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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)


I. Arguments of the Third Participants

  1. Argentina

(a) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

144. Argentina supports the conclusion 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 , because it induces United States producers to file or to support applications for the petition for the initiation of anti-dumping and countervailing duty investigations.

145. Argentina emphasizes that the object and purpose of Articles 5.4 and 11.4 should be considered "just as valid"76 as the text of those provisions. According to Argentina, Articles 5.4 and 11.4 seek to ensure not only that WTO Members comply with the threshold tests set out in those provisions, but also that investigations are initiated in proper form and that "unjustified proliferation of investigations"77 is avoided. According to Argentina, this "object and purpose" is also reflected in the requirement contained in those provisions not to initiate investigations when domestic producers expressly supporting the application account for less than 25 per cent of the domestic industry.

146. Argentina notes that the mere initiation of an investigation brings with it the possibility of provisional measures being introduced in accordance with Article 7 of the Anti-Dumping Agreement and Article 12.12 of the SCM Agreement . Argentina submits that a proliferation of investigations could entail injury to a large number of exporters to the United States' market and disrupt normal trade flows among WTO Members.

(b) 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

147. Argentina argues that, because the CDSOA is inconsistent with the United States' WTO obligations under the Anti-Dumping Agreement and the SCM Agreement , it also violates Article XVI:4 of the WTO Agreement .

  1. Hong Kong, China

(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

148. Hong Kong, China submits that the mandated distribution of offsets under the CDSOA constitutes specific action against dumping and subsidization under Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. Although the constituent elements of dumping are not referred to in the CDSOA, no payments under the CDSOA can be made unless anti-dumping duties are collected. Anti-dumping duties cannot be collected unless an anti-dumping order is imposed. An anti-dumping order cannot be imposed unless the constituent elements of dumping exist. The same is true for subsidization. Notwithstanding the fact that the CDSOA does not refer to the constituent elements of dumping or subsidization, actions under the CDSOA can be taken only if the constituent elements of dumping and/or subsidization are found. Thus, actions under the CDSOA are clearly "in response" to the constituent elements of dumping and/or subsidization.

149. Hong Kong, China adds that the CDSOA is a specific action against dumping or subsidization because it places imported goods at a competitive disadvantage relative to domestically-produced goods, and brings about an adverse impact on the imported goods. The additional burden is a direct result of the domestic producers of the United States having an increased cash flow that, in turn, is the result of distribution of funds directly stemming from the existence of an anti-dumping or countervailing duty order. The mere fact that the United States producers receive a distribution because an anti-dumping or countervailing duty order is in place is sufficient to render the CDSOA inconsistent with the Anti-Dumping Agreement and the SCM Agreement .

150. Hong Kong, China says that the Panel has not concluded that there exists a test for conditions of competition or competitive advantage in Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . Rather, according to Hong Kong, China, the Panel has used this analysis only to demonstrate that the CDSOA is a direct burden on imported goods. By offsetting the effects of dumping and subsidization in addition to the anti-dumping and countervailing duty order, payments under the CDSOA impermissibly alter the competitive conditions in favour of domestic producers. According to Hong Kong, China, if anti-dumping and countervailing duties level the playing field, the CDSOA payments tilt the field back in favour of the domestic producers in the United States. By definition, CDSOA payments would improve the recipients' competitive position. Hong Kong, China says that it is, therefore, established, through the conditions of competition analysis, that the CDSOA results in a "direct" burden on imported goods.

151. Hong Kong, China notes that in the dispute concerning the US - 1916 Act, the Appellate Body unequivocally restricted permissible responses to dumping to definitive anti-dumping duties, provisional measures or price undertakings. The Appellate Body's analysis was not based on any particular provisions in the Anti-Dumping Agreement in isolation, but rather on the Anti-Dumping Agreement as a whole. In that case, the Appellate Body looked at the overall purpose and meaning of the Anti-Dumping Agreement and found that only those measures expressly provided for in the Anti-Dumping Agreement are permissible specific actions against dumping. As far as the present case on the CDSOA is concerned, Hong Kong, China says that it sees no reason why the same analysis of examining the overall purpose and meaning of the whole Agreement should not be adopted in order to decide whether any action that is not expressly provided for in the Agreement is permissible.

(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

152. Hong Kong, China submits that the object and purpose of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement is to limit the initiation of investigations to those instances where the domestic industry has a genuine interest in the adoption of measures against dumping or subsidization. Hong Kong, China maintains that the CDSOA provides domestic producers who have not been adversely affected by dumped/subsidized imports with an incentive to file or to support anti-dumping and countervailing actions, and in doing so, renders the quantitative thresholds in Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement meaningless.

  1. Israel

(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

153. Israel submits that the CDSOA is a specific action against dumping and subsidization within the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , because it awards monetary damages to parties that have been found to be injured by dumping or subsidization.

(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

154. Israel endorses 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 operates in such a way that the investigating authorities are unable to conduct an objective and impartial examination of the level of support that exists for an application.

  1. Norway

(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

155. Norway submits that the Panel correctly concluded that the CDSOA is a non-permissible specific action against dumping contrary to Article 18.1 of the Anti-Dumping Agreement and that it is a non-permissible specific action against a subsidy contrary to Article 32.1 of the SCM Agreement . As Article 32.1 of the SCM Agreement contains parallel language to Article 18.1 of the Anti-Dumping Agreement, Norway says it agrees with the Panel that the phrase "specific action against a subsidy" must be understood similarly to encompass, at a minimum, action that may be taken only when the constituent elements of a subsidy are present. Norway adds that a Member's actions with respect to subsidies are spelled out in Articles VI and XVI of the GATT 1994, as interpreted by the SCM Agreement, and limited to one of the following three types of action against subsidization: "countervailing measures" imposed in accordance with Part V of the SCM Agreement ; "countermeasures" against a "prohibited subsidy" imposed in accordance with Part II of the SCM Agreement ; or, "countermeasures" against subsidies that cause "adverse effects" to the interests of the Member concerned, according to Part III of the SCM Agreement . The "specific measures" available to a WTO Member to meet subsidization are thus limited to the above-mentioned measures.

156. Norway notes that the United States has argued in US - Norwegian Salmon AD that limits exist with respect to the actions a Member State may take in response to unfair trade practices.

157. Norway contends that the legislative history of the CDSOA is a relevant and important factor to be taken into account when demonstrating that the CDSOA was aimed at creating an additional specific measure as a response to foreign dumping and subsidization.

(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

158. Norway expresses agreement with the Panel that the CDSOA, by mandating offset payments to affected domestic producers, provides a strong financial incentive to domestic producers to file applications for the imposition of anti-dumping or countervailing measures, or to support such applications made by other domestic producers. In Norway's submission, a domestic producer cannot be considered to have made an "application", or to have "supported" it, within the meaning of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, if it does so in order to qualify for offset payments provided under the CDSOA.

159. Norway submits that the CDSOA has the effect of stimulating the filing of applications and making it easier for applicants to obtain the support of other domestic producers, so as to meet the quantitative thresholds laid down in Article 5.4 of the Anti-Dumping Agreement and in Article 11.4 of the SCM Agreement. In doing so, the CDSOA operates in a way which prevents the United States' authorities from conducting an objective examination of whether an application is made "by or on behalf of the domestic industry" as required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement .

(c) 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

160. Norway argues that the CDSOA is inconsistent with Article XVI:4 of the WTO Agreement and nullifies and impairs benefits accruing to the complainants because it is inconsistent with Articles 18.1 and 5.4 of the Anti-Dumping Agreement, and with Articles 32.1 and 11.4 of the SCM Agreement.

IV. Procedural Matters: Arguments of the Participants and the Third Participants

A. Allegation of Flaws in the Notice of Appeal

  1. Canada

161. In a letter dated 5 November 2002, Canada requested the Appellate Body to issue a preliminary ruling that the United States is in breach of Rule 20(2)(d) of the Working Procedures, because the United States' appellant's submission contains certain arguments, allegations and requests for ruling that the United States did not include in the Notice of Appeal dated 18 October 2002. Canada refers explicitly to paragraph 40 of the United States' appellant's submission, in which the United States argues that the Panel failed to set out "the basic rationale behind" its finding as required by Article 12.7 of the DSU (by not explaining why it examined the burden the measure creates on the conditions of competition under which imports compete), and that the Panel failed to conduct an "objective assessment of the matter before it" as required by Article 11 of the DSU.

162. Canada also refers to Sections IV and VI of the United States' appellant's submission, where 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, and by issuing an advisory opinion on a measure outside its terms of reference. According to Canada, these claims relate to the exercise of jurisdiction by the Panel under Article 7 of the DSU, and the United States should have included them in its Notice of Appeal.

163. Canada concludes that the United States' claims, concerning violations by the Panel of Articles 7, 11 and 12 of the DSU, are outside the scope of appellate review, because the United States failed to include them in its Notice of Appeal.

  1. United States

164. Responding to the arguments raised by Canada in its request for a preliminary ruling, the United States argues that its Notice of Appeal "is more than sufficient in setting out the 'findings or legal interpretations of the Panel' from which the United States is appealing."78 The United States submits that, in the first numbered paragraph of its Notice of Appeal, it appeals as erroneous the Panel's findings that the CDSOA is inconsistent with Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement ; and that such findings are based on "erroneous findings of issues of law and related legal interpretations."79 According to the United States, each of its arguments alleged by Canada to be outside the scope of the appeal falls within the matters raised in this first numbered paragraph of the United States' Notice of Appeal.

165. As regards paragraph 40 of the United States' appellant's submission, the United States notes that one of the legal bases for the Panel's findings on Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement is the "conditions of competition" test. Because the United States' claim at issue in paragraph 40 concerns the "conditions of competition" test, it relates to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement. The United States' Notice of Appeal covers the Panel's findings and related legal interpretations regarding Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , and, therefore, the matters addressed in paragraph 40 "fall squarely within the matters raised in the first numbered paragraph of the U.S. notice."80 The United States also argues that Canada's claim that the United States' Notice of Appeal should have specifically cited Articles 11 and 12.7 of the DSU is contrary to the Appellate Body's interpretation of Rule 20 of the Working Procedures. The United States submits that, under the interpretation of this rule set out by the Appellate Body in US - Shrimp, the Notice of Appeal need only identify the findings or legal interpretations of the Panel which are being appealed as erroneous; the Notice of Appeal is not designed to be a summary or outline of the arguments to be made by the appellant. The United States clarified at the oral hearing that it does not request the Appellate Body to make a specific finding that the Panel has failed to comply with Articles 11 or 12.7 of the DSU; the comments on these Articles found in paragraph 40 are simply supportive of the United States' argument that the Panel erred in interpreting Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement .

166. Turning next to Canada's contentions regarding Section IV of the United States' appellant's submission, the United States submits that the Panel's findings on Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement were based in part on the Panel's findings concerning the CDSOA in combination with other United States laws. Because the United States' claim at issue in Section IV concerns the combination issue, it relates to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . The United States' Notice of Appeal covers the Panel's findings and related legal interpretations regarding Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , and, therefore, the matters addressed in Section IV "are plainly covered" by the Notice of Appeal.81

167. As to Canada's contentions on Section VI of the United States' appellant's submission, the United States submits that the Panel's advisory opinion was made in the context of its findings on Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . Section VI concerns the advisory opinion issue and, therefore, relates to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . Because the United States' Notice of Appeal covers the Panel's findings and related legal interpretations regarding Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , the matters addressed in Section VI "are well within the scope"82 of the Notice of Appeal.

168. The United States also argues that Canada's arguments alleging that due process mandates that these issues should be included in the Notice of Appeal are without merit. The United States points out that there is no "notice of appeal" preceding an "other appellant's" submission under the Working Procedures. Furthermore, an appellee has 15 days to respond to an appellant's submission (which is preceded by a notice of appeal), but only 10 days to respond to an "other appellant's" submission (which is not preceded by a notice of appeal). Thus, the United States argues, Canada's logic regarding due process would suggest that all appeals to date under the WTO in which there has been an "other appellant's" submission have violated the "fundamental requirements of due process".

  1. Australia

169. Australia contends that some allegations of errors by the United States are not properly before the Appellate Body by reason of insufficiencies of the Notice of Appeal. Australia submits that the Notice of Appeal does not include any reference to the fact that the Panel may have violated Articles 11 and 12.7 of the DSU. Nor does it include any reference that the Panel may have exceeded its terms of reference.

  1. Brazil

170. According to Brazil, the United States' claim that the Panel exceeded its terms of reference by examining claims concerning the CDSOA in combination with other United States laws is not properly before the Appellate Body, because the United States failed to include this claim in its Notice of Appeal.

  1. European Communities, India, Indonesia and Thailand

171. The European Communities, India, Indonesia and Thailand argue that, only if the allegations of error are adequately identified in the Notice of Appeal, are the other parties to the proceedings in a position to exercise their rights under the DSU and the Working Procedures. They also recall the Appellate Body's recognition that Article 3.10 of the DSU commits WTO Members to engage in the dispute settlement procedures "in good faith" and that the procedural rights under the DSU must be exercised in a manner that does not prevent other Members from exercising their own rights. According to the European Communities, India, Indonesia and Thailand, withholding a claim of error until the filing of the appellant's submission is inconsistent with the requirements of good faith and due process. Thus, the European Communities, India, Indonesia and Thailand conclude that the claims identified in Canada's letter dated 5 November 2002 should be excluded from the scope of this appeal.

  1. Japan

172. Japan argues that the claims identified in Canada's letter dated 5 November 2002 as new claims of error made by the United States cannot be characterized simply as grounds for the current appeal, as legal arguments in support of an allegation included in the Notice of Appeal, or as statements of a provision of the covered agreements. Therefore, Japan concludes that the United States contravened Rule 20(2)(d) of the Working Procedures by including these new allegations in its appellant's submission.

  1. Korea

173. Korea submits that the United States included in its appellant's submission several points not raised in the Notice of Appeal. According to Korea, this is in violation of Rule 20(2)(d) of the Working Procedures.

  1. Norway

174. Norway contends that some of the allegations in the United States' appellant's submission are not mentioned in the Notice of Appeal and, therefore, should be excluded from the scope of appellate review.

B. Allegations Regarding the Scope of Appellate Review

  1. Canada

175. Canada further argues in its request for a preliminary ruling and in its appellee's submission that the United States' appellant's submission is "inconsistent with Article 17.6 of the DSU, because it purports to adduce new evidence … and that consideration of such new evidence is outside the scope of appellate review."83 According to Canada, Article 17.6 of the DSU prohibits the Appellate Body from receiving and examining evidence that was not before the Panel in order to impugn the factual findings of the Panel.

176. Canada submits that in paragraphs 120-121 of the United States' appellant's submission, the United States purports to impugn evidence on which the Panel relied, namely two letters submitted to the Panel by Canada. For Canada, this attempt by the United States to impugn the "credibility and weight"84 the Panel attached to the two letters is inconsistent with Article 17.6 of the DSU. Canada also stresses that the United States does so even though it did not comment on this evidence when the evidence was first brought before the Panel, and even though the Panel gave the United States ample opportunity to comment on the letters.

177. In addition, Canada submits that in footnotes 148-149 of the United States' appellant's submission, the United States adduces new evidence that it characterizes as being "available on the public record". Canada argues that consideration by the Appellate Body of such new evidence would be contrary to Article 17.6 of the DSU and that such new evidence "should be struck from the record".85

  1. United States

178. The United States argues that nothing in its appellant's submission requests, or in any way indicates, that the Appellate Body should do anything but examine the issues of law underlying the Panel's findings and the associated legal interpretations. According to the United States, paragraphs 120 and 121 of its appellant's submission, cited by Canada, "go to the core of one of the legal errors committed by the Panel"86, namely that the Panel assumed, as a matter of law, without sufficient basis, that the statute would necessarily result in the initiation of anti-dumping and subsidy cases with less than the level of support required under the WTO Agreement . The United States argues that the Panel's erroneous conclusions resulted, in part, from the Panel's "misunderstanding of two letters"87, and that paragraphs 120 and 121 of the appellant's submission seek to clarify the contents of these letters. The United States claims that, in showing that the Panel lacked a basis for its finding that the CDSOA amounts to a prima facie violation of the WTO Agreement , the arguments in paragraphs 120 and 121 are entirely appropriate and "well within the scope of the matters to be examined in this appeal."88

179. As to footnotes 148 and 149 of its appellant's submission, the United States submits that the appeal involves a prima facie challenge to the CDSOA and that the issue turns on whether or not the Panel had a sufficient basis for its legal conclusions. Thus, the United States argues, it "cited to [the public documents in these footnotes] to provide the Appellate Body with a greater understanding of the facts involved in the dispute and to reinforce the point that the panel lacked a sufficient basis for its findings."89

  1. Australia

180. Australia submits that, under Article 17.6 of the DSU, paragraphs 120 and 121 of the United States' appellant's submission, and footnotes 148 and 149 thereto, should be disregarded, as the United States may not contest the accuracy of, or introduce, factual evidence for the first time in appeal proceedings.

  1. European Communities, India, Indonesia and Thailand

181. The appellees argue that the new factual arguments and the new factual evidence adduced by the United States at paragraphs 120 and 121 of its appellant's submission, and in the accompanying footnotes, should be disregarded by the Appellate Body. The new factual arguments in paragraphs 120 and 121 were not raised during the Panel proceedings. In addition, the footnotes refer to documents that were not part of the record of the Panel proceedings.

  1. Japan

182. Japan first recalls that in Canada - Aircraft, the Appellate Body declined to rule on a new argument made by Brazil on appeal. According to Japan, the Appellate Body's decision was based on the ground that in order to rule on the new argument, it would have to solicit, receive and review new facts that were not before the Panel, and that were not considered by it, a scenario excluded by Article 17.6 of the DSU. Therefore, Japan argues that the new argument and the new evidence brought by the United States should be rejected.

  1. Korea

183. Korea contends that the United States' appellant's submission is inconsistent with Article 17.6 of the DSU because it adduces new evidence that had not been presented to the Panel.

  1. Norway

184. Norway argues that the United States has adduced new factual arguments and new factual evidence in its appellant's submission that are outside the scope of appellate review.


To continue with V. Procedural Matters and Ruling

Return to Index


76 Argentina's third participant's submission, para. 7.

77 Ibid., para. 8.

78 United States' letter of 8 November 2002.

79 Ibid.

80 Ibid.

81 United States' letter of 8 November 2002.

82 Ibid.

83 Canada's letter dated 5 November 2002.

84 Canada's appellee's submission, para. 155.

85 Canada's letter dated 5 November 2002.

86 United States' letter dated 8 November 2002.

87 Ibid.

88 Ibid.

89 Ibid.