Subsidies Enforcement Report to Congress 2018

SUBSIDIES ENFORCEMENT ANNUAL REPORT TO THE CONGRESS

2021 Joint Report of the Office of the United States Trade Representative and the United States Department of Commerce

Table of Contents EXECUTIVE SUMMARY ...... 1 INTRODUCTION ...... 3 NEGOTIATIONS AND INITIATIVES ...... 4 United States-Mexico-Canada Agreement ...... 4

United States-United Kingdom Trade Agreement Negotiations ...... 5

United States-Kenya Trade Agreement Negotiations ...... 5

WTO Negotiations ...... 5

Trilateral Initiative and Other Bilateral Negotiations ...... 7

Addressing Market-Distorting Trade Practices in the Steel Industry ...... 8

U.S. TRADE REMEDY PROCEEDINGS ...... 10 Overview and Trends ...... 10

Petitioner Counselling ...... 11

Self-Initiation of Circumvention Inquiries in AD and CVD Orders ...... 12

Rule on Currency Undervaluation ...... 13

Application of U.S. CVD Law to China ...... 13

OTHER MONITORING AND ENFORCEMENT ...... 14

Interagency Center on Trade Implementation, Monitoring and Enforcement ... 14

Advocacy Efforts and Monitoring Subsidy Practices Worldwide ...... 15 Support for American Producers of Seasonal and Perishable Fruits and

Vegetables ...... 15

Steel and Aluminium Monitoring ...... 16

U.S. Actions Taken to Counter Chinese Government Subsidy Practices...... 17

WTO Subsidies Committee ...... 22

WTO Dispute Settlement ...... 31

Foreign CVD and Subsidy Investigations of U.S. Exports ...... 51

U.S. Monitoring Of Subsidy-Related Commitments ...... 53 CONCLUSION ...... 54

Subsidies Agreement and the U.S. CVD law EXECUTIVE SUMMARY to challenge and remedy the harm caused to U.S. industries, workers and exporters by This is the twenty-sixth annual trade-distorting foreign-government report to Congress describing the activities subsidies. USTR and Commerce work to and actions taken by the Office of the resolve issues of concern with foreign United States Trade Representative (USTR) governments’ practices and measures and the U.S. Department of Commerce through informal and formal bilateral and (Commerce) to identify, monitor, and multilateral engagement, advocacy, and address trade-distorting foreign negotiation. In those instances where U.S. 1 government subsidies. Strong enforcement rights and interests cannot be effectively of international trade rules is vital to furthered through these means, USTR will providing U.S. manufacturers, workers and initiate and pursue WTO dispute settlement exporters the opportunity to compete on a proceedings. level playing field at home and abroad. In 2020, USTR and Commerce continued to The U.S. Government’s subsidies monitor and evaluate foreign government enforcement program helps to ensure that subsidies, engage with trading partners on American companies and workers can subsidy issues, advocate for stronger compete globally on a level playing-field subsidy disciplines and pursue concrete and are not placed at a competitive action against foreign government practices disadvantage by trade-distorting foreign that appear to be inconsistent with government subsidies. In 2021, USTR and international subsidy rules. Through these Commerce will continue to challenge unfair actions, USTR and Commerce identified, trade practices, including harmful foreign deterred, and challenged foreign government subsidization, through rigorous government subsidization that harms the enforcement of domestic trade remedy United States. laws and U.S. rights under international trade agreements, as well as robust The principal tools available to the monitoring of foreign subsidies. U.S. Government to address harmful subsidy practices are the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (Subsidies Agreement) and U.S. domestic countervailing duty (CVD) law, while other venues and initiatives, such as the Steel Global Forum, also play a useful role. The Subsidies Agreement obligates all WTO Members to administer their government support programs consistent with certain rules. The United States relies on the disciplines and tools provided under the

1 This report is mandated by Section 281(f)(4) of the Uruguay Round Agreements Act.

2020 Subsidies Enforcement Highlights

Enhanced Ability to Address Subsidies under the United States-Mexico-Canada Agreement (USMCA): On January 29, 2020, the USMCA was signed into law. The USMCA strengthens the United States’ ability of the government to address trade-distorting subsidies, including through enforcement of trade remedy laws, and new prohibitions on the most egregious subsidies to state-owned enterprises (SOEs) and the most harmful types of fisheries subsidies.

United States-United Kingdom Free Trade Agreement Negotiation (US-UK FTA): On May 5, 2020, the United States and the United Kingdom launched trade agreement negotiations and held five sets of negotiating sessions in 2020. Relevant key negotiating objectives of a prospective US-UK FTA seek to strengthen the ability of the government to address trade-distorting subsidies, including through enforcement of trade remedy laws, a broader definition of an SOE, and strong disciplines on the most egregious subsidies involving SOEs and a prohibition of harmful fisheries subsidies.

Countervailing Undervalued Currency: On February 4, 2020, Commerce published a final rule modifying its regulations related to possible countervailable subsidies associated with unfairly undervalued currency. These regulations became effective on April 6, 2020. Commerce has applied these regulations in preliminary CVD determinations on imports from China and Vietnam, preliminarily finding that government action contributed to currency undervaluation conferring a countervailable subsidy to exporters from those countries of the products under investigation. Final determinations in these investigations are expected to be made in spring of 2021.

Rigorous Enforcement of Trade Remedies: In 2020, Commerce brought trade-enforcement to an all-time high: 550 orders, of which 144 are CVD and 406 AD, of which 205 involve products from China and 269 involve steel products.

Stopping circumvention of trade remedies: Commerce issued 14 affirmative preliminary or final circumvention determinations in 2020 – the most in any single year. Furthermore, in May and November, Commerce self-initiated three inquiries into possible circumvention of steel-related AD/CVD orders on products from China based on Commerce’s own monitoring of trade patterns.

Trilateral Initiative and Other Bilateral Efforts: The United States continued to work with the European Union and Japan to develop stronger and more effective subsidy rules and pushed bilaterally, in particular, for more effective disciplines on the market-distorting behavior of SOEs.

WTO Fisheries Subsidies Negotiations: In 2020, the United States continued to advocate for strong fisheries subsidies constraints, such as a proposal to “cap and reduce” subsidies, and prohibitions on subsidies to vessels determined to be engaged in IUU fishing, subsidies regarding overfished stocks, subsidies contingent on fishing outside the Member’s exclusive economic zone, and subsidies to vessels not flying the Member’s own flag.

Holding China Accountable for its Subsidies Notification Obligations: The United States pressed China on its failure to notify the full range of its steel and other industrial subsidy programs and utilized a rarely used mechanism to request that China provide certain legal measures - apparently not publicly available – related to government support programs for its fisheries and semiconductor industries.

Seasonal and Perishable Fruits and Vegetables: Commerce has established an outreach program to connect with farmers of seasonal and perishable fruits and vegetables, to enhance their understanding of applicable trade remedy laws and processes. Commerce has also created a new channel for stakeholders to convey information relating to foreign subsidies provided to exporters/producers of seasonal and perishable fruits and vegetables through accessing the Subsidies Enforcement Office’s “inbox” via https://www.trade.gov/get-help-foreign-subsidies.

INTRODUCTION the trade interests of another WTO Member. The WTO Subsidies Agreement establishes multilateral disciplines on the USTR and Commerce have unique use of subsidies and provides mechanisms and complementary roles with respect to for challenging government measures that their responses to U.S. trade policy contravene these disciplines.2 The problems associated with foreign disciplines established by the Subsidies government subsidies. In general, USTR has Agreement are subject to WTO dispute primary responsibility for developing and settlement procedures. The remedies in coordinating the implementation of U.S. such circumstances can include the international trade policy, including with withdrawal or modification of a subsidy, or respect to subsidy matters; representing the elimination of a subsidy’s adverse the United States in the WTO, including the effects within certain timeframes. In Committee on Subsidies and Countervailing addition, the Subsidies Agreement sets Measures (Subsidies Committee); and forth rules and procedures on the chairing the U.S. interagency process on application of CVD measures by WTO matters of subsidy trade policy. The Members with respect to subsidized Interagency Center on Trade imports. Implementation, Monitoring, and Enforcement within USTR also has provided The Subsidies Agreement divides the U.S. Government an increased research subsidy practices into three classes: and monitoring ability. prohibited (red light) subsidies; permitted yet actionable (yellow light) subsidies; and The role of Commerce, through its permitted non-actionable (green light) Enforcement and Compliance (E&C) unit subsidies.3 Subsidies contingent upon within the International Trade export performance (export subsidies) and Administration, is to administer and enforce subsidies contingent upon the use of the U.S. CVD law, identify and monitor the domestic over imported goods (import- subsidy practices of other countries, substitution subsidies or local-content provide the technical expertise needed to subsidies) are prohibited. All other analyze and understand the impact of subsidies are permitted, but are foreign subsidies on U.S. commerce, and nevertheless actionable through CVD or provide assistance to interested U.S. parties dispute settlement action if they are (i) concerning remedies available to them “specific”, e.g., limited to a firm, industry or under U.S. law. E&C also identifies group and (ii) found to cause adverse trade appropriate and effective strategies and effects, such as material injury to a opportunities to address problematic domestic industry or serious prejudice to foreign subsidies and works with USTR to engage foreign governments on subsidies

2 This report focuses on measures that would fall 3 With the expiration in 2000 of certain provisions of under the purview of the Subsidies Agreement and the Subsidies Agreement regarding green light does not comprehensively address activities that subsidies, the only non-actionable subsidies at would be addressed under other WTO agreements, present are those that are not specific, as discussed such as the Agreement on Agriculture. below.

issues. Moreover, E&C works closely with subsidization and the market-distorting USTR in responding to foreign government practices of state-owned enterprises (SOEs). requests for information, and in defending The resulting USMCA achieves this the interests of U.S. exporters in foreign objective. CVD cases involving imports from the United States. Within E&C, subsidy Specifically, in the realm of trade monitoring and enforcement activities are remedies, the United States preserved its carried out by the Subsidies Enforcement ability to enforce rigorously its trade laws, Office (SEO). See Attachment 1. including the CVD law. Additionally, the USMCA promotes cooperation among the NEGOTIATIONS AND INITIATIVES trade remedies administrators of the three countries, particularly with regard to the UNITED STATES-MEXICO-CANADA AGREEMENT sharing of information that would improve the ability of administrators to effectively On September 30, 2019, the United monitor and address unfair trade. The States, Mexico, and Canada concluded USMCA also enshrines cooperation negotiations aimed at modernizing the between the parties in the conduct of duty North American Free Trade Agreement evasion proceedings. (NAFTA) of 1994. The result was the United States-Mexico-Canada Agreement In the chapter of USMCA covering (USMCA), a 21st century, high-standard SOEs, the United States has built upon agreement. Representatives of the three previously negotiated agreements. In countries subsequently signed the USMCA particular, the USMCA: (1) broadens the on November 30, 2019, and in December definition of an SOE to include instances of 2019, the agreement was submitted to the government-minority ownership in which countries’ respective legislatures for government control can be established; (2) approval. On July 1, 2020, USMCA entered adopts SOE-subsidy disciplines that go into force. significantly beyond the WTO Subsidies Agreement, such as prohibitions on The process to modernize NAFTA financing to insolvent or uncreditworthy began on May 18, 2017, when USTR sent a SOEs; and (3) contains enhanced letter notifying the United States Congress transparency provisions. of the Administration’s intent to initiate renegotiation of the NAFTA. With respect to marine fisheries, the USMCA achieved the goal of In accordance with the Bipartisan establishing rules to prohibit certain Congressional Trade Priorities and harmful subsidies, such as those that Accountability Act of 2015, USTR released negatively affect overfished fish stocks, and negotiating objectives 30 days prior to those provided to operators caught formal negotiations. One item the United engaged in illegal, unreported and States included in the objectives was a unregulated (IUU) fishing. It also enhances commitment to ensuring that a revised the transparency and reporting of fisheries NAFTA strengthen the ability of the subsidies programs beyond what the government to address trade-distorting Subsidies Agreement already requires and

obligates the Parties to make their best with respect to government equity efforts to refrain from introducing new or investments into an SOE. extending or enhancing existing subsidy programs that contribute to overfishing or With respect to marine fisheries, overcapacity. Parties also agreed to work similar to USMCA, the United States’ together in the WTO towards strengthening negotiation objective is to establish rules to rules on the provision of fisheries subsidies. prohibit harmful fisheries subsidies, such as Such rules help level the playing field for those that contribute to overfishing and the U.S. industry and benefit the long-term IUU fishing and pursue transparency in health of the ocean’s environment and fish fisheries subsidies programs. stocks, which are essential both to those who depend on fishing and to consumers. UNITED STATES-KENYA TRADE AGREEMENT NEGOTIATIONS UNITED STATES-UNITED KINGDOM TRADE AGREEMENT NEGOTIATIONS On March 17, 2020, the U.S. Trade Representative notified Congress of the On October 16, 2018, the U.S. Trade Administration’s intent to negotiate a trade Representative notified Congress of the agreement with Kenya. On July 8, 2020, the Administration’s intent to negotiate a trade U.S. Trade Representative and Kenya agreement with the United Kingdom. On Cabinet Secretary for Industrialization, May 5, 2020, the U.S. Trade Representative Trade, and Enterprise Development Betty and United Kingdom Secretary of State for Maina formally launched trade agreement International Trade Elizabeth Truss negotiations between the United States and announced the formal launch of trade the Republic of Kenya. Since the launch, agreement negotiations between negotiations have commenced. the United States and the United Kingdom. Since the launch, U.S. and UK In the chapter of the US-Kenya FTA negotiators have held five sets of covering SOEs, the United States’ negotiating sessions in May, June, July- negotiation objective is to build upon August, September and October 2020. previously negotiated agreements, including USMCA. In particular, the United In the chapter of the US-UK FTA States seeks to: (1) build on the definition covering SOEs, the United States’ of an SOE in the USMCA; (2) adopt SOE- negotiation objective is to build upon subsidy disciplines that go beyond the WTO previously negotiated agreements, Subsidies Agreement; and (3) develop including USMCA, to achieve ambitious new enhanced transparency provisions, disciplines for SOEs. In particular, the including those related to third-party SOEs negotiation objectives include: (1) define operating in Kenya. SOEs on the basis of government ownership or control; (2) adopt SOE-subsidy disciplines WTO NEGOTIATIONS that go beyond the WTO Subsidies During the WTO Ministerial Agreement and USMCA; and (3) further Conference in December 2015 (MC10), no develop transparency provisions, including agreement was reached among Ministers to continue the Doha Development Round

mandate. While delegations expressed Members have put forward several diverging views on whether and how to proposals designed to bridge gaps and continue to engage on the various Rules bypass continued abstract debates in the Negotiating Group (RNG) issues in a post- RNG. MC10 environment, a large number of delegations stressed the importance of Following MC11, the RNG engaged continuing to work on fisheries subsidies as in a rigorous negotiating schedule, with an issue that stands on its own merits, negotiating rounds on a near-monthly basis moving away from old linkages and and intense intersessional work. During this stalemates that have been obstacles to period, in the spring of 2019, the United reaching consensus. Thus, between MC10 States worked to refocus the negotiations and MC11, there was intensive work on the away from the desire by many Members to fisheries subsidies negotiations. preserve policy space to grow their fisheries and rather focused on the actual subsidies At MC11, in December 2017, currently being provided with a creative Ministers issued a Ministerial Decision in proposal that would set limits on Members which Members committed to “continue to subsidy programs.4 The proposal, engage constructively in the fisheries cosponsored with Australia, Argentina and subsidies negotiations, with a view to Uruguay, would constrain the total value of adopting, by the Ministerial Conference in fisheries subsidies provided by the WTO 2019, an agreement on comprehensive and Members with the largest marine capture effective disciplines that prohibit certain production, and require commitments to forms of fisheries subsidies that contribute reduce subsidy levels from the largest to overcapacity and overfishing, and subsidizers, otherwise known as a “cap and eliminate subsidies that contribute to IUU- reduce” approach. This proposed approach fishing.” The United States, for its part, was intended to complement and was in continued to play a leadership role in the addition to the prohibitions under negotiations and to press for negotiation on some of the most harmful comprehensive and effective disciplines of subsidies, such as those that support IUU the most harmful types of subsidies that fishing and fishing on overfished stocks. would apply to all Members, regardless of development status. The United States also cosponsored new text proposals with numerous FISHERIES SUBSIDES Members, including enhanced transparency and notification requirements, As previously reported, the United and proposals to prohibit subsidies to States has long been an active and vessels and operators determined to have constructive participant in the fisheries engaged in IUU fishing, subsidies contingent subsidies negotiations in the RNG, pressing on fishing outside the Member’s for a meaningful agreement to prohibit the jurisdiction, and subsidies to vessels not most harmful types of fisheries subsidies. flying the Member’s own flag.5 While these The United States and various like-minded proposals directly address the worst forms

4 TN/RL/GEN/197/Rev.2 Argentina, Australia, Indonesia, Japan, New Zealand 5 TN/RL/GEN/201/Rev.1 (cosponsored with and Uruguay).

of industrial fishing subsidies, Members at place, all sessions reverted to a virtual all levels of development continued to press format. for exceptions and other carve-outs from the prohibitions, in particular to preserve The RNG held week-long negotiating policy space for continued or future “clusters” in September, October, subsidization. November, and December, along with Heads of Delegation level meetings Toward the end of 2019, after it throughout the period and an intensive became clear that the RNG would not meet intersessional schedule. This included its December deadline for completing the meetings in various configurations, with the negotiations, the Rules Group committed to intention for dynamic engagement to try to an intensive work program in 2020 with the bridge the continued wide gaps in aim of reaching agreement by the planned Members’ negotiating positions. Twelfth Ministerial Conference in June 2020. The RNG held negotiating sessions in Throughout 2020, the United States January, February and March, during which continued to press for a meaningful Members continued their intensive outcome, one that would change the status discussions on the full range of potential quo, constrain the largest subsidizers, and fisheries subsidies disciplines. prohibit the most harmful fisheries Unfortunately, following the March session, subsidies. Although there was modest in-person negotiations were put on hold progress, several Members continued to due to the coronavirus (COVID-19) debate broad principles rather than engage pandemic. Although Members continued to in constructive, text-based negotiations. In have some limited exchange of views in addition to the challenges posed by the writing, including on proposals by India on COVID-19 pandemic, strong divergences special and differential treatment, and by among Members remain and conclusion by the Least Developed Country (LDC) Group 2020 was not possible. The negotiations on several issues, there was otherwise will continue in 2021. limited engagement in the Spring. The United States will continue to In late June, the RNG Chair, engage actively and constructively in the Ambassador Wills from Colombia, initiated negotiations in 2021 to press for effective a return to active negotiations through disciplines to prohibit that most drive circulation of a draft consolidated text. In overfishing or support IUU fishing. The late July, at a meeting of Heads of United States also will continue to advocate Delegation, the RNG agreed to resume for enhanced transparency and notification continuous negotiations starting in of fisheries subsidy programs. September, using the draft consolidated text as a basis. Negotiating sessions were TRILATERAL INITIATIVE AND OTHER BILATERAL held in a virtual format with some in hybrid NEGOTIATIONS form, allowing for in-person Geneva During the past year, the United participation and virtual participation of States continued work in various fora to capital-based officials. In the late fall, when address ongoing concerns regarding non- additional COVID-19 restrictions were put in market-oriented policies and practices in

third countries that lead to severe to determine that an entity is a public body, overcapacity, and undermine the proper it is not necessary to find that the entity functioning of international trade, including “possesses, exercises or is vested with where existing rules are not effective. governmental authority.”6

Toward that end, technical experts ADDRESSING MARKET-DISTORTING TRADE from the European Union (EU), Japan and PRACTICES IN THE STEEL INDUSTRY the United States held in-depth discussions in the early months of 2020 to develop In 2020, the United States continued possible stronger and more effective rules its active engagement in the Global Forum on industrial subsidies and SOEs to promote on Steel Excess Capacity (Global Forum), a more level playing field. One of the key the North American Steel Trade Committee issues under discussion by this technical (NASTC), and the Steel Committee of the group deals with how to address market- Organization for Economic Cooperation and distorting behavior of SOEs. Development (OECD), as well as its strong enforcement efforts with respect to steel. In addition, the group is working to develop rules to prohibit outright certain Excess capacity in global steelmaking particularly egregious subsidy practices and, remains a significant problem, with capacity for other particularly distortive subsidy continuing to exceed demand for steel by a types, to obligate the subsidizing country to wide margin. The COVID-19 pandemic prove that the subsidy does not cause exacerbated global imbalances in 2020 by commercial harm to others. Further, the diminishing demand in key steel-consuming group is considering a revised rule on the sectors, while steelmaking capacity use of external benchmarks, a new rule that continued its increase in regions already provides a targeted remedy to address characterized by excess capacity. According subsidies related to excess capacity, a to the OECD, the gap between global definition of the “threat of serious steelmaking capacity and demand was prejudice,” and enhanced rules to increase expected to increase to at least 700 million the costs of transparency and notification metric tons in 2020, after narrowing failures. slightly between 2016 and 2019. This excess of capacity over consumption is On January 14, 2020, the trade twice the combined annual steel ministers from Japan, the EU, and the consumption of the United States, the United States met and issued a statement, European Union, and Japan. China detailing areas of agreement and issues that continues to account for the largest share continue to be worked upon. Beyond the of existing and new global steelmaking topics noted above, the trade ministers capacity, and in 2020 achieved a record- agreed that on the issue of “public body”, high volume of annual steel production. the interpretation by the WTO Appellate These sustained high levels of steelmaking Body in several reports undermines the capacity and associated production remain effectiveness of WTO subsidy rules and that out of line with market realities, and

6 https://ustr.gov/about-us/policy-offices/press- trilateral-meeting-trade-ministers-japan-united- office/press-releases/2020/january/joint-statement- states-and-european-union.

continue to cause distortions in trade and practices of third countries that have patterns and global prices. led to severe excess capacity and that undermine the proper functioning of ENGAGEMENT international trade. Among other things, this trilateral work, as noted above, entails During 2020, the United States exploring the development of rules to th hosted the 30 meeting of the NASTC, a confront particularly egregious subsidy longstanding platform for government- practices, including subsidies contributing industry cooperation among the United to overcapacity, and to address the market- States, Mexico, and Canada on steel policy distorting behavior of state enterprises. In matters, and for coordination on issues in parallel to this initiative, the United States, multilateral fora of importance to the steel the European Union, and Japan have made sector. NASTC efforts include monitoring joint submissions to the WTO concerning and information-sharing regarding the myriad ways in which state intervention developments in key steel-producing third and the conduct of state enterprises countries with a view to identifying and contribute to overcapacity in steel and addressing distortions in the global steel other industrial sectors. (For further market. information, see WTO Subsidies Committee section, below.) The United States is also an active participant in the Steel Committee of the In addition to these cooperative OECD, which convened one meeting and efforts with like-minded trading partners, undertook various workstreams remotely in USTR and Commerce continue to use 2020. The OECD Steel Committee provides bilateral engagement with other countries a forum for government, industry, and labor to press for change in foreign government representatives from 30 economies conduct that distorts steel markets and (including several non-OECD members) to international trade in the steel sector. discuss evolving challenges facing the steel industry. Reducing market-distorting TRADE REMEDY ENFORCEMENT subsidies affecting the steel sector and encouraging structural adjustment are key Overall, Commerce administered a objectives of the Committee’s work. The total of 269 AD/CVD orders on steel-related United States and like-minded trading products in 2020 – nearly half of the 550 partners are working through the OECD orders in place. Steel Committee and the separate Global Forum to develop data and analyses on the Commerce has also focused on anti- prevalence of subsidies and other circumvention efforts, particularly involving government support measures in the steel circumvention of U.S. AD and CVD orders on sector, and the role of those measures in steel products. For example, in May 2018, creating or sustaining excess capacity. Commerce made affirmative final circumvention determinations for The United States is also working corrosion-resistant steel products (CORE) closely with the European Union and Japan and cold-rolled steel products (CRS) made to address non-market-oriented policies with substrate from China, shipped to

Vietnam for minor processing, and then involving oil country tubular goods (OCTG) exported to the United States – in made with substrate from China, completed circumvention of existing AD and CVD in Brunei and the Philippines, and then orders on CORE and CRS from China. On exported to the United States. Final December 16, 2019, Commerce made determinations are expected in mid-2021. affirmative final circumvention determinations involving CORE and CRS that In addition, Commerce published are made with substrate from Korea or new regulations that strengthen its current Taiwan, shipped to Vietnam for minor steel import monitoring program. The new processing, and then exported to the regulations allow for a continuation of the United States – in circumvention of existing timely monitoring of steel import trends but AD and CVD orders on CORE and CRS from also new data collection that will help Korea and Taiwan. detect circumvention and evasion involving steel products. The new regulations include: In August 2019, Commerce broke new ground by self-initiating inquiries into • a new requirement to identify the possible circumvention of the AD/CVD steel import licenses and the orders on CORE from China and country where imported steel Taiwan. Specifically, Commerce examined products are melted and poured; an whether steel substrate from China or aggregate version of this country of Taiwan is exported to any of 5 third melt and pour data will be included countries (Costa Rica, Guatemala, Malaysia, in the public Steel Import South Africa, and the UAE) for completion, Monitoring and Analysis (SIMA and then exported to the United system); States. This was the first time that Commerce self-initiated circumvention • expand the scope of the steel import inquiries based on its own monitoring of monitoring program to include all trade patterns. It was also the first self- steel products subject to Section 232 initiation of multi-country circumvention tariffs; and inquiries. In 2020, Commerce made • extend the duration of the steel affirmative anti-circumvention findings import monitoring program. regarding CORE completed in Costa Rica, Malaysia, and the UAE. U.S. TRADE REMEDY PROCEEDINGS In May 2020, Commerce self- initiated an inquiry into possible OVERVIEW AND TRENDS circumvention of AD/CVD orders involving Commerce’s E&C unit rigorously stainless steel sheet and strip made with enforces U.S. trade laws by conducting CVD substrate from China, completed in investigations of imports into the United Vietnam, and then exported to the United States that are allegedly subsidized by States. A final determination is expected in foreign governments and that cause harm early-2021. Also, in November 2020, to U.S. industries. Commerce also conducts Commerce self-initiated new inquiries into AD investigations of imports that are possible circumvention of AD/CVD orders alleged to be dumped at prices that are less

10 than fair value that cause harm to U.S. estimated breakdown of the share of industries and workers. In addition, the AD/CVD orders by industry grouping: U.S. International Trade Commission (USITC) – an independent agency – CURRENT AD/CVD ORDERS BY PRODUCT determines whether the imports at issue PRODUCT/GROUP SHARE OF TOTAL (%) materially injure, threaten material injury to, or materially retard the establishment of Steel 49 the competing U.S. industry. Investigations Chemicals 13 vary widely in scope and complexity and will Other Metals 8 result in a CVD order (and/or AD order) Plastics & Rubber 8 Foodstuffs 4 upon affirmative determinations by both Paper & Paperboard 4 Commerce and the USITC. These orders Textiles 4 direct the U.S. Customs and Border Other Manufacture 4 Protection to collect duties on unfairly Machinery & Auto 4 subsidized or dumped goods entering the Cement & Ceramics 2 country, giving relief to domestic industries Minerals <1 harmed by unfair trading practices. Details on all of Commerce’s CVD Commerce continues to monitor and proceedings that were active from January enforce its AD and CVD orders through 1, 2020, through June 30, 2020, as reported various proceedings, including by the United States to the WTO Subsidies circumvention inquiries. Such inquiries Committee in accordance with Article 25.11 determine if an existing AD/CVD order is of the Subsidies Agreement, are available in being circumvented. In addition, WTO document G/SCM/N/363/USA Commerce defends its determinations in (October 16, 2020), available at the WTO U.S. courts and, as discussed in detail public document web site at further below, before WTO dispute https://docs.wto.org/.7 Detailed analysis of settlement panels and NAFTA or USMCA the individual subsidy programs that binational panels. Commerce has investigated in each CVD proceeding since 1980 can be accessed As of December 28, 2020, there through the SEO’s Electronic Subsidies were a total of 550 AD and CVD orders in Enforcement Library website at place covering a broad array of industries https://esel.trade.gov. and products, providing relief to domestic industries and workers from unfairly traded PETITIONER COUNSELLING goods. Of these 550 total orders, 144 are CVD orders. Based on available data, Historically, most of Commerce’s AD roughly 0.75 percent of U.S. imports for and CVD proceedings have been initiated in consumption were subject to AD or CVD response to formal petitions received by orders. The following table shows the Commerce from U.S. industries who are seeking relief from injury caused by

7 Similar detailed information for the period July 1, become available to the public around April 2021, 2020 through December 31, 2020 was not available also on the WTO’s public document site. at the time of drafting this report, but should

11 allegedly dumped and unfairly subsidized • Provides potential petitioners with imports into the United States. U.S. law publicly available tariff and trade (the Tariff Act of 1930, as amended) data from Commerce, the U.S. establishes specific elements that a petition Department of Treasury and the must include before Commerce can initiate USITC. an investigation on the basis of a petition.8 In order to assist U.S. companies in In fiscal year 2020 alone, the PCAU understanding those statutory conducted over 950 counseling sessions, to requirements and the general process of ensure that domestic industries obtain the compiling and submitting an AD or CVD relief that they are entitled to under the petition, E&C maintains an AD/CVD Petition trade remedy laws.9 Counseling and Analysis Unit (PCAU), which has a dedicated staff of professionals that SELF-INITIATION OF CIRCUMVENTION INQUIRIES IN provide help and advice to domestic AD AND CVD ORDERS industries as to the remedies to which they Under U.S. law, Commerce may may be entitled under the trade remedy conduct a circumvention inquiry when laws. For example, the PCAU: evidence suggests that merchandise subject • Helps industries (i.e., potential to an AD or CVD order undergoes a minor petitioners) to understand the U.S. alteration that brings the product outside unfair trade laws and the the scope of the order. Commerce may requirements for filing a petition also conduct circumvention inquiries when and requesting the initiation of an evidence suggests that merchandise subject investigation; to an order is completed or assembled in • Advises potential petitioners in the United States or third countries from determining what types of parts and components imported from the information will be required in order country subject to the order. Commerce to pursue action against a foreign can also find that later-developed industry suspected of unfair trade merchandise (i.e., merchandise developed practices; after the initiation of an AD/CVD • Assists potential petitioners to investigation) may also be covered by an ensure their petition is in existing order. compliance with statutory initiation Typically, circumvention inquiries standards; and are initiated in response to allegations filed by the domestic industry. However,

8 Specifically, the petition must provide a reasonable that a government financial contribution has been basis to believe or suspect that dumping and/or made, which bestows a benefit on the foreign subsidization of a particular product is occurring, producer/exporter, and that the subsidy is “specific,” that the domestic industry has suffered material e.g., limited to a particular company, or industry or injury, threat thereof, or the establishment of a group of companies or industries. domestic industry is materially retarded, and that 9 Additional information on the statutory there is a causal link between them. In order to requirements and process for filing a trade remedies allege that a subsidy exists, the petition must allege petition is available at: https://www.trade.gov/ec- and support with reasonably available information petition-counseling.

Commerce’s regulations provide that a sector of the economy can constitute a circumvention inquiry may be self-initiated group of enterprises for purposes of when Commerce determines from available determining whether a subsidy is specific, information that an inquiry is warranted. on February 4, 2020, Commerce published Commerce has developed the capacity to the Modification of Regulations Regarding more fully utilize self-initiation to stop Benefit and Specificity in Countervailing circumvention of U.S. trade laws. Duty Proceedings (Currency Rule)(85 FR 6031). On May 12, 2020, Commerce announced the self-initiation of a new The Currency Rule sets forth inquiry into possible circumvention of Commerce’s approach to analyzing the AD/CVD orders involving stainless steel specificity of domestic subsidies and the sheet and strip made with substrate from determinations of undervaluation and China, completed in Vietnam, and then benefit when examining potential subsidies exported to the United States. Also, on arising where government action on the November 5, 2020, Commerce announced exchange rate contributes to an the self-initiation of new inquiries into undervaluation of a currency. The Currency possible circumvention of AD/CVD orders Rule became effective on April 6, 2020. involving oil country tubular goods made Commerce has applied this new regulation with substrate from China, completed in in preliminary determinations for cases Brunei and the Philippines, and then from China and Vietnam, preliminarily exported to the United States. These finding that currency undervaluation actions demonstrate Commerce’s vigilance conferred a countervailable benefit to to stop circumvention of U.S. trade laws, exporters from those countries.10 Final wherever it occurs. determinations in those investigations are expected to be made in early spring of RULE ON CURRENCY UNDERVALUATION 2021, and, pursuant to the regulation, Commerce will continue to evaluate While the existing statute provides allegations of currency undervaluation Commerce with the authority to address supported by reasonably available subsidies resulting from unfair currency information. undervaluation, in order to provide additional guidance to the public on how APPLICATION OF U.S. CVD LAW TO CHINA Commerce will determine the existence of a benefit when examining a potential subsidy Starting in the 1980s, Commerce resulting from currency undervaluation and declined to apply the CVD law to nonmarket clarify that companies in the traded goods economies (NMEs) because Soviet-era

10 See, Passenger Vehicle and Light Truck and Twist Ties From the People's Republic Tires From the Socialist Republic of of China: Preliminary Affirmative Vietnam: Preliminary Affirmative Countervailing Duty Determination and Countervailing Duty Determination and Alignment of Final Determination With Alignment of Final Determination With Final Antidumping Duty Determination; 2020, 85 FR Final Antidumping Duty Determination; 2020, 85 FR 77167-77169 (December 1, 2020), and 71607-71610 (November 10, 2020), and accompanying Preliminary Decision Memorandum. accompanying Preliminary Decision Memorandum;

economies presented obstacles to its disputes challenging WTO Members’ application. In 2006, based on a CVD maintenance of subsidy programs that petition filed by the U.S. coated free sheet appear to be prohibited are discussed paper industry, Commerce determined that below in the WTO Dispute Settlement reforms in China’s economy had removed section. those obstacles, and began to apply U.S. CVD law to China. Public Law 112-99, OTHER MONITORING AND amending Section 701 of the Tariff Act of ENFORCEMENT 1930, reaffirmed Commerce’s ability to impose countervailing duties on INTERAGENCY CENTER ON RADE IMPLEMENTATION, merchandise from countries that MONITORING AND ENFORCEMENT Commerce has designated as NMEs when those imports benefit from countervailable In 2016, the Trade Facilitation and subsidies and materially injure a U.S. Trade Enforcement Act of 2015 (TFTE) industry. Efforts by China to challenge statutorily established the Interagency Commerce’s ability to countervail Chinese Center on Trade Implementation, subsidies under Public Law 112-99 through Monitoring and Enforcement (the “Center”) WTO dispute settlement were unsuccessful. within USTR to support the trade enforcement function across the U.S. Since 2006, numerous U.S. government. industries concerned about subsidized imports from China have filed CVD By 2020, the Center had analysts petitions. At the end of December 2020, with subject matter expertise in subsidies Commerce had in place 205 AD and CVD analysis and economics, the political orders on imports from China, involving economies of China and other major trading many different products and industries, 71 partners, and in a diverse set of language of which were CVD orders. skills – including Mandarin, Japanese, Korean, French, German, and Turkish. There is a broad array of alleged subsidies that Commerce has investigated In 2020, the Center continued to or is investigating in these CVD cases, enhance USTR’s trade enforcement including currency, preferential government activities with respect to Section 301 trade policy loans; income tax and value-added actions and in the context of WTO dispute tax exemptions and reductions; the settlement. Specifically, the Center provision by the government of goods and continued to support the U.S. challenge to services such as land, electricity, and steel India’s export subsidies at the WTO, and to on non-commercial terms; and a variety of research and identify foreign government provincial and local government subsidies. subsidies in order to advance the U.S. agenda of enhancing subsidies transparency Several of the programs Commerce in various multilateral fora: the WTO has investigated appear to be prohibited Subsidies and Agriculture committees, the under the Subsidies Agreement, including a OECD Global Steel Forum on Excess myriad of export-contingent grants and tax Capacity, OECD Trade Policy Papers, a new incentives. Details on the U.S. WTO OECD initiative on fossil fuel subsidies, and

at the Government/Authorities Meeting on Commerce announced a comprehensive Semiconductors. plan - the Action Plan to Support American Producers of Seasonal and Perishable Fruits ADVOCACY EFFORTS AND MONITORING SUBSIDY and Vegetables (Action Plan) - to address PRACTICES WORLDWIDE threats that increased imports pose to American producers of seasonal and The United States is strongly perishable fruits and vegetables. The plan committed to enforcing its rights under the resulted from over 300 written submissions Subsidies Agreement. Specifically, the U.S. and two days of hearings in August 2020, in Government is focusing its monitoring and which the agencies heard live testimony enforcement activities in key overseas from over 60 witnesses concerning seasonal markets by working to address harmful and perishable products. The witnesses foreign government subsidies and ensuring included 11 Members of Congress, elected foreign government compliance with state officials from Florida and Georgia, existing trade agreements. By working to leadership from national and state address a wide range of subsidy practices, agricultural associations, academics, and the U.S. Government’s subsidies dozens of producers of seasonal and enforcement program is helping to meet perishable products from Florida, Georgia, the important goal of expanding U.S. and other states. Numerous witnesses exports and creating and preserving U.S. testified that Mexico’s trade practices harm jobs. southeastern and other growers of seasonal and perishable fruits and vegetables and Identifying, researching and that urgent relief is needed. evaluating potential foreign government subsidy practices is a core function of the Commerce followed through on two subsidies enforcement program. Expert important elements of the Action Plan to subsidy analysts in E&C and USTR (including Support American Producers of Seasonal within the Center) with various foreign and Perishable Fruits and Vegetables in language skills primarily conduct this work. 2020. First, Commerce established an The work includes performing research and outreach program to connect with growers in-depth analysis of potential subsidies and of seasonal and perishable fruits and cultivating relationships with U.S. industry vegetables to enhance their understanding contacts. USTR and E&C officers stationed of applicable trade remedy laws and overseas (for example, in China) enhance processes. Second, Commerce established these efforts by helping to gather, clarify, a new formal internet channel and confirm the accuracy of information ([email protected]) for stakeholders to concerning foreign subsidy practices. provide information related to unfair subsidies for foreign producers and SUPPORT FOR AMERICAN PRODUCERS OF exporters of seasonal and perishable SEASONAL AND PERISHABLE FRUITS AND products, including those in Mexico. The VEGETABLES internet channel is a concrete step to address potential threats of increased On September 1, 2020, USTR, the imports that may injure U.S. producers. Department of Agriculture (USDA), and

Commerce will continue to monitor The SIMA team also publishes a foreign subsidy practices that have a direct series of comprehensive reports detailing impact on American producers of seasonal current steel trade flows involving the top and perishable fruits and vegetables. importing and exporting countries. These reports cover steel trade flows that may STEEL AND ALUMINIUM MONITORING impact U.S. markets, and the reports provide U.S. business with updated market Commerce administers the Steel intelligence on the changing trade patterns Import Monitoring and Analysis (SIMA) globally. Users of the reports are able to program. SIMA provides early and reliable compare markets and objectively evaluate statistical information on steel mill imports and react to market trends, allowing a to the government and the public by “deep dive” analysis of steel trends. combining the data reported on steel import licenses with other publicly available In addition, SIMA has developed an data in the Steel Import Monitor on Interactive Global Steel Trade Monitor that Commerce’s website. SIMA posts a variety provides extensive and timely steel trade of tables that alert U.S. steel producers to data for the top 20 global steel importing increases in certain kinds of imports and countries and top 20 global steel exporting rapid price changes. Steel is the only sector countries. This tool gives users flexibility to for which the U.S. Government currently select online customized import and export collects early import information. flows in intuitive graphic form and detailed charts for five aggregate steel mill product On September 11, 2020, Commerce groups: flat, long, pipe & tube, semi- published a final rule (85 FR 56162) finished, and stainless products. implementing changes to its steel import licensing system, with an effective date of The interactive monitor provides October 13, 2020. In the final rule, customized access to detailed data in tables Commerce modified its regulations and graphs about the top countries that pertaining to the SIMA system to require play an integral role in global steel trade. steel import license applicants to identify Both the reports and the interactive the country where the steel used in the monitor include annual and year-to-date manufacture of the imported steel product global export and import trends, import and was melted and poured (the country of export composition by type of products, melt and pour); expand the scope of steel and export and import market share by products subject to the SIMA licensing country and type of steel product. requirement to an additional eight tariff lines (at the ten-digit level); extend the In addition to the enhancements to SIMA system indefinitely by eliminating the the SIMA system, Commerce is undertaking regulatory provision concerning the to establish a system of import licensing to duration of the SIMA system; and codify facilitate the monitoring of imports of eligibility for use of the low-value license for aluminum articles. An aluminum import certain steel entries up to $5,000. monitoring and analysis program will provide internal and external parties earlier advanced warning of potential import

concerns. A proposed rule was published in by the rules to which it agreed when it April 2020 (85 FR 23748) announcing the joined the WTO in 2001. With subsidy Department’s proposal and requesting transparency obligations, concerns involve public comments. A final rule was China’s chronic failure to notify all aspects published on December 23, 2020 (85 FR of its industrial subsidy regime to the WTO, 83804). particularly at the sub-central levels of government. China maintains a largely U.S. ACTIONS TAKEN TO COUNTER CHINESE opaque industrial support system and GOVERNMENT SUBSIDY PRACTICES employs dozens, if not hundreds of subsidies – some of which may be OVERVIEW prohibited – as an integral part of industrial policies designed to promote or protect its Despite its insistence that it be SOEs and favored domestic industries. The treated as a market economy, the Chinese heavy state role in the economy has government has continued to reinforce the generated trade frictions with China’s many state’s significant role in China’s economy, trade partners, including the United States, which relies heavily on state-owned and and caused significant harm to the U.S. state-financed enterprises. China’s state manufacturing base. In response, the capitalist and mercantilist strategy diverges United States and other WTO Members from the path of economic reform that have pursued several successful dispute drove China’s accession to the WTO, and is settlement proceedings against China with incompatible with an international trading respect to its subsidies practices, and have system expressly based on open, market- pressed China in the WTO Subsidies oriented policies and rooted in the Committee to be more transparent (see principles of non-discrimination, market below and WTO Subsidies Committee access, reciprocity, fairness, and section of this report). transparency. With the state leading China’s economic development, the Transparency is a core principle of Chinese government has pursued new and the WTO agreements, and it is firmly more expansive industrial and mercantilist enshrined as a key obligation under the policies, often designed to limit market Subsidies Agreement, as well as China’s access for imported goods, foreign Protocol of Accession to the WTO and manufacturers, and foreign service- accompanying report of the Working Party. suppliers. The Chinese government does Each WTO Member is required to file this while also offering substantial biennial notifications of all specific subsidies government guidance, regulatory support, that it maintains. This information is and resources, including subsidies, to required, among other reasons, so that it is Chinese industries, particularly industries possible to assess the nature and extent of dominated by SOEs. a Member’s subsidy programs and their likely impact on trade and competing Against this backdrop, there industries in the territory of other continue to be serious concerns regarding Members. China’s poor record of compliance with its WTO obligations and its willingness to play

Despite the obligation to submit years after its implementation, or after a regular subsidy notifications, and despite program has been terminated, as was the being the largest trader among WTO case with most of the reported sub-central Members, China has repeatedly engaged in government subsidy programs, contributes obfuscation and delaying tactics. It did not little to the transparency of China’s file its first subsidy notification until 2006, subsidies regime. five years after joining the WTO. That notification only covered the period from In 2018, the day before its trade 2001 to 2004. China submitted a second policy review, China submitted its fourth notification five years later, in 2011, subsidy notification covering the years covering the period 2005 to 2008. In 2015-2016, well over a year past the October of 2015, China submitted its third deadline. This was the first subsidy notification, covering the periods 2009 to notification of China, since becoming a WTO 2014. Not only were all three notifications Member in 2001, that included in a single late; they were significantly incomplete. document both central and sub-central subsidies. Unfortunately, the notification In particular, none of these suffered from the same over-reporting and notifications included the numerous central under-reporting. Numerous insignificant government subsidies for certain sectors programs and programs that should not (e.g., steel, aluminum, and wild capture have been notified, were over-reported, fisheries), and none included a single while important programs were drastically subsidy administered by provincial or local under-reported, such as those for steel, government authorities, even though the aluminum, semiconductors, and fish. This is United States has successfully challenged another example of China’s subterfuge scores of provincial and local government when it comes to meeting its WTO subsidy measures as prohibited subsidies in obligations. WTO dispute settlement proceedings. In July of 2019, China submitted its In July 2016, China finally submitted most extensive subsidy notification to date, its first subsidy notification notifying a covering 2017-2018. This notification limited range of sub-central government covered approximately 500 programs and subsidy programs since becoming a WTO was the first to include at least two subsidy Member in 2001. The notification covered programs from all of the provinces, the period 2001-2014. Unfortunately, the centrally administered cities, and number and range of sub-central autonomous regions. While there government subsidy programs covered continued to be some over-reporting of represent a very small sample of the programs that are not actionable subsidies programs administered at the sub-central under the Subsidies Agreement, and under- levels of government. Moreover, many of reporting of important programs, especially the programs were first raised by the at the sub-central levels of government, the United States in dispute settlement 2019 notification was a step forward for proceedings and terminated because they China in meeting its transparency were prohibited under the Subsidies obligations under the Subsidies Agreement. Agreement. Notifying a program several

China’s large and growing role in more WTO languages. However, to date, it world production and trade necessitates appears that China has not published in its that its trading partners understand the official journal or made available extent and nature of China’s subsidy regime translations of the vast majority of the legal at both the central and sub-central measures that establish and fund China’s government levels. The United States and subsidy programs. Additionally, China is several other Members have expressed obligated pursuant to its WTO accession serious concerns about the incompleteness commitments to provide trade-related legal of China’s notifications and have repeatedly measures upon request through an “inquiry requested that China submit complete and point”. A request made by the United timely notifications that include subsidies States in 2020 for certain trade-related provided by provincial and local measures relating to semiconductors and government authorities, as well as subsidies wild capture fisheries was rejected without provided to industries with serious a valid reason. Thus, while China generally overcapacity problems, such as steel, benefits from many of the rules of the WTO aluminum, and wild capture fisheries, – such as those providing increased market among others. access – it continues to break others, such as those relating to its transparency The magnitude of governmental obligations. support in pursuit of industrial policies at all levels of government can be seen in the U.S. ACTIONS IN THE WTO SUBSIDIES COMMITTEE – various industrial plans emanating from ARTICLE 25.8 QUESTIONS AND ARTICLE 25.10 China’s Thirteenth Five-Year Plan. For “COUNTER NOTIFICATIONS” OF CHINESE SUBSIDY example, to date, the Chinese government PROGRAMS has announced RMB 300 billion Over the past several years, the (approximately $46 billion) for the United States has taken aggressive steps in implementation of its Made in China 2025 the WTO Subsidies Committee to address industrial plan and RMB 139 billion China’s failure to provide timely and (approximately $21 billion) for the National complete subsidy notifications, with at least Integrated Circuit Fund (in addition to new some limited success. As detailed below, funding recently announced at the central the United States has made formal requests and provincial levels including, for example, for information from China regarding its National IC Fund Phase 2). Moreover, the subsidy regime and has now counter- government has announced nearly a notified close to 500 unreported Chinese thousand government “guidance funds” subsidy measures to the WTO Subsidies with targeted fundraising of RMB 3.3 trillion Committee. These actions were taken ($476 billion) to support strategic under provisions of the Subsidies industries. Agreement that allow WTO Members to Pursuant to its WTO accession address the failure of other Members to commitments, China is also obligated to comply with their transparency obligations. publish all trade-related measures – ARTICLE 25.8 INFORMATION REQUESTS including subsidy measures – in a single official journal and make available translations of these measures in one or

The United States submitted written governments appeared to play an requests to China for information under important role in implementing China’s Article 25.8 of the Subsidies Agreement in industrial policies for its SEI. Considering October 2012, April 2014, April 2015, and China’s failure to respond to this Article April 2017.11 25.8 request, the United States submitted a counter notification under Article 25.10 of In its 2012 Article 25.8 request, the the Subsidies Agreement in October 2015 United States included evidence of central (see below) covering the subsidy measures government and sub-central government raised in the 2014 Article 25.8 request. subsidy measures that provided assistance to a wide range of industrial sectors in In the spring of 2015, the United China, including semiconductors, States employed the Article 25.8 aerospace, steel, fisheries, and textiles. mechanism yet again to submit questions to Under Article 25.9 of the Subsidies China on various measures that appear to Agreement, China was obligated to be fishery subsidies. Many of the measures respond, “as quickly as possible and in a were first listed in the WTO’s Trade Policy comprehensive manner”. When China did Report for China, drafted by the WTO not respond to this request, the United Secretariat as part of its review of China’s States submitted a counter notification trade policies under the Trade Policy under Article 25.10 of the Subsidies Review Mechanism. When China did not Agreement in October 2014 (see below) respond to this request, in April the United covering most of the subsidy programs States submitted a counter notification raised in the 2012 Article 25.8 request, and under Article 25.10 of the Subsidies revised the 2012 request for the remaining Agreement (see below) covering the programs not included in the counter subsidy measures raised in the spring 2015 notification. Article 25.8 request.

The United States also submitted an In April 2017, the United States and Article 25.8 request in 2014. This request the European Union jointly submitted an pertains to China’s policies, programs, and Article 25.8 request on possible subsidies implementing measures in support of its provided to China’s steel industry. In prior “strategic emerging industries” (SEI). A key meetings of the Subsidies Committee, China objective of this plan was to promote key stated that it only provided subsidies to its SEI sectors, which included: (1) new energy steel companies under three broadly vehicles, (2) new materials (a category that available (e.g., non-specific) programs. includes textile products), (3) Considering this statement, the United biotechnology, (4) high-end equipment States, along with the European Union manufacturing, (5) new energy, (6) next- requested information on nearly 160 generation information technology, and (7) possible subsidies provided to China’s steel energy conservation and environmental industry. These possible subsidies were protection. As with other industrial listed in the annual reports of several steel planning measures in China, sub-central companies, many of which appear to meet

11 The first U.S. Article 25.8 information request was notification, which China had not done since made in October 2004. This submission was becoming a Member in 2001. intended to prompt China to submit a subsidy

the notification requirements set forth notification of subsidy measures in China. under Article 25 of the Subsidies This counter notification was based on the Agreement. Given the worldwide Article 25.8 questions submitted to China in overcapacity in the steel industry, the October 2012. Because China did not United States believes that it is critical for respond to these questions after two years, China to respond to this request and notify the United States counter notified the all subsidies provided to its steel industry in measures at issue. This counter notification accordance with its obligations. included 110 subsidy measures, covering, inter alia, steel, semiconductors, non- ARTICLE 25.10 COUNTER NOTIFICATIONS ferrous metals (including aluminum), textiles, fisheries, and various sector- The United States has utilized the specific stimulus initiatives. As part of this Article 25.10 counter notification counter notification, the United States mechanism of the Subsidies Agreement provided hyperlinks in its submission to with respect to Chinese subsidy measures complete translations of each counter five times: in October 2011, October 2014, notified measure. October 2015, April 2016, and April 2017. As noted, close to 500 subsidy measures In October of 2015, the United have been counter notified to date. States submitted its third counter notification of subsidy measures in China. In its 2011 Article 25.10 submission, All the measures in this counter notification the United States identified 200 unreported pertain to China’s policy of promoting its subsidy measures that China has SEIs. This counter notification was based on maintained since 2004, including many the Article 25.8 questions submitted to provided by provincial and local China in the spring of 2014. Once again, government authorities. Although not because China did not respond to these obligated to do so, in its submission, the questions, the United States counter United States provided access to complete notified the measures at issue. Over 60 translated copies of each legal measure. subsidy measures were included in the These measures were from (1) various CVD counter notification. As with other investigations conducted by Commerce; (2) industrial planning measures in China, sub- examining a Section 301 petition that had central governments appear to play an been filed by the United Steelworkers Union important role in implementing China’s SEI regarding China’s green energy support policy. Although China submitted its third programs; and (3) extensive research subsidy notification (covering 2009 – 2014) conducted by USTR and Commerce shortly after the third U.S. counter (including some research that eventually led notification, it covered very few of the to successful WTO dispute settlement subsidy programs referenced in the U.S. proceedings). The various measures counter notifications. included as part of the counter notification were voluminous, numbering over several In the spring of 2016, the United hundred pages. States submitted its fourth counter notification of subsidy measures in China. In October 2014, the United States All the measures in this counter notification submitted a second Article 25.10 counter pertain to China’s fisheries subsidies. This

counter notification was based on Article Known Brand” program. Many of these 25.8 questions submitted to China in the implementing measures indicate that this spring of 2015. Once again, because China new program is essentially a successor to did not respond to these questions, the the Famous Export Brand program that was United States counter notified the subject to the WTO dispute settlement measures at issue. The measures counter proceeding. China does not appear to have notified included measures to support notified any of the central or sub-central fishing vessel acquisition and renovation; a government Internationally Well-Known 100 percent corporate income tax Brand measures. Therefore, to obtain more exemption; grants for new fishing comprehensive information on China's equipment; subsidies for insurance; "brand" programs, and to establish the facts subsidized loans for processing facilities; surrounding the successor program, the fuel subsidies; preferential provision of United States submitted its request under water, electricity, and land; grants to Article 25.10 of the Subsidies Agreement. explore new offshore fishing grounds; The submission contained 80 measures, grants for establishing famous brands; and including translations of all the special funds for SEIs in the marine implementing measures. economy. Over 40 subsidy measures were included in the counter notification. As To date, China has not provided a with prior counter notifications, full complete, substantive response to any of translations of each measure were included these counter notifications. Instead, China in the counter notification. has included in its subsidy notifications a small number of the programs from the U.S. In April 2017, the United States counter notifications and has argued that submitted its fifth counter notification of other measures counter notified did not subsidy measures in China pertaining to provide any financial support, have, in fact, China’s Internationally Well-Known Brand been notified, or have been terminated. program. As background, in 2008, the For most programs, China claims that the United States initiated WTO dispute United States has “misunderstood” China’s settlement proceedings challenging China's subsidy programs and the relationship Famous Export Brand program (and related between the programs notified by China programs), which provided prohibited and those contained in the U.S. counter export subsidies in the form of cash grants notifications. However, China has also and other benefits to large, well-known refused to engage with the United States in exporters. In 2009, pursuant to settlement any bilateral discussions on this matter, talks, a mutually agreed solution was despite bi-annual requests to do so dating reached with China, under which it back to 2011. terminated or amended dozens of the inconsistent measures. WTO SUBSIDIES COMMITTEE

After the settlement, the United Due to the global pandemic, in 2020, States discovered, through intensive the WTO Subsidies Committee did not hold research, central and sub-central measures its formal semi-annual meeting in April of implementing the “Internationally Well- 2020. Instead, the Subsidies Committee

22 met only once, in October of 2020, covering SUBSIDY NOTIFICATIONS BY OTHER WTO MEMBERS the agenda items for both the spring and fall meetings. The October meeting was Subsidy notification and surveillance conducted with Geneva-based delegates is one means by which the Subsidies and capital-based officials participating Committee and its Members seek to ensure virtually. adherence to the disciplines of the Subsidies Agreement. In keeping with the At the October meeting, the objectives and directives expressed in the Subsidies Committee continued its regular Uruguay Round Agreements Act, WTO work of reviewing WTO Members’ periodic subsidy notifications also play an important notifications of their subsidy programs and role in U.S. subsidies monitoring and the consistency of Members’ domestic laws, enforcement activities. regulations, and actions with the requirements of the Subsidies Agreement. Under Article 25.2 of the Subsidies Agreement, Members are required to Among other items addressed in the report certain information on all measures course of the year were the following: the that, as set forth in Articles 1 and 2 of the role of subsidies in the creation of Agreement, meet the definition of a subsidy overcapacity; submission of questions to and that are specific. In 2020, the Subsidies China under Article 25.8 of the Subsidies Committee reviewed subsidies notifications Agreement on potential subsidies to its from 35 Members.12 Numerous Members steel industry (see discussion above); have never made a subsidy notification to subsidy transparency and China’s the WTO, although many are lesser publication and inquiry point obligations developed countries.13 under its protocol of accession; examination of ways to improve the timeliness and REVIEW OF CVD LEGISLATION, REGULATIONS, AND completeness of subsidy notifications; MEASURES “graduation” of certain developing countries from Annex VII(b) of the Subsidies Throughout 2019 and 2020, many Agreement; and review of the export WTO Members submitted notifications of subsidy program extension mechanism for new or amended CVD legislation and certain small economy developing country regulations, as well as CVD investigations Members. Further information on these initiated and decisions taken. These various activities is provided below. notifications were reviewed and discussed by the Subsidies Committee at its October 2020 meeting. In reviewing notified CVD

12 During the October 2020 meeting, the Subsidies Ukraine, United States, Uruguay, and Vietnam; the Committee reviewed the 2019 new and full subsidies 2017 new and full subsidy notifications of Brazil, notifications of Argentina, Australia, Brazil, Brunei China, India, Mexico, and Vietnam; the 2015 new Darussalam, Burkina Faso, Canada, Chile, China, and full notification of China;and the 2009 new and Ecuador, El Salvador, the European Union, Georgia, full subsidies notification of Gabon. Honduras, Iceland, India, Indonesia, Japan, Jordan, 13 See Report (2020) of the WTO Committee on Kazakhstan, Republic of Korea, Mexico, Moldova, Subsidies and Countervailing Measures (G/L/1368), 2 New Zealand, North Macedonia, Philippines, Russian November 2020. Federation, Saint Lucia, Switzerland, Togo, Turkey,

legislation and regulations, the Subsidies regulation is on the agenda during the Committee procedures provide for the regular Spring 2021 meeting of the exchange in advance of written questions Subsidies Committee. and answers to clarify the operation of the notified laws and regulations and their As for CVD measures, 10 WTO relationship to the obligations of the Members notified CVD actions taken during Subsidies Agreement. The United States the latter half of 2019, and 10 Members continued to play an important role in the notified actions taken in the first half of Subsidies Committee’s examination of the 2020.16 In 2020, the Subsidies Committee operation of other Members’ CVD laws and reviewed actions taken by Australia, their consistency with the obligations of the Canada, China, Chinese Taipei, Colombia, Subsidies Agreement. the European Union, India, Mexico, Peru, United Kingdom, and the United States. To date, 116 WTO Members14 have notified that they have CVD legislation in NOTIFICATION IMPROVEMENTS place or stated they do not have such legislation. In 2020, the Subsidies Several years ago, the Chairman of Committee reviewed notifications of new or the WTO’s Trade Policy Review Body, acting amended CVD laws and regulations from through the Chairman of the General Angola, Argentina, Plurinational State of Council, requested that all committees Bolivia, Cameroon, Costa Rica, Ghana, India, discuss "ways to improve the timeliness and Japan, Kenya, People’s Democratic Republic completeness of notifications and other of Lao, Liberia, United Arab Emirates, the information flows on trade measures." The United Kingdom, the United States, and United States has fully supported the Vietnam.15 continuation of this initiative considering Members’ poor record in meeting their During the October meeting, China subsidy notification obligations. made a statement regarding the United States’ final currency regulation, which is The United States took the initiative described earlier in this report. Despite not under this agenda item to review the being on the agenda for the October 2020 subsidy notification record of several large meeting, China stated that the U.S. currency exporters who have not provided complete regulation is inconsistent with the SCM and timely subsidy notifications. Of primary Agreement, has systemic implications concern in this regard was China. In 2020, beyond the WTO’s jurisdiction, and poses a the United States continued to devote threat to the multilateral trading system. significant time and resources to The United States responded that it would researching, translating, monitoring, and be prepared to engage more fully when the analyzing China’s subsidy measures and practices, such as those for semiconductors

14 The European Union is counted as one Member. 15 In keeping with WTO practice, the review of These notifications do not include those submitted legislative provisions which pertain or apply to both by Bulgaria, the Czech Republic, Estonia, Hungary, AD and CVD actions by a Member generally has Latvia, Lithuania, Malta, Poland, Romania, the Slovak taken place in the Antidumping Committee. Republic, and Slovenia before these Members 16 G/L/1368. acceded to the European Union.

and wild capture fisheries. The United under Article 25.9, Members that receive States has also been working with several such a request must answer “as quickly as other large exporting country Members possible and in a comprehensive manner.” bilaterally to assist and encourage them to meet their subsidy notification obligations. Despite these provisions, many Pursuant to our efforts, Indonesia questions submitted to Members under submitted its first notification since 1996. Article 25.8 remain unanswered, are answered only many years after the The United States has also been questions are first submitted, or are concerned with the lack of subsidy answered orally after significant delay. To notifications by Members with respect to address this problem, the United States sub-central government programs. While proposed that the Subsidies Committee China continues to be the primary focus of establish deadlines for the submission of this concern, other countries such as written answers to Article 25.8 questions Canada, Mexico, and Brazil also seem to and include all unanswered Article 25.8 have difficulty comprehensively notifying questions on the bi-annual agendas of the sub-central government programs. Subsidies Committee until the questions are Considering the efforts the United States answered.17 The United States’ original makes to notify its state programs, the proposal set out specific deadlines for United States has focused on identifying responses to questions.18 Although many such gaps in other Members’ subsidy Members supported the proposal, several notifications and pressed these Members to other Members, such as China, India, South notify their sub-central government Africa, and Brazil had in prior years voiced programs. concerns that strict, mandatory deadlines for responding to Article 25.8 questions In 2020, under the transparency would be overly burdensome. To agenda item of the Subsidies Committee, acknowledge that concern, the United the United States continued to advocate for States submitted a revised proposal in 2019 a specific proposal that it originally that would allow Members to mutually submitted in 2011 to strengthen and agree to an appropriate timeframe to improve the procedures of the Subsidies respond to such questions. Specifically, Committee under Article 25.8 of the under the revised proposal, Members Subsidies Agreement. Under Article 25.8, would agree to non-mandatory deadlines any Member may make a written request for the submission of answers in writing. for information on the nature and extent of Under this proposal, Members would a subsidy granted by another Member, or endeavor to submit written answers to for an explanation of why a specific Article 25.8 questions within 60 days and measure is not considered subject to the respond to follow-up questions within 30 notification requirement. This mechanism days, to the extent possible.19 Several allows Members to draw attention to and Members who were previously opposed to request information about subsidy the proposal signaled that these revisions measures that are of concern. Further,

17 G/SCM/W/555; October 21, 2011. 19 G/SCM/W/557/Rev.3. 18 G/SCM/W/557/Rev.1; September 22, 2014.

were a positive step and might form a basis “GRADUATION” FROM ANNEX VII (B) OF THE to continue discussions and seek consensus. SUBSIDIES AGREEMENT

To further address concerns raised Annex VII of the Subsidies by some members regarding the need to Agreement identifies certain lesser consult with sub-central governments, the developed country Members that are United States submitted another revised eligible for types of special and differential proposal prior to the October 2020 treatment. Specifically, any export meeting.20 The revision noted that subsidies provided by these Members are Members may need to take into account not prohibited. The Members identified in the time necessary to consult with sub- Annex VII include those WTO Members central governments. It is notable that for designated by the United Nations as “least the first time since the proposal had been developed countries” (Annex VII(a)) as well presented to the Subsidies Committee, as countries that, at the time of the China was the only member that objected negotiation of the Subsidies Agreement, outright to the proposal. China continues had a per capita GNP under $1,000 per to maintain that Article 25.8 of the annum and that are specifically listed in Subsidies Agreement does not specifically Annex VII(b).21 A country automatically require that replies be in writing or that “graduates” from Annex VII(b) status when specific deadlines be met, and that the its per capita GNP rises above the $1,000 United States’ proposal would impose new threshold. At the WTO’s Fourth Ministerial obligations and burdens on Members. Conference, Ministers decided that the Notably, China is the only Member that is calculation of the $1,000 threshold would regularly subject to requests under Article be based on constant 1990 dollars. The 25.8, and consistently refused to respond to WTO Secretariat updated these calculations such requests in writing (see above). in 2020.22

In 2021, the United States will SUBSIDIES AND OVERCAPACITY SUBMISSION continue to work on finding a pragmatic solution that satisfies the underlying At the fall 2016 meeting of the objective of enhancing the information Subsidies Committee, the European Union, exchange, and will continue to promote its Japan, Mexico, and the United States revised proposal and other means to submitted a paper on the problem of improve compliance with the subsidy overcapacity in certain sectors (e.g., steel notification obligations of the Subsidies and aluminum).23 The paper was a follow- Agreement. up to the recognition by the G20 that industrial overcapacity has become a major problem for the global economy. It

20 G/SCM/W/557/Rev.4. recognition of a technical error made in the final 21 Members identified in Annex VII(b) are Bolivia, compilation of this list and pursuant to a General Cameroon, Congo, Cote d’Ivoire, Dominican Council decision, Honduras was formally added to Republic, Egypt, Ghana, Guatemala, Guyana, India, Annex VII(b) on January 20, 2001. Indonesia, Kenya, Morocco, Nicaragua, Nigeria, 22 G/SCM/110/Add.17. Pakistan, Senegal, Sri Lanka, and Zimbabwe. In 23 G/SCM/W/579/Rev.1.

suggested that the Subsidies Committee specifically examined the provision of low- could usefully examine the extent to which cost lending by state-owned banks to state- subsidies contribute to overcapacity and owned industrial enterprises to increase how such subsidies could be further aggregate demand during times of severe disciplined in the interest of providing a recession, and subsequent steps taken by level playing field and an environment governments to convert the loans to equity. where trade and resource allocation is not As the paper notes, this type of lending is distorted. often made without regard of the borrowers’ risk and may be explicitly or Prior to the spring 2017 meeting of implicitly guaranteed by the government. the Subsidies Committee, the European The key question raised by this paper is Union, Japan, and the United States whether and under what circumstances submitted a follow-up paper.24 This paper such below-market financing should be described in greater detail the role of subject to stronger subsidy disciplines and subsidies in creating overcapacity and what those disciplines should be. discussed options for addressing this issue through changes to the Subsidies As part of the WTO Public Forum Agreement and in the Subsidies Committee. held in October 2018, the European Union, It also called upon Members to heed the Japan, and the United States sponsored a call of world leaders in the G20 for working session titled “Make the playing transparency and collective action to tackle field level again! (Ensuring global fair trade harmful subsidies that contribute to severe by 2030).” The speakers, who included overcapacity experienced in several sectors representatives from industry, government today. and the legal profession, discussed the extent to which WTO Members have the On the margins of the fall 2017 tools to defend themselves against the meeting of the Subsidies Committee, the most harmful types of subsidies that lead to United States and the European Union overcapacity and distort international trade, organized a panel discussion on this topic, and whether the WTO rulebook on which included academics and international subsidies needs to be improved and trade lawyers. The purpose of the seminar updated. was to have experts discuss the relationship between subsidies and overcapacity from To continue the work of highlighting different perspectives and consider how the the role of government intervention in Subsidies Agreement could be strengthened certain key industries in creating and and improved to address the problem. maintaining overcapacity, during the spring 2019 meeting of the Subsidies Committee, Before the spring 2018 meeting of the United States, the EU, and Japan hosted the Subsidies Committee, Canada, the a presentation by the OECD authors of the European Union, Japan, Mexico, and the report, “Measuring distortions in United States submitted a paper concerning international markets: the aluminum value the role of below-market financing in the context of overcapacity.25 The paper

24 G/SCM/W/572/Rev.1. 25 G/SCM/W/575.

27 chain”.26 The presentation focused on the regulatory enforcement in the sector. The contribution of government support to United States also drew attention to the large aluminum producers in China. A key departure of China, the world’s largest message of the presentation was that producer of steel, from the Forum’s work, government support along each stage of but noted that the vast majority of Global the aluminum value chain has been critical Forum Members will continue to work to the build-up in capacity, which raises towards achieving the goals set out by the concerns about the nature of global G20 leaders. competition in the aluminum market. The OECD report noted the importance of the At the October 2020 meeting of the need to strengthen the current subsidy Subsidies Committee, the United States, rules, notably to enhance transparency and European Union, Japan, Canada, and to better capture state influence in the Norway made coordinated interventions on economy, including through SOEs. this agenda item, highlighting concerns regarding the contribution of subsidies to During the November 2019 meeting overcapacity in the semiconductor and steel of the Subsidies Committee, the United sectors. In particular, the United States States delivered an intervention focusing on highlighted the OECD report titled, the work of the Global Forum on Steel “Measuring Distortions in International Excess Capacity, which was established by Markets: The Semiconductor Value G20 Leaders in 2016. The United States Chain”.27 Specifically, the United States drew attention to the Global Forum’s work noted the report’s findings regarding the to provide recommendations to reduce importance of subsidies and other support excess capacity and enhance market measures in the global semiconductor function in the steel sector, including by market, which the OECD estimated to removing and refraining from granting exceed $50 billion during the period 2014 to market distorting subsidies and other types 2018. The vast majority of this support of support measures. Notably, the United stems from regular budgetary sources and States summarized the numerous types of thus does not include government equity direct and indirect government measures investments, state-owned bank lending, or identified by the Global Forum that can fuel targeted R&D support. The United States excess capacity and which should be also highlighted the report’s focus on removed, including certain types of non- support by China, including through the market financing, such as debt forgiveness National Integrated Circuit Fund, which was and policy loans; equity investments not on established in 2014 and which China has market terms; grants; tax benefits; the not yet notified to the WTO. This fund, preferential provision of goods and along with many local government funds, services; and other distortive policy have made large equity investments in measures such as export subsidies, and lax China’s semiconductor industry, resulting in

26 OECD (2019), "Measuring distortions in 27 OECD (2019), "Measuring distortions in international markets: the aluminium value international markets: The semiconductor value chain", OECD Trade Policy Papers, No. 218, OECD chain", OECD Trade Policy Papers, No. 234, OECD Publishing, Paris, https://doi.org/10.1787/c82911ab- Publishing, Paris, https://doi.org/10.1787/8fe4491d- en. en.

very significant government ownership and regard, the United States uncovered control over the sector. Notably, the report information on certain Chinese support found that China is the country that measures relating to the fishing and dedicates the largest amount of state semiconductor industries, for which public support to its semiconductor industry. The references exist. Because these measures United States also described several are not published however, the United important recommendations included in States submitted a request pursuant to the report, such as a call for greater China’s commitments in its Protocol of transparency for support measures, Accession to publish all measures pertaining enhanced scrutiny of government equity to, or affecting trade in goods and services, investments, and specific disciplines on and to provide all the relevant information SOEs, among others. The statements made regarding such measures whenever asked by Canada, the EU, Japan, and Norway by another WTO Member. Specifically, echoed those of the United States, and under China’s Protocol of Accession, China including the need to reengage in the agreed to “establish or designate an enquiry Global Forum. point where, upon request of any individual, enterprise or WTO Member all In 2021, the United States, along information relating to the measures with the other proponents of this issue, will required to be published … may be continue to seek ways in which the obtained.” Despite having submitted an Subsidies Committee can play a role in initial request in April 2020 and being addressing subsidies that contribute to required to re-submit it in May 2020, the vercapacity in key industrial sectors. United States has not yet received a formal response from China. The United States SUBSIDY TRANSPARENCY AND CHINA’S PUBLICATION therefore urged China to respond to its AND INQUIRY POINT OBLIGATIONS UNDER CHINA’S request by providing all the requested PROTOCOL OF ACCESSION documents as soon as possible in accordance with its obligations under its Under this agenda item, the United Protocol of Accession. In 2021, the United States explained its long-standing concerns States will continue to press China to with China’s failure to adequately comply provide the requested trade-related with its transparency obligation for measures subject to the U.S. inquiry point industrial subsidies and its continued efforts request. to obtain information about China’s support measures in light of China’s reluctance to ARTICLE 27.4 UPDATE provide information about such subsidies. Although the United States has been able to Under the Subsidies Agreement, identify many such measures, and has most developing country Members were obtained legal citations for some, many obligated to eliminate their export subsidies have not been published in a single official by December 31, 2002. Article 27.4 of the journal (i.e., the MOFCOM Gazette) – as Subsidies Agreement authorizes the required by China’s commitments in its Subsidies Committee to extend this Protocol of Accession to the WTO – and are deadline for Members, where requested not otherwise publicly accessible. In that and justified. If the Subsidies Committee

does not affirmatively determine that an Council adopted the recommendation of extension is justified, that Member’s export the Subsidies Committee in July 2007.28 subsidies must be phased out within two (Attachment 3 contains a chart of all the years. programs for which extensions were granted previously). To address the concerns of certain small, developing country Members, a In 2020, the United States continued special procedure within the context of its efforts to ensure that all extension Article 27.4 of the Subsidies Agreement was recipients had either terminated the adopted at the Fourth WTO Ministerial program at issue or were in the process of Conference in 2001. Under this procedure, doing so. As agreed by Members in 2016, developing country Members who met all the WTO Secretariat circulated a report the agreed-upon qualifications became indicating the status of notifications and of eligible for annual extensions upon request actions reported by Members who were for a five-year period through 2007, in given extensions under Article 27.4 at the addition to the two years referred to under spring 2018 Subsidies Committee Article 27.4. Antigua and Barbuda, meeting.29 Barbados, Belize, Costa Rica, Dominica, the Dominican Republic, El Salvador, Fiji, PERMANENT GROUP OF EXPERTS Grenada, Guatemala, Jamaica, Jordan, Mauritius, Panama, Papua New Guinea, St. Article 24.3 of the Subsidies Kitts and Nevis, St. Lucia, St. Vincent and Agreement directs the Subsidies Committee the Grenadines, and Uruguay made yearly to establish a Permanent Group of Experts requests for extensions under this special (PGE) “composed of five independent procedure when it was still in place. persons, highly qualified in the fields of subsidies and trade relations.” The Following a request for a further Subsidies Agreement articulates three roles extension after the agreed upon five-year for the PGE: (1) to provide, at the request period, in 2007, the Subsidies Committee of a dispute settlement panel, a binding decided to recommend to the General ruling on whether a particular practice Council a further extension of the transition brought before that panel constitutes a period until 2013 under special procedures prohibited subsidy within the meaning of like those that had been in place previously. Article 3 of the Subsidies Agreement; (2) to This recommendation included a final two- provide, at the request of the Subsidies year phase-out period (ending in 2015) as Committee, an advisory opinion on the provided for in Article 27.4 of the Subsidies existence and nature of any subsidy; and (3) Agreement. An important outcome of to provide, at the request of a Member, a these negotiations, insisted upon by the “confidential” advisory opinion on the United States and other developed and nature of any subsidy proposed to be developing countries, was that the introduced or currently maintained by that beneficiaries have no further recourse to Member. To date, the PGE has not been extensions beyond 2015. The General called upon to fulfill any of these functions.

28 WT/L/691. 29 RD/SCM/36/Rev.3.

Article 24 further provides for the Members’ subsidy notifications, including Subsidies Committee to elect experts to the the notification of fisheries subsidies (due PGE, with one of the five experts being June 30, 2021), and will continue to discuss replaced every year. The election to the proposal made by the United States to replace an expert whose term has expired is improve and strengthen the Subsidies normally taken by the Subsidies Committee Committee’s procedures under Article 25.8 during its regular spring meeting in the year of the Subsidies Agreement. Finally, the following the expiration. United States will submit its own “new and full” subsidies notification in the summer of At the beginning of 2019, the 2021. Permanent Group of Experts had five members: Mr. Ichiro Araki (Japan), Ms. Luz WTO DISPUTE SETTLEMENT Elena Reyes de la Torre (Mexico); Mr. Jaemin Lee (Korea); Mr. Rabih Nasser EUROPEAN COMMUNITIES AND CERTAIN MEMBER (Brazil); and Ms. Marina Foleta (Moldova). STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT (DS316) The term of Mr. Ichiro Araki expired in spring 2020 but the Committee was On October 6, 2004, the United unable to reach a consensus on a States requested consultations with the EU, replacement. In the spring of 2021, the as well as with Germany, France, the United term Ms. Reyes de la Torre will expire. It Kingdom, and Spain, with respect to has recently been proposed that Ms. subsidies provided to Airbus, a Tomoko Ota (Japan) fill the slot of Mr. Araki manufacturer of large civil aircraft. The and that Mr. Donald Orth (Canada) fill the United States alleged that such subsidies slot of Ms. Reyes de la Torre. The violated various provisions of the Subsidies Committee will likely formally approve Agreement, as well as Article XVI:1 of the these two nominations at the spring General Agreement on Tariffs and Trade meeting of the Committee. 1994 (GATT 1994). Despite an attempt to resolve this dispute through the negotiation COMMITTEE PROSPECTS FOR 2021 of a new agreement to end subsidies for large civil aircraft, the parties were unable In 2021, the United States will follow to come to a resolution. As a result, the up on the answers to our questions United States filed a panel request on May received from China on its 2019 notification 31, 2005. The U.S. request challenged and two prior notifications, as well as the several types of EU subsidies that appeared Article 25.8 questions on the possibly to be prohibited, actionable, or both. A unnotified subsidy programs to its steel panel was established on July 20, 2005. industry. The United States will also seek to continue the discussion of subsidy- The panel issued its report on June induced overcapacity and the further 30, 2010. It agreed with the United States development of disciplines to address this that the disputed measures of the EU, issue. More generally, the Subsidies France, Germany, Spain, and the United Committee will continue to work in 2021 to Kingdom were inconsistent with the improve the timeliness and completeness of Subsidies Agreement, as detailed below:

• Every instance of “launch aid” provided most of the panel’s findings, including the to Airbus was found to be an actionable recommendation that the EU take subsidy because, in each case, the terms appropriate steps to remove the adverse charged for this unique low-interest, effects or withdraw the subsidies. The success-dependent financing were more Appellate Body report and the panel report, favorable than would have been as modified by the Appellate Body report, available in the market. were adopted by the Dispute Settlement • Some of the launch aid provided for the Body (DSB) on June 1, 2011. The EU had A380, Airbus’s newest and largest until December 1, 2011 to bring itself into aircraft, was found to be contingent on compliance with the adopted reports. exports and, therefore, a prohibited subsidy. On December 1, 2011, the EU sent • Several instances in which the German the United States a “Compliance Report” and French governments developed asserting that it had taken steps to address infrastructure for Airbus were found to the subsidies and had thereby come into be actionable subsidies because the compliance with its WTO obligations. infrastructure was not generally However, the United States believed the EU available and was provided for less than notification showed that the EU had not adequate remuneration by the withdrawn the subsidies in question and government. had, in fact, granted new subsidies to • Several government equity infusions Airbus’ development and production of into the Airbus companies were found large civil aircraft. On December 9, 2011, to be subsidies because they were the United States requested consultations provided on more favorable terms than with the EU regarding the December 1, available in the market. 2011, notification. The United States also requested authorization from the WTO DSB • Several EU and Member State research programs to develop new aircraft to impose countermeasures annually in technologies were found to provide response to the EU’s claim that it fully actionable grants to Airbus. complied with the ruling in this case. The amount of the countermeasures would vary • The subsidies found were determined to annually, but in a recent period preceding cause adverse effects to the interests of the request are estimated as having been in the United States in the form of lost the range of $7-10 billion. sales, displacement of U.S. imports into the EU market, and displacement of U.S. In early 2012, the United States and exports into the markets of Australia, the EU agreed to a sequencing agreement Brazil, China, Chinese Taipei, Korea, under which the determination of the Mexico, and Singapore. amount and imposition of any countermeasures would not occur until The EU appealed the ruling to the after WTO proceedings determining WTO Appellate Body. The Appellate Body whether the EU has complied with its WTO issued its findings on May 18, 2011. The obligations. The Arbitrator accordingly Appellate Body reversed the panel’s suspended its work. On March 30, 2012, findings that certain launch aid was a the United States requested that a dispute prohibited export subsidy, but left intact

settlement panel be formed to determine inconsistent. The appellate report found that the EU had failed to comply fully with that the WTO-inconsistent subsidies its WTO obligations. The panel issued its continue to cause significant lost sales of report on the U.S. claims on September 22, Boeing aircraft in the twin-aisle and very 2016, finding that the EU and its member large aircraft markets and that these States had failed to come into compliance subsidies impede exports of Boeing 747 with the recommendations from the aircraft to numerous geographic markets. original proceedings: On July 13, 2018, at the request of • The EU claimed that it took 36 “steps” the United States, the arbitration regarding to comply with the WTO findings against the level of countermeasures (suspended in it, but the panel concluded that 34 of January 2012) was resumed. On October 2, the steps were “not ‘actions’ relating to 2019, the arbitrator issued its decision that the ongoing (or even past) the level of countermeasures subsidization,” and that the remaining commensurate with the degree and nature two “steps” were insufficient. of the adverse effects determined to exist is • The panel reaffirmed the original up to $7.5 billion annually. panel’s findings that France, Germany, Spain, and the United Kingdom gave On May 17, 2018, the EU Airbus $15 billion in subsidized represented to the DSB that it had taken financing, along with subsidized capital new steps to achieve compliance with its contributions. WTO obligations. However, following • The panel found the member States consultations, the United States did not gave $4.8 billion in new subsidized agree that the EU had achieved compliance. financing to Airbus. At the request of the EU, the WTO • The panel concluded that the collective established a second compliance panel on effect of ongoing subsidies was to August 27, 2018. The parties filed deprive U.S. producers of billions of submissions in late 2018 and early 2019, dollars of sales in the United States, and the second compliance Panel held a Europe, Australia, China, India, Korea, meeting with the parties on May 7-8, 2019. Singapore, and the United Arab On December 2, 2019, the second Emirates. compliance panel issued its report. The The EU appealed these findings on panel found that the EU continued to be in October 13, 2016. In May 2018, the breach of Articles 5(c) and 6.3(a), (b), and appellate report confirmed that the EU and (c) of the SCM agreement, and that the EU four member States failed to comply with and certain member States had accordingly the earlier WTO determination finding failed to comply with the DSB launch aid for the A380 aircraft to be recommendations under Article 7.8 of the inconsistent with their WTO obligations. SCM Agreement to “take appropriate steps The appellate report further confirmed that to remove the adverse effects or … almost $5 billion in additional launch aid withdraw the subsidy.” The panel agreed that Airbus received from EU member with the United States that none of the states for the A350 XWB was also WTO- measures taken by the four EU member

States amounted to a withdrawal of the However, the panel did find certain U.S. launch aid for the A350XWB and A380. The practices to be inconsistent with its WTO panel also found that that launch aid for the obligations. Specifically, certain NASA and A380 and A350XWB continue to be a Department of Defense research and genuine and substantial cause of lost sales development programs as well as certain to U.S. aircraft, and impedance of exports state tax and investment incentives were of U.S. aircraft to China, India, Korea, found to be subsidies that caused adverse Singapore, and the United Arab Emirates. effects. The U.S. foreign sales corporation and extraterritorial income (FSC/ETI) tax On December 6, 2019, the EU exemptions were found to be prohibited notified the Dispute Settlement Body of its export subsidies pursuant to previous WTO decision to appeal certain findings. rulings. However, because those previous rulings already addressed the FSC/ETI UNITED STATES – MEASURES AFFECTING TRADE IN exemptions, the panel refrained from LARGE CIVIL AIRCRAFT (DS353) making a recommendation in this case.

On October 6, 2004, the EU The EU filed a notice of appeal on requested consultations with respect to April 1, 2011. The United States cross- “prohibited and actionable subsidies appealed on April 28, 2011. The Appellate provided to U.S. producers of large civil Body held two hearings on the issues raised aircraft.” The EU alleged that such in the appeal: the first on August 16-19, subsidies violated several provisions of the 2011, addressing issues related to whether Subsidies Agreement, as well as Article III:4 certain U.S. practices were subsidies, and of the GATT 1994. Consultations were held the second on October 11-14, 2011, on November 5, 2004. On May 31, 2005, focusing on the panel’s findings that the the EU requested the establishment of a U.S. practices caused serious prejudice to panel to consider its claims, and on June 27, EU interests. The Appellate Body issued its 2005, filed a second request for ruling in March 2012. The Appellate Body’s consultations regarding large civil aircraft decision upheld or modified the panel’s subsidies. This request addressed many of findings regarding the federal research and the measures covered in the initial development programs and state tax and consultations, as well as several additional investment incentives but curtailed some of measures that were not covered. The EU the panel’s findings as to the adverse requested establishment of a panel effects caused by those subsidies. regarding its second panel request on January 20, 2006. On September 23, 2012, the United States notified the EU and the WTO that it The panel issued its report on March had modified the terms of research and 31, 2011. It agreed with the United States development programs and otherwise that many of the EU’s claims were without operated its programs in a manner to merit. Particularly, the panel found that comply with the WTO rulings. However, the many of the U.S. practices challenged by EU did not agree with this assessment. the EU were not subsidies or did not cause Immediately thereafter, on September 25, adverse effects to the interests of the EU. 2012, the EU requested consultations with

the United States over its compliance. agreed that it was worth $28 million. Consultations were held on October 10, However, it found that these subsidies 2012. The very next day, October 11, the did not cause adverse effects to Airbus. EU requested the formation of a dispute • The EU alleged that Boeing received $51 settlement panel by the WTO Dispute million in tax benefits from 2007 Settlement Body to determine whether the through 2014 under the FSC/ETI United States has complied with the rulings. program that Congress discontinued in The DSB formed a panel to hear the EU’s 2006. The Panel found that there was claim on October 23, 2012. no evidence that Boeing benefitted from this program in the 2007-2014 The compliance Panel circulated its period. report on June 9, 2017, with the following • The EU asserted that the City of Wichita findings: issued “industrial revenue bonds” in a way that gave Boeing tax subsidies. The Findings against the EU: Panel found that this program was a subsidy, but that it did not constitute a • The EU alleged that DoD provided WTO breach because it was not Boeing with funding and other “specific,” i.e., targeted toward resources worth $2.9 billion to conduct particular entities or industries. research that assisted Boeing’s • development of large civil aircraft. The The EU brought claims with respect to a Panel rejected most of the EU claims for number of Washington State programs. procedural reasons. It found that the The Panel rejected one of the EU claims remaining claims were worth less than for procedural reasons. The Panel $50 million, and that most of those found that all of the remaining programs were not subsidies. The Panel programs were subsidies. However, subsequently found the DoD funding to with one exception, the Panel found constitute subsidies did not cause that these programs did not cause any adverse effects to Airbus. adverse effects to Airbus. • • The EU alleged that the National The EU alleged that several South Aeronautics and Space Administration Carolina programs worth a total of $1.7 (“NASA”) provided funding and billion caused adverse effects to Airbus. resources to Boeing worth $1.8 billion. The Panel found that all but three of The Panel found that NASA research these programs either were not and development programs conferred subsidies or were not “specific,” i.e., did subsidies, but that the total value was not involve the type of targeting needed less than $200 million. It found that to establish a WTO inconsistency. these subsidies did not cause adverse Although it found that three South effects to Airbus. Carolina programs, worth a total of $78 million, were subsidies, the Panel • The EU alleged that the Federal Aviation concluded that they did not cause Administration (“FAA”) provided adverse effects to Airbus. funding and resources worth $28 million to Boeing. The Panel found that the FAA Findings against the United States program in question was a subsidy and

• The EU argued that Washington State’s analysis and found that the measure adjustment to its Business and was inconsistent with the SCM Occupation (“B&O”) tax applicable to Agreement to the extent that Boeing aerospace manufacturing foregoes remains entitled to FSC/ETI tax revenue that could otherwise be concessions. collected from Boeing, making it a • The panel did not err in using the period subsidy for WTO purposes. The Panel following the end of the found that this program confers a implementation period to assess subsidy on Boeing, worth an average whether the Wichita industrial revenue value of $100-110 million per year bonds were specific because of the during the period of review. The Panel granting of disproportionately large further found that these subsidies cause amounts of subsidy to certain adverse effects, but only with respect to enterprises, but the panel erred in certain sales of the Airbus A320 aircraft. finding that no disparity existed between the expected and actual On June 29, 2017, the EU filed a distribution of the subsidy. However, notice of appeal on certain findings, and the there were insufficient factual findings United States filed a notice of other appeal by the panel or undisputed facts on the on August 10, 2017. The Division assigned record for the Appellate Body to to hear the appeal consists of Mr. Peter Van complete its legal analysis in this den Bossche (Presiding Member), Mr. respect. Thomas R. Graham, and Mr. Shree B.C. • The panel did not err in its Servansing. Oral hearings before the interpretation of the term “limited Appellate Body took place in April and number” of certain enterprises with September 2018. On March 28, 2019, the respect to the specificity of the South Appellate Body circulated its report with Carolina economic development bonds, the following relevant findings: but the panel erred by excluding evidence as to the percentage of bonds • The panel did not err in including DoD by value used by certain enterprises procurement contracts within its terms from its evaluation of whether the of reference, but the panel did not subsidy was specific by reason of sufficiently engage with evidence and predominant use by certain enterprises. arguments regarding whether the However, there were insufficient factual funding conferred a benefit. However, findings by the panel or undisputed there were insufficient factual findings facts on the record for the Appellate by the panel or undisputed facts on the Body to complete its legal analysis in record for the Appellate Body to this respect. complete the analysis in this respect. • The panel erred in the application of the • The panel erred when considering term “designated geographical region” whether revenue was “foregone” with in assessing the specificity of the South respect to the FSC/ETI tax concessions Carolina MCIP job tax credits. The by focusing on the conduct of eligible Appellate Body completed the legal taxpayers rather than the government. analysis with respect to this and found The Appellate Body completed the legal that the subsidy was specific.

• The panel correctly found that the EU 2012, the United States objected to the had failed to establish that there was a level of suspension of concessions continuation of the original adverse requested by the EU, referring the matter effects of the pre-2007 aeronautics R&D to arbitration pursuant to Article 22.6 of the subsidies into the post-implementation DSU. On November 27, 2012, the United period in the form of present serious States and the EU each requested that the prejudice in relation to the A330 and arbitration be suspended pending the A350XWB. conclusion of the compliance proceeding. • The panel erred in its analysis of On June 5, 2019, at the request of the whether the technology effects of the European Union, the arbitration regarding pre-2007 aeronautics R&D subsidies in the level of countermeasures was resumed. relation to certain U.S. aircraft On October 13, 2020, the arbitrator issued continued into the post-implementation its decision that the level of period, and therefore, the panel’s countermeasures commensurate with the finding that the EU failed to establish degree and nature of the adverse effects that the pre-2007 R&D subsidies was a determined to exist for the Washington genuine and substantial cause of B&O tax rate subsidy is up to approximately adverse effects to the A350XWB and $4 billion annually. The arbitrator did not A320neo in the post-implementation take account of Washington State’s period was reversed. However, there elimination of the B&O tax rate subsidy on were insufficient factual findings by the April 1, 2020. panel or undisputed facts on the record for the Appellate Body to complete its UNITED STATES — COUNTERVAILING MEASURES ON legal analysis in this respect, and there CERTAIN HOT-ROLLED CARBON STEEL FLAT PRODUCTS was no basis to conclude that the FROM INDIA (DS436) original adverse effects, in the form of On April 24, 2012, India requested technology effects, continued into the consultations concerning countervailing post-implementation period. measures on certain hot-rolled carbon steel • The panel correctly found that the EU flat products from India. India challenged failed to establish that the tied tax the Tariff Act of 1930, in particular sections subsidies cause adverse effects in the 771(7)(G) regarding cumulation of imports twin-aisle LCA market in the post- for purposes of an injury determination and implementation period, but that there 776(b) regarding the use of “facts were adverse effects in the post- available.” India also challenged Title 19 of implementation period in the form of the Code of Federal Regulations, sections significant lost sales in the single-aisle 351.308 regarding “facts available” and LCA and in the form of threat of 351.511(a)(2)(i)-(iv), which relates to impedance of imports of Airbus single- Commerce’s calculation of benchmarks. In aisle LCA in the U.S. and United Arab addition, India challenged the application of Emirates markets. these and other measures in Commerce’s On September 27, 2012, the EU CVD determinations and the USITC’s injury requested authorization from the DSB to determination. Specifically, India argued impose countermeasures. On October 22, that these determinations were

37 inconsistent with Articles I and IV of the most of India’s claims with respect to GATT 1994 and Articles 1, 2, 10, 11, 12, 13, Commerce’s application of facts available 14, 15, 19, 21, 22, and 32 of the SCM under Article 12.7 in the determination at Agreement. The DSB established a panel to issue. The Panel also rejected most of examine the matter on August 31, 2012. India’s claims against Commerce’s The panel was composed by the Director specificity determinations under Article 2.1, General on February 18, 2013, as follows: and its calculation of certain benchmarks Mr. Hugh McPhail, Chair; Mr. Anthony Abad used in the proceedings under Article 14(d). and Mr. Hanspeter Tschaeni, Members. The Panel found that Commerce’s determination that certain low-interest The Panel met with the parties on loans constituted “direct transfers” of funds July 9-10, 2013, and on October 8-9, 2013. was consistent with Article 1.1(a)(1), but The Panel circulated its report on July 14, that Commerce’s determination that a 2014. The Panel rejected India’s claims captive mining program constituted a against the U.S. statutes and regulations financial contribution was not consistent concerning facts available and benchmarks with Article 1.1(a). under Articles 12.7 and 14(d) of the Subsidies Agreement, respectively. It also Finally, the Panel found that rejected India’s “as such” claim regarding Commerce did not act inconsistently with the U.S. statutory cumulation provision for Articles 11, 13, 21 and 22 of the SCM five-year reviews but found that the statute Agreement when it analyzed new subsidy governing cumulation in original allegations in the context of review investigations was inconsistent with Article proceedings. 15 of the SCM Agreement because it required the cumulation of subsidized On August 8, 2014, India appealed imports with dumped non-subsidized the Panel’s findings; on August 13, 2014, imports in the context of countervailing the United States also appealed certain of duty investigations. the Panel’s findings. The Appellate Body released its report on December 8, 2014. Applying this reasoning, the Panel also found that the USITC acted The Appellate Body upheld the inconsistently with Article 15.3 insofar as it Panel’s findings regarding the U.S. cross-cumulated subsidized and dumped benchmarks regulation but found that non-subsidized imports in the certain instances of Commerce’s application countervailing duty investigation of hot- of these regulations were inconsistent with rolled steel from India. Article 14(d). The Appellate Body rejected India’s interpretation of “public body” The Panel rejected all of India’s under Article 1.1(a)(1), but reversed the claims regarding consideration of economic Panel’s finding that Commerce acted factors under Article 15.4 of the SCM consistently in making the public body Agreement. The Panel also rejected India’s determination at issue on appeal. challenges under Article 1.1(a)(1) of the Regarding specificity, the Appellate Body SCM Agreement to Commerce’s “public rejected each of India’s appeals under body” findings in two instances, as well as Article 2.1(c), as it did with respect to

India’s challenge to the Panel’s finding the Appellate Body report, on December under Article 1.1(a)(1)(i) relating to “direct 19, 2014. transfers of funds.” The Appellate Body also reversed the Panel’s finding that At the DSB meeting held on January Commerce had acted inconsistently with 16, 2015, the United States notified the DSB Article 1.1(a)(1)(iii) in finding that captive of its intention to comply with the mining program constituted a provision of recommendations and rulings and indicated goods. Finally, the Appellate Body upheld it would need a reasonable period of time the Panel’s rejection of India’s claims under (RPT) to do so. On March 24, 2015, the Articles 11, 13 and 21 regarding new United States and India informed the DSB subsidy allegations. The Appellate Body that they had agreed on an RPT of 15 reversed the Panel’s findings under Article months, ending on March 19, 2016. At the 22 of the SCM Agreement but was unable United States’ request, India then agreed to to complete the analysis. a 30-day extension to April 18, 2016.

The Appellate Body found that the On March 7, 2016, the USITC issued Panel had failed to conduct an objective a Section 129 determination in the hot- examination of the U.S. cumulation statute, rolled steel from India CVD proceeding to and the Appellate Body itself completed the comply with the findings of the Appellate analysis of this “as such” claim. The Body. On March 18, 2016, Commerce Appellate Body found that, for the most issued its preliminary determination memos part, the U.S. cumulation statute is not in the Section 129 proceedings, and on April inconsistent with the SCM Agreement. The 14, 2016, Commerce issued its final Section Appellate Body found, however, that one 129 determinations. On April 22, 2016, the subsection of the cumulation provision - United States informed the DSB that it had 1677(7)(G)(i)(III) - is inconsistent with the complied with the recommendations and SCM Agreement because it requires the rulings in this dispute. USITC to assess cumulatively the effects of imports that are subject to simultaneous On June 5, 2017, India requested CVD investigations with the effects of consultations regarding the U.S. imports that are subject to only AD implementation. Despite consultations investigations. That subsection would only with the United States in July and October apply however, if Commerce self-initiated 2017, India continued to have concerns that an investigation on the same day that a the United States failed to implement the petition was filed covering the same DSB’s recommendations and rulings in the products. The USITC has never applied this underlying dispute. Consequently, in April subsection, however, because there are no 2018, India requested the establishment of instances in which the Commerce has taken a panel pursuant to Article 21.5 of the action to trigger it. DSU. Subsequently on May 25, 2018, the WTO established a compliance panel to The DSB adopted the Appellate Body examine India’s challenges regarding the report and the Panel report, as modified by Section 129 determinations by Commerce and the USITC.

On November 15, 2019, the WTO On May 25, 2012, China requested dispute panel under Article 21.5 issued its WTO consultations with respect to 22 U.S. public Final Report. The compliance Panel CVD investigations of Chinese imports rejected the majority of India’s claims that conducted since 2008. Consultations were the United States failed to bring its held on June 25 and July 18, 2012, which countervailing duty determination and failed to resolve the dispute. On August 20, injury determination into compliance. The 2012, China requested the establishment of United States prevailed on eight sets of a WTO panel, and the Dispute Settlement claims, including on finding the National Body established a panel at its September Mineral Development Corporation as a 28, 2012, meeting. In this dispute, China public body, rejection of in-country included claims related to the “public benchmarks, use of out-of-country bodies” issue that were like those raised in benchmarks, the calculation of the benefit United States – Definitive Anti-Dumping and under the Steel Development Fund Countervailing Duties on Certain Products program, new subsidies, disclosure of from China (DS379), and included claims essential facts, the “appropriateness” of related to export restraints, initiation exceeding a terminated domestic standards, benchmarks, specificity, and the settlement rate, and all but one aspect of application of adverse facts available. After the injury determination. The compliance multiple submissions and two in-person Panel found in favor of India on a certain meetings with the panel, on July 14, 2014, aspect of specificity, and on one aspect of the panel found that with respect to the the USITC’s non-attribution analysis. The majority of issues, the challenged compliance Panel also found that the investigations were consistent with the United States’ failure to amend the United States’ WTO obligations. The panel cumulation statute was inconsistent with did find, however, that Commerce’s public the DSB recommendation concerning 19 body determinations were inconsistent with USC § 1677(7)(G)(i)(III) made in the original the standards set forth by the Appellate proceedings of the dispute. Body in United States — Definitive Anti- Dumping and Countervailing Duties on On December 18, 2019, the United Certain Products from China (DS379). States notified the Dispute Settlement Body of its decision to appeal issues of law China appealed the panel’s findings covered in the report of the compliance with respect to the specificity of certain Panel and legal interpretations developed subsidies, benchmarks used by Commerce by the compliance Panel. Because no in four investigations, and Commerce’s division of the Appellate Body can be application of facts available. The United established to hear this appeal, the United States cross-appealed, arguing that the States is conferring with India so the parties Panel made findings with respect to certain may determine the way forward in this matters that were outside of its terms of dispute. reference. On October 16 and 17, 2014, the United States, China, and third participants UNITED STATES – COUNTERVAILING MEASURES ON presented arguments before the Appellate CERTAIN PRODUCTS FROM CHINA (DS437) Body.

On December 18, 2014, the appoint an arbitrator to determine the RPT. Appellate Body circulated its report. On The parties filed written submissions and benchmarks, the Appellate Body reversed met with the arbitrator on September 9, the panel and found that Commerce’s 2015. On October 9, 2015, the arbitrator determination to use out-of-country determined that the RPT would end on April benchmarks in four CVD investigations was 1, 2016, which was months shorter than the inconsistent with Articles 1.1(b) and 14(d) time period that the United States of the Subsidies Agreement. On specificity, explained it needed to complete the Appellate Body rejected one of China’s implementation. claims with respect to the order of analysis in de facto specificity determinations. In March 2016, Commerce However, the Appellate Body reversed the completed its issuance of preliminary panel’s findings that Commerce did not act determinations in the proceedings under inconsistently with Article 2.1 of the section 129 of the Uruguay Round Subsidies Agreement when it failed to Agreement Act and issued a schedule for identify the “jurisdiction of the granting public comment. For the public body, de authority” and “subsidy program” before facto specificity, and benchmark issues in all finding the subsidy specific. On facts proceedings, and the land issue in three available, the Appellate Body accepted proceedings, Commerce’s ultimate China’s claim that the panel’s findings determinations were the same as in the regarding facts available were inconsistent underlying investigations and the originally with Article 11 of the DSU and reversed the calculated CVD margins were unchanged. panel’s finding that Commerce’s application However, Commerce provided additional of facts available was not inconsistent with analysis and explanation supporting these Article 12.7 of the Subsidies Agreement. determinations. With respect to three Lastly, the Appellate Body rejected the U.S. other proceedings pertaining to land, appeal of the panel’s finding that China’s Commerce determined that some land use panel request met the requirements of programs were not specific. Also, in the Article 6.2 of the DSU to present an two proceedings pertaining to export adequate summary of the legal basis its restraints, Commerce determined not to claim sufficient to present the problem initiate investigations into the export clearly. restraint programs. For the three proceedings involving these non-specific The DSB adopted the reports of the land programs and the two proceedings panel and the Appellate Body on January involving export restraints the revised CVD 16, 2015. margins were lower.

China and the United States On March 31, 2016, Commerce consulted in the months that followed in an issued final determinations with respect to effort to agree on the RPT for the United eight of the challenged CVD investigations States to bring its measures into conformity and, on April 1, USTR directed Commerce to with the DSB’s recommendations and implement those determinations. rulings but could not reach agreement. On Furthermore, because Commerce had July 9, 2015, China requested that the WTO already revoked one of the remaining CVD

orders challenged in the WTO dispute, so-called “ongoing conduct” (collection of Commerce determined it had already duties and cash deposits). brought its measure into conformity with respect to that investigation. In addition, The compliance panel conducted an Commerce determined that it had already in-person meeting in Geneva on May 10 withdrawn an approach determined by the and 11, 2017 and circulated its report to DSB to be inconsistent “as such” with the WTO members on March 19, 2018. Subsidies Agreement. Regarding public bodies, the United States prevailed on China’s “as applied” challenge On April 26, 2016, Commerce issued to the public bodies determinations in the its final determinations with respect to two twelve challenged section 129 of the remaining six CVD proceedings. On determinations. Although the panel May 13, 2016, the Government of China disagreed with the United States and found (GOC) filed a consultation request at the Commerce’s May 2012 Public Bodies WTO challenging all the section 129 Memorandum to be a challengeable determinations including those yet to be measure and of general/prospective completed. On May 19, 2016, Commerce application, the United States prevailed on issued final determinations for the China’s “as such” challenge to the remaining CVD proceedings. On May 26, memorandum. Regarding input specificity, 2016, USTR directed Commerce to the panel found that 11 section 129 implement the completed final section 129 determinations are inconsistent with Article determinations in the remaining CVD 2.1(c) of the Subsidies Agreement. proceedings. On June 9, 2016, Commerce Regarding benchmarks, the panel rejected published a Federal Register notice China’s interpretation of Article 14(d) of the announcing the section 129 determinations. Subsidies Agreement but found that In June 2016, the United States informed Commerce’s factual findings did not the WTO that it had come into compliance support its use of out-of-country in this dispute. benchmarks in four section 129 determinations. The United States also In July 2016, at China’s request, the prevailed on China’s claim that the use of WTO established a compliance panel to out-of-country benchmarks in four section examine China’s challenge to the section 129 determinations was inconsistent with 129 determinations. The compliance Article 32.1 of the Subsidies Agreement. proceeding covered 15 investigations as Regarding the additional administrative and well as 12 administrative reviews and 10 sunset reviews, the panel found the sunset reviews. There were four main challenged reviews to be within its issues in the compliance dispute, which jurisdiction and concluded that the public concerned Commerce’s new methodologies body and input specificity determinations in for determining whether SOEs are “public nine administrative reviews were WTO- bodies”, when to use out-of-country inconsistent. However, the United States benchmarks, additional analyses regarding prevailed on China’s challenge to the other the specificity of input subsidies, and determinations in the 12 administrative whether implementation should include reviews at issue and prevailed on China’s additional periodic and sunset reviews and claims regarding 10 sunset reviews. Finally,

the United States prevailed on China’s industries through a complex web of laws, “ongoing conduct” claim. regulations, policies, and industrial plans. Finding that the kinds of subsidies at issue On April 27, 2018, the United States in this dispute cannot be addressed using appealed certain findings of the compliance existing WTO remedies, such as Panel regarding the Public Bodies countervailing duties, calls into question the Memorandum, Commerce’s benchmark and usefulness of the WTO to help WTO input specificity redeterminations, and Members address the most urgent whether certain Commerce determinations economic problems in today’s world were within the compliance Panel’s terms economy. The United States noted specific of reference. On May 2, 2018, China aspects of the findings of the appellate appealed certain findings of the compliance report that are erroneous and undermine Panel regarding Commerce’s the interests of all WTO Members in a fair redeterminations that certain state-owned trading system, including erroneous enterprises were “public bodies”, the Public interpretations of “public body” and out-of- Bodies Memorandum, and the legal country benchmark, diminishing U.S. rights interpretation of Articles 1.1(b) and 14(d) of and adding to U.S. obligations, engaging in the SCM Agreement. The three persons fact-finding, and treating prior reports as hearing the appeal were Thomas R. Graham “precedent.” as Presiding Member, and Ujal Singh Battia and Shree B.C. Servansing. An appellate On October 17, 2019, China report was circulated on July 16, 2019. The requested authorization to suspend appellate majority upheld the findings of concessions and other obligations pursuant the compliance Panel. The appellate report to Article 22.2 of the DSU. On October 25, includes a lengthy dissent that calls into 2019, the United States objected to China’s question the reasoning and interpretative request, referring the matter to arbitration analysis of the appellate majority and prior pursuant to Article 22.6 of the DSU. On Appellate Body reports. November 15, 2019, the WTO notified the parties that the arbitration would be carried The DSB considered the appellate out by the panelists who served during the report and the compliance Panel report, as compliance proceeding: Mr. Hugo modified by the appellate report, at its Perezcano Diaz, Chair; and Mr. Luis meeting on August 15, 2019. The United Catibayan and Mr. Thinus Jacobsz, States noted in its DSB statement that, Members. The arbitration proceedings are through the interpretations applied in this ongoing. proceeding, based primarily on erroneous approaches by the Appellate Body in past UNITED STATES — CVD MEASURES ON reports, the WTO dispute settlement SUPERCALENDERED PAPER FROM CANADA (DS505) system is weakening the ability of WTO Members to use WTO tools to discipline On March 30, 2016, Canada injurious subsidies. The Subsidies requested consultations with the United Agreement is not meant to provide cover States to consider claims related to U.S. for, and render untouchable, one Member’s countervailing duties on supercalendered policy of providing massive subsidies to its paper from Canada. Consultations between

the United States and Canada took place in On July 12, 2018, Commerce Washington, DC on May 4, 2016. rescinded the CVD order on supercalendered paper from Canada as part On June 9, 2016, Canada requested of a changed circumstances review because the establishment of a panel challenging the domestic industry was no longer certain actions of Commerce with respect interested in the remedy provided by such to the CVD investigation and final an order. Notwithstanding revocation of determination, the CVD order, and an the order, the United States appealed expedited review of that order. The panel certain aspects of the panel report to the request also presented claims with respect Appellate Body in August 2018. Specifically, to alleged U.S. “ongoing conduct” or, in the the United States appealed the panel’s alternative, a purported rule or norm, with adverse finding of “ongoing conduct” respect to the application of adverse facts related to the application of adverse facts available in relation to subsidies discovered available to subsidies discovered at during the course of a CVD investigation. verification.

Canada alleged that the U.S. On February 6, 2020, the Appellate measures at issue were inconsistent with Body upheld the panel’s adverse finding of obligations under Articles 1.1(a)(1), 1.1(b), “ongoing conduct” related to the 2, 10, 11.1, 11.2, 11.3, 11.6, 12.1, 12.2, 12.3, application of adverse facts available to 12.7, 12.8, 14, 14(d), 19.1, 19.3, 19.4, 22.3, subsidies discovered at verification, 22.5, 32.1 of the Subsidies Agreement; and although one Appellate Body Member Article VI:3 of the GATT 1994. issued a separate opinion casting doubt on the panel’s ability to define the precise A panel was established in July 2016 content, repeated application, and and subsequently composed by the likelihood of continued application of the Director-General in August 2016. The panel “ongoing conduct” measure. That same held meetings with the parties in March and Appellate Body Member also questioned June of 2017. whether there was an actual dispute between the parties because the CVD order On July 5, 2018, the panel publicly on supercalendered paper from Canada, released its report. The panel sided with the only CVD proceeding involving Canada Canada on most issues, including in the dispute, had been revoked in 2018. Commerce’s determination to countervail the provision of electricity in the province At its meeting on March 5, 2020, the of Nova Scotia for less than adequate DSB considered the appellate and panel remuneration. Most significantly, the panel report, as modified by the appellate report. found that the application of adverse facts The United States noted in its DSB available to subsidies discovered at statement that there were serious verification constitutes “ongoing conduct,” procedural and substantive concerns with which, the panel concluded, is inconsistent the report and objected to the adoption of with Article 12.7 of the Subsidies the report as an Appellate Body Report. Agreement. The United States explained that the report cannot be an Appellate Body report

44 because an individual who served on the UNITED STATES – CERTAIN MEASURES RELATING TO appeal is not a valid member of the THE RENEWABLE ENERGY SECTOR (DS510) Appellate Body given that the individual is affiliated with a government in breach of On September 9, 2016, India Article 17.3 of the DSU. The concern requested WTO consultations regarding related to the individual’s service was alleged domestic content requirement and further compounded because the appeal subsidy measures maintained under directly implicated the interests of that renewable energy programs in the states of government. The United States also Washington, California, Montana, reiterated its concerns of ex-Appellate Body Massachusetts, Connecticut, Michigan, members’ continuation of service without Delaware, and Minnesota. India’s request authorization by the DSB, and the failure to alleges inconsistencies with Articles III:4, adhere to the deadline in Article 17.5 of the XVI:1 and XVI:4 of the GATT 1994, Article DSU. Accordingly, the United States did not 2.1 of the TRIMS Agreement, Articles 3.1(b), join in a consensus to adopt the reports 3.2, 5(a), 5(c), 6.3(a), 6.3(c) and 25 of the that were before the DSB. The United Subsidies Agreement. Consultations States explained that because there was no between India and the United States took valid Appellate Body report in this dispute, place in Geneva on November 16-17, 2016. the reports could only be adopted by positive consensus. Because there was no India requested the establishment consensus on adoption, the DSB did not of a WTO panel to examine the challenged validly adopt any reports in this dispute, measures on January 17, 2017. A panel was and therefore there was no valid established on March 21, 2017. recommendation of the DSB with which to The panel circulated its report on bring a measure into conformity with a June 27, 2019. The Panel found that certain covered agreement. measures maintained by the states of On June 18, 2020, Canada requested California, Massachusetts, Minnesota, and authorization to suspend concessions and Washington were not within its terms of other obligations pursuant to Article 22.2 of reference. With respect to the measures the DSU on grounds that the United States that the panel found to be within its terms had failed to inform the DSB of its intention of reference, the panel found that each of with respect to implementation of the those measures were inconsistent with recommendations and rulings in accordance Article III:4 of the GATT 1994 because they with Article 21.3 or DSU or to propose a accorded less favorable treatment to reasonable period of time comply. On June imported products as compared to like 26, 2020, the United States objected to domestic products. The Panel exercised Canada’s request, referring the matter to judicial economy on India's claims under arbitration pursuant to Article 22.6 of the Articles 2.1 and 2.2 of the TRIMS DSU. In August 2020, the WTO notified the Agreement and Articles 3.1(b) and 3.2 of parties that the arbitration would be carried the SCM Agreement. out by the original panelists who heard the On August 15, 2019, the United dispute. The arbitration proceedings are States notified the DSB of its decision to ongoing.

appeal to the Appellate Body certain issues subsidy under the SCM Agreement; and (4) of law and legal interpretations in the panel several applications of facts available in the report. On August 20, 2019, India notified CVD proceedings at issue. Turkey also the DSB of its decision to cross-appeal. On challenges the USITC’s cumulative December 10, 2019, the Appellate Body assessment of the effects of subsidized Division in this appeal informed the parties imports with those of dumped, that it had not completed its work on the unsubsidized imports both “as such” and appeal. “as applied.”

UNITED STATES – COUNTERVAILING MEASURES ON The panel report was circulated in CERTAIN PIPE AND TUBE PRODUCTS FROM TURKEY December 2018 and found against the (DS523) United States on public body, specificity, the application of facts available, and cross- On March 8, 2017, Turkey requested cumulation in original investigations. The consultations with the United States panel rejected India’s “as applied” and “as concerning several CVD measures against such” claim on benchmarks and on Turkish steel products. Specifically, Turkey cumulation in five-year reviews. requested consultations regarding the following CVD proceedings: oil country On January 25, 2019, the United tubular goods from Turkey; welded line States notified the DSB of its decision to pipe from Turkey; heavy walled rectangular appeal the panel’s findings on its terms of welded carbon steel pipes and tubes from reference, public body, specificity, the Turkey; and circular welded carbon steel application of facts available, and cross- pipes and tubes from Turkey. cumulation. On January 30, 2019, Turkey also notified the DSB of its decision to After consultations failed to resolve appeal on the issue of public body. The the dispute, Turkey requested the United States filed appellant and appellee establishment of a WTO panel to hear its submissions in January and February 2019. claims. The panel was established on June On December 10, 2019, the Appellate Body 19, 2017. Division hearing this appeal informed the parties that it had not completed its work Turkey challenges the following on the appeal. aspects of Commerce’s CVD determinations: (1) Commerce’s findings INDIA -- EXPORT RELATED MEASURES (DS541) that two Turkish hot-rolled steel producers are “public bodies” capable of providing Export subsidies provide an unfair financial contributions under the SCM competitive advantage to recipients, and Agreement; (2) Commerce’s decision to use WTO rules expressly prohibit them. As out-of-country benchmarks for measuring noted above, there is a limited exception to the benefit from the provision of hot-rolled this rule for specified developing countries steel, and its alleged practice of frequently that may continue to provide export using out-of-country benchmarks; (3) subsidies temporarily until they reach a Commerce’s determinations that the defined economic benchmark. India was provision of hot-rolled steel is a specific initially within this group, but it eventually

surpassed the benchmark. Because India’s November 19, 2019, India notified the DSB exemption has expired, India is expected to of its decision to appeal nearly every finding immediately withdraw its export subsidies, of the Panel. On November 28, 2019, the but to date India has not done so. In fact, United States filed its appellee submission. India has expanded benefits under several Because no division of the Appellate Body of its export subsidies programs. can be established to hear this appeal, the United States is conferring with India to On March 14, 2018, the United seek a positive solution to this dispute. States requested consultations with India with regard to certain prohibited export UNITED STATES – CERTAIN SYSTEMIC TRADE REMEDY subsidy schemes. It appears that India MEASURES (DS535) continues to provide export subsidies through: (1) the Export Oriented Units On December 20, 2017, Canada Scheme and sector specific schemes, requested consultations with the United including Electronics Hardware Technology States concerning certain laws, regulations Parks Scheme and BioTechnology Parks and practices that Canada claims are Scheme, (2) the Merchandise Exports from maintained by the United States in its AD India Scheme, (3) the Export Promotion and CVD proceedings. Specifically, Canada Capital Goods Scheme, (4) Special Economic alleges that the United States: (1) fails to Zones, and (5) a duty-free imports for implement WTO-inconsistent findings by exporters program. The United States held liquidating final duties in excess of WTO- consultations with India on April 11, 2018. consistent rates, and failing to refund cash Those consultations unfortunately did not deposits collected in excess of WTO- resolve the dispute. consistent rates; (2) retroactively collects provisional AD and CVD duties following On May 17, 2018, the United States preliminary affirmative critical filed a request for the establishment of a circumstances determinations; (3) treats Panel and submitted its first written and export controls as a financial contribution second written submission on September and improperly initiates investigations into 20, 2018 and October 11, 2018, and/or imposes duties; (4) improperly respectively. On February 12-13, 2019, the calculates the benefit in determining Panel held a substantive meeting with the whether there is a provision of goods for parties, and on February 13, 2019, the less than adequate remuneration; (5) Panel held a meeting with the third parties. effectively closes the evidentiary record On October 31, 2019, the Panel released its before the preliminary determination and final report where the United States fails to exercise its discretion to accept prevailed on the vast majority of the issues. additional factual information; and (6) Specifically, the Panel found that India creates an institutional bias in favor of provided export subsidies through five affirmative results in injury, threat of injury, schemes: EOU schemes; MEIS scheme; or material retardation determinations due EPCG scheme; SEZ scheme; and DFIS to the U.S. statutory provision treating a tie scheme which were found to be vote by the USITC Commissioners as an inconsistent with the Subsidies Agreement affirmative determination. and rejected India’s defenses. On

Canada claims these alleged 19.3, 19.4, 21.1, 21.2, 32.1 and 32.5 of the measures are inconsistent with Articles VI Subsidies Agreement; and Article VI:3 of the (in particular, VI:2 and VI:3) and X:3(a) of GATT. the GATT 1994; Articles 1, 3.1, 6 (in particular, 6.1, 6.2, and 6.9), 7 (in particular, At the request of Canada, the WTO 7.4 and 7.5), 9 (in particular, 9.2, 9.3, 9.3.1, Director-General composed a panel in the and 9.4), 10 (in particular, 10.1 and 10.6), CVD dispute on July 6, 2018. 11 (in particular 11.1 and 11.2), 18 (in particular, 18.1 and 18.4) of the AD On August 24, 2020, the panel Agreement; Articles 1 (in particular, 1.1(a) hearing the CVD dispute circulated its final and 1.1(b)), 10, 11 (in particular, 11.2, 11.3, report, in which it ruled against the United and 11.6), 12 (in particular, 12.1 and 12.8), States on most issues, including 14(d), 15.1, 17 (in particular, 17.3, 17.4, and Commerce’s selection of benchmarks used 17.5), 19 (in particular, 19.1, 19.3 and 19.4), to determine the adequacy of remuneration 20 (in particular, 20.1 and 20.6), 21 (in for stumpage (i.e., the right to harvest particular, 21.1 and 21.2), and 32 (in timber from government lands). In particular, 32.1 and 32.5) of the SCM particular, the panel adopted Canada’s Agreement, and Articles 21.1 and 21.3 of “regional markets” framework in the DSU. The United States disagrees with interpreting the second sentence of Article every aspect of Canada’s wide-ranging 14(d) of the SCM Agreement. As a result, challenge to U.S. laws, regulations, and the panel concluded that it is not sufficient approaches. Consultations between the for an investigating authority to use as a United States and Canada occurred in benchmark a market-determined price from February 2018. anywhere in the country of provision where evidence shows the prevailing market UNITED STATES – COUNTERVAILING MEASURES ON conditions for the government-provided SOFTWOOD LUMBER FROM CANADA (DS533) good differ from the prevailing market conditions for the same or similar goods On November 28, 2017, the sold in other parts of the country of Government of Canada filed two separate provision. In that scenario, an investigating requests for WTO consultations regarding authority is required to consider using, at the final AD and CVD determinations in the least as a starting point in its benefit softwood lumber investigations. Dispute assessment, a benchmark price resulting settlement panels were subsequently from the prevailing market conditions established in both disputes on April 9, within that region, because that price would 2018. necessarily relate to the prevailing market conditions for the government-provided In the CVD WTO dispute, Canada good. The Panel also made adverse findings challenges various aspects of Commerce’s regarding Commerce’s determination not to final determination related to stumpage offset comparison results with “negative and non-stumpage programs. Canada benefits” as well as Commerce’s finding of alleges that the U.S. measures at issue are entrustment or direction with respect to log inconsistent with Articles 1.1(a)(1), 1.1(b), export restrictions in the Canadian province 2.1(a), 2.1(b), 10, 11.2, 11.3, 14(d), 19.1, of British Columbia.

On September 28, 2020, the United • Anti-Dumping Duties on Large Power States notified the DSB of its decision to Transformers from the Republic of Korea appeal to the Appellate Body certain issues (investigation number A-580-867). of law and legal interpretations in the panel report. No division of the Appellate Body Korea alleged that the challenged has been established to hear this appeal. measures are inconsistent with U.S. WTO obligations under Article 6.8 and Annex II of UNITED STATES – ANTI-DUMPING AND the Anti-Dumping Agreement and Article COUNTERVAILING DUTIES ON CERTAIN PRODUCTS AND 12.7 of the SCM Agreement. Korea further THE USE OF FACTS AVAILABLE (DS539) alleged that the United States failed to comply with a number of supposedly On February 14, 2018, Korea related procedural and substantive requested consultations with the United obligations under various other provisions States concerning certain AD and CVD of the Anti-Dumping Agreement and the determinations involving various products SCM Agreement. from Korea, and certain laws, regulations and other alleged measures maintained by In addition, Korea alleged that the United States with respect to the use of section 776 of the Tariff Act of 1930, facts available in AD and CVD proceedings. codified at 19 U.S.C. § 1677e, as amended by section 502 of the Trade Preferences On April 16, 2018, Korea requested Extension Act of 2015, and the certain the establishment of a WTO dispute related legal provisions governing the use of settlement panel regarding the use of facts facts available, are "as such" inconsistent available in various segments of the with the Anti-Dumping Agreement and the following investigations: SCM Agreement. Korea also challenged Commerce’s "use of adverse facts available" • Anti-Dumping Duties on Certain Corrosion- as a purported "ongoing conduct, or rule or Resistant Steel Products from the Republic norm" when Commerce allegedly "selects of Korea (investigation number A-580-878). facts from the record that are adverse to the interests of the foreign producers or • Anti-Dumping Duties on Certain Cold- exporters without (i) establishing that the Rolled Steel Flat Products from the Republic adverse inferences can reasonably be of Korea (investigation number A-580-881). drawn in light of the degree of cooperation • Countervailing Duties on Certain Cold- received, and (ii) ensuring that such facts Rolled Steel Flat Products from the Republic are the best information available' in the of Korea (investigation number C-580-882). particular circumstances."

• Anti-Dumping Duties on Certain Hot- At its meeting on May 28, 2018, the Rolled Steel Flat Products from the Republic DSB established a panel. Brazil, Canada, of Korea (investigation number A-580-883). China, Egypt, the European Union, India, Japan, Kazakhstan, Mexico, Norway and the • Countervailing Duties on Certain Hot- Russian Federation reserved their third- Rolled Steel Flat Products from the Republic party rights. Following agreement of the of Korea (investigation number C-580-884).

parties, the panel was composed on to the Government of Spain’s December 5, 2018. implementation of the EU’s Common Agricultural Policy are de jure specific; UNITED STATES – CERTAIN MEASURES RELATED TO (2) Commerce’s application of section 771B RENEWABLE ENERGY (DS563) of the Tariff Act of 1930, as amended (codified at 19 U.S.C. § 1677-2), with On August 2018, China requested respect to the processed agricultural consultations with the United States product subject to the investigation (i.e., concerning certain measures allegedly ripe olives) and the decision to deem adopted and maintained in the states of countervailable subsidies provided to raw Washington, California, and Michigan in olive growers as though they were provided relation to alleged subsidies or domestic with respect to the manufacture, content requirements in the energy sector. production, or exportation of ripe olives; China alleges that the measures appear to and (3) Commerce’s calculation of the 27.02 be inconsistent with United States’ percent subsidy rate for one of the three obligations under Articles 3.1(b) and 3.2 of investigated ripe olive processors in Spain, the Subsidies Agreement, Articles 2.1 and which was subsequently used in the 2.2 of the Trade-Related Investment calculation of the 14.97 percent subsidy Measures (TRIMS Agreement), and Article rate established for “all other” producers III:4 of the General Agreement on Tariffs and exporters of ripe olives from Spain. and Trade 1994 (GATT 1994). The United States and China held consultations in The EU alleges that Commerce’s Geneva on October 23, 2018. determinations are inconsistent with Article VI:3 of the GATT 1994, and Articles 1.1(a), UNITED STATES – ANTI-DUMPING AND 1.1(b), 1.2, 2.1, 2.2, 2.4, 10, 12.1, 12.5, 12.8, COUNTERVAILING DUTIES ON RIPE OLIVES FROM SPAIN 14, 19.1, 19.3, 19.4, and 32.1 of the SCM (DS577) Agreement. In addition, the EU claims that section 771B of the Tariff Act of 1930, as On January 28, 2019, the EU amended (codified at 19 U.S.C. § 1677-2), is requested consultations concerning the “as such” inconsistent with Article VI:3 of imposition of AD/CVDs on ripe olives from the GATT 1994 and Articles 1.1(b), 10, 14, Spain. Consultations between the EU and 19.1, 19.3, 19.4, and 32.1 of the SCM the United States took place on March 20, Agreement. 2019. After consultations failed to resolve the dispute, the EU requested the With respect to the USITC’s injury establishment of a panel on May 16, 2019. determination, the EU’s panel request The EU’s panel request challenges several alleges that the USITC’s injury aspects of Commerce’s final CVD determination is inconsistent with Articles determination and the USITC’s injury VI:1, VI:2, and VI:3 of the GATT 1994, and determination. Articles 15.1, 15.2, 15.5, and 22.5 of the SCM Agreement, as well as Articles 3.1, 3.2, With respect to Commerce’s CVD 3.5, and 12.2.2 of the AD Agreement. determination, the EU challenges: (1) Commerce’s determination that certain grants provided to olive growers pursuant

On June 24, 2019, the DSB was held on December 17, 2019, in established a panel to examine the EU’s connection with this administrative appeal. claims. The panel was composed on October 18, 2019. Panel proceedings are On October 23, 2020, the Competition ongoing. Chamber of INDECOPI reversed the Commission’s determination, resulting in the revocation of countervailing duties on U.S. FOREIGN CVD AND SUBSIDY INVESTIGATIONS OF exports of ethanol to Peru. U.S. EXPORTS CVD INVESTIGATION OF U.S. CORN - PERU In 2020, USTR and Commerce helped to defend U.S. commercial interests On July 24, 2018, the Government of in CVD investigations that involved exports Peru self-initiated a CVD investigation on of products from the United States. imports of corn from the United States (there is no accompanying AD proceeding). CVD INVESTIGATION OF U.S. ETHANOL – PERU As with the Peru ethanol proceeding, this On May 10, 2017, the Government investigation was conducted by Peru’s of Peru initiated a CVD investigation on Antidumping and Countervailing Duty imports of ethanol from the United States Commission (INDECOPI). INDECOPI issued (there is no accompanying AD proceeding). the “essential facts” report on November The investigation was conducted by Peru’s 14, 2019, in which it found injury to the Antidumping and Countervailing Duty Peruvian corn industry and countervailable Commission (CDS) within the National subsidization to the U.S. corn industry Institute for the Defense of Competition through 10 federal programs. The United and Protection of Intellectual Property States and U.S. domestic industry filed (INDECOPI). The case covers eight U.S. written comments on the essential facts federal programs and 28 programs report on December 10, 2019. A hearing administered by 17 different states. Peru before INDECOPI was held on December 16, released the “essential facts” report on 2019. On January 17, 2020, Peru ended the August 29, 2018, which presaged its investigation without imposing duties, affirmative subsidy findings for several U.S. which was a major victory for U.S. farmers. Department of Agriculture subsidy CVD INVESTIGATION OF U.S. ETHANOL – COLOMBIA programs found to benefit U.S. corn production, the main input into ethanol On January 28, 2019, the production. The United States submitted Government of Colombia initiated a CVD detailed comments on Peru’s findings. On investigation on imports of ethanol from November 6, 2018, Peru announced the the United States (there is no release of its final determination. The final accompanying AD proceeding). The CVD rate for all U.S. companies was investigation was requested by the approximately 10 percent. On November Colombian ethanol industry and is being 30, 2018, the United States and the U.S. conducted by Colombia’s Ministry of domestic industry filed administrative Commerce, Industry, and Tourism (MINCIT). appeals regarding various aspects of the Several federal government programs are final determination to INDECOPI. A hearing being examined, as well as numerous state

programs. On May 3rd, the Government of On August 14, 2020, China Colombia released its preliminary findings announced the initiation of a CVD which included the investigation of 31 investigation of U.S. exports of federal and state level aid programs. The polyphenylene ether (PPE) to China (an provisional duties imposed were at 9.36 accompanying AD investigation was percent ad valorem. On April 30, 2020, initiated on August 3). The investigation is MINCIT released its final determination, in being conducted by MOFCOM. Over one which it found affirmative injury and hundred programs are being examined, countervailable subsidization for various which overlap significantly with those USDA and state corn and ethanol programs. programs investigated in the N-propanol Colombia has imposed a final country-wide investigation. These include several dozen duty rate of $USD 0.06646 per kilogram on federal and state government programs ethanol exported from the United States to allegedly provided to upstream oil and Colombia, which will remain in place for natural gas producers. A preliminary two years. determination is expected in mid-2021.

CVD INVESTIGATION OF U.S. N-PROPANOL – CHINA CVD INVESTIGATION OF U.S. GLYCOL ETHERS – CHINA

On July 29, 2019, the Government of On September 14, 2020, China China announced the initiation of a CVD announced the initiation of a CVD investigation on U.S. exports of normal investigation of U.S. exports of certain propyl alcohol (N-propanol) to China, with monoalkyl ethers of ethylene glycol and an accompanying AD investigation initiated propylene glycol (glycol ethers) to China (an on July 23, 2019. The CVD investigation was accompanying AD proceeding was initiated conducted by China’s Ministry of Commerce on August 31). The investigation is being (MOFCOM), which examined over one conducted by China’s MOFCOM. Over one hundred federal and state government hundred programs are being examined, programs in the United States. In the many of which are the same programs at preliminary determination published on issue in the N-propanol matter, including September 4, 2020, MOFCOM found that several dozen federal and state government several dozen federal and state programs programs allegedly provided to upstream had provided subsidy benefits to upstream oil and natural gas producers. A preliminary oil and natural gas producers, and those determination is expected in mid-2021. benefits were deemed to have passed through to U.S. producers of N-propanol. CVD INVESTIGATION OF U.S. POLYVINYL CHLORIDE MOFCOM’s final determination published (PVC) – CHINA on November 17, 2020 had no material changes from the preliminary On September 25, 2020, China determination, and resulted in final CVD notified the U.S. Embassy in Beijing that a rates between 34.2 and 37.7 percent ad CVD petition had been filed on August 18, valorem for the U.S. company respondents. 2020 with respect to U.S. exports of PVC. The investigation is being conducted by CVD INVESTIGATION OF U.S. POLYPHENYLENE ETHER MOFCOM. There is significant overlap (PPE) – CHINA between this petition and the N-propanol,

PPE, and glycol ethers petitions, in which current Members. Typically, the applicant the vast majority of subsidy programs are submits an application to the WTO General alleged upstream subsidies to the oil and Council, which establishes a working party gas industries. A preliminary determination to review information regarding the is expected in mid-2021. applicant’s trade regime and to oversee the negotiations over WTO membership. CHINA’S AD/CVD MEASURES ON SOLAR-GRADE POLYSILICON FROM THE UNITED STATES – EXPIRY The economic and trade information REVIEW reviewed by the working party includes the acceding candidate’s subsidies regime. China’s Ministry of Commerce Subsidy-related information is summarized imposed definitive AD (53.3% - 57%) and in a memorandum submitted by the CVD duties (0% to 2.1%) on imports of U.S. applicant detailing its foreign trade regime, solar-grade polysilicon (a high-purity form which is supplemented and corroborated by of polysilicon used in the production of independent research throughout the CSPV cells) on January 20, 2014. In accession negotiation. USTR and November 2018, China allowed its AD/CVD Commerce, along with an interagency team, duties on solar-grade polysilicon from the review the compatibility of the applicant EU to expire. However, instead of allowing party’s subsidy regime with WTO subsidy the AD/CVD duties on U.S. imports to expire rules. Specifically, the interagency team after their five-year imposition, China examines information on the nature and initiated expiry reviews of these measures, extent of the candidate’s subsidies, with at the Chinese domestic industry’s request, emphasis on subsidies that are prohibited on January 18, 2019. under the Subsidies Agreement. Additionally, an accession candidate’s trade On January 19, 2020, MOFCOM remedy laws are examined to determine issued the final determination in the expiry their compatibility with relevant WTO reviews of its AD and CVD measures on obligations. solar‐grade polysilicon from the United States. According to the notice, effective U.S. policy is to seek commitments January 20, 2020, MOFCOM will continue from accession candidates to eliminate all the duties for an additional five years at the prohibited subsidies upon joining the WTO, same rates imposed in the original and to not introduce any such subsidies in investigation (i.e., AD duty rates ranging the future. The United States may seek from 53.3% ‐ 57%; CVD rates ranging from additional commitments regarding other 0% ‐ 2.1%). subsidies in a specific country that are of particular concern to U.S. industries. U.S. MONITORING OF SUBSIDY-RELATED COMMITMENTS In 2020, USTR and Commerce reviewed information regarding the WTO ACCESSION NEGOTIATIONS accession of numerous countries. Working Party meetings occurred during 2020 for Countries and separate customs Ethiopia, Uzbekistan, Union of the Comoros, territories seeking to join the WTO must and Timor-Leste. negotiate the terms of their accession with

WTO TRADE POLICY REVIEWS CONCLUSION

The WTO’s Trade Policy Review China continues to be the most (TPR) mechanism provides USTR and common source of dumped and subsidized Commerce with another opportunity to imports into the United States. Both the review the subsidy practices of WTO number of cases filed in the United States Members. The four largest traders in the and other countries, and the numerous WTO (the EU, the United States, Japan, and strategies and tactics the Chinese China) have been examined once every government uses to implement its industrial three years. The next 16 largest Members, and mercantilist policies in pursuit of a so- based on their share of world trade, have called “socialist market economy,” been reviewed every five years. The underscore the need to more closely remaining Members have been reviewed monitor and counter China’s behavior, to every seven years, with the possibility of a consider how the subsidy rules could be longer interim period for least-developed strengthened and to defend Commerce’s Members. For each review, two documents factual finding that China remains a are prepared: a policy statement by the nonmarket economy. government of the Member under review and a detailed report written independently More broadly, the U.S. government by the WTO Secretariat. will continue to focus its subsidy enforcement efforts on defending U.S. CVD By describing Members’ subsidy actions to counteract injurious foreign practices, these reviews play an important government subsidization, pursuing several role in ensuring that WTO Members meet significant WTO dispute settlement cases, their obligations under the WTO advocating for tougher subsidy disciplines in agreements, including the Subsidies a variety of fora, pushing for greater Agreement. In reviewing these TPR reports, transparency with respect to the support USTR and Commerce scrutinize the programs of foreign governments information concerning the subsidy (especially in those sectors experiencing practices detailed in the report, but also overcapacity, such as fisheries, steel, and conduct additional research on potential primary aluminum), and closely monitoring omissions regarding known subsidies – the actions of all WTO Members to ensure especially prohibited subsidies – that have adherence to the obligations set out in the not been reported. Subsidies Agreement.

In 2020, USTR and Commerce By actively working to address reviewed the TPR reports of 7 Members, trade-distorting foreign government including the European Union, Australia, subsidies, the U.S. government’s subsidies Japan, Zimbabwe, Thailand, Indonesia, and enforcement program promotes a level Macao, China. playing field of competition, and contributes to the goals of expanding U.S. exports, advancing economic growth, and encouraging job creation. Notwithstanding the success of enforcement efforts to date,

54 the U.S. government is reviewing options Ultimately, a trading environment for how these efforts may be expanded and that is free from trade-distorting intensified. The establishment of the Center government subsidies will be more open in 2017 and its continued growth is one and competitive, bringing significant example of these efforts. economic benefits to American manufacturers, farmers, ranchers, workers, and consumers alike.

ATTACHMENT 1

Fostering U.S. Global Competitiveness by Combating Unfair Foreign Subsidies E&C’s Subsidies Enforcement Office is Here to Help

What are Unfair Foreign Subsidies and How Do They Affect American Companies and Workers? U.S. companies--large and small--are increasingly selling American-made products in markets across the globe. When selling overseas, many companies find themselves at a disadvantage to foreign competitors who benefit unfairly from financial assistance from foreign governments. Such “subsidies” can take many forms, including:

 Export loans or loan guarantees at preferential rates  Tax exemptions for exporters or favored companies or industries  Assistance conditioned on the purchase of domestic goods  R&D grants for the development and commercialization of new technologies

What is the Subsidies Enforcement Office and What Can It Do for You?

ITA’s Enforcement and Compliance (E&C) knows that U.S. exporters, manufacturers and workers can be highly successful in diverse industries and overseas markets when they can compete on a level playing field. However, it is clear that not all foreign companies or governments always play by internationally accepted rules. E&C’s Subsidies Enforcement Office (SEO) is committed to confronting foreign government subsidies and related trade barriers that impede U.S. companies’ and workers’ ability to expand into and compete fairly in these crucial markets. With a variety of resources and tools at its disposal, the SEO provides:

 A dedicated staff that continually monitors and analyzes foreign subsidies and intervenes, where possible and appropriate, to challenge harmful foreign subsidies.

 Resources to find information on a wide range of foreign government The SEO has vigorously defended the subsidy practices, including our online Subsidies Library. interests of dozens of U.S. exporters subject to foreign anti-subsidy (CVD) proceedings.  Counseling services to American companies on the tools available to address unfairly subsidized imports.

 Advice to U.S. companies whose exports are subject to foreign countervailing duty (anti-subsidy) actions and that takes an active role in such cases to defend U.S. interests.

What Other Remedies Are Available To Combat Unfair Foreign Subsidies?

In addition to the SEO services noted above, under the U.S. trade remedy laws and international trade rules if a foreign subsidy meets certain conditions, the U.S. government could take the following steps, where appropriate:

 Impose special duties (i.e., countervailing duties) on subsidized imports that are injuring U.S. industries.

 Challenge foreign subsidization through the dispute settlement system of the World Trade Organization.

What is the Next Step?

Contact the SEO if you believe subsidized imports are harming your company, or foreign subsidies or foreign countervailing duty proceedings are impeding your ability to export and compete abroad. SEO experts can evaluate the situation to determine what tools under U.S. law and international trade rules are available to effectively address the problem. Working together we can combat harmful foreign subsidies, to ensure that high quality, export-related jobs in the United States are created and preserved.

Subsidies Enforcement Office, E&C, Office of Policy, 1401 Constitution Ave., NW, Room 3713, Washington, DC 20230 Questions can be referred to Gregory Campbell at (202) 482-2239 or [email protected] http://esel.trade.gov

ATTACHMENT 2

THE ELECTRONIC SUBSIDIES ENFORCEMENT LIBRARY [http://esel.trade.gov]

First Screen

Main Features of the Webpage

Subsidies Enforcement Library This is the gateway to the library. The visitor can click on the links under this heading to access information regarding subsidy programs that have been analyzed by Enforcement and Compliance staff in the course of CVD proceedings since 1980.

Published Since 2007 - This links to subsidy programs analyzed in the most recent CVD decisions since 2007. By clicking on this link, the visitor can access a search feature to find programs by entering terms or dates or selecting from a list of terms (such as country name), in various boxes where indicated. Clicking on the “search” button will execute a search based on the terms and dates selected and open a “search results page” displaying the relevant CVD decisions arranged in reverse chronological order from top to bottom. The visitor can then click on the decision title to access a copy of the decision for review.

Published Prior to 2007 - This links to subsidy programs analyzed in earlier CVD proceedings through 2007. The information is provided by country and then subdivided into various categories, based on the Department of Commerce's finding in the proceeding. More detailed information about a program in a specific case can be easily found by clicking on the hyperlinked cite to the Federal Register notice, in which a complete description of the program and Commerce’s analysis is provided.

Home This link will take the visitor back to the SEO homepage.

Overview This links to the informational page found in Attachment 1 of this Report, which includes a general overview of the SEO as well as contact information.

FAQ This link contains “frequently asked questions” that the visitor can consult for additional information regarding the SEO and the subsidies library.

Contact Us This link will automatically open up an email form with the SEO’s email address, which the visitor can use to submit comments or questions. SEO staff aims to respond to all relevant queries within a week.

Subsidies Enforcement This link opens to the SEO webpage where additional information and links are provided for other relevant material, such as the Subsidy Reports to Congress and the WTO Subsidies Agreement.

ATTACHMENT 3

Programs Granted Extension Under Article 27.4 of the Subsidies Agreement

WTO MEMBER NAME OF PROGRAM

Fiscal Incentives Act ANTIGUA & BARBUDA Free Trade/Processing Zones

Fiscal Incentive Program

Export Allowance

Research & Development Allowance

International Business Incentives

BARBADOS Societies with Restricted Liability

Export Re-Discount Facility

Export Credit Insurance Scheme

Export Finance Guarantee Scheme

Export Grant & Incentive Scheme

Fiscal Incentives Program

Export Processing Zone Act BELIZE Commercial Free Zone Act

Conditional Duty Exemption Facility

Free Zone BOLIVIA

(Annex VII Country) Temporary Admission Regime for Inward Processing

Duty Free Zone Regime COSTA RICA Inward Processing Regime

DOMINICA Fiscal Incentives Program

DOMINICAN REPUBLIC Law No. 8-90, to “Promote the Establishment of Free Trade Zones”

Export Processing Zones & Marketing Act EL SALVADOR Export Reactivation Law

Short-Terms Export Profit Deduction

Export Processing Factories/Zones Scheme

The Income Tax Act (Film Making & Audio Visual Incentive Amendment Degree 2000)

FIJI

GRENADA Fiscal Incentives Act No. 41 of 1974

Qualified Enterprise Act No. 18 of 1978

Statutory Rules and Orders No. 37 of 1999

Special Customs Regimes

GUATEMALA Free Zones

Industrial and Free Trade Zones (ZOLIC)

Free Trade Zone of Puerto Cortes (ZOLI)

HONDURAS Export Processing Zones (ZIP) (ANNEX VII COUNTRY)

Temporary Import Regime (RIT)

Export Industry Encouragement Act

Jamaica Export Free Zone Act JAMAICA Foreign Sales Corporation Act

Industrial Incentives (Factory Construction) Act

JORDAN Income Tax Law No. 57 of 1985, as amended

Export Processing Zones

KENYA Export Promotion Program Customs & Excise Regulation (ANNEX VII COUNTRY)

Manufacture Under Bond

Export Enterprise Scheme

Pioneer Status Enterprise Scheme MAURITIUS Export Promotion

Freeport Scheme

Export Processing Zones

PANAMA Official Industry Register

Tax Credit Certificates (CAT)

PAPUA NEW GUINEA Section 45 of the Income Tax Act

Income Tax Concessions

Tax Holidays & Profits Generated

Concessionary Tax on Dividends SRI LANKA (ANNEX VII COUNTRY) Indirect Tax Concessions - Internal Tax Exemptions

Export Development Investment Support Scheme

Import Duty Exemption

Exemption from Exchange Control

Fiscal Incentives Act ST. KITTS & NEVIS

Fiscal Incentives Act

ST. LUCIA Micro & Small-Scale Business Enterprise Act

Free Zone Act

ST. VINCENT AND THE Fiscal Incentives Act GRENADINES

URUGUAY Automotive Industry Export Promotion Regime