Discussion on the determination of US tax amount from the case of China's photovoltaic products

A major feature of this case is that the tax amount is extremely high. If two taxes are imposed, most of China's PV products will be extinct in the US market due to excessive tax costs. At present, no one has raised any objection to the United States from the high dumping of anti-dumping duties and countervailing duties in accordance with the dumping margin and the amount of subsidies.

From the high taxation standard: the provisions of the US law

The US anti-dumping procedure is mainly divided into the investigation phase and the tax assessment phase. The purpose of the investigation phase is to determine whether a particular commodity meets the requirements for anti-dumping duties, that is, dumping of imported products, damage to domestic industries, and a causal relationship between dumped imports and damage. The tax assessment stage mainly involves the amount of anti-dumping duties levied.

The investigation phase involved four rulings: (1) The International Trade Commission’s preliminary ruling on damage. If the result of the ruling is negative, the investigation is terminated; if the result is positive, the investigation procedure is continued. (2) The Ministry of Commerce's preliminary ruling on below fair value (LTFV). Regardless of the outcome of the preliminary ruling, the investigation process continues. (3) The final decision of the Ministry of Commerce on LTFV. If the result of the ruling is negative, the investigation is terminated; if the result is positive, the investigation procedure is continued. (4) The final decision of the International Trade Commission on damage. If the result of the ruling is negative, the investigation is terminated; if the result is positive, the tax assessment stage is entered. In the tax assessment stage, the relevant tax amount should be equal to the dumping margin, that is, the part of the normal value of the goods involved that exceeds the export price (or the presumed export price).

In US law, the regulatory rules on how much anti-dumping duties are imposed are entirely dependent on the constitutional rules on whether anti-dumping duties can be imposed and are compatible with the latter's dumping margins. Considering that not all dumping can be effectively converted into damage to domestic industries, the anti-dumping tax is determined according to the dumping margin. As far as the Chinese PV products case is concerned, the final tax amount is as high as 249.96%, which is closely related to the provisions of the US law.

From low taxation standards and appropriate amount standards

The provisions of the WTO Agreement on anti-dumping are mainly found in Article 6 of the GATT 1994 and anti-dumping agreements. Both legal documents are composed of constitutional rules and regulatory rules. Among them, Article 6.1 of GATT 1994 stipulates whether the importing country can impose the elements of anti-dumping duties on imported products: dumping, damage and the causal relationship between dumped imports and damage. Articles 6.2 and 6.5 stipulate that if a regulatory anti-dumping duty is imposed, the amount shall not exceed the dumping margin. When the countervailing duty and anti-dumping duties are simultaneously imposed, no duplicate relief may be caused. The Anti-Dumping Agreement has refined the above provisions.

Article 9 of the Anti-Dumping Agreement establishes two criteria for the determination of the amount of tax. First, the amount of tax is determined from the low level of damage. The standard has a soft law nature, and Article 9.1 states that “if the countervailing duty is less than the dumping margin is sufficient to remove damage to the domestic industry, the anti-dumping duty is desirable”. “desirable” means that the competent authority has no obligation but is expected to adopt this standard. The second is to take the appropriate amount of countervailing duties. The standard has a hard-stated nature and Article 9.2 states that it should “collect an appropriate amount of anti-dumping duties on a non-discriminatory basis, depending on the circumstances of each case”. According to Article 9.3, the amount of countervailing duty shall not exceed the dumping margin regardless of the standard adopted.

It is worth noting that neither Article 6 of GATT 1994 nor Article 9 of the Anti-Dumping Agreement requires that the anti-dumping tax should be equal to the dumping margin. Article 9.1 of the Anti-Dumping Agreement puts forward a proposal that is completely contrary to the practice in the United States: the amount of tax is determined from the low level of damage. However, the provisions of Article 9.1 are not mandatory and the United States is not obliged to comply with the standard. The provisions of Article 9.2, which are mandatory, are vague, mentioning only the appropriate amount of standards and not specifying the legal status of the appropriate amount. The legal question that arises from this is whether the United States has consistently determined the appropriate amount of tax in accordance with the discretionary rate of dumping.

Revelation: independence of the appropriate amount of standards

The US-AD/CVD on China case (DS379) focuses on the legal status of the appropriate amount of standards in countervailing duties, ie whether the appropriate amount is independent of the amount of the subsidy. In view of the similarities between the anti-dumping tax and the countervailing duty in determining the amount of tax, the enlightenment of the legal opinion of the case is self-evident.

With regard to the independence of the appropriate amount of criteria, the panel of experts in the above case and the Appellate Body gave diametrically opposite conclusions. In the opinion of the Group of Experts, the context most relevant to the relative standard of the appropriate amount is that the amount of the subsidy must not be exceeded, and the amount of the tax is appropriate as long as the final tax does not exceed the limit. The Appellate Body believes that, in accordance with the principle of effective interpretation of the treaty, if the “appropriate amount” is attached to the subsidy amount, the provision of the appropriate amount will be made redundant. In the opinion of the Appellate Body, the amount of the subsidy is only the maximum amount of the appropriate amount.

If the analysis of the US-AD/CVD on China case is applied to the Chinese PV product case, especially the determination of the anti-dumping tax, the above view of the Appellate Body can be restated as follows: Article 9.2 of the Anti-Dumping Agreement The most closely related context is Article 9.1, not Article 9.3. Because according to the principle of effective interpretation of the treaty, if the appropriate amount under Article 9.2 is attached to the interpretation of Article 9.3, it is appropriate that the provisions of Article 9.2 become redundant as long as the countervailing duty does not exceed the amount of the subsidy. In contrast, by using the word “desirable”, Article 9.1 encourages the competent authorities to link the amount of anti-dumping duties with the damage to be eliminated. Moreover, once it proves that there is a causal relationship between the subsidized imported product and the damage, the competent authority cannot levy a countervailing duty in disregard of the damage. Therefore, the appropriate amount has an independent legal status, and the US Department of Commerce should consider the damage caused by the domestic industry to determine the appropriate tax amount, rather than equating the tax amount with the dumping margin.

Challenge the legitimacy of double taxation

The content of anti-dumping duties and countervailing duties can be roughly divided into two parts: under what conditions the competent authority has the right to levy taxes and how the competent authorities levy taxes. The former involves the formation of a particular situation and the latter involves the regulation of the situation. Specific to the legal relationship level, the former discusses the constitutional taxation legal relationship between the exporter and the importing country, the purpose is to determine under what circumstances the exporter has a tax liability; the latter discusses the tax between the exporter and the competent authority. The purpose of governing legal relationships is to determine how much tax can be paid for regulatory purposes when the exporter has a constitutional tax liability.

In the WTO Agreement, there is no provision that the amount of tax in the regulatory rules should correspond to the amount of subsidy or the margin of dumping in the constitutive rules. In view of the fact that the Appellate Body has stated that the appropriate amount of the standard has an independent legal status, then we have reason to believe that the United States is not in compliance with the WTO Agreement. In Other words, even if the United States has the right to tax Chinese PV products, it does not mean that it can levy such high tariffs unscrupulously. In order to protect its legitimate rights and interests, China should use the WTO trade dispute settlement procedures to challenge the legitimacy of the double-counter tax.