Chinese Duties on EU X-Ray Gear Violate Global Rules: WTO

China’s anti-dumping duties on European Union X-ray security-inspection equipment violate global commerce law, the World Trade Organization said in its second ruling condemning a Chinese trade-remedy measure.

China accused EU companies of selling the equipment on the Chinese market below cost, a practice known as dumping, causing what it called substantial injury to Chinese producers of the scanners. Port authorities, customs officials and air-cargo companies use the equipment to detect explosives, weapons, radioactive materials, narcotics, contraband and fake goods.

“I will not accept tit-for-tat retaliation against European companies through the misuse of trade-defense instruments,” EU Trade Commissioner Karel De Gucht said in an e-mailed statement from Brussels yesterday after the Geneva- based WTO published its ruling. “The panel report is very clear, so I expect China to remove the measures immediately.”

The case highlights EU concerns about retaliation by China when it’s confronted by trade measures that punish its producers for breaking WTO rules. The U.S. has also accused China of initiating anti-dumping and anti-subsidy probes and imposing duties to strike back at trading partners that have exercised their WTO rights in ways it doesn’t like.

China will evaluate the WTO ruling and reserves its right to appeal, the Ministry of Commerce said in a statement today. The nation has 60 days to appeal the decision.

Dumping Levies

In June 2010, the EU imposed a five-year tariff on Chinese cargo-scanning equipment to help London-based Smiths Group Plc (SMIN) compete against cheaper imports. The 34 percent duty punished Nuctech Co. -- China’s sole exporter of the gear -- for dumping.

Seven months later, China applied a 33.5 percent anti- dumping duty on X-ray equipment made by Germany’s Smiths Heimann GmbH in January 2011, with all other European exporters subject to a 71.8 percent levy.

The EU argued that China failed to adhere to transparency requirements, preventing the companies it was investigating from accessing information that served as the basis for the dumping finding. The 27-nation bloc also said China had failed to prove that the targeted EU imports had undercut or depressed the price of domestic products or that Chinese manufacturers had been injured by the European goods.

“Having found China acted inconsistently with certain provisions of the anti-dumping agreement, we recommend China bring its measure into conformity with its obligations under that agreement,” WTO judges said in a 136-page ruling on the trade arbiter’s website.

U.S. Complaint

China lost a similar case on Oct. 18, when the WTO’s Appellate Body upheld an earlier panel ruling backing a U.S. challenge of Chinese anti-dumping and anti-subsidy duties on more than $200 million of imports U.S. grain-oriented flat- rolled electrical steel.

The U.S. has also lodged WTO complaints against Chinese anti-dumping and anti-subsidy levies on broiler chicken imports and on more than $3 billion of American cars. WTO panels are probing those challenges.

China faces more EU anti-dumping duties than any other country. European levies to counter alleged unfair Chinese trade practices cover about 1 percent of the bloc’s imports from China, which were worth more than 292 billion euros ($381 billion) in 2011.

EU-China goods trade as a whole was valued at 429 billion euros in 2011 compared with 4 billion euros in 1978. The EU is the biggest market for Chinese exports, while China is the bloc’s No. 2 commercial partner, after the U.S.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net