China.

The Chinese duties have effectively closed the market in China to U.S. exports of GOES.  Since the duties were imposed in 2010, the value of U.S. exports of GOES to China has plummeted from $250 million a year to just $3 million a year.  GOES is a high-tech, high-value magnetic specialty steel that is used primarily in the production of power transformers, rectifiers, reactors, and large electric machines. Kelley Drye & Warren represents ATI Allegheny Ludlum in the WTO case.