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UNITED STATES � ANTI-DUMPING ACT OF 1916
AB-2000-5 AB-2000-6
WORLD TRADE ORGANIZATION
I. Introduction
1. The United States, the European Communities and Japan appeal from certain
issues of law and legal interpretations in the Panel Reports, United States -
Anti-Dumping Act of 1916, complaint by the European Communities (the "EC Panel
Report")1 and United States - Anti-Dumping Act of 1916, complaint by Japan (the
"Japan Panel Report").2 These Panel Reports were rendered by two Panels composed
of the same three persons.3 The two Panel Reports, while not identical, are alike
in all major respects.
2. The Panel was established to consider claims by the European Communities and
Japan that Title VIII of the United States Revenue Act of 1916 (the "1916 Act")4
is inconsistent with United States' obligations under the covered agreements.
The 1916 Act allows, under certain conditions, civil actions and criminal
proceedings to be brought against importers who have sold foreign-produced goods
in the United States at prices which are "substantially less" than the prices at
which the same products are sold in a relevant foreign market.5
3. The European Communities claimed that the 1916 Act is inconsistent with
Articles VI:1 and VI:2 of the General Agreement on Tariffs and Trade 1994 (the
"GATT 1994"), Articles 1, 2.1, 2.2, 3, 4 and 5 of the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
(the "Anti-Dumping Agreement ") and Article XVI:4 of the Marrakesh Agreement
Establishing the World Trade Organization (the "WTO Agreement "). In the
alternative, the European Communities claimed that the 1916 Act is inconsistent
with Article III:4 of the GATT 1994. Japan claimed that the 1916 Act is
inconsistent with Articles III:4, VI and XI of the GATT 1994, Articles 1, 2, 3,
4, 5, 9, 11, 18.1 and 18.4 of the Anti-Dumping Agreement and Article XVI:4 of
the WTO Agreement .
4. In the EC Panel Report, circulated to Members of the World Trade Organization
(the "WTO") on 31 March 2000, the Panel concluded that:
(i) the 1916 Act violates Article VI:1 and VI:2 of the GATT 1994;
(ii) the 1916 Act violates Articles 1, 4 and 5.5 of the
Anti-Dumping Agreement;
(iii) the 1916 Act violates Article XVI:4 of the Agreement Establishing the WTO;
(iv) as a result, benefits accruing to the European Communities under the WTO
Agreement have been nullified or impaired.6
5. In the Japan Panel Report, circulated to Members of the WTO on 29 May 2000,
the Panel concluded that:
(i) the 1916 Act violates Article VI:1 and VI:2 of GATT 1994;
(ii) the 1916 Act violates Articles 1, 4.1, 5.1, 5.2, 5.4, 18.1 and 18.4 of the
Anti-Dumping Agreement;
(iii) the 1916 Act violates XVI:4 of the Agreement Establishing the WTO; and
(iv) as a result, benefits accruing to Japan under the WTO Agreement have been
nullified or impaired.7
6. In both Panel Reports, the Panel recommended that the Dispute Settlement Body
(the "DSB") request the United States to bring the 1916 Act into conformity with
its obligations under the WTO Agreement.8
7. On 29 May 2000, the United States notified the DSB of its intention to appeal
certain issues of law covered in the EC Panel Report and the Japan Panel Report
and certain legal interpretations developed by the Panel, pursuant to paragraph
4 of Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"), and filed two Notices of Appeal pursuant to
Rule 20 of the Working Procedures for Appellate Review (the "Working
Procedures"). In view of the close similarity of the issues raised in the two
appeals, it was decided, after consultation with the parties, that a single
Division would hear and decide both appeals.9 On 8 June 2000,
the United States filed one appellant's submission for both appeals. On 13 June
2000, the European Communities and Japan filed a joint other appellants'
submission in respect of both appeals.10 On 23 June 2000, the European Communities
and Japan each filed an appellee's/third participant's submission11, and the
United States filed an appellee's submission.12 On the same day, India and Mexico
each filed a third participant's submission.13
8. The oral hearing in the two appeals was held on 19 July 2000. The
participants and third participants presented oral arguments and responded to
questions put to them by the Members of the Division hearing the appeals.
II. Arguments of the Participants and Third Participants
A. Claims of Error by the United States - Appellant
1. Claims Against the 1916 Act as Such
(a) Jurisdiction of the Panel to Hear Claims Against the 1916 Act as Such
9. The United States argues that the Panel erred in failing to dismiss the
claims raised by the European Communities and Japan under Article VI of the GATT
1994 and the Anti-Dumping Agreement for lack of jurisdiction. In each dispute,
the complaining party invoked the jurisdiction of the Panel pursuant to Article
17 of the Anti-Dumping Agreement. However, when Article 17 of the Anti-Dumping
Agreement is invoked as a basis for a panel's jurisdiction to determine claims
made under that Agreement, it is necessary for the complaining party to
challenge one of the three types of measure set forth in Article 17.4 of that
Agreement, i.e., a definitive anti-dumping duty, a provisional measure or a
price undertaking. In the view of the United States, a Member wishing to
challenge another Member's anti-dumping law as such must wait until one of the
three measures referred to in Article 17.4 is also challenged.
10. The United States considers that this rule is clearly established by the
text and context of Article 17.4 of the Anti-Dumping Agreement, as well as by
the Appellate Body Report in Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico
("Guatemala - Cement ").14 In the present cases, the complainants only challenged
the 1916 Act as such, and did not challenge any measure of the type identified
in Article 17.4. For this reason alone, according to the United States, the
Panel's findings must be vacated for lack of jurisdiction.
11. The United States also contends that the Panel erred in finding that it had
jurisdiction to consider claims under Article VI of the GATT 1994. The United
States considers that Article VI of the GATT 1994 and the Anti-Dumping Agreement
form part of an inseparable package of rights and obligations and that, based on
the reasoning of the Appellate Body in Brazil - Measures Affecting Desiccated
Coconut15, one part of such a package cannot be invoked independently of the
other. The United States thus concludes that, since the Panel did not possess
jurisdiction to consider the Anti-Dumping Agreement claims, and since Article VI cannot be invoked
independently of the Anti-Dumping Agreement, it follows that the Panel also lacked jurisdiction to
consider claims under Article VI of the GATT 1994.
(b) Mandatory and Discretionary Legislation
12. The United States requests the Appellate Body to reverse the Panel's
analysis and findings regarding the distinction between mandatory and
discretionary legislation. If the Panel found, or the Appellate Body finds, that
the 1916 Act is ambiguous, then, the United States submits, the Panel should
have asked, and the Appellate Body should ask, whether there is an
interpretation of the 1916 Act that would permit the United States to act in
conformity with its WTO obligations. Instead, according to the United States,
the Panel interpreted and applied the distinction between mandatory and
discretionary legislation in a way that has no basis in existing WTO/GATT
jurisprudence, erred in treating the distinction as a "defence", and erred in
its treatment of United States' municipal law relevant to this issue.
13. As regards the nature of the mandatory and discretionary legislation
distinction, the United States considers that the Panel based its approach on a
"gross misreading" of the panel report in United States Measures Affecting the
Importation, Internal Sale and Use of Tobacco ("United States - Tobacco").16
Contrary to the Panel's finding, whether or not a law has been applied in the
past does not determine the applicability of the distinction between mandatory
and discretionary legislation. The United States also asks the Appellate Body to
reject the Panel's finding in the Japan Panel Report that Article 18.4 of the
Anti-Dumping Agreement renders the distinction between mandatory and
discretionary legislation "irrelevant". The cases cited by the Panel,
EC -
Anti-Dumping Duties on Audio Tapes in Cassettes Originating in Japan ("European
Communities - Audio Cassettes")17
and United States - Definition of Industry
Concerning Wine and Grape Products ("United States - Wine and Grape Products")18,
do not support such a conclusion. Furthermore, the United States contends, the
ordinary meaning and context of Article 18.4 demonstrate that this provision
does not modify or otherwise limit the distinction between mandatory and
discretionary legislation.
14. The United States also underlines that there is no legal basis for the
Panel's finding that the distinction between discretionary and mandatory
legislation is a "defence" which the United States bore the burden of proving.
The burden of proving that a measure is inconsistent with a WTO provision rests
with the complaining party, which must demonstrate that the law in question
mandates a violation of the relevant provision. Since the European Communities
and Japan have not met the burden of proof, properly applied, the United States
asks the Appellate Body to reverse the Panel's findings that the 1916 Act
violates the provisions at issue in this dispute.
2. Applicability of Article VI of the GATT 1994 and the Anti-Dumping Agreement
to the 1916 Act
15. The United States claims that the principal substantive error made by the
Panel was its finding that Article VI of the GATT 1994, as interpreted by the
Anti-Dumping Agreement, applies to the 1916 Act.
16. According to the United States, this finding is erroneous because it is
based on an erroneous test for determining the applicability of Article VI. The
correct analysis, in the view of the United States, is that for a Member's law
to fall within the scope of Article VI, it must satisfy two criteria. First, the
law must impose a particular type of border adjustment measure, namely, duties
on an imported product. Second, the duties imposed by the Member's law must
specifically target "dumping" within the meaning of Article VI:1. Consequently,
the United States concludes, if the Member's law imposes a type of measure other
than duties, or if it does not specifically target dumping, it is not governed
by Article VI.
17. The United States submits that, with respect to dumping, Article VI of the
GATT 1994 simply provides Members with a right to use anti-dumping duties, and
then sets forth rules regulating the manner in which Members may exercise this
right. Article VI does not attempt to regulate other types of measure that a
Member may want to take in order to counteract dumping, as that task is left to
other GATT provisions, including Article III:4 of the GATT 1994. The United
States considers that the ordinary meaning of the terms used in Article VI -
and, in particular, Article VI:2 - as well as the limited role of Article VI
within the GATT framework, Articles 1 and 18.1 of the Anti-Dumping Agreement,
the panel reports in Japan - Trade in Semi-Conductors ("Japan -
Semi-Conductors")19 and
EEC - Regulation on Imports of Parts and Components ("EEC
- Parts and Components")20 and the negotiating history of Article VI, confirm such
an interpretation of the scope of Article VI.
18. According to the United States, the word "may" in Article VI:2 of the GATT
1994 confirms that Article VI provides a right that Members would not otherwise
have - the right to impose duties - but does not contain any prohibition on the
use of other types of measure. Article 1 of the Anti-Dumping Agreement means that a Member's actions are governed by Article VI
and the Anti-Dumping Agreement if a Member is applying one of the specified measures to
counteract dumping, i.e., anti-dumping duties, provisional measures or price
undertakings. Article 18.1 of the Anti-Dumping Agreement and its footnote 24
also make clear that when specific action taken against dumping is in the form
of anti-dumping duties, provisional measures or price undertakings, such action
must comply with Article VI, as interpreted by the Anti-Dumping Agreement, but
that when specific action against dumping takes another form, such action is
governed by the provisions of the GATT 1994 other than Article VI.
19. The United States claims that the Panel engaged in a flawed analysis of the
scope of Article VI and, as a result, erroneously concluded that Article VI of
the GATT 1994 and the Anti-Dumping Agreement apply to all anti-dumping measures. The United States
reasons that, when the correct test is applied, it is clear that Article VI does
not apply to the 1916 Act. The United States underscores that the 1916 Act does
not impose any type of border adjustment, much less duties, on imported
products: it is an internal law.
20. The United States adds that the 1916 Act is also not subject to Article VI
because it does not specifically target "dumping" within the meaning of Article
VI:1. Although one element of a 1916 Act claim is the existence of a price
difference between two national markets, the United States argues that this
element alone is not sufficient under the 1916 Act. Rather, the United States
contends, such a price difference is simply one indicator, or supporting
evidence, of the possible existence of the activity which the 1916 Act does
target, i.e., predatory pricing by the importer in the United States' market,
which consists of sales at predatorily low price levels with the intent to
destroy, injure, or prevent the establishment of an American industry or to
restrain trade in or monopolize a particular market. According to the United
States, the existence of such predatory intent is the primary indicator of the
anti-competitive conduct which is targeted by the 1916 Act, as the United
States' courts have held.
21. The United States observes that the Panel found that the 1916 Act violates
various substantive and procedural requirements of Article VI of the GATT 1994
and the Anti-Dumping Agreement. The United States requests the Appellate Body to
reverse these findings as they were all based on the Panel's erroneous view of
the scope of Article VI and the Anti-Dumping Agreement.
22. The United States reiterates that the Panel found support for its broad view
of the scope of Article VI in Article VI:1 even though the actual text of this
provision does not address the issue of whether Article VI regulates all actions
against dumping, or only the imposition of anti-dumping duties. The United
States recalls that, on its interpretation of Article VI:2 of the GATT 1994 and
Articles 1 and 18.1 of the Anti-Dumping Agreement, a Member may take specific
action against dumping - other than the imposition of anti-dumping duties - so
long as such action is in accordance with, or consistent with, the provisions of
the GATT 1994 other than Article VI. If the Appellate Body accepts this
interpretation, it follows that Article VI does not apply to the 1916 Act, the
claims made by the European Communities and Japan under the various provisions
of Article VI and the Anti-Dumping Agreement must fail, and the Panel's findings
of violations of those provisions must be reversed. In addition, the United
States submits, since the Panel's findings of violation of Article XVI:4 of the
WTO Agreement are based on its findings of violation of Article VI, the
Appellate Body must also reverse the findings of violation of Article XVI:4.
B. Arguments by the European Communities - Appellee/Third Participant
1. Claims Against the 1916 Act as Such
(a) Jurisdiction of the Panel to Hear Claims Against the 1916 Act as Such
23. The European Communities requests the Appellate Body to reject the United
States' arguments on the issue of jurisdiction on the basis that this ground of
appeal is both untimely and unfounded. The United States could have and should
have raised this objection before the interim review stage of the panel
proceedings in the case brought by the European Communities. Interim review is
only intended to allow review of "precise aspects" of the report and not the
presentation of new arguments. The European Communities relies in particular on
the principle that procedural objections must be raised in a timely manner and
in good faith, as confirmed by the Appellate Body in Korea - Definitive
Safeguard Measure on Imports of Certain Dairy Products ("Korea - Dairy
Safeguards")21 and United States - Tax Treatment for "Foreign Sales Corporations"
("United States - FSC").22
24. The European Communities also argues that the jurisdictional arguments of
the United States are misconceived since Article 17.4 of the Anti-Dumping
Agreement only applies to proceedings involving the imposition of the measures
identified in that provision and does not generally shelter anti-dumping
legislation from scrutiny under the dispute settlement mechanism. Even if it
did, the legislation would still have to comply with Article XVI:4 of the WTO
Agreement, which has also been invoked in this proceeding and is properly before
the Appellate Body.
(b) Mandatory and Discretionary Legislation
25. In relation to the issue of the relevance and meaning of the alleged
distinction between mandatory and discretionary legislation in WTO law, the
European Communities contests that any such general principle exists and refers
the Appellate Body to the report of the panel in United States - Sections
301-310 of the Trade Act of 1974 ("United States - Section 301 ").23
26. The European Communities also considers that the existing GATT and WTO case
law clearly demonstrates that the alleged distinction between mandatory and
discretionary legislation would in any event not protect the 1916 Act from
review in dispute settlement proceedings.
2. Applicability of Article VI of the GATT 1994 and the Anti-Dumping Agreement
to the 1916 Act
27. On the central question of the scope of application of Article VI of the
GATT 1994, the European Communities supports the view of the Panel that Article
VI recognizes the existence of a specific problem in international trade -
dumping - and establishes a specific discipline which must be followed by WTO
Members in dealing with it. This discipline applies to rules and measures taken
thereunder, which, viewed objectively, deal with dumping. The discipline is not
limited to rules which provide for the imposition of duties at the frontier.
28. The European Communities bases its interpretation of the scope of Article VI
of the GATT 1994 on the text of Article VI itself, as well as on Articles 1 and
18.1 of the Anti-Dumping Agreement. In particular, Article VI:1 establishes that
Article VI applies to measures which: (i) are targeted at imports; and (ii)
provide a remedy against trading practices defined by reference to price
discrimination in the form of lower prices in the importing country than those
in the country of export. When Article VI:2, on which the United States relies,
is read in the context of Article VI:1, it is clear that the word "may" simply
means that the imposition of duties is optional, and that the amount of any such
duty may not be greater than the margin of dumping. Furthermore, according to
the European Communities, Article 18.1 of the Anti-Dumping Agreement and
footnote 24 make clear that "specific action" against dumping may only be taken
in accordance with Article VI, but this does not prevent the application of
safeguard measures or countervailing duties (pursuant to and in conformity with
Articles XIX and VI of the GATT 1994, respectively) to conduct which may also
involve dumping.
29. The European Communities considers that the arguments made by the United
States on appeal mischaracterize the Panel's findings, and find no support in
the text or context of Article VI, Articles 1 or 18.1 of the Anti-Dumping
Agreement, or the panel reports in Japan - Semi-Conductors or EEC - Parts and
Components. The European Communities cautions that the arguments of the United
States as regards the scope of Article VI of the GATT 1994 would eviscerate the
disciplines of Article VI and allow Members easily to circumvent their WTO
obligations by modifying their legislation to provide for fines instead of
anti-dumping duties.
30. Since the European Communities believes that the Panel correctly interpreted
the scope of Article VI of the GATT 1994 and the Anti-Dumping Agreement, the
European Communities asks the Appellate Body also to uphold the Panel's related
conclusions that the 1916 Act violates Article VI:1 and VI:2 of the GATT 1994
and Articles 1, 4.1, 5.4, 5.5, 18.1 and 18.4 of the Anti-Dumping Agreement.
31. The European Communities reasons that when an anti-dumping law, which falls
within the scope of application of Article VI of the GATT 1994 and the
Anti-Dumping Agreement, allows the imposition of sanctions other than duties,
this is a breach of the discipline established by Article VI of the GATT 1994
and the Anti-Dumping Agreement. Likewise, if such a law provides for imposition
of measures on the basis of criteria which do not fulfil the substantive
requirements of the discipline, or pursuant to procedures which do not respect
its procedural requirements, such measures also constitute breaches of the
discipline. The European Communities contends that the 1916 Act breaches the
discipline in all three respects.
C. Arguments by Japan - Appellee/Third Participant
1. Claims Against the 1916 Act as Such
(a) Jurisdiction of the Panel to Hear Claims Against the 1916 Act as Such
32. Japan argues that the Panel correctly concluded that it had jurisdiction.
According to Japan, nothing in the text of Article 17 of the Anti-Dumping
Agreement or its context takes away the well-established GATT/WTO right to
challenge facially inconsistent legislation. Article 17.4 is a special and
additional rule listed in Appendix 2 to the DSU. According to Japan, Article
17.4 is an exception to the general rule contained in Article 17.1 of the
Anti-Dumping Agreement and, by its terms, Article 17.4 establishes special rules
that apply only to challenges of actions taken by anti-dumping authorities.
(b) Mandatory and Discretionary Legislation
33. According to Japan the Panel correctly concluded that, in light of Article
18.4 of the Anti-Dumping Agreement, the distinction between mandatory and discretionary
legislation is not relevant in this dispute. In any event, Japan contends, the
1916 Act is mandatory in character. When its substantive elements are
established, the remedies (fines and/or imprisonment) prescribed by the 1916 Act
must be imposed. Japan submits that the Panel also correctly concluded that the
burden of proof was properly on the United States to substantiate its claim that
the 1916 Act was not mandatory.
2. Applicability of Article VI of the GATT 1994 and the Anti-Dumping Agreement
to the 1916 Act
34. In Japan's view, the Panel correctly concluded that the proper basis for
applicability of Article VI of the GATT 1994 is the type of conduct addressed,
not the remedies applied to the conduct. By its terms, the object of Article VI
is to counteract "dumping". Japan underscores that anti-dumping duties are the
instrument, not the object of Article VI.
35. Japan believes that its interpretation is supported by the plain meaning of
Article VI, as well as Articles 1 and 18.1 of the Anti-Dumping Agreement. Japan
also expresses concern that Members could easily circumvent WTO obligations if a
Member could escape Article VI simply by enacting legislation providing for
fines and/or imprisonment rather than anti-dumping duties.
36. Japan agrees with the Panel that the 1916 Act falls within the scope of
Article VI of the GATT 1994. On its face, the 1916 Act addresses the same type
of price discrimination as Article VI. The existence in the 1916 Act of certain
additional requirements, which make the imposition of measures to counteract
dumping more difficult than required by Article VI, do not make the Act fall
outside the scope of Article VI. According to Japan, the historical context,
legislative history and United States' case law regarding the 1916 Act all
support this conclusion.
37. Japan argues that since the Panel correctly determined that Article VI of
the GATT 1994 and the Anti-Dumping Agreement were applicable to the 1916 Act,
its findings and conclusions regarding violations of the GATT 1994 and
Anti-Dumping Agreement provisions also were correct. In particular, the Panel
correctly concluded that anti-dumping duties are the only permissible remedy to
counteract dumping. The text of Article VI:2 of the GATT 1994 explicitly and
unambiguously establishes that anti-dumping duties are the only authorized
remedy for dumping, and Article 18.1 and footnote 24 of the Anti-Dumping
Agreement confirm this conclusion. Japan adds that this conclusion is further
supported by the object and purpose of Article VI:2, as well as by the
negotiating history.
1
WT/DS136/R, 31 March 2000.
2
WT/DS162/R, 29 May 2000.
3 As
the composition of both
Panels was identical, we
will refer to the Panels as
"the Panel".
4 Act
of 8 September 1916, 39
Stat. 756 (1916); 15 U.S.C.
� 72.
5
Relevant factual aspects of
the 1916 Act are set out at
paras. 2.1 - 2.5 and 2.13 -
2.16 of the EC Panel
Report, and at paras. 2.1 -
2.5 and 2.14 - 2.16 of the
Japan Panel Report.
Relevant portions of the
1916 Act are also
reproduced in this Report,
infra, para. 129.
6 EC
Panel Report, para. 7.1.
7 Japan
Panel Report, para. 7.1.
8 EC
Panel Report, para. 7.2;
Japan Panel Report, para.
7.2.
9
Pursuant to Rule 21 of the
Working Procedures.
10
Pursuant to Rule 23(1) of
the Working Procedures.
11
Pursuant to Rules 22 and 24
of the Working
Procedures. The
European Communities is an
appellee in dispute
WT/DS136 and a third
participant in dispute
WT/DS162. Japan is an
appellee in dispute
WT/DS162 and a third
participant in dispute
WT/DS136.
12
Pursuant to Rule 23(3) of
the Working Procedures.
13
Pursuant to Rule 24 of the
Working Procedures.
India is a third
participant in both
disputes. Mexico is a third
participant in dispute
WT/DS136, but not in
dispute WT/DS162.
14
Appellate Body Report,
WT/DS60/AB/R, adopted 25
November 1998.
15
Appellate Body Report,
WT/DS22/AB/R, adopted 20
March 1997.
16
Panel Report, adopted 4
October 1994, BISD 41S/131.
17
Panel Report (unadopted),
ADP/136, circulated 28
April 1995.
18
Panel Report, adopted 28
April 1992, BISD 39S/436.
19
Panel Report, adopted 4 May
1988, BISD 35S/116.
20
Panel Report, adopted 16
May 1990, BISD 37S/132.
21
Appellate Body Report,
WT/DS98/AB/R, adopted 12
January 2000.
22
Appellate Body Report,
WT/DS108/AB/R, adopted 20
March 2000.
23
Panel Report, WT/DS152/R,
adopted 27 January 2000.
To continue with
D. Claims of Error by the European Communities and Japan - Appellants |
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