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WT/DS217/AB/R
WT/DS234/AB/R

16 January 2003

(03-0209)

Original: English

UNITED STATES - CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF
2000


AB-2002-7


Report of the Appellate Body


(Continued)


III. Arguments of the Participants and the Third Participants

A. United States - Appellant

  1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

15. The United States claims that the Panel erred in finding that the CDSOA is a specific action against dumping and subsidization under Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.

16. According to the United States, the Panel misapplied the "constituent elements" test as developed by the Appellate Body in US - 1916 Act . For the United States, the language of the CDSOA does not include the constituent elements of dumping or of a subsidy, and these constituent elements do not form part of the essential components of the statute. The United States maintains that, unlike the measure at issue in US - 1916 Act , the CDSOA by its terms does not impose measures on dumped or subsidized products, or impose any form of liability on importers/foreign producers/exporters when dumping or subsidization is found, and dumping or subsidization is not the trigger for application of the CDSOA. Rather, the United States argues, the CDSOA provides for the distribution of money ("triggered" by an applicant's qualification as an "affected domestic producer") from the United States government to domestic producers.

17. The United States also submits that the CDSOA is not action "in response" to dumping or a subsidy. The United States characterizes the Panel's approach as suggesting that the CDSOA could be perceived as action in response to "injury", which is separate from "dumping" or a "subsidy". According to the United States, the Panel erred in finding that, because the payments follow from the collection of anti-dumping or countervailing duties, the payments may be made only in situations presenting the constituent elements of dumping or of a subsidy. The United States claims that, under the Panel's approach, any expenditure of the collected duties would be specific action against dumping or subsidies. The United States adds that, if the collected duties were spent for international emergency relief, according to the Panel's reasoning they would be specific action against dumping or subsidies, because they would be made only where the constituent elements of dumping or of a subsidy were present. The United States maintains that the only connection that the CDSOA has with anti-dumping and countervailing duty orders is that the CDSOA limits availability of CDSOA offset payments to the universe of products covered by an existing or revoked order, and to "affected domestic producers", namely those who supported the investigation and still produce the particular product. According to the United States, CDSOA payments can and do occur at times when no order continues to exist or even when no dumping or subsidization is currently occurring. Thus, the United States concludes that the Panel's conclusion that there is a "clear, direct and unavoidable connection"31 between the determination of dumping or of a subsidy and CDSOA offset payments is incorrect. Rather, the United States argues that the CDSOA is an exercise of the intrinsic right of a WTO Member to provide subsidies.

18. The United States also claims that the Panel failed to read Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement in conjunction with footnotes 24 and 56 thereto to determine the meaning of "specific action". According to the United States, the footnotes to Articles 18.1 and 32.1 are an integral part of the Articles' texts and inform the meaning of "specific action". The effect of these footnotes is to permit action involving dumping or subsidies that is consistent with the GATT 1994 provisions and that is not addressed by the provisions on dumping or countervailable subsidies in Article VI of the GATT 1994. The United States argues that the Panel should have interpreted Articles 18.1 and 32.1 in a manner so as to: (1) give meaning to the footnotes' express permission to take "actions" authorized under other relevant provisions of the WTO Agreement ; and (2) avoid the creation of any limitations on the sovereign power over fiscal matters not otherwise specifically proscribed by the WTO Agreement s. In the present case, the Panel examined the CDSOA under the SCM Agreement and, according to the United States, did not find the CDSOA to violate any limitations set forth in that Agreement. The United States concludes that the CDSOA is covered by the footnotes 24 and 56, and, therefore, the CDSOA is not a specific action prohibited by Article 18.1 of the Anti-Dumping Agreement or Article 32.1 of the SCM Agreement.

19. The United States also claims that the Panel failed to consider the ordinary meaning of the term "against" in the context in which it is used or in the light of the object and purpose of the Anti-Dumping Agreement and Article VI of the GATT 1994. With respect to the determination of the Panel that the CDSOA operates against dumping or a subsidy, in the sense that it has an adverse bearing on dumping or subsidization, the United States argues that an action can be characterized as operating "against" dumping within the meaning of Article 18.1 of the Anti-Dumping Agreement , or "against" a subsidy within the meaning of Article 32.1 of the SCM Agreement, only if it applies directly to the dumped or subsidized imported good or an entity responsible for the dumped or subsidized imported goods, and if it burdens the dumped or subsidized imported good, or an entity responsible for the dumped or subsidized imported good. The United States says that the Panel erred by finding that the term "against" in Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement encompasses any form of adverse bearing, whether it be direct or indirect, and by finding that this term does not imply a requirement that the action applies directly to the imported good or an entity responsible for it and is burdensome.

20. The United States maintains that the Panel erred by concluding that an "adverse bearing" on dumping is demonstrated by the effect of the CDSOA on the competitive relationship between dumped/subsidized goods and domestic products. The United States first criticizes the Panel for failing to provide any explanation for inclusion of such a "conditions of competition" test under Articles 18.1 and 32.1. The United States goes on to explain that, even though, historically, there has been a "conditions of competition" test under Article III of the GATT 1994, which is used to determine whether a measure is applied "so as to afford protection" or accords imports "treatment no less favorable" than that accorded like domestic products, Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement do not call for a "conditions of competition" test, as the language in Articles 18.1 and 32.1 is markedly different from the language in Article III of the GATT 1994. The United States points out that there is no indication in the text of Article 18.1 or Article 32.1 that use of the words "against dumping" or "against a subsidy" was intended to encompass a "conditions of competition" test.

21. The United States further submits that, even assuming, arguendo, that a "conditions of competition" test is applicable to an analysis under Articles 18.1 and 32.1, the CDSOA's impact on the conditions of competition would be too remote and indirect to result in a violation. The United States posits several reasons: first, the CDSOA does not mandate that qualifying expenses be based on costs incurred by domestic producers in competing with dumped/subsidized imports subject to an order; second, there is nothing in the text of the CDSOA that directs, or even provides any incentive for, domestic producers to spend disbursements to bolster their competitive position over dumped/subsidized products; third, the CDSOA cannot ensure that, even if domestic producers do use the distributed money in the production of the product covered by an order, they will be successful in improving their competitive position vis-à-vis foreign producers/exporters; and fourth, the CDSOA does not prohibit foreign producers from lowering prices to compete with domestic products. The United States argues, therefore, that the Panel's conclusion that the CDSOA has an adverse bearing on the conditions of competition is pure speculation.

22. The United States maintains that the Panel erred in finding that the CDSOA will have the effect of providing a financial incentive for domestic producers to file, or at least support, a petition, and that this compounds the CDSOA's adverse bearing on dumping or subsidization, because the financial incentive will likely result in a greater number of anti-dumping/countervail applications and investigations, and in a greater number of anti-dumping/countervail orders. According to the United States, even if the CDSOA were to result in more investigations being initiated and, in turn, more orders being put in place, such a result could not lead to a violation of Article 18.1 of the Anti-Dumping or Article 32.1 of the SCM Agreement. This is because the Panel did not find any provision of United States law relating to the imposition of anti-dumping or countervailing duty orders to be inconsistent with United States WTO obligations. Thus, any increase in WTO-consistent investigations and orders cannot result in violations of Articles 18.1 and 32.1. The United States goes on to state that, even assuming, arguendo, that an increase in WTO-consistent anti-dumping and countervailing duty investigations and orders could lead to a WTO violation, no evidence was adduced before the Panel to show that the CDSOA provides a financial incentive that will induce producers to file or support a petition they otherwise would not file or support. According to the United States, nor was there any evidence that any such incentive will lead to an increase in investigations or orders brought before the Panel.

23. The United States argues that the Panel incorrectly relied on the stated purpose of the CDSOA to confirm that the CDSOA constitutes specific action against dumping or a subsidy. According to the United States, debates surrounding the passage of the CDSOA or the "Findings of Congress" introducing the CDSOA would be relevant to its interpretation only if the terms of the CDSOA were ambiguous and its operation unclear. In this case, because there was no allegation that the CDSOA is ambiguous, the only relevant question before the Panel was whether, by its terms, the CDSOA constitutes specific action against dumping and subsidization.

24. The United States also submits that the Panel erred in extending the Appellate Body's reasoning in US 1916 Act on permissible responses to dumping to the permissible responses to subsidization under the GATT 1994 and the SCM Agreement. The United States contrasts the language of Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement with Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement. The United States argues that the conclusion reached by the Appellate Body in US - 1916 Act -that Article VI of the GATT 1994 encompasses all measures taken against dumping-was based on the specific language of Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement . The United States submits that such a conclusion cannot be extended to the subsidy provisions of Article VI of the GATT 1994 and of Part V of the SCM Agreement, because their scope is limited to the imposition of countervailing duties (and by implication, provisional duties and price undertakings).

  1. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

25. The United States claims that the Panel erred in finding a violation of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. The United States argues that the Panel agreed with the United States that those provisions "require[ ] only that the statistical thresholds be met, and impose[ ] no requirement that the investigating authorities inquire into the motives or intent of a domestic producer in electing to support a petition."32 The Panel also concluded that the United States has implemented its obligations under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement in its domestic laws and that the CDSOA did not in any way amend or modify such laws. According to the United States, the Panel should have "ended its inquiry" there.33

26. The United States further refers to the Panel's finding that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement because it allegedly undermines the value of those provisions to the countries with whom the United States trades, and because it allegedly defeats the object and purpose of those articles. In this respect, the United States emphasizes that the Appellate Body has repeatedly directed panels to the words of the agreement to determine the intentions of parties and has explained that, as set out in Article 31 of the Vienna Convention on the Law of Treaties (the "Vienna Convention")34, principles of treaty interpretation do not condone the imputation into a treaty of words or concepts that are not there. According to the United States, the Panel used the object and purpose of Articles 5.4 and 11.4, rather than the terms of those provisions, as the basis for finding a violation.

27. The United States submits that a finding of a violation cannot be based solely on the conclusion that a measure, although consistent with the text of the relevant provisions, "undermines the value"35 of those provisions to other trading partners. According to the United States, the Panel in this case confused the basis for finding a violation of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement with the basis for making a finding of non-violation nullification and impairment under Article XXIII:1(b) of the GATT 1994.

28. The United States criticizes the Panel for its finding that the United States may be regarded as not having acted in good faith. According to the United States, there is no basis in the WTO Agreement for a panel to conclude that a Member has not acted in good faith, or to enforce a principle of "good faith" as a substantive obligation agreed to by WTO Members. The United States emphasizes that dispute settlement panels are subject to clear and unequivocal limits on their mandate: they may clarify "existing provisions" of covered WTO agreements and may examine the measures at issue in the light of the relevant provisions of the covered WTO Agreements.36

29. The United States maintains that the Panel erred in conducting an analysis of whether the CDSOA creates an incentive for a domestic producer to support an investigation, despite its finding that the texts of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement do not impose an obligation to inquire into the motives behind such support. It was thus legal error for the Panel to conclude that the CDSOA creates a financial incentive to support applications in anti-dumping and countervailing duty investigations and therefore "in effect mandates"37 domestic producers to support such petitions, and then to use this conclusion as a basis for finding that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. Moreover, according to the United States, the Panel's finding was based on "nothing more than assumption and speculation"38 that the CDSOA creates a "spectre"39 of such investigations being initiated without proper industry support.

30. The United States adds that the Panel's finding is at odds with the CDSOA and the operation of relevant United States laws. Under those laws, the United States Department of Commerce ("USDOC") alone, and not the United States International Trade Commission ("USITC"), makes a determination whether there is sufficient domestic industry support for initiation of an anti-dumping or countervailing duty investigation. The necessary declaration of support to qualify for CDSOA distributions is made by domestic producers before the USITC, and not before USDOC. Moreover, the United States notes that the CDSOA declaration of support is not required prior to the initiation of an investigation, and may contradict previously expressed opposition to an application. The United States adds that a domestic producer can express support as late as the final injury investigation questionnaire, which can be issued more than 200 days after an application has been filed.

31. The United States submits that the Panel's "failure to understand the operation of U.S. law is compounded by its consideration of the only two purported pieces of 'evidence' that have been advanced in support of complaining parties' claim."40 One of the pieces of evidence is described as a letter from a domestic producer in which it reportedly changed its position to express support for an application to be able to benefit from any potential CDSOA distributions. USDOC's decision to initiate the investigations, however, had been made 294 days before the domestic producer purportedly changed its position before the USITC. Moreover, an examination of the letter reveals, according to the United States, that it is not what the Panel claimed it to be. In fact, the United States points out that "the company that authored the letter states therein that it is expressing its 'continuing' support for the petitions (i.e., it is not expressing a change in position)".41

32. The United States also refers to a letter in which a United States' producer purportedly urged other domestic producers to support a petition against Canadian softwood lumber imports by citing the CDSOA. According to the United States, examination of the letter referencing the CDSOA shows that it was not written by a domestic producer, but instead by a law firm informing domestic producers of the merits and circumstances of their case, as well as various provisions of United States law, including the CDSOA. Thus, according to the United States, there was no evidence to support the Panel's conclusion. As such, there was no evidence on the record with which Complaining Parties could meet their burden to establish a prima facie case and, as a consequence, the Panel's finding amounts to a shifting of the burden of proof to the United States.

  1. The Combination of Duties and CDSOA Offset Payments

33. The United States alleges that the Panel exceeded its terms of reference by examining claims concerning the CDSOA in combination with other United States laws and regulations. Citing Article 7 of the DSU and the Appellate Body Report in India - Patents (US) , the United States notes that a panel's terms of reference are limited to the claims set out in the complaining parties' request for establishment of a panel. In this case, the United States argues, the Complaining Parties' request for establishment of a panel set out a challenge to the CDSOA as such, that is, the Complaining Parties challenged the CDSOA prior to implementation and independent of any other laws. According to the United States, although the Panel acknowledged that the CDSOA was the measure at issue, the Panel proceeded to find that the CDSOA violates Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement because the combination of anti-dumping duties (or countervailing duties) and the CDSOA transfers a competitive advantage to affected domestic producers.

34. The United States notes, however, that the request did not include a challenge to provisions of United States laws or regulations relating to the imposition of anti-dumping or countervailing duties, or a challenge to the CDSOA in conjunction with provisions of United States laws or regulations relating to the imposition of anti-dumping or countervailing duties. Furthermore, according to the United States, the Complaining Parties did not even mention in their request for establishment of a panel the provisions of United States laws or regulations relating to the imposition of anti-dumping or countervailing duties. Therefore, the United States argues that the Panel's terms of reference were limited to determining whether the CDSOA, as such, violates identified provisions of the WTO Agreement .

35. The United States acknowledges that the Panel can review relevant provisions of United States law for interpretative purposes, but argues that the Panel was not at liberty to examine the CDSOA together with other provisions of United States law in order to find a WTO violation. In support of its claim, the United States refers to the Appellate Body Report in US - Certain EC Products and the Panel Report in US - Section 129(c)(1) URAA. Therefore, the United States concludes, the Panel exceeded its terms of reference by examining whether the CDSOA, in combination with United States laws on the imposition of anti-dumping duties (or countervailing duties), violates Articles 18.1 and 32.1.

  1. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

36. The United States requests that the Appellate Body reverse the Panel's finding that the CDSOA violates Article XVI:4 of the WTO Agreement on the grounds that the CDSOA is consistent with Articles VI:2 and VI:3 of the GATT 1994, Articles 5.4, 18.1 and 18.4 of the Anti-Dumping Agreement, and Articles 11.4, 32.1 and 32.5 of the SCM Agreement. For the same reason, the United States requests the Appellate Body to reverse the Panel's finding that the benefits accruing to the Complaining Parties under the WTO Agreement have been nullified or impaired.42

  1. The "Advisory Opinion"

37. The United States maintains that the Panel erred by rendering an advisory opinion on a measure that was not before it. Specifically, the United States appeals the Panel's statement that "[e]ven if CDSOA offset payments were funded directly from the US Treasury, and in an amount unrelated to collected anti-dumping duties, we would still be required to reach the conclusion … that offset payments may be made only in situations presenting the constituent elements of dumping."43 The United States asserts that there was no measure before the Panel where payments were funded directly from the United States Treasury and, therefore, there was no basis for the Panel to opine on what its findings would be if such a measure were presented to it. The United States emphasizes that this finding should be reversed because the Panel has no authority to make findings on a matter that is not before it.

  1. Article 9.2 of the DSU

38. The United States submits that the Panel erred in denying the request by the United States for the issuance of a separate panel report in the dispute brought by Mexico. According to the United States, Article 9.2 of the DSU gives Members an unqualified right to the issuance of separate panel reports upon request. Specifically, that provision contains no requirement for a party to make its request for a separate panel report by a certain time in the panel proceeding. Nor does it, according to the United States, require the requesting party to demonstrate that it would suffer prejudice if its request is not accepted. Nor does it require that a separate interim report be issued, contrary to what the Panel stated.


To continue with B. Australia - Appellee

Return to Index


31 Panel Report, para. 7.21.

32 United States' appellant's submission, para. 95, quoting Panel Report, para. 7.63.

33 United States' appellant's submission, para. 97.

34 Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.

35 United States' appellant's submission, para. 101.

36 Ibid., para. 106, referring to Articles 3.2 and 7.1 of the DSU.

37 United States' appellant's submission, para. 112.

38 Ibid., para. 113.

39 Ibid.

40 Ibid., para. 118.

41 Ibid., para. 120.

42 United States' appellant's submission, para. 133.

43 Panel Report, para. 7.22.