3. Conclusion

1.54 For the above reasons, we conclude that section 353.25(a)(2)(ii) is not consistent with Article 11.2 of the AD Agreement.⁴⁹⁹

D. Consistency of the Final Results Third Review with Article 11.2 of the AD Agreement

1.55 We have found that section 353.25(a)(2)(ii) of the DOC regulations is inconsistent with Article 11.2 of the AD Agreement. Since the Final Results Third Review is itself based on and determined by section 353.25(a)(2)(ii), we must find that the Final Results Third Review is thereby also inconsistent with Article 11.2 of the AD Agreement.

E. Consistency of the Failure to Self-Initiate an Injury Review with Article 11.2 of the AD Agreement

1.56 Korea raises two claims concerning ex officio Article 11.2 injury reviews. First, Korea effectively claims that an ex officio injury review was "warranted" in the present case because there had been no dumping -- and therefore no injury caused by dumping -- for three years and six months. Second, Korea claims that even if the US were to have decided that an ex officio injury review was "warranted" in the present case, the International Trade Commission ("ITC") does not have the authority to conduct such a review because Article 11.2 is not properly implemented in US legislation.

1. Is an Ex Officio Article 11.2 Injury Review Warranted After Three Years and Six Months' no Dumping?

1.57 Korea argues that the United States violated Article 11.2 of the AD Agreement because, "after concluding for three years that no injury was occurring as a result of dumping, the authorities had an obligation on their own initiative ('it was warranted') to investigate whether injury as well as dumping would be likely to resume if the order were revoked."⁵⁰⁰ Korea is effectively claiming that Article 11.2 necessarily requires an investigating authority to self-initiate an Article 11.2 injury review solely on the basis of three years and six months' no dumping, because any injury found to exist will not be caused by dumped imports due to the absence of dumping.

1.58 The issue before us is whether Article 11.2 necessarily requires an investigating authority, following three years and six months' findings of no dumping, to find that an ex officio Article 11.2 review of "whether the injury would be likely to continue or recur if the duty were removed or varied" is "warranted".

1.59 A review of "whether the injury would be likely to continue or recur if the duty were removed or varied" could include a review of whether (1) injury that is (2) caused by dumped imports⁵⁰¹ would be likely to continue or recur if the duty were removed or varied. With regard to injury, we believe that an absence of dumping during the preceding three years and six months is not in and of itself indicative of the likely state of the relevant domestic industry if the duty were removed or varied. With regard to causality, an absence of dumping during the preceding three years and six months is not in and of itself indicative of causal factors other than the absence of dumping. If the only causal factor under consideration is three years and six months' no dumping, the issue of causality becomes whether injury caused by dumped imports will recur. This necessarily requires a determination of whether dumping will recur. Thus, the "injury" review that Korea believes is "warranted" on the basis of three years and six months' no dumping would be entirely dependent upon a determination of whether dumping will recur. This is precisely the type of determination that the United States sought to make in the present case. The mere fact of three years and six months' findings of no dumping does not require the investigating authority to, in addition, self-initiate a review of "whether the injury would be likely to continue or recur if the duty were removed or varied".

1.60 We therefore reject Korea's claim that the United States violated Article 11.2 of the AD Agreement by failing to initiate, solely on the basis of three years and six months' no dumping, an ex officio Article 11.2 review of "whether the injury would be likely to continue or recur if the duty were removed or varied".

2. Does the ITC Have the Authority to Conduct an Ex Officio Article 11.2 Injury Review?

1.61 Korea effectively claims that US law is inconsistent with Article 11.2 of the AD Agreement because it does not provide the ITC with the authority to conduct an ex officio Article 11.2 injury review where "warranted".

1.62 We reject Korea's claim because the United States has established that the ITC has a general authority to conduct ex officio Article 11.2 injury reviews by virtue of section 751(b) of the 1930 Tariff Act and section 207.45(c) of the ITC regulations.⁵⁰²

F. Article 2.2.1.1 of the AD Agreement

1.63 Korea submits that the United States violated Article 2.2.1.1 of the AD Agreement because it "disregarded cost data prepared by Respondents which were in accordance with generally accepted accounting principles of Korea and accurately reflected costs".⁵⁰³ We understand Korea to claim that the United States violated Article 2.2.1.1 by rejecting (a) the Flamm econometric study regarding cost trends (the "Flamm study"), and (b) the cost data submitted by respondents for 1996.

1.64 Article 2.2.1.1 of the AD Agreement provides in relevant part:

1.65 In addressing these two claims, we note that Article 2.2.1.1 of the AD Agreement applies "[f]or the purpose of paragraph 2" of Article 2, while the cost data in issue was submitted in the context of an Article 11.2 review. However, neither party questioned the applicability of Article 2.2.1.1 in the present case.⁵⁰⁴ For the purpose of our analysis in this case, therefore, we proceed on the assumption that Article 2.2.1.1 does apply.

1. Rejection of the Flamm Study

1.66 Korea claims that the United States violated Article 2.2.1.1 of the AD Agreement because it disregarded cost data in the Flamm study which (1) were in accordance with the generally accepted accounting principles of Korea and (2) accurately reflected costs. Korea's claim is effectively based on an interpretation of Article 2.2.1.1 of the AD Agreement that requires a Member to accept projections for future costs based on historical cost data provided those projections are "in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration." Article 2.2.1.1, however, clearly indicates that the provisos concerning generally accepted accounting principles and reflection of costs of production and sale only apply to "records kept by the exporter or producer under investigation". As the projections for the Flamm study, which were prepared by an outside consultant on behalf of Hyundai, do not constitute "records kept by the exporter or producer under investigation", we believe that the two provisos contained in the first sentence of Article 2.2.1.1 do not apply to the US treatment of the projections for that study. Accordingly, we must reject Korea's claim based on those provisos, i.e., that the United States violated Article 2.2.1.1 because it rejected projections for future costs based on historical cost data that are "in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration."

1.67 Assuming for the sake of argument that it were permissible to interpret Article 2.2.1.1 of the AD Agreement so as to require a Member to accept projections for future costs based on historical cost data provided they are "in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration", we believe that Korea's claim would still fail. As the Final Results Third Review do not suggest that any projected costs were rejected because they were not prepared "in accordance with the generally accepted accounting principles" of Korea, we understand Korea to argue that the United States violated Article 2.2.1.1 by rejecting projected costs that "reasonably reflect the costs associated with the production and sale" of DRAMs. In light of Korea's interpretation of Article 2.2.1.1 of the AD Agreement, and in light of Articles 17.5(ii) and 17.6(i) of the AD Agreement, Korea's claim would require us to determine whether, given the record evidence before the DOC, an unbiased and objective investigating authority could properly have found that the Flamm study did not "reasonably reflect the costs associated with the production and sale" of DRAMs. In its Final Results Third Review, the DOC found that "the cost portion of the Flamm study was based on several questionable premises including the assumption of certain production yields and rates." For example, the DOC stated that the Flamm study contained "optimistic capacity rates" that were "difficult to accept" in a context of production cutbacks, and that the capacity scenario was based on a demand assumption that could not be borne out by market conditions present at that time. ⁵⁰⁵ Korea has failed to challenge the DOC's finding of "questionable premises", and has failed to identify anything in the record to indicate that, in light of the "questionable premises" identified by the DOC, an unbiased and objective investigating authority could not properly have considered that the study did not "reasonably reflect the costs associated with the production and sale" of DRAMs. Korea merely notes that the "record contains ... a valid econometric study", and accuses the DOC of having "summarily rejected" that study.

1.68 In EC - Hormones, the Appellate Body stated that:

1.69 In failing to advance anything beyond conclusory arguments in support of its claim that the DOC should not have rejected the Flamm study, we consider that Korea has failed to "establish a prima facie case" that an objective and impartial investigating authority could not properly have found that the study did not "reasonably reflect the costs associated with the production and sale" of DRAMs.

1.70 Accordingly, assuming for the sake of argument that Article 2.2.1.1 of the AD Agreement requires a Member to accept projections for future costs based on historical cost data provided those projections are "in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration", we would reject Korea's claim that the United States violated Article 2.2.1.1 of the AD Agreement by rejecting projections for future costs based on historical cost data that "reasonably reflect the cost of production and sale" of DRAMs.

2. Rejection of Respondents' 1996 Cost Data

1.71 Korea further claims that the United States violated Article 2.2.1.1 of the AD Agreement by rejecting respondents' cost data for 1996. We understand Korea's claim to refer exclusively to the DOC's rejection of cost data submitted by LGS for the second half of 1996. The Final Results Third Review do not suggest that the DOC rejected LGS cost data for the first half of 1996. ⁵⁰⁷ Nor do the Final Results Third Review suggest that cost data submitted by other respondents for 1996 was rejected.

1.72 As the Final Results Third Review do not suggest that LGS cost data for the second half of 1996 were rejected because they were not prepared "in accordance with the generally accepted accounting principles" of Korea, we understand Korea to argue that the United States violated Article 2.2.1.1 by rejecting LGS cost data for the second half of 1996 that "reasonably reflect the costs associated with the production and sale" of DRAMs. In light of Articles 2.2.1.1, 17.5(ii) and 17.6(i) of the AD Agreement, Korea's claim requires us to determine whether, given the record evidence before the DOC, an unbiased and objective investigating authority could properly have found that the cost data submitted by LGS for the second half of 1996 did not "reasonably reflect the costs associated with the production and sale" of DRAMs.

1.73 In its Final Results Third Review, the DOC stated that its review of LGS cost data for the second half of 1996 "indicates that there are serious questions whether the reported costs were understated due to significant changes in LGS' depreciation schedule and write-offs of foreign exchange losses." ⁵⁰⁸ These "serious questions" were then described in greater detail by the DOC in the Final Results Third Review. However, Korea has failed to challenge the DOC's finding of "serious questions", and has failed to identify anything in the record to indicate that, in light of such "serious questions", an unbiased and objective investigating authority could not properly have considered that the LGS cost data for the second half of 1996 did not "reasonably reflect the costs associated with the production and sale" of DRAMs. Korea merely states that the DOC's "failure to treat properly Respondents' actual cost and price data ... violates Article 2.2.1.1".⁵⁰⁹ In failing to advance anything beyond conclusory arguments in support of its claim that the DOC should not have rejected the LGS cost data for the second half of 1996, we consider that Korea has failed to establish a prima facie case that an objective and impartial investigating authority could not properly have found that the LGS cost data for the second half of 1996 did not "reasonably reflect the costs associated with the production and sale" of DRAMs. Accordingly, we must reject Korea's claim that the United States violated Article 2.2.1.1 of the AD Agreement by rejecting the LGS cost data for the second half of 1996.

G. Article 6.6 of the AD Agreement

1.74 Korea submits that, in making the alleged errors in its flawed analysis, the DOC infringed Article 6.6 of the AD Agreement because "it failed to satisfy itself as to the accuracy of data supplied by the Petitioner",⁵¹⁰ and uncritically accepted and relied on the petitioner's data without taking any action to confirm that it was accurate. It appears that Korea's claims target principally the DOC's treatment of data supplied by the petitioner, and not data obtained from other sources.⁵¹¹ In particular, Korea argues that in analyzing whether respondents may have dumped in 1996, and whether respondents could remain competitive without dumping, the DOC relied on unverified data from petitioner Micron.

1.75 Article 6.6 provides:

1.76 With reference to Articles 6.6, 17.5(ii) and 17.6(i) of the AD Agreement, we must determine whether, on the basis of record evidence before the DOC, an unbiased and objective investigating authority could properly have been satisfied as to the accuracy of the information on which the DOC based its findings of (a) whether respondents had dumped in 1996, and (b) whether respondents could remain competitive without dumping.

1. Whether Respondents Had Dumped During 1996

1.77 Korea asserts that the United States violated Article 6.6 of the AD Agreement because, in determining whether the respondents had dumped⁵¹² during 1996, the DOC relied on unverified news articles and research reports regarding the state of the industry, including spot market prices, that had been provided by the petitioner.

1.78 In essence, we understand Korea to argue that Members cannot discharge their Article 6.6 obligation to "satisfy themselves as to the accuracy of the information supplied by interested parties upon which their findings are based" unless they verify the accuracy of that information. However, the text of Article 6.6 does not explicitly require verification of all information to be relied on. Indeed, the term "verify" only arises in Article 6.7 of the AD Agreement. Article 6.6 simply requires Members to "satisfy themselves as to the accuracy of the information". In our view, Members could "satisfy themselves as to the accuracy of the information" in a number of ways without proceeding to some type of formal verification, including for example reliance on the reputation of the original source of the information. Indeed, we consider that anti-dumping investigations would become totally unmanageable if investigating authorities were required to actually verify the accuracy of all information relied on. ⁵¹³

1.79 The United States asserts that information submitted by interested parties "included independent market analysts' reports from such reputable brokerage houses as Goldman Sachs, Merrill Lynch, Lehman Brothers, and ABN Amro Hoare Govett; business and market news reporting by well-known news organizations such as the Wall Street Journal, New York Times, Financial Times, Reuters, Korea Herald, and Nikkei; and reports from various trade journals" (footnote omitted).⁵¹⁴ The United States also notes that the respondents and their customers submitted data on "average U.S. prices reported by Dataquest and the American IC Exchange, studies by independent analysts and numerous newspaper and magazine articles".⁵¹⁵ The United States argues that the DOC satisfied itself as to the accuracy of information submitted by interested parties, and refers to specific examples of how the DOC "applied its considerable experience in market analysis and considered the source of the information, its internal logic, and its consistency with other information in determining [the] accuracy and usefulness" of certain news reports presented by the respondents and brokerage house reports presented by the petitioner.⁵¹⁶ Korea has failed to identify anything in the record (other than the fact that the information was not verified) to indicate that an unbiased and objective investigating authority could not properly have been satisfied as to the accuracy of this information.

1.80 We recall that the text of Article 6.6 does not support Korea's argument that it is perforce violated in all cases where a Member fails to verify the accuracy of all information relied on. In the absence of additional argumentation from Korea demonstrating that an unbiased and objective investigating authority could not properly have been satisfied as to the accuracy of the information relied on by the DOC in determining whether respondents had dumped during 1996, we find that Korea has failed to establish a prima facie case that the United States violated Article 6.6 of the AD Agreement in determining whether respondents had dumped during 1996.

2. Whether Respondents Could Remain Competitive Without Dumping

1.81 We consider that Korea's claim concerning the use of unverified data regarding the competitiveness of respondents should be rejected for two reasons. First, Korea fails to identify which "unverified data from Micron" is in issue.

1.82 Second, Korea's claim again assumes that Article 6.6 of the AD Agreement requires Members to verify the accuracy of information on which findings are based. However, we recall that failure to verify the accuracy of information does not necessarily constitute a violation of Article 6.6. In the absence of additional argumentation (i.e., other than the failure to verify) from Korea indicating that an objective and unbiased investigating authority could not properly have been satisfied as to the accuracy of information relied on by the DOC in determining whether respondents could remain competitive without dumping, we find that Korea has failed to establish a prima facie case that the United States violated Article 6.6 with regard to the DOC's findings as to whether respondents could remain competitive without dumping.

To continue with Article 5.8 of the AD Agreement

⁴⁹⁹ In arriving at our finding, we examined the matter in accordance with the terms of Article 17.6, including 17.6 sub-para (ii). In interpreting the relevant provisions of the AD Agreement in the course of addressing the claims and arguments before it, we have done so in accordance with customary rules of interpretation of public international law. We note that, in making certain of its arguments in response to the claims of Korea, the United States characterised those arguments as constituting a "permissible interpretation" of the terms of the AD Agreement. As a matter of fact, where we failed to find those arguments persuasive, we rejected them on the basis that they were not consistent with the AD Agreement and, in reaching such a view, we did so on the basis of the customary rules of interpretation of public international law. The fact that the arguments concerned had been presented as a "permissible interpretation" did not, in the circumstances of this case, alter the legal basis upon which we were able to, and did, evaluate them, viz. the customary rules of interpretation of public international law. We further observe that, as a consequence, there is neither warrant nor need in this case to enquire further as to whether the AD Agreement " more generally", as it were, admits of further interpretation.

⁵⁰⁰ See para. 4.303, supra.

⁵⁰¹ We note that, by virtue of note 9 of the AD Agreement, the term "injury" in Article 11.2 "shall be interpreted in accordance with the provisions of" Article 3. Article 3.5 of the AD Agreement requires the establishment of a causal link between the dumped imports and the injury found to exist. Thus, we consider that the Article 11.2 examination of "whether the injury would be likely to continue or recur if the duty were removed or varied" may also involve an examination of whether any injury that is found to be likely to continue or recur is caused by dumped imports. We can envisage circumstances, however, when an Article 11.2 injury review need not necessarily include an examination of causal link.

⁵⁰² See para. 4.317, supra.

⁵⁰³ See para. 4.390, supra.

⁵⁰⁴ The Panel asked both parties oral questions concerning the applicability of Article 2.2.1.1 in the present case. In its oral response, the United States in particular did not dispute the applicability of Article 2.2.1.1. While noting that an Article 2 dumping determination had not been made in the present Article 11.2 review, the United States asserted that cost data submitted for the Article 11.2 review had been assessed using the "Anti-Dumping Agreement, our standard methodology".

⁵⁰⁵ 62 Fed. Reg. 39809 (24 July 1997), at 39818.

⁵⁰⁶ EC Measures Concerning Meat and Meat Products, WT/DS26/AB/R, adopted 13 February 1998, para. 98.

⁵⁰⁷ 62 Fed. Reg. 39809 (24 July 1997), at 39818.

⁵⁰⁸ 62 Fed. Reg. 39809 (24 July 1997), at 39818.

⁵⁰⁹ See para. 4.397, supra.

⁵¹⁰ See para. 4.388, supra.

⁵¹¹ This is confirmed by para. (g) of Korea's request for establishment, where Korea asserts that the Final Results Third Review were "based on unverified information from the petitioning company" (WT/DS99/2).

⁵¹² A careful reading of the Final Results Third Review reveals that the DOC did not find that respondents had "dumped" during 1996. The DOC only found that respondents "may have made U.S. sales below COP [cost of production] during 1996", and that "the existence of below-cost sales during May and June of 1996 suggests that the number of below-cost sales increased following the end of the third review period" (62 Fed. Reg. 39809 (24 July 1997), at 39817). A finding of sales below-cost is not equivalent to a finding of dumping within the meaning of Article 2.

⁵¹³ For example, we query whether investigating authorities should be required to verify import statistics from a different government office. We also query whether investigating authorities should be required to verify "official" exchange rates obtained from a central bank.

⁵¹⁴ See para. 4.436, supra.

⁵¹⁵ See para. 4.436, supra.

⁵¹⁶ See para. 4.438, supra.