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WORLD TRADE
ORGANIZATION

WT/DS179/R
22 December 2000

(00-5484)

Original: English

UNITED STATES � ANTI-DUMPING MEASURES ON
STAINLESS STEEL PLATE IN COILS AND STAINLESS
STEEL SHEET AND STRIP
FROM KOREA

Report of the Panel

(Continued)

ANNEX 2-1

FIRST SUBMISSION OF THE UNITED STATES

(26 May 2000)

CONTENTS

  1. INTRODUCTION
     
  2. STATEMENT OF THE CASE
  1. PROCEDURAL BACKGROUND
     
  2. FACTUAL BACKGROUND 
  1. Initiation, Fact-Gathering, and the Preliminary Determination
     
  2. Verification, Opportunity for Comment, and the Final Determination
  1. ARGUMENT
  1. STANDARD OF REVIEW
     
  2. AS THE COMPLAINING PARTY, KOREA HAS THE BURDEN OF ESTABLISHING A VIOLATION OF A WTO AGREEMENT 
     
  3. THE ACTIONS OF THE UNITED STATES WERE NOT INCONSISTENT WITH ARTICLE X:3 OF GATT 1994
     
  4. THE UNITED STATES' TREATMENT OF SALES TO A US CUSTOMER THAT WENT BANKRUPT AND FAILED TO PAY WAS CONSISTENT WITH ARTICLES 2.4 AND 12.2 OF THE AGREEMENT AND ARTICLE X:3 OF GATT 1994 
  1. Statement of Relevant Facts 
     
  2. Introduction to the Argument
     
  3. Article 2.4 Does Not Require Exclusion of Sales from Export Price 
     
  4. The United States' Treatment of Bad Debt Expense in the Calculation of Constructed Export Price Was Consistent With the Requirements of the Agreement 
     
  5. Allowance For Differences in Selling Expenses Such as Bad Debt in The Comparison of Export Price And Normal Value is Consistent With Article 2.4 
     
  6. The United States' Decision to Include The Sales to ABC Company in the Dumping Analysis And the Rationale Provided for That Decision Was Consistent With the Requirements of Article 12.2  of the Agreement and Article X:3 of GATT 1994.
  1. THE UNITED STATES PERMISSIBLY CONCLUDED THAT PRICES ESTABLISHED PRIOR TO A SEVERE DEVALUATION OF THE KOREAN WON SHOULD NOT BE AVERAGED WITH PRICES ESTABLISHED AFTER SUCH A DEVALUATION IN ACCORDANCE WITH ARTICLES 2.4, 2.4.1, 2.4.2, 6.1, 6.2, 6.9 AND 12.2
  1. Introduction 
     
  2. Statement of Relevant Facts 

(a) The Situation of the Korean Won in 1997-1998 

(b) The United States' Conduct of the Investigation 

  1. The Exchange Rate Policy Applied in This Case Is Consistent With Article 2.4.1 of The AD Agreement

(a) Article 2.4.1 Does Not Address Construction of Averages in Light of Sudden and Precipitous Currency Devaluations 

(b) The United States' Actions in Creating Two Averaging Periods Is in Accordance with the Purpose of Article 2.4.1 

(c) Korea's Arguments Regarding Article 2.4.1 are Without Merit 

  1. The Exchange Rate Policy Applied in This Case Is Consistent With Article 2.4.2 of The AD Agreement
     
  2. The Procedures Used in Reaching The Decision to Apply Multiple Averages Were Consistent With Articles 6.1, 6.2, 6.9, And 12.2  of The AD Agreement

  1. THE UNITED STATES' TREATMENT OF HOME MARKET SALES TO LOCAL CUSTOMERS WAS CONSISTENT WITH ARTICLES 2.4, 6.1, 6.2, 6.9 AND 12.2 269
  1. Statement of Relevant Facts
     
  2. The United States Converted Won-Denominated Sales By Using Exchange Rates Established Under a Methodology Consistent With Article 2.4
     
  3. The United States' Establishment of the Facts Was Proper, and Its Evaluation Unbiased and Objective 
     
  4. The Procedures Used In Reaching Its Decision To Apply The Currency of the Transaction Are Consistent With the Requirements of Article 6.1, 6.2, 6.9, and 12.2 of the Agreement and Article X:3 of GATT 1994
  1. THE PANEL SUGGESTION SOUGHT BY KOREA IS INCONSISTENT WITH ESTABLISHED PANEL PRACTICE AND THE DSU 274
  1. CONCLUSION

NOTE: In this submission, including the exhibits, the United States has placed information which POSCO has previously designated as business proprietary information in brackets ("{ }"). This information has been omitted and the brackets left in the text."{ }"

I. INTRODUCTION

1. The Republic of Korea ("Korea") contests two determinations by the United States Department of Commerce (the "Department") establishing dumping by Korean producers of stainless steel plate in coils ("SSPC" )and stainless steel sheet and strip ("SSSS") in coils.1 According to Korea, the United States erred in three general respects: 1) by including in the determination of export price sales for which the customer never paid, even though those sales were made in accordance with the producer's normal selling practices and the company recognized the bad debt expense in its accounting records for the period of investigation; 2) by establishing different weighted-average export prices and normal values for periods in which market conditions differed significantly; and 3) by treating as Korean won transactions sales which, although invoiced in both won and US dollars, were actually paid in Korean won.

2. Korea contends that the errors of the United States resulted in an overstatement of the dumping margin found for Pohang Iron & Steel Co., Ltd. ("POSCO").2 As a result, according to Korea, these actions of the United States are inconsistent with the obligations of a Member of the World Trade Organization ("WTO"), including certain obligations contained in Articles VI and X of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and Articles 1, 2, 6, and 12 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "AD Agreement").3

3. As the United States demonstrates below, Korea's claims are without foundation.

4. With respect to the issue of sales to a customer that failed to pay due to bankruptcy, the Department included those sales in the determination of export price, consistent with Article 2.1 of the Agreement. Based on the evidence of record, the Department concluded that the sales were representative of POSCO's normal selling practices and, therefore, they did not distort the determination of export price. Moreover, POSCO recognized the bad debt expense generated by those sales in its accounting records for the period of investigation. Therefore, the Department took account of that expense in the construction of export price for sales through POSCO's US affiliate, consistent with Article 2.3 of the Agreement. Moreover, before comparing export price and normal value, the Department made due allowance for differences in selling expenses such as bad debt, consistent with Article 2.4. Through an appropriate adjustment to normal value, the United States ensured that differences in such expenses had no impact on the dumping analysis.

5. With respect to the United States' conclusion that transactions made prior to a currency devaluation of almost 50 per cent were not "comparable" to transactions made during that devaluation, and thus that separate averages should be created with respect to sales during the different periods, the United States' action is in accordance with Articles 2.4, 2.4.1 and 2.4.2. Specifically, this action is most pertinently addressed by the provision of the AD Agreement governing averaging, Article 2.4.2. This provision contemplates averages of only those normal value and export price transactions which are "comparable." Further, 2.4 confirms that comparability includes such concepts as levels of trade, physical characteristics, and time. The United States reasonably concluded that a significant devaluation of a currency rendered sales in that currency made prior to the devaluation not comparable to sales made after such a devaluation. Establishing separate averages ensured that the devaluation did not distort the dumping analysis.

6. With respect to the issue of the United States' treatment of home market sales to local customers, the United States made a factual determination that the sales at issue were transactions made in Korean won based upon the evidence of record that the sales were paid in won, and the won amount on the invoice was recorded in the respondent company's accounting records, notwithstanding a US dollar figure separately listed on the invoice. Based upon its well-established practice of using the currency of the transaction, the United States converted these won-sale prices into US dollars in accordance with Article 2.4.1 of the Anti-dumping Agreement.

7. Finally, with respect to all three issues, the United States afforded POSCO a full and adequate opportunity to defend its interests. This opportunity included an extensive period in which POSCO submitted any factual information which it believed was relevant to the determination of dumping. Moreover, POSCO was given full access to the administrative record which contained all factual information on which the United States based its determination. Finally, POSCO was given the opportunity to present legal arguments, as well as rebuttal to arguments raised by other parties, and could participate in a hearing at which POSCO could address the United States' officials in charge of the investigation in person. These procedures, of which POSCO took full advantage, provided a level of transparency and a full opportunity for POSCO to defend its interests which more than met the obligations of Article 6 of the AD Agreement. Moreover, all of the United States' determinations were published in notices that met all of the requirements of Article 12.2.

II. STATEMENT OF THE CASE

A. PROCEDURAL BACKGROUND

8. For purposes of this first submission, the United States does not take exception to Korea's statement concerning the "procedural background" of this case.4

B. FACTUAL BACKGROUND

9. In this section the United States will review the procedures undertaken by the Department, the investigating authority in the United States charged with determining whether sales to the United States are sold at less than normal value (i.e. whether such sales are "dumped"). This review will demonstrate the transparency, and full opportunity to participate enjoyed by all parties. Because Korea has alleged three unrelated deficiencies of the US anti dumping measures against Korean SSPC and SSSS, rather than discussing the facts pertinent to each of those claims in this section, the United States will introduce, prior to each issue-specific discussion, the facts most pertinent to that claim. In doing so, the United States will review the evidence contained in the administrative record that was before the Department with regard to each of the three contested issues demonstrating that the facts were properly established and reasonably supported the United States' determination.

10. Korea begins its discussion by describing generally the anti-dumping law and practice of the United States.5 For purposes of this first submission, the United States does not take exception to Korea's description of this general law and practice discussed in paragraphs 3.2 through 3.10 of Korea's first submission, except with respect to footnote 2, as discussed further below.6

1. Initiation, Fact-Gathering, and the Preliminary Determination

11. The investigation of SSPC was initiated on 20 April 1998 pursuant to a petition brought by domestic producers of a like product and workers in that industry. The United States announced that, in order to determine the existence of dumping, it would examine imports during calendar year 1997.7

12. The investigation of SSSS was initiated on 30 June 1998 pursuant to a petition brought by domestic producers of a like product and workers in that industry. The United States announced that, in order to determine the existence of dumping, and in accordance with its regulations, it would examine imports during the period 1 April 1997 through 31 March 1998.8

13. Upon filing of the petitions, the United States International Trade Commission (USITC), the investigating authority in the United States charged with determining whether dumped imports have caused material injury or a threat of material injury, began its investigations. USITC issued a preliminary finding of material injury or threat of material injury to the domestic industry by reason of dumped imports of SSPC and SSSS.

14. After initiation of the SSPC investigation and the preliminary finding of material injury by USITC, the United States proceeded to gather information regarding sales to the United States by POSCO for purposes of calculating a margin of dumping. In this regard, the United States issued POSCO an initial questionnaire in the SSPC investigation on 27 May 1998.9 After having received an extension of time from the United States, POSCO provided information in response to the initial questionnaire on 1 July 1998 and 20 July 1998. After reviewing POSCO's responses, the United States identified specific areas about which it required further clarification. POSCO provided further information and clarification as requested on such issues from August through October 1998.10

15. After initiation of the SSSS investigation and the preliminary finding of material injury by USITC, the United States proceeded to gather information regarding sales to the United States by POSCO for purposes of calculating a margin of dumping. In this regard, the United States issued an initial questionnaire in the SSSS investigation on 3 August 1998. After having received an extension of time from the United States, POSCO provided information in response to the initial questionnaire on 2 September 1998 and 23 September 1998.11 After reviewing POSCO's responses, the United States identified specific areas about which it required further clarification. POSCO provided further information and clarification as requested on such issues from October through December 1998.12

16. The United States published its preliminary determination in the SSPC case on 4 November 1998, preliminarily finding dumping by the only known Korean producer of SSPC, POSCO, at a rate of 2.77 per cent.13 The United States published its preliminary determination on SSSS on 4 January 999.14 Subsequent to issuance of this preliminary determination in the SSSS case, and in accordance with the United States' regulations, at 19 C.F.R. � 351.224, POSCO alleged that the United States had made certain ministerial errors in the calculation of POSCO's antidumping margin. Commerce carefully reviewed POSCO's allegations and concluded that POSCO was correct. Accordingly, on 26 January 1999 the United States published a notice which corrected POSCO's antidumping duty rate to 3.92 per cent.15

17. With regard to sales to the bankrupt customer, in the SSPC investigation the issue arose just before the Department's preliminary determination. Therefore, for purposes of the preliminary determination, the United States accepted POSCO's argument that the sales should be excluded from the dumping analysis. The United States also excluded the sales in the SSSS preliminary determination but, based on a more complete record, took account of the bad debt expense in the dumping analysis.16 As will be discussed below, both POSCO and the US domestic industry commented on this issue throughout the proceedings. As explained fully in the notices of the final determinations, the United States ultimately concluded that the sales should be included in the dumping analysis, with appropriate adjustments to account for the bad debt and other selling expenses.

18. With regard to the depreciation of the won during November and December 1997, in the preliminary determinations, as in the final determinations, the United States accepted arguments advanced by POSCO, over the objections by the domestic industry, that the depreciation was so large and precipitous that Commerce should apply daily exchange rates during the period, rather than 40-day rolling average exchange rates, as it had in all prior cases involving depreciation.17 The United States explicitly requested comments on whether, in the final determination, it should divide its POI such that pre- and post-devaluation sales would not be compared.18 This issue is also discussed in further detail below.

19. With regard to the issue of home market sales to "local customers" in Korea (which were invoiced in both US dollars and Korean won, but paid in won), in the preliminary determination of SSPC the United States excluded these sales from its analysis of sales in the home market because it was under the mis-impression at the time that these sales were destined for export, and thus not sales "for consumption in the home market".19 For the preliminary determination in the SSSS case, the United States accepted POSCO's argument that the sales were "consumed" by its customer in the home market. Therefore, the United States included such sales in its analysis of home market sales.

20. Finally, in the preliminary determinations in both cases, parties were notified that they had an opportunity to submit briefs addressing the issues raised by the preliminary determination. Further, parties were notified that they had the opportunity to respond to briefs filed by other parties. Finally, the United States notified the parties that, if they so requested, the United States would hold a hearing so that the parties could address their arguments regarding the preliminary determination to an official in charge of making the final determination.20

21. Subsequent to the preliminary determination, the United States began imposing provisional measures on those companies found to be dumping in the form of a cash deposit requirement upon importation based upon the weighted-average dumping margin calculated in the preliminary determination.

2. Verification, Opportunity for Comment, and the Final Determination

22. After the preliminary determination was issued, the United States continued to receive factual information from POSCO in response to requests for clarification on various issues. Department personnel visited POSCO from 9 November until 13 November 1998, and verified the accuracy of POSCO's responses submitted in the SSPC investigation. Department personnel again visited POSCO from 1 March until 5 March 1999, and verified the accuracy of POSCO's responses in the SSSS investigation. As will be discussed further below, during verification the United States was able to clarify a number of issues raised during the investigation. For example, in the SSPC investigation, an examination of the records of POSCO's US affiliate revealed that the sales that were not paid due to the customer's bankruptcy were written off and the bad debt expense was recognized in the company's accounting records for the period of investigation. The United States published its factual findings from its verification trips in reports available to all parties.21

23. Subsequent to verification, all parties were afforded an opportunity to present written arguments on all issues which they considered relevant to the United States in reaching its final determination.22 Parties were also permitted to provide a written rebuttal to any written argument raised by another party.23 Notwithstanding Korea's suggestion in the current dispute that it did not have an opportunity to comment on the United States' determination with respect to the three issues it raises, an examination of the briefs reveals that POSCO did, in fact, provide extensive arguments relating to each of the issues which are the subject of this dispute.

24. The United States also afforded all parties an opportunity for a hearing at which they could make an oral presentation of their arguments to Department officials in charge of making the final determination, and could respond orally to arguments raised by other parties. Although the US domestic industry requested such a hearing in the SSPC case, POSCO did not request a hearing to address the issues. The domestic industry subsequently withdrew its request and the hearing was cancelled.24 In the SSSS case both parties requested a hearing, and one was held on 26 April 1999.25

25. The United States published its final determination in the SSPC investigation on 31 March 1999, finding dumping by POSCO at a rate of 16.26 per cent.26 The United States published its final determination in the SSSS investigation on 8 June 1999 finding POSCO's margin of dumping to be 12.12 per cent. The substance of these final determinations is discussed in greater detail below, with respect to each of the three issues raised by Korea.

26. Subsequent to these final determinations, and the affirmative injury determinations, POSCO challenged the United States' determinations before the United States Court of International Trade on 15 June 1999. However, POSCO voluntarily abandoned its judicial challenges on 22 October 1999.27

III. ARGUMENT

A. STANDARD OF REVIEW

27. With respect to its challenge to the Redetermination Results, Korea seeks to retry several factual issues that were before the DOC. To accomplish this, Korea invites the Panel to step into the shoes of the DOC and engage in a de novo review of the facts. However, under Article 17.6(i) of the AD Agreement and GATT and WTO jurisprudence, the Panel is precluded from engaging in such an exercise.

28. It is well-established as a general matter that panel review is not a substitute for proceedings conducted by national investigating authorities. Numerous panels - both GATT and WTO - have recognized that the role of panels is not to conduct a de novo review of the factual findings of a national investigating authority.28 In describing the role of panels when reviewing factual issues, the panel in the Korean Resins case stated, in part:

The Panel . . . should [not] substitute its own judgment for that of the KTC as to the relative weight to be accorded to the facts before the KTC. To do so would ignore that the task of the Panel was not to make its own independent evaluation of the facts before the KTC to determine whether there was material injury to the industry in Korea but to review the determination as made by the KTC for consistency with the Agreement, bearing in mind that in a given case reasonable minds could differ as to the significance to be attached to certain facts.29

29. Similarly, in the Softwood Lumber case, the panel described the appropriate standard of review as follows:

The Panel considered that in reviewing the action of the United States authorities in respect of determining the existence of sufficient evidence to initiate, the Panel was not to conduct a de novo review of the evidence relied upon by the United States authorities or otherwise to substitute its judgment as to the sufficiency of the particular evidence considered by the United States authorities. Rather, in the view of the Panel, the review to be applied in the present case required consideration of whether a reasonable, unprejudiced person could have found, based upon the evidence relied upon by the United States at the time of initiation, that sufficient evidence existed of subsidy, injury and causal link to justify initiation of the investigation.30

30. More recently, the panel in the Argentina Footwear case declared as follows:

In our view, we have no mandate to conduct a de novo review of the safeguard investigation conducted by the national authority. Rather, we must determine whether Argentina has abided by its multilateral obligations under the Agreement on Safeguards . . . in reaching its affirmative finding of injury and causation in the footwear investigation.31

The Appellate Body concluded that the panel "stated the standard of review correctly ... ."32

31. In the case of anti-dumping measures, any doubt on this score is eliminated by Article 17.6 of the AD Agreement, which expressly sets forth the standard of review to be applied by this Panel. In subparagraph (i), panels are instructed not to substitute their judgment for that of the national investigating authorities, but instead to proceed as follows:

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 ... . (Emphasis added).

32. In interpreting subparagraph (i), the panel in the Guatemala Cement case found the standard articulated by the Softwood Lumber panel to be consistent with the standard of review under Article 17.6(i), concluding as follows: "Thus, we agree with the Panel in Softwood Lumber that our role is not to evaluate anew the evidence and information before the Ministry at the time it decided to initiate."33 Although the Appellate Body reversed the panel in Guatemala Cement on other grounds, the panel 's articulation of the appropriate standard of review was subsequently followed by the panel in the HFCS case.34

33. In addition to establishing the standard of review for factual issues, the AD Agreement also establishes the "scope" of that review. Specifically, Article 17.5(ii) of the AD Agreement directs the Panel to limit its review to the facts that were before the DOC when it made its determination (i.e., the evidence contained in the administrative record).35

34. Finally, in reviewing legal questions that turn on the proper meaning to be ascribed to the AD Agreement, subparagraph (ii) of Article 17.6 states as follows:

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.

35. Thus, the relevant question in every case is not whether the challenged determination rests upon the best or the "correct" interpretation of the AD Agreement, but whether it rests upon a "permissible interpretation" (of which there may be many). If it does, then this Panel must uphold the determination.

B. AS THE COMPLAINING PARTY, KOREA HAS THE BURDEN OF ESTABLISHING A VIOLATION OF A WTO AGREEMENT

36. A complainant bears the initial burden of coming forward with evidence and argument that establishes a prima facie case of a violation.36 In addition, if the balance of evidence is inconclusive with respect to a Korean claim, Korea must be held to have failed to establish that claim.37 Accordingly, the burden is on Korea to demonstrate that the United States' actions are inconsistent with United States' WTO obligations.

37. This principle is not affected by Korea's incorrect assertion that anti-dumping measures constitute "derogations" from alleged free-trade principles of the WTO. To the contrary, the right conferred by Article VI and the AD Agreement to impose anti-dumping measures forms part of the carefully drawn balance of rights and obligations in the WTO Agreement.

38. The principle that trade remedies authorized by the WTO agreements do not constitute "exceptions" was endorsed by the Appellate Body in the Wool Shirts case, which involved the US application of a special safeguard restraint under the WTO Agreement on Textiles and Clothing (ATC). In challenging the US measure, India made the same argument that had been made in the past with respect to anti-dumping measures. Specifically, India argued that because the special safeguard remedy in the ATC allegedly is an "exception" to other "free trade" provisions of the ATC, the burden of proof shifted from India to the United States. The Appellate Body roundly rejected this argument, holding that India, as the complainant, bore the burden of presenting a prima facie case of a violation. The Appellate Body reasoned that rather than being an "exception," the special safeguard restraint provisions of the ATC constituted part of an overall balance of rights and obligations. This reasoning applies with equal force to anti-dumping measures; namely, the right to impose anti-dumping measures constitutes part of an overall balance of rights and obligations contained first in GATT 1947, and now in the WTO.

39. Even if anti-dumping measures could be characterized as a derogation from, or an "exception" to, alleged free-trade principles, this would not affect the assignment of the burden of producing evidence of a violation. As the Appellate Body stated in the EC Hormones case:

The general rule in a dispute settlement proceeding requiring a complaining party to establish a prima facie case of inconsistency with a provision of the SPS Agreement before the burden of showing consistency with that provision is taken on by the defending party, is not avoided by simply describing that same provision as an "exception". In much the same way, merely characterizing a treaty provision as an "exception" does not by itself justify a "stricter" or "narrower" interpretation of that provision than would be warranted by examination of the ordinary meaning of the actual treaty words, viewed in context and in the light of the treaty's object and purpose, or, in other words, by applying the normal rules of treaty interpretation.38

40. In summary, the burden of proving that the United States has acted inconsistently with its WTO obligations rests with Korea as the complaining party.

C. THE ACTIONS OF THE UNITED STATES WERE NOT INCONSISTENT WITH ARTICLE X:3 OF GATT 1994

41. Korea contends throughout its arguments that the actions of the United States were not in accordance with Article X:3 of GATT 1994. In essence, Korea argues that Article X:3 provides for panel review of the consistency of any action by a Member with its own domestic law, regulation and practice. That reading cannot be found in Article X:3.

42. The task of a panel is to review the consistency of a Party's actions with the Agreement and not with that Party's domestic laws, regulations or practices. Throughout its submission, Korea argues that various actions of the United States were inconsistent with some precedent under United States practice, or with the holding of some domestic court of the United States. However, this Panel's mandate is set forth in its terms of reference and DSU Article 7.2, which requires panels to "address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute." Further, under Article 3.2 of the DSU, the purpose of the dispute settlement system of the WTO is to: "preserve the rights and obligations of members under the covered agreements, and to clarify the existing provisions of those agreements. . . ." Finally, Article 3.7 of the DSU provides that ". . .the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements." Thus, the clear focus of the dispute settlement system is consistency of an action with the covered agreements.

43. The panels which have addressed the meaning of Article X:3 have, as Korea asserts, held that Article X:3 established some minimum standards of transparency and fairness. However, as observed by the Appellate Body in Bananas, Article X:3 does not address the consistency of particular administrative rulings, but rather the administration of such rulings.

The text of Article X:3(a) clearly indicates that the requirements of "uniformity, impartiality and reasonableness" do not apply to the laws, regulations, decisions and rulings themselves, but rather to the administration of those laws, regulations, decisions and rulings. The context of Article X:3(a) within Article X, which is entitled "Publication and Administration of Trade Regulations", and a reading of the other paragraphs of Article X, make it clear that Article X applies to the administration of laws, regulations, decisions and rulings. To the extent that the laws, regulations, decisions and rulings themselves are discriminatory, they can be examined for their consistency with the relevant provisions of the GATT 1994.39

44. In the present case, Korea is not arguing that the United States, having issued anti-dumping administrative rulings on SSPC and SSSS otherwise in accordance with GATT 1994 and the AD Agreement, is administering those rulings in an unfair manner. Rather, Korea's complaints focus on the rulings themselves. As the panel observed in Bananas, to the extent those rulings are inconsistent with a covered agreement, the Panel can address the issues without reference to Article X:3.40

45. This understanding of Article X:3 is reinforced by the fact that the disputes in which panels applied that provision relate to situations in which the overall administration of some program was alleged to be arbitrary. For example, the allegation addressed under Article X:3 by the Appellate Body in United States - Import Prohibition of Certain Shrimp and Shrimp Products41 was that the entire procedure under review was "non-transparent and ex-parte," that there was no formal notice of or reasons provided for actions, and that there was no opportunity for review of or appeal from an action.

46. Such cases, in which the allegation is one of overall arbitrary application addressed by Article X:3 are very different from the purpose for which Korea uses Article X:3 in the present case. Korea has not alleged that the overall procedure of the anti-dumping law of the United States is applied arbitrarily, or that Members are otherwise deprived of basic due process, such as notice and opportunity for review in anti-dumping proceedings.

47. Consistency is an important feature of a transparent anti-dumping procedure. In fact, as discussed in the following sections, each allegation of inconsistency made by Korea is without merit. Moreover, it is a fundamental principle of all administrative law in the United States that a government agency must follow its prior practice, or give a reasoned explanation for its departure.42 Thus, the United States operates an anti-dumping system which meets the general transparency, due-process and consistency parameters of Article X:3.

48. However, a "uniform, impartial and reasonable" system is not necessarily one in which each decision looks like the one before. The benefits of consistency do not always outweigh the need of investigating authorities to allow their policies to evolve to suit new factual scenarios. Consistency with prior cases is a laudable goal, to the extent the actions taken in such cases were themselves consistent with the AD Agreement, in that it enhances predictability and transparency. However, where facts properly established and objectively assessed reveal flaws or gaps in prior practice, reasonableness requires that the practice be changed or supplemented.

49. Moreover, while Article X:3 establishes broad due process parameters for all areas of trade subject to a covered agreement, the AD Agreement establishes specific due process requirements applicable to antidumping proceedings. In this regard, Article 6 provides exporters opportunities to defend their interests, and Article 12 requires public notice and explanation of determinations. Further, under Article 17.6 a panel may review whether an investigating authority has properly established and objectively evaluated the facts, and interpreted relevant provisions of the AD Agreement reasonably. These specific provisions demonstrate that the panel should look first to the AD Agreement, which deals specifically with antidumping inquiries.43

50. Finally, domestic judicial review retains an important function under the dispute settlement system. In the antidumping context in particular, Article 13 of the AD Agreement requires that members maintain independent judicial, arbitral or administrative tribunals or procedures for the resolution of disputes relating to antidumping actions.

51. The United States notes that in the cases before the panel, POSCO had the right, under United States law, to bring before domestic courts its arguments about the consistency of the actions taken with United States law, regulations, practice, and prior court holdings.44 Indeed, POSCO brought such challenges before the United States Court of International Trade. However, POSCO voluntarily dismissed those cases one week after Korea requested panel review.45 Thus, Korea has elected not to bring its allegations of inconsistency with US law and practice before the domestic tribunal which is charged with deciding such issues, and which the United States is required to make available to POSCO under Article 13 of the AD Agreement. Moreover, to the extent the arguments presented to this panel rely on judicial holdings in the United States, POSCO has declined to bring its arguments to the very body which issued those holdings.

52. Thus, the panel should disregard Korea's various arguments that some alleged inconsistency by the United States with domestic law or practice constitutes a violation of Article X:3.


1 See Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Plate in Coils ("SSPC") from the Republic of Korea, 64 Fed. Reg. 15444 (31 March 1999) (hereinafter SSPC Final Determination) (ROK Ex. 11); and Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From the Republic of Korea, 64 Fed. Reg. 30664 (8 June 1999) (hereinafter SSSS Final Determination) (ROK Ex. 24). The Federal Register is the United States� official publication of notices by all government agencies and organizations, including the Department.

2 First Submission by the Republic of Korea, 5 May 2000 ("ROK First Submission") at para. 1.2.

3 ROK First Submission, at para. 1.1.

4 ROK First Submission, at para. 2.1 - 2.4.

5 ROK First Submission at para. 3.2 - 3.10.

6 See, discussion in section III.D., below.

7 Notice of Initiation of Antidumping Investigations: Stainless Steel Plates in Coils form Belgium, Canada, Italy, South Africa, South Korea and Taiwan, 63 Fed. Reg. 20580 (27 April 1998) ("SSPC Initiation") (ROK Ex. 3).

8 Initiation of Antidumping Duty Investigations: Stainless Steel Sheet and Strip in Coils from France, Germany, Italy, Japan, Mexico, South Korea, Taiwan and the United Kingdom, 63 Fed. Reg. 37521 (13 July 1998) ("SSSS Initiation") (ROK Ex. 15).

9 (US Ex. 1).

10 ROK First Submission, at para. 3.12.

11 (US Ex. 2).

12 ROK First Submission, at para. 3.20.

13 Notice of Preliminary Determination of Sales at Less Than Fair Value: Stainless Steel Plate in Coils ("SSPC") from the Republic of Korea, 63 Fed. Reg. 59535 (1998) (hereinafter "SSPC preliminary determination") (ROK Ex. 4).

14 Notice of Preliminary Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils from South Korea, 64 Fed. Reg. 137 (1999) (hereinafter "SSSS preliminary determination") (ROK Ex. 16).

15 Notice of Amended Preliminary Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From Korea, 64 Fed. Reg. 3928 (1999) (ROK Ex. 18).

16 SSPC preliminary determination, 63 Fed. Reg. at 59536-37 (ROK Ex. 4); SSSS Preliminary Determination, 64 Fed. Reg. at 140 (ROK Ex. 16).

17 SSPC preliminary determination 63 Fed. Reg. at 59539 (ROK Ex. 4); SSSS preliminary determination, 64 Fed. Reg. at 145 (ROK Ex. 16). The United States� general rules for conversion of currency are discussed in detail below.

18 Id.

19 SSPC Preliminary Determination, 63 Fed. Reg. at 59536 (ROK Ex. 4) ("we are disregarding home market local sales because there is knowledge that these sales are not consumed in the foreign market"). The United States� designation of these sales as "local sales" was a terminology adopted from POSCO.

20 SSPC Preliminary determination, 63 Fed. Reg. at 59539 (ROK Ex. 4); SSSS preliminary determination, 64 Fed. Reg at 147 (ROK Ex. 16).

21 (ROK Ex. 6) and (ROK Ex. 19).

22 POSCO presented its written arguments in the SSPC case to the United States on 26 January 1999. See POSCO SSPC Brief (ROK Ex. 7). POSCO presented its written arguments in the SSSS case to the United States on 15 April 1999. See POSCO SSSS Brief (ROK Ex. 20).

23 POSCO presented its written rebuttals in the SSPC case to the United States on 2 February 1999. See POSCO SSPC Rebuttal Brief (ROK Ex. 9). POSCO presented its written rebuttals in the SSSS case to the United States on 21 April 1999. See POSCO SSSS Rebuttal Brief (ROK Ex.22).

24 See SSPC Final Determination ("Case History"), 64 Fed. Reg. at 15444 (ROK Ex. 11).

25 See SSSS Final Determination ("Case History"), 64 Fed. Reg. at 30665 (ROK Ex. 24).

26 SSPC Final Determination, 64 Fed. Reg. at 15456 (ROK Ex. 11). Note that in addition to POSCO, the United States also investigated Inchon Iron and Steel Co., Ltd. ("Inchon"), and Taihan Electric Wire Co., Ltd. ("Taihan"). The United States found that Inchon was not dumping, in both the preliminary and final determinations, and thus no antidumping duties have been required on exports by Inchon. Taihan did not provide any information in response to the United States� questionnaire, nor did it participate in any other manner in the investigation; consequently, Taihan�s antidumping margin was based upon the facts available under 19 USC. � 1677e. See, SSSS preliminary determination 64 Fed. Reg. at 146-147. None of the issues raised by Korea relate either to Inchon or Taihan.

27 (US Ex. 4).

28 See, e.g., United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear, WT/DS24/R, Report of the Panel, as modified by the Appellate Body, adopted 25 February 1997, para. 7.12., citing Korea - Anti-dumping Duties on Imports of Polyacetal Resins from the United States, Report of the Panel adopted 27 April 1993, BISD 40S/205, para. 227 (hereinafter "Korean Resins"); United States - Initiation of a Countervailing Duty Investigation into Softwood Lumber Products from Canada, BISD 34S/194, Report of the Panel adopted 3 June 1987, BISD 34S/194, para. 335 (hereinafter "Softwood Lumber"); United States - Anti-Dumping Duties on Imports of Stainless Steel Plate from Sweden, ADP/117, Report of the Panel issued 24 February 1994 (unadopted), para. 284 and 387 (hereinafter "Plate from Sweden").

29 Korean Resins, para. 227.

30 Softwood Lumber, para. 335.

31 Argentina - Safeguard Measures on Imports of Footwear, WT/DS121/R, Report of the Panel as modified by the Appellate Body adopted 12 January 2000 (hereinafter "Argentina Footwear"), para. 8.117.

32 Argentina - Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, Report of the Appellate Body adopted 12 January 2000, para. 117.

33 Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R, Report of the Panel, as reversed on other grounds by the Appellate Body, adopted 25 November 1998, para. 7.57.

34 Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R, Report of the Panel adopted 24 February 2000, paras. 7.94-7.95 (hereinafter "HFCS").

35 See HFCS, para. 7.43 ("[W]e are required to consider this dispute on the basis of the facts before the investigating authority, pursuant to Article 17.5(ii) of the AD Agreement.").

36 See, e.g., United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, Report of the Appellate Body adopted 23 May 1997, page 14 (hereinafter "Wool Shirts"); and European Communities - Measures Affecting Livestock and Meat (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, Report of the Appellate Body adopted 13 February 1998, para. 104 (hereinafter "EC Hormones").

37 India - Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/R, Reports of the Panel and the Appellate Body adopted 22 September 1999, para. 5.120.

38 EC Hormones, para. 104 (emphasis added).

39 European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, Report of the Appellate Body, 9 September 1997 (hereinafter "Bananas"), at para. 200 (emphasis in original).

40 Id.

41 United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, Report of the Appellate Body, 12 October 1998 (hereinafter "Shrimp"), at para. 188.

42 The United States Supreme Court explained this rule under the law of the United States: an agency "must be given ample latitude to adapt [its] rules and policies to the demands of changing circumstances," but "an agency changing its course . . . is obligated to supply a reasoned analysis for the change beyond that which may be required when an agency does not act in the first instance." Motor Vehicle Mfrs. Ass'n of United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 US 29, 42 (1983), (US Ex. 5). In the antidumping context, the United States Court of International Trade has stated that "well established principles of administrative law provide that an administrative agency has the authority to change or revoke its policies and practices, if a reasonable explanation is provided for such a change." Sanyo Electronics v. United States, 86 F. Supp. 2d 1232, 1241 (Ct. Int�l. Trade, 4 June 1999) (US Ex. 6).

43 Bananas, at para. 204.

44 See, 28 USC. � 1581(c) which vests the United States Court of International Trade with jurisdiction over all civil actions relating to the anti-dumping statute. (US Ex. 3).

45 See, (US Ex. 4).


To continue with D. The United States' treatment of sales to a US customer that went bankrupt and failed to pay was consistent with articules 2.4 and 12.2 of the Agreement and article X:3 of GATT 1994

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