10 January 1992

4.25 In Brazil's view, the fact that there might be no discrimination within the separate countervailing duty laws of the United States did not dispose of the issue of whether these different laws "which provide different methods and timetables for revoking a countervailing duty order" discriminated when applied. The fact that the United States claimed to treat all footwear the same, and the fact that it claimed to treat all products "in the same posture" the same, did not dispose of the issue before this Panel. Both of these arguments disguised the discrimination that occurred.

4.26 Brazil noted that footwear from Brazil and footwear from India and Spain were treated the same not because they were footwear. They were treated the same because, for reasons of United States domestic law, they were processed under the same countervailing duty law of the United States -- Section 104 of the 1979 Act, applicable to injury reviews of pre-existing countervailing duty orders concerning dutiable products from Subsidies Agreement signatories.

4.27 In Brazil's view, the fact that footwear from India and Spain may have been discriminated against as well as footwear from Brazil did not change the fact that Brazil experienced discrimination. In the Brazilian case, there was over 100 million United States dollars in countervailing duties and interest at stake, whereas the Indian and Spanish cases involved relatively small dollar amounts.

4.28 Brazil considered that the real distinction at issue was not that between footwear and everything else, but between dutiable and duty-free products. Perhaps this distinction would be valid in situations in which dutiable and duty-free were permanent, fixed categories. But that was not the case here. Products moved from dutiable to duty-free status, and from duty-free to dutiable status, within the United States for a wide variety of reasons. In recent years the most significant reason had been preferences: the United States Generalized System of Preferences, the Caribbean Basin Initiative, the Free Trade Area between Israel and the United States, and the Free Trade Agreement between Canada and the United States. Some products had become duty-free under these programs while others had returned to dutiable status.

4.29 Brazil went on to argue that not only did individual products change their duty status for preferential and other reasons, but frequently they did so for some contracting parties and not for others. Products might be duty-free under GSP for all developing countries or, if competitive need criteria were met, only for some developing countries. Brazil did not claim that this treatment violated the General Agreement insofar as it related only to customs duties. On the contrary, GATT had authorized such derogations from the most-favoured-nation clause of Article I to benefit developing countries. They were also allowed under other articles, such as Article XXIV. But the concept of a GATT derogation from most-favoured-nation treatment on tariffs to benefit developing contracting parties could not be extended so as to permit a contracting party to unilaterally establish additional limitations beyond tariffs, not sanctioned by the GATT, and to apply them to the detriment of other contracting parties. Such an extension would be a clear denial of the most-favoured-nation treatment required by Article I:1. Nothing in Article VI or elsewhere in the General Agreement would permit differential and changing standards for the injury test depending upon the dutiable status of a particular product at a particular time.

4.30 In sum, Brazil considered that once the Article VI obligations of an injury test entered into force for the United States, Article I required that they be applied in a non-discriminatory manner. Article VI obligations were of both a substantive and a procedural nature, and these obligations were not sheltered by the PPA. What had been sheltered by the PPA until 1 January 1980 in the case of the United States was the injury test itself, and not the procedures or methods by which it was applied. It was not permissible that revocation of countervailing duty orders, in the case of a no injury finding, be backdated to the effective date of the Article VI obligation in the case of duty-free products, and to the request date in the case of dutiable products from Subsidies Agreement signatories. The Article VI obligations had to be fully applied under Article I:1 on a most-favoured-nation basis.

4.31 Brazil considered that it was no more permissible to apply two different procedures for backdating the effect of the Article VI injury test in a way that discriminated than it would be to apply two different standards for injury in a country's countervailing duty laws in a way that discriminated. Whereas it might be acceptable to have two different standards for injury -- for example, "material injury" in one law and "serious injury" in another, it would be a clear most-favoured-nation violation of Article I to apply these two different standards simultaneously to different groups of countries. Similarly, Brazil noted, while it was permissible, pursuant to Article 6.7 of the Subsidies Agreement, for a signatory to determine injury on a regional basis in exceptional circumstances, this discretionary action could not be taken in a manner that discriminated. A signatory could not decide -- consistent with Article I -- to provide the regional injury analysis for some countries but not for others.

4.32 The United States responded that the basis for the United States designating preferential duty-free status to products imported from developing countries was expressly sanctioned by the CONTRACTING PARTIES, and was embodied in the 1979 Enabling Clause. India's fasteners and Mexico's lime and automotive glass were declared duty-free under the United States GSP, and were, therefore, entitled to preferential treatment, without the United States having violated the most-favoured-nation provision of Article I. Likewise, Trinidad and Tobago received preferential treatment under the Caribbean Basin Initiative, for which the United States received a waiver of applicability of the most-favoured-nation clause. These were recognized preferences intended to provide disadvantaged countries with assistance to be able to compete with stronger economies. Providing them with preferential treatment did not violate any most-favoured-nation obligation.

4.33 The United States went on to note that Brazil was not arguing that the United States discriminated against Brazil because its footwear imports would not be duty-free by virtue of being eligible for GSP treatment, nor was Brazil arguing that its footwear qualified under the CBI preference. Nevertheless, without qualifying for the preference, it wanted the same preferential treatment. Such an argument would undermine the purpose and function of the Enabling Clause.

4.34 The United States noted that under Brazil's argument, for example, the United States would have to provide the same treatment to the European Communities as it provided to a least developed country for which a preference had been granted under the Enabling Clause. That would undermine the preference of course, because if the European Communities were granted the same treatment as a developing country, the developing country would then be deprived of the economic assistance the preference was intended to provide.

4.35 Thus, contrary to Brazil's assertions, the United States was not asking the Panel to find that Article VI "permits differential and changing standards for the injury test depending upon the dutiable status of a particular product at a particular time". To the contrary, the United States agreed with Brazil that such changing standards would not be consistent with GATT most-favoured-nation obligations. However, that was not the case. The difference complained of by Brazil -- the need to make a request -- could be described as, at most, a de minimis procedural requirement. A more minimal requirement was hard to imagine. The reason why the United States implemented a special transition rule for cases like non-rubber footwear, on the other hand, stemmed from basic Article VI obligations. In short, the circumstances of this case were sui generis.

4.36 Brazil considered that the timing of Brazil's request for an injury review was not properly at issue in this proceeding. However, in response to a question from the Panel as to whether it was reasonable for Brazil to believe that the injury test required by Article VI would be applied as of the date the Article VI obligation became effective, and also in the light of aspersions cast by the United States upon Brazil's motives in waiting until October 1981 to request an injury review, Brazil wished to make certain points on the timing of its injury review request.

4.37 Brazil vehemently denied assertions by the United States that Brazil had attempted to manipulate the three-year window provided in Section 104(b) of the Trade Agreements Act of 1979 for requesting an injury review. Brazil eliminated its subsidy on footwear nine months after the injury test was requested. However, the injury determination was not made by the United States until fifteen months after the request, and six months after the subsidy was eliminated. The fact that the subsidy had been eliminated by the time the USITC considered the question of injury was totally within the control of the United States, and not within the control of Brazil.

4.38 Moreover, Brazil considered that it was reasonable for Brazil to conclude that the effect of a negative injury determination under Section 104(b) in the case of non-rubber footwear from Brazil would be backdated to 4 January 1980, the date on which United States authorities suspended liquidation on entries of non-rubber footwear from Brazil. This was because the 1979 Act did not indicate that revocation of a countervailing duty order in the event of a negative injury finding was to be backdated to the date of a request for injury review. Rather, Section 104(b)(4)(B) of the 1979 Act indicated that "upon being notified of a negative determination under paragraph (2) by the Commission, the administering authority shall revoke the countervailing duty order then in effect, publish notice thereof in the Federal Register, and refund, without payment of interest, any estimated countervailing duties collected during the period of suspension of liquidation".

4.39 Brazil noted that on 28 December 1979, four days prior to the effective date of Section 104, the United States suspended liquidation on all entries of non-rubber footwear from Brazil, effective 4 January 1980. Thus, any suspension of liquidation with regard to the countervailing duty on Brazilian footwear had already occurred effective 4 January 1980 and could not have reoccurred in October 1981. In fact, as the Subsidies Agreement panel noted (SCM/94 at page 3), "no suspension of liquidation was ordered" in October 1981 "and the original suspension of liquidation ordered on 4 January 1980 remained in effect. As subsequently explained in the notice of revocation 'it was not necessary for the Department, upon notification by the USITC, to suspend liquidation of entries of the products pursuant to [Section 104 of the Trade Agreements Act of 1979], since previous suspensions remained in effect'". It was thus reasonable for Brazil to rely on the 4 January 1980 suspension of liquidation, and the backdating of the negative injury determination only to the request date of 29 October 1981 constituted unjustifiable discrimination in contravention of Article I:1.

4.40 The United States responded that Brazil was thoroughly aware that under United States law the exporting country had three years from entry into force of the Article VI obligation in which to request an injury review and that the injury review had to be completed by the USITC within three years of commencement of the injury review investigation. Brazil had taken full advantage of this three-year window, delaying its request for an injury review so as to delay the phasing out of its subsidy programme on non-rubber footwear. In fact, a key element in the USITC's negative injury finding in May 1983 -- explicitly noted by both Commissioners writing in the majority -- was that Brazil had imposed an export tax to offset the remaining subsidies and provided its assurance to the DOC that the tax would continue to be imposed even if the order were revoked. Accordingly, the timing of the injury review actually worked to Brazil's benefit.

4.41 The United States considered that the language of Section 104(b) of the 1979 Act was clear on its face. Moreover, Brazil had more than six months to study the law, before it took effect on 1 January 1980. Not only did the Brazilian Government study the law, but documents prepared by the Government of Brazil and submitted to the United States Government during the relevant period conclusively demonstrated that Brazil's understanding of the United States law was clear and, in fact, quite sophisticated. The purpose of these communications was to inform the DOC of offset measures that Brazil was in the process of implementing in order to ensure that the subsidy margins would be reduced to zero. Indeed, the Government of Brazil explicitly contemplated not requesting an injury review at all on imports of non-rubber footwear. That would have been its right and the order would have terminated without the need to examine injury at all if the margin of subsidy was reduced to zero and remained there. Since the Government of Brazil expressly indicated its interest in exploring this possibility, the United States considered that it was inconsistent now for the Government of Brazil to adopt the contrary position. In addition, the United States had made a special effort to inform all countries with outstanding countervailing duty orders of the transitional procedures and the schedule of the USITC for conducting injury reviews. There was therefore no basis to Brazil's claim that it was not aware that the date of its request for an injury review would be the date of revocation of the order if the injury review went negative.

4.42 The United States further considered that what Brazil might term as an advantage -- the automatic backdating of an injury determination to the date of the Article VI obligation -- denied to Brazil, might by other contracting parties be considered to be a disadvantage and that the three-year window for requesting an injury review under Section 104(b) -- available to Brazil -- might be considered by other contracting parties to be an advantage denied to them. The United States wondered how Brazil would respond to such a hypothetical circumstance.

4.43 Brazil responded to these United States arguments by stating that, like the United States, Brazil considered Section 104(b) to be clear on its face but that Brazil disagreed with the United States as to the interpretation of this law "clear on its face". In particular, in view of the suspension of liquidation implemented by United States authorities on 4 January 1980, Brazil considered that it was reasonable to expect that revocation of the countervailing duty order would be backdated to this, the only, suspension of liquidation involving non-rubber footwear. The fact that Brazil had discussed various scenarios with United States authorities regarding the phasing out of the Brazilian subsidy programme in no way changed the reasonableness of this interpretation. As to the United States hypothetical concerning relative advantages and disadvantages, Brazil was not prepared to respond to such a hypothetical set of facts.

5.1 India made a submission to the Panel in which it supported Brazil's complaint and emphasized the categorical and unconditional nature of obligations under Article I. India considered that there was little room for doubt that the most-favoured-nation obligations of Article I applied not only to benefits flowing from the General Agreement but also those flowing from the Agreements negotiated under the Tokyo Round. In this regard, India cited the 1968 Note by the Director-General ²³ and the Decision of the CONTRACTING PARTIES of 28 December 1979, entitled "Action by the CONTRACTING PARTIES on the Multilateral Trade Negotiations". ²⁴ The Decision stated, inter alia, that "the CONTRACTING PARTIES also note that existing rights and benefits under the GATT of contracting parties not being parties to these Agreements, including those derived from Article I, are not affected by these Agreements".

5.2 Furthermore, in the case under dispute, India considered that it was clear that the Subsidies Agreement obliged the United States to levy countervailing duties on the importation of products alleged to have been subsidized only after the determination of an injury. This obligation became effective for the United States as of 1 January 1980, once the PPA ceased to have effect in relation to Article VI. It therefore followed that the United States had to apply the injury test unconditionally to all contracting parties from the date this obligation became effective for it, irrespective of whether the exporting country specifically requested an injury determination in accordance with United States law. Any imposition and collection of countervailing duties without providing for an injury determination from 1 January 1980 would hence be inconsistent with its obligations under Article VI of the General Agreement. The United States practice of extending the benefit of injury test to some contracting parties from 1 January 1980, and denying that benefit to others, thus violated the most-favoured-nation obligation of the United States under Article I.

5.3 India noted that in the United States submission to the Panel the United States had tried to argue that the provisions of Article I applied only to "like products" and that since no discriminatory treatment was meted out to non-rubber footwear from Brazil vis-à-vis imports from other sources, there had been no breach of Article I. In India's view this line of argument was untenable. Article VI provided for imposition of countervailing duties on products alleged to be subsidized only after determination of an injury. The like product requirement of Article I might not be very relevant in that situation. What was relevant was the procedural requirement and the methodology for extending the injury test before imposition of countervailing duties. Under Article I, the United States had the obligation to extend this benefit on a most-favoured-nation basis, irrespective of what the United States countervailing duty legislation provided.

5.4 India considered that while the general extension on a most-favoured-nation basis of the injury test to all contracting parties might not be directly relevant to this particular case, it was nonetheless a fundamental policy issue of which the Panel should take due cognizance.

Procedural Ruling

6.1 The Panel recalled that in their first submissions to the Panel, Brazil and the United States disagreed on the proper scope of the proceeding. In addition to its presentation on Article I:1, Brazil made arguments to the Panel concerning the administration of United States' countervailing duty laws under Article X and non-violation nullification and impairment under Article XXIII:1(b) and (c). Brazil considered these latter issues to be within the standard terms of reference of the Panel. The United States claimed that these issues had not been raised by Brazil in consultations or in its request for the establishment of a panel. They were therefore outside the terms of reference. The United States did not address these issues on the merits in its submission to the Panel and it requested the Panel to make a ruling on the matter.

6.2 On 18 September 1991, the Panel made the following ruling:

Background to the Dispute

6.3 The Panel recalled that the dispute between Brazil and the United States involves the interrelationship of three different countervailing duty laws of the United States: (1) Section 303 of the Tariff Act of 1930; (2) Section 331 of the Trade Act of 1974; and (3) Sections 701 and 104 of the Trade Agreements Act of 1979. The first of these laws, Section 303 of the Tariff Act of 1930, provides for the imposition of a countervailing duty order on subsidized imports of dutiable products without the benefit of an injury determination. In order to bring its legal regime in the countervailing duty area into conformity with Article VI:6(a), the United States introduced the injury requirement in respect of duty-free products from contracting parties in Section 331 of the Trade Act of 1974, and in respect of dutiable products from signatories of the Subsidies Agreement in Sections 701 and 104 of the Trade Agreements Act of 1979. ²⁵

6.4 The Panel noted that the injury determination procedure in Section 331 of the Trade Act of 1974 applies only to duty-free -- not dutiable -- products from contracting parties to GATT. Pursuant to Section 331 of the 1974 Act, whenever a dutiable product, subject to a countervailing duty order under Section 303 of the Tariff Act of 1930, imposed without the benefit of an injury test, is subsequently accorded duty-free treatment, the outstanding (pre-existing) order receives an injury review and, presuming the injury review is negative, the outstanding order is revoked effective as of the date that the product acquires duty-free status. Under this Section 331 procedure, the injury review requirement is automatically implemented, whether or not there is a specific request for such a review. ²⁶ Section 331 requires that revocation of an outstanding order be made effective as of the date the product at issue becomes duty-free, unless the exporting country is not a GATT contracting party, in which case revocation is effective as of the date of accession to the GATT. ²⁷

6.5 The Panel then noted that Section 104 of the Trade Agreements Act of 1979 provides a transitional procedure whereby dutiable products subject to outstanding countervailing duty orders, imposed under Section 303 of the Tariff Act of 1930 without the benefit of an injury test, become eligible for an injury review upon accession to the Subsidies Agreement by the exporting country concerned. Pursuant to Section 104(b) of the Trade Agreements Act of 1979, a contracting party signatory to the Subsidies

Agreement may request an injury review within three years of the United States' accession to the Subsidies Agreement (1 January 1980) and, presuming the injury review is negative, the countervailing duty order is revoked effective as of the date the review is requested.

6.6 The Panel further noted that the United States designates products as duty-free in two different ways: Some product categories acquire duty-free status in the United States as the result of concessions granted to other contracting parties, as in the various rounds of GATT multilateral trade negotiations. Pursuant to Article I, these concessions are extended unconditionally to all contracting parties. Other products gain duty-free status in the United States only in respect of the exporting countries' status within United States preferential trading arrangements, the most important of these being the United States GSP programme which entered into force in 1974. ²⁸ Such preferential programmes provide duty-free treatment only to certain products originating in the designated beneficiary countries.

6.7 The Panel then recalled that, in accordance with Section 331 of the Trade Act of 1974, the United States revoked an outstanding countervailing duty order on fasteners from India. The revocation was effective as of the date that duty-free status was accorded this product (1982) pursuant to the United States GSP programme. Also under Section 331, the United States revoked outstanding countervailing duty orders on industrial lime and automotive glass from Mexico -- both duty-free products under the GSP programme of the United States -- effective as of the date that Mexico acceded to the GATT (1986). ²⁹ The application of Section 331 of the Trade Act of 1974 depended on the duty-free status of the products in issue and this in turn depended upon whether the products originated in countries which were designated as beneficiaries under the United States GSP programme. In contrast, the Panel recalled that, in accordance with Section 104(b) of the Trade Agreements Act of 1979, following accession to the Subsidies Agreement by both the United States and Brazil on 1 January 1980, the United States revoked an outstanding countervailing duty order on dutiable non-rubber footwear from Brazil effective as of the date that Brazil requested the injury review (29 October 1981), not on the effective date of the United States obligation to provide an injury determination to Subsidies Agreement signatories (1 January 1980).

Applicability of Article I:1

6.8 The Panel noted that Article I:1 provides in relevant part:

The Panel considered that the rules and formalities applicable to countervailing duties, including those applicable to the revocation of countervailing duty orders, are rules and formalities imposed in connection with importation, within the meaning of Article I:1.

6.9 The Panel proceeded to consider whether the United States, through the operation of Section 331 of the Trade Act of 1974, accords an advantage to countries subject to pre-existing countervailing duty orders on products designated as duty-free under the United States GSP programme. In the view of the Panel, the automatic backdating of the effect of revocation of a pre-existing countervailing duty order, without the necessity of the country subject to the order making a request for an injury review, is properly considered to be an advantage within the meaning of Article I:1. It was equally clear from the record that this advantage is not accorded, under Section 104(b) of the Trade Agreements Act of 1979, to contracting parties signatories to the Subsidies Agreement. When such a signatory contracting party seeks revocation of a pre-existing countervailing duty order on a dutiable product originating in its territory, it is required to request the United States authorities for an injury review, following which the United States authorities conduct a review investigation and revoke the countervailing duty order, presuming there is a negative injury determination, but with the revocation effective as of the date of the request for the review.

6.10 The Panel recalled that the United States had argued that countries subject to the automatic backdating procedure under Section 331 could conceivably make the opposite argument from that of Brazil: that they were treated less favourably than those Subsidies Agreement signatories availing themselves of the three-year period for requesting an injury review under Section 104(b). The Panel however considered that Article I:1 does not permit balancing more favourable treatment under some procedures against a less favourable treatment under others. If such a balancing were accepted, it would entitle a contracting party to derogate from the most-favoured-nation obligation in one case, in respect of one contracting party, on the ground that it accords more favourable treatment in some other case in respect of another contracting party. In the view of the Panel, such an interpretation of the most-favoured-nation obligation of Article I:1 would defeat the very purpose underlying the unconditionality of that obligation. ³⁰

6.11 The Panel noted that Article I would in principle permit a contracting party to have different countervailing duty laws and procedures for different categories of products, or even to exempt one category of products from countervailing duty laws altogether. The mere fact that one category of products is treated one way by the United States and another category of products is treated another is therefore in principle not inconsistent with the most-favoured-nation obligation of Article I:1. However, this provision clearly prohibits a contracting party from according an advantage to a product originating in another country while denying the same advantage to a like product originating in the territories of other contracting parties.

6.12 The Panel consequently examined whether the products to which the United States had accorded the advantage of automatic backdating are like the products to which this advantage had been denied. The Panel noted that the products to which the procedures under Section 331 of the Trade Act of 1974 had actually been applied (industrial fasteners, industrial lime, automotive glass) are not like the product to which Section 104(b) of the Trade Agreements Act of 1979 had been applied in the case of Brazil (non-rubber footwear). However, the Panel also noted that Brazil not only claimed that the application of these two Acts in concrete cases was inconsistent with Article I:1 of the General Agreement but also that the United States' legislation itself was inconsistent with that provision. The Panel recalled that neither Section 331 of the 1974 Act nor Section 104(b) of the 1979 Act makes any distinction as to the particular products to which each applies, other than that the former applies to duty-free products originating in the territories of contracting parties and the latter applies to dutiable products originating in the territories of contracting parties signatories to the Subsidies Agreement. The products to which Section 331 of the 1974 Act accords the advantage of automatic backdating are therefore in principle the same products to which Section 104(b) of the 1979 Act denies the advantage of automatic backdating.

6.13 Having found that Section 331 of the 1974 Act and Section 104(b) of the 1979 Act are applicable to like products, the Panel examined whether this legislation as such is consistent with Article I:1. The Panel noted that the CONTRACTING PARTIES had decided in previous cases that legislation mandatorily requiring the executive authority to impose a measure inconsistent with the General Agreement was inconsistent with that Agreement as such, whether or not an occasion for the actual application of the legislation had arisen. ³¹ The Panel recalled that the backdating provisions of the two Acts are mandatory legislation, that is they impose on the executive authority requirements which cannot be modified by executive action, and it therefore found that these provisions as such, not merely their application in concrete cases, have to be consistent with Article I:1.

6.14 As the Panel previously noted, the United States accords duty-free status under a variety of laws only to products of a particular origin, the most important being the law establishing the GSP. The GSP programme of the United States, both in its nature and in its design, accords duty-free status to only certain products originating in only certain developing countries. The Panel noted that, together with the grant of a tariff advantage to the designated beneficiary countries under this programme, Section 331 of the Trade Act of 1974 accords a non-tariff advantage to the same beneficiary countries in the form of the automatic backdating of countervailing duty revocation orders. The Panel considered that the grant of this non-tariff advantage under Section 331 of the 1974 Act to duty-free products originating in a country beneficiary of the GSP programme, which advantage is denied to dutiable products originating in the territory of a Subsidies Agreement signatory, is inconsistent with the most-favoured-nation provision of Article I:1 of the General Agreement.

6.15 The Panel then examined whether the CONTRACTING PARTIES had taken any action which would permit the United States to accord the non-tariff advantage of Section 331 of the Trade Act of 1974 to duty-free products emanating from countries beneficiaries of the GSP programme, without unconditionally and immediately according this same advantage to dutiable products originating in the territories of signatories of the Subsidies Agreement. In this regard, the Panel noted that a Decision of 28 November 1979, entitled "Differential and More Favourable Treatment, Reciprocity and Fuller Participation of the Developing Countries", ³² otherwise known as the "Enabling Clause", permits, in paragraph 2(a) thereof, "preferential tariff treatment accorded by developed contracting parties to products originating in developing countries in accordance with the Generalized System of Preferences ... ", notwithstanding the provisions of Article I. It was clear that the Enabling Clause expressly limits the preferential treatment accorded by developed contracting parties in favour of developing contracting parties under the Generalized System of Preferences to tariff preferences only.

6.16 The Panel referred in this context to a discussion of this issue by an earlier panel concerned with the customs user fee of the United States. ³³ The panel in that case considered the claim that exemption from a merchandise processing fee granted to the beneficiaries of the Caribbean Basin Economic Recovery Act was not authorized by the waiver granting the United States authority to extend duty-free treatment to these beneficiaries, and that it was also not authorized by the Enabling Clause. That panel noted that no answer in opposition to this legal claim was given and that it was not aware of any that could be given. However, in view of the fact that this claim was raised by third parties and not by the parties to the dispute, this earlier panel did not consider it appropriate to make a formal finding on the issue.

6.17 Accordingly, the Panel found that there is no decision of the CONTRACTING PARTIES justifying the given inconsistency with Article I:1 of the non-tariff advantage accorded to duty-free products originating in countries beneficiaries of the United States GSP programme in the backdating of the effect of the revocation of countervailing duty orders. ³⁴

Additional Issues

6.18 The Panel noted that Brazil raised an additional issue: that it was reasonable for Brazil to assume that the United States revocation of the countervailing duty on non-rubber footwear would be backdated to 4 January 1980, the date of the only suspension of liquidation by the United States authorities on entries of non-rubber footwear from Brazil, rather than to 29 October 1981, the date of Brazil's request for an injury review. Brazil considered that the United States backdating of the revocation of the countervailing duty in this context constituted discrimination in contravention of Article I:1. No separate suspension of liquidation was ordered in conjunction with the injury review request since there was already a suspension in effect dating back to 4 January 1980. The Panel recalled that Section 104 does not specify that the backdating of revocation of a countervailing duty order shall be only to the date of the request for an injury review. What Section 104 does provide, in paragraph (b)(4)(B), is that the revocation shall be backdated to the date of suspension of liquidation and, in paragraph (b)(3), that suspension of liquidation shall occur on the date the request for an injury review is received. The Panel further noted the United States argument that Brazil was fully aware of the elements of Section 104(b) upon its entry into force, and of its implications for the revocation of the countervailing duty order in this case. However, in view of the Panel's finding in the preceding paragraph, the Panel did not consider it necessary to propose a ruling on this additional issue raised by Brazil.

6.19 Similarly, the Panel did not consider it appropriate in the context of this case to address the issues raised in India's third party submission in respect of the non-applicability of the PPA. It was not clear to the Panel how India's arguments respecting the non-applicability of the PPA directly affect Brazil's case before this Panel. GATT practice has been for panels to make findings only on the issues raised by the parties to the dispute. ³⁵ The Panel believed that this was sound legal practice and should also be followed in the present case. It was of course open to any contracting party which wished to raise this issue to commence consultation and dispute settlement proceedings in its own right under the General Agreement.

7.1 The Panel noted that Brazil requested a general ruling on the matter in dispute, but did not request the Panel to make a specific recommendation to the CONTRACTING PARTIES.

7.2 The Panel found that the United States failed to grant, pursuant to Section 104(b) of the Trade Agreements Act of 1979, to products originating in contracting parties signatories to the Subsidies Agreement the advantage accorded in Section 331 of the Trade Act of 1974 to like products originating in countries beneficiaries of the United States GSP programme, that advantage being the automatic backdating of the revocation of countervailing duty orders issued without an injury determination to the date on which the United States assumed the obligation to provide an injury determination under Article VI:6(a). Accordingly, the Panel concludes that the United States acted inconsistently with Article I:1 of the General Agreement.

²³ L/3149

²⁴ BISD 26S/201

²⁵ The Panel noted that Section 701 of the 1979 Act contains the general requirement of an injury determination in countervailing duty cases involving products imported from signatories of the Subsidies Agreement, whereas Section 104(b) of this Act contains the transitional provision applicable to outstanding countervailing duty orders involving products imported from such signatories.

²⁶ Paragraph (a)(2) of Section 331 provides: "In the case of any imported article or merchandise which is free of duty, duties may be imposed under this section only if there is an affirmative determination [of injury] by the Commission ... ".

²⁷ See paragraphs 2.18 and 2.19 above.

²⁸ Trade Act of 1974, Title V, as amended, 19 U.S.C. Section 2416

²⁹ As the Panel recalled, Brazil had also argued that a countervailing duty order on steel wire rod from Trinidad and Tobago was revoked pursuant to Section 331 of the Trade Act of 1974. However, because steel wire rod from Trinidad and Tobago received duty-free treatment pursuant to the Caribbean Basin Economic Recovery Act, 19 U.S.C. Section 2701 (1983), which entered into force after the end of the three-year transitional procedure of Section 104(b) of the Trade Agreements Act of 1979, the Panel did not consider this particular application of Section 331 of the Trade Act of 1974 relevant to the analysis of the Article I issue in this case.

³⁰ A previous panel rejected a similar "balancing" argument in the context of the national treatment obligation in Article III:4. Panel report on "United States - Section 337 of the Tariff Act of 1930", adopted on 7 November 1989, BISD 36S/345, 387.

³¹ Panel report on "United States - Taxes on Petroleum and Certain Imported Substances", adopted on 17 June 1987, BISD 34S/136, 160; and Panel report on "European Economic Community - Regulation on Imports of Parts and Components", adopted on 16 May 1990, BISD 37S/132, 198.

³² BISD 26S/203

³³ Panel report on "United States - Customs User Fee", adopted on 2 February 1988, BISD 35S/245, 290.

³⁴ The Panel noted that Brazil had also mentioned the existence of other preferential arrangements -- specifically, free-trade arrangements between the United States and other contracting parties that would be covered by Article XXIV. However, the question of whether such Article XXIV arrangements can include non-tariff preferences has repeatedly been discussed but never resolved by the CONTRACTING PARTIES. See, for example, the Report of the Working Party on the Accession of Iceland to EFTA, BISD 18S/174, 177. In any case, the Panel did not consider that the resolution of such an issue with respect to Article XXIV arrangements was necessary to the disposition of the case at hand.

³⁵ Panel report on "United States - Customs User Fee", adopted on 2 February 1988, BISD 35S/245, 290.