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

Report of the Panel

(Continued)

D. 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

53. As noted above, in the SSPC and SSSS investigations, the United States examined POSCO's US sales of the subject merchandise during the periods 1 January through 31 December 1997, and 1 April 1997 through 31 March 1998, respectively.⁴⁶ During these periods, POSCO made sales primarily through two affiliated companies: (1) POSCO Steel ("POSTEEL"), a trading company in Korea; and (2) Pohang Steel America Corporation ("POSAM"), a wholly-owned subsidiary located in the United States.

54. The United States requested that POSCO report all sales of the subject merchandise to the United States made during the period of investigation. In its response to the United States' initial questionnaires, POSCO stated

"The reported amounts ... include sales to a now bankrupt US company, [...]. That company did not pay POSCO for certain sales but did take possession of some of POSCO's merchandise in the POI. POSCO wrote the unpaid sales off in the POI and expects to exclude them from its US database."⁴⁷

55. It is the United States' treatment of those sales to ABC Company⁴⁸ that Korea now challenges. Although the issue arose in a similar manner in both investigations, how the record and the issue developed differed.

56. In the SSPC investigation, POSCO initially referred to these sales as having been written off, as noted above, and then subsequently stated merely that they were unpaid.⁴⁹ POSCO also claimed that they were insignificant and atypical and, therefore, should be excluded.⁵⁰ Approximately one week before the United States' preliminary analysis, petitioners submitted comments in which they argued, on the basis of legal precedents, that these sales should be treated as a direct selling expense for bad debt.⁵¹ POSCO also submitted rebuttal comments.⁵² For purposes of the preliminary determination, the United States accepted POSCO's argument and excluded the sales to ABC Company.⁵³

57. The issue arose in a similar manner in the SSSS case except that, prior to the preliminary determination, the United States obtained additional accounting information that demonstrated that the sales had been written off.⁵⁴ Based on that information, in the preliminary determination, the United States accounted for the bad debt as an indirect selling expense, although it continued to exclude the sales, as it had in the SSPC case.⁵⁵ Thus, as of 4 January 1999, three months prior to the SSPC final determination and six months before the SSSS final determination, POSCO was on notice that the United States viewed the customer's failure to pay as a bad debt expense.

58. The verification in both investigations confirmed the write off of these sales,⁵⁶ and the parties continued to comment on this issue in their case and rebuttal briefs.⁵⁷ The United States then reviewed the evidence in light of the parties' comments and the applicable legal precedent. For the final determinations, the United States determined that the sales to ABC Company should be included in the calculation of export price and constructed export price. The United States allocated the bad debt expense over all US sales of the subject merchandise.⁵⁸

59. As demonstrated below, the United States' final determinations were entirely consistent with Articles 2.4, and 12.2 of the Agreement and Article X:3 of GATT 1994.

2. Introduction to the Argument

60. In challenging the United States' treatment of POSCO's US bad debt expense, Korea presents four lines of argument: (1) these sales are "atypical" and the fair comparison requirement of Article 2.4 requires the exclusion of atypical export sales from the determination of export price; (2) an adjustment for bad debt expense is inconsistent with Article 2.4 because such expenses do not affect price comparability; (3) if an adjustment for bad debt expense is consistent with Article 2.4, the manner in which the United States made the adjustment in this case is not; and (4) the United States' treatment of these sales was inconsistent with the procedural requirements of Article 12.2 of the Agreement and Article X:3 of GATT 1994.

61. Moreover, the theme that runs through all of Korea's arguments is that the United States ' treatment of POSCO's US bad debt expense is not only an issue of a fair comparison, but an issue of fairness in some broader sense. Korea urges this panel to develop rules to govern the conduct of anti-dumping investigations and, in doing so, to look beyond the substantive and procedural requirements of the Agreement.⁵⁹ The panel should reject such arguments.

62. Articles 3.2 and 19.2 of the DSU state explicitly that the panel's role is to "clarify" the agreements and in so doing the panel "cannot add to or diminish the rights and obligations provided in the covered agreements." Moreover, the role of the panel in reviewing anti-dumping measures is more explicitly circumscribed in Article 17.4 of the Agreement, which states

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.

63. Therefore, whether the United States' determinations are consistent with the Agreement may only be judged by reference to the terms of the Agreement itself, as interpreted in accordance with customary rules of international law. If those determinations rest on a permissible interpretation, they are in conformity with the Agreement.

64. The rules embodied in the Vienna Convention on the Law of Treaties have attained the status of customary rules of international law. In accordance with those rules, terms must be given their ordinary meaning in their context, and in light of the object and purpose of the treaty. It is those principles that must guide the panel in making its rulings and recommendations.⁶⁰

3. Article 2.4 Does Not Require Exclusion of Sales from Export Price

65. Korea argues that the United States violated Article 2.4 by failing to exclude certain sales that it alleges to be "atypical" from the export price. However, Article 2.4 does not address the issue of what sales establish export price and normal value. That matter is addressed in Article 2.1.⁶¹

66. It is evident that, in drafting Article 2.1, limitations on the sales used to determine export price and normal value were considered. Article 2.1 expressly limits the determination of normal value to sales "in the ordinary course of trade." It is significant that there is no such limitation in Article 2.1 on the determination of export price.⁶² The absence of a limitation on sales used to determine export price must be interpreted as intentional. It is also logical in that it is the export sales that are alleged to be dumped and causing injury. The fact that dumped sales may be atypical in some respect does not alter their potential to injure.

67. While it is Article 2.1 that addresses the sales used to determine export price and normal value, Korea bases its argument on Article 2.4 which addresses the comparison of export price and normal value. Specifically, the second and third sentences of Article 2.4 require that the comparison of export price and normal value

shall be made at the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time. Due allowance shall be made in each case, on its merits, for differences which affect price comparability, including differences in conditions and terms of sale, taxation, levels of trade, quantities, physical characteristics, and any other differences which are also demonstrated to affect price comparability.

68. Article 2.4 explicitly recognizes that sales may differ in many respects that affect the comparability of their prices. Where such differences exist, it is "due allowance," not exclusion, that Article 2.4 requires.⁶³ Establishing price comparability through appropriate adjustments is all that is necessary to achieve the object and purpose of the Agreement, which is to determine dumping through a comparison of export price and normal value.

69. In an attempt to support its argument that Article 2.4 requires more than "due allowance" for differences affecting comparability, Korea presents a distorted view of US legislative history and judicial precedent and of US practice. Citing to the Statement of Administrative Action Accompanying the Uruguay Round Agreements Act ("SAA") and judicial decisions, Korea asserts that the United States routinely excludes atypical sales from its analysis of "both export price and normal value."⁶⁴ However, the language quoted from the SAA refers solely to the exclusion from normal value of sales not in the ordinary course of trade. It has nothing to do with the determination of export price. Furthermore, US courts have repeatedly recognized that US law, like Article 2.1, does not require the exclusion of sales from export price.⁶⁵ Rather, the US courts have recognized that the goal is to include all export sales, but to utilize appropriate adjustments to ensure a fair comparison.⁶⁶ Thus, contrary to Korea's assertion, US law and practice reflects the interpretation of Articles 2.1 and 2.4, discussed above.

70. Although the goal is to include all export sales, the United States may exclude export sales in certain situations. Exclusion of export sales is a narrow exception, not the rule. Generally, the United States will only exclude US sales if they are (1) not representative of the seller's normal selling behaviour, and (2) are so small that they would have an insignificant effect on the dumping analysis.⁶⁷ In these situations, providing for allowances to establish a fair comparison can be difficult, impossible or unduly burdensome.⁶⁸

71. The sales to ABC Company were not so small that they would have an insignificant effect on the dumping analysis. Furthermore, they are not unrepresentative of POSCO's normal selling practices. Bad debt is a normal cost of doing business. Far from being an atypical event, companies - including POSCO - routinely establish reserve accounts for bad debt, in accordance with Generally Accepted Accounting Principles.⁶⁹ Thus, a sale is not atypical simply because it generates a bad debt expense, even if it is the first bad debt experienced in a particular channel of trade. Moreover, there is nothing about the prices, products or terms of sale for these transactions that is unrepresentative of POSCO's normal selling practices. Therefore, there is nothing distortive or unfair about including POSCO's sales to ABC Company in the determination of export price.

72. Although differences in selling expenses such as bad debt may affect the comparability of export price and normal value, allowance for such differences can be made, and such allowance is all that Article 2.4 requires. Korea acknowledges that Article 2.4 requires due allowance for differences that affect price comparability, but asserts that an adjustment for POSCO's US bad debt expense - the very condition that Korea argues renders the sales incomparable - was prohibited. Having assumed away any possible adjustment, Korea then argues that, unless the sales are excluded, the dumping comparison is unfair. However, Korea's premise, i.e., that an adjustment for bad debt expense is prohibited, is incorrect; therefore, the argument is fatally flawed.

73. As discussed below, the United States' allowance for POSCO's US bad debt expense, both in constructing export price and in comparing export price to normal value, was entirely consistent with Articles 2.3 and 2.4.

4. The United States' Treatment of Bad Debt Expense in the Calculation of Constructed Export Price Was Consistent With the Requirements of the Agreement

74. During the period of investigation, POSCO made some sales through its US associate, POSAM. For these sales, the United States constructed the export price, consistent with Article 2.3.⁷⁰ Despite the obvious relevance of Article 2.3, Korea ignores it entirely, focusing solely on Article 2.4.

75. While the export price is normally the price first charged by the exporter to a buyer in the importing country,⁷¹ Article 2.3 of the Agreement states:

where it appears to the authorities concerned that the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed on the basis of the price at which the imported products are first resold to an independent buyer. . . .

76. To construct the export price for POSCO's sales through POSAM, the United States started with the price to the first independent buyer in the United States, consistent with Article 2.3. The United States then deducted expenses, including an allocated portion of the bad debt expense,⁷² incurred in connection with the sale from POSAM to the independent buyer, and an amount for profit. By deducting from the price to the independent purchaser the expenses and profits associated with the transaction between that purchaser and the associated importer, a constructed price from the exporter to the associated importer, i.e., the export price, was created. Therefore, for the sales through POSAM, the bad debt expense was not an adjustment to export price under the "due allowance" provision of Article 2.4, but rather a deduction made to construct the export price.

77. Article 2.4 specifically envisions the type of constructed export methodology employed by the United States. In particular, Article 2.4 envisions the deduction of the selling expenses associated with the sale by the affiliated importer. The fourth and fifth sentences of Article 2.4 state

In the cases referred to in paragraph 3, allowances for costs, including duties and taxes, incurred between importation and resale, and for profits accruing, should also be made. If in these cases price comparability has been affected, the authorities shall establish the normal value at a level of trade equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under this paragraph.

78. Based on the fifth sentence of Article 2.4, it is evident that the allowances for costs and profits contemplated in the fourth sentence are not those which establish comparability, but rather are adjustments made to construct export price. In the fifth sentence, Article 2.4 recognizes that such adjustments might render the constructed export price and the normal value incomparable, giving rise to the need for "due allowances" to establish comparability.

79. As discussed above, the United States' construction of the export price for POSCO's sales through POSAM, including the deduction of an allocated portion of the bad debt expense incurred in connection with POSAM's resale to the unaffiliated customer, was consistent with Article 2.3 of the Agreement. Further, before comparing that constructed export price to normal value, the United States made a downward adjustment to normal value to account for differences in the circumstances of sales in the home market which affect price comparability.

80. Korea gives the false impression that the United States' adjustment is entirely one sided, i.e., a downward adjustment to export price. That is not the case. In fact, the United States' adjustment for differences in circumstances of the sales that affect price comparability are always made to normal value, not export price. Moreover, the adjustment is neutral, i.e., it may either raise or lower normal value, depending on the facts of the case. The United States' circumstance of sale adjustment is further described below.

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

81. During the period of investigation, POSCO also made sales of the subject merchandise directly to independent buyers in the United States. For those sales the United States used the price charged by POSCO to the independent buyer as the export price.⁷³ When comparing that export price to normal value, the United States made an adjustment to normal value to account for differences affecting price comparability that was consistent with Article 2.4.

82. Article 2.4 contains a general requirement to make due allowance for differences that affect price comparability as well as an illustrative list of such factors, e.g., conditions and terms of sale, taxation, physical characteristics, quantities. Korea asserts that selling expenses such as bad debt do not fall within any of the factors explicitly listed in Article 2.4. The United States disagrees. Allowance for differences in conditions and terms of sale is among the adjustments specifically contemplated by Article 2.4. The United States interprets differences in "conditions and terms of sale" as including differences in selling expenses such as bad debt. That is a permissible interpretation based on the ordinary meaning of the words.

83. An ordinary meaning of "terms" of sale is the stipulations and conditions that define the nature and extent of the sales contract (e.g., quantity, delivery).⁷⁴ An ordinary meaning of "conditions" of sale is the "mode or state of being" of sales.⁷⁵ Thus, it is permissible to interpret conditions of sale to include the mode or circumstances under which sales are made in each market. For example, in the domestic market a producer may sell directly to consumers and provide a warranty, while in an export market the product may be sold to distributors with no warranty. Similarly, the nature of the customer base in the domestic market may generate more bad debt than the customer base in the export market. These differences in the selling conditions in each market would be reflected in the additional warranty or bad debt expenses in the export market.

84. Selling expenses such as warranty costs and bad debt not only reflect conditions of sale in the market, they are also an element of price.⁷⁶ Therefore, differences in such selling expenses affect price comparability. Requiring "due allowance" for such differences ensures that any positive difference between export price and normal value reflects dumping rather than differences in the selling conditions in each market.

85. Korea asserts that due allowance for differences in selling conditions cannot be made unless the condition is one within the exporter's control and known at the time of sale.⁷⁷ Article 2.4 contains no such limitation.

86. Many normal selling conditions, in addition to bad debt, are not within the exporter's control and the amount of the associated expense is not known at the time of sale. For example, warranty, technical assistance and credit expenses are not entirely within the exporter's control and the exporter does not know at the time of sale whether or to what extent such expenses will be incurred. Nevertheless, sellers, including POSCO, anticipate such costs and they are an element of price. Most importantly, as discussed above, Article 2.4 recognizes that differences in conditions of sale may affect price comparability. Therefore, making allowance for such differences is consistent with Article 2.4.

87. To ensure that the expenses associated with conditions of sale in each market are neutralized, the United States deducts the home market expenses from normal value and then adds to normal value the US expenses.⁷⁸ As a result, both export price and normal value reflect identical conditions of sale. The adjustment neither inflates nor deflates margins; it neutralizes differences in selling conditions in the two markets.⁷⁹ By virtue of this adjustment, consistent with Article 2.4, differences in conditions of sale do not have an effect on the dumping analysis.

88. Finally, Korea asserts that, even if an allowance for differences in selling conditions such as bad debt is permitted under Article 2.4, the means by which the United States made the adjustment in this case is not. Specifically, Korea argues that Article 2.4 only permits the allocation of such expenses on a transaction-specific basis.⁸⁰

89. Nothing in Article 2.4 requires the allocation of selling expenses on a transaction-specific basis. What constitutes a reasonable allocation may depend on the nature of the expense or the particular facts of the case. For example, it may be reasonable to allocate transportation costs on a transaction-specific or customer-specific basis because there are known variances in distance. In contrast, while bad debt is a normal, anticipated expense, specifically what transactions, or even what customer, will generate a bad debt is not known in advance. All transactions and customers sold on credit are a potential source of bad debt. Therefore, it is reasonable to reflect an allocated portion of that expense in all prices.

90. For the reasons discussed above, the United States' calculation of this adjustment 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.

91. Article 6 of the Agreement requires that interested parties be given a full opportunity to defend their interests throughout an anti-dumping investigation⁸¹ and sets forth certain procedural obligations in the conduct of anti-dumping investigations.⁸² US law and practice, both generally and in the investigations at issue here, demonstrate the United States' strong commitment to fulfilment of those obligations.

92. The United States issues written questionnaires to exporters, including supplemental questionnaires to clarify or supplement information previously submitted. Throughout US anti-dumping investigations the parties are afforded timely access to all information provided to or obtained by the United States, including confidential information made available under administrative protective order, all comments and legal arguments presented by the parties and the United States' internal memoranda.⁸³

93. Normally, within 75 days before its final determination, the United States issues a preliminary determination, which sets forth the United States' preliminary conclusions and the evidence relied upon in reaching those conclusions, consistent with Article 12.2 of the Agreement. The parties are then given the opportunity to comment on the preliminary determination, both in writing and at a public hearing.⁸⁴

94. The United States is required by law to consider the comments of the parties and address them in its final determination. Upon considering the parties' comments, the United States may determine that a change in the methodology used in the preliminary determination is warranted, or that its preliminary determination was correct. In either event, the United States is required to explain the reasons for its decisions in the public notice of its final determination.

95. These procedures ensure that all interested parties are informed of the essential facts and issues under consideration and have a full opportunity to defend their interest. The fact that it is not uncommon for the United States to change its methodology in response to comments by the parties proves that these procedures are meaningful and effective tools that, in fact, fulfill the requirements of the Agreement.

96. As discussed above, in these investigations the parties, including POSCO, took full advantage of these procedures to defend their interests, vigorously arguing numerous issues before the United States, including the treatment of POSCO's US sales to ABC Company. Nevertheless, Korea claims that the United States failed to meet the minimum standards of transparency and procedural fairness required by Article X:3 of GATT 1994 and Article 12.2 of the Agreement.

97. Korea's claim under Article X:3 is based on essentially three allegations: (1) it is unreasonable to include atypical sales in the dumping analysis; (2) the United States failed to follow US legal precedent regarding the exclusion of US sales, and (3) the United States gave inconsistent explanations in the notices of final determination.⁸⁵ Korea also argues that the third allegation gives rise to a violation of Article 12.2 of the Agreement.⁸⁶

98. The United States has demonstrated above that these sales were not atypical and that including them in the dumping analysis was reasonable and consistent with the Agreement. Moreover, the United States' decision to change its treatment of the sales to ABC Company in its final determinations was neither abrupt nor inconsistent with the United States' practice, as Korea asserts.⁸⁷ To the contrary, we have demonstrated above that the change was made as a result of a thorough examination of the facts, in light of the comments of the parties, and to conform the United States' final determination to US law and practice.

99. Quoting selectively from the United States' final determinations, Korea also asserts that the reasons given in the notices of the final determinations for the treatment of the sales to ABC Company were "inherently contradictory."⁸⁸ Therefore, Korea claims that the explanations are unreasonable and, as such, inconsistent with the requirements of Article X:3 of GATT 1994 to administer the law in a uniform, impartial and reasonable manner. Korea further argues that these allegedly contradictory explanations are an inadequate statement of the reasons for the decision and, therefore, inconsistent with Article 12.2 of the Agreement.

100. As discussed above, the United States agrees that Article X:3 requires that the United States cannot be arbitrary in its administration of its anti-dumping determinations. However, this does not require complete consistency with all prior cases. Similarly, Article 12.2 requires an explanation of the factual and legal basis for a dumping determination. However, Article 12.2 does not impose any requirements across cases. Article 12.2 requires that each public notice of a dumping determination contain "the findings and conclusions reached on all issues of fact and law considered material by the investigating authorities." As long as each decision is adequately explained, the requirements of Article 12.2 are met. There are many reasons why the explanation in one case may differ from the explanation in another (e.g., a difference in the facts; a change in policy). Such differences do not render the decision arbitrary or the explanation inadequate. As long as the investigating authority provides a rational explanation for its determination the requirements of Article X:3 and Article 12.2 are fulfilled.

101. Moreover, when the United States' explanations for these decisions are read in their entirety, the inconsistency alleged by Korea disappears. In both notices, the United States discussed the criteria the United States normally uses in determining whether to exclude US sales from its analysis, i.e., (1) whether the sales were representative of the POSCO's behaviour, and (2) whether they were so small that they would have an insignificant effect on the margin.⁸⁹ A failure to meet either criterion could result in a decision not to exclude the sales. Therefore, a discussion of both criteria is not necessary to explain adequately a decision not to exclude US sales. Nevertheless, both criteria were discussed in these cases.

102. In the SSPC Final Determination, the United States explained its decision not to exclude the sales to ABC Company, stating that

the sales account for such a large percentage of POSCO's US sales that they cannot be dismissed as abnormalities. Moreover, the price of the sales themselves is not necessarily distortive because, at the time they were made, POSCO was not aware that the customer would declare bankruptcy.⁹⁰

103. Thus, in addition to finding that the volume of sales was not insignificant, the United States' explanation included a finding that the sales to ABC Company were not unrepresentative of POSCO's selling practices, i.e., when POSCO set the prices it was acting in accordance with its normal selling practices, not based on the subsequent bankruptcy. Therefore, using those prices did not distort the dumping analysis.

104. Similarly, in the SSSS Final Determination, with respect to whether the sales were representative of POSCO's selling practices the United States stated

There was nothing atypical about the sales at the time they were made; we agree with petitioners that there is an inherent risk, when selling to customers on a credit basis, that the customer might not make full or even partial payment. Moreover, the price of the sales themselves is not necessarily distortive because, at the time they were made, POSCO was not aware that the customer would declare bankruptcy.⁹¹

105. With respect to whether the sales were too small to have an impact on the dumping analysis, the facts in the SSSS case were not as clear cut as in SSPC. The discussion in the SSSS notice focused on a particular argument raised by POSCO, which it could not raise in the SSPC case because of the difference in the quantities involved in the sales at issue. Specifically, POSCO argued in the SSSS case that it was the United States' practice to treat 5 per cent as the threshold for determining that the volume of sales is significant.⁹² In response, the United States explained that the 5 per cent threshold was not generally used in determining whether to exclude US sales.⁹³ The United States then chose not to make an explicit finding on the issue of whether the sales were insignificant, explaining that it was relying instead on the fact that the sales were not unrepresentative.⁹⁴ Because that finding provided a sufficient basis for the decision not to exclude the US sales, it was unnecessary for the United States to address the question of whether the volume of the sales at issue was significant in order to adequately explain its decision.

106. Thus, when read in their entirety, it is evident that the United States' explanations in these two cases are complete and entirely consistent with each other and with the United States' established practice. Therefore, Korea has no basis for its claim that the United States' determinations are inconsistent with Article 12.2 of the Agreement and Article X:3 of GATT 1994.

46 SSPC Final Determination, 64 Fed. Reg. at 15444 (ROK Ex. 11); SSSS Final Determination, 64 Fed. Reg. at 30666 (ROK Ex. 24).

47 SSPC POSCO Response to Section A of Initial Questionnaire dated 2 July 1998, at A-3, (US Ex. 7); SSSS POSCO Response to Section A of Initial Questionnaire dated 3 September 1998, at A-3, (US Ex. 8) (emphasis added).

48 We have adopted the designation for this company chosen by Korea for reasons of confidentiality. ROK First Submission, at para. 3.30.

49 SSPC Supplemental Questionnaire Response, Sections B and C, at 15 (ROK Ex. 28). As the United States noted in its final determination, POSCO requested exclusion based on its belief that the sales would be treated as unpaid and that the credit expense would be distortive. SSPC Final Determination, 64 Fed. Reg. at 15448 (ROK Ex. 11).

50 Id.

51 Letter of 19 October 1998 from US Petitioners to Department of Commerce at 2-3, (ROK Ex. 31).

52 Letter of 22 October 1998 from POSCO to Department of Commerce at 2-5, (ROK Ex. 32).

53 SSPC Preliminary Determination, 63 Fed. Reg. at 59536-37, (ROK Ex. 4).

54 SSSS Preliminary Determination, 64 Fed. Reg. at 140, (ROK Ex. 16).

55 Id.

56 SSPC POSAM Verification Report, at 8-9 and Exhibit 5 (US Ex. 9); SSSS POSAM Verification Report, at 8, (US Ex. 10).

57 US Petitioners� SSPC Case Brief at 1-9, (ROK Ex. 8); POSCO�s SSPC Rebuttal Brief at 3-11, (ROK Ex. 9).

58 SSPC Final Determination, 64 Fed. Reg. at 15448-49, (ROK Ex. 11); SSSS Final Determination, 64 Fed. Reg. at 30673-74, (ROK Ex. 24). The change in the United States� methodology to treat bad debt as a direct selling expense, rather than an indirect selling expense, was necessary to conform the determination to US law and practice. See, e.g., Daewoo Electronics Co. v. United States, 712 F. Supp. 931, 938-40 (Ct. Int�l. Trade 1989) (the court agreed with Korean producers of color television receivers that bad debt is a direct selling expense that must be included in the circumstance of sale adjustment to normal value (then called "foreign market value" or "FMV")), (US Ex. 11); Notice of Final Determination of Sales at Less Than Fair Value: Foam Extruded PVC and Polystyrene Framing Stock from the United Kingdom, 61 Fed. Reg. 51411, 51417 (2 October 1996), (US Ex. 12); Color Television Receivers from the Republic of Korea: Final Results of Administrative Review, 61 Fed. Reg. 4408, 4412 (6 February 1996) (hereinafter "CTVs from Korea"), (US Ex. 13).

59 Korea�s First Submission, paragraph 4.26, footnote 104.

60 United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996 (hereinafter "Reformulated Gasoline") at 23; Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996 (hereinafter "Taxes on Alcoholic Beverages") at 12; Australia - Subsidies Provided to Producers and Exporters of Automotive Leather (WT/DS126) - Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW, 14 January 2000 (hereinafter "Automotive Leather") at para. 6.25.

61 Article 2.1 defines dumping as existing where, "the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country."

62 As discussed below, Article 2.3 addresses the construction of export price in special circumstances. As in Article 2.1, there is no limitation in Article 2.3 on the sales used to establish export price.

63 The contrary interpretation asserted by Korea ignores the customary rules of treaty interpretation. In attempting to read a limitation on export price sales into Article 2.4, Korea directly contradicts Article 2.1, where such limitations are addressed and applied only to normal value. The "fundamental principle of effet utile is that a treaty interpreter is not free to adopt a meaning that would reduce parts of a treaty to redundancy or inutility." Automotive Leather, at para. 6.25.

64 Korea� s First Submission at paragraph 4.32. (Emphasis added). Korea argues that the United States acted inconsistently with Article X:3 of GATT 1994 by failing to follow the alleged contrary US legal precedent. As discussed above, Korea misreads and misapplies Article X:3. Nevertheless, as discussed below, Korea�s assertion that the United States failed to follow precedent is false.

65 In Chang Tieh Industry Co., Ltd. v. United States, 840 F. Supp. at 145, (ROK Ex. 35), a case cited by Korea, the court stated

if Congress intended to require [ITA] to exclude all sales made outside the �ordinary course of trade� from its determination of United States price it could have provided for such an exclusion in the definition of United States price, as it has in the definition of foreign market value.