I. Claims under Article 5.8 of the AD Agreement

1. De Minimis Margin Threshold for Administrative Reviews

a) Claim Raised by Korea

1.616 Korea claims that the United States violates Article 5.8 of the AD Agreement by setting the de minimis margin threshold for administrative reviews at a level lower than that required by that provision. The following are Korea's arguments in support of that claim:

1.617 The WTO obliges the United States to ensure not only that its practice in administering its anti-dumping law is in conformity with the AD Agreement and the General Agreement, but also that its law and regulations on their face are consistent with those obligations. This claim concerns the latter obligation.

1.618 By setting the de minimis threshold in administrative reviews at 0.5 percent,⁴³⁹ the United States has violated its obligations under Article 5.8 of the AD Agreement, which sets the threshold at two percent. The obligation of Article 5.8 is that:

1.619 Nor is there any basis to the arguments, as pursued by the United States in the course of enacting its legislation to implement the WTO agreements and its anti-dumping regulations pursuant to that law, that the obligation imposed by Article 5.8 is limited to anti-dumping investigations and does not extend to reviews of anti-dumping duties.

1.620 Article 5.8 uses the word "cases," a generic word that applies to the review stage of proceedings as well as the investigation stage. "Cases" was used in the comparable provision, Article 5.3, of the Tokyo Round Anti-Dumping Code.⁴⁴⁰ Although the focus of revisions to this Article in the Uruguay Round was to make it mandatory (replacing "should" with "shall") and to replace "negligible" with a quantified "de minimis" threshold, the scope of applicability also was addressed.

1.621 A review of the Uruguay Round negotiating history of Article 5.8 shows that the obligation imposed by Article 5.8 is not limited to investigations. Article 5.7 of the 6 July 1990 "Carlisle I" draft read: "For the purpose of this Code, the margin of dumping shall be considered to be de minimis if this margin is less than x percent ad valorem . . .." (emphasis added by Korea).⁴⁴¹ This attempt to clarify the scope of the provision was opposed by the United States, and so the express application to all phases of an anti-dumping proceeding disappeared in the "Carlisle II" draft of 14 August 1990, which contained two alternate bracketed versions of this provision. One said that "there should be immediate termination of cases, at any stage of the investigation, against imports from a particular country where the margin of dumping is less than x percent ad valorem . . ." (emphasis added by Korea). The other version repeated the formulation of the Tokyo Round Code, substituting a quantified threshold for "negligible": "There should be immediate termination in cases where the margin of dumping is less than x percent ad valorem" (emphasis added by Korea).⁴⁴²

1.622 By the next draft, the 6 November 1990 New Zealand I, Article 5.8 said: "There should be immediate termination in cases where the margin of dumping is de minimis, 10/" and this footnote 10 provided: "For the purpose of this paragraph, a de minimis margin of dumping is considered to be less than x percent, expressed as a percentage of the normal value."⁴⁴³ This formulation remained unchanged until the "Dunkel Draft" of 20 December 1991, in which the formulation is the same as that quoted above from Article 5.8 of the approved Agreement (except for substitution of the last two words - "export price" is used in the Agreement, whereas the Dunkel Draft referred to "normal value").⁴⁴⁴

1.623 Thus, the effort by the United States to expressly limit the scope of Article 5.8 to investigations was unsuccessful. The same generic formulation used in the Tokyo Round Code ("in cases") was maintained.

1.624 The application of the de minimis threshold to reviews as well as to investigations also is supported by a review of related Uruguay Round AD Agreement provisions. According to Article 9.2, anti-dumping duties, when imposed, shall be collected "in the appropriate amounts in each case." That amount, as per Article 9.3, shall not exceed the margin of dumping established under Article 2. The margin of dumping calculation rules of Article 2 apply to both investigations and reviews. This tracing of the rules applicable to the assessment of anti-dumping duties to be collected discloses no logical reason why the de minimis level during the review stage of a proceeding should be different than at the investigation stage. That which is the legal equivalent of a zero margin for purposes of determining whether to impose an anti-dumping duty is also the legal equivalent of zero for collecting anti-dumping duties.⁴⁴⁵

1.625 Finally, this analysis is confirmed by the DOC's own regulations, which, by definition, treat investigations and annual reviews as parts of the same proceeding. Section 353.2(q) defines "Proceeding" as follows:

In that investigations and annual reviews are part of the same proceeding, they should be subject to the same de minimis threshold.

1.626 The proscription of Article 11.1 is that an anti-dumping duty shall remain in force only as long as and to the extent necessary "to counteract dumping which is causing injury." Under Article 5.8, a calculated margin of dumping of less than two percent is not "dumping." Therefore, the United States is in breach of its WTO obligations by maintaining a de minimis threshold of 0.5 percent for administrative reviews.

1.627 At the first meeting of the Panel, Korea made the following additional arguments:

1.628 By setting the de minimis threshold in administrative reviews at 0.5 percent, the United States has violated its obligations under Article 5.8 of the Anti-Dumping Agreement, which sets the threshold at two percent. The obligation of Article 5.8 applies to "cases," including reviews as well as investigations.

1.629 The United States has argued, as it did in the course of enacting its legislation to implement the WTO agreements and its anti-dumping regulations pursuant to that law, that the obligation imposed by Article 5.8 is limited to anti-dumping investigations and does not extend to reviews of anti-dumping duties. This is incorrect.

1.630 Article 5.8 uses the word "cases," a generic word that applies to the review stage as well as the investigation stage of proceedings. The extensive review of the Uruguay Round negotiating history of Article 5.8 contained in our written submission shows that the obligation of Article 5.8 is not limited to investigations and that the effort by the United States during the negotiations to expressly limit the scope of Article 5.8 to investigations was unsuccessful. The same generic formulation used in the Tokyo Round Code ("in cases") was maintained.

1.631 This analysis is confirmed by an analysis of the provisions both of the Uruguay Round and of the DOC's own regulations, which, by definition, treat investigations and annual reviews as parts of the same proceeding. In that an investigation and all subsequent reviews are parts of the same "case" or "proceeding," they are subject to the same de minimis threshold.

b) Response by the United States

1.632 The United States responds to Korea's claim with the following arguments:

1.633 Consistent with the framework set forth in the AD Agreement, anti-dumping proceedings in the United States consist of two phases: (1) an initial phase consisting of an investigation; and (2) if an investigation results in the imposition of an order (definitive duties), an assessment and review phase. In an investigation, the DOC applies a de minimis standard of 2 percent ad valorem.⁴⁴⁷ In the assessment and review phase, the DOC applies a de minimis standard of 0.5 percent ad valorem.⁴⁴⁸

1.634 Under Article 5.8, Members must apply a 2 percent de minimis standard in anti-dumping investigations. Korea claims that because the DOC does not apply a de minimis standard of 2 percent for purposes of assessments and reviews, the United States is in violation of Article 5.8.⁴⁴⁹ Korea's claim is unfounded, however, because Article 5.8 applies only to initial anti-dumping investigations. Article 5.8 does not apply to assessments and reviews.

1.635 By way of background, the AD Agreement distinguishes between the investigatory phase and the assessment and review phase of an anti-dumping proceeding. Article 5 deals with investigations, while Article 9 deals with assessments and Article 11 deals with reviews. This structure is reflected in other provisions of the AD Agreement. For example, Articles 12.1 and 12.2 set forth obligations concerning the contents of public notices issued during an investigation, while Article 12.3 sets forth comparable obligations with respect to reviews. Likewise, Article 18.3, which is a transition rule, distinguishes between "investigations" and "reviews of existing measures."

1.636 In Desiccated Coconut, the Appellate Body recognized this distinction between an initial investigation and the post-investigation phase, noting that the imposition of "definitive" duties (an "order" in US terminology) ends the investigative phase.⁴⁵⁰ Although Desiccated Coconut was a dispute over countervailing duties, given the similarities between the SCM Agreement and the AD Agreement, the following statement of the Appellate Body is particularly apt:

1.637 Article 5 is entitled "Initiation and Subsequent Investigation." There is nothing in the text of Article 5 that suggests that the provisions of that article, including Article 5.8, apply to anything other than the investigation phase of an anti-dumping proceeding. Indeed, the first sentence of Article 5.8 makes it clear that Article 5.8, like Article 5 in general, deals only with the investigation phase.⁴⁵²

1.638 Korea's only textual argument is that the word "cases" in the second sentence of Article 5.8 refers "to the review stage of proceedings as well as the investigation stage." In other words, according to Korea, the word "cases," appearing in an article that, by its terms, deals only with "investigations," means "investigations and reviews."

1.639 Korea must violate basic principles of treaty interpretation in order to reach this result. According to Article 31(1) of the Vienna Convention, "[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." The first sentence of Article 5.8 also uses the word "case," and in that sentence it is very clear that "case" means "investigation." Moreover, the ordinary meaning of the term "case" is: "[a]n instance of the existence or occurrence of something."⁴⁵³ The United States previously has established that the context of Article 5.8 is "investigations." Putting the ordinary meaning of "cases" and the context together, it is clear that the second sentence of Article 5.8 was intended to refer to investigations where there was the existence or occurrence of a de minimis dumping margin.

1.640 Korea cites the fact that the EU and Japan apply a 2 percent de minimis standard to both investigations and reviews. This reference is legally irrelevant. While Article 31(3)(b) of the Vienna Convention permits a consideration of "any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation," unilateral policy decisions made by only two signatories to the AD Agreement for purposes of their domestic legislation do not constitute "subsequent practice" within the meaning of Article 31.3(b).⁴⁵⁴

1.641 Finally, Korea's discussion of the negotiating history of Article 5.8 is both legally irrelevant and contradicts Korea's own position. Korea's discussion is legally irrelevant because under Article 32 of the Vienna Convention, recourse may be had to the preparatory work of a treaty "when the interpretation according to Article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable." The application of Article 31 to Article 5.8 makes it clear that the 2 percent de minimis standard applies only to investigations, and not to reviews. Thus, the meaning of Article 5.8 is not "ambiguous or obscure." Moreover, this result is not "manifestly absurd or unreasonable," and Korea has not even alleged that it is.

1.642 Moreover, as a factual matter, the drafting history discussed by Korea contradicts its own position. Korea refers to the so-called "Carlisle I" draft, which would have expanded the coverage of Article 5.8 to the entire "Code." Korea correctly notes that the United States opposed this expansion and that, as a result, the ultimate language of Article 5.8 repeated the formulation in the 1979 AD Agreement. Thus, contrary to what Korea alleges, the drafting history shows that the drafters declined to apply the 2 percent de minimis standard to anything other than investigations.

1.643 In light of the above, the Panel should dismiss Korea's claim and find that the United States' application of a 0.5 percent de minimis standard to the assessment and review phase does not violate US obligations under Article 5.8 of the AD Agreement.

c) Rebuttal Arguments Made by Korea

1.644 Korea makes the following arguments in rebuttal to the United States responses:

1.645 The United States seeks to make much of the facts that Article 5 of the AD Agreement is entitled "Initiation and Subsequent Investigation" and that the Appellate Body in Brazil -- Coconut recognized there were two distinct phases in an anti-dumping proceeding--investigation and reviews.

1.646 The second US fact is self-evident, uncontested and irrelevant. The issue is whether the mere fact that the de minimis threshold appears in Article 5 is dispositive. It is not.

1.647 As to the first "fact," Article 5.9 clearly is not limited to the investigation stage. It provides that "[a]n anti-dumping proceeding shall not hinder the procedures of customs clearance." (Emphasis added by Korea.) Thus, Article 5 is not limited to investigations, its title notwithstanding.

1.648 Also, the de minimis threshold set out in the second sentence of Article 5.8 uses the generic word "cases." Granted, as a matter of drafting, the use of "proceedings" (as in Article 5.9), rather than the retention of the more amorphous "cases" (as originally used in the comparable provision (Article 5.3) of the Tokyo Round Anti-Dumping Code), would have been preferable. However, US argument to the contrary notwithstanding, "cases" as used in Article 5.8 cannot be interpreted textually to refer only to the investigation stage of an anti-dumping proceeding.

1.649 The purpose of the AD Agreement and of GATT Article VI--to define the circumstances in which and procedures by which a Member legitimately can apply an anti-dumping measure--also supports finding that a good-faith interpretation of the de minimis provision must apply the provision to all phases of an anti-dumping proceeding. There is no logical reason why the de minimis level during the review stage of a proceeding should be different than at the investigation stage. Moreover, any other holding would allow a Member such as the United States to set the review threshold as low as it wished.

1.650 Application of the de minimis threshold to the review stage of a proceeding thus is supported by the interpretive rules of Article 31 of the Vienna Convention. According to Article 32 of the Vienna Convention, recourse to the preparatory work of the AD Agreement and the circumstances of its conclusion is permissible to confirm the meaning of the de minimis provision. Alternatively, recourse to supplemental means of interpretation would be permissible if the Panel were to find either that limiting the threshold to the investigation stage would lead to an unreasonable, indeed manifestly absurd, result, or that the meaning of "cases" is ambiguous.

1.651 The negotiating history shows clearly that the US effort to limit the provision to investigations failed. The arguments to the contrary in the US first submission do not square with the facts. The Tokyo Round Code used the generic word "cases." Attempts in the "Carlisle I" and "Carlisle II" drafts to specify more clearly the scope of the provision were unsuccessful. Therefore, in the "Dunkel Draft," as in the text of Article 5.8 appearing in the approved legal text, the Tokyo Round Code's reference to "cases" was retained.

1.652 Thus, the text of Article 5.8, rules of treaty interpretation, the Uruguay Round negotiating history and common sense dictate that the 2.0 percent de minimis threshold apply to anti-dumping reviews. Because Section 351.106(c) of the DOC's regulations⁴⁵⁵ sets the de minimis threshold for administrative reviews at 0.5 percent, the United States is in breach of its WTO obligations.

To continue with Rebuttal Arguments Made by the United States

⁴³⁹ The threshold for reviews is set out in Section 351.106(c) of the DOC's anti-dumping regulations, 62 Fed. Reg. 27296, 27382-83 (May 19, 1997) (Ex. ROK-49). The current regulation is cited rather than the regulation applicable to the Korean DRAM proceeding because this claim relates to an inconsistency of the regulation on its face rather than as applied in the DRAM proceeding.

⁴⁴⁰ Article 5.3 of the Tokyo Round Anti-Dumping Code provided: "There should be immediate termination in cases where the margin of dumping . . . is negligible."

⁴⁴¹ MTN.GNG/NG8/W/83/Add.5 (23 July 1990), p. 18.

⁴⁴² Unpublished working document, reprinted in Inside US Trade (21 August 1990) (Ex. ROK-80).

⁴⁴³ Unpublished working document, reprinted in Inside US Trade (9 November 1990) (Ex. ROK-81).

⁴⁴⁴ Reprinted in 3 THE GATT URUGUAY ROUND: A NEGOTIATING HISTORY (1986-1992) 457 (TERENCE P. STEWART, ed., 1993) (Ex. ROK-82).

⁴⁴⁵ The United States appears to be the only WTO Member that provides a separate, lower de minimis threshold for reviews. The EU and Japan, in contrast, expressly apply the AD Agreement's two percent de minimis threshold to both investigations and reviews. See, respectively, G/ADP/N/1/EEC/2/Suppl.1 (1 April 1997), clause 17 and Articles 11(5) and 9(3); G/ADP/Q1/JPN/4 (12 August 1996), para. 4.

⁴⁴⁶ 19 C.F.R. � 353.2(q) (1996) (emphases added by Korea) (Ex. ROK-83).

⁴⁴⁷ 19 U.S.C. � 1673b(b)(3) (Ex. USA-19); New AD Regulations, 62 Fed. Reg. at 27382-83 (sec. 351.106(b)(1)) (Ex. USA-80).

⁴⁴⁸ New AD Regulations at � 351.106(c)(1).

⁴⁴⁹ Although Korea's request for the establishment of a panel fails to specify the particular provision of US law alleged to be in violation of Article 5.8, in its first submission, Korea refers to 19 C.F.R. � 351.106(c) (1998).

⁴⁵⁰ WT/DS/22/AB/R, p. 11.

⁴⁵¹ Id. A similar distinction was recognized under the 1979 AD Agreement. See EC - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil, ADP/137, Report of the Panel adopted 30 October 1995, para. 585, in which the panel stated:

⁴⁵² The first sentence of Article 5.8 provides as follows: "[a]n application under paragraph 1 shall be rejected and an investigation shall be terminated promptly as soon as the authorities concerned are satisfied that there is not sufficient evidence of either dumping or of injury to justify proceeding with the case."

⁴⁵³ Webster's II New Riverside University Dictionary, 234 (1984).

⁴⁵⁴ See EC - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil, ADP/137, Report of the Panel adopted 30 October 1995, para. 497 ("The practices of three of the total signatories to an Agreement did not constitute subsequent practice in the application of the treaty in accordance with Article 31(3)(b) of the Vienna Convention on the Law of Treaties.").

⁴⁵⁵ See 62 Fed. Reg. 27296, 27382-83 (19 May 1997) (Ex. ROK-49).