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World Trade
Organization

WT/DS99/R
29 January 1999
(99-0256)
Original: English

United States - Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of one Megabit or Above from Korea

Report of the Panel

(Continued)


F. Claims under Article X:1 and X:2 of GATT 1994

1. Transparency and Due Process in the Administration of Government Measures

a) Submission by Korea

1.454 Korea makes the following arguments on the application of Article X:

1.455 Unlike most GATT provisions, which are concerned with the content of a government's laws, regulations, decisions and rulings, Article X of the General Agreement focuses on the administration of those laws, regulations, decisions and rulings.354 It articulates the fundamental principles of transparency (publication and disclosure of government measures and actions) and what is widely known as due process (fundamental fairness).

1.456 Despite its importance, there is very little precedent regarding Article X. A review of the relevant chapter of the GATT Analytical Index discloses that, in most disputes, complainants made subsidiary claims regarding Article X. When panels found violations of a substantive GATT article, however, they declined to rule on the subsidiary claim.355 Given the past treatment of Article X, Korea stresses its Article X claims are not subsidiary to any other claim. They are independent - separate and distinct.

1.457 The GATT Analytical Index notes that Article X was based on the 1923 International Convention Relating to the Simplification of Customs Formalities and on US proposals.356 In Article 1 of the Simplification Convention, "[t]he Contracting States . . . undertake that their commercial relations shall not be hindered by excessive, unnecessary or arbitrary customs or other similar formalities."

1.458 The concerns that led to the drafting of GATT Article X are fully expressed in the so-called Sullivan Study, prepared by the US Department of State to annotate and explain the articles of the US model friendship, commerce and navigation (FCN) treaty.357 In the annotation for Article XV of the US model FCN, which closely follows GATT Article X, the drafters state:

Inclusion of Article XV in the treaty is based primarily because of concern that customs administration could nullify or impair the benefits occurring from the liberalization of trade. This Article is intended to provide protection against a variety of forms of administrative inequity or harassment which cumulatively could become a serious impediment to trade. Article XV is based on ample precedents, including reciprocal trade agreements, GATT, the proposed ITO Charter, and various multilateral conventions on customs administration and formalities dating back to the 1920's.358

1.459 The WTO Appellate Body has recognized the critical role of the GATT Article X obligations. In United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear it stated:

Article X:2, General Agreement, may be seen to embody a principle of fundamental importance - that of promoting full disclosure of governmental acts affecting Members and private persons and enterprises, whether of domestic or foreign nationality. The relevant policy principle is widely known as the principle of transparency and has obviously due process dimensions. The essential implication is that Members and other persons affected, or likely to be affected, by governmental measures imposing restraints, requirements and other burdens, should have a reasonable opportunity to acquire authentic information about such measures and accordingly to protect and adjust their activities or alternatively to seek modification of such measures.359

1.460 This quotation, which relates to the requirement of prior publication set out in Article X:2, applies with equal force to Articles X:1 and X:3(a), which state in relevant part:

1. Laws, regulations, judicial decisions and administrative rulings of general application, made effective by any contracting party, pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting their sale, distribution, transportation, insurance, warehousing, inspection, exhibition, processing, mixing or other use, shall be published promptly in such a manner as to enable governments and traders to become acquainted with them.

* * *

2. (a) Each contracting party shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of this Article. (Emphasis added by Korea.)

Government measures must be published in such a manner as to enable governments and traders to become acquainted with them (Article X:1), and they must be administered in a uniform, impartial and reasonable manner (Article X:3(a)).

1.461 In Response to a question from the Panel,360 Korea further argued:

The WTO Agreements are a unitary whole. The transparency and uniformity obligations of Article X apply to the WTO Agreements, including the AD Agreement. When a Member promulgates a law or regulation or issues an administrative ruling of general application, it must comply with Article X:1. Also, the Member must administer each statute, regulation and administrative ruling in a way that complies with Article X:3. Thus, Article X applies to each and every action the Department takes in a revocation proceeding. Any other interpretation would allow a Member to completely avoid the dictates of Article X (and, thereby, the substantive obligations of the AD Agreement).

b) Response by the United States

1.462 The United States responds to Korea's submission with the following arguments:

1.463 Article X:1 provides, in part:

Laws, regulations, judicial decisions and administrative rulings of general application, made effective by any contracting party, pertaining to . . . rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports . . . shall be published promptly in such a manner as to enable governments and traders to become acquainted with them.

1.464 Throughout its submissions, the United States has established that section 751 of the Act and section 353.25(a)(2) of the DOC's regulations govern a decision by the DOC to revoke an anti-dumping duty order. Section 353.25(a)(2) of the regulations sets forth the criteria which the DOC will consider in evaluating whether revocation is appropriate. Moreover, the DOC's regulations require that the final results of all administrative reviews be published, including decisions on revocation.361 Thus, the United States has complied with its obligations under Article X:1 by promptly publishing all relevant laws, regulations, and administrative decisions in a manner that enables governments and traders to become acquainted with them.

1.465 Considering the undisputed fact that the United States promptly published these statutory and regulatory provisions, the United States has satisfied all the requirements of Article X:1. As the plain language suggests, Article X:1 simply requires Members to publish certain laws and regulations of general application. This provision does not concern itself with the content or substantive elements of a Member's legislation. Indeed, Korea agrees by stating that Article X is unlike most provisions of the WTO agreements, "which are concerned with the content of a government's laws, regulations, decisions and rulings," because Article X relates to the administration of those laws, regulations, decisions and rulings. Nevertheless, Korea's arguments focus solely on the substantive elements of the US anti-dumping law and regulations.

1.466 Aside from publication, Korea believes that the relevant issue under Article X:1 is "whether the criteria on which [the DOC's] decision was based were objective . . ." No possible interpretation of the plain language of Article X:1 could contemplate a requirement such as the one Korea advocates before this Panel. Article X:1 does not require "objective criteria" to be set forth in the DOC's regulations. This argument goes to the content of the US laws and regulations which Korea acknowledges to be irrelevant in the context of an Article X:1 argument. Were this not the case, then probably all anti-dumping legislation of every WTO Member with such legislation, including Korea, would be in violation of Article X:1.

1.467 The United States has consistently noted, that Korea, as the complaining party, bears the burden of proving that the DOC's application of its anti-dumping law and regulations to the Final Results Third Review violated Article X. Specifically, under paragraph 1 of Article X, Korea must establish that the United States failed to publish rules and requirements which establish or revise principles applicable in future cases. Moreover, under paragraph 3 of Article X, Korea bears the burden of establishing that the DOC failed to administer its laws and regulations in a uniform, impartial, and reasonable manner. Korea's mere assertions - unsupported by proof - do not sustain Korea's burden to establish an Article X violation. Therefore, the United States submits that the Panel must reject these claims.

1.468 Korea recognizes that Article X embodies the fundamental principles of transparency and (what is widely known as) "due process." These principles do not concern themselves with the consistency of a Member's laws, regulations, decisions and rulings with the substantive provisions of the WTO agreements, including the AD Agreement.362 Rather, Article X relates to the administration of a Member's laws, regulations, decisions, and rulings.363

1.469 In discussing the policy underlying the obligations contained in Article X, the Appellate Body has stated:

The essential implication is that Members and other persons affected, or likely to be affected, by governmental measures imposing restraints, requirements and other burdens, should have a reasonable opportunity to acquire authentic information about such measures and accordingly to protect and adjust their activities or alternatively to seek modification of such measures.364

1.470 Korea has not sustained its burden to establish that the Korean Respondents in the Final Results Third Review did not have a "reasonable opportunity to acquire authentic information" regarding the administration of the US anti-dumping law and regulations. Moreover, Korea's arguments do not relate to the "administration" of the US measures but, rather, the consistency of such measures with other GATT 1994 or AD Agreement provisions.365 As such, Korea's argument that the United States has violated Article X should be rejected.

2. Failure to Publish Objective and Specific Factors Regarding the "No Likelihood/Not Likely" Criterion

a)Claim Raised by Korea

1.471 Korea claims that the United States failed to publish objective and specific factors regarding the "no likelihood/not likely" criterion promptly and in such a manner as to enable Korea and Korean companies to become acquainted with them, thus violating Article X:1 of GATT 1994. Korea makes the following arguments in support of this claim:

1.472 The standard governing the objective criteria and methodology which the United States will use in determining whether (and when) to revoke an anti-dumping duty order clearly is (a) a government measure of general application366 that (b) pertains to (i) rates of customs duty or (ii) requirements on imports. Accordingly, the application of that standard in the proceeding involved in this dispute is subject to the transparency and due process requirements of GATT Article X.

1.473 US law does not set out the objective criteria and methodology for determining entitlement to revocation. The applicable provision (section 751(d)(1) of the Tariff Act of 1930, as amended, 19 U.S.C. � 1675(d)(1)) merely states that "[t]he administering authority may revoke, in whole or in part, . . . an anti-dumping duty order . . . after review under . . . this section." There are no objective criteria or methodology, merely authorization of unbounded discretion.367

1.474 The US regulation also does not set out the objective criteria and methodology for determining entitlement to revocation. The applicable provision provides no guidance in this regard:

(2) The Secretary may revoke an order in part if the Secretary concludes that:

(i) One or more producers or resellers covered by the order have sold the merchandise at not less than foreign market value for a period of at least three consecutive years;

(ii) It is "not likely" that those persons will in the future sell the merchandise at less than foreign market value; and

(iii) For producers or resellers that the Secretary previously has determined to have sold the merchandise at less than foreign market value, the producers or resellers agree in writing to their immediate reinstatement in the order, as long as any producer or reseller is subject to the order, if the Secretary concludes under �353.22(f) that the producer or reseller, subsequent to the revocation, sold the merchandise at less than foreign market value.368

Governments and traders are advised that the Secretary has the authority to revoke (but is not required to revoke) if he concludes that "[i]t is not likely that those persons will in the future sell the merchandise at less than foreign market value." However, they are not advised of the meaning of "not likely" or how it will be applied, and, by virtue of the verb "may" at the start of the regulation, they are reminded that the US authorities have unbounded discretion to decide not to revoke an anti-dumping duty order.

1.475 US judicial decisions permit this and, thus, are also unenlightening on that point. For example, in Toshiba, the CIT declared:

Section 751(c) [now 751(d)(1)] of the Tariff Act of 1930 commits the decision to revoke an anti-dumping order to the unfettered discretion of the DOC of Commerce . . ..

* * *

The language of the regulations indicates that the Secretary is not compelled to grant revocation even when plaintiffs satisfy the requirements for revocation.

* * *

The regulation does not present an objective criterion for determining whether there is "no likelihood" of resumption of LTFV [less than fair value (i.e., less than normal value)] sales. Instead, the petitioner must establish this fact to the satisfaction of the Secretary.369

1.476 Finally, no objective criteria and methodology for determining entitlement to revocation are set out in US administrative rulings of general application. In the Notice of Final Results in this case the DOC mentioned "the predictive nature of the revocation proceeding."370 The US CIT has asserted that ordinarily past behaviour constitutes substantial evidence of expected future behaviour.371 In the Final Results in this case, the DOC agrees that normally three years of no dumping margins plus certification of agreement to reinstatement of the anti-dumping order are all that is required for a decision to revoke.372 When is satisfaction of these criteria not sufficient in the DOC's eyes? "When additional evidence is on the record . . .."373 In other words, the DOC adds a third, vague and undefined requirement for revocation whenever it believes that it should do so. This is not an objective criterion. It is the exercise of unfettered discretion.

1.477 In this way, there is no publication in such a manner as to enable governments and traders to become acquainted with the situations in which the US authorities will choose to add a third requirement to secure revocation. Likewise, there is no such publication of what substantive criteria will be applied in those cases in which the DOC chooses to examine this additional requirement. What does the DOC look at? "[A]ll relevant economic factors and other information on the record in a particular case."374 The DOC continues by noting that "depending upon the facts of a case, we consider 'such factors as . . .'"375; a list of factors follows.

1.478 For purposes of GATT Article X, the issue is not whether the DOC explained its decision at length. Rather, the issue is whether the criteria on which its decision was based were objective and were publicized in such a manner as to enable governments and traders to become acquainted with them (i.e., to know ahead of time the criteria on which the determination would be based). They were not.

1.479 First, the standard applied by the DOC in its preliminary determination not to revoke the anti-dumping duty order was different, and stricter, than the standard set out in the US regulations. The DOC denied revocation on the grounds that the Korean Respondents could not satisfy the DOC that there was "no likelihood" of future dumping.376 By the final determination, the DOC recognized that it should have applied the standard of whether it was "not likely" that the Korean companies would dump in the future. The DOC also recognized "the potential difference in meaning" between "no likelihood" and "not likely."377 However, it sought to argue that it had not applied the erroneous "no likelihood" standard so as to require a higher degree of certainty that dumping would not recur than was implied by the current standard--"not likely." The explanation rings hollow, but more significant for purposes of GATT Article X, it is an admission that neither the Korean government nor the companies could have known the level of certainty that the DOC would require for revocation in this case.

1.480 Second, neither the Korean government nor the companies could have known the substantive factors that the DOC would consider appropriate. The DOC acknowledges this, albeit in a convoluted fashion, in its notice of final results:

We also disagree with Hyundai's assertion that the DOC erred by relying on Brass Sheet and Strip as support for its preliminary determination not to revoke. The DOC did not rely upon Brass Sheet and Strip as support for each of the elements addressed in the DOC's preliminary determination regarding the "not likely" issue. Rather, the DOC relied upon Brass Sheet and Strip primarily to confirm the legal standard for the type of factors the DOC has considered relevant in the past (e.g., conditions and trends in the industry, currency movements and the ability of the foreign entity to compete in the US without dumping).378

Thus, despite its repeated references to Brass Sheet and Strip,379 the DOC admits that this supposed source of criteria does not in fact specify the criteria that the DOC will use in its revocation decision, and indeed it does not necessarily specify the range of factors that Commerce may use.

1.481 Thus, the DOC believes it has complete discretion to choose the criteria it wishes to consider determinative in each specific case. The criteria the DOC uses will vary from case to case. They are not uniform or impartial and they are neither known to nor knowable by governments and traders. Therefore, the United States is in breach of its transparency and due process obligations under Article X:1 and X:3(a) of the General Agreement. The United States also is in breach of the obligations of Article 17.6(i) of the AD Agreement to evaluate facts in an unbiased and objective manner.

To continue with Response by the United States


354 The Appellate Body referenced this distinction in European Communities-Regime for the Importation, Sale and Distribution of Bananas (9 September 1997), WT/DS 27/AB/R, para. 200.

355 See 1 GATT, ANALYTICAL INDEX: GUIDE TO GATT LAW AND PRACTICE 293-312 (6th ed. 1995).

356 See id. at 309. The 1923 Convention is printed in 30 League of Nations Treaty Series, No. 775, p. 378 (Ex. ROK-74).

357 US DOC of State, Standard Draft Treaty of Friendship, Commerce and Navigation (Charles H. Sullivan ed., 1970) (relevant excerpts Ex. ROK-75).

358 Id. at p. 247 (emphasis added by Korea).

359 United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear (10 February 1997), WT/DS24/AB/R, section VI, pp. 21-22 (emphasis added by Korea).

360 The panel recalls that the question was: "How would Korea describe the relationship, if any, in legal terms between Article X of GATT 94 and the AD Agreement?"

361 See 19 C.F.R. �� 353.22(c)(8) and 353.25(c)(2)(v)(vi) (1997) (Ex. USA-24).

362 See European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, Report of the Appellate Body adopted 9 September 1997, at para. 200.

363 Id.

364 United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear, WT/DS24/AB/R, Report of the Appellate Body adopted 10 February 1997, at 21-22 (emphasis added by the United States).

365 For example, Korea's argument that the "not likely" criterion in section 353.25(a)(2) does not contain objective criteria is one of Korea's central arguments under both Article 11 of the AD Agreement and Article X:1 of GATT 1994. In addition, the argument that the United States failed to provide the same advantage to Korea that was provided to Japan is the basis for Korea's arguments under GATT 1994 Article I, as well as Article X:3(a). The notion that Article X imposes duplicative obligations on WTO Members is untenable, and is inconsistent with the Appellate Body's interpretation of Article X.

366 The recently released Panel Report in Japan-Measures Affecting Consumer Photographic Film and Paper clarifies that Article X:1 extends to administrative rulings in individual cases that establish or revise principles or criteria applicable in future cases. WT/DS44/R, para. 10.388 (31 March 1998).

367 See Toshiba, 15 C.I.T. at 598-600 (Ex. ROK-5).

368 19 C.F.R. � 353.25(a)(2) (1996).

369 Toshiba, 15 C.I.T. at 598-600 (emphasis added by Korea) (citations omitted) (Ex. ROK-5).

370 62 Fed Reg. 39809, 39812 (24 July 1997) (Ex. ROK-3).

371 Tatung Co. v. United States, 18 C.I.T. 1137, 1144, 1994 C.I.T. LEXIS 288 (Ex. ROK-76).

372 62 Fed. Reg. 39809, 39810 (24 July 1997) (Ex. ROK-3).

373 Id.

374 Id.

375 Id. (quoting Brass Sheet and Strip from Germany, 61 Fed. Reg. 49727, 49730 (23 September 1996).

376 62 Fed. Reg. 12794, 12796 (18 March 1997) (Ex. ROK-34).

377 62 Fed. Reg. 39809, 39812-13 (24 July 1997) (Ex. ROK-3).

378 Id. at 39812 (emphasis added by Korea) (Ex. ROK-3).

379 Brass Sheet and Strip from Germany, 61 Fed. Reg. 49727 (23 September 1996) (Ex. ROK-36).