On March 26, 2014 the WTO Panel issued its report on the case of China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (China – Rare Earths). This is the second time in which China had been challenged by the United States for its export restriction and maintenance of export duties after in 2012 the case China was also accused by the United States to have unlawfully restricted its export of nine (bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc) raw materials [China-Raw Materials] (DS394,395,398). Indonesia is one of the third parties in this case. 

The products at issue, which are being contested by the United States, are various rare earths, tungsten and molybdenum. The United States argued that China’s measure at issue restricts export on those following materials in the form of: 1) quantitative restriction 2) additional requirements and procedures in connection of the quantitative restriction and other conditions that appear to treat foreign investors differently from domestic entities 3) other restrictions such as licensing requirements – and including with the quantitative restrictions 4) maintaining a minimum export price system for the export of those materials 5) administration of these export restrictions is not uniform, impartial, reasonable or transparent 6) administering restrictions that are not published. With regards to the export duties, the complainants assert that China subjects various forms of rare earths, tungsten, and molybdenum to export duties and that those materials are not listed in Annex 6 of China's Accession Protocol.

Consequently, in its submission, the United States have requested the Panel to find that China’s measure at issue violates Article VII of General Agreement on Tariffs and Trade (hereinafter referred to as “GATT”) on the valuation of customs purpose, Article VIII of GATT on fees and formalities connected with importation and exportation and Article XI of GATT on quantitative restrictions and finally, the measure at issue also violates Paragraph 11.2 of China’s Accession Protocol.  However, China argues to the contrary. China’s main defense is based on GATT Article XX(b) which it attempted to justify its export restriction to protect human, animal or plant life or health from the pollution caused by mining the products at issue.

Ultimately, the Panel ruled in favor of the United States. Following earlier line of case law such as China – Raw Materials, the Panel in this present dispute applied the similar line of reasoning. The Panel held that China’s export restriction on various forms of rare earths, tungsten and molybdenum is a form export quota that is inconsistent with Article VIII and XI of the GATT. Moreover, the export duties that were maintained by China is also inconsistent with Paragraph 11.3 of China’s Accession Protocol because China failed to eliminate taxes and charges applied to exports. In sum, the Panel emphasized that no WTO Member has, under WTO law, the right to dictate or control the allocation or distribution of rare earth resources to achieve an economic objective.