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UNITED
STATES � ANTI-DUMPING MEASURES ON
Report of the Panel (Continued) III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1 Korea respectfully requests the Panel to find that the U.S. anti-dumping measures at issue, including actions preceding those measures, are inconsistent with the following provisions of the AD Agreement and GATT 1994:
3.2 Therefore, Korea requests that the Panel find that: (i) the United States has nullified or impaired a benefit accruing to Korea, directly or indirectly, under the WTO Agreements; and (ii) the United States is impeding the achievement of the objectives of the WTO Agreements. 3.3 Korea further requests that the Panel recommend that the United States bring its anti-dumping measures against Plate and Sheet from Korea into conformity with the WTO AD Agreement and GATT 1994. Specifically, Korea requests that the Panel suggest that the United States revoke the anti-dumping duty orders concerning Plate and Sheet from Korea.
3.4 The United States respectfully requests the Panel to find that the actions of the United States in conducting the investigations at issue were in conformity with the requirements of the AD Agreement and GATT 1994. 3.5 The United States further requests
that, should the Panel agree with Korea on the merits of the case, the Panel
nonetheless should reject Korea�s request to revoke the anti-dumping duty orders
concerning Plate and Sheet from Korea, and make a general recommendation and
suggestions for implementation, consistent with the DSU and established GATT/WTO
practice.
IV.
ARGUMENTS OF THE PARTIES AND THIRD PARTIES
4.1 With the agreement of the parties, the
Panel has decided that, in lieu of the traditional descriptive part of the Panel
report setting forth the arguments of the parties, the parties' submissions will
be annexed in full to the Panel report. Accordingly, the parties' first and
second written submissions and oral statements, along with their written
responses to questions, are attached at Annex 1 (Korea) and Annex 2
(the United States). The written submissions and oral statements of the third
parties are attached at Annex 3.
5.1 The United States did not make
any comments on the interim report. Korea did however offer a number of
comments on the interim report, as discussed below. Neither party requested an
interim review meeting.
5.2 Korea considers that the Panel misread
the discussion of �local sales� in the Final Determination in Plate. The interim
report assumes that the DOC made a factual determination that the �local sales�
were denominated in won rather than in dollars. The Final Determination however
does not address the issue of denomination at all. Moreover, the interim report
appears to read the Plate Final Determination as if the DOC made a factual
determination that �local sales� were paid in won using the exchange rate
prevailing on the date of invoice. Once again, no such determination was made.
Although the DOC did say that the customer pays in won, it did not say how many
won were paid or what exchange rate was used to calculate the amount of won
paid. This confusion may result from a misunderstanding about the significance
of a charge to the sales ledger. There is no connection between the exchange
rate that applies to the sales ledger charge and the exchange rate that applies
to the payment. Korea considers that this incorrect understanding of the factual
determinations made by the DOC led the Panel to a line of reasoning that is not
relevant to the issues presented. Therefore, Korea requests that paragraphs 6.19
- 6.31 be revised to reflect the absence of a factual determination that the
exchange rate was fixed as of the time of invoice. Korea considers that, in the
absence of such a factual determination, there is no basis for upholding the
DOC�s double conversion methodology in the Plate case.
5.3 The Panel recognizes that the Final
Determination in Plate does not contain an unambiguous determination that the
amount of won paid was based upon the dollar/won exchange prevailing at the time
of invoice23. It is however clear from
the Determination as a whole that the DOC believed that the won amounts
initially reported to the DOC � amounts which were equivalent to the dollar
amount invoiced converted to won at the exchange rate prevailing on the date of
invoice � were the amounts actually paid. Thus, the DOC summarized the arguments
of the parties as reflecting a choice between calculating normal value "based
upon the US dollar price at which the local sales were invoiced" or using "the
won prices the customers actually pay". In examining this question, the DOC
compared POSCO's internal exchange rate on the date of invoice not only
with the DOC's "market" exchange rate on the date of invoice but also with DOC's
market exchange rate on the date of payment, and concluded that they were
dissimilar. The DOC noted that this contrasted with the situation in Roses
from Colombia, where "the Department verified that the payment in pesos
reflected the market exchange rate at the date of payment" (emphasis added).24
Thus, both the issue posed and the manner in which it was addressed indicate the
DOC's belief that the won amount paid was calculated based upon the exchange
rate prevailing as of the date of invoice. Given POSCO's questionnaire responses
� which initially reported a won invoiced amount and never suggested that the
won amount paid differed from the amount invoiced � the DOC's belief was in our
view eminently reasonable. Thus, we have not � except in para. 6.9 � made the
changes requested by Korea.
5.4 Korea argues that, in Paragraph
6.29, the interim report notes an �admitted error� by the DOC in the Plate case,
namely, the comparison of POSCO�s �internal exchange rate� to the wrong U.S.
exchange rate. Nevertheless, the interim report considers that this �admitted
error� does not give rise to an inconsistency with the AD Agreement. In so
doing, the interim report overlooks the fact that this �admitted error� vitiates
one of the three reasons given in the Final Determination for the double
conversion, in fact, the reason identified by the United States as the �primary
basis� for the double conversion. Moreover, the interim report appears to
accept, sub silentio, the notion of �harmless error�, an approach
inconsistent with that taken by another recent panel25.
5.5 We disagree with Korea. In our view,
the factual error committed by the DOC does not undermine the validity of the
DOC's resolution of this issue. Nor do we see any inconsistency between our
ruling here and that in Guatemala � Cement II. The issue in that dispute
was whether certain violations of the AD Agreement � failure to
provide timely notice of initiation, to provide an appropriate public notice and
to timely provide the text of the application � were harmless. Here, the
question is rather whether certain factual errors vitiate a
determination, thus giving rise to a violation.
5.6 Korea contends that the interim
report is incorrect in treating as a question of fact the issue whether the DOC
adjusted for the unpaid sales as part of �constructing the export price� or as
an adjustment to the export price (paras. 6.62 to 6.70). There is no dispute
between the parties as to what the DOC did: The DOC calculated a �bad debt
expense� for the unpaid sales and made an adjustment to all of POSCO�s export
sales to account for that expense. The only question is how to characterize this
adjustment. That characterization is a question of law. In order to preserve the
current balance in the WTO system between acceptance of factual determinations
and review of legal conclusions, Korea submits that a panel should not unduly
defer to the investigating authority�s own characterization of its actions.
Rather, a panel should determine as a factual question what actually happened
and then should determine as a legal question, based on an objective, functional
analysis, which provisions of the AD Agreement are most applicable to the
factual situation. Korea therefore requests that we treat this as a legal
question, with conforming changes to the ensuing analysis.
5.7 We do not agree with Korea. Our task
as a Panel is to review the determinations of the DOC and to establish, as a
matter of fact, the bases on which it acted. As the determinations and
underlying analysis memoranda indicated that the actions in question were taken
as part of the construction of the export price, the consistency of those
actions with the AD Agreement must be assessed against the provisions
relating to such construction.
5.8 Korea argues that the interim
report in para. 6.123 addresses issues not properly before the Panel for
decision. Moreover, Korea does not consider that the reasoning in Paragraph
6.123 is sufficient to justify an inference that multiple averaging is permitted
by the AD Agreement in the circumstances suggested in that Paragraph and,
particularly, in Footnote 123. Accordingly, Korea suggests that the Panel delete
all of paragraph 6.123, except for the first sentence. Alternatively, Korea
suggests that the Panel keep the first two sentences of Paragraph 6.123 and
replace the rest of the paragraph with the following: �We express no opinion as
to whether the Anti-Dumping Agreement permits the use of multiple averaging in
that factual circumstance.�
5.9 We decline to make the change
requested by Korea. Paragraph 6.123 is an essential part of our findings and is
necessary in order to make clear why the DOC's actions were inconsistent with
the AD Agreement and to provide guidance in respect of implementation.
5.10 Korea argues that the interim
report generally follows the common practice of panels of declining to decide
issues that are considered �unnecessary� to resolution of the dispute, typically
because a measure has been found inconsistent with one provision of a WTO
Agreement and the panel considers it unnecessary to analyse the measure�s
consistency with a second provision. However, the interim report inexplicably
departs from this practice in two respects. After finding that the United
States� use of multiple averaging in the Plate and Sheet investigations was
inconsistent with the requirement of Article 2.4.2, the interim report continues
to analyse the consistency of multiple averaging with Article 2.4.1 (in
Paragraphs 6.128 - 6.131) and with the �fair comparison� requirement of Article
2.4 (in Paragraphs 6.134 - 6.136). In the interests of �judicial economy,� and
judicial consistency, Korea requests that these paragraphs be replaced in their
entirety by paragraphs declining to address these �unnecessary� issues.
5.11 We decline to make the changes
suggested by Korea. We recognize that we might well have exercised judicial
economy in respect of these claims. Having addressed them in the interim report,
however, we do not see what interest would now be served by excising our
conclusions from the final report. To the contrary, their inclusion could prove
of some utility depending the course of any possible appeal.
5.12 In response to comments by Korea, we have also made certain minor
changes to paragraphs 6.3, 6.22, 6.24, 6.27, 6.51, 6.66, 6.68, 6.111 and 6.120.
Additional typographical and other minor changes were made to paragraphs 1.7,
6.33, 6.68, 6.69, 6.79, 6.84, 6.97, 6.105, 6.106, 6.119, 6.125 and 7.8.
VI.
FINDINGS
A.
GENERAL REMARKS
6.1. In reviewing the United States' final
measures imposing the anti-dumping duties at issue in this dispute, we keep in
mind the applicable principles concerning the burden of proof and the standard
of review in disputes under the AD Agreement.
6.2. In WTO dispute settlement
proceedings, the burden of proof with respect to a particular claim or defense
rests with the party that asserts such claim or defiance26.
In the context of the present dispute, this means that Korea is obliged to
present a prima facie case of violation of the relevant Articles of the
AD Agreement. In this regard, the Appellate Body has stated that ". . . a
prima facie case is one which, in the absence of effective refutation by
the defending party, requires a panel, as a matter of law, to rule in favour of
the complaining party presenting the prima facie case27".
Thus, where Korea presents a prima facie case in respect of a
claim, it is for the United States to provide an "effective refutation" of
Korea's evidence and arguments, by submitting its own evidence and arguments in
support of the assertion that it has complied with its obligations under the
AD Agreement. Assuming evidence and arguments are presented on both sides,
it is then our task to weigh and assess that evidence and those arguments in
order to determine whether Korea has established that the United States acted
inconsistently with its obligations under the AD Agreement.
6.3. Article 17.6 of the AD Agreement sets
out a special standard of review for disputes arising under that Agreement. With
regard to factual issues, Article 17.6(i) provides:
"(i) in its assessment of the facts of the
matter, the panel shall determine whether the authorities' establishment of
the facts was proper and whether their evaluation of those facts was unbiased
and objective. If the establishment of the facts was proper and the evaluation
was unbiased and objective, even though the panel might have reached a
different conclusion, the evaluation shall not be overturned;"
Assuming that we conclude that the establishment
of the facts with regard to a particular claim in this case was proper, we then
may consider whether, based on the evidence before the DOC at the time of the
determination, an unbiased and objective investigating authority evaluating that
evidence could have reached the conclusions that the DOC reached on the matter
in question28.
6.4. With respect to questions of the
interpretation of the AD Agreement, Article 17.6(ii) provides:
"(ii) the panel shall interpret the relevant
provisions of the Agreement in accordance with customary rules of
interpretation of public international law. Where the panel finds that a
relevant provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the authorities' measure to be in
conformity with the Agreement if it rests upon one of those permissible
interpretations."
Thus, in considering those aspects of the United
States' determinations which stand or fall depending on the interpretation of
the AD Agreement itself rather than or in addition to the analysis of
facts, we first interpret the provisions the AD Agreement. As the Appellate Body
has repeatedly stated, panels are to consider the interpretation of the WTO
Agreements, including the AD Agreement, in accordance with the principles
set out in the Vienna Convention on the Law of Treaties (Vienna
Convention). Thus, we look to the ordinary meaning of the provision in
question, in its context, and in light of its object and purpose. Finally, we
may consider the preparatory work (the negotiating history) of the provision,
should this be necessary or appropriate in light of the conclusions we reach
based on the text of the provision. We then evaluate whether the United States'
interpretation is one that is "permissible" in light of the customary rules of
interpretation of international law.
B.
ALLEGED "DOUBLE CONVERSION" OF CERTAIN HOME MARKET SALES PRICES
6.5. The claims addressed in this section
of our report relate to the treatment by the DOC of certain sales by POSCO in
the Korean market in both the Plate and Sheet investigations.
These sales, which we will refer to as "local sales", are ordered and invoiced
in US dollars, but are paid in Korean won. Some shipping invoices and all tax
invoices relating to these sales also reflect a won price, using a calculation
based upon the Korean Exchange Bank's exchange rate as of the date of invoice.
The won price is recorded in POSCO's accounting records. As local sales are made
pursuant to letters of credit, payment is made some months after invoice date;
the parties disagree as to what the record in the two investigations shows with
respect to the basis for the won amounts actually paid.
6.6. POSCO reported local sales in won in
its initial questionnaire responses (the questionnaire response in the Sheet
investigation also reported dollar amounts "for ease of verification"). In
subsequent supplemental questionnaire responses, however, POSCO modified its
home market sales listings to report local sales in dollars. In legal briefs
submitted to the DOC in both investigations, POSCO argued that the DOC should
calculate normal value on the basis of the US dollar price at which local sales
were invoiced29. The petitioners
disagreed. In its final determinations in the Plate and Sheet
investigations, the DOC used as the basis for its calculation of the normal
value the won prices recorded in POSCO's accounting records. The DOC converted
these won prices to US dollars at the exchange rate prevailing on the date of
certain US sales.
2.
Claims under Article 2.4.1 of the AD Agreement
(a)
Arguments of the parties
6.7. Korea considers that the DOC
performed a "double conversion" of local sales by converting the dollar amounts
appearing in the invoices into won at one exchange rate and converting them back
into dollars at a different exchange rate. In Korea's view, Article 2.4.1 of the
AD Agreement permits currency conversions only when such conversions are
"required", i.e., when there is no other reasonable alternative. Korea considers
that the "double conversion" by the DOC was unnecessary, as it could simply have
used the original dollar prices in the invoices. Accordingly, the DOC's "double
conversion" of local sales departed from the requirement of Article 2.4.1 that
currency conversions be performed only when required30.
6.8. The United States argues that
the phrase "[w]hen the comparison under paragraph 4 requires a conversion of
currencies" in Article 2.4.1 establishes the condition under which the rules
that follow will apply, but it cannot be read to require that currency
conversions be avoided in any particular circumstances, particularly where the
transaction occurs in a foreign currency. In any event, the United States
considers that it made no "double conversion" of local sales in these
investigations. Rather, the DOC made a proper factual determination that the
local sales were won transactions as reported by POSCO in its questionnaire
responses. The DOC simply converted those won amounts into dollars consistent
with the methodology established in Article 2.4.1.
(b)
Evaluation by the Panel
(i)
Does Article 2.4.1 prohibit unnecessary currency conversions?
6.9. Korea alleges that the DOC performed
an unnecessary "double conversion" of certain home market sales prices, in
violation of Article 2.4.1, which in Korea's view permits the conversion of
currencies only when such conversions are "required". As a threshold matter,
therefore, we must consider whether Article 2.4.1 permits the conversion of
currencies only when required or, expressed another way, whether Article 2.4.1
prohibits unnecessary currency conversions.
6.10. Our starting point in respect of
this issue is of course the text of the relevant provisions of the AD
Agreement. Article 2.4.1 provides that:
"When the comparison under paragraph 4 requires
a conversion of currencies, such conversion should be made using the rate of
exchange on the date of sale8, provided that when a sale of foreign currency
on forward markets is directly linked to the export sale involved, the rate of
exchange in the forward sale shall be used. Fluctuations in exchange rates
shall be ignored and in an investigation the authorities shall allow exporters
at least 60 days to have adjusted their export prices to reflect sustained
movements in exchange rates during the period of investigation. (emphasis
added). 8[Footnote omitted]
6.11. Article 2.4.1 sets forth rules with respect to the conversion of
currencies to be applied "[w]hen the comparison under paragraph 4 requires a
conversion of currencies . . . ." While Article 2.4.1 does not spell out the
precise circumstances under which currency conversions are to be avoided, we
consider that it does establish a general � and in our view, self-evident -
principle that currency conversions are permitted only where they are required
in order to effect a comparison between the export price and the normal value.
We note that a contrary interpretation would call into doubt the utility of the
introductory clause of Article 2.4.1. If the drafters had not intended to
establish a rule that currency conversions be performed only when required, they
could easily have drafted Article 2.4.1 to provide that "Currency conversions
should be made using the rate of exchange on the date of sale �." Further, such
an interpretation could result in the unusual situation where currency
conversions that were required in order to perform a comparison under Article
2.4 would be subject to the rules set forth in Article 2.4.1, but unnecessary
currency conversions could be performed without regard to the rules of Article
2.4.1.
6.12. We need not here arrive at any
general understanding as to when currency conversions are or are not required
within the meaning of Article 2.4.1, nor do we express any view regarding
Korea's "reasonable alternative" test. Rather, we consider it sufficient to
conclude, for the purposes of this dispute, that currency conversion is not
"required", and would thus not be permissible under Article 2.4.1, in instances
where the prices being compared are already in the same currency.
6.13. We do not understand the United
States to contest that it would be inconsistent with Article 2.4.1 to perform a
currency conversion in a case where the prices to be compared were already in
the same currency. While the United States initially disputed that Article 2.4.1
prohibits unnecessary currency conversions, it subsequently appears to have
acknowledged that Article 2.4.1 would not permit currency conversions in a case
where the sales to be compared were already in the same currency. Thus, the
United States explained at the second meeting of the Panel that:
"A review of the submissions confirms that
there is no real disagreement over the meaning of the relevant provisions of
Article 2.4.1. Korea and the United States agree that if the sales used to
establish normal value are in a different currency than the export price
sales, conversion at the rate in effect on the date of sale was appropriate,
and if the sales are in the same currency, no conversion is necessary or
appropriate." (emphasis added)31
(ii) Did the United States properly determine that the local sales were made in
won?
6.14. As discussed above, Korea claims that the
DOC unnecessarily converted certain dollar-denominated sales in the Korean
market into won at one exchange rate and converted them back into dollars in
order to compare them to dollar-denominated export sales at a different exchange
rate. It follows from our discussion in the previous section of this Report that
such an unnecessary "double conversion" would be inconsistent with Article 2.4.1
of the AD Agreement. The question remains whether the DOC in fact made
such an impermissible "double conversion".
6.15. The United States considers that the
sales in question were properly found to have been made in won, such that a
conversion to dollars was necessary in order to compare those prices to
dollar-denominated export prices. In other words, the United States denies that
it performed a "double conversion" in respect of local sales. This issue is a
critical one to our inquiry, as the existence of a "double conversion" is a
necessary predicate to Korea's claim. To the extent that Korea is correct, the
United States acted in a manner inconsistent with Article 2.4.1; to the extent
that the United States is correct, then the factual predicate underlying Korea's
claim is without basis and Korea's claim must fail.
(i) standard of review
6.16. In examining this issue, we must
first consider the issue of the proper standard of review to be applied in
reviewing the DOC's determination. The United States considers that
whether the sales in question were in dollars or won is a question of fact.
Accordingly, the Panel should assess pursuant to Article 17.6(i) whether the
DOC's establishment of the facts was proper and whether its evaluation of those
facts was unbiased and objective. Korea by contrast argues that the
determination in question was not a factual determination, because there were no
facts in dispute.
6.17. As noted in Section VI.A, above,
Article 17.6 sets forth the standard of review to be applied by a panel when
examining a matter under the AD Agreement. It is evident from the text of
Article 17.6 that the standard of review to be applied by panels depends upon
the nature of the question before it. The relevant standard to be applied when
considering questions of law, i.e., the interpretation of the AD Agreement,
is set forth in Article 17.6(ii). The standard to be applied in reviewing
determinations of an investigating authority in respect to questions of fact is
set forth in Article 17.6(i). Thus, the question before us is whether that
determination is one of fact and thus subject to the standard of review set
forth in Article 17.6(i).
6.18. Korea's view appears to be that
Article 17.6(i) applies only in respect of the establishment of certain
objectively-ascertainable underlying facts, e.g., did the invoices express the
sales values in terms of dollars or won, in what currency payment was made, etc.
We consider that this interpretation does not however coincide with the language
of Article 17.6(i). That Article speaks not only to the establishment of the
facts, but also to their evaluation. Therefore, the Panel must check not merely
whether the national authorities have properly established the relevant facts
but also the value or weight attached to those facts and whether this was done
in an unbiased and objective manner. This concerns the according of a certain
weight to the facts in their relation to each other; it is not a legal
evaluation.
6.19. In this case, it is generally true that the
underlying facts on the basis of which the DOC considered whether the sales in
question were made in dollars or won are not disputed (although we will see that
there is substantial disagreement between the parties about one key underlying
factual issue). We consider, however, that the DOC's determination that the
sales in question were made in won was a factual determination in as much as it
represents a determination made on the basis of the evaluation of certain facts
and does not involve the interpretation of provisions of the AD Agreement.
6.20. In light of the above, we consider
that the task before us is to examine whether an unbiased and objective
investigating authority evaluating the evidence before the DOC in the Plate and
Sheet investigations could properly have determined that the local sales in
question were made in won rather than in dollars. Given the nature of the
arguments before us, we recall that pursuant to Article 17.5(ii) of the AD
Agreement we are to examine the matter based upon "the facts made available in
conformity with appropriate domestic procedures to the authorities of the
importing Member". Finally, we note that this dispute relates to two separate
investigations, and that the facts before the DOC differ. Thus we will review
the determinations of the DOC in these two investigations separately.
23. The DOC
statement that "it is more appropriate to use the won price in which the
customer actually pays" is not entirely clear. Similarly, the import of the
statement that "the customer pays in won not US dollars, and the sales value of
the merchandise is charged to the sales ledger in won, based on the
aforementioned exchange rate [i.e., the exchange rate on the date of invoice]",
depends upon whether the final clause regarding exchange rates relates only to
the sales ledger or also to the amounts paid.
24. See para
6.22, infra.
25. Guatemala �
Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico,
WT/DS156/R, para. 8.22, adopted 17 November 2000.
26. United
States � Measure Affecting Imports of Woven Wool Shirts and Blouses from India
("United States � Shirts and Blouses"), Appellate Body Report, WT/DS33/AB/R,
adopted 23 May 1997, p. 14.
27. European
Communities � Measures Concerning Meat and Meat Products ("EC � Hormones"),
Appellate Body Report, WT/DS26/AB/R�WT/DS48/AB/R, adopted 13 February 1998,
para. 104.
28. We note that
this is the same standard as that applied by the Panel in Mexico � Anti-Dumping
Investigation of High Fructose Corn Syrup, Report of the Panel, WT/DS132/R,
adopted 24 February 2000, which, in considering whether the Mexican
investigating authorities had acted consistently with Article 5.3 in determining
that there was sufficient evidence to justify initiation, stated (para. 7.95):
"Our approach in this dispute will � be to examine whether the evidence before
SECOFI at the time it initiated the investigation was such that an unbiased and
objective investigating authority evaluating that evidence could properly have
determined that sufficient evidence of dumping, injury and causal link existed
to justify initiation."
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