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WORLD TRADE
ORGANIZATION

WT/DS217/R
WT/DS234/R
16 September 2002

(02-4742)

  Original: English

UNITED STATES – CONTINUED DUMPING AND SUBSIDY
OFFSET ACT OF 2000


Report of the Panel


The report of the Panel on United States – Continued Dumping and Subsidy Offset Act of 2000 is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 16 September 2002 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.


Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
 

TABLE COF CONTENTS


I. INTRODUCTION

II. FACTUAL ASPECTS

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. COMPLAINING PARTIES

B. UNITED STATES

IV. ARGUMENTS OF THE PARTIES

A. FIRST WRITTEN SUBMISSION OF THE COMPLAINING PARTIES

1. Australia 

2. Brazil 

3. Canada

4. Chile and Japan

5. European Communities, India, Indonesia and Thailand

6. Korea 

7. Mexico 

B. FIRST WRITTEN SUBMISSION OF THE UNITED STATES

C. FIRST ORAL STATEMENTS OF THE COMPLAINING PARTIES

1. Australia 

2. Brazil

3. Canada

4. Chile

5. European Communities

6. India

7. Indonesia

8. Japan

9. Korea

10. Mexico

11. Thailand 

D. FIRST ORAL STATEMENT OF THE UNITED STATES

E. ANSWERS OF COMPLAINANTS TO QUESTIONS FROM THE PANEL

1. Australia

2. Brazil 

3. Canada

4. Chile 

5. European Communities, India, Indonesia, Thailand 

6. Japan 

7. Korea

8. Mexico

F. ANSWERS OF THE UNITED STATES TO QUESTIONS FROM THE PANEL, CHILE AND THE EUROPEAN COMMUNITIES

1. Answers of the United States to questions from the Panel

2. Answers of the United States to questions from Chile

3. Answers of the United States to questions from the European Communities

G. SECOND WRITTEN SUBMISSIONS OF THE COMPLAINING PARTIES

1. Australia

2. Brazil 

3. Canada 

4. Chile and Japan

5. European Communities, India, Indonesia and Thailand

6. Korea

7. Mexico 

H. SECOND WRITTEN SUBMISSION OF THE UNITED STATES 

I. SECOND ORAL STATEMENTS OF THE COMPLAINING PARTIES

1. Australia

2. Brazil 

3. Canada

4. Chile

5. European Communities

6. India

7. Indonesia

8. Japan

9. Korea

10. Mexico

11. Thailand

J. SECOND ORAL STATEMENT OF THE UNITED STATES

K. COMPLAINING PARTIES' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE SECOND MEETING

1. Australia

2. Brazil

3. Canada 

4. Chile

5. European Communities, India, Indonesia and Thailand

6. Japan

7. Korea

8. Mexico

L. UNITED STATES' ANSWERS TO QUESTIONS FROM THE PANEL AFTER THE SECOND MEETING

V. ARGUMENTS OF THE THIRD PARTIES

VI. INTERIM REVIEW


A. UNITED STATES 

B. MEXICO

C. CANADA 

D. AUSTRALIA

E. JAPAN 

F. EUROPEAN COMMUNITIES 

G. KOREA 

VII. FINDINGS

A. PROCEDURAL ISSUES 

1. Submission of new evidence

2. Issuance of separate reports 

B. AD ARTICLE 18.1 AND SCM ARTICLE 32.1, AND PARAGRAPHS 2 AND 3 OF GATT ARTICLE VI – SPECIFIC ACTION AGAINST DUMPING/SUBSIDY

1. Introduction 

2. The standard for determining whether or not a measure constitutes a "specific action against dumping" 

3. Does the CDSOA act specifically in response to dumping, in the sense that CDSOA payments may be made only in situations presenting the constituent elements of dumping? 

4. Is the CDSOA a specific action against dumping? 

5. Is the CDSOA permitted by footnotes 24 and 56 of the AD and SCM Agreements respectively?

6. Conclusion

C. AD ARTICLE 5.4/SCM ARTICLE 11.4 - STANDING

1. Arguments of the parties 

2. Evaluation by the Panel

3. Conclusion 

D. AD ARTICLE 8.3/SCM ARTICLE 18.3 - UNDERTAKINGS

1. Arguments of the parties 

2. Evaluation by the Panel 

E. DEVELOPING COUNTRY ISSUE – AD ARTICLE 15

1. Arguments of the parties

2. Evaluation by the Panel

F. AD ARTICLE 18.4/SCM ARTICLE 32.5 & WTO ARTICLE XVI:4 - NECESSARY STEPS TO ENSURE CONFORMITY 

1. Arguments of the parties 

2. Evaluation by the Panel 

G. ADVERSE EFFECTS - SCM ARTICLE 5

1. Arguments of the parties

2. Evaluation by the Panel

H. SCM ARTICLES 4.10 AND 7.9

1. Arguments of the parties 

2. Evaluation by the Panel 

I. GATT ARTICLE X:3(A)

1. Arguments of the parties 

2. Evaluation by the Panel

3. Conclusion 

VIII. CONCLUSIONS AND RECOMMENDATION  


LIST OF ANNEXES

ANNEX A

Third Party Submissions and Oral Statements

Contents

Page

Annex A-1      Third Party Submission of Argentina

A-2

Annex A-2      Third Party Oral Statement of Argentina

A-8

Annex A-3      Third Party Submission of Hong Kong, China

A-13

Annex A-4      Third Party Oral Statement of Hong Kong, China

A-22

Annex A-5      Third Party Submission of Israel

A-24

Annex A-6     Third Party Submission of Norway

A-27

Annex A-7      Third Party Oral Statement of Norway

A-35

I. INTRODUCTION

1.1 On 21 December 2000, Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand, made a joint request for consultations with the United States of America under Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”), Article XXII:1 of the GATT, Articles 17.2 and 17.3 of the Anti-Dumping Agreement, and Articles 7.1 and 30 of the Subsidies and Countervailing Measures Agreement (the "SCM Agreement") regarding the amendment to the Tariff Act of 1930 signed into law by the President on 28 October 2000 with the title of "Continued Dumping and Subsidy Offset Act of 2000" (WT/DS217/1). On 6 February 2001, consultations were held in Geneva, but failed to resolve the dispute.

1.2 On 21 May 2001, Canada and Mexico requested consultations with the United States pursuant to Article 4 of the DSU, Article XXII:1 of GATT 1994, Articles 7.1 and 30 of the SCM Agreement and Article 17 of the Anti-Dumping Agreement regarding the same matter (WT/DS234/1). Consultations were held on 29 June 2001 in Geneva, but the parties failed to reach a mutually satisfactory resolution of the dispute.

1.3 On 12 July 2001, Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand requested the establishment of a panel pursuant to Articles 4.7 and 6 of the DSU, Article XXIII of the GATT 1994, Article 17 of the Anti-Dumping Agreement and Article 30 of the SCM Agreement, in accordance with the standard terms of reference provided for in Article 7.1 of the DSU (WT/DS217/5). At its meeting of 23 August 2001, the Dispute Settlement Body (the “DSB”) established the Panel.

1.4 On 10 August 2001, Canada and Mexico separately requested the establishment of a panel with respect to the same matter pursuant to Articles 4.7 and 6 of the DSU, Article XXIII of GATT 1994, Article 17 of the Anti-Dumping Agreement and Article 30 of the SCM Agreement (WT/DS234/12 and WT/DS234/13). At its meeting of 10 September 2001, the DSB agreed to those requests and, pursuant to Article 9.1 of the DSU, referred the matter to the panel established on 23 August 2001 (WT/DS234/14).

1.5 The terms of reference of the Panel are:

“To examine, in the light of the relevant provisions in the covered agreements cited by Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand in document WT/DS217/5, by Canada in document WT/DS234/12 and by Mexico in document WT/DS234/13, the matters referred by Australia, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico and Thailand to the DSB in those documents and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.”

1.6 On 15 October 2001, Australia, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico and Thailand requested the Director-General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:

"If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panellists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request."

1.7 On 25 October 2001, the Director-General accordingly composed the panel as follows:
 
Chairman:

Members:
H.E. Mr. Luzius Wasescha
 
Mr. Maamoun Abdel-Fattah
Mr. William Falconer 

1.8 Argentina, Canada, Costa Rica, Hong Kong, China, Israel, Mexico and Norway reserved their third party rights in DS217, and were considered as third parties in the single Panel. Australia, Brazil, Canada (in respect of Mexico's complaint), the European Communities, India, Indonesia, Japan, Korea, Mexico (in respect of Canada's complaint) and Thailand reserved their third party rights in DS234.

1.9 The Panel met with the parties on 5 – 6 February 2002 and 12 March 2002. It met with the third parties on 6 February 2002.

1.10 The Panel submitted its interim report to the parties on 17 July 2002. The Panel submitted its final report to the parties on 2 September 2002.

II. FACTUAL ASPECTS

2.1 This dispute concerns the Continued Dumping and Subsidy Offset Act of 2000 (the “CDSOA” or the “Offset Act”), which was enacted on 28 October 2000 as part of the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act, 2001.1 The CDSOA amends Title VII of the Tariff Act of 1930 by adding a new section 754 entitled Continued Dumping and Subsidy Offset.2 Regulations prescribing administrative procedures under the Act were brought into effect on September 21, 2001.3

2.2 The CDSOA provides that :

Duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures. Such distribution shall be known as “the continued dumping and subsidy offset”.4

2.3 The term “affected domestic producers” means:5

a manufacturer, producer, farmer, rancher, or worker representative (including associations of such persons) that –

(A) was a petitioner or interested party in support of the petition with respect to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered, and

(B) remains in operation.

Companies, business, or persons that have ceased the production of the product covered by the order or finding or who have been acquired by a company or business that is related to a company that opposed the investigation shall not be an affected domestic producer.6

2.4 In turn, the term “qualifying expenditure” is defined by the CDSOA as “expenditure[s] incurred after the issuance of the anti-dumping duty finding or order or countervailing duty order in any of the following categories:

(A) Manufacturing facilities.
(B) Equipment.
(C) Research and development.
(D) Personnel training.
(E) Acquisition of technology.
(F) Health care benefits to employees paid for by the employer.
(G) Pension benefits to employees paid for by the employer.
(H) Environmental equipment, training or technology.
(I) Acquisition of raw materials and other inputs.
(J) Working capital or other funds needed to maintain production.”7

2.5 The CDSOA provides that the Commissioner of Customs shall establish in the Treasury of the United States a special account with respect to each order or finding8 and deposit into such account all the duties assessed under that Order.9 The Commissioner of Customs shall distribute all funds (including all interest earned on the funds) from the assessed duties received in the preceding fiscal year to affected domestic producers based on a certification by the affected domestic producer that he is eligible to receive the distribution and desires to receive a distribution for qualifying expenditures incurred since the issuance of the order or finding.10 Funds deposited in each special account during each fiscal year are to be distributed no later than 60 days after the beginning of the following fiscal year.11 The CDSOA and regulations prescribe that (1) if the total amount of the certified net claims filed by affected domestic producers does not exceed the amount of the offset available, the certified net claim for each affected domestic producer will be paid in full, and (2) if the certified net claims exceed the amount available, the offset will be made on a pro rata basis based on each affected domestic producer’s total certified claim.

2.6 Special accounts are to be terminated after “(A) the order or finding with respect to which the account was established has terminated; (B) all entries relating to the order or finding are liquidated and duties assessed collected; (C) the Commissioner has provided notice and a final opportunity to obtain distribution pursuant to subsection (c); and (D) 90 days has elapsed from the date of the notice described in subparagraph (C).” All amounts that remain unclaimed in the Account are to be permanently deposited into the general fund in the US Treasury.12

2.7 The CDSOA applies with respect to all anti-dumping and countervailing duty assessments made on or after 1 October 200013 pursuant to an anti-dumping order or a countervailing order or a finding under the Antidumping Act of 1921 in effect on 1 January 1999 or issued thereafter.14

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. COMPLAINING PARTIES

3.1 The complaining parties submit that the express purpose of the Offset Act is to remedy the "continued dumping or subsidisation of imported products after the issuance of anti-dumping orders or findings or countervailing duty orders". According to the complaining parties, with that objective, the Offset Act mandates the US customs authorities to distribute on an annual basis the duties assessed pursuant to a countervailing duty order, an anti-dumping order or a finding under the Antidumping Act of 1921 to the "affected domestic producers" for their "qualifying expenses" (these duties are referred to below as "offsets").

3.2 The complainants submit that the Offset Act constitutes mandatory legislation, which can itself be subject to WTO dispute settlement procedures since it leaves no discretion to the competent authorities which must pay the "offsets" whenever the conditions stipulated in the Offset Act are present.

3.3 The complaining parties argue that the "offsets" constitute a specific action against dumping and subsidisation that is not contemplated in the GATT, the Anti-Dumping Agreement (the "AD Agreement") or the SCM Agreement. Moreover, in the complaining parties' view, the "offsets" provide a strong incentive to the domestic producers to file or support petitions for anti-dumping or anti-subsidy measures, thereby distorting the application of the standing requirements provided for in the AD Agreement and the SCM Agreement. In addition, the complaining parties argue that the Offset Act makes it more difficult for exporters subject to an anti-dumping or countervailing duty order to secure an undertaking with the competent authorities, since the affected domestic producers will have a vested interest in opposing such undertakings in favour of the collection of anti-dumping or countervailing duties. In the view of the complaining parties this is not a reasonable and impartial administration of the US laws and regulations implementing the provisions of the AD Agreement and the SCM Agreement regarding standing determinations and undertakings.

3.4 For the above reasons, Australia15, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico and Thailand consider that the Act is, in several respects, in violation of the following provisions:

- Article 18.1 of the AD Agreement, in conjunction with Article VI:2 of the GATT and Article 1 of the AD Agreement;

- Article 32.1 of the SCM Agreement, in conjunction with Article VI.3 of the GATT and Articles 4.10, 7.9 and 10 of the SCM Agreement;16

- Article X (3)(a) of the GATT;

- Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement;

- Article 8 of the AD Agreement and Article 18 of the SCM Agreement; and

- Article XVI.4 of the Marrakesh Agreement establishing the WTO, Article 18.4 of the AD Agreement and Article 32.5 of the SCM Agreement.

3.5 The complaining parties submit that by being inconsistent with the above provisions, the Offset Act nullifies or impairs the benefits accruing to them under the cited agreements.

3.6 Furthermore, Mexico considers that the payments made under the Offset Act constitute specific subsidies within the meaning of Article 1 of the SCM Agreement, which causes "adverse effects" to its interests, in the sense of Article 5 of the SCM Agreement, in the form of nullification and impairment of benefits accruing directly or indirectly to Mexico. For this reason, Mexico considers that the Act is also in violation of Article 5 of the SCM Agreement.

3.7 India and Indonesia also submit that the CDSOA undermines AD Article 15 on special and differential treatment for developing country Members.

B. UNITED STATES

3.8 The United States argues that the CDSOA authorizes government payments and that the distributions made under the Act are consistent with GATT Article VI and the Anti-dumping and SCM Agreements because they are not actionable subsidies and are not “action against” dumping or a subsidy.

3.9 The United states submits that there is no evidence either that the CDSOA has been or will be administered in an unreasonable or partial manner (Art. X:3(a) of GATT 1994) so as to affect standing and undertaking determinations in anti-dumping and countervailing duty investigations. According to the United States, the complaining parties have failed to establish a prima facie case of a WTO violation, and in the absence of a specific violation of another WTO Agreement provision, the complaining parties’ claims under Article XVI:4 of the Marrakesh Agreement establishing the WTO, Article 18.4 of the Antidumping Agreement, and Article 32.5 of the SCM Agreement must also fail.

IV. ARGUMENTS OF THE PARTIES

4.1 The main arguments, presented by the parties in their written submissions, oral statements and answers to questions, are summarized below.

A. FIRST WRITTEN SUBMISSION OF THE COMPLAINING PARTIES

1. Australia

(a) Introduction

4.2 Australia, acting jointly and severally with a number of other Members, brings this dispute against the United States concerning the Continued Dumping and Subsidy Offset Act (“the Act”), which amends Title VII of the Tariff Act of 1930 (“the Tariff Act”) through the insertion of a new section 754. The Act was included in Public Law 106-387 (“the Agriculture Appropriations Act”), and was signed into law by the President of the United States on 28 October 2000. The Act applies to all anti-dumping and countervailing duty assessments made on or after 1 October 2000.

4.3 The Act as implemented provides that:

— duties assessed by the United States following the issue of a countervailing duty order, an anti-dumping duty order or a finding under the Antidumping Act of 1921

— shall be distributed

  • to any manufacturer, farmer, rancher, or worker representative (including associations of such persons) that

  • was a petitioner or interested party in support of the petition for that countervailing duty order, anti-dumping duty order or finding under the Antidumping Act of 1921; and

  • remains in operation;

  • for expenditure on approved items incurred in relation to the like product after the countervailing duty order, anti-dumping duty order or finding under the Antidumping Act of 1921 was issued.

(b) Legal Argument

(i) The Act is mandatory legislation

4.4 According to Australia, the Act leaves no discretion with respect to its implementation. The Act compels the distribution, by the Commissioner for Customs, of duties assessed pursuant to an anti-dumping order or finding or to a countervailing duty order. When considered in light of the findings of the Appellate Body in United States – Antidumping Act of 1916 (hereinafter US – 1916 AD Act), the Act is mandatory legislation within the meaning of the concept of mandatory as distinct from discretionary legislation as it has been developed and applied in both GATT and WTO jurisprudence. As such, the Act may be challenged in WTO dispute settlement proceedings.

(ii) The Act is inconsistent with Article 18.1 of the Anti-Dumping Agreement, in conjunction with Article VI:2 of the GATT 1994 and Article 1 of the Anti-Dumping Agreement

4.5 Australia argues that the scope of GATT Article VI:2 and Articles 1 and 18.1 of the Anti-Dumping Agreement was examined in detail in US – 1916 AD Act. According to Australia, in that case, the Appellate Body found that Article 18.1 of the Anti-Dumping Agreement, in conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement, are the only provisions applicable to a measure that is a specific action against dumping and prohibit any action that is not a definitive anti-dumping duty, a provisional measure or a price undertaking. To the extent that a measure provides for “specific action against dumping” other than those permissible responses, it will necessarily be inconsistent with Article 18.1 of the Anti-Dumping Agreement, read in conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement.

4.6 In Australia's view, an “anti-dumping duty order” within the meaning of the Act is the administrative instrument published by the relevant authority establishing the anti-dumping duty that may be imposed on a dumped product. It is the formal determination by the United States that there exists a situation presenting the constituent elements of dumping.

4.7 According to Australia, a finding under the Antidumping Act of 1921 within the meaning of the Act is the administrative instrument published by the relevant United States authority that formally determined that there existed a situation presenting the constituent elements of dumping. Although repealed in 1979, some findings under the Antidumping Act of 1921 continue in effect, and the United States continues to assess duties pursuant to those findings.

4.8 Australia argues that “Duties assessed pursuant to … an anti-dumping duty order, or a finding under the Antidumping Act of 1921” under the Act refers to duties that may only be assessed in response to situations presenting the constituent elements of dumping within the meaning of GATT Article VI:1, as elaborated by Article 2 of the Anti-Dumping Agreement. They are thus a “specific action against dumping of exports from another Member” within the meaning of Article 18.1 of the Anti-Dumping Agreement.

4.9 However, Australia submits, the Act does not mandate either a definitive anti-dumping duty, a provisional measure or a price undertaking, which are the only permissible responses to dumping provided by GATT Article VI, and in particular GATT Article VI:2, read in conjunction with the Anti-Dumping Agreement. Instead, the Act mandates that if duties are assessed:

- in response to situations presenting the constituent elements of dumping,

- and there exists injury, threat of injury or retardation caused by that dumping to an industry in the United States,

then those duties must be distributed to the domestic producers affected by the dumping conduct who supported the application for an anti-dumping duty investigation. According to Australia, by promulgating the Act, the United States has violated Article 18.1 of the Anti-Dumping Agreement, in conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement.

(iii) The Act is inconsistent with Article 32.1 of the SCM Agreement, in conjunction with Article VI:3 of the GATT 1994 and Articles 4.10, 7.9 and 10 of the SCM Agreement

4.10 In Australia's view, the Act mandates a specific action in response to situations presenting the constituent elements of subsidisation when considered in the light of the reasoning that underpinned the findings of the Panel and Appellate Body in US – 1916 AD Act.

4.11 Australia argues that the distribution of assessed duties is not simply a subsidy to producers but is contingent on, and linked to, positive determinations of countervailing duty orders. The duties are only distributed to affected producers who have supported the original petition and in situations where there has been a countervailing duty order issued. If duties are not collected, i.e., if there is no countervailing duty order, then the duties are not distributed to affected producers for eligible expenditure on the product which has been the subject of a countervailing duty investigation. The affected domestic producers will not receive a distribution of duties assessed unless they have supported the original petition and unless a special account has been established in response to a countervailing duty order. When the countervailing duty order is terminated, so too is the special account. The affected producers are no longer “entitled” or eligible to receive the duties assessed.

4.12 Australia asserts that the Act mandates action in response to situations presenting the constituent elements of subsidisation and is therefore a specific action against a subsidy within the meaning of Article 32.1 of the SCM Agreement, in conjunction with GATT Article VI. However, Australia notes, the Act does not mandate a countervailing duty, a provisional measure, a voluntary undertaking, or a countermeasure authorised by the DSB, which are the only responses to a subsidy permitted by GATT Article VI, read in conjunction with the SCM Agreement.

4.13 According to Australia, the Act ensures that both a countervailing duty and a counter-subsidy are applied to the benefit of affected domestic producers. The Act mandates a measure to counterbalance, or act against, the subsidy over and above the assessed level of subsidisation. The Act therefore mandates an additional form of relief contrary to Article 10 of the SCM, which provides that only one form of relief is available – either a countervailing duty or a countermeasure. The Act also imposes countermeasures on products from other Members not subject to the countervailing duty orders. The distribution of duties assessed to the affected domestic producers is based on qualifying expenditure incurred in relation to the product which has been the subject of a countervailing duty order. These distributed duties amount to counter-subsidies to affected domestic producers which affect the products of competing WTO Members other than those subject to the (original) countervailing duty order. Australia asserts that, as such, the offsets provided under the Act amount to counter-subsidies which affect the export of products of competing WTO Members not subject to the original countervailing duty order.

4.14 In Australia's view, the Act also mandates action which is to counterbalance the effects of a subsidy of another WTO Member without authorisation by the DSB. Australia argues that such action is only permissible where the subsidising Member has failed to implement a recommendation of the DSB regarding the challenged subsidy.

4.15 Australia submits that by promulgating the Act, the United States has violated its obligations under Article 32.1 of the SCM, in conjunction with GATT Article VI and Articles 4.10, 79 and 10 of the SCM.

(iv) The Act is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

4.16 Australia argues that the Act provides a direct and tangible financial incentive to domestic producers of the like product that is alleged to have been dumped or subsidised to support an application for an anti-dumping or countervailing duty investigation. According to Australia, the Act creates a systemic bias in favour of such an application succeeding, making it easier – indeed providing active encouragement – for the needed levels of industry support to be reached in a particular case. In the view of Australia, the Act does not accord either with the principle that the legal framework of a rules-based system must itself be impartial and objective so as not to encourage or discourage a particular outcome, or with the principle of good faith that informs the covered agreements. Australia submits that by promulgating the Act, the United States distorts, or threatens to distort, the requirement that an application be made “by or on behalf of the domestic industry”, and has violated Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

(v) The Act 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

4.17 Australia argues that by violating the provisions of the Anti-Dumping and SCM Agreements as outlined in Australia’s submission, the United States has also violated Article XVI:4 of the WTO Agreement, as well as Article 18.4 of the Anti-Dumping Agreement and/or Article 32.5 of the SCM Agreement, which each require a Member to ensure the conformity of its laws, regulations and administrative procedures with its WTO obligations.

2. Brazil

(a) Introduction

4.18 Brazil has brought this dispute against the United States to challenge the consistency of the Continued Dumping and Subsidy Offset Act of 2000 (hereinafter the “Byrd Amendment”)17 with United States obligations under the WTO Agreements. According to Brazil, this Act requires US authorities to distribute the proceeds of duties assessed pursuant to anti-dumping and countervailing duty orders among those domestic producers that supported the requests for the investigations which ultimately led to the imposition and assessment of such duties.

4.19 Brazil challenges the consistency of the Byrd Amendment with Article X:3(a) of the GATT 1994, Article VI of the GATT 1994 as interpreted by Articles 18.1, 5.4, 8.1 and 18.4 of the AD Agreement and Articles 10, 4.10, 7.9, 32.1, 11.4, 18.1 and 32.5 of the SCM Agreement, and Article XVI of the Agreement Establishing the WTO.

(b) Systemic issues raised by this proceeding

(i) Broadening the remedies available under WTO

4.20 Brazil argues that a finding by the panel that the Byrd Amendment is consistent with US WTO obligations under the GATT 1994, the AD Agreement and the SCM Agreement has implications that go far beyond these three agreements. In essence, such a finding would endorse the use of two forms of remedies by WTO Members to offset damages to their industries under the covered agreements: (1) the payment of monetary damages; and (2) the subsidization of injured industries in the importing country to allegedly offset damages from dumped or subsidized imports. In Brazil's view, since these are not remedies provided in the relevant agreements, a finding that such actions are consistent with those agreements is tantamount to a finding that, irrespective of the remedies available under WTO agreements, a government may unilaterally take whatever steps it deems appropriate to promote further deterrence of the complained of behaviour or to “offset” any adverse consequences of the complained of behaviour. Brazil argues that this is not limited to the agreements at issue in this proceeding, but would appear applicable to any agreements which authorize the use of tariffs as a mechanism to redress grievances.

(ii) Encouraging a proliferation in proceedings under the relevant agreements

4.21 Brazil asserts that there is little question that, if the Byrd Amendment is found to be consistent with the GATT 1994, the AD Agreement and the SCM Agreement, other countries will quickly follow the US lead. Member governments will have difficulty telling their aggrieved industries that they can not get Byrd Amendment like monetary damages and extra deterrent effects when industries in the largest economy in the world are enjoying these additional benefits. In short, according to Brazil, the Byrd Amendment provisions, without ever being negotiated by WTO Members or incorporated into any of the agreements, will become a part of the GATT 1994, the AD Agreement and the SCM Agreement.

4.22 Brazil argues that the proliferation of monetary damages will increase the incidence of anti-dumping and countervailing measures both in the United States and, increasingly as this practice proliferates, in other countries. Monetary damages make it more attractive for a corporation or trade association to commit resources to anti-dumping and countervailing duty investigations. According to Brazil, the additional “deterrent” effect claimed by the bill’s sponsors will also make anti-dumping and countervailing duty measures more attractive.

(c) The Byrd Amendment remedy provides an additional remedy for dumping and subsidization like the remedies under the Anti-Dumping Act of 1916 which were found to be inconsistent with US WTO obligations

(i) The remedies required under the Byrd Amendment are non-discretionary and mandatory and, therefore, actionable under WTO precedent

4.23 Brazil asserts that it is well established in the jurisprudence of both GATT and WTO panels that legislation can be challenged independently of its application in specific circumstances where that legislation is mandatory, leaves no discretion as to its application and implementation, and is inconsistent with WTO obligations of a Member. According to Brazil, the Byrd Amendment is mandatory and does not allow the US authorities to decide whether or not to distribute anti-dumping and countervailing duties to the parties that support the request for the imposition of such duties.

(ii) The remedy provided by the Byrd Amendment is unquestionably a specific action against dumping

4.24 Brazil argues that the panel and Appellate Body findings in United States – Anti-dumping Act of 1916 focused on whether Article VI of the GATT 1994 as interpreted by the AD Agreement limits specific actions against dumping to those actions provided for in Article VI or the AD Agreement.18 In reaching its conclusion, the Panel was quite explicit in the limitations on actions against dumping, stating “…that only measures in the form of anti-dumping duties may be applied to counteract dumping….”19 The Appellate Body reached an identical conclusion.”20

4.25 According to Brazil, the Byrd Amendment 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 United States – Anti-Dumping Act of 1916. Entitlement to the Byrd Amendment remedies is based entirely on a determination of dumping or subsidization under the relevant US laws implementing the AD and SCM Agreements.

(iii) The remedy provided by the Byrd Amendment is an additional remedy, like the remedy at issue in the Anti-dumping Act of 1916 proceeding

4.26 In the view of Brazil, the objective of anti-dumping measures is clearly articulated in Article VI:2 of the GATT 1994 when it states that anti-dumping duties are to be imposed “in order to offset or prevent dumping.” Thus, Brazil argues, the objective is remedial – the prevention of dumping or, where measures do not prevent dumping, to offset the dumping. The AD Agreement provides two remedies: (1) imposition of anti-dumping duties; and (2) price undertakings. Neither Article VI of GATT 1994 nor the AD Agreement contemplate an additional remedy that compensates the injured industry in the importing country by awarding damages for the past effects of the dumping.

4.27 Brazil asserts that in United States – Anti-Dumping Act of 1916, the panel decision was based on the fact that the law at issue provided “for other remedies than anti-dumping duties” and that this was not “in accordance with the provisions of GATT 1994” and “Article 18.1” of the AD Agreement.21 The imposition of fines or imprisonment and the recovery of damages were available under the 1916 Act, in addition to the imposition of anti-dumping duties. Thus, the remedy which the panel and Appellate Body found to be inconsistent with Article VI of the GATT 1994 and Article 18.1 of the AD Agreement included the very same remedy which is at issue in this proceeding, namely the awarding of monetary damages to parties that have been found to be injured by dumping. In Brazil's view, both the damages awarded by the Byrd Amendment and the damages awarded under the 1916 Act are based on a demonstration of the constituent elements of dumping. According to Brazil, the fact that, under the Byrd Amendment, “damages” are paid out of the revenues of anti-dumping duties collected and that, under the 1916 Act, “damages” are paid directly by the entities involved in the dumping, is irrelevant. In both cases, the remedy being applied is a remedy intended to offset the injury by rewarding damages to the complaining parties.

4.28 Brazil argues that, according to its sponsors, the Byrd Amendment was intended to provide an additional “deterrent” to dumping and subsidization in the form of exporting entities assisting competitors at their own expense.22 Also described as a “double hit”23, the objective clearly was to provide an additional or greater remedy than just anti-dumping or countervailing duties.

(iv) The logic of the Appellate Body finding in United States – Anti-Dumping Act of 1916 applies equally to the Byrd Amendment’s distribution of the revenues from countervailing duties to complaining US entities

4.29 Brazil asserts that Article 32.1 of the SCM Agreement is the counterpart of Article 18.1 of the AD Agreement and prohibits Members from taking “specific action against a subsidy” of another Member, unless that action is consistent with Article VI:3 of the GATT 1994, as interpreted by the SCM Agreement. Thus, Brazil argues, under the reasoning of United States – Anti-Dumping Act of 1916, the same limitations apply to subsidy remedies as apply to anti-dumping remedies.

(v) The Byrd Amendment remedies are more available than remedies under the 1916 Act

4.30 According to Brazil, the remedies available under the Anti-Dumping Act of 1916 are not as easily obtained as the remedies under the Byrd Amendment. As discussed in the Report of the Appellate Body, the 1916 Act imposes certain requirements, in addition to showing the existence of injurious dumping, on parties seeking damages and on the government in order to obtain the requested civil or criminal remedy.24 Indeed, the requirements of the Anti-Dumping Act of 1916 are such that the act has seldom been used and there have never been court imposed sanctions or remedies.25 In contrast, Brazil argues, the Byrd Amendment is applicable to every situation where anti-dumping and/or countervailing duties are imposed and all companies that supported the request for the investigation which led to the imposition of duties are automatically eligible to receive the monetary damage payments.

(d) The Byrd Amendment compromises objective assessments in determining whether the request for an investigation has the minimum level of support required for initiation under Article 5.4 of the AD agreement and Article 11.4 of the SCM Agreement

(i) Under the Byrd Amendment, it is impossible for US authorities to objectively and impartially determine whether support is based on the possible monetary rewards or the desire to seek imposition of anti-dumping and countervailing duties

4.31 Brazil argues that, under Article 17.6 of the AD Agreement, authorities are held to certain standards in their determinations of the facts, specifically whether authorities’ establishment of the facts was proper and whether their evaluation was unbiased and objective. Article X:3 of the GATT 1994, applicable to investigations under either the AD or SCM Agreements, requires that laws, regulations, decisions and rulings be administered in an “impartial and reasonable manner.” The Appellate Body has stated that the notion of “good faith” is incorporated into Article X:3 and “informs the provisions of the Anti-Dumping Agreement, as well as other covered agreements.”26 Thus, there is clearly a threshold of objectivity, impartiality and good faith in acting under the relevant agreements.

4.32 According to Brazil, both Article 5.4 of the AD Agreement and 11.4 of the SCM Agreement require authorities to make determinations regarding the level of support for the request for investigations under the AD and SCM Agreements respectively.27 The relevant request is seeking an investigation that will result in the imposition of remedial measures to offset the effects of any injurious dumping or subsidization found during the investigation. The question under both Articles is whether there is sufficient industry support for the initiation of investigations to obtain such remedial measures.

4.33 Brazil submits that the ability of US authorities to make such a determination in light of the existence of the Byrd Amendment is seriously, indeed fatally, compromised. The result of either an anti-dumping or a countervailing duty investigation under the Byrd Amendment will also affect whether those parties supporting the request for an investigation are eligible, if the investigation results in the assessment of either anti-dumping or countervailing duties, for the monetary benefits provided under the Byrd Amendment. In Brazil's view, the requesting parties under the Byrd Amendment no longer have a single interest in pursuing the investigation, namely the imposition of anti-dumping or countervailing measures. These parties now have an additional interest, namely qualifying for the monetary benefits provided by the Byrd Amendment. Logically, Brazil argues, there is no way that US authorities can distinguish whether support for a request for an investigation is motivated by the interest in the remedial effects of the anti-dumping and countervailing measures or by the desire not to forego the possible monetary benefits of an investigation in the form of Byrd Amendment payments.

(ii) Monetary damages will also increase the likelihood of adding respondents in order to increase the revenues generated by the anti-dumping and/or countervailing duties, usually to the detriment of smaller suppliers from developing countries

4.34 Brazil asserts that the question of industry support for a request under Article 5.4 of the AD Agreement and/or Article 11.4 of the SCM Agreement not only relates to the level of industry support for a request, but also to the scope of that request in terms of the responding countries to be included. Because of the ability of authorities to cumulatively assess the effects of imports from multiple sources under Article 3.3 and 15.3 of the AD and SCM Agreements respectively, requesting industries have substantial discretion in determining which countries and how many countries to include within the scope of the request. Where anti-dumping and/or countervailing measures are the sole issue, requesting parties may not wish to expend the additional resources necessary to develop information on dumping from smaller sources. The requesting parties may well consider that the costs outweigh the benefits of pursuing these additional countries. However, Brazil argues, with the possibility of now collecting monetary damages on each additional entry of covered merchandise, the evaluation of the requesting industry may well be altered. According to Brazil, the question is not solely whether measures are required on one or more additional suppliers (or groups of negligible suppliers which together account for more than 7 per cent of imports, as permitted under Article 5.8 of the AD Agreement), but also whether the inclusion of one or more additional suppliers will increase the duty revenues and, therefore, the amount of monetary damages available for distribution to the industry. In Brazil's view, it is thus quite possible that the decision to include specific respondents is as dependent, if not more dependent, on the prospect of monetary rewards as it is on the need for anti-dumping or countervailing measures. Brazil argues that this distortion is most likely to adversely affect smaller suppliers and developing countries. Large suppliers are always more likely to be included than small suppliers simply because of their impact on the market in terms of volume, import penetration and prices. Absent a monetary incentive, smaller suppliers are often left out of investigations because the cost of pursuing duties on these suppliers outweighs the benefits of any duties on such a small volume of supply.

(e) The Byrd Amendment compromises the ability of US authorities to terminate or suspend investigations pursuant to voluntary undertakings under Articles 8.1 and 18.1 of the AD and SCM Agreements respectively

4.35 Brazil argues that for the same reasons that the Byrd Amendment compromises the ability to determine the level of support for initiation of an investigation, it also compromises the ability to make determinations about the suspension or termination of investigations under Article 8.1 of the AD Agreement and Article 18.1 of the SCM Agreement. By virtue of the Byrd Amendment, the monetary damages awarded from the proceeds of the anti-dumping or countervailing duties collected have become part of the “remedy” in the United States under its laws implementing the AD and SCM Agreements respectively. In becoming a part of the “remedy”, the monetary damages also inevitably become part of the evaluation of whether the acceptance of voluntary undertakings in lieu of the imposition of duties is an acceptable alternative to address the underlying dumping and/or subsidization. According to Brazil, in becoming a part of this evaluation, the issue of monetary damages becomes an element not contemplated by either the AD or SCM Agreements and, therefore, compromises the ability of US authorities to evaluate voluntary undertakings in the manner required by these agreements.

(f) The Byrd Amendment prevents US authorities from administering the US anti-dumping and countervailing duty laws in a uniform, impartial and reasonable manner as required by Article X:3(a) of the GATT 1994

4.36 Brazil asserts that while it is clear that the Byrd Amendment violates substantive obligations of the GATT 1994, the AD Agreement and the SCM Agreement as set forth above, the Byrd Amendment also leads to the violation of the procedural and due process safeguards of Article X:3(a) of GATT 1994. Article X:3(a) imposes an obligation on Members to “administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings….” Furthermore, in United States – Stainless Steel the panel affirmed that the anti-dumping laws and regulations were “laws and regulations” within the meaning of Article X:1 of the GATT 1994 and, therefore, within the scope of the laws, regulations, decisions and rulings to which Article X:3(a) applies.28

4.37 According to Brazil, the Byrd Amendment fatally compromises the ability of US authorities to determine the level of industry support for the imposition of anti-dumping or countervailing measures. The issue of support is not limited to the determination of support for the initial requests under Articles 5.4 and 11.4 of the AD and SCM Agreements respectively. This issue, Brazil argues, arises, for example, under Commerce Department regulation 351.222 relating to the revocation of anti-dumping duty orders.29 Paragraph (g), for example, provides that the Secretary of Commerce may revoke an anti-dumping duty order where “producers accounting for substantially all of the production of the domestic like product to which the order…pertains have expressed a lack of interest in the order….”30 Similarly, under paragraph (i) of the same regulation, the Secretary may revoke an order where the “domestic interested parties have provided inadequate response to” the notice initiating a 5 year sunset review. According to Brazil, in these cases, the extent to which the industry is willing to “express interest” in the continuation of an anti-dumping order or to provide an “adequate response” in order to avoid the revocation of an existing anti-dumping duty order can be crucial to the outcome. Indeed, absent the expression of industry interest in a changed circumstances review or an adequate response in a sunset review, the anti-dumping duty order is automatically revoked.31 Yet, in Brazil's view, the industry position is inevitably influenced by the effects of their position – not opposing a revocation in a changed circumstances review and not providing adequate responses in a sunset review – on their ability to continue to enjoy monetary damages from the US authorities as long as the duties remain in place. According to Brazil, the US authorities in these situations have no greater ability to make an impartial, objective determination regarding the support, or lack thereof, for the continuation of anti-dumping measures than they have in evaluating the degree of support for the initial request. Thus, Brazil argues, how the law is administered in terms of revocations will vary depending on the extent to which a domestic industry is influenced by the desire to continue to obtain the monetary damage payments.

(g) The Byrd Amendment also violates United States’ obligations to bring its laws into conformity with the WTO Agreement

4.38 Brazil argues that based on the inconsistencies of the Byrd Amendment with the GATT 1994, the AD Agreement and the SCM Agreement, the US is in violation of Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) which requires each Member to “ensure conformity of its laws, regulations and administrative procedures with its obligations as provided in” the annexes to that agreement.

(h) Request for findings and recommendations

4.39 Based on the foregoing, Brazil respectfully requests that the Panel find that:

(a) The Byrd Amendment is inconsistent with US obligations under the various provisions of the GATT 1994, the AD Agreement, the SCM Agreement and the WTO Agreement;

(b) The specific actions to address dumping and subsidization in the Byrd Amendment are contrary to Articles VI:2 and VI:3 of the GATT 1994, Article 18.1 of the AD Agreement, and Articles 10, 4.10, 7.9 and 32.1 of the SCM Agreement;

(c) The financial incentives mandated in the Byrd Amendment and provided to domestic producers that support requests for anti-dumping and countervailing duty investigations result in inconsistencies with Articles 5.4 and 11.4 of the AD and SCM Agreements respectively;

(d) The financial incentives mandated in the Byrd Amendment and provided to domestic producers prevent US authorities from acting consistently with Articles 8.1 and 18.1 of the AD and SCM Agreements respectively;

(e) The Byrd Amendment results in administration of the US anti-dumping and countervailing duty laws in a manner inconsistent with the procedural safeguards of Article X:3(a) of the GATT 1994; and

(f) The cumulative violations specified above result in a violation of Article XVI of the WTO Agreement, Article 18.4 of the AD Agreement, and Article 32.5 of the SCM Agreement.

4.40 Brazil also requests that the panel recommend that the United States bring the law at issue into conformity with its obligations under the cited agreements and repeal the Byrd Amendment.

3. Canada

(a) Introduction

4.41 According to Canada, at issue in this dispute is the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA), a law enacted by the United States to amend Title VII of the Tariff Act of 1930.32 The CDSOA requires that duties assessed pursuant to anti-dumping or countervailing duty orders “shall” now be distributed to “affected domestic producers” who qualify for the distribution. To qualify, producers must file or support an anti-dumping or countervailing duty application (in US law, a “petition”) that results in the issuance of an order under which duties are collected. Therefore, Canada argues, in the CDSOA, the US government has enacted law that effectively pays producers to initiate or support petitions and, because duties can only be paid out if collected, to see that undertaking agreements are not entered into. Canada submits that the CDSOA breaches the United States’ WTO obligations in the following ways.

4.42 First, according to Canada, the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement) and the Agreement on Subsidies and Countervailing Measures (the SCM Agreement), in conjunction with the General Agreement on Tariffs and Trade 1994 (GATT 1994) limit the actions Members can take to offset injurious dumping and subsidization. In the context of dumping, the Appellate Body confirmed in United States – Anti-Dumping Act of 191633 that these actions are restricted to definitive anti-dumping duties, provisional measures and undertakings. In Canada’s view, the Appellate Body’s findings apply equally to limit actions that can be taken under the SCM Agreement and GATT 1994. The CDSOA provides for payments meant to offset injurious dumping or subsidization. Canada argues that this is a remedy that is not permitted. As such, Canada submits, it contravenes Article 18.1 of the Anti-Dumping Agreement in conjunction with Article VI of GATT 1994 and Article 1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement in conjunction with Article VI of GATT 1994 and Article 10 of the SCM Agreement.

4.43 Second, in Canada's view, the Anti-Dumping and SCM Agreements require that an investigating authority only initiate anti-dumping or countervailing duty investigations if they determine that the requisite level of industry support for the application exists. Creating monetary incentives for domestic producers to either bring or support petitions, in turn makes it more likely that the Department of Commerce (DOC) will find that a particular petition has sufficient support to initiate an investigation. According to Canada, in distorting the domestic industry support provisions of the Tariff Act of 1930, the CDSOA therefore, breaches Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

4.44 Third, Canada argues that the Anti-Dumping and SCM Agreements provide the means for the early resolution of anti-dumping and countervailing duty investigations through the acceptance of undertakings. Under US law, the acceptance of undertakings by the DOC is effectively tied to the relevant domestic industry consenting to any proposed agreement. In creating a financial reward that is only available in cases where duties are assessed, the CDSOA provides US producers with an incentive to withhold their consent. As a result, the CDSOA undermines the ability of the suspension agreement provisions of US law to operate in a manner consistent with the United States’ WTO obligations under Article 8.1 of the Anti-Dumping Agreement and Article 18.1 of the SCM Agreement.

4.45 Fourth, according to Canada, in addition to the substantive WTO violations identified above, the CDSOA also makes the administration of US anti-dumping and countervailing duty law unfair, unreasonable and partial, contrary to Article X:3(a) of GATT 1994. It creates incentives that make it more likely that domestic producers will bring or support petitions and thwart undertakings. This makes it impossible to have a reasonable and impartial administration of US trade remedy laws in breach of Article X:3(a) of GATT 1994.

4.46 Finally, Canada argues that for the same reasons identified above, the United States has failed to ensure that its laws, regulations and administrative procedures are in conformity with its WTO obligations as required by Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization (the WTO Agreement), Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement.

(b) The CDSOA

4.47 According to Canada, before the CDSOA was enacted, anti-dumping and countervailing duties were part of the general revenue of the United States. As a result of the CDSOA all duties assessed pursuant to anti-dumping or countervailing duty orders or a finding under the Antidumping Act of 1921, will now be distributed on an annual basis to affected domestic producers for qualifying expenditures.34 These payments are called “Offsets”.35

4.48 Canada asserts that to obtain an Offset, an applicant must submit a certification to the Assistant Customs Commissioner indicating it meets the requirements of the CDSOA. Only a petitioner or those domestic producers or associations who supported a petition (“affected domestic producers”) that resulted in an order imposing duties and remain in operation are eligible to receive an Offset. Affected domestic producers may only receive Offsets for “qualifying expenditures”. These are expenses incurred after an anti-dumping or countervailing duty order is issued that relate to the production of a product covered by the order and fall within an enumerated category.

4.49 Canada is of the view that the CDSOA is structured to ensure that all duties to be paid out to affected domestic producers are segregated into individual accounts based on individual orders issued by the DOC. At least 90 days before the end of a fiscal year, the Commissioner of Customs must publish in the Federal Register, a Notice of Intention to distribute Offsets. Affected domestic producers whose certified claims are accepted will subsequently receive payments from the account established for the order under which the claim is made. Any funds remaining in a Special Account are to be permanently deposited into the general fund of the US Treasury.

4.50 Canada asserts that proponents of the CDSOA have repeatedly explained why it was necessary to enact the legislation. Shortly after the CDSOA was enacted, Senator Byrd stated that, even where the DOC and the ITC impose duties to respond to unfair trade practices, such “compensatory duties are ineffective in providing relief to the domestic industry”, and again that “current law has simply not been strong enough… ”. Senator DeWine, who sponsored earlier versions of the Act, stated that those earlier versions “would take the 1930 Act one step further” beyond imposing duties and that it was “time we impose a heavier price on dumping and subsidization.” 36

4.51 Canada posits that the substance of the bill and the manner in which it was passed raised many concerns within Congress and the Administration. Congressional concerns were best summarized in the statement by Senator Nickles who called the CDSOA a mistake, and said it was improper for a trade provision to be added to an agriculture bill, that it could not have passed in the normal process, and that it was not consistent with WTO rights in “any way, shape or form.” President Clinton himself asked Congress to override the CDSOA and the Clinton Administration, in its Statement of Administration Policy, declared that the CDSOA was unnecessary because “the purpose of the anti-dumping and countervailing duties themselves” was to restore conditions of fair trade, and that the Act raised concerns regarding the consistency with US trade policy objectives including the potential for “trading partners to adopt similar mechanisms.” These statements demonstrate that US lawmakers are themselves aware of the trade distorting potential of the CDSOA as well as the fact that it is WTO inconsistent.37

(c) Legal argument

(i) WTO rules limit the action Members can take against dumping or subsidization

The CDSOA is a “specific action against dumping” that is not in accordance with GATT 1994 and the Anti-Dumping Agreement

4.52 Canada argues that in United States – Anti-Dumping Act of 1916, the Appellate Body found that to understand the requirements of Article VI it must be read together with the provisions of the Anti-Dumping Agreement. It also found that the scope of Article VI of GATT 1994 was clarified, in particular, by Article 18.1 of the Anti-Dumping Agreement. It stated that Article 18.1 of the Anti-Dumping Agreement prohibits all “specific action against dumping” that is not “in accordance with the provisions of the GATT 1994 as interpreted by [the Anti-Dumping] Agreement”. Moreover, the ordinary meaning of the phrase "specific action against dumping" is action that is taken in response to situations presenting the constituent elements of "dumping". It follows that "specific action against dumping" must, at a minimum, encompass actions that may be taken only when the constituent elements of "dumping" are present.

4.53 Canada asserts that the Appellate Body concluded that, to be permitted, these forms of actions are limited to definitive anti-dumping duties, provisional measures and price undertakings.38 As no other form of “action” is authorized by Article VI:2, as interpreted by the Anti-Dumping Agreement, any action against dumping taken in any other form will violate Article 18.1 of the Anti-Dumping Agreement and Article VI:2 of GATT 1994.39

4.54 According to Canada, Offsets will only be paid out after an anti-dumping or countervailing duty order has been issued and duties collected. Therefore, action under the CDSOA “is taken in response to a situation that presents the constituent elements of dumping”. As such the CDSOA constitutes a “specific action against dumping”.

4.55 Canada submits that this conclusion is evidenced in a number of ways related to the fact that the CDSOA segregates and distributes duties on the basis of particular orders. First, the Act and the Regulations require that duties under each order are kept in order-specific accounts. Second, only petitioners or domestic persons who supported a particular petition can receive payments from these accounts. Third, “affected domestic producers” can only receive Offsets for “qualifying expenditures” incurred after the issuance of a particular order. These expenditures must relate to the production of the product covered by that order. Finally, in situations where funds in a particular account are insufficient to pay all qualifying expenditures claimed, payments will be made on a pro rata basis.

4.56 According to Canada, that the CDSOA constitutes “specific action against dumping” is also evident in section 1002, in which Congress effectively declares that it is a “specific action against dumping” needed to “strengthen US trade laws” because the application of anti-dumping and countervailing duties fails to ensure that “market prices [return] to fair levels.” Moreover, as reflected in its title, the “Continued Dumping and Subsidy Offset Act of 2000” was designed to “offset” dumping or subsidies. “Offset” means “[a] counterbalance to or compensation for something else…”40 As the drafters of the CDSOA and its predecessors have repeatedly stated, Offsets are meant to compensate domestic producers for injury caused by continued dumping or subsidization of imports.

4.57 Canada posits that, having demonstrated that the CDSOA is a “specific action against dumping”, the question becomes whether the CDSOA is a “specific action against dumping” that is “in accordance with the provisions of [Article VI:2] of GATT 1994 as interpreted by the [Anti-Dumping] Agreement.” The CDSOA is clearly not a definitive anti-dumping duty, a provisional measure or an undertaking. Rather, the CDSOA is an action in the form of a payment meant to “offset” the effects of injurious dumping.41 Accordingly, it is inconsistent with Article 18.1 of the Anti-Dumping Agreement in conjunction with Article VI:2 of GATT 1994. The CDSOA also undermines the importance of the long-standing trade policy objective of Members, reflected in the Agreements, to limit actions against unfair trade practices to those that restore the “level playing field”, the competitive balance between domestic products and imports. As Article VI:2 makes clear, the aim of a duty is to neutralize trade distorting effects caused by dumping through applying a charge that removes the price differential between such imports and domestic goods.42

The CDSOA is a “specific action against a subsidy” that is not in accordance with GATT 1994 as interpreted by the SCM Agreement

4.58 In Canada’s view, the legal reasoning of the Appellate Body in United States - Anti-Dumping Act of 1916 applies equally to similar provisions regarding measures that can be taken to counteract injurious subsidization under the SCM Agreement and Article VI:3 of GATT 1994.

4.59 Canada argues that, except for replacing “subsidy” for “dumping of exports”, Article 32.1 of the SCM Agreement is identical to Article 18.1 of the Anti-Dumping Agreement. Like Article 18.1 of the Anti-Dumping Agreement in the context of Article VI:2 of GATT 1994, Article 32.1 of the SCM Agreement can be said to clarify the scope of application of Article VI of GATT 1994 in the context of subsidies. It follows that “specific action against a subsidy” should similarly be interpreted as any action taken “when the constituent elements of [subsidization] are present”. It also follows that, as in the case with Article 18.1, Article 32.1 can be interpreted to prohibit “specific action against a subsidy” that does not accord with Article VI of GATT 1994 as interpreted by the SCM Agreement.

4.60 Canada argues that the CDSOA operates in the context of the issuance of countervailing duty orders and the assessment and distribution of countervailing duties. As a result, for purposes of this challenge, the CDSOA raises issues in the context of Part V of the SCM Agreement and Article VI:3 of GATT 1994. Therefore, in Canada’s view, the issue as to whether the CDSOA might constitute a “countermeasure” that is an allowable “specific action against a subsidy”, under Parts II or III of the Agreement, is not necessarily raised in this dispute.43 However, to the extent the Panel considers these issues, Canada submits that the CDSOA cannot be considered to be a “specific action against a subsidy” that is in accordance with Parts II or III of the SCM Agreement because, at a minimum, it has not been authorized as a “countermeasure” by the DSB.

4.61 It is the view of Canada that Part V of the SCM Agreement, in conjunction with Article VI:3 of GATT 1994, provides for remedies similar to those permitted under the Anti-Dumping Agreement, in conjunction with Article VI:2 of GATT 1994. More specifically, Articles 10, 17, 18 and 19 of Part V of the SCM Agreement, in conjunction with Article VI of GATT 1994 allow for three types of “countervailing measures”, namely: countervailing duties, provisional measures and undertakings. Therefore, any “specific action against a subsidy” taken in the context of a countervailing duty investigation that is not one of these actions is not in accordance with Article VI of GATT 1994 and Part V of the SCM Agreement.44

4.62 Canada asserts that, as provided for in section 1003 of the CDSOA, Offsets will be made with respect to duties assessed under not only anti-dumping orders but also countervailing duty orders. Therefore, for the same reasons set out in the context of “specific action against dumping”,45 Canada submits that the CDSOA constitutes a “specific action against a subsidy”. As the CDSOA is also clearly neither a countervailing duty, provisional measure or an undertaking, it is a “specific action against a subsidy” that is not in accordance with Article VI of GATT 1994 as interpreted by the SCM Agreement. Accordingly, it violates Article 32.1 of the SCM Agreement in conjunction with Article VI of GATT 1994.

(ii) The CDSOA prevents the United States from making domestic industry support determinations in accordance with the Anti-Dumping or SCM Agreements

4.63 In Canada's view, Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement set out the requisite support needed from a domestic industry for a dumping or countervailing duty investigation to be initiated. They establish procedural requirements that must be complied with before an anti-dumping or countervailing duty investigation can be initiated.46

4.64 Canada submits that in agreeing to the text of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement, the Members agreed to requirements that mandate investigating authorities to both examine the support for an application before initiation and establish quantitative thresholds by which that examination is to be judged.47 As the United States itself has acknowledged, these provisions establish a “predictable standard for determining whether an application is supported by the domestic industry.”48 Therefore, any measure that undermines the “examination” required to establish the requisite level of industry support under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement must necessarily result in a Member being unable to fulfil the obligations imposed by these provisions.

4.65 In Canada's opinion, this conclusion is further supported by Article 17.6(i) of the Anti-Dumping Agreement. The Appellate Body has found, that in effect, Article 17.6(i) defines when investigating authorities can be considered to have acted inconsistently with the Anti-Dumping Agreement in the course of their “establishment” and “evaluation” of the relevant facts.49 It follows that an investigating authority’s determination of industry support levels must be “unbiased and objective” and “proper”. The Appellate Body has stated that, to be “objective”, an examination must conform to “the dictates of the basic principles of good faith and fundamental fairness” and that the relevant facts must “… be investigated in an unbiased manner, without favouring the interests of any interested party … .”50 Canada sees no reason why this reasoning would not apply to a determination of domestic industry support in a countervailing duty investigation.

4.66 Canada argues that one of the primary conditions for receiving an Offset under the CDSOA is that an affected domestic producer bring or support a petition. In other words, it effectively pays affected domestic producers to either bring or support petitions. It follows that if a particular US producer does not do one or the other, such producer not only foregoes receipt of an Offset but it also faces a situation in which its domestic competitors, who receive Offsets, gain a competitive advantage over them. These monetary incentives thus favour the interests of US domestic producers who bring or support petitions over those who do not and importers. They make it impossible for the DOC to determine what level of support a petition actually has because they necessarily distort levels of support or opposition to a particular petition.

4.67 According to Canada, this conclusion is supported by evidence of circumstances in which the CDSOA has already been used to garner support for petitions. For instance, prior to the filing of the petition in the current anti-dumping and countervailing duty investigations involving Canadian softwood lumber, a letter was circulated to US softwood lumber companies asking that they support the petition to commence a countervail investigation.51

4.68 Therefore, Canada submits, as a result of the CDSOA, establishment of the domestic support thresholds in the United States can no longer be relied on to mean what they were intended to mean: namely that the industry believes itself to be injured by imports and therefore feels that an investigation is necessary. In distorting the domestic industry support provisions of the Tariff Act of 1930 in this manner, the CDSOA breaches Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

(iii) The CDSOA prevents the United States from considering undertaking proposals in a manner consistent with the Anti-Dumping and SCM Agreements

4.69 Canada asserts that both the Anti-Dumping Agreement and the SCM Agreement allow domestic investigating authorities to suspend or terminate anti-dumping and countervailing duty investigations where exporters (or governments in the case of countervailing duty investigations) enter into voluntary agreements to stop the unfair trade practices alleged in a petition.

4.70 In Canada's view, by resolving issues raised in investigations through agreement, undertaking agreements restore competitive relationships between imports and domestic products with minimal disruption including that caused by the imposition of a duty. Measures that undermine the ability to enter into undertaking agreements, therefore, thwart the purpose reflected in the Members’ agreement to these provisions.

4.71 Canada notes that the ability of the DOC to enter into undertakings, or as they are called under US law, “suspension agreements”, is found in the Tariff Act of 1930.52 The DOC can only enter into such agreements if certain criteria are met. These criteria include the requirements that the DOC notify and consult with the petitioner regarding a proposed suspension agreement, provide the petitioner with a copy of the proposed agreement and allow the petitioner to submit comments on it and consult with the petitioner on those comments.

4.72 Canada argues that recent US case law makes clear that the DOC can effectively only enter into suspension agreements with the consent of the petitioner.53 As set out above, under the CDSOA, only an “affected domestic producer”, i.e., a person who either filed or supported a petition, is eligible to receive an Offset. These persons will only receive an Offset if a particular investigation is completed and an anti-dumping or countervailing duty order issued. In other words, these persons will only receive Offsets if a suspension agreement is not entered into. Thus, the CDSOA gives these persons a financial stake in seeing that a suspension agreement is not agreed to.

4.73 According to Canada, if Members were able to undermine the ability of their investigating authorities to enter into undertakings, Articles 8 and Article 18 would be rendered meaningless. As has been demonstrated, before the CDSOA was enacted, the DOC, effectively, could only enter into suspension agreements with the consent of the domestic industry involved. Now, with the CDSOA, not only does the DOC need domestic industry approval to enter into suspension agreements, but the US government has also enacted a law that will only benefit US producers if they do not provide that approval. As a consequence, the CDSOA undermines the ability of the suspension agreement provisions of US law to operate in a manner consistent with the United States’ WTO obligations under Article 8.1 of the Anti-Dumping Agreement and Article 18.1 of the SCM Agreement.

(iv) The CDSOA results in the unfair, unreasonable and partial administration of US anti-dumping and countervailing duty law

4.74 Canada submits that under WTO rules a Member must not only ensure the conformity of the substance of its laws with its WTO obligations, but it is also required to administer its laws in a fair, reasonable and impartial manner. This obligation is provided for in Article X:3(a) of GATT 1994. Article X:3(a) applies to all laws, regulations, decisions and rulings “of the kind described in [Article X:1].” Article X:1 refers to all “laws, regulations, judicial decisions and administrative rulings of general application …”. As the CDSOA is an amendment to the Tariff Act of 1930, and the Tariff Act of 1930 is itself a law of general application, the CDSOA is subject to the requirements of Article X:3(a).54

4.75 Canada notes that the Appellate Body has found that the obligation contained in Article X:3(a) concerns fairness and recognizes that the unfair administration of laws can itself have adverse effects. It noted that “Article X:3 … establishes certain minimum standards for transparency and procedural fairness in the administration of trade regulations … .”55

4.76 According to Canada, in Argentina – Measures Affecting The Export Of Bovine Hides and The Import of Finished Leather, the Panel was of the view that Article X:3(a) can involve an examination of whether there is a possible impact on the competitive situation for traders due to alleged partiality, unreasonableness or lack of uniformity in the application of customs rules, regulations, etc.56 In that case, the Panel concluded, in particular, that an inherent danger created by a conflict of interest in involving domestic industry in the customs clearance process of the hides its domestic suppliers exported led to an administration of laws that was not “impartial.”57

4.77 Canada is of the opinion that the CDSOA similarly affects the administration of US anti-dumping and countervail laws. It leads to the application of those laws, with respect to both determinations of industry support and the acceptance of undertakings, in a manner that is neither reasonable nor impartial.

4.78 According to Canada, the CDSOA creates incentives that distort the process by which the DOC establishes domestic industry support, as well as the ability of the DOC to enter into undertakings. This has the potential to exacerbate the number of investigations initiated and continued against imports where such investigations may be without merit. By making it profitable to indicate support for petitions or avoid undertakings, the CDSOA also creates an “inherent danger” that US anti-dumping and countervailing duty laws will be “applied in a partial manner so as to permit persons with adverse commercial interests to” thwart the entry of imports. As a result, imports face treatment that is not fair, reasonable or impartial. Accordingly, the CDSOA results in a violation of Article X:3(a) of GATT 1994.

(v) The CDSOA also violates the United States’ obligation to bring its law into conformity with the WTO Agreements

4.79 Canada argues that Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement oblige Members to bring their domestic law into conformity with their obligations under the WTO Agreements. The fact that the CDSOA provides for the application of a remedy that is not a permitted “specific action against dumping” or a permitted “specific action against a subsidy”, violates the domestic industry support and undertaking provisions of the Anti-Dumping and SCM Agreements and results in an unfair, unreasonable and partial administration of US laws, means that the United States has failed to ensure the conformity of its laws, regulations and administrative procedures with its obligations under the WTO Agreements and thus the United States should also be found in violation of its obligations under Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement.

(d) Request for findings and recommendations

4.80 For these reasons, Canada respectfully requests that the Panel find that the CDSOA is inconsistent with the specific provisions of the Anti-Dumping Agreement, SCM Agreement, GATT 1994 and the WTO Agreement as identified above and that the United States has failed to ensure that its laws are in conformity with the Anti-Dumping Agreement, the SCM Agreement, GATT 1994 and the WTO Agreement. Canada also requests that the Panel recommend that the United States bring its measure into conformity with the Anti-Dumping Agreement, the SCM Agreement, GATT 1994 and the WTO Agreement.

4. Chile and Japan

(a) Introduction

4.81 Japan and Chile argue that the Continued Dumping and Subsidy Offset Act of 2000 (hereinafter referred to as the “Act”) is a violation by the United States of its obligations under the WTO agreements. The Act is a mandatory, non-discretionary legislation that requires the US authorities to distribute assessed anti-dumping and countervailing duties among the domestic producers that support an investigation that ultimately leads to the imposition of those duties.

4.82 Japan and Chile will demonstrate that the Act is inconsistent with the General Agreement on Tariffs and Trade 1994 (“GATT”), the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (“ADA”), the Agreement on Subsidies and Countervailing Measures (“ASCM”) and the Marrakesh Agreement Establishing the WTO (the “WTO Agreement”).

(b) Factual aspects

(i) Legislative history of the Act

4.83 According to Japan and Chile, the text that became the Act derives directly from a proposal introduced by Sen. Michael DeWine in the 105th Congress in 1998. Sen. DeWine then introduced the same bill as S.61 in the 106th Congress with Sen. Robert Byrd as one of the co-sponsors. On 3 October 2000, late in the 106th Congress, Sen. Byrd attached S.61, with some modifications, to the Agriculture and Related Agencies Appropriations Act for Fiscal Year 2001 (H.R. 4461).

4.84 Japan and Chile assert that the Act did not proceed through regular legislative channels, such as House Ways and Means Committee and Senate Finance Committee, due to the lack of support that would otherwise have enabled it to pass through those channels. Instead, it was attached to the FY 2001 agricultural appropriations bill because the appropriations measure was a “must-pass” bill and enjoyed broad bipartisan support. The appropriations bill contained many popular provisions, including funding for agricultural programmes.

4.85 According to Chile and Japan, the Act triggered significant opposition within the United States. The Chairman of the Ways and Means Committee (the committee with jurisdiction over the measure in the House of Representatives) and the Chairman of the Senate Finance Committee (the committee with jurisdiction over the measure in the Senate) both expressed their serious concerns and opposition to the Act. In signing the Agricultural Appropriations measure to which it was attached, President Clinton voiced his strong opposition to the Act. In the October 2000 Statement of Administration Policy, the US Administration stated that “there are significant concerns regarding administrative feasibility and consistency with our trade policy objectives, including the potential for trading partners to adopt similar mechanisms”. Early in 1994, the US Administration had already succeeded in opposing the attempt by petitioner interests to add similar compensation provisions to the Uruguay Round implementing legislation. The Act also triggered significant criticism from the United States public. Also, Japan and several other WTO Members expressed their opposition to the Act to the US Congress and Administration, and formally protested the Act in the Committee on Anti-Dumping Practices and in the Committee on Subsidies and Countervailing Measures.

(ii) Factual description of the Act

4.86 Japan and Chile argue that the Act amends the Tariff Act of 1930, which is the principal statute governing US anti-dumping and countervailing proceedings, by adding a new Section 754. Section 754(a) provides for the annual distribution of duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921, to the affected domestic producers for qualifying expenditures.

4.87 Chile and Japan note that the Act requires the Commissioner of Customs to establish and maintain “special accounts” and to deposit into those accounts all anti-dumping or countervailing duties (including interest earned on such duties) that are assessed under the anti-dumping order or finding or the countervailing duty order with respect to which the account was established.

4.88 Japan and Chile recall that no later than 60 days after the first day of a fiscal year, the funds available in a special account will be distributed to “affected domestic producers” who have incurred “qualifying expenditures” on a pro rata basis. Distributions from a special account to “affected domestic producers” are referred to as “dumping and subsidy offsets.”

4.89 Japan and Chile further note that each fiscal year, a party seeking dumping and subsidy offsets is required to certify that it desires and is eligible to receive a distribution. Section 754(b)(1) defines the term “affected domestic producer” to include “any manufacturer, producer, farmer, rancher, or worker representative (including associations of such persons)” that was a petitioner or an interested party supporting the original anti-dumping or countervailing petition and that remains in operation. The Act excludes from the definition of “affected domestic producers” those companies, businesses or persons that have ceased the production of the product in question or that have been acquired by a company or business that is related to a company that opposed the investigation. No persons other than ‘affected domestic producers’ are entitled to receive the distributions.

4.90 Chile and Japan assert that once the anti-dumping or countervailing duties are imposed, the subsequent actions mandated by the Act are automatic and must be necessarily performed, culminating in the distribution of the duties to domestic producers. The design and intended operation of the Act demonstrates a linkage between dumping and subsidization and the distribution of assessed duties.

(c) Legal arguments

(i) The Act constitutes mandatory, non-discretionary legislation that is actionable as such under WTO law

4.91 Japan and Chile recall that it is established in GATT and WTO jurisprudence that legislation that mandates action that is inconsistent with the WTO rules and leaves no discretion to the executive branch of government, can be challenged as such, i.e., independently from the application of that legislation in specific instances. The Act is a mandatory legislation that accords no discretion to the executive branch of the US government with respect to the distribution of the assessed anti-dumping and countervailing duties to domestic producers. This is demonstrated by the repeated use of the word “shall” in several key provisions of the Act (e.g., “[D]uties assessed pursuant to a countervailing duty order, an anti-dumping duty order…shall be distributed…to the affected domestic producers”, “[s]uch distribution shall be made not later than 60 days after the first day of a fiscal year”, “[t]he Commissioner shall distribute all funds … to affected domestic producers….”). Therefore, the Panel clearly has the authority and the mandate to review the consistency of the Act as such with the provisions of the WTO agreements cited in the request for the establishment of the Panel.

(ii) The Act mandates specific action against dumping in violation of Article 18.1 of the ADA, read in conjunction with Article VI:2 of the GATT and Article 1 of the ADA

4.92 Chile and Japan argue that the Appellate Body in United States – Antidumping Act of 1916 stated that Article 18.1 of the ADA prohibits a Member from taking specific action against dumping of exports from another Member, unless that action is in accordance with Article VI:2 of the GATT, as interpreted by the ADA. The Appellate Body concluded that “[i]f specific action against dumping is taken in a form other than a form authorized under Article VI of the GATT 1994, as interpreted by the Anti-Dumping Agreement, such action will violate Article 18.1.” Japan and Chile will demonstrate that the Act mandates specific action against dumping that is not permissible under Article VI and is therefore in violation of Article 18.1 of the ADA.

4.93 According to the Appellate Body, the ordinary meaning of the phrase “specific action against dumping from another Member” in Article 18.1 of the ADA is “action that is taken in response to situations presenting the constituent elements of dumping.” The Appellate Body also indicated that “specific action against dumping” is a measure that “encompass[es] action that may be taken only when the constituent elements of dumping are present.”

4.94 Chile and Japan submit that the specific action required by the Act – offset payments – is directed against dumping of exports by other Members and thus, by definition, requires that the constituent elements of dumping be present; the payments authorized by the Act will be distributed to affected domestic producers only when these elements are present. This is demonstrated by the fact that where the constituent elements of dumping are not present, there can be no imposition of an anti-dumping duty order or anti-dumping duty finding and, evidently, without an anti-dumping duty there simply are no assessed duties to distribute to the domestic producers under the Act. This means that the action mandated by the Act (i.e., the distribution of the assessed duties to the domestic producers) can only take place if and when the United States determines that the constituent elements of dumping are present and, accordingly, levies an anti-dumping duty on the importation of the product concerned. The Act, therefore, provides for specific action against dumping, as that phrase has been interpreted by the Appellate Body.

4.95 Chile and Japan argue that the Act mandates “specific action against dumping” is further demonstrated by its use of the word “offset” to describe the authorized payments. The Act seeks to counterbalance or compensate domestic producers for alleged damage suffered from “continued dumping and subsidization” of products imported into the United States after an anti-dumping or countervailing duty is imposed on those products. Sponsors of the Act in the US Congress described the distributions under the Act as a “mechanism to help injured US industries recover from the harmful effects of illegal foreign dumping and subsidies” as a way “to counter the adverse effects of foreign dumping and subsidization of US industries” and as means of “compensation for damages caused by dumping or subsidization.” By so doing, the sponsors acknowledge that they are “specific action against dumping.”

4.96 In Chile and Japan's view, the sponsors intended the distribution of anti-dumping and countervailing duties as a deterrence mechanism against dumping and subsidization, in addition to the anti-dumping and countervailing duties levied on the products in question. Such an intended and express objective further demonstrates that the distribution mandated by the Act constitutes specific action against dumping.

4.97 Chile and Japan assert that in the US – Antidumping Act of 1916 case, the Appellate Body held that Article 18.1 requires that specific action against dumping of exports be in accordance with Article VI, as interpreted by the ADA, and concluded that “Article VI is applicable to any ‘specific action against dumping’ of exports. Article VI must also be read in conjunction with Article 1 of the ADA, which imposes an obligation on Members to act in accordance with Article VI of the GATT when applying an anti-dumping measure. It also held that the provisions of the ADA, including Article 18.1, govern the application of Article VI in so far as anti-dumping is concerned.

4.98 The Appellate Body stated conclusively that paragraph 2 of Article VI limits the permissible responses to dumping to definitive anti-dumping duties, provisional measures and price undertakings. Thus, to the extent that a law or regulation mandates specific action against dumping that is neither a definitive anti-dumping duty, a provisional measure nor a price undertaking, such legislation would be contrary to Article VI and would, therefore, violate Article 18.1.

4.99 Chile and Japan posit that the distribution of offsets under the Act is neither a definitive anti-dumping duty, a provisional measure or a price undertaking and is, therefore, not in accordance with Article VI:2. It is in fact a distinct and separate remedy against dumping that is neither contemplated by nor in accordance with Article VI or the ADA. Therefore, since the Act mandates specific action against dumping that is not permissible under Article VI:2, it is contrary to Article 18.1 of the ADA.

(iii) The Act mandates specific action against subsidies in violation of Article 32.1 of the ASCM, read in conjunction with Article VI:3 of the GATT and Articles 10, 4.10 and 7.9 of the ASCM

4.100 Chile and Japan argue that as the subsidies counterpart to Article 18.1 of the ADA, Article 32.1 of the ASCM prohibits a Member from taking “specific action against a subsidy” of another Member, unless that action is in accordance with Article VI:3 of the GATT, as interpreted by the ASCM. Apart from the reference to subsidization as opposed to dumping, Article 32.1 of the ASCM does not differ from Article 18.1 of the ADA. Therefore, the analysis under Article 18.1 of the ADA above, including the interpretation developed by the Appellate Body in US – Antidumping Act of 1916 of the phrase “specific action against”, applies mutatis mutandis to Article 32.1 of the ASCM. Thus, “specific action against a subsidy of another Member” under Article 32.1 of the ASCM is action taken in response to situations that present the constituent elements of subsidization. Also, to qualify as a “specific action against a subsidy” a measure must encompass action that may be taken only when the importing country determines that the constituent elements of subsidization are present.

4.101 Chile and Japan asserts that where the constituent elements of subsidization are not present, there can be no imposition of a countervailing duty and without such duty there simply are no assessed duties to distribute to the domestic producers under the Act. Thus, the distribution of “offsets” under the Act is entirely dependent on a determination by the United States that the constituent elements of subsidization are present. Moreover, countervailing duties will only be distributed to domestic producers pursuant to the Act if and when the United States determines that a subsidized product is being imported into its territory and countervailing duties are collected. The Act, therefore, provides for specific action against a subsidy of another Member. The use of the word “offset” by the Act to describe the authorized payments to domestic producers lends further evidence that those payments constitute specific action against subsidization. The statements made by the co-sponsors of the Act further demonstrate that the Act was intended to serve as a deterrence mechanism against subsidization and that the distribution mandated by the Act constitutes specific action against subsidization.

4.102 According to Chile and Japan, Article 32.1 of the ASCM requires that a specific action against a subsidy of another Member be in accordance with Article VI of the GATT, as interpreted by the ASCM. Articles 10, 4.10 and 7.9 of the ASCM interpret and elaborate Article VI:3. These provisions, read in conjunction, limit the permissible remedies that a Member may take in response to subsidization. Footnote 35 to Article 10 of the ASCM provides that only one form of relief shall be available to a Member to protect against the effects of a particular subsidy in its domestic market, and specifies that the only possible form of relief is either a countervailing duty or a countermeasure authorized by the DSB. The relief conferred by the Act to the domestic producers is neither a countervailing duty nor a countermeasure authorized by the DSB. It is a separate form of relief not contemplated or authorized by the ASCM.

4.103 Chile and Japan submit that Article VI:3 as interpreted by the ASCM establishes that the permissible remedy to “offset” any subsidy bestowed by another Member is a “countervailing duty”. The Act, however, counterbalances or compensates affected domestic producers for subsidization bestowed by another Member by distributing among those producers the assessed countervailing duties. In itself, the action mandated by the Act is not a countervailing duty. Nor is the distribution of duties provided for by the Act the other permissible form of relief authorized by Articles 4.10 or 7.9 of the ASCM: a countermeasure authorized by the DSB. The distribution of countervailing duties is therefore not one of the available forms of relief against subsidization under the ASCM.

4.104 Chile and Japan are of the view that the Act, therefore, mandates “specific action against a subsidy” that is not in accordance with Article VI:3 of the GATT, as interpreted by inter alia footnote 35 of Article 10 and Article 32.1 of the ASCM, read in conjunction with Articles 4.10 and 7.9 of that Agreement. As such, the Act is contrary to Article 32.1 of the ASCM.

(iv) The Act is inconsistent with the requirements in Article 5.4 of the ADA and Article 11.4 of the ASCM regarding standing to initiate an investigation

4.105 Chile and Japan argue that by limiting distribution of anti-dumping and countervailing duties only to those producers that support an application to initiate an anti-dumping or countervailing investigation, the Act provides a direct financial incentive to domestic producers to support rather than oppose or express neutrality toward an application. In this way, the Act undermines, circumvents, and is therefore inconsistent with, the requirements of Article 5.4 of the ADA and 11.4 of the ASCM, both of which set forth the minimum level of producer assent necessary for an application to be considered as having been made “by or on behalf of the domestic industry.”

4.106 According to Chile and Japan, Articles 5.4 of the ADA and 11.4 of the ASCM require a positive determination by the authorities, carried out on the basis of an examination of the degree of support for, or opposition to, an application to initiate an anti-dumping or countervailing investigation. The examination must show that the application has been made “by or on behalf of the domestic industry”. An application is considered to have been made “by or on behalf of the domestic industry” only where the examination shows that an application passes both positive and negative tests. A positive test requires that a majority of those in the industry who express views supports an application. A negative test bars initiation of any application that fails to gain the positive support of producers representing at least 25 per cent of production. This interpretation is confirmed by the Uruguay Round negotiating history of Articles 5.4 and 11.4.

4.107 In the view of Chile and Japan, 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 ADA and the ASCM. When a treaty provision specifies, as do Articles 5.4 and 11.4, that actions of private parties are necessary to establish a Member’s right to take certain action, government provision of a financial incentive for those private parties to act one way rather than another is inconsistent with the requirement that Members perform their treaty obligations in good faith. The Act is thus inconsistent with Articles 5.4 of ADA and 11.4 of ASCM and with the United States’ obligation to perform them in good faith.

4.108 Chile and Japan submit that the Act is further inconsistent with Articles 5.4 of ADA and 11.4 of ASCM because it frustrates the purpose of “examination” under these Articles. The determination on the support under Articles 5.4 of ADA and 11.4 of ASCM must be based on the examination of true support for, or opposition to, the application, i.e., a claim that the domestic industry is injured by allegedly dumped imports. As expressly stated in Article 4.1 of ADA and Article 16.1 of ASCM, the ADA and the ASCM contemplate to exclude domestic parties’ support or opposition from the examination under Articles 5.4 of ADA and 11.4 of the ASCM, if such support or opposition is distorted by other interests. The prospect of a payout from eventual anti-dumping or countervailing duties induces industry members to change from silence or even opposition to support of a petition, making it easier to meet the 25 per cent threshold and facilitating initiation of investigations. The incentive created by the Act prevents the US investigation authority from distinguishing the true support by the domestic producers of the investigation from the support of a prospective distribution of duties. The Act thus frustrates the purpose of Articles 5.4 of the ADA and 11.4 of the ASCM, and therefore is inconsistent with these Articles.

4.109 In addition, Chile and Japan assert that the Act impedes Articles 5.4 of ADA and 11.4 of ASCM from being applied in a neutral and impartial manner to meet their underlying requirements and conditions contemplated in Articles 5.1 of ADA and 11.1 of ASCM. The purpose of the “by or on behalf of ” requirement in Articles 5.1 and 11.1 is to ensure that the investigation is initiated only when the domestic producers as a whole share a common recognition that they are truly in need of trade remedies in the form of anti-dumping or countervailing duties against dumped or subsidized imports. However, where a Member provides a direct financial incentive to domestic producers to support the investigation, the quantitative requirement inherent in the thresholds does not perform its intended function. It renders Articles 5.4 and 11.4 meaningless, since Members would be allowed to initiate investigations without having objectively determined if the application has been made “by or on behalf of” the domestic industry. The Act, therefore, is inconsistent with Article 5.4 of the ADA and 11.4 of the ASCM and with the United States’ obligation thereunder.

(v) The Act is inconsistent with the undertaking provisions in Articles 8.1 of the ADA and 18.1 of the ASCM

4.110 Chile and Japan argue that the undertaking provisions in Articles 8.1 of the ADA and 18.1 of the ASCM provide an alternative to the actual imposition of countervailing duties or anti-dumping duties. Those provisions require every Member to make a good faith effort to consider proposed undertakings and to utilize them where possible. Such interpretation is also supported by the provisions of Articles 8.3 of the ADA and 18.3 of the ASCM, which require authorities to have a proper reason for rejecting an offered undertaking.

4.111 In the opinion of Chile and Japan, under the United States’ anti-dumping and countervailing duty laws, petitioners have an effective veto over the decision by the administering authorities to accept an undertaking or a “suspension agreement.” All parties to an investigation, including petitioners, are permitted to comment on a proposed suspension agreement. The petitioners are also entitled to exercise considerable control over decisions to terminate a suspension agreement and to re-start an investigation. A recent decision by the US Court of International Trade affirms that the US administering authorities’ normal practice is in fact to seek and obtain “the consent of petitioners” before undertaking a suspension agreement.

4.112 Chile and Japan assert that the Act deters domestic producers from allowing the US authorities to accept and maintain undertakings pursuant to Articles 8.1 of the ADA and 18.1 of the ASCM, because acceptance or maintenance of such undertakings would mean that offsets would not be distributed. The Act, therefore, effectively decreases the likelihood that the investigating authority will be able to accept or maintain undertakings.

4.113 As a result, Chile and Japan submit, the Act undermine the aim of Articles 8.1 of the ADA and 18.1 of the ASCM, effectively renders them meaningless, and therefore is inconsistent with and violates these Articles.

(vi) As a result of the Act, the United States’ administration of trade laws is inconsistent with Article X:3(a) of the GATT

4.114 In the view of Chile and Japan, the Act directs the United States to administer its anti-dumping and countervailing duty laws in a way that makes it impossible for the United States to comply with its obligations under Article X:3(a) of the GATT. As a result of the Act, therefore, the United States administers its anti-dumping and countervailing duty laws in violation of Article X:3(a) of the GATT.

4.115 Chile and Japan argue that Article X:3(a) reflects both the notion of good faith and the notion of due process. It establishes certain minimum standards for procedural fairness in the administration of trade regulations. The obligations contained in Article X:3(a) may be viewed as a specific incorporation of the fundamental international legal principle of abus de droit, requiring WTO Members to refrain from engaging in an abusive exercise of their rights.

4.116 It is Chile and Japan's view that while the United States has the right to administer anti-dumping and countervailing duty laws, it is under an obligation to administer those laws in a reasonable, impartial and uniform manner. In other words, the United States may not abuse its right to administer those laws.

4.117 According to Chile and Japan, having in place a law that creates a financial incentive for affected domestic producers renders the administration of the United States’ anti-dumping and countervailing duty laws per se unreasonable in violation of Article X:3(a). The Act will artificially increase the number of anti-dumping and countervailing duty cases brought in the United States, for the simple reason that the domestic industry will seek the imposition of anti-dumping and countervailing duties in the expectation of receiving financial gain in the form of offsets. The application of measures similar to the Act by all WTO Members would lead to an intolerable situation, thus underscoring the unreasonableness of the measure. The application of a measure that would lead to an explosion of the number of trade-restricting and trade-distorting measures and that puts at risk the proper functioning of the international trading system, cannot in any way be seen as a reasonable administration of anti-dumping and countervailing duty laws.

4.118 Chile and Japan argue that the mandated distribution of duties under the Act also makes an impartial administration of the US anti-dumping and countervailing duty laws impossible in violation of Article X:3(a). The presence of a financial incentive for applying US anti-dumping and countervailing duty laws create an “inherent danger” that those laws will not be administered in an impartial manner. In particular, by giving an incentive to domestic producers the Act will automatically increase the level of support by the domestic industry for the application expressed by domestic producers of the like product. Similarly, the Act will curtail the likelihood that the United States will accept alternative solutions (such as voluntary undertakings), since the domestic producers will oppose the acceptance of an undertaking by the authority in the expectation that they will receive a financial gain from the imposition of anti-dumping or countervailing duties. Additionally, the Act will encourage the domestic industry to put pressure on the US Department of Commerce to find higher dumping margins or a higher degree of subsidization because the petitioners and those who support the petition will gain economically from such higher margins.

4.119 Chile and Japan submit that a Member’s obligation to administer its trade laws in a uniform manner pursuant to Article X:3(a) requires that Members apply their trade laws in a consistent and predictable manner. By distributing the anti-dumping and countervailing duties to domestic producers based on their support of the investigation, the Act raises the question of “potential frivolous suits”, distorts the determination of support and undermines the provisions for undertakings, and deters WTO Members from exporting to the United States. These significant changes introduced by the Act considerably affect exporters from other WTO Members, impeding the predictability they would have in a normal situation where anti-dumping and countervailing duty laws are administered in a manner consistent with the WTO rules. Thus, the Act prevents the United States from administering its anti-dumping and countervailing laws in a uniform manner.

4.120 Chile and Japan submit that therefore the United States acts inconsistently with Article X:3(a) of the GATT 1994 because the Act prevents the United States from administering its anti-dumping and countervailing duty laws in a reasonable, impartial and uniform manner.

(vii) The Act violates the general obligation of the United States to ensure the conformity of its laws, regulations and administrative procedures with the provisions of the WTO agreements

4.121 Chile and Japan assert that the United States, as a result of its demonstrated violation of the ADA, the ASCM and the GATT, is also violating its general obligation under Article XVI of the WTO Agreement, Article 18.4 of the ADA and Article 32.5 of the ASCM to ensure the conformity of its laws, regulations and administrative procedures with its obligations under the covered agreements.

(d) Conclusion

4.122 For the reasons stated above, Japan and Chile respectfully request the Panel to find that the Act violates:

- Article 18.1 of the ADA, in conjunction with Article VI:2 of the GATT and Article 1 of the ADA;

- Article 32.1 of the ASCM, in conjunction with Article VI:3 of the GATT and Articles 10, 4.10, and 7.9 of the ASCM;

- Article 5.4 of the ADA and Article 11.4 of the ASCM;

- Article 8 of the ADA and Article 18 of the ASCM;

- Article X:3(a) of the GATT

- Article XVI:4 of the WTO Agreement, Article 18.4 of the ADA and Article 32.5 of the ASCM.

4.123 Japan and Chile also request the Panel to find, pursuant to Article 3.8 of the DSU, that as a consequence of the infringement of the above cited provisions, the United States has nullified and impaired the benefits accruing to Japan and Chile under the cited agreements. Japan and Chile therefore request the Panel to recommend that the United States bring the Act into conformity with the corresponding covered agreements. Furthermore, and pursuant to Articles 3.7 and 19.1, second sentence, of the DSU, Japan and Chile request that the Panel suggest the withdrawal of the inconsistent Act as the only possible way for the United States to implement such recommendations. It is the main features and the basic rationale of the Act that violate the cited provisions. Therefore, only by actually repealing the Act could the United States bring it into conformity with the covered agreements and comply with the recommendations.

5. European Communities, India, Indonesia and Thailand

(a) Introduction

4.124 The European Communities, India, Indonesia and Thailand (the “complainants”) bring this complaint against the Continued Dumping and Subsidy Offset Act of 2000 (the “CDSOA”), also known as the Byrd Amendment, which was signed into law by the President of the United States on 28 October 2000.

4.125 According to the European Communities, India, Indonesia and Thailand, the Byrd Amendment seeks to provide an additional remedy against dumping and subsidisation which is neither contemplated nor permitted by the WTO Agreements. Moreover, that additional remedy is unnecessary. In addition, the Byrd Amendment affects the application by the United States of other remedies permitted by the WTO Agreements (duties and undertakings) in a manner which is inconsistent with those agreements. In particular, the Byrd Amendment will increase unnecessarily the number of investigations initiated by the US authorities and, as a result, the number of anti-dumping and countervailing duty measures. Moreover, the Byrd Amendment will render more difficult, if not impossible, the acceptance of undertakings by the US authorities.

(b) The measure in dispute

(i) Description of the Byrd Amendment

4.126 The European Communities, India, Indonesia and Thailand recall that the CDSOA provides that:

Duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures. Such distribution shall be known as the continued dumping and subsidy offset.

4.127 The term “affected domestic producers” is defined by the CDSOA as including those producers that made or supported the petition leading to the finding or order. In turn, the term “qualifying expenses” includes certain categories of expenses incurred after the issuance of the order or finding with respect to the production of the same product that is the subject of the order or finding concerned .

(ii) Legislative history of the Byrd Amendment

4.128 According to the European Communities, India, Indonesia and Thailand, the Byrd Amendment was rushed through the US Congress in a rather unusual manner. It was attached by its sponsors to a totally unrelated, “must-pass” bill, at a late stage of the legislative process and was not the subject of any proper debate.

4.129 The adoption of the Byrd Amendment was unsuccessfully opposed by the US Administration. The Statement of Administration Policy issued on 11 October 2000 states that the “distribution of the tariffs themselves to producers is not necessary to the restoration of conditions of fair trade”. Although President Clinton signed the bill including the Byrd Amendment, he criticised it and called upon Congress to override it or amend it.

(c) Claims

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

4.130 The European Communities, India, Indonesia and Thailand submit that the Byrd Amendment is inconsistent with Article 18.1 of the Anti-Dumping Agreement and with Article 32.1 of the SCM Agreement because

(a) the offset payments constitute specific action against dumping and subsidisation; and

(b) such action is not in accordance with the provisions of the GATT, as interpreted by the Anti-Dumping Agreement and the SCM Agreement.

4.131 Furthermore, the European Communities, India, Indonesia and Thailand argue that contrary to the “findings” asserted by the US Congress in the CDSOA, the offset payments are not necessary to remedy the injurious effects of dumping and subsidisation. Rather, the Byrd Amendment gives double protection to the US industry, as acknowledged by the US Administration.

The offset payments constitute specific action against dumping and subsidisation

The structure and design of the Byrd Amendment

4.132 The European Communities, India, Indonesia and Thailand assert that the analysis of the terms of the Byrd Amendment shows clearly that the offset payments operate as specific action against dumping and subsidisation, as this notion has been interpreted by the Appellate Body in United States – 1916 Anti-Dumping Act. In fact, the offset payments mandated by the Byrd Amendment are made

- only if an anti-dumping order or finding or a countervailing duty order has been issued;

- exclusively to the domestic producers “affected” by the dumping or subsidisation which is the subject of such order or finding;

- from the monies collected pursuant to such order or finding; and

- in order to compensate the “affected” producers for injuries caused by the dumping or subsidisation in question.

The purpose of the Byrd Amendment

4.133 In the view of the European Communities, India, Indonesia and Thailand, the Byrd Amendment is premised on the mistaken notion that the imposition of anti-dumping and countervailing duties does not provide a sufficient remedy to the US industry, because dumping and subsidisation “continue” after the imposition of such measures. The stated purpose of the Byrd Amendment is to “offset” the effects of such “continued” dumping or subsidisation by making cash payments to the affected domestic producers.

4.134 These complainants argue that that purpose is highlighted by the title of the Byrd Amendment (the Continued Dumping and Subsidy Offset Act of 2000), as well as by the name given to the payments made under the Byrd Amendment (the “continued dumping and subsidy offset”). Moreover, the purpose to counter “continued” dumping and subsidisation is openly stated in Section 1002 of the CDSOA, which sets out the “findings” of the US Congress providing the justification for the enactment of the act.

4.135 According to these complainants, the legislative history of the Byrd Amendment provides further confirmation that it was designed as a specific response against dumping and subsidisation. According to its main proponents, the purpose of the Byrd Amendment is to deter foreign exporters from “continuing” to export dumped or subsidised products and, failing that, to compensate the US producers for the injury caused by such “continued” dumping or subsidisation.

The offset payments are not in accordance with the GATT provisions, as interpreted by the Anti-Dumping Agreement and the SCM Agreement

The Anti-Dumping Agreement

4.136 In the view of the European Communities, India, Indonesia and Thailand, as confirmed by the Appellate Body in United States – 1916 Anti-Dumping Act, Article VI, and, in particular, Article VI:2, read in conjunction with the Anti-Dumping Agreement, limit the permissible responses to dumping to definitive anti-dumping duties, provisional measures and price undertakings. The offset payments mandated by the Byrd Amendment are neither import duties, nor provisional measures in the form of duties or securities, nor price undertakings given by the exporters. Therefore, they are not action taken “in accordance with” the provisions of the GATT, as interpreted by the Anti-Dumping Agreement.

The SCM Agreement

4.137 The European Communities, India, Indonesia and Thailand note that Articles VI and XVI of the GATT, as interpreted by the SCM Agreement, allow Members to take one of the following three types of action against subsidisation:

- “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 imposed in accordance with Part III of the SCM Agreement.

4.138 These complainants argue these three remedies are not cumulative, as clarified by Footnote 35 of the SCM Agreement.

4.139 The European Communities, India, Indonesia and Thailand posit that Part V of the SCM Agreement permits the adoption of three types of “countervailing measures”: countervailing duties; provisional measures; or voluntary undertakings given by the subsidising Government or the foreign exporter. The offset payments do not fall within any of those three types of measures and, therefore, are not actions “in accordance” with Part V of the SCM Agreement.

4.140 In the view of the European Communities, India, Indonesia and Thailand, the adoption of “countermeasures” under Parts II or III of the SCM Agreement must be authorised in advance by the DSB. Such authorisation can be granted only if certain conditions are met. The United States has not received, nor indeed requested, an authorisation from the DSB to make the offset payments by way of “countermeasures”. Moreover, none of the conditions for receiving such an authorisation would be satisfied.

4.141 Furthermore, these complainants submit, footnote 35 provides that countervailing measures and countermeasures authorised under Parts II and III cannot be applied cumulatively. Yet, under the Byrd Amendment, the offset payments can be made only if the subsidy concerned has already been the subject of a countervailing duty order. Therefore, the same subsidy cannot be the subject of a “countermeasure”.

The offset payments provide double protection to the US industry

4.142 The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment is based on the specious theory that the “continuation” of dumping and subsidisation after the issuance of an anti-dumping or a countervailing duty order causes injuries which are not remedied by those orders. That theory is unfounded. Under US law, anti-dumping and countervailing duties are, as a general rule, liquidated on the basis of dumping and subsidisation that occurs after the relevant order is issued. Thus, it is true that, to the extent that duties are collected, this implies that dumping or subsidisation have “continued”. However, such “continued” dumping or subsidisation is already redressed by the collection of the duties themselves. Therefore, the offset payments are a remedy for injury which has already been remedied by the collection of anti-dumping duties or countervailing duties.

4.143 The European Communities, India, Indonesia and Thailand posit that the fallacy underlying the “findings” of the US Congress was duly exposed by the Statement of Administration Policy of 11 October 2001. The effect of the Byrd Amendment is, in reality, to give a “double hit” to foreign exporters. In President Clinton’s own words, the Byrd Amendment “will provide select US industries with a subsidy above and beyond the protection level needed to counteract foreign subsidies”.

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

4.144 According to the European Communities, India, Indonesia and Thailand, the Byrd Amendment provides a financial inducement to domestic producers for making applications for the imposition of anti-dumping or countervailing measures, or for supporting the applications made by other domestic producers. The provision of that financial inducement is inconsistent with Article 5.4 of the Anti-Dumping Agreement and with Article 11.4 of the SCM Agreement for the following reasons:

(a) it is incompatible with the obligation of the US authorities to conduct an objective examination of the relevant facts for establishing whether an application is made “by or on behalf of the domestic industry”;

(b) it prevents the US authorities from ascertaining whether an application is made “by or on behalf of the domestic industry” before initiating an investigation; and

(c) it frustrates the object and purpose of those two provisions, which is to limit the initiation of investigations to those instances where the domestic industry has a genuine interest in the adoption of anti-dumping or countervailing measures.

The Byrd Amendment provides a financial inducement to file applications or support those made by other producers

4.145 The European Communities, India, Indonesia and Thailand note that the Byrd Amendment provides that the offset is to be paid only to the “affected domestic producers”, a category which is defined as including the petitioners and those interested parties who support the petition. Accordingly, no offset is paid to any domestic producer who either opposes actively or does not support the application. As a result, the European Communities, India, Indonesia and Thailand argue, the Byrd Amendment has the effect of 1) stimulating the filing of applications; and 2) making it easier for the 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.

The Byrd Amendment is incompatible with the obligation of the US authorities to make an objective examination of the relevant facts for establishing whether an application is made “by or on behalf of the domestic industry”

4.146 The European Communities, India, Indonesia and Thailand are of the view that like any other factual “examination” mandated by the Anti-Dumping Agreement or the SCM Agreement, 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 requirement is not stated expressly in Article 5.4 of the Anti-Dumping Agreement or in Article 11.4 of the SCM Agreement, but it is a corollary of the principle of good faith which informs all the covered agreements. The Appellate Body has noted that in order to be “objective” an examination must conform to “the dictates of the basic principles of good faith and fundamental fairness”. More precisely, an “objective” examination requires that the relevant facts “be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties in the investigation.”

4.147 The European Communities, India, Indonesia and Thailand submit that the Byrd Amendment is incompatible with this fundamental requirement. Through the promise of offset payments, the US Government is unduly influencing the very facts which its authorities are required to “examine”. Moreover, as a result, it becomes more likely that those authorities will determine that an application is made “by or on behalf of the domestic industry”. This is nothing short of an attempt to manipulate the outcome of the determination required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. Furthermore, by so doing, the US authorities favour the interests of certain parties (the producers who support genuinely the imposition of measures) over those of other interested parties (including not only the exporters but also the domestic producers who oppose the initiation).

The Byrd Amendment makes it impossible for the US authorities to ascertain whether the application is made “by or on behalf of the domestic industry”

4.148 According to the European Communities, India, Indonesia and Thailand, a domestic producer cannot be considered to have made an “application”, or to “support” 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 exclusively in order to qualify for the offset payments provided under the Byrd Amendment. When the “support” of a domestic producer is “bought” with the promise of a financial reward, such “support” cannot be regarded as genuine and cannot be taken into account for the purposes of the determination required by Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

4.149 The European Communities, India, Indonesia and Thailand submit that by its very existence, the Byrd Amendment calls into question the credibility of any application or expression of support made by the US producers. In fact, following the adoption of the Byrd Amendment, it has become impossible for the US authorities to tell whether a domestic producer has made an “application” or expressed its “support” for an application made by another producer because it is truly interested in the adoption of anti-dumping or countervailing measures or, rather, because it wants to share in the distribution of the offset. As a result, the Byrd Amendment prevents the US authorities from ascertaining whether an application is genuinely made “by or on behalf of the domestic industry” and, consequently, from making a proper determination to that effect before initiating an investigation

The Byrd Amendment defeats the object and purpose of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

4.150 In the view of the European Communities, India, Indonesia and Thailand, the Anti-Dumping Agreement and the SCM Agreement limit the discretion of Members to impose anti-dumping or countervailing measures by providing that, except in “special circumstances”, no investigation shall be initiated unless an application has been made “by or on behalf of the domestic industry”. The object and purpose of such prohibition is self-evident. If the potential beneficiaries of an anti-dumping measure or of a countervailing measure do not consider them to be in their interest, there is no good reason, in the absence of “special circumstances”, for the authorities of the importing Member to impose a measure which restricts trade among the WTO Members. Yet, the Byrd Amendment makes it possible, and indeed encourages, the initiation of investigations and, consequently, the imposition of anti-dumping and countervailing measures, in cases where the domestic industry has no genuine interest in the adoption of such measures, thereby defeating the object and purpose of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

(iii) Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement

4.151 The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment provides a financial inducement to domestic producers for opposing the acceptance of undertakings. The provision of that inducement is inconsistent with Article 8.3 of the Anti-Dumping Agreement and with Article 18.3 of the SCM Agreement for the following reasons:

(a) it will lead to the rejection of undertakings without a proper “reason”;

(b) it is incompatible with the obligation of the US authorities to conduct an objective examination of whether the acceptance of an undertaking would be “appropriate”; and

(c) it undermines the object and purpose of those two provisions, which is to provide an alternative remedy to the imposition of duties.

4.152 The European Communities, India, Indonesia and Thailand posit that the authorities of the importing Member enjoy wide discretion in order to decide whether or not to accept an undertaking. Nevertheless, such discretion is not unlimited. It is implicit in Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement that the authorities cannot reject an undertaking without examining first whether it would be “appropriate” to accept it. For the reasons already explained, such examination must be “objective”. In other words, it must conform to “the dictates of the basic principles of good faith and fundamental fairness”.

4.153 Furthermore, the European Communities, India, Indonesia and Thailand argue, Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement make it clear that the authorities must have a “reason” for rejecting an undertaking. Those two provisions do not limit a priori the types of “reasons” which can be invoked by the authorities. But this does not mean that the authorities can invoke all sorts of motives for rejecting an undertaking. The “reasons” alluded in Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement must be pertinent for deciding whether the acceptance of an undertaking is “appropriate”. At a minimum, they should be related to the specific terms or circumstances of the undertaking under consideration or to a Member’s “general policy” with respect to undertakings.

The Byrd Amendment provides a financial inducement to petitioners for opposing the acceptance of the undertakings offered by the exporters

4.154 The European Communities, India, Indonesia and Thailand assert that if the US authorities accept an undertaking, no anti-dumping or countervailing duties will be assessed and, consequently, no offset will be distributed to the affected domestic producers. Thus, under the Byrd Amendment, the petitioners have a pecuniary interest in opposing the acceptance of undertakings by the authorities.

The petitioners’ opposition is given “considerable” weight by the US authorities when deciding whether to accept an undertaking

4.155 The European Communities, India, Indonesia and Thailand argue that under US law, the petitioners play an active and privileged role in the procedure leading to the decision whether to accept an undertaking. Furthermore, the US authorities have stated that the petitioners’ opposition is something to which they accord “considerable weight” when assessing whether to accept an undertaking. In fact, undertakings are very rarely, if ever, accepted against the petitioner’s opposition.

The Byrd Amendment will lead to the rejection of undertakings without a valid “reason”

4.156 In the opinion of the European Communities, India, Indonesia and Thailand, following the adoption of the Byrd Amendment, the petitioners are likely to object systematically to any undertakings offered by the exporters, not because they consider them less effective than the imposition of duties, but rather because they have a vested financial interest in the imposition of duties. Unlike the petitioners’ legitimate concern that an undertaking may be less effective than the imposition of duties, the pecuniary interest of the petitioners in receiving the offset is an extraneous consideration, which has no bearing on whether an undertaking is an “appropriate” remedy. Therefore, following the adoption of the Byrd Amendment, the petitioners’ opposition cannot be regarded as a proper “reason” for rejecting an undertaking.

The Byrd Amendment is incompatible with the obligation of the US authorities to make an objective examination of whether the acceptance of an undertaking would be appropriate

4.157 The European Communities, India, Indonesia and Thailand submit that through the offset payments, the US authorities are unduly influencing the outcome of the examination of the “appropriateness” of accepting an undertaking which they are required to make under Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement. Moreover, they do it in a way which favours the interests of the petitioners over those of the exporters.

The Byrd Amendment frustrates the object and purpose of Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement

4.158 The European Communities, India, Indonesia and Thailand assert that the object and purpose of Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement is to provide an alternative remedy to injurious dumping and subsidisation which, while giving equivalent protection to the domestic producers, is more beneficial for the exporters. The Byrd Amendment, together with the US policy of according “considerable” weight to the petitioners’ opposition, will render very difficult, if not impossible, the acceptance of undertakings, thereby defeating the object and purpose of Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement. This consequence of the Byrd Amendment is particularly pernicious for developing country Members. By making virtually impossible the acceptance of undertakings, the purpose of the obligation imposed by Article 15 of the Anti-Dumping Agreement will also be defeated by the Byrd Amendment.

(iv) Article X:3 (a) of the GATT

4.159 The European Communities, India, Indonesia and Thailand are of the view that the offset payments mandated by the Byrd Amendment lead to an unreasonable and partial administration of the US laws and regulations concerning the initiation of anti-dumping and countervailing duty investigations and the acceptance of undertakings within the framework of such investigations. For that reason, the Byrd Amendment is inconsistent with Article X.3(a) of the GATT.

The US anti-dumping and countervailing duty laws and regulations concerning the initiation of investigations and undertakings fall within the scope of Article X:1

4.160 The European Communities, India, Indonesia and Thailand posit that the “administered measures” at issue are the provisions concerning the initiation of anti-dumping and countervailing duty investigations and the acceptance of undertakings which are contained in the Tariff Act of 1930 and in the implementing regulations issued by the US Department of Commerce. It is beyond question that those measures are “laws and regulations” and that they are “of general application”. Furthermore, those measures “pertain” to “rates of duty, taxes or charges” or to “other requirements, restrictions or prohibitions on imports”. Therefore, they fall within the purview of Article X:1, with the consequence that their “administration” is subject to the requirements imposed by Article X :3 (a).

The Byrd Amendment leads to an “unreasonable” administration of the US laws and regulations concerning the initiation of investigations and the acceptance of undertakings

4.161 In the view of the European Communities, India, Indonesia and Thailand, the Byrd Amendment leads to an “unreasonable” administration of the US laws and regulations concerning the initiation of investigations because it provides a strong financial incentive to file or support applications. As a result, anti-dumping and countervailing measures will be imposed in cases where the domestic industry has no genuine interest in the adoption of such measures.

4.162 The European Communities, India, Indonesia and Thailand argue that the Byrd Amendment also leads to an "unreasonable" administration of the US laws and regulations concerning undertakings. Together with the US policy of according “considerable” weight to the petitioners’ opposition, the Byrd Amendment will render more difficult, if not impossible, the acceptance of undertakings. Thus, foreign exporters will be deprived of an alternative, more beneficial, remedy for no other reason than the interest of the domestic producer in securing a windfall financial gain.

The Byrd Amendment leads to the “partial” administration of the US laws and regulations concerning the initiation of investigations and the acceptance of undertakings

4.163 In the opinion of the European Communities, India, Indonesia and Thailand, the offset payments result in the "partial" administration of the US laws and regulations concerning the initiation of investigations because they increase artificially the level of support for the applications. This favours certain parties at the expense of other interested parties. The offset payments also lead to a “partial” administration of the US laws and regulations concerning undertakings because, as a result, the exporters’ interest in obtaining an alternative remedy in lieu of the imposition of duties is subordinated to the pecuniary interest of the domestic producers.

(v) Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article XVI:4 of the WTO Agreement

4.164 The European Communities, India, Indonesia and Thailand submit that by being inconsistent with Articles 18.1, 5.4 and 8.3 of the Anti-Dumping Agreement and with Articles 32.1, 11.4 and 18.3 of the SCM Agreement, the Byrd Amendment is also inconsistent with Article 18.4 of the Anti-Dumping Agreement and with Article 32.5 of the SCM Agreement, respectively.

4.165 By being inconsistent with Articles 18.1, 5.4 and 8.3 of the Anti-Dumping Agreement, with Articles 32.1, 11.4 and 18.3 of the SCM Agreement and with Article X :3 (a) of the GATT, the European Communities, India, Indonesia and Thailand argue, the Byrd Amendment is also inconsistent with Article XVI:4 of the WTO Agreement.

6. Korea

(a) Introduction

4.166 Korea argues that the Appellate Body already has adjudicated the primary issue in this proceeding. In US – Anti-Dumping Act of 1916, the Appellate Body affirmed the Panel’s conclusion that, in the context of an anti-dumping (AD) (or countervailing duty (CVD)) investigation, Members may take one and only one action – they may impose duties equal to or less than the margin of dumping (or the subsidy level).58 Moreover, a Member may impose AD or CVD duties only after complying with all applicable provisions of the relevant agreements.59

4.167 Unfortunately, according to Korea, just like the 1916 Act, the Byrd Amendment60 creates a specific action, other than imposition of AD or CVD duties, to be taken where imports are found to be dumped or subsidized. Therefore, just like the 1916 Act, the Byrd Amendment is inconsistent with a host of US obligations under various WTO agreements, including Article VI of GATT 1994, Articles 5.4, 8 and 18.1 of the AD Agreement and Articles 11.4, 18 and 32.1 of the SCM Agreement.

(b) Statement of the facts

4.168 Korea posits that the relevant facts are few and quite straightforward. On 28 October 2000, the President of the United States signed into law the Byrd Amendment,61 and simultaneously asked Congress to repeal the law:

I call on the Congress to override this provision, or amend it to be acceptable, before they adjourn.62

4.169 According to Korea, the US Government further conceded that the offset provides an additional measure that is not necessary to restore free trade:

. . . unfair trade laws have as their purpose the restoration of conditions of fair trade. However, that is the purpose of the anti-dumping and countervailing duties themselves, which accomplish that purpose. By raising the price of imports they shield domestic producers from import competition and allow domestic manufacturers to raise prices, increase production and improve revenues. Consequently, distribution of the tariffs themselves to producers is not necessary to the restoration of conditions of fair trade.63

4.170 Korea asserts that the Byrd Amendment is mandatory. Where the conditions for its application are met, the US authority must implement the statute’s directive.64 The authority has no discretion to do otherwise, due to the use of mandatory words in the text of the statute.65 In sum, the United States has adopted a law mandating that, where an AD or CVD order or finding has been imposed or made, the US authorities must, in addition to collecting the AD or CVD duties, distribute the duties to the US producers that requested the investigation.

(c) Argument

(i) The Byrd Amendment is inconsistent with provisions of GATT 1994, the Anti-Dumping Agreement and the SCM Agreement because it constitutes an impermissible “specific action” against imports

4.171 Korea argues that Article 18.1 of the AD Agreement has been interpreted to “limit the anti-dumping instruments that may be used by Members to those expressly contained in Article VI and the Anti-Dumping Agreement.”66 In United States - 1916 Act, the Panel found the 1916 Act to be inconsistent with US WTO obligations, concluding that “[e]xcept for provisional measures and price undertakings, the only type of remedies foreseen by the Anti-Dumping Agreement is the imposition of duties.”67

4.172 The Appellate Body affirmed these findings, holding that Article VI:2 of GATT 1994 and Article 18.1 of the AD Agreement, read together, prohibit Members from taking specific action against dumping that is not stipulated in Article VI:2 and the AD Agreement, i.e., any measure other than (or in addition to) provisional remedies, price undertakings and anti-dumping duties applied in accordance with Article VI:2 and the AD Agreement.68

4.173 Korea asserts that Article 32.1 of the SCM Agreement is the analog provision to Article 18.1 of the AD Agreement. With the exception of the words “a subsidy of” and “dumping of exports”, the two provisions are identical. Because the provisions are nearly identical in text and are identical in terms of context and purpose, one fairly can draw on the reports of the panel and Appellate Body in United States - 1916 Act.

4.174 According to Korea, these reports indirectly indicate that Article 32.1 (like Article 18.1 of the AD Agreement) clarifies that a Member may impose on subsidized imports only those remedies (may take only those “specific actions”) specifically provided for under Article VI and the SCM Agreement. When the specified conditions are met, a Member may impose a countervailing duty to offset a subsidy. But, due to Article VI of GATT 1994 and Article 32.1 of the SCM Agreement, it may not take any other specific actions against subsidized imports.69

4.175 In Korea's view, however, the Byrd Amendment imposes on US authorities a requirement to take an additional mandatory specific action after they have conducted an AD or CVD investigation, have determined that relief is appropriate and have imposed relief in the form of a duty on imports of the subject merchandise. The Amendment requires the US authority to transfer the duties collected directly to the US companies that supported the petition.70

4.176 Moreover, Korea submits, the transfer of duties collected from imports directly to the domestic competitors of the affected companies, as well as the law itself which mandates this transfer, is a “specific action” that is inconsistent with Article VI of GATT 1994, Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement. Just as with the 1916 Act, which imposed impermissible “‘specific action against dumping’ in the form of civil and criminal proceedings and penalties,”71 the Byrd Amendment imposes a specific action against dumping and subsidized imports in the form of a direct transfer of assets from the affected foreign company to its domestic competitors.

4.177 It is Korea's opinion that the Byrd Amendment is a specific action against dumping and/or subsidies because it requires the US Customs Service to take action (administer the offset) “only when the constituent elements of ‘dumping’ [or a subsidy] are present.”72 Thus, the offset is available only when the conditions for imposing an anti-dumping or countervailing duty are satisfied (i.e., only when dumping or subsidization causing material injury exists) and only when a duty is imposed.73 Moreover, the offset is available only to “affected domestic producers”, which the statute defines as “any manufacturer, producer, farmer, rancher or worker representative (including associations of such persons)” that was a petitioner or an interested party in support of the petition and that remains in operation.74

4.178 Finally, Korea argues that the offset payments to the “affected domestic producer” are transferred directly from a “special account” that must be created for the duties assessed and collected under each individual AD or CVD order.75 Thus, the offsets are paid directly from the duties collected to compensate the “affected domestic producers” for injuries caused by the dumping or subsidy of which they complained.

4.179 Therefore, Korea posits, the Byrd Amendment mandates an impermissible “specific action” just as the 1916 Act does. Indeed, in many ways the Byrd Amendment is far more pernicious and trade distortive than is the 1916 Act. The 1916 Act is limited to certain forms of international price discrimination. The Byrd Amendment, however, applies not only to dumping but also to subsidies – it has a far larger scope. Also, the 1916 Act is rarely invoked. But, the Byrd Amendment applies to all AD and CVD proceedings resulting in the imposition of duties.76 Thus, it profoundly alters the conditions of competition to favour US producers in all US markets for all products.

4.180 According to Korea, this analysis is confirmed by the statements of many US Congressmen, including Senator Byrd (Democrat – West Virginia), who crafted, introduced and ensured enactment of the Amendment by the US Congress.

4.181 For the reasons set forth above, Korea urges the Panel to find that the Byrd Amendment mandates the imposition of an impermissible specific action and, thus, that the United States is in violation of Article VI of GATT 1994, Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.

(ii) The Byrd Amendment is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement because it impermissibly distorts and undermines the standing threshold, encouraging abuse of otherwise permissible actions, and rendering these WTO Provisions meaningless

4.182 Korea argues that Article 5.4 of the AD Agreement sets forth the standard for determining whether an application for an AD investigation is supported by “the industry,” i.e., whether the companies that support the requested investigation are sufficient to constitute “the industry.” If the support does not exceed the stated threshold, an authority may not initiate the investigation. Under Article 5.4, an authority cannot initiate an investigation unless: (i) the investigation is supported by producers accounting for more than 50 per cent of the total production of the like product (by volume or value) produced by that portion of the industry that supports or opposes the petition; and (ii) those in support account for at least 25 per cent of total domestic production.

4.183 Korea asserts that the threshold established in Article 11.4 of the SCM Agreement is, for all practical purposes, identical to that set forth in Article 5.4 of the AD Agreement.

4.184 According to Korea, as the negotiating history indicates, these thresholds were designed to balance carefully a number of competing rights and interests, primarily the right of an industry to seek relief from unfair trade practices versus the interest in ensuring that it is the industry, and not a sector of it, or for that matter, an individual company, that is seeking relief. Indeed, perhaps the most important concern was that the provision be drafted to ensure that complaints or petitions be filed only when warranted and only when supported by a substantial enough portion of an industry.77 The balancing took place in a context in which AD or CVD duties were the only possible forms of relief (apart from negotiated settlements).

4.185 In Korea's view, the Byrd Amendment distorts and undermines the balancing of interests agreed upon by the negotiators. Indeed, this alteration is the purpose of the Amendment. The Amendment vastly increases the incentive for companies to support a petition by providing cash transfers from importers to affected producers, but only to those domestic producers supporting the petition.78 Producers that oppose a petition are not eligible for the offsets.79

4.186 Korea argues that the Byrd Amendment therefore creates a powerful incentive for every company in every industry not only to bring petitions without merit, but also to support any petition that is brought. The potential of receiving the offset induces companies that otherwise would be uninterested to show interest and to support a petition which they otherwise would not support. Moreover, because the mere initiation of an investigation often distorts trade patterns, regardless of whether AD or CVD duties eventually are imposed, the Byrd Amendment is trade distortive. In short, by offering a “cash reward,” the Amendment encourages overuse and abuse of the US AD and CVD laws.

4.187 Due to the Byrd Amendment, Korea asserts, the standards set forth in Article 5.4 and Article 11.4 are meaningless as applied in the United States, and the two provisions are reduced to “inutility.” By adopting the Byrd Amendment as law, the United States signals that it interprets Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement as allowing the Byrd Amendment and action under it. By doing so, the United States has adopted an interpretation that reduces to inutility Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement. The Byrd Amendment therefore is based on a fundamental misreading of these provisions – an impermissible interpretation.80

4.188 In the view of Korea, the US government has taken action – in passing the Byrd Amendment – that improperly influences the very facts that the US authority is supposed to examine in making its determination. Thus, the US has violated its obligation to conduct an objective examination81 under Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.

4.189 Korea submits that the United States has violated this obligation because it has used the Byrd Amendment to manipulate the situation to bias the process and to increase the likelihood that the US authority will conclude that the relevant domestic industry supports a given petition.

(iii) The Byrd Amendment is inconsistent with Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement because it impermissibly deters agreements on undertakings

4.190 In Korea's view, the Byrd Amendment is inconsistent with WTO provisions regarding undertakings, in particular, Article 8.1 of the AD Agreement and Article 18.1 of the SCM Agreement. It reduces these provisions to inutility and renders them useless in the context of US AD and CVD proceedings. Under US practice, the US government must consult with the affected industry before accepting an undertaking.82 But the Byrd Amendment creates an incentive for the US industry to oppose undertakings. This is because a price undertaking can not exceed the amount of the margin or subsidy.83 By supporting the imposition of duties, the domestic industry may receive not merely the imposition of the duties as allowed by the WTO agreements and US law (which, in essence, results in price levels consistent with a price undertaking), but also the direct transfer of the duties collected.

4.191 Korea argues that in this manner, the Byrd Amendment also leads directly to abuse of AD and CVD measures. This is because measures are imposed in situations that, absent the Byrd Amendment and the incentives it creates, would lead to undertakings.

4.192 Korea submits that, similar to the impact of the Byrd Amendment on the standing assessment, the Byrd Amendment is an action taken by the United States which biases the process by which undertakings are reached to decrease substantially the likelihood that the domestic industry that supports the petition (the petitioners) will support an undertaking. Therefore, by passing the Byrd Amendment, the United States has violated its obligation to have its authority undertake an objective examination84 of whether accepting an undertaking under Article 8.3 of the AD Agreement or Article 18.3 of the SCM Agreement would be “appropriate” in the circumstances, which include the views of petitioners.

(d) Conclusion

4.193 For the reasons set forth above, Korea asks the Panel to find that, by maintaining the Byrd Amendment, the United States is in violation of Article VI of GATT 1994, Articles 5.4, 8 and 18.1 of the AD Agreement and Articles 11.4, 18 and 32.1 of the SCM Agreement. Korea requests the Panel to recommend that the United States bring its laws into conformity with its obligations under these WTO provisions.

4.194 Finally, Korea respectfully requests the Panel to suggest that, to meet its WTO obligations, the United States should repeal the Byrd Amendment.85


To continue with  7. Mexico
 

1 Public Law 106-387, 114 Stat. 1549, 28 October 2000, sections 1001-1003.

2 Codified as 19 USC 1675c.

3 Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 66 Fed. Reg. 48,546 (US Customs Service 21 Sept. 2001) (final rule) (codified at 19 CFR §§ 159.61 – 159.64) (the "Regulations").

4 United States Tariff Act of 1930, Section 754 (a).

5 Ibid., Section 754(b)(1).

6 The International Trade Commission (the “ITC”) must provide to the US Customs Service (“Customs”) a list of the affected domestic producers in connection with each order or finding that would potentially be eligible to receive the offset. See Section 754 (d) 1 of the United States Tariff Act of 1930.

7 Ibid., § 754(b)(4), 114 Stat. 1549A-73.

8 United States Tariff Act of 1930, Section 754(e)(1).

9 Ibid., Section 754(e)(2)

10 Ibid., Section 754(d)(2) and (3).

11 Ibid., Section 754 (c)

12 United States Tariff Act of 1930, § 754(e)(4), CDSOA § 1003(a), 114 Stat. 1549A-75. Regulations, 66 Fed. Reg. 48,546, 48,554 (19 C.F.R. § 159.64(d)).

13 Section 1003 (c) of the CDSOA.

14 United States Tariff Act of 1930, Section 754(d)(1).

15 We note that Australia did not pursue any claims in relation to GATT Article X(3)(a) and Articles 8 AD and 18 SCM Agreement.

16 Canada and Mexico claimed a violation of Article 32.1 of the SCM Agreement, in conjunction with Article VI.3 of the GATT and Article 10 of the SCM Agreement. WT/DS234/12 and WT/DS234/13.

17 Pub. L. 106-387, 114 Stat. 1549. Title X of the law, The Continued Dumping and Subsidy Offset Act of 2000, added section 754(a) to the Tariff Act of 1930. See, Common Exhibits 1 and 15.

18 Report of the Panel, United States – Anti-Dumping Act of 1916, WT/DS136/R, 31 March 2000 and WT/DS162/R, 29 May 2000, para.6.230. Report of the Appellate Body, United States – Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, 28 August 2000, paras. 127-133.

19 Report of the Panel, United States – Anti-Dumping Act of 1916, para. 6.230.

20 Report of the Appellate Body, United States – Anti-Dumping Act of 1916, para. 126.

21 Report of the Panel, United States – Anti-Dumping Act of 1916, paras. 6.204-6.205.

22 144 Cong. Rec. S7883-7884 (daily ed. 9 July 1998) (Statement of Senator DeWine). Senator DeWine’s bill was introduced as S. 2281 in the Senate on 9 July 1998 and by Representative Regula as H.R. 2509 in the House of Representatives on 18 September 1997.

23 145 Cong. Rec. S497-498 (daily ed. 20 Jan. 1999).

24 Report of the Appellate Body, United States – Anti-Dumping Act of 1916, para. 131-132.

25 Report of the Panel, United States – Anti-Dumping Act of 1916, para. 6.42.

26 Report of the Appellate Body, United States – Anti-Dumping Measures on Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, WT/DS184/AB/R, para. 101.

27 Brazil notes that an important concern in the Uruguay Round negotiations, a concern ultimately reflected in the results, was to ensure that investigations were only initiated where warranted and, in particular, where supported by a substantial portion of the industry. According to Brazil, this, in turn, led to the threshold determinations which are being compromised by the Byrd Amendment. See, T. Stewart (ed.), The GATT Uruguay Round, A Negotiating History (1986-1992), Vol. II: Commentary, at 1575-88.

28 Report of the Panel, United States - Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea - WT/DS179/R, 22 December 2000 (Adopted 1 February 2001) para. 6.49, n.62.

29 19 CFR 351.222 (2000). See, Common Exhibit 12.

30 19 CFR 351.222(g).

31 19 CFR 351.222(i).

32 Title X (Sections 1001 – 1003) of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001 (Common Exhibit-1).The CDSOA is also referred to as the “Byrd Amendment”. The CDSOA adds a new section 754 entitled the “Continued Dumping and Subsidy Offset.” (Common Exhibit-15).

33 United States – Anti-Dumping Act of 1916, Report of the Appellate Body, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000.

34 United States Tariff Act of 1930, § 754(a) in CDSOA, § 1003(a), 114 Stat. 1549A-73. (Common Exhibit-1). Canada’s submission will refer to “orders and findings” as “orders”.

35 Regulations detailing procedures for payments under the Act came into effect on 21 September 2001. 66 Fed. Reg. 48,546 (US Customs Service 21 Sept. 2001) (final rule). (Common Exhibit-3)

36 See paragraphs 27 to 31 of Canada’s First Submission.

37 See paragraphs 32 to 35 of Canada’s First Submission.

38 United States – Anti-Dumping Act of 1916, para. 137.

39 See paragraphs 39 to 47 of Canada’s First Submission.

40 The New Shorter Oxford English Dictionary, Vol. 2 (Oxford: Clarendon Press, 1993), p. 1985. (Exhibit CDA-7)

41 According to Canada, the CDSOA does not have anything to do with “offsetting” injury as meant by Article VI and the Antidumping Agreement. Payments under the CDSOA are made in addition to the application of a definitive final duty directed at injury. Instead of levelling the playing field between imports and domestic products, the CDSOA goes beyond and in effect prevents this “levelling” by transferring duties to industry members in the form of compensation for qualifying expenditures.

42 See paragraphs 55 to 59 of Canada’s First Submission.

43 These remedies are not cumulative - see Footnote 35 to Article 10 of the SCM Agreement.

44 This, Canada argues, is supported by the object and purpose of the provisions. The aim of countervailing duties is to neutralize trade distortions caused by subsidies in order to re-establish the competitive balance between foreign and domestic products. Article VI:3 of GATT 1994 and footnote 36 of the SCM Agreement both define a countervailing duty as a “special duty levied for the purpose of offsetting any subsidy.” The negotiating history of Article VI clarifies that Members intended to limit actions to counteract subsidization to the application of countervailing duties. See United States – Anti-Dumping Act of 1916 (Complaint by Japan), Report of the Panel, WT/DS162/R, adopted 26 September 2000, paras. 6.226 – 6.228.

45 See paragraphs 14 to 16 above and paragraphs 48 to 53 and 68 of Canada’s First Submission.

46 Predecessor provisions of these articles were also considered to be essential procedural requirements. See Footnote 70 of Canada’s First Submission.

47 During the Uruguay Round negotiations, a number of proposals were tabled that sought to require investigating authorities to examine the support for an application before initiation to ensure that the application was properly filed “by or on behalf of” the domestic industry. See for example “Amendments to the Anti-Dumping Code: Submission by Canada,” MTN.GNG/NG8/W/65, 22 December 1989, Section I(a)(i), p. 1. (Exhibit CDA-9).

48 See “Statement of Administrative Action” in Message from the President of the United States Transmitting the Uruguay Round Agreements, Texts of Agreements Implementing Bill, Statement of Administrative Action and Required Supporting Statements, H.R. Doc. No. 103-316, Vol. 1 at 656 (1994), p. 812, referring to Article 5.4 of the ADA. (Exhibit CDA-10)

49 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, Report of the Appellate Body, WT/DS184/AB/R, adopted 23 August 2001, para. 56.

50 Ibid., para. 193.

51 See Exhibit CDA-11. For another example, see also CDA-12.

52 United States Tariff Act of 1930, § 704 with respect to countervailing duty investigations and § 734 for anti-dumping investigations. (Common Exhibit-15)

53 Bethlehem Steel Corp. v. United States, 146 F. Supp. 2d 927, 930 (Ct. Int’l Trade 2001) (Exhibit CDA-13, p. 4), citing H. Rep. No. 96-317 at 63, 67. See paragraphs 86 to 88 of Canada’s First Submission.

54 See the Panel Report in United States – Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179/R, adopted 1 February 2001, footnote 62.

55 United States – Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body, WT/DS58/AB/R, adopted 12 October 1998, para. 183.

56 Argentina – Measures Affecting The Export Of Bovine Hides and The Import of Finished Leather, Report of the Panel, WT/DS155/R, adopted 16 February 2001, para. 11.77.

57 Ibid., paras. 11.99-11.100.

58 WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) (1916 Act).

59 See Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, Article 18.1; Agreement on Subsidies and Countervailing Measures, Article 32.1; 1916 Act, WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000).

60 The Continued Dumping and Subsidy Offset Act (known as the Byrd Amendment), codified as Section 754 of Title VII of the Tariff Act of 1930, Public Law 106-387 (28 October 2000), 114 Stat. 1549, Title X – Continued Dumping and Subsidy Offset (Byrd Amendment). The text of the Byrd Amendment is provided in Common Exhibit 1. The US Customs Service regulations promulgated pursuant to the law, 66 Fed. Reg. 48546-55 (21 September 2001), are provided in Common Exhibit 3.

61 The Byrd Amendment is provided in Common Exhibit 1.

62 28 October 2000 Press Release from the US Mission to the European Union (http://www.useu.be/ISSUES/clin1028.html) (visited 22 October 2001) (see Exhibit ROK-2).

63 Statement of Administrative Policy, distributed by US Office of Management and Budget (11 October 2000) (http://www.whitehouse.gov/omb/legislative/sap/106-2/hr4461-h.html) (visited 22 October 2001) (emphasis added) (provided in Common Exhibit 9).

64 See, e.g., 1916 Act, WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) at paras. 88-91 (upholding the Panel’s finding that the 1916 Act is mandatory and concluding that the discretion of the US Department of Justice not to bring actions under the 1916 Act “is not . . . of such a nature or of such breadth” to make the act discretionary). Here, the US Executive Branch has no discretion at all regarding whether and when to implement the Byrd Amendment.

65 See, e.g., Byrd Amendment, Sections 754(a) (“Duties assessed . . . shall be distributed . . . .”) and 754(c) (“The Commissioner [of US Customs] shall prescribe procedures for distribution . . . . Such distribution shall be made not later than . . . .”) (emphases added) (Common Exhibit 1).

66 1916 Act, WT/DS162/R at 6.216 (emphasis in original).

67 Id. (emphasis added). Id. at paras. 6.230-6.231.

68 1916 Act, WT/DS136/AB/R, WT/DS162/AB/R at paras. 137-138.

69 See id.; 1916 Act, WT/DS162/R (29 May 2000) at paras. 6.216 and 6.230-6.231.

70 Byrd Amendment, Sections 754(b)(1) and 754(d)(3) (Common Exhibit 1). Therefore, as discussed above, the Byrd Amendment is a mandatory law and can be challenged regardless of whether it has been implemented in a specific case. See, e.g., 1916 Act, WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) at paras. 88-91.

71 Id. at para. 137.

72 Id. at para. 122.

73 See Byrd Amendment, Section 754(a) (Common Exhibit 1).

74 Id. at Sections 754(b)(1)(A) and (B).

75 Id. at Section 754(e).

76 It applies to all assessments made on or after 1 October 2000 in connection with all AD and CVD orders and findings in effect as of 1 January 1999 or issued thereafter. 66 Fed. Reg. 48546 (third column) (21 September 2001) (Common Exhibit 3).

77 See, e.g., T. Stewart (Ed.), The GATT Uruguay Round, A Negotiating History (1986-1992), Vol. II: Commentary (Kluwer: 1993) at pp. 1452, 1575-88 (explaining that the thresholds were established to address “concern[s] with the possibility that unwarranted complaints would be filed and unwarranted investigations commenced.” (p. 1575) (footnote omitted)).

78 Byrd Amendment, Sections 754(a) and (b)(1)(A) and (B) (Common Exhibit 1).

79 Id.

80 “[I]nterpretation must give meaning and effect to all the terms of a treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.” US – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R (29 April 1996) at p. 23. See also, e.g., Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R (14 December 1999) at paras. 80-81.

81 See, e.g., US – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (24 July 2001) at para. 196, regarding Article 3.1 of the AD Agreement:

If an examination is to be “objective”, the investigation and evaluation of the relevant factors must be even handed. Thus, investigating authorities are not entitled to conduct the investigation in such a way that it becomes more likely that, as a result of the fact-finding or evaluation process, they will determine that the domestic industry is injured.

82 See 19 USC. §§ 1671c(e)(1), 1673c(e)(1); 19 C.F.R. § 351.208(f)(2)(iii). Moreover, if, within 20 days of the publication of the notice of suspension, the US authority receives a request to continue its investigation from even one single domestic producer that is a party to the investigation, the authority must continue the investigation. 19 USC. §§ 1671c(g)(2), 1673c(g)(2) (see Exhibit ROK-4 and Common Exhibit 15).

83 See Article 8.1 of the AD Agreement; Article 18.1 of the SCM Agreement.

84 See n. 81 above.

85 See, e.g., 1916 Act, WT/DS162/R at para. 6.292.