This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.
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Current status
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Summary of the dispute to date
The summary below was up-to-date at
Consultations
Complaint by China (See also DS565 and DS587)
On 4 April 2018, China requested consultations with the United States concerning certain tariff measures on Chinese goods which would allegedly be implemented through Section 301-310 of the US Trade Act of 1974.
China claimed that the measures appear to be inconsistent with:
- Articles I:1 and II:1 (a) and (b) of the GATT 1994; and
- Article 23 of the DSU.
On 13 April 2018, the United States requested the Chair of the DSB to circulate to Members a communication where it indicated that the United States was willing to enter into consultations with China, without prejudice to the US view that China's letter of 4 April 2018 did not satisfy the requirements of Article 4 of the DSU. On 25 April 2018, China requested the Chair of the DSB to circulate to Members a communication responding to the United States' communication of 13 April 2018. While disagreeing with the US view that China's letter of 4 April 2018 did not satisfy the requirements of Article 4 of the DSU, China indicated its willingness to schedule a mutually convenient date for consultations within the scope of China's request.
On 6 July 2018, China requested additional consultations that supplemented its consultations request of 4 April 2018. China referred to the publication by the United States on 15 June 2018 of a list of products of Chinese origin to be subject to an ad valorem duty of 25% imposed by the United States on the importation of certain Chinese products, since 6 July 2018. China maintained that these duties were only applied to China's products and in excess of the United States' bound rates.
On 16 July 2018, the United States requested the Chair of the DSB to circulate to Members a communication referring to China's 6 July 2018 supplement to its consultations request of 4 April 2018. The United States also referred to certain additional duties imposed by China on the importation of certain products from the United States.
On 16 July 2018, China requested additional consultations that supplemented its original consultations request of 4 April 2018 as well as its supplemental request of 6 July 2018. China referred to the publication by the United States on 10 July 2018 of a list of products of Chinese origin to be subject to an ad valorem duty of 10% to be imposed by the United States on the importation of certain Chinese products . China maintained that these duties were only to be applied to China's products and in excess of the United States' bound rates.
On 26 July 2018, the United States requested the Chair of the DSB to circulate to Members a communication referring to China's 16 July 2018 supplement to its consultations request. The United States indicated that the United States was willing to enter into consultations with China, without prejudice to the US view that China's letter of 4 April 2018 did not satisfy the requirements of Article 4 of the DSU. The United States also referred to certain additional duties that China announced it would impose on the importation of certain products from the United States.
On 18 September 2018, China requested additional consultations that supplemented its original consultations request of 4 April 2018 as well as its supplemental requests of 6 July 2018 and of 16 July 2018. On this occasion, China referred to the publication by the United States on 17 September 2018 of a list of products of Chinese origin to be subject to an ad valorem duty of 10% from 24 September 2018 and of 25% from 1 January 2019. China maintained that these duties were only to be applied to China's products and in excess of the United States' bound rates.
On 28 September 2018, the United States requested the Chair of the DSB to circulate to Members a communication referring to China's 18 September 2018 supplemental consultations request. The United States indicated that it was willing to enter into consultations with China, and referred to certain additional duties on the importation of products from the United States that China had announced on 18 September 2018.
Panel and Appellate Body proceedings
On 6 December 2018, China requested the establishment of a panel. At its meeting on 18 December 2018, the DSB deferred the establishment of a panel.
At its meeting on 28 January 2019, the DSB established a panel. Brazil, Canada, the European Union, India, Indonesia, Japan, Kazakhstan, Korea, New Zealand, Norway, the Russian Federation, Singapore, Chinese Taipei and Ukraine reserved their third-party rights.
On 24 May 2019, China requested the Director-General to compose the panel. On 3 June 2019, the Director-General composed the panel. Following the resignation of a panelist on 25 September 2019, and further to a request from China, the Director-General on 17 October 2019 appointed a new panelist.
On 9 April 2020, the Chair of the panel informed the DSB that based on the timetable agreed between the parties and the panel, the panel expected to issue its final report to the parties by the end of June 2020. The Chair apprised the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation depends on completion of translation.
On 15 September 2020, the panel report was circulated to Members.
This dispute concerns China's challenge to the additional duties that the United States imposed on certain products from China. The United States imposed these additional duties pursuant to the findings of a Section 301 Report addressing China's practices related to technology transfer, intellectual property, and innovation, which the United States considers to be unfair and distortive policies of “state-sanctioned theft”, misappropriation of US technology, intellectual property, and commercial secrets.
Before the Panel, China challenged:
- the 25% additional duties imposed in June 2018 on a first set of products with an approximate annual trade value of USD 34 billion (List 1); and
- the additional duties on a second set of products with an approximate annual trade value of USD 200 billion (List 2), initially imposed in September 2018 at 10% and subsequently raised in May 2019 to 25%.
China claimed that these additional duties were inconsistent with Articles I:1 and II:1(a) and (b) of the GATT 1994.
The United States raised two main sets of arguments in response:
- that by engaging in bilateral negotiations to address several trade concerns — including some matters covered by this dispute — the parties had decided to settle their dispute outside the °ÄÃÅÁùºÏ²Ê¹ÙÍø×ÊÁÏ, and thus reached a “settlement of the matter” within the meaning of the third sentence of Article 12.7 of the DSU; for that reason the Panel should confine its report to a brief statement of the facts and a notation that a settlement has been reached; and
- that, in any event, the additional duties were justified under Article XX(a) of the GATT 1994, as measures necessary to protect US public morals. The United States argued that China's acts, policies, and practices addressed in the relevant Section 301 Report amounted to “state-sanctioned theft” and misappropriation of US technology, intellectual property, and commercial secrets, and this violated the public morals prevailing in the United States.
Panel's findings
The Panel recognized that an ongoing bilateral process was taking place between China and the United States. However, the Panel observed that this bilateral process seemed to be parallel to the panel proceedings, and not intended, by China at least, to replace them. The Panel found that the parties had not reached a settlement of the matter within the meaning of the third sentence of Article 12.7 of the DSU
The Panel found that the challenged additional duties were prima facie inconsistent with Article I:1 of the GATT 1994 because they applied only to products from China; and prima facie inconsistent with Article II of the GATT 1994, because they were applied in excess of the rates to which the United States bound itself in its Schedule of Concessions.
With respect to the United States' defence under Article XX(a) of the GATT 1994, the Panel adopted a holistic approach to determining whether the measures at issue were “necessary to protect public morals”. This approach involved an overall assessment based on the Panel's interpretation of each element of Article XX(a) and on its application to the specific facts of this dispute. Following this holistic approach, the Panel refrained from reaching any intermediate conclusions before completing the entire analysis of whether the measures could be shown by the United States to be provisionally justified.
With respect to the identification of the public morals objective invoked by the United States, the Panel observed that the “standards of right and wrong” invoked by the United States (including norms against theft, misappropriation and unfair competition) could — at least at a conceptual level — be covered by the concept of “public morals” in Article XX(a).
With respect to the necessity of the measures, the Panel focused its analysis on the United States' explanation of how the specific measures that it chose to impose, i.e. additional duties on a wide range of selected products from China, contributed to the public morals objective invoked. The Panel directed its enquiry towards seeking to identify the nexus between the measures the United States had chosen and the US public morals concerns, in order to inform the examination of the question of whether and how the measures contributed, and could therefore be demonstrated to be “necessary”, to protect public morals within the meaning of Article XX(a).
Regarding the imposition of additional duties on List 1 products, the Panel found that the United States had not provided an explanation demonstrating a genuine relationship of ends and means between the imposition of additional duties on these products and the public morals objective invoked by the United States. The Panel found, in particular, that the United States had not provided evidence in support of its assertion that the products on which it imposed additional duties benefitted from practices of China that the United States considered to be contrary to its public morals, nor evidence that would more generally demonstrate how the additional duties it applied to selected products otherwise contributed to its public morals objective.
Regarding the imposition of additional duties on List 2 products, the Panel found that the United States had not provided an explanation that would allow the Panel to understand an “ends and means” relationship between the additional duties on List 2 products and the public morals objective invoked by the United States.
In summary, the Panel concluded that the United States had not provided an explanation demonstrating how the imposition of additional duties on the selected imported products in List 1 and List 2 was apt to contribute to the public morals objective invoked, and, following on from that, how they were necessary to protect public morals. The Panel found, accordingly, that the United States had not met its burden of demonstrating that the measures are provisionally justified under Article XX(a).
The Panel Report contains additional “Concluding Comments” emphasising the Panel's awareness of the wider context in which the °ÄÃÅÁùºÏ²Ê¹ÙÍø×ÊÁÏ system currently operates, which was “one reflecting a range of unprecedented global trade tensions”. The Panel pointed out that its role was not to draw any legal conclusions or make recommendations on any matters other than those it had been specifically tasked to deal with. In this connection, the Panel recalled that the Government of the United States had not, up to the present time, initiated action under the °ÄÃÅÁùºÏ²Ê¹ÙÍø×ÊÁÏ DSU with respect to measures that China had imposed in response to the United States measures at issue in this dispute. The Panel emphasized that it had sought to perform diligently its adjudicatory role under Article 11 of the DSU in relation to the matters that fell within its terms of reference. Finally, the Panel expressed its encouragement to the parties to continue to work for a mutually agreed solution to the matters raised in the dispute.
On 26 October 2020, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report.
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