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WORLD TRADE
ORGANIZATION

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)


B. Australia - Appellee

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

39. Australia submits that the Panel did not err in concluding that the CDSOA is "specific action" against dumping or a subsidy. The Panel's position-that a measure that may be taken only in situations presenting the constituent elements of dumping is clearly specific action in response to dumping-was not an unexplained assumption. The Panel's conclusion was plainly arrived at in the context of its examination of the scope of the Appellate Body's findings concerning the meaning of the phrase "specific action against dumping" in US - 1916 Act.

40. According to Australia, the Panel did not err in determining that the CDSOA acts specifically in response to dumping. The Panel correctly applied the rationale of the Appellate Body's finding in US - 1916 Act in holding that offset payments under the CDSOA are conditioned on a determination of dumping: offset payments are actions which may be taken only in response to conduct which presents the constituent elements of dumping. In the view of Australia, the constituent elements of dumping are built into the essential elements for eligibility under the CDSOA. A determination of dumping or subsidization is the first requirement for eligibility for offset payments under the CDSOA.

41. Australia contends that the Panel did not err when it concluded that it did not need to examine footnote 24 to the Anti-Dumping Agreement and footnote 56 to the SCM Agreement . The Appellate Body's findings in US - 1916 Act are fully dispositive of this matter in this dispute, and the Panel's finding is fully consistent with them. Having found the CDSOA to be "specific action against dumping" within the meaning of Article 18.1 of the Anti-Dumping Agreement and "specific action against a subsidy" within the meaning of Article 32.1 of the SCM Agreement, the Panel correctly concluded that the CDSOA was governed solely by Articles 18.1 and 32.1. Otherwise, the Panel would have erroneously treated footnotes 24 and 56 as the primary provisions, and Articles 18.1 and 32.1 as the residual provisions.

42. Australia maintains that the Panel did not err when it concluded that the CDSOA acts "against" dumping. The Panel's conclusion that action "against" dumping must have some adverse bearing on dumping, took account of all ordinary meanings of the word "against". According to Australia, the Panel did not err when it concluded that there is no requirement that a measure act directly on an imported dumped product or entities responsible for that product. The Panel correctly noted that Article 18.1 of the Anti-Dumping Agreement refers only to measures that act against "dumping" as a practice, and that there is no express requirement that the measure must act against the imported dumped product, or entities responsible for that product. The Panel similarly noted that Article 32.1 of the SCM Agreement refers to specific action against "a subsidy", not action against the imported subsidized product or a responsible entity. In the view of Australia, the notion of "direct" does not necessarily attach to the term "against". For Australia, the Panel considered both the meaning and the context of the word "against", was mindful of the Appellate Body's findings in US - 1916 Act , and correctly concluded that the ordinary meaning of the term "against", which is not qualified in any way in Article 18.1, encompasses any form of adverse bearing, be it direct or indirect.

43. Australia submits that the Panel did not err in finding that the CDSOA has an adverse bearing on dumping. The United States argues that the Panel did not examine whether the CDSOA burdens imports or the entity responsible for their importation, but rather whether the CDSOA distorts the conditions under which imports compete. However, according to Australia, this argument is premised on the Panel having erred in concluding that there is no requirement that a measure act directly on an imported dumped product or a responsible entity. As the Panel did not err in making that conclusion, the United States' argument is not sustainable. In any case, Australia maintains that the Panel's conclusion that the CDSOA has an adverse bearing on dumping is correct. Offset payments to "affected domestic producers" when combined with anti-dumping duties operate to impose a double remedy in respect of dumped goods. To provide a double remedy is to cross the line of equilibrium at which point something undesirable is counteracted or removed, and to create a new situation requiring redress or relief. By its very nature, a double remedy to "affected domestic producers" is adverse to dumped goods.

44. According to Australia, the Panel did not err in considering that the CDSOA's "legislative history" confirmed that the CDSOA constitutes "specific action against dumping". The Panel's review of the intent of United States Congress after it had already concluded that the CDSOA bears adversely on dumping and therefore acts against dumping, cannot be considered to be reliance on the intent of United States Congress to reach a finding. It is not an error per se for a panel to review whether the stated purpose or intent of a law concurs with its own findings.

45. Australia maintains that the Panel did not err when it concluded that the Appellate Body's interpretation of the provisions of the Anti-Dumping Agreement in US - 1916 Act applies equally to the provisions of the SCM Agreement . For Australia, the Panel correctly concluded that the only remedies permitted by the GATT 1994, as interpreted by the SCM Agreement , were countervailing duties, provisional measures, undertakings and countermeasures, and that to the extent that the CDSOA may be regarded as a specific action against a subsidy, but not a permissible remedy, it would be inconsistent with Article 32.1 of the SCM Agreement. Textual differences between Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement , on the one hand, and Article VI:3 of the GATT 1994 and Article 10 of the SCM Agreement , on the other hand, do not render the Panel's conclusion invalid.

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

46. Australia submits that the Panel reached its finding in respect of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement on the basis of the text of the relevant provisions. Thus, the Panel did not confuse violations of Articles 5.4 and 11.4 with a non-violation claim of nullification and impairment under Article XXIII:1(b) of the GATT 1994. Australia submits that the Panel expressly stated that "the first consequence" of the CDSOA's operation is that it renders the quantitative tests established by those Articles irrelevant, and that it was on this basis that the Panel found a violation of those Articles.

47. Australia endorses the Panel's application of the principle of good faith in its analysis of claims made in relation to Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement . According to Australia, the Panel's finding is consistent with the general rule of treaty interpretation set out in Article 31 of the Vienna Convention and the Appellate Body's findings in US - Gasoline and US - Hot-Rolled Steel. Adopting a measure that renders meaningless a WTO Member's application of these provisions cannot be consistent with the principle of good faith that informs them.

48. Australia endorses the Panel's conclusion that the CDSOA creates a financial incentive for domestic producers to initiate and support petitions. According to Australia, it was not an error for the Panel to use that conclusion as a basis for its finding that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.44

  1. The Combination of Duties and CDSOA Offset Payments

49. Australia argues that the Panel did not exceed its terms of reference by examining claims concerning the CDSOA in combination with other United States laws and regulations. Australia agrees with the United States that the Complaining Parties' panel 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. However, according to Australia, "[t]he Panel's reference to 'the combination of anti-dumping duties and offset subsidies' is not a finding concerning the CDSOA in combination with other anti-dumping laws and regulations of the United States as such."45 Rather, it is, and "should properly be seen, as a general reference to 'anti-dumping duties' as a permissible remedy within the meaning of the Anti-Dumping Agreement."46

  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

50. Australia submits that the Panel correctly found that the CDSOA violates Articles 5.4 and 18.1 of the Anti-Dumping Agreement and Articles 11.4 and 32.1 of the SCM Agreement . Accordingly, the Panel's finding that the CDSOA is inconsistent with Article 18.4 of the Anti-Dumping Agreement , Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO Agreement is also correct. Australia goes on to argue that, under Article 3.8 of the DSU, such violations constitute a prima facie case of nullification or impairment. Because the United States did not present to the Panel any evidence to rebut such presumption of nullification and impairment, the CDSOA constitutes a violation of Article 3.8 of the DSU as well.

  1. The "Advisory Opinion"

51. Australia submits that the Panel did not exceed its terms of reference by clarifying the scope of its finding in the first sentence of paragraph 7.22. Australia notes that, in arguing that the Panel erred in issuing an advisory opinion on a measure outside its terms of reference, the United States has not entered any argument in relation to the first sentence of paragraph 7.22; rather, the United States' argument relates strictly to the second sentence of the Panel's statement at paragraph 7.22 of its Report.

C. Brazil - Appellee

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

52. Brazil submits that the Panel did not err in finding that CDSOA payments violate Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. For Brazil, there can be no question that entitlement to the remedy provided for in the CDSOA is an action which is taken in response to situations presenting the constituent elements of dumping, precisely the situation addressed by the Appellate Body in US - 1916 Act. The specific action-distribution of duties assessed under anti-dumping duty orders to affected domestic producers-is permitted only when the constituent elements of dumping have been demonstrated. Brazil argues that it is not the expenditure of the collected anti-dumping duties in a vacuum that constitutes the response to dumping, but the disbursement to the petitioning parties that make up the industry producing the product covered by the anti-dumping order.

53. Brazil refers to the United States' argument that, because CDSOA payments can and do occur at points in time when an order no longer exists and there is no finding that dumping is currently occurring, they cannot be considered against, or in response to, dumping or subsidization.47 Brazil disagrees with this argument. For Brazil, this apparently addresses the delay in disbursement, which would be more a function of the retrospective nature of the anti-dumping regime in the United States and the logistics of liquidation and payment, rather than some disconnect between the payments and a finding of the constituent elements of dumping. The more appropriate question to ask is whether the payments can be made before a finding of the constituent elements of dumping. According to Brazil, the answer is no.

54. For Brazil, it is indisputable that CDSOA payments constitute specific action against dumping. This is discerned from a review of Article VI of the GATT 1994, the premise behind the CDSOA, the actual effect of CDSOA payments, as well as the comparisons to be drawn from the measure at issue in US - 1916 Act , which the Appellate Body has already found to be a specific action against dumping. The measure, which the panel and Appellate Body found in US - 1916 Act to be inconsistent with Article VI of the GATT 1994 and Article 18.1 of the Anti-Dumping Agreement , included the very same remedy that the Panel in these proceedings found invalid, namely the awarding of monetary damages to parties that have been found to be injured by dumping. Both the damages awarded by the CDSOA and the damages awarded under the measure at issue in US - 1916 Act are based on a demonstration of the constituent elements of dumping. Brazil adds that the CDSOA is not simply a decision by the United States government on how to spend revenues generated by anti-dumping duties. It is, rather, intended to have the effect of providing an additional remedy for dumping. It provides additional deterrence in that monies paid in the form of dumping duties by importing parties are distributed in the form of monetary damages to competitors. It also provides an additional incentive to United States' domestic industries to pursue anti-dumping actions in that it rewards them with monetary damages.

55. Brazil supports the conclusion of the Panel that an action "against" dumping must have some adverse bearing on dumping. The term "against" is best understood in the context of Article VI:2 of the GATT 1994, which states that anti-dumping duties are to be imposed in order to "offset or prevent dumping". Brazil sees no inconsistency in the Panel's treatment of the term "against" and the object and purpose of anti-dumping duties. In respect of the United States' contention that the Panel established a new "conditions of competition" test under Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , Brazil contends that Article 18.1 of the Anti-Dumping Agreement refers only to measures that act against "dumping" as a practice; there is no express requirement in the provision that the measure must act against the imported dumped product, or entities connected to, or responsible for, the dumped good.

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

56. Brazil endorses the Panel's conclusion that the CDSOA violates Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement . Brazil maintains that the CDSOA operates in such a manner that United States' investigating authorities are unable to conduct an objective and impartial examination of the level of support for an application. As a consequence, the Panel correctly concluded that the CDSOA has undermined the value of provisions of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement and that the United States "may be regarded as not having acted in good faith in promoting this outcome."48 According to Brazil, the incentive to file or support anti-dumping and countervailing duty petitions created by CDSOA payments raises the potential for a minority of domestic producers to be able to control and initiate anti-dumping and/or countervailing duty proceedings. The numerical thresholds under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement have, as their object and purpose, to prevent this from happening. According to Brazil, "[i]t is this return to the situation that existed before the Uruguay Round Agreements that implicates and violates the provisions of Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement."49

  1. The Combination of Duties and CDSOA Offset Payments

57. Brazil argues that the Panel did not exceed its terms of reference by examining claims concerning the CDSOA in combination with other United States laws and regulations. According to Brazil, the Complaining Parties raise no claims against United States laws or regulations relating to the imposition of anti-dumping or countervailing duties, because they are not the subject of this dispute. Rather, Brazil argues, the relationship of those laws and regulations to the claims that the CDSOA violates Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement is incidental to the dispute. Brazil submits that the Complaining Parties do not dispute that, in as much as they are permitted specific actions, anti-dumping and countervailing duties are presumably valid under the Anti-Dumping Agreement and the SCM Agreement . Instead, Brazil claims that the Complaining Parties are disputing the CDSOA payments because they clearly do not qualify as permissible measures under Article 18.1 and Article 32.1.

D. Canada - Appellee

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

58. Canada submits that the CDSOA is a specific action against dumping or subsidization within the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . According to Canada, neither the text nor context of Article 18.1 or the Appellate Body's interpretation of that provision in US - 1916 Act indicates that the constituent elements of dumping must be built into a measure for it to constitute "specific action." A measure is "specific action" where its operation is contingent upon the existence of constituent elements of dumping or a subsidy. A WTO Member may not escape its obligations by calling dumping or a subsidy something else, or by not incorporating the definition of dumping or a subsidy into the measure itself. Where a practice is clearly defined in national laws, it is not necessary for each and every law targeting that practice to specifically incorporate the constituent elements of that practice. Requiring that the constituent elements of dumping or of a subsidy be built into the measure for it to constitute "specific action", would eviscerate Articles 18.1 and 32.1. This would create a loophole for measures that have no other purpose and effect than to act against dumping or a subsidy, solely because they do not, in themselves, contain the elements of these practices.

59. Canada maintains that, in fact, the CDSOA does incorporate the constituent elements of dumping and a subsidy. Offset subsidies are possible only where there is an anti-dumping or countervailing duty order. Such orders are imposed once there has been a determination of injurious dumping or a subsidy. Offset subsidies are therefore possible only where there is already a determination of dumping or a subsidy, and in no other circumstance. As well, offset subsidies are paid out to "affected domestic producers". These are not domestic producers generally affected by imports. Rather, they are producers that produce like domestic products and that initiate or support an anti-dumping or countervailing investigation. Finally, offset subsidies reimburse certain "qualifying expenditures"; qualifying expenditures must relate to a product covered by an order. Thus, for Canada, every element of the CDSOA depends, for its operation, on a finding of dumping or subsidization.

60. Canada argues that the "trigger" for the operation of the CDSOA is, by design, an anti-dumping or countervailing duty order, not simply status as an "affected domestic producer". The very notion of "affected domestic producer" in this context does not exist separate from, or without the presence of, dumping or subsidization.

61. Canada contends that the Panel did not need to examine whether the CDSOA was an "action" within footnotes 24 and 56, because it had already found it was "specific action" within the meaning of Articles 18.1 and 32.1. "Specific action" is to be distinguished from "action" within the meaning of the footnotes. A measure is a "specific action" against dumping where the objective reason for the imposition of the measure is dumping itself. Action triggered by something other than dumping (like a safeguard based on a serious increase in imports that could have been caused by dumping by foreign exporters) that nevertheless has an incidental impact on dumping is "action" within the meaning of footnote 24. In that event, the basis for the imposition of a measure would not objectively be dumping, but its causes or effects. Canada adds that a measure does not escape the requirements of Article 18.1 of the Anti-Dumping Agreement on the sole ground that it is otherwise consistent with the GATT 1994.

62. Canada submits that the Panel decided correctly that the CDSOA is "against" dumping or a subsidy. The Panel's interpretation of the term "against" is in accordance with the principles of treaty interpretation. For Canada, a measure that is in some way related to dumping may have but one of three possible effects on the practice: it may encourage it; be neutral to it; or, discourage it. A measure is against dumping when it is structured in a way as to discourage the practice of dumping exports. This interpretation of "against" is supported by the context of Article 18.1. The provisions of the Anti-Dumping Agreement regulate not only what measures WTO Members may impose in response to dumping, but also the modalities of that imposition. The Anti-Dumping Agreement specifically permits duties, provisional duties and undertakings, and prohibits all specific action, direct or indirect, against dumping that is not one of those remedies. This limitation on specific action is in keeping with the object and purpose of the Anti-Dumping Agreement to further the substantial reduction of tariffs and other barriers to trade, to eliminate discriminatory treatment in international trade relations and to develop a more viable and durable multilateral trading system.

63. Canada further maintains that, in finding adverse bearing in respect of the CDSOA, the Panel relied on traditional concepts employed by panels: an examination of conditions of competition. In this regard, the Panel was not reading words into the text of the treaty or proposing a new test. In fact, the Panel considered "conditions of competition" in giving substance to the proposed definition that a measure is "against dumping" where it "burdens" imports.

64. Canada contends that the United States' arguments concerning the alleged "remoteness" of the consequences of the CDSOA or the "speculative" nature of the Panel's analysis, are without merit. The CDSOA is mandatory legislation that is being challenged as such. The direct and necessary consequences of the CDSOA are apparent from its design, architecture and underlying structure. Based on the design, architecture and underlying structure of the CDSOA, the Panel determined that certain consequences necessarily follow from its operation that tied the offset payments to dumping and subsidies.

65. Canada submits that Article 32.1 of the SCM Agreement is identical in terminology, structure and intent to Article 18.1 of the Anti-Dumping Agreement , except for the reference to subsidy instead of dumping. This identical wording gives rise to a strong interpretative presumption that the two provisions set out the same obligation or prohibition. In the view of Canada, footnote 35 to Article 10 of the SCM Agreement expressly confirms this presumption. It provides that there are two sets of "specific action" consistent with the WTO Agreement, and requires that Members may choose one or the other specific action against a subsidy: countermeasures under Part II or III and countervailing duties, undertakings and provisional measures under Part V. For Canada, no other remedies are contemplated. Article 32.1 is identical in scope to Article 18.1 of the Anti-Dumping Agreement . Remedies against subsidies are restricted to the three measures governed by Part V of the SCM Agreement , and to multilaterally-sanctioned countermeasures.

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

66. Canada endorses the Panel's finding that the CDSOA violates Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement .

67. Canada emphasizes that Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement require an investigating authority to determine that an application has the support of the domestic industry, based on an examination of the level of support for an application in the domestic industry. Canada argues that "[t]his determination and examination is not a mechanical exercise of toting up the number of producers and their share of domestic production."50 The requirement is, rather, for an objective and impartial assessment of evidence on the record that indicates that requisite support exists to initiate an investigation.

68. Canada submits that, under the CDSOA, "the United States pays domestic producers either to bring or to support applications."51 According to Canada, providing such a "monetary reward for producers to support an antidumping application … precludes the possibility of an objective and impartial determination … of industry support."52 Canada submits that the CDSOA violates Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement precisely because it prevents the United States from complying with its obligations under those Agreements.

69. Canada takes the view that, in arguing for a literal reading of the texts of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement , the United States ignores the fact that those provisions "expressly require an authority to examine (enquire into the nature, look closely or analytically) the evidence as to those thresholds and determine (establish precisely) industry support."53 According to Canada, this is "manifestly at variance with the apparent U.S. position that the sole obligation of a member is to tally up numbers presented by applicants."54

70. Canada further submits that the Panel's reference to good faith and object and purpose was not meant to replace the text of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement with either of these principles; but "rather to give a full and effective meaning to the text in the light of these interpretative principles."55 Good faith and object and purpose are elements to be considered in the elaboration of an obligation by virtue of Article 31 of the Vienna Convention. According to Canada, "[t]his necessarily means that the obligation under Article 5.4 and 11.4 cannot be met where a Member vitiates its own capacity to make a 'determination', or to undertake an 'examination', by offering inducements that influence the basis for that determination."56 Such an inducement, Canada argues, would render the determination partial and subjective.

  1. The Combination of Duties and CDSOA Offset Payments

71. Canada argues that the Panel made no findings with regard to United States anti-dumping and countervailing duty laws outside of the CDSOA; rather, the statement of the Panel is clearly with regard to the operation and effect of the CDSOA in the context of the United States trade remedies system. According to Canada, when the Panel stated that the combination of anti-dumping duties and offset subsidies is not merely to level the playing field, but to transfer the competitive advantage to affected domestic producers, it was referencing the impact of offset payments in addition to duties that would also exist. Canada further states that the CDSOA does not operate in a vacuum, and it constitutes a second remedy against dumped imports.

  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

72. Canada agrees with the Panel that the CDSOA is inconsistent with Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement because it violates Articles 18.1 and 5.4 of the Anti-Dumping Agreement , Articles 32.1 and 11.4 of the SCM Agreement , and Articles VI:2 and VI:3 of the GATT 1994. Based on these findings, Canada also agrees with the Panel's conclusion that the CDSOA constitutes a breach of Article 3.8 of the DSU, because it nullifies and impairs benefits accruing to the complainants under the covered agreements.

  1. The "Advisory Opinion"

73. Canada takes the view that the Panel did not render an advisory opinion. Instead, it made a statement in support of its overall argument concerning the operation of the CDSOA. According to Canada, the Panel did not arrive at a legal conclusion in respect of the payment of duties from the United States Treasury itself, and so could not have been in legal error. Nor did the Panel offer an "advisory opinion" on that issue. Canada also points out that, in stating 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"57, the Panel was merely responding to specific arguments raised by the United States in the course of the proceedings.

  1. Article 9.2 of the DSU

74. Canada argues that Article 9.2 should be interpreted in the context of the other provisions of the DSU and in the light of the overall object and purpose of that Agreement. Canada refers, in particular, to Articles 3.2 and 3.3 of the DSU.

75. Canada argues that to interpret Article 9.2 in a manner that permits a WTO Member to ask for separate reports at any time, including at the end of the panel process, would undermine the prompt settlement of disputes. Canada submits that such a reading of Article 9.2 would also violate procedural fairness and impose an additional burden on the rights of parties. Canada concludes that Article 9.2 of the DSU does not grant an unfettered right to Members to ask for separate reports at any point in time; rather, where the exercise of such a right amounts to a potential abus de droit, a panel must have the discretion to refuse to grant the request.

E. European Communities, India, Indonesia and Thailand - Appellees

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

76. The European Communities, India, Indonesia and Thailand, as joint appellees, submit that the Panel correctly applied the test enunciated by the Appellate Body in US - 1916 Act in determining that the CDSOA is a specific action against dumping or a subsidy. According to them, this test does not require the Panel to establish whether the constituent elements of dumping are "explicitly built into" the CDSOA, but, rather, whether the offset payments are actions that may be taken only when the constituent elements of dumping are present. This test is met not only when the constituent elements of dumping are "explicitly built into" the action at issue, but also where they are implicit in the express conditions for taking the action concerned. They maintain that the CDSOA offset payments meet this test for the following reasons. First, the offset payments are not made to all United States' enterprises, or even to all United States' producers "affected" by imports, but only and exclusively to the United States' producers "affected" by an instance of dumping or subsidization which has been previously the subject of an anti-dumping or a countervailing duty order, respectively. Second, the offset payments are paid for "qualifying expenses" incurred by the affected domestic producers "after" the issuance of an anti-dumping or a countervailing duty order and prior to the termination of the order. Third, the "qualifying expenses" must be related to the production of a product that has been the subject of an anti-dumping or countervailing duty order.

77. The European Communities, India, Indonesia and Thailand argue that, to determine whether the CDSOA is specific, the Panel was not required to examine footnote 24 of the Anti-Dumping Agreement and footnote 56 of the SCM Agreement . According to them, the scope of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement and that of the footnotes are mutually exclusive. Therefore, once it is established that an action is "specific action against dumping", it is not necessary to make a finding to the effect that such action is not covered by the footnote. They add that, in any event, offset payments do not constitute "action" under other relevant provisions of the GATT 1994 within the meaning of footnotes 24 and 56 and that the CDSOA is not an action taken "under other relevant provisions" of the GATT 1994.

78. The European Communities, India, Indonesia and Thailand contend that the Panel was not required to further consider whether the CDSOA was action "against" dumping or a subsidy because, in the light of the test enunciated by the Appellate Body in US - 1916 Act , a conclusion that the CDSOA offset payments constitute specific action against dumping or a subsidy stems from the establishment that the offset payments are an action that may be taken only when the constituent elements of dumping, or of a subsidy, are present. In any event, they submit that the Panel's interpretation of the term "against", which encompasses action that has an "indirect" adverse bearing on dumping or subsidization, is in accordance with the rules of treaty interpretation. According to them, the Panel's interpretation is consistent with the ordinary meaning of the term "against" as it corresponds to definitions such as "in competition with", "to the disadvantage of", "in resistance to" and "as protection from"; it would also be borne out by the immediate context of the term "against", in particular by the surrounding language of Articles 18.1 and 32.1, which does not prohibit specific action against dumped or subsidized imports, or against the importers of dumped or subsidized products, but rather against "dumping" and against "a subsidy". Also, they point out that the SCM Agreement authorizes indirect action in the form of "countermeasures".

79. The European Communities, India, Indonesia and Thailand support the conclusion of the Panel that the CDSOA has an adverse bearing on dumping and subsidization because it puts dumped/subsidized imports at a competitive disadvantage. According to the European Communities, India, Indonesia and Thailand, this conclusion is based exclusively on the interpretation of Articles 18.1 and 32.1, more specifically of the term "against".

80. The European Communities, India, Indonesia and Thailand submit that the CDSOA operates "against" dumping/a subsidy because the offset payments are objectively apt to have an "adverse bearing" on dumping or subsidization. In this vein, they point out that the qualifying expenses under the CDSOA are costs incurred "in competing with" the dumped/subsidized imports. They add that the offset payments allow the domestic producers to improve their competitive position vis-à-vis dumped and subsidized imports, and it is reasonable to expect that, in practice, they will use them for that purpose.

81. The European Communities, India, Indonesia and Thailand support the Panel's conclusion that the stated purpose of the CDSOA confirms that it is specific action against dumping. They are of the view that the stated purpose of the CDSOA is relevant for its interpretation, and they assert that Section 1002 is an integral part of the terms of the CDSOA.

82. The European Communities, India, Indonesia and Thailand submit that countervailing measures and countermeasures are the only permitted responses to subsidization. According to them, the Appellate Body's finding in US - 1916 Act-that the only specific actions against dumping allowed by Article VI of the GATT 1994, as interpreted by the Anti-Dumping Agreement , are definitive duties, provisional measures and price undertakings-was not based exclusively on the presence of the term "measure" in Article 1 of the Anti-Dumping Agreement . They add that footnote 35 to Article 10 of the SCM Agreement provides contextual confirmation that the SCM Agreement does not allow the application of other measures against a subsidy. They contend that, as the wording of Article 32.1 mirrors that of Article 18.1, it is reasonable to assume that both provisions have a similar object and purpose; consequently, they should have a similar scope. Furthermore, they submit that the United States' interpretation of Article 32.1 would reduce that provision to redundancy.

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

83. The European Communities, India, Indonesia and Thailand endorse the finding of the Panel that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement . They assert that, contrary to what the United States maintains, the Panel reached its conclusion based on the text of those provisions.

84. The European Communities, India, Indonesia and Thailand submit that the examination of  the relevant facts for establishing whether an application is made "by or on behalf of the domestic industry" must be conducted in an "objective" manner. This is not stated expressly in Articles 5.4 or 11.4, but it is a corollary of the principle of good faith which informs all the covered agreements. According to them, the CDSOA is incompatible with the obligation to make an "objective" examination required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement because, through the offset payments, the United States authorities are "unduly influencing the very facts which they are required to 'examine'."58

85. The European Communities, India, Indonesia and Thailand argue that the United States' reading of Articles 5.4 and 11.4 would lead to absurd and unacceptable results and cannot be correct. If it did not matter whether an application or an expression of support is "genuine", the authorities could take any action within their reach in order to coerce or induce the domestic producers to make or support applications, so as to ensure that the quantitative thresholds of Articles 5.4 and 11.4 are reached.

86. The European Communities, India, Indonesia and Thailand emphasize that they are not suggesting that an investigating authority is to ascertain actively in each case the subjective motivations of a producer in expressing support for an application; but they argue that if there is evidence calling into question the credibility of a declaration of support, the administrative authorities cannot ignore such evidence without violating Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement .

87. The European Communities, India, Indonesia and Thailand endorse the Panel's conclusion that the CDSOA defeats the object and purpose of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement because it encourages the initiation of investigations in cases where the domestic industry has no genuine interest in the imposition of anti-dumping or countervailing duties. The consequence is that United States investigating authorities are prevented from reaching a proper determination of support before initiating an investigation.

88. The European Communities, India, Indonesia and Thailand submit that Members must observe the general principle of good faith, recognized by the Appellate Body as a pervasive principle that informs the covered agreements, in the application and interpretation of the Anti-Dumping Agreement and the SCM Agreement. They submit that the obligation to perform a treaty obligation in good faith means that such obligations "must not be evaded by a merely literal interpretation".59 It means also that the parties "must abstain from acts that are calculated to frustrate the object and purpose of the treaty".60

89. The European Communities, India, Indonesia and Thailand emphasize that the Panel's finding that the CDSOA provides a financial incentive to file or support applications is a question of fact, and not a question of law. They add that the United States has not claimed that, by finding that the CDSOA provides a financial incentive to file or support applications, the Panel has acted inconsistently with Article 11 of the DSU; accordingly, in their view, this finding is beyond the scope of appellate review.

90. In any event, the European Communities, India, Indonesia and Thailand submit that the Panel correctly concluded that the CDSOA provides a financial incentive to file or support applications. They submit that the reason why the evidence of "actual effects" of the CDSOA cannot be shown is because, as a result of the CDSOA, "it has become impossible, both for the U.S. authorities and for the complainants, to tell whether a domestic producer supports the imposition of measures as such or the distribution of the offset. The appropriate consequence to be drawn from this is not that the CDSOA can have no effects on the degree of support, but rather that the U.S. authorities are no longer in a position to make a proper determination of support, whether positive or negative."61

91. The European Communities, India, Indonesia and Thailand emphasize that they "have not claimed that the CDSOA affects the standing determination in each and every case."62 Rather, their claim is that "there is a risk that the offset payments will influence the decision of the domestic producers in an indeterminate number of cases"63 and that by creating that risk, the United States has acted inconsistently with the obligation to conduct an objective examination of the level of support. They submit that "[t]he existence of such risk can be reasonably inferred, as the Panel did, from the potential amount of the payments made under the CDSOA, as compared to the costs of filing or supporting applications."64

92. The European Communities, India, Indonesia and Thailand note that the United States argues that the declarations of support for the purposes of the distribution of the offset payments can be made to the USITC after the initiation of the investigation. They stress that it remains true, however, that the CDSOA provides an incentive for filing applications or for supporting them before the initiation of the investigation because domestic producers cannot be sure that the other domestic producers will file or support an application, and thus whether the thresholds set out in Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement will be met.

  1. The Combination of Duties and CDSOA Offset Payments

93. The European Communities, India, Indonesia and Thailand argue that the Panel did not exceed its terms of reference in the manner alleged by the United States. According to them, the Panel made findings and recommendations exclusively with respect to the CDSOA. They argue that the Panel made no finding or recommendation with respect to the WTO-consistency of the United States laws or regulations relating to the imposition of anti-dumping duties or countervailing duties. Rather, the European Communities, India, Indonesia and Thailand submit that the Panel treated the duties imposed pursuant to those laws and regulations as a fact when assessing the WTO-consistency of the CDSOA. They argue that the Panel correctly took into account those facts when assessing whether the offset payments had an adverse bearing on dumping and subsidization. According to them, by doing so, the Panel was merely assessing the effects of the CDSOA against the relevant factual background, and thus the Panel did not exceed its terms of reference.

  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

94. The European Communities, India, Indonesia and Thailand argue that the CDSOA is inconsistent with Article XVI:4 of the WTO Agreement and nullifies or impairs benefits accruing to the complainants under Article 3.8 of the DSU because the CDSOA is inconsistent with the Anti-Dumping Agreement and the SCM Agreement .

  1. The "Advisory Opinion"

95. The European Communities, India, Indonesia and Thailand note that the statement at issue was provided in response to a United States' argument. They argue that paragraph 7.22, where the statement in question appears, is part of the Panel's reasoning, and is pertinent and useful in order to understand the Panel's rationale for considering why the CDSOA constitutes "specific action" against dumping or a subsidy. Thus, they argue that the statement in question is not beyond the Panel's terms of reference.

  1. Article 9.2 of the DSU

96. The European Communities, India, Indonesia and Thailand argue that, even though Article 9.2 of the DSU does not set any deadline for requesting a separate panel report, this does not mean that the parties to a dispute may request a separate report at any time of the proceedings. Citing the Appellate Body's statement in US - FSC, they argue that WTO Members are under a positive duty to exercise their procedural rights under the DSU in good faith and may forfeit those rights if they fail to do so. In the same way as the principle of good faith requires a defendant to raise its objections "seasonably and promptly"65, it requires also that the right to a separate report under Article 9.2 of the DSU be exercised in a timely manner. They conclude that, because the United States clearly failed to request the report in a timely manner, the Panel was correct in rejecting the United States' request.


To continue with F. Japan and Chile - Appellee

Return to Index


44 Australia's appellee's submission, para. 61.

45 Australia's appellee's submission, para. 72, quoting Panel Report, para. 7.36.

46 Australia's appellee's submission, para. 72.

47 United States' appellant's submission, para. 22.

48 Brazil's appellee's submission, para. 27.

49 Brazil's appellee's submission, para. 30.

50 Canada's appellee's submission, para. 96.

51 Ibid., para. 106.

52 Ibid.

53 Ibid., para. 109. (original emphasis)

54 Ibid.

55 Canada's appellee's submission, para. 115.

56 Ibid., para. 117.

57 Panel Report, para. 7.22.

58 European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 127.

59 European Communities', India's, Indonesia's and Thailand's appellees' submission, para. 148.

60 Ibid.

61 Ibid., para. 163.

62 Ibid., para. 164.

63 Ibid.

64 Ibid.

65 European Communities's, India's, Indonesia's and Thailand's appellees' submission, para. 188, quoting Appellate Body Report, US - FSC, para. 166.