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WORLD TRADE
ORGANIZATION

WT/DS194/R
29 June 2001
(01-3175)

 
  Original: English

UNITED STATES - MEASURES TREATING
EXPORTS RESTRAINTS AS SUBSIDIES



Report of the Panel



The report of the Panel on United States - Measures Treating Exports Restraints as Subsidies is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 29 June 2001 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that, in accordance with the DSU, only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.

Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.




 

TABLE OF CONTENTS

  1. INTRODUCTION
  1. COMPLAINT OF CANADA
     
  2. ESTABLISHMENT AND COMPOSITION OF THE PANEL
     
  3. PANEL PROCEEDINGS
  1. FACTUAL ASPECTS
  1. SECTION 771(5) OF THE TARIFF ACT OF 1930 AS AMENDED BY THE URUGUAY ROUND AGREEMENTS ACT
     
  2. THE STATEMENT OF ADMINISTRATIVE ACTION 
     
  3. THE "PREAMBLE" TO THE US COUNTERVAILING DUTY REGULATIONS
     
  4. "PRACTICE" OF THE US DEPARTMENT OF COMMERCE 
  1. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
  1. CANADA
     
  2. UNITED STATES
  1. REQUEST OF THE UNITED STATES FOR PRELIMINARY RULINGS
  1. REQUEST OF THE UNITED STATES
  1. Introduction
     
  2. Factual Background
     
  3. Legal Argument

(a) Assuming for Purposes of Argument that Canada's Interpretation of Article 1 of the SCM Agreement Is Correct, Section 771(5) Does Not Violate US WTO Obligations Because Section 771(5) Does Not Mandate that the DOC Treat Export Restraints as Subsidies

(b) Canada's Claims Concerning "US Practice" Under Section 771(5) Should be Dismissed 

(c) The Panel Should Dismiss Canada's Claims Concerning the SAA and the Preamble Because Neither Document Was Identified as a Measure in Canada's Panel Request and Because Neither Document Constitutes a "Measure" Within the Meaning of Article 6.2 of the DSU 

  1. RESPONSE OF CANADA 
  1. The Matter Raised By Canada's Panel Request Is Properly Before This Panel
     
  2. The Mandatory/Discretionary Distinction Is Not A "Procedural Matter" Going to The Jurisdiction Of This Panel 
     
  3. The Sufficiency Of The Consultations On US Practice
     
  4. The Sufficiency Of Canada's Panel Request
     
  5. Conclusion
  1.  MAIN ARGUMENTS OF THE PARTIES
  1. FIRST WRITTEN SUBMISSION OF CANADA
  1. Introduction
     
  2. Pre- And Post-WTO US Countervailing Duty Law And The US Measures
     
  3. Legal Argument

(a) To Be A Countervailable Subsidy, A Practice Must Satisfy The Definition Of "Financial Contribution" 

(b) The Treatment Of Export Restraints As An "Indirect Subsidy" Is Inconsistent With The Express Terms Of The SCM Agreement

(c) The US Measures Also Violate The United States' Obligation To Bring Its Law Into Conformity With The WTO Agreements

  1. FIRST WRITTEN SUBMISSION OF THE UNITED STATES
  1. Introduction
     
  2. Legal Argument

(a) Canada Bears the Burden of Proof 

(b) The SCM Agreement Does Not Preclude Treating an Export Restraint as a Subsidy 

(i) As an Economic Matter, Export Restraints Are Recognized as Subsidies

(ii) Ruling Out the Possibility that Export Restraints Could Constitute Subsidies Would Be Inconsistent with the Object and Purpose of the SCM Agreement

(iii) The Text and Context of Article 1.1 Indicate that an Export Restraint Can Constitute an Indirect Subsidy Within the Meaning of Subparagraph (iv)

(iv) Nothing in the Negotiating History of the SCM Agreement Precludes the Possibility that an Export Restraint Could Constitute a Subsidy

  1.  Conclusion
  1.  FIRST ORAL STATEMENT OF CANADA
  1. The US Request For Preliminary Rulings
     
  2. The Definition Of "Subsidy" In The SCM Agreement
     
  3. The United States' Arguments Regarding the "Economics" of Export Restraints are Misplaced
  1. FIRST ORAL STATEMENT OF THE UNITED STATES
     
  2. SECOND WRITTEN SUBMISSION OF CANADA
  1. Introduction
     
  2. The Role Of The Mandatory/Discretionary Distinction As A Defence In WTO Jurisprudence

(a) GATT/WTO Case Law

(b) The US Measures At Issue

  1. US Contentions That The Preamble Has No Legal Effect Misstate US Administrative Law And The Role Of The Commerce Preamble
     
  2. "Practice" Is A Measure, And Fits Within The WTO Concept Of "Mandatory"
     
  3. Comments On The US Submissions Regarding The SCM Agreement In The US Oral Statement
  1. SECOND WRITTEN SUBMISSION OF THE UNITED STATES
  1. Introduction
     
  2. The Mandatory/Discretionary Doctrine

(a) Section 771(5) 

(b) The SAA

(c) The Preamble 

(d) US "Practice"

(e) The Measures Taken Together

  1. None Of The Measures Cited By Canada Violate Any Of The Provisions Of The WTO Agreements That Canada Has Invoked
     
  2. Canada Has Failed In Its Attempt To Demonstrate That An Export Restraint Can Never, Under Any Set Of Circumstances, Constitute A Subsidy

(a) "Entrusts or Directs"

(i) "Authoritative Instruction"

(ii) "Alternative Choices"

(iii) The "Slippery Slope" 

(b) "Private Body"

(c) To Carry Out One or More of the Type of Functions Illustrated in (i) to (iii) Which Would Normally Be Vested in the Government and that in No Real Sense Differs from Practices Normally Followed by Governments

(d) Object and Purpose

  1. Conclusion
  1. SECOND ORAL STATEMENT OF CANADA
  1. Introduction And The United States' Continued Efforts To Define "Subsidy" As "Countervailable Benefit"
     
  2. The Measures At Issue Require The United States To Treat An Export Restraint As A "Financial Contribution"
     
  3. Export Restraints Do Not Come Within Article 1.1 (A)(1)(Iv) Of The SCM Agreement Because They Do Not "Entrust" Or "Direct" A Private Body To Provide Goods
  1. SECOND ORAL STATEMENT OF THE UNITED STATES
  1. ARGUMENTS OF THE THIRD PARTIES
     
  2. INTERIM REVIEW
     
  3. FINDINGS
  1. REQUEST FOR PRELIMINARY RULINGS
     
  2. CLAIM UNDER ARTICLE 1 OF THE SCM AGREEMENT - WHETHER THE TREATMENT OF EXPORT RESTRAINTS AS FINANCIAL CONTRIBUTIONS IS INCONSISTENT WITH THE SCM AGREEMENT AND WHETHER US LAW REQUIRES SUCH TREATMENT
  1. The type of legislation that can be found as such to be inconsistent with WTO obligations
     
  2. Order in which the issues will be addressed
     
  3. Whether the treatment of export restraints as financial contributions is inconsistent with the SCM Agreement

(a) Scope of rulings

(b) Rules of treaty interpretation 

(c) Definition of "financial contribution" in the SCM Agreement 

(d) Text and context of the elements of the definition of "financial contribution" in the SCM Agreement 

(i) A government "entrusts or directs"

(ii) "Private body"

(iii) "To carry out one or more of the type of functions illustrated in (i) to (iii) above"

(iv) "Which would normally be vested in the government" and "the practice, in no real sense, differs from practices normally followed by governments"

(e) Object and purpose 

(f) Negotiating History 

(i) Negotiating history of the inclusion of the "financial contribution" requirement 

(ii) Negotiating history of the definition of "financial contribution" 

(iii) Summary 

(g) Conclusion 

  1. Whether US law requires the treatment of export restraints as financial contributions

(a) Application of the mandatory vs. discretionary distinction 

(b) The measures 

(c) The measures "separately" and "taken together"

(i) The Statute

(ii) The Statement of Administrative Action 

(iii) The Preamble to the US Countervailing Duty Regulations 

(iv) US "Practice" 

(v) Summary

(d) Conclusion 

  1. CLAIMS UNDER OTHER PROVISIONS
  1. CONCLUSIONS AND RECOMMENDATIONS   

     

LIST OF ANNEXES

ANNEX A

Parties' Answers to Written Questions

Contents

Page

Annex A-1     Executive Summary of Answers of Canada to questions posed by the Panel at the First Substantive Meeting

A-2

Annex A-2 Executive Summary of Answers of the United States to questions posed by the Panel at the First Substantive Meeting

 A-17

Annex A-3 Executive Summary of Answers of Canada to Questions posed by the Panel at the Second Substantive Meeting

A-41
Annex A-4 Executive Summary of Answers of the United States to Questions posed by the Panel at the Second Substantive Meeting A-55
Annex A-5 Letter from the United States commenting on Canada's Answersto Questions posed at the Second Substantive Meeting of the Panel A-70
Annex A-6  Letter from Canada to the Panel commenting on the US letter of 7 March 2001 A-73




Annex B
 Third Party Submissions
 

Content

Page

Annex B-1 Executive Summary of Third Party Written Submission of the EC

B-2

Annex B-2 Third Party Oral Presentation of the EC

B-7

Annex B-3 Replies of the EC to Third Party Questions from the Panel

B-14

Annex B-4 Third Party Oral Presentation of India

B-19


Continuation: Introduction