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UNITED STATES – CONTINUED DUMPING AND SUBSIDY
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.
2. Brazil 3. Canada 5. European Communities, India, Indonesia and Thailand 6. Korea 7. Mexico B. FIRST WRITTEN SUBMISSION OF THE UNITED STATES 2. Brazil 3. Canada 4. Chile 6. India 7. Indonesia 8. Japan 9. Korea 10. Mexico 11. Thailand D. FIRST ORAL STATEMENT OF THE UNITED STATES 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 5. European Communities, India, Indonesia and Thailand 6. Korea 7. Mexico H. SECOND WRITTEN SUBMISSION OF THE UNITED STATES 2. Brazil 3. Canada 4. Chile 6. India 7. Indonesia 8. Japan 9. Korea 10. Mexico 11. Thailand J. SECOND ORAL STATEMENT OF THE UNITED STATES 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 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 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 3. Conclusion D. AD ARTICLE 8.3/SCM ARTICLE 18.3 - UNDERTAKINGS E. DEVELOPING COUNTRY ISSUE – AD ARTICLE 15 F. AD ARTICLE 18.4/SCM ARTICLE 32.5 & WTO ARTICLE XVI:4 - NECESSARY STEPS TO ENSURE CONFORMITY G. ADVERSE EFFECTS - SCM ARTICLE 5 H. SCM ARTICLES 4.10 AND 7.9 I. GATT ARTICLE X:3(A) 3. Conclusion VIII. CONCLUSIONS AND RECOMMENDATION
LIST OF ANNEXES ANNEX A Third Party Submissions and Oral Statements
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:
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.
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.
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.
(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 th |
