d) Rebuttal Arguments Made by the United States

1.653 The United States makes the following arguments in rebuttal:

1.654 In its first written submission to the Panel, the United States established that the text and context of Article 5.8 demonstrate that this provision applies only to initial anti-dumping investigations, and not to reviews of definitive anti-dumping duties, such as the underlying administrative review of the order on DRAMs from Korea. There is one additional contextual point that further confirms the fact that Article 5.8 applies only to investigations.

1.655 Korea's argument, as the United States understands it, is that due to the presence of the word "cases" in the second sentence of Article 5.8, Article 5.8 applies to an anti-dumping proceeding as a whole, and not merely to the initial investigatory phase. The natural consequence of this argument is that whenever the authorities find a dumping margin of less than 2 percent, then they must consider the margin de minimis and immediately terminate the case (or, in US terminology, "revoke" the anti-dumping order).

1.656 However, this result is at odds with Article 11.3, footnote 22. That provision says that in countries with a retrospective assessment system, such as the United States, a finding "that no duty is to be levied shall not by itself require the authorities to terminate the definitive duty." In other words, under footnote 22, a finding of a zero dumping margin does not require termination of an anti-dumping order, even though such a dumping margin would be considered de minimis under Article 5.8.

1.657 Put simply, if Article 5.8 means what Korea says it means, then footnote 22 is a nullity. If Article 5.8 applies to more than initial investigations, then any time an authority administering a retrospective system finds a dumping margin of less than 2 percent, under Article 5.8 it must immediately terminate the case (or revoke the order). Under Korea's interpretation, one never gets to footnote 22, because one of the events that triggers its application (a finding of a zero dumping margin) automatically results in the termination of the duty, and there is nothing left to do under Article 11.

1.658 Obviously, this construction violates the principle of "effectiveness" of treaty interpretation which. Therefore, the United States respectfully submits that the Panel must find that Article 5.8 only applies to initial anti-dumping investigations. Such an interpretation renders both Article 5.8 and Article 11.3 (footnote 22) effective, and, as a result, conforms to accepted rules of treaty interpretation.

1.659 Finally, although the text and context of Article 5.8 make clear that Article 5.8 applies only to investigations, Korea has suggested that it somehow makes no sense to have different de minimis standards apply to different phases of an anti-dumping proceeding. To the contrary, there is a very good reason for having different standards.

1.660 Injurious dumping is a pernicious trade practice which the international community has "condemned" for over fifty years.⁴⁵⁶ Dumping is defined as the amount by which the normal value of a like product sold in the ordinary course of trade exceeds the export price of the product.⁴⁵⁷ Any excess, however small, constitutes dumping.

1.661 In the Uruguay Round of multilateral trade negotiations, however, the drafters recognized that for purposes of investigations, a higher (more forgiving) standard of "actionable dumping" (which is what a de minimis standard is) was appropriate. This recognition is consistent with the fact that the calculation of a dumping margin necessarily involves scores (and in some cases, hundreds) of discrete factual determinations, some of which may involve situations where the outcome is close and the exercise of human judgment is unavoidable. For example, in the case of an adjustment to normal value, it may be a "close call" as to whether a particular expense is direct or indirect or whether the amount of the adjustment has been properly documented. This inevitable aspect of the anti-dumping process arguably makes it unfair to subject parties involved (perhaps for the first time) in an initial investigation of dumping to an overly rigorous standard of actionable dumping.

1.662 Following an investigation, however, an exporter knows how the anti-dumping rules apply to its particular factual situation. Therefore, it is appropriate to hold the exporter to a more demanding de minimis standard, because the exporter is in a position to avoid dumping margins of 1-2 percent. Thus, contrary to Korea's assertions, there is a sound basis for apply different de minimis standards to different phases of an anti-dumping proceeding.

1.663 Finally, Korea's reliance on the negotiating history of Article 5.8 remains misplaced. First of all, it is clear from the plain text (and context) of Article 5.8 that it applies only to investigations. Thus, reliance on negotiating history to reach a different interpretation is precluded by the Vienna Convention. Secondly, as discussed in our first written submission, that negotiating history actually confirms the position of the United States. Specifically, it shows that there was an attempt to render the definition of de minimis in Article 5.8 applicable to more than just the investigatory phase. However, this attempt was not successful.

1.664 At the second meeting of the Panel, the United States made the following additional rebuttal arguments:

1.665 Korea notes that Article 5.9 of the AD Agreement uses the word "proceeding." According to Korea, this proves that Article 5 is not limited to investigations, and Korea implies that this means that Article 5.8 is not limited to investigations.

1.666 First, it is by no means clear that the term "proceeding," as used in Article 5.9, refers to something other than an "investigation." The term "proceeding" is simply not defined in the AD Agreement.

1.667 However, even assuming that Korea is correct in its assertion that the word "proceeding," as used in Article 5.9, encompasses both the investigatory and post-investigatory phases, this fact would seem to undercut Korea's argument, because it suggests that the drafters knew what terminology to use when they sought to make a particular right or obligation extend beyond the investigation phase. Thus, if Korea's definition of "proceeding" is correct, the fact that the drafters declined to use this term in Article 5.8 demonstrates that the drafters intended that Article 5.8 apply only to investigations.

1.668 Indeed, in its rebuttal submission, Korea concedes that it "would have been preferable" if the drafters had used the word "proceeding" in Article 5.8. Certainly, from Korea's perspective, it would have been preferable if the drafters had done so, because it would have given Korea a textual basis for its claim. Unfortunately for Korea, the drafters did not.

J. Inconsistency of the Remedy Sought by Korea

a) Submission by the United States

1.669 Regarding the findings and recommendations requested by Korea, contained in Section III.A of this report. The United States submits that the specific remedy sought by Korea is inconsistent with established panel practice. The following are the arguments of the United States in support of this submission:

1.670 In its first submission, Korea has asked this Panel to recommend that the United States "revoke the anti-dumping duty order on DRAMs from Korea." In so doing, Korea has requested a specific remedy that is inconsistent with established GATT/WTO practice and the DSU. Therefore, should the Panel agree with Korea on the merits, the Panel nonetheless should reject the requested remedy, and instead should make a general recommendation, consistent with the DSU and established GATT/WTO practice, that the United States bring its anti-dumping measure into conformity with its obligations under the AD Agreement.

1.671 The specific remedy⁴⁵⁸ of revocation requested by Korea goes far beyond the type of remedies recommended by the overwhelming preponderance of prior GATT 1947 and WTO panels. In virtually every case in which a panel has found a measure to be inconsistent with a GATT obligation, panels have issued the general recommendation that the country "bring its measures . . . into conformity with GATT."⁴⁵⁹ This is true not only for GATT disputes, in general, but for disputes involving the imposition of anti-dumping (and countervailing duty) measures, in particular.⁴⁶⁰

1.672 This well-established practice is codified in Article 19.1 of the DSU, which provides:

1.673 Indeed, in the first case to work its way through the WTO dispute settlement system, the recommendations of both the panel and the Appellate Body carefully adhered to Article 19.1.⁴⁶¹

1.674 The requirement that panels make general recommendations reflects the purpose and role of dispute settlement in the WTO, and, before it, under GATT 1947. Article 3.4 of the DSU provides that "[r]ecommendations and rulings made by the DSB shall be aimed at achieving a satisfactory settlement of the matter," and Article 3.7 provides that "[a] solution mutually acceptable to the parties to a dispute . . . is clearly to be preferred." To this end, Article 11 of the DSU directs panels to "consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution." Ideally, a mutually agreed solution will be achieved before a panel issues its report. However, if this does not occur, a general panel recommendation that directs a party to conform with its obligations still leaves parties with the necessary room to cooperate in arriving at a mutually agreed solution.⁴⁶²

1.675 Indeed, a Member generally has many options available to it to bring a measure into conformity with its WTO obligations. A panel cannot, and should not, prejudge by its recommendation the solution to be arrived at by the parties to the dispute after the DSB adopts the panel's report.

1.676 In addition, the requirement that panels issue general recommendations comports with the nature of a panel's expertise, which lies in the interpretation of covered agreements. Panels generally lack expertise in the domestic law of a defending party.⁴⁶³ Thus, while it is appropriate for a panel to determine in a particular case that a Member's legislation was applied in a manner inconsistent with that country's obligations under a WTO agreement, it is not appropriate for a panel to dictate which of the available options a party must take to bring its actions into conformity with its international obligations.

1.677 The compliance process under the DSU makes the precise manner of implementation a matter to be determined in the first instance by the Member concerned, subject to limited rights to compensation or retaliation by parties that have successfully invoked the dispute settlement procedures. In Article 19 of the DSU, the drafters precluded a panel from prejudging the outcome of this process in their recommendations.

1.678 In sum, specific remedies are at odds with established GATT and WTO practice and the express terms of the DSU. Therefore, regardless of how the merits of this case are decided, Korea's request for revocation of the anti-dumping order on DRAMs should be rejected.

b) Rebuttal Response by Korea

1.679 Korea makes the following arguments in rebuttal to the United States submission:

1.680 The United States erroneously asserts that Korea impermissibly requests the Panel to recommend a "specific remedy."

1.681 There are two sentences in Korea's remedy request. In the first, Korea respectfully requests the Panel to find that the United States is not in conformity with its obligations under Articles I, VI and X of the General Agreement and Articles 2, 5.8, 6, 11.1 and 11.2 of the AD Agreement. This is in complete compliance with the so-called "general remedy" recommendation that is mandated by Article 19.1 of the DSU, which provides that "[w]here a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that Agreement." (Footnotes omitted.)

1.682 In the second sentence of its remedy request, Korea "further requests that the Panel suggest that the United States take the following actions to comply with its obligations under the WTO Agreements . . .." This language was carefully crafted to conform with the second sentence of Article 19.1 of the DSU, which provides:

1.683 In short, Korea is asking the Panel: (a) to make the "general remedy" recommendation called for by the first sentence Article 19.1 of the DSU; and (b) to suggest ways the US could implement that recommendation, as permitted by the second sentence of Article 19.1.

V. Interim Review

1.1 On 6 November 1998, Korea and the United States requested the Panel to review, in accordance with Article 15.2 of the DSU, precise aspects of the interim report issued to parties on 23 October 1998.

A. Comments by Korea

1.2 Korea requested a number of changes to the Panel's description of Korea's main arguments. Certain of these proposed changes were made by the Panel.

1.3 The Panel corrected typographical errors identified by Korea in Section VI of the report.

1.4 At the request of Korea, we corrected our description of the period of the first administrative review at paragraph 6.2. In light of this correction, we amended references in the findings to the period of time during which no dumping was found.

1.5 With regard to paragraph 6.55, Korea asserted that the Panel made a conclusory assertion with no explicit indication of the reasons supporting the finding. Korea asked the Panel to clarify the reasons why the Final Results Third Review were inconsistent with Article 11.2 of the AD Agreement. The Panel made a change to this paragraph.

1.6 With regard to paragraph 6.92, Korea asked the Panel to issue findings regarding GATT 1994 Articles I and X, to avoid the situation described by the Appellate Body in Australia - Measures Affecting Importation of Salmon.⁴⁶⁴ Korea stated that in that case the Appellate Body found that the panel had erred in law by misapplying the doctrine of judicial economy. We note the Appellate Body's statement in United States - Shirts and Blouses that "a panel need only address those claims which must be addressed in order to resolve the matter at issue".⁴⁶⁵ We also note that this statement was referred to by the Appellate Body in Salmon. In Salmon, the Appellate Body also stated that "a panel has to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings 'in order to ensure effective resolution of disputes to the benefit of all Members' [consistent with Article 21.1 of the DSU]." Having found that section 353.25(a)(2)(ii) of the DOC regulations, and the Final Results Third Review based on that provision, are inconsistent with Article 11.2 of the AD Agreement, we consider that we have resolved "the matter at issue" and "enable[d] the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by [the United States] with those recommendations and rulings 'in order to ensure effective resolution of disputes to the benefit of all Members'." For these reasons, we consider that it is not necessary for us to examine Korea's claims under Articles I and X of GATT 1994.

B. Comments by the United States

1.7 With regard to paragraphs 6.42 to 6.50, the United States expressed the concern that certain phrases used by the Panel could be taken out of context. The United States asked the Panel to ensure a clear distinction between the type of standard that administering authorities must apply in order to satisfy the "necessary" standard under Article 11.2, and the quantum (and nature) of the evidence that must support conclusions under such a standard. The Panel made some changes to paragraphs 6.43, 6.47 and 6.50.

1.8 The Panel corrected a typographical error identified by the United States in Section VI of the report.

1.9 With respect to the second sentence of paragraph 6.50, the United States proposed replacing the word "likelihood" with "necessity". The Panel did not make this change.

To continue with Findings

⁴⁵⁶ GATT 1994, Art. VI:1.

⁴⁵⁷ Id. See also AD Agreement, Art. 2.

⁴⁵⁸ By "specific" remedy, the United States means a remedy that requires a party to take a particular, specific action in order to cure a WTO-inconsistency found by a panel.

⁴⁵⁹ See, e.g., Canada - Measures Affecting Exports of Unprocessed Herring and Salmon, L/6268, Report of the Panel adopted 22 March 1988, BISD 35S/98, 115, para. 5.1. The United States indicates that in escess of 100 prior panel reports in which panels have made recommendations using similar language.

⁴⁶⁰ See, e.g., Canadian Countervailing Duties on Grain Corn from the United States, SCM/140 and Corr. 1, Report of the Panel adopted 28 April 1992, BISD 39S/411, 432, para. 6.2; Korean Resins, ADP/92, para. 302.

⁴⁶¹ In Reformulated Gasoline, the Appellate Body recommended "that the Dispute Settlement Body request the United States to bring the baseline establishment rules contained in Part 80 of Title 40 of the Code of Federal Regulations into conformity with its obligations under the General Agreement." WT/DS2/AB/R, p. 29. The panel in that case issued a virtually identical recommendation. WT/DS2/R, Report of the Panel, as modified by the Appellate Body, adopted 20 May 1996, para 8.2.

Even more noteworthy is Japan Taxes, in which the Appellate Body recommended "that the Dispute Settlement Body request Japan to bring the Liquor Tax Law into conformity with its obligations under the General Agreement on Tariffs and Trade 1994." WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, at 34.

⁴⁶² As noted by Prof. Jackson:

John H. Jackson, World Trade and the Law of the GATT 184 (1969) (citations omitted) (Ex. USA 82).

⁴⁶³ Indeed, Article 8.3 of the DSU provides that citizens of Members whose governments are parties to a dispute normally shall not serve on a panel concerned with that dispute, absent agreement by the parties.

⁴⁶⁴ Adopted 20 October 1998, WT/DS18/AB/R, hereinafter "Salmon".

⁴⁶⁵ 1Adopted 23 May 1997, WT/DS33/AB/R, p. 19.