UNITED STATES - CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF
2000

AB-2002-7

Report of the Appellate Body

(Continued)

V. Procedural Matters and Ruling

185. We turn first to the procedural matters raised in this appeal. As we indicated earlier in this Report⁹⁰, Canada, supported by other appellees⁹¹ and one third participant⁹², argues that the United States is in breach of Rule 20(2)(d) of the Working Procedures , because the United States' appellant's submission allegedly includes claims, allegations and requests for ruling that were not included in the United States' Notice of Appeal.⁹³ Canada requests that these claims be struck from the appeal. In addition, Canada objects, with support from other appellees⁹⁴ and one third participant⁹⁵, to the inclusion in the United States' appellant's submission of arguments that, in Canada's view, impugn certain evidence relied upon by the Panel, and to the inclusion of what Canada regards as new evidence that was not before the Panel. Canada submits that these arguments and the alleged new evidence are outside the scope of appellate review by virtue of Article 17.6 of the DSU.

186. Canada requested a preliminary ruling on these issues⁹⁶, to which the United States objected on the grounds that Canada's claims are "meritless"⁹⁷ and because neither the DSU nor the Working Procedures permits such rulings.⁹⁸ We denied the request for a preliminary ruling⁹⁹ without ruling on the substance of the issues. We will address them here in turn.

A. Allegations of Flaws in the Notice of Appeal

187. Canada, supported by other participants, argues that the United States refers in its appellant's submission to four issues that were not included in the Notice of Appeal:

• the United States' contention in paragraph 40 of its appellant's submission that the Panel failed to meet its obligations under Article 11 of the DSU¹⁰⁰ because the Panel did not undertake an objective assessment of the matter before it;
   
• the United States' contention in paragraph 40 of its appellant's submission that the Panel failed to meet its obligations under Article 12.7 of the DSU¹⁰¹ because the Panel did not explain why it examined the burden that the measure creates on conditions of competition;
   
• the United States' contention in Section IV of its appellant's submission that the Panel exceeded its terms of reference¹⁰² by examining claims concerning the CDSOA "in combination" with other United States laws and regulations; and
   
• the United States' contention in Section VI of its appellant's submission that the Panel exceeded its terms of reference by issuing an "advisory opinion" on a measure that was not before it.

188. Canada submits that these "claims, allegations and requests for ruling"¹⁰³ are not properly before us because they were not included in the Notice of Appeal. According to Canada, Rule 20(2)(d) of the Working Procedures "requires a Notice of Appeal to include 'a brief statement of the nature of the appeal, including allegations of errors in the issues of law covered in the panel report and legal interpretations developed by the panel.'"¹⁰⁴ Canada argues that these requirements, "as well as the requirements of due process, mandate[ ] the United States to include in its Notice of Appeal all claims of error that the United States intends to raise."¹⁰⁵ Canada submits that "[b]y failing to include any reference to claims that the Panel violated Articles 7, 11 and 12.7 of the DSU, the United States is in breach of these requirements."¹⁰⁶ Canada asserts that these claims of error are very serious allegations that must not be made without proper notification to the appellees in the Notice of Appeal.¹⁰⁷ Finally, Canada requests that the claims with respect to Articles 7, 11 and 12.7 be struck from this appeal.

189. The United States clarified at the oral hearing that it is not requesting a finding that the Panel failed to act consistently with Articles 11 and 12.7 of the DSU. The United States explained that the reference in paragraph 40 of its appellant's submission to the Panel's failure to meet its obligations under Articles 11 and 12.7 of the DSU is merely an argument in support of its claim that the Panel erred in interpreting Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement .

190. As we have not been asked to make findings under Articles 11 and 12.7, we make no such findings. However, we observe that paragraph 40 of the United States' appellant's submission refers explicitly to the Panel's failure to meet its obligations under those provisions. The clear implication is that the United States was indeed making claims under Articles 11 and 12.7 of the DSU. We also note that the United States did not suggest in its letter of 8 November 2002, objecting to Canada's request for a preliminary ruling on the scope of appeal, that it was not requesting findings under those provisions. In our view, Canada and the other appellees were therefore justified in interpreting the United States' appellant's submission as if such claims were indeed being made by the United States. However, given the United States' explanation at the oral hearing that it was not pursuing such claims, the issue of whether they were notified in the Notice of Appeal has become moot.

191. We look next to the other two matters raised by Canada and other participants as not being in the Notice of Appeal and hence not properly before us, namely the United States' arguments in Sections IV and VI of its appellant's submission that the Panel exceeded its terms of reference. The United States contends¹⁰⁸ that its Notice of Appeal is in accordance with Rule 20(2)(d) and relies on our interpretation of that Rule in US - Shrimp, where we said:

The Working Procedures for Appellate Review enjoin the appellant to be brief in its notice of appeal in setting out "the nature of the appeal, including the allegations of errors". We believe that, in principle, the "nature of the appeal" and "the allegations of errors" are sufficiently set out where the notice of appeal adequately identifies the findings or legal interpretations of the Panel which are being appealed as erroneous. The notice of appeal is not expected to contain the reasons why the appellant regards those findings or interpretations 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 legal arguments in support of the allegations of error are, of course, to be set out and developed in the appellant's submission.¹⁰⁹ (original emphasis)

192. According to the United States, 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."¹¹⁰ The United States contends that the claims regarding the Panel's exceeding its terms of reference are included in the Notice of Appeal because they fall within the United States' claim set out in the Notice that the Panel erred in its interpretation of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . In any event, the United States stated at the oral hearing that, as a question of jurisdiction, it is open to the Appellate Body to examine whether a panel exceeded its terms of reference even if no such claim is included in the Notice of Appeal.

193. In examining these submissions, we look first to Rule 20(2) of the Working Procedures, which prescribes what is to be included in the Notice of Appeal. In addition to the title of the panel report under appeal, the name of the appellant, and the service address, paragraph (d) states that a Notice of Appeal shall include:

� a brief statement of the nature of the appeal, including the allegations of errors in the issues of law covered in the panel report and legal interpretations developed by the panel.

194. We have examined this provision in previous appeals.¹¹¹ Most recently, in US - Countervailing Measures on Certain EC Products, we said:

[O]ur previous rulings have underscored the important balance that must be maintained between the right of Members to exercise the right of appeal meaningfully and effectively, and the right of appellees to receive notice through the Notice of Appeal of the findings under appeal, so that they may exercise their right of defence effectively. �[The] requirements under Rule 20(2) serve to ensure that the appellee also receives notice, albeit brief, of the "nature of the appeal" and the "allegations of errors" by the panel.¹¹²

195. The underlying rationale of Rule 20(2)(d) is thus to require the appellant to provide notice of the claims of error that the appellant intends to argue on appeal.¹¹³

196. Turning to the Notice of Appeal filed in this case, the United States maintains that "[e]ach of the U.S. arguments claimed by Canada to be outside the scope of the appeal fall squarely within the matters raised in the first numbered paragraph of the U.S. notice."¹¹⁴

197. We examine first the arguments in Section IV of the United States' appellant's submission, which is entitled "The Panel Exceeded Its Terms of Reference By Examining Claims Concerning The CDSOA In Combination With Other U.S. Laws And Regulations." In that Section, the United States submits that 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), violate Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.¹¹⁵ The United States argues that the Panel's terms of reference are limited to examining whether the CDSOA, as such, is WTO-consistent, and do not permit an examination of whether the CDSOA, in combination with any other United States law or regulation, violates United States obligations' under the WTO Agreement .

198. Canada, supported by other appellees¹¹⁶ and one third participant¹¹⁷, alleges that Section IV of the United States' appellant's submission relates to a claim as to "the exercise of jurisdiction by the Panel under Article 7 of the DSU"¹¹⁸, and that such claim was not included in the Notice of Appeal. Canada asks us to exclude this claim from the scope of appeal. The United States responds that "[b]ecause the U.S. notice of appeal covers the Panel's findings and related legal interpretations regarding Antidumping Agreement Article 18.1 and SCM Agreement 13.2 [sic], the matters addressed in Section IV are plainly covered by the notice of appeal."¹¹⁹

199. A plain reading of the first numbered paragraph of the United States' Notice of Appeal, which the United States submits includes the claim that the Panel exceeded its terms of reference by ruling on the CDSOA in combination with other laws, reveals that there is no explicit reference to Article 7 of the DSU. Nor is there any allegation, explicit or implied, that the Panel exceeded its terms of reference with respect to any of its findings. Indeed, no such claim is apparent in any of the paragraphs of the Notice of Appeal.

200. We do not agree with the United States' contention that the first numbered paragraph of the United States' Notice of Appeal, referring generally to the Panel's failure properly to interpret Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement , "plainly covers" a claim that the Panel exceeded its terms of reference. As we have said, the Notice of Appeal "serve[s] to ensure that the appellee also receives notice, albeit brief, of the 'nature of the appeal' and the 'allegations of errors' by the panel."¹²⁰ Generic statements such as that relied upon by the United States cannot serve to give the appellees adequate notice that they will be required to defend against a claim that the Panel exceeded its terms of reference. This is particularly so for procedural errors; it can be especially difficult to discern a claim of procedural error by a panel from general references to panel findings or from extracts of a panel report, because allegations of procedural error by a panel may not necessarily be raised until the appellate stage.

201. Therefore, we agree with Canada and other participants that the Notice of Appeal does not provide adequate notice that a claim that the Panel exceeded its terms of reference in ruling on the CDSOA in combination with other laws would be argued by the United States on appeal.

202. Canada, supported by other appellees¹²¹ and one third participant¹²², also challenges the United States' arguments set out in Section VI of the United States' appellant's submission as being outside the scope of appeal because they were not included in the Notice of Appeal. Section VI of the United States' appellant's submission is entitled "The Panel Erred in Issuing an Advisory Opinion on a Measure Outside of Its Terms of Reference." The United States contends in that Section that the Panel rendered an "advisory opinion" by making a finding on a measure that was not before it, when it said:

Even 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 - for the reasons set forth in the preceding paragraph - that offset payments may be made only in situations presenting the constituent elements of dumping.¹²³

203. The United States argues that because there was no measure before the Panel regarding payments funded directly from the United States Treasury, the Panel had no authority to make this finding.

204. Canada, supported by other participants, alleges that Section VI of the United States' appellant's submission relates to a claim as to "the exercise of jurisdiction by the Panel under Article 7 of the DSU"¹²⁴, which was not in the Notice of Appeal. Canada requests us to rule that this claim of the United States is outside the scope of appellate review. The United States responds that "[b]ecause the U.S. notice of appeal covers the Panel's findings and related legal interpretations regarding Antidumping Agreement Article 18.1 and SCM Agreement Article 13.2 [sic], the matters addressed in Section VI are well within the scope of the notice of appeal."¹²⁵

205. We have already explained that we see no reference, explicit or implicit, in the Notice of Appeal regarding the Panel's exceeding its terms of reference. Therefore, our reasoning above applies equally to the United States' claim regarding the alleged advisory opinion in the Panel Report.

206. Having concluded that the Notice of Appeal does not provide notice to the appellees that the United States intended to make claims that the Panel exceeded its terms of reference, the next question is whether we are precluded from examining these claims on appeal. As we have explained, if an appellee has not received sufficient notice in the Notice of Appeal that a particular claim will be advanced by the appellant, that claim normally will be excluded from the appeal. However, we observe that the United States has argued in this appeal that we are entitled to examine questions of jurisdiction in any event, even if not included in the Notice of Appeal.¹²⁶

207. We agree with the United States' position. We have stated previously, in relation to a panel's obligation to address issues related to its jurisdiction, that:

� panels have to address and dispose of certain issues of a fundamental nature, even if the parties to the dispute remain silent on those issues. In this regard, we have previously observed that "[t]he vesting of jurisdiction in a panel is a fundamental prerequisite for lawful panel proceedings." For this reason, panels cannot simply ignore issues which go to the root of their jurisdiction - that is, to their authority to deal with and dispose of matters. Rather, panels must deal with such issues - if necessary, on their own motion - in order to satisfy themselves that they have authority to proceed.¹²⁷ (footnote omitted)

208. In our view, the same reasoning applies in this case. As we have said, "[a]n objection to jurisdiction should be raised as early as possible"¹²⁸ and it would be preferable, in the interests of due process, for the appellant to raise such issues in the Notice of Appeal, so that appellees will be aware that this claim will be advanced on appeal. However, in our view, the issue of a panel's jurisdiction is so fundamental that it is appropriate to consider claims that a panel has exceeded its jurisdiction even if such claims were not raised in the Notice of Appeal.

209. It is convenient to proceed now with a consideration of the United States' claims that the Panel exceeded its terms of reference "by examining claims concerning the CDSOA in combination with other U.S. laws and regulations" and "in issuing an advisory opinion on a measure outside of its terms of reference."¹²⁹

210. Turning to the first of the United States' contentions, the Panel stated, in connection with its discussion on whether the CDSOA operates "against" dumping or a subsidy, that:

We agree that dumping over time may be evidence of a competitive advantage. However, the combination of anti-dumping duties and offset subsidies is not merely to level the playing field, but to transfer that competitive advantage to "affected domestic producer".¹³⁰ (emphasis added; footnote omitted)

211. In addition, the Panel said in a footnote:

Although our finding that the CDSOA constitutes "specific action against dumping" and subsidy rests on the adverse impact of the CDSOA on exporters/foreign producers engaged in dumping, that adverse impact does not result exclusively from the provision of offset payment subsidies (or the use of a subsidy). The adverse impact results from the combination of anti-dumping duties and offset payment subsidies in the particular circumstances of the CDSOA.¹³¹ (original underlining)

212. In our view, these statements do not constitute a finding by the Panel that was outside its terms of reference. The Panel was merely reflecting in its reasoning the fact that the CDSOA does not operate in a vacuum but, rather, operates in a context that includes other laws and regulations. The Panel's view was that the combination of anti-dumping duties (or countervailing duties) and CDSOA offset payments distorts the competitive relationship between dumped (subsidized) and domestic products, to the detriment of dumped (subsidized) products. This led the Panel to find that the CDSOA-alone-has an adverse bearing on dumping (subsidization) and, therefore, operates "against" dumping (subsidies) within the meaning of Article 18.1 of the Anti-Dumping Agreement (and Article 32.1 of the SCM Agreement ). Therefore, we dismiss the claim of the United States that the Panel exceeded its terms of reference by examining claims concerning the CDSOA "in combination" with other United States laws and regulations.

213. We turn next to the United States' contention that the Panel erred in issuing an "advisory opinion" on a measure outside of its terms of reference. The United States takes issue with the following statement by the Panel:

Even 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 - for the reasons set forth in the preceding paragraph - that offset payments may be made only in situations presenting the constituent elements of dumping.¹³²

214. We note that the Panel made this observation in response to the United States' argument that the fact that CDSOA distributions are funded by proceeds from anti-dumping and countervailing duties does not render the CDSOA a "specific action against dumping."¹³³ The Panel reasoned that, even if the offset payments were funded directly from the United States Treasury, and in an amount unrelated to the collected duties, it would still "reach the conclusion � that offset payments may be made only in situations presenting the constituent elements of dumping."¹³⁴ We do not agree with the United States that, in making this statement, the Panel was making a finding on a matter that was outside the Panel's terms of reference. In our view, the Panel was simply making an observation to make it abundantly clear that its finding was in no way based on the fact that offset payments are funded from collected anti-dumping duties. Therefore, we dismiss the United States' claim that the Panel issued an "advisory opinion" exceeding its terms of reference.¹³⁵

B. Allegations Regarding the Scope of Appellate Review Under Article 17.6 of the DSU

215. We turn next to the second procedural issue raised by Canada¹³⁶, supported by other appellees¹³⁷ and one third participant¹³⁸, namely the issue whether the United States included arguments and evidence in its appellant's submission that are outside the scope of appellate review by virtue of Article 17.6 of the DSU. Specifically, Canada points to the comments in paragraphs 120 and 121 of the United States' appellant's submission regarding two letters referred to in paragraphs 7.62 and 7.45 of the Panel Report. In addition, Canada contends that footnotes 148 and 149 of the United States' appellant's submission refer to evidence that was not before the Panel.

216. In examining these questions, we recall first that Article 17.6 of the DSU provides:

An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.

1. The United States' Comments About Letters Before the Panel

217. In paragraphs 7.45 and 7.62 of the Panel Report, the Panel refers to a letter from a United States producer¹³⁹ which, according to the Panel, demonstrates that that producer changed its position concerning an application after initiation of the investigation, and decided to express support for the application to impose anti-dumping and countervailing duties in order to remain eligible for possible offset payment subsidies.¹⁴⁰ In the same paragraphs, the Panel also referred to a letter from a lawyer dated 8 January 2001¹⁴¹, which, according to the Panel, illustrates the potential for the CDSOA to encourage domestic producers to support applications for the imposition of dumping or countervailing duties.¹⁴² The Panel referred to those letters in paragraph 7.62 to support its finding that the United States failed to comply with its obligations under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement (more specifically, as regards the issue that the CDSOA operates as an incentive for domestic producers to support applications for imposition of anti-dumping and countervailing duties). These letters were also cited in paragraph 7.45 in relation to the finding that the CDSOA is contrary to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement (more specifically, as regards the question whether the CDSOA operates "against" dumping or subsidies within the meaning of those provisions).

218. The United States makes the following comments on the letters in paragraphs 120 and 121 of its appellant's submission:

Moreover, the examination of the letter reveals that the letter is not what the Panel claimed it to be. It is neither a letter from a "domestic producer" nor a letter changing positions. In fact, 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), citing a letter it submitted to the ITC over a month earlier in which the producer had already expressed support for the petition. Moreover, the company had entered an appearances before the ITC and Commerce as a "foreign manufacturer, producer, or exporter, or the United States importer, of subject merchandise" not a domestic producer. Thus, the letter is irrelevant to the issue for which the Panel cited it. Contrary to the claim of the Panel, the company did not change its position.¹⁴³ (footnotes omitted)

The Panel also cited a letter in which a U.S. producer purportedly urged other domestic producers to support a petition against Canadian softwood lumber imports by citing the CDSOA. Examination of the letter referencing the CDSOA, however, 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 U.S. law including the CDSOA. Importantly, the letter counsels that petitioners/supporters cannot count on obtaining funds under the CDSOA. The letter does not try to use the CDSOA to induce other domestic producers to support a petition. It certainly does not promise CDSOA disbursements if domestic producers support the petition. Furthermore, there is no indication that the letter actually had the effect of influencing any domestic producers to support the petition, much less to support a petition it otherwise would not but for the potential to become eligible for CDSOA offsets.¹⁴⁴ (original emphasis; footnotes omitted)

219. Canada agrees that the two letters referred in paragraphs 120-121 of the United States appellant's submission were in evidence before the Panel. Canada's objection is that the United States is prohibited by virtue of Article 17.6 of the DSU from challenging the "credibility and weight the Panel attached to the two letters."¹⁴⁵ Canada argues that the Panel's statements about the letters did not form part of its legal reasoning. Therefore, according to Canada, we cannot consider the United States' explanations about the nature of the letters because there is "no question of legal characterisation by the Panel of facts before it in respect of the two letters".¹⁴⁶

220. We do not regard the United States' comments in paragraphs 120-121 as impugning the Panel's factual findings on the two letters. In our view, the United States' comments form part of its challenge to the Panel's legal conclusions that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement , as well as with Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement . Whether such findings are supported by those letters is an issue of law, properly raised by the United States in its Notice of Appeal, on which we have the authority to decide under Article 17.6 of the DSU.

2. Allegations of New Evidence in Footnotes 148 and 149

221. In footnotes 148 and 149 of the United States' appellant's submission, the United States cites various documents in connection with its challenge to the Panel's conclusions about the import of the two letters referred to above, noting that they are "available on the public record".¹⁴⁷ According to Canada¹⁴⁸, supported by other participants¹⁴⁹, the documents constitute new evidence that was not before the Panel and, consequently, our consideration of that evidence is beyond the scope of appellate review by virtue of Article 17.6 of the DSU.

222. We agree with the submission of Canada. It is not disputed that footnotes 148 and 149 of the United States' appellant's submission refer to documents that were not part of the Panel record. The United States submits that it referred to the documents "to provide the Appellate Body with a greater understanding of the facts involved in the dispute".¹⁵⁰ However, Article 17.6 is clear in limiting our jurisdiction to issues of law covered in panel reports and legal interpretations developed by panels. We have no authority to consider new facts on appeal. The fact that the documents are "available on the public record" does not excuse us from the limitations imposed by Article 17.6. We note that the other participants have not had an opportunity to comment on those documents and, in order to do so, may feel required to adduce yet more evidence. We would also be precluded from considering such evidence. We find, therefore, that the documents referred to in footnotes 148 and 149 of the United States' appellant's submission that were not part of the Panel record, constitute new evidence. Consequently, by virtue of Article 17.6 of the DSU, we are precluded from taking those documents into account in deciding this appeal.

To continue with VI. Issues Raised in This Appeal

Return to Index

90 Supra, paras. 161-163.

91 Australia, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand join Canada in respect of allegations regarding the non-inclusion of claims under DSU Articles 7, 11 and 12.7. In addition, Brazil joins Canada in respect of allegations regarding the non-inclusion of claims under Article 7 of the DSU.

92 Norway.

93 The Notice of Appeal is attached as Annex I to this Report.

94 Australia, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand.

95 Norway.

96 Letter dated 5 November 2002 from the Permanent Representative of Canada to the Presiding Member (hereinafter, Canada's letter dated 5 November 2002). A letter was submitted jointly on 8 November 2002 by the European Communities, India, Indonesia and Thailand, in support of Canada's request for a preliminary ruling. Japan also filed a letter on 8 November 2002 in support of Canada's request for a preliminary ruling.

97 United States' letter dated 8 November 2002.

98 Ibid.

99 Letter from the Director of the Appellate Body Secretariat dated 8 November 2002.

100 Article 11 states in relevant part:

� a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.