Source: YI CAI

Author: Feng Difan

China also criticized the US for repeatedly violating the WTO's core principle of non-discrimination, calling it a "rule-breaker" and a "double-standard manipulator."

A reporter from China Business News learned from authoritative sources that on April 29th local time, at a regular meeting of the WTO Committee on Subsidies and Countervailing Measures, China questioned the US countervailing duty investigation on crystalline silicon photovoltaic cells, stating that it exceeds jurisdiction and undermines WTO rules.

Recently, the US Department of Commerce issued final determinations in the countervailing duty investigations on photovoltaic products from Malaysia, Vietnam, Thailand, and Cambodia, imposing countervailing duties of up to 3403.96% on solar products from Cambodia.

At the same time, China criticized the US for providing discriminatory subsidies to its semiconductor industry under the CHIPS and Science Act. China also condemned the US so-called "reciprocal tariff" practices, arguing that they violate WTO rules as they effectively provide export-contingent and domestic content-based subsidies, thereby undermining the multilateral trading system. China emphasized the need to uphold rules-based global trade and called on WTO members to hold such practices accountable.

US Countervailing Duty Investigation on Photovoltaic Products Exceeds Jurisdictional Scope

This time, the US side notified relevant new countervailing duty actions in its semi-annual report for 2024.

In a statement, China expressed its concerns regarding the countervailing duty investigation on crystalline silicon photovoltaic cells initiated by the United States, as listed in its semi-annual report.

China strongly criticized the US Department of Commerce's final determinations in the transnational subsidy investigations involving Cambodia, Malaysia, Thailand, and Vietnam, particularly opposing the unprecedented 3403.96% subsidy rate imposed on Cambodian companies.

China stated that this figure is economically incredible and violates WTO rules. China believes that the US exceeded its jurisdiction by misclassifying private enterprises as public bodies, incorrectly applying benchmarks, and abusing "Adverse Facts Available" (AFA).

China warned that such actions disrupt global trade and supply chains, especially those of developing countries, and urged the US to stop undermining the multilateral trading system.

China also opposed the US Department of Commerce's use of speculative assumptions in assessing transnational subsidies, such as the allegation that China provided polysilicon to Cambodia, for which the US side lacked sufficient evidence.

China argued that the US Department of Commerce improperly reversed the burden of proof by ignoring factual materials submitted by the Chinese government and responding companies, requiring them to refute non-existent subsidies.

Jian GUAN, Managing Partner of Beijing Grandwin Law Firm, told a China Business News reporter that unsurprisingly, the US once again brought China into the picture in its ruling. Among the 3403.96% duty rate, the investigating authority determined that 1940.23% of the rate was attributable to "transnational subsidies" originating from China. This astronomical ruling has once again broken the world record for countervailing duty rates and has also broken through the lower bound of the US's disregard for WTO rules in its countervailing duty investigations.

Jian GUAN explained to the reporter that, firstly, "Adverse Facts Available" (AFA). The aforementioned duty rate was artificially calculated by the US Department of Commerce based on "adverse facts available." Among the 17 subsidy programs that the final determination found Cambodian companies to have received, seven programs were assigned an identical subsidy rate of 471.25% through this calculation. This astonishing subsidy rate implies that for every dollar of solar products exported by a Cambodian company, the Cambodian government would have to subsidize that company by thirty-four dollars. Not only is the Cambodian government incapable of providing such a level of subsidy, but even a country like the United States would not have the fiscal capacity to subsidize any enterprise at such a level.

Jian GUAN stated that WTO panels and the Appellate Body have repeatedly emphasized in numerous cases that the purpose of investigating authorities using "facts available" is to fill in missing information, not to punish the responding companies. Furthermore, investigating authorities have an obligation when using "facts available" to ensure the reasonableness and relevance of the alternative data they choose to use and to provide reasons for their choice.

He stated that in its final determination, the US Department of Commerce repeatedly emphasized not how to obtain reasonable facts relevant to the case to fill in missing information, but rather how to select an available "highest" rate and, by accumulating the figures from multiple programs, calculate a prohibitive countervailing duty rate to punish the responding companies. This approach completely disregards WTO rules and constitutes an abuse of "adverse facts available."

Jian GUAN analyzed that, secondly, regarding the use of speculative assumptions in assessing transnational subsidies, the US side has wantonly employed transnational subsidy investigations. The subsidy program assigned the 471.25% rate is named "Chinese government's provision of wafers to Cambodian enterprises through cross-border means." This marks the first time since the amendment to the US countervailing duty regulations took effect in April 2024 that the US Department of Commerce has initiated a transnational subsidy investigation targeting raw materials and loans from China in a countervailing duty investigation involving another country.

"In stark contrast to its previously strictly limited approach to transnational subsidy investigations, the US Department of Commerce, after amending its countervailing duty regulations, has completely opened the door to such investigations. To date, it has initiated transnational subsidy investigations targeting China in at least nine countervailing duty cases," he introduced. The transnational subsidy investigations launched by the US potentially violate the territoriality limitations set forth in the WTO's Agreement on Subsidies and Countervailing Measures (ASCM), as the Agreement was never intended to apply to so-called "transnational subsidies."

Jian GUAN stated that transnational subsidy investigations exacerbate the US abuse of countervailing duty investigations against other WTO Members, disrupting local business environments.

"If this practice is allowed to proliferate, every WTO Member could become a victim of transnational subsidy investigations, and normal economic and trade exchanges between countries will be hindered," he said.

Double Standards

This time, China also criticized the US for repeatedly violating the WTO's core principle of non-discrimination, calling it a "rule-breaker" and a "double-standard manipulator."

Specifically, China criticized the US CHIPS and Science Act for imposing non-market restrictions on subsidy recipients, such as prohibiting investment in certain countries, which China argues distorts global markets and undermines fair competition in the semiconductor industry.

China stated that, the US applies double standards on subsidy issues, enforcing strict regulations on other countries while granting substantial subsidies to its own industries, particularly the semiconductor industry, without demonstrating the absence of trade-distorting effects.

For example, China cited the US subsidy of $7.86 billion to a chip manufacturer, arguing that this contradicts the standards the US applies to other countries.

China stated that the US measures are "discriminatory and unilateral," driven by the "America First" ideology. China urged a return to multilateralism, stating that "unilateralism and protectionism lead nowhere."