China's anti-dumping duties on X-ray security scanners - WTO case

26 February 2013
by eub2 -- last modified 26 February 2013

A World Trade Organization panel report (DS425) found that China's anti-dumping duties on imports of X-ray security scanners from the EU were in breach of WTO anti-dumping rules. The report marks a clear victory for the EU. If the report is not appealed within 60 days, China will be expected to remove its anti-dumping duties on EU imports of X-ray security scanners.

What did the EU challenge at the WTO?

China imposed anti-dumping duties on imports of X-ray security scanners from the EU in January 2011. Ranging from 33.5% to 71.8%, they essentially closed the Chinese market to imports of European X-ray security scanners. Anti-dumping measures can be imposed when an investigation finds that imported products are sold at prices lower than the domestic prices of the product and that this "dumping" causes injury to the industry of the importing country. A direct causal link must be proven between the dumping and the injury caused. In addition WTO rules provided for certain due process and transparency requirements that have to be respected. Based on these rules, the EU saw no justification for the Chinese measures, either on substantive or procedural grounds.

The Chinese anti-dumping measures were imposed after the EU had decided to introduce definitive anti-dumping duties on a related product, cargo scanners from China in June 2010, making Beijing's action look more like retaliation rather than an effort to address genuine concerns about "injurious dumping".

In July 2011 the EU requested WTO consultations on the matter, but these failed to bring about an acceptable solution. As a consequence, the EU challenged, for the first time ever, a Chinese trade defence measure before a WTO panel in December 2011.

What products are subject to China's current anti-dumping duties?

China's anti-dumping investigation concerned X-Ray Security Inspection Equipment - the so-called "security scanners" from the European Union. These are widely used in various types of security checks and customs inspections, mainly in the inspection of weapons, explosives, dangerous articles, smuggled goods, and other suspicious substances and contraband concealed in objects such as bags, goods, containers, and vehicles. The investigation covered a wide range of such products including security scanners for hand luggage and cargo scanners.

What is the impact of the duties on EU industry?

The trade flow at stake was approximately €70 million of EU exports to China per year at the time when the duties were imposed. Exports d EU exports were severely hampered as a result of the duties, ranging from 33.5% to 71.8%.

What are the specific findings of the WTO panel?

The panel found China violated WTO rules in all aspects of the investigation challenged by the EU.

First, concerning what was the most hotly debated issue during the proceedings, the panel agreed with the EU that China used a flawed methodology in analysing the effects of EU exports on prices of X-ray security scanners in China's domestic market.

This methodology involved comparing the weighted average unit values for the entire range of products covered by the investigation, without taking into account the considerable differences among the products, particularly between "high-energy" and "low-energy" scanners. While EU exports were exclusively of the cheaper "low-energy" scanners, used mainly for luggage inspection, China compared the prices of those products with average unit prices for the entire range of domestic products that included very expensive "high-energy" scanners used for inspecting cargo.

The panel stressed that an investigating authority must consider whether the prices of imported and domestic products are actually comparable. In this case, the records showed that the Chinese authorities did not take any steps to ensure that the prices were in fact comparable. The Chinese authorities also disregarded a considerable amount of evidence showing that price comparability was an issue: there are clear differences in the uses of, and physical characteristics between, scanners exported to China and some Chinese domestic scanners.

The panel illustrated the differences with the pictures as shown below:

    Examples of high energy scanner (included in the domestic X-ray security scanners production in China) (Source: WTO panel report)



Example of a low energy scanner (EU exports to China) (Source: WTO panel report)

Secondly, the panel agreed with the EU that China's assessment of the alleged injury to its domestic industry of X-ray security scanners was incorrect. In particular, China failed to consider all relevant economic factors and its examination of the state of the domestic industry, including the trends in individual injury factors, lacked objectivity and was not always reasoned and adequate.

The panel also invalidated China's conclusion that the alleged injury was caused by imports from the EU. It underlined that China's flawed 'price effects analysis' undermined Beijing's conclusion that there was a causal link between the imports from the EU and the injury suffered by the industry. In addition, the panel criticised China for failing to examine objectively the evidence showing that certain other factors – such as the aggressive business expansion and pricing strategy of a Chinese producer and factors relating to product quality, technology and fair competition – might have caused the alleged injury.

Thirdly, the panel agreed with the EU that the Chinese Ministry of Commerce (MOFCOM) failed to respect certain due process and transparency requirements provided for by WTO anti-dumping rules. In particular, the panel ruled that China:

    failed to ensure a proper summary of certain confidential information;

    failed to disclose certain essential facts during the investigation;

    failed to provide relevant information regarding certain aspects of the investigation in its public notice; and

    failed to explain in its public notice why it rejected certain arguments of the cooperating EU producer.

Next steps

The parties concerned have the possibility to appeal against the panel's ruling before the WTO Appellate Body within 60 days. In the event of an appeal, the WTO Appellate Body will re-examine issues of law invoked by the parties to the dispute and issue a ruling within 60 to 90 days. If no appeal is filed, the report will be adopted by the WTO Dispute Settlement Body and China will be bound to comply with the recommendations of the panel report to bring its measure into conformity with WTO rules.

What happens to the duties in place?

The panel invalidated crucial aspects of China's assessment, necessary for the imposition of the duties (notably relating to the determination of injury and of the causal link with imports from the EU). The EU takes the view that the duties should therefore be repealed.

Further information

The EU's WTO case against China's anti-dumping duties on x-ray security inspection equipment from the EU

The WTO Panel Report

Source: European Commission