## Facts

- China challenged additional U.S. ad valorem duties imposed on imports from China following a U.S. investigation under Section 301 of the Trade Act of 1974 into alleged Chinese practices on technology transfer, intellectual property, and innovation.
- The challenged measures were 25% additional duties applied to two sets of products (commonly “List 1” and “List 2”), covering hundreds of tariff subheadings adopted in 2018, including later amendments expanding coverage.
- China requested WTO consultations in April 2018 and filed addenda as additional U.S. tariff actions occurred; consultations in August and October 2018 did not resolve the dispute.
- A WTO panel was established in January 2019 and composed in June 2019; the panel report was circulated on September 15, 2020.
- The United States appealed in October 2020; the appeal was not completed because the Appellate Body was not able to hear it.

## Issues

1. Whether bilateral exchanges between the parties amounted to a mutually agreed “solution” requiring the panel to end its work under DSU Article 12.7.
2. Whether the challenged tariff instruments (Lists 1 and 2 and amendments) were sufficiently identified and within the panel’s terms of reference.
3. Whether the U.S. additional duties accorded less favorable treatment to Chinese-origin goods than to like goods from other WTO Members, contrary to GATT 1994 Article I:1.
4. Whether the additional duties exceeded the United States’ bound rates and failed to provide scheduled treatment, contrary to GATT 1994 Article II:1(a) and (b).
5. Whether the measures were justified under GATT 1994 Article XX(a) as “necessary to protect public morals.”

## Decision

- The panel found no mutually agreed “solution” under DSU Article 12.7 and proceeded to decide the dispute.
- The panel found the challenged additional duties and related amendments were within its terms of reference.
- The panel held the United States acted inconsistently with GATT Article I:1 because the additional duties applied only to goods originating in China, while like goods from other WTO Members were not subject to them.
- The panel held the United States acted inconsistently with GATT Article II:1(a) and (b) because the additional 25% duties resulted in duties in excess of U.S. bound tariff rates and departed from the tariff treatment in the U.S. Schedule.
- The panel rejected the U.S. defense under GATT Article XX(a), finding the United States did not demonstrate the measures were “necessary” to protect public morals.
- The panel recommended the United States bring the measures into conformity with its GATT 1994 obligations.

## Legal Principles

- Under GATT Article I:1, an “advantage” in customs duties (including the advantage of not being subject to additional duties) must be accorded immediately and unconditionally to like products from all WTO Members; origin-based differentiation limited to one Member breaches MFN.
- Under GATT Article II:1(a) and (b), Members may not impose ordinary customs duties in excess of the bound rates in their schedules and must accord the scheduled tariff treatment.
- A panel request must identify the specific measures at issue with sufficient clarity to define the panel’s terms of reference and permit the respondent and third parties to understand the case to answer.
- GATT Article XX(a) permits measures “necessary to protect public morals,” and a Member has latitude to define its public morals objectives, but it must still prove necessity through a reasoned showing of a genuine relationship between the measure’s design and the stated objective, including consideration of reasonably available alternatives.
- If a respondent fails to establish that a measure falls within the relevant Article XX subparagraph (here, necessity under XX(a)), the panel need not reach the Article XX chapeau.

## Conclusion

The panel concluded that the U.S. Section 301 additional duties on specified Chinese-origin goods violated MFN and tariff binding obligations under GATT 1994 Articles I:1 and II:1(a)–(b) and were not justified under the public morals exception in Article XX(a), recommending conformity with GATT obligations.


China v. United States, WT/DS543/R (WTO Panel 2020)