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UNITED STATES � CONTINUED DUMPING AND SUBSIDY
4.195 Mexico argues that at issue in this dispute is whether the Continued Dumping and Subsidy Offset Act of 2000 (the "Act") is consistent with certain obligations of the United States under the Agreement on Subsidies and Countervailing Measures ("SCM Agreement"), the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("AD Agreement"), the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), and the Marrakesh Agreement Establishing the World Trade Organization ("WTO Agreement"). 4.196 The terms of reference of the Panel are:
4.197 According to Mexico, the relevant facts can be summarized as follows:
4.198 It is Mexico's view that the Act mandates the United
States authorities to act in a manner that is inconsistent with the WTO
Agreements. Consequently, Mexico argues that it is entitled to challenge the Act
"as such".
(i) Article 18.1 of the AD Agreement and Article 32.1 of
the SCM Agreement
4.199 According to Mexico, on the facts of this dispute, the
Act is inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of
the SCM Agreement.
4.200 Mexico asserts that these provisions state that no
"specific action" may be taken against dumping of exports from another Member or
a subsidy of another Member except in accordance with the provisions of the GATT
1994 as interpreted by the two Agreements. Under these provisions, a limited set
of specifically defined actions are the only remedies available.
4.201 Mexico argues that the Act establishes a regime for the
systematic collection of funds received from anti-dumping and countervailing
duties on imported products and their distribution to certain United States
producers of like products who were petitioners or in support of a petition
related to the order or finding upon which the duties were levied. The funds
that are distributed are referred to in the Act as "offsets", and their
distribution is mandated.
4.202 Mexico submits that the regime established by the Act
is plainly a specific action against dumping of exports of another Member and
subsidies of another Member because the Act directly and systematically offsets
the dumping and subsidizing of exports and, thereby, amounts to a response to
situations presenting the constituent elements of dumping and subsidizing. The
distribution of offsets under the Act is directly linked to and caused by the
imposition of the United States� anti-dumping and countervailing duties, the
funds that are distributed are created by the existence of dumping and
subsidization, the amount of the funds is equal to the amount of such dumping
and subsidization, and the funds are distributed as offsets to domestic
producers of products that are "like" those found to have been dumped and
subsidized.
4.203 In Mexico's view, the specific action taken under the
Act is not consistent with the provisions of the GATT 1994 as interpreted by the
AD Agreement and the SCM Agreement. It effectively doubles the protection
conferred upon United States producers by the application of anti-dumping and
countervailing duties. This additional remedy distorts trade flows, upsets
expected competitive relationships and provides unreasonable trade protection
that cannot, under any reasonable interpretation, be regarded as "in accordance
with the provisions of the GATT 1994". Accordingly, it is inconsistent with
Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.
(ii) Article 5 of The SCM Agreement
4.204 Mexico asserts that on the facts of this dispute, the
Act is also inconsistent with paragraph (b) of Article 5 of the SCM Agreement.
That provision disciplines actions by Members that cause, through the use of any
subsidy, adverse effects to the interests of other Members. "Adverse effects"
include nullification or impairment of benefits accruing directly or indirectly
to a Member under the GATT 1994.
The granting of subsidies by the Act nullifies or impairs
benefits accruing to Mexico
4.205 Mexico argues that by virtue of Articles 7.1 and 7.3 of
the SCM Agreement, a WTO Member can invoke the remedy provisions in Part III of
the Agreement with respect to the granting of any actionable subsidy by another
Member.
4.206 In Mexico's view, the offsets are subsidies within the
meaning of Article 1.1 of the SCM Agreement in that they constitute a direct
transfer of funds in the form of cash grants which automatically confer a
benefit to the recipient. They are specific within the meaning of Articles 1.2
and 2 of that Agreement, because, by law, access to the subsidies is limited to
a defined universe of recipients. This universe is comprised of enterprises who
produce products that are �like� the products that generated the offset
payments, who were either petitioners or in support of the petition that gave
rise to the duties on those products, who are still in operation and who were
not acquired by a related company that opposed the original investigation.
Accordingly, they are subject to the provisions of Part III of the SCM
Agreement, which include Article 5.
4.207 Mexico asserts that the distribution of offsets under
the Act is explicitly mandated and amounts to the granting of subsidies which,
in turn, amounts to the "use of" subsidies within the meaning of Article 5 of
the SCM Agreement. Through the use of such subsidies, the Act nullifies or
impairs benefits accruing directly or indirectly to Mexico under the GATT 1994
within the meaning of paragraph (b) of Article 5 of the SCM Agreement.
4.208 Mexico argues that the benefits that are being
nullified or impaired accrue to Mexico under Articles II and VI of the GATT
1994. With respect to Article II, in cases where anti-dumping and countervailing
duties are in place against imports of Mexican products, Mexico can legitimately
expect that the competitive relationship between Mexican and like United States
products will be defined by a tariff, at most, equal to the United States�
tariff binding under Article II:1 plus permissible anti-dumping and/or
countervailing duties as contemplated under Article II:2(b) and no more. With
respect to Article VI, in cases where anti-dumping and countervailing duties are
imposed on imports of products from Mexico, Mexico can legitimately expect that
the competitive relationship between Mexican and like United States products
will be modified by the imposition of the duties by, at most, the maximum
anti-dumping and countervailing duties permitted under Article VI:2 and VI:3 of
the GATT 1994 and no more.
4.209 According to Mexico, at the time these benefits accrued
to it under Articles II and VI of the GATT 1994, Mexico could not have
reasonably anticipated the introduction of the Act.
4.210 Mexico asserts that upon granting, the subsidies
mandated by the Act per se nullify or impair the above-noted benefits in
that they systematically upset the expected competitive relationship between
Mexican and like United States products in cases where anti-dumping and
countervailing duties apply. In addition to the expected tariffs under GATT
Article II and duties under GATT Articles II:2(b), VI:2 and VI:3, the
competitive relationship between the imported and like domestic products is
established and, thereby, upset by the subsidies. The nullification or
impairment is direct and systematic and it reflects the explicit objective of
the Act �- to enhance the remedial effect of United States� anti-dumping and
countervailing duty laws.
4.211 In the circumstances of this dispute, Mexico submits,
the granting of subsidies per se causes nullification or impairment
within the meaning of Article 5(b) of the SCM Agreement, and thereby violates
that provision. Since the Act mandates the granting of subsidies it necessarily
results in action that is inconsistent with a WTO provision.
The maintaining of subsidies by the act nullifies or impairs
benefits accruing to Mexico
4.212 Mexico is of the view that in addition, by virtue of
Articles 7.1 and 7.3 of the SCM Agreement, a WTO Member can invoke the remedy
provisions in Part III of the SCM Agreement with respect to the maintaining of
any actionable subsidy by another Member.
4.213 Mexico posits that the Act provides the means or
infrastructure for the granting of the subsidies and, thereby, "maintains" those
subsidies within the meaning of Articles 7.1 and 7.3. Maintaining subsidies in
circumstances where the granting of subsidies is mandated and other actions have
been taken with respect to the subsidies amounts to the "use of" a subsidy
within the meaning of Article 5 of the SCM Agreement.
4.214 According to Mexico, the maintenance of subsidies in
such circumstances nullifies or impairs benefits accruing to Mexico under the
GATT 1994. The above-noted benefits and Mexico�s associated legitimate
expectations pertain to both current trade and to the creation of predictability
needed to plan future trade. In the circumstances of this dispute, the mere
existence of the Act impairs the predictability of the conditions of future
trade and, thereby, the ability of Mexican exporters who face United States�
anti-dumping and countervailing duties to plan for that trade.
4.215 Accordingly, Mexico asserts, the maintenance of
subsidies by the Act in the specific circumstances of this dispute, which
amounts to the use of subsidies, causes nullification or impairment within the
meaning of Article 5(b) and thereby violates that provision.
(iii) Article 5.4 of the AD Agreement and Article 11.4 of
the SCM Agreement
4.216 Mexico argues that Article 5.4 of the AD Agreement and
11.4 of the SCM Agreement set out minimum requirements regarding the initiation
of anti-dumping or countervailing duty investigations. Both provisions state
that an investigation cannot be initiated unless the authorities have determined
that an application has been made "by or on behalf of the domestic industry".
4.217 Mexico submits that when the investigating authorities
determine whether an application is made "by or on behalf of the domestic
industry", the determination must be conducted in an objective manner and must
conform to the principles of good faith.
4.218 In Mexico's view, the Act creates a financial incentive
for domestic producers to file or support petitions for the initiation of an
investigation, rather than abstaining from doing so. The incentive distorts the
functioning of the thresholds regarding standing and, hence distorts the
examination that the investigating authority is required to make in order to
determine whether the application has been made "by or on behalf of the domestic
industry". This makes it impossible for the investigating authority to carry out
the "objective examination" it is obliged to undertake.
4.219 Thus, according to Mexico, the Act violates Article 5.4
of the AD Agreement and Article 11.4 of the SCM Agreement.
(iv) Article 8 of the AD Agreement and Article 18 of the
SCM Agreement
4.220 In Mexico's opinion, Article 8 of the AD Agreement and
Article 18 of the SCM Agreement allow domestic investigating authorities to
suspend or terminate anti-dumping and countervailing duty investigations where
the exporter (or the government in countervailing duty investigations) provides
a satisfactory voluntary undertaking.
4.221 When investigating authorities determine whether
undertakings should be agreed to, the determination must be conducted in an
objective manner and must conform to the principles of good faith.
4.222 Mexico argues that the Act creates a financial
incentive for the petitioners to oppose the acceptance of undertakings and,
therefore, will lead to the rejection of such undertakings without proper
reason. This makes it impossible for the investigating authority to conduct an
objective examination of whether undertakings would be appropriate and thereby
renders the price undertaking provisions in the two Agreements inutile.
4.223 Thus, in Mexico's view, the Act violates Article 8 of
the AD Agreement and Article 18 of the SCM Agreement.
(v) Article X:3(a) of the GATT 1994
4.224 Article X:3(a) of the GATT 1994 requires Members to
administer in a uniform, impartial and reasonable manner all its laws,
regulations, decisions and administrative rulings of general application
pertaining to the classification or the valuation of products for customs
purposes, or to rates of duty, taxes or other charges, or to requirements,
restrictions or prohibitions on imports or exports. The United States�
anti-dumping and countervailing duty laws and regulations are subject to this
provision.
4.225 Mexico asserts that by mandating United States
authorities to act inconsistently with their obligations under the AD Agreement
and the SCM Agreement regarding standing determinations and price undertakings,
the Act does not lead to a reasonable and impartial administration of the United
States� laws and regulations implementing those provisions.
4.226 Accordingly, Mexico submits, the Act is inconsistent
with Article X:3(a) of the GATT 1994.
(vi) Article XVI:4 of the WTO Agreement, Article 18.4 of
the AD Agreement and Article 32.5 of the SCM Agreement
4.227 Mexico asserts that Article XVI:4 of the WTO Agreement,
Article 18.4 of the AD Agreement and Article 32.5 of the SCM Agreement require
the United States to bring its anti-dumping and countervailing duty laws into
conformity with the WTO Agreements including the GATT 1994, the AD Agreement and
the SCM Agreement.
4.228 Mexico is of the opinion that as a consequence of being
inconsistent with the above-noted provisions of the AD Agreement, the SCM
Agreement and the GATT 1994, the Act is not in conformity with those covered
Agreements and, is therefore inconsistent with Article XVI:4 of the WTO
Agreement, Article 18.4 of the AD Agreement and Article 32.5 of the SCM
Agreement.
(d) Findings requested
4.229 For the foregoing reasons, Mexico respectfully requests
that the Panel find that the Act is inconsistent with:
(a) Article 18.1 of the AD Agreement and Article 32.1
of the SCM Agreement on the grounds that it mandates specific action
against dumping of exports from another Member and subsidies of another
Member, which is not in accordance with the provisions of GATT 1994, as
interpreted by the two Agreements.
(b) Paragraph (b) of Article 5 of the SCM Agreement on the
grounds that:
(i) It mandates the granting of subsidies in a
manner and in circumstances that will necessarily nullify or impair
benefits accruing to Mexico under Articles II and VI of the GATT
1994; and
(ii) it maintains subsidies in a manner and in
circumstances that nullify or impair benefits accruing to Mexico
under Articles II and VI of the GATT 1994.
(c) Article 5.4 of the AD Agreement and Article 11.4
of the SCM Agreement.
(d) Article 8 of the AD Agreement and Article 18 of
the SCM Agreement.
(e) Article X:3(a) of the GATT 1994.
(f) Article XVI:4 of the WTO Agreement, Article 18.4
of the AD Agreement and Article 32.5 of the SCM Agreement.
4.230 Mexico also requests that the Panel find, pursuant to
Article 3.8 of the DSU, that as a result of the infringements of the provisions
cited above, the United States has nullified or impaired the benefits accruing
to Mexico under the Anti-Dumping Agreement, the SCM Agreement, the GATT 1994 and
the WTO Agreement. Mexico also requests that the Panel recommend that the United
States bring its measure into conformity with its obligations under the AD
Agreement, the SCM Agreement, the GATT 1994 and the WTO Agreement and take
appropriate steps to remove the adverse effects of the subsidies or withdraw the
subsidies at issue. Mexico further requests that, in the exercise of its powers
under Article 19.1 of the DSU, the Panel suggest that the United States repeal
the Act.
B. FIRST WRITTEN SUBMISSION OF THE UNITED STATES (a) Introduction
4.231 The United States asserts that the �Continued Dumping
and Subsidy Offset Act of 2000� (CDSOA) was signed into law on October 28, 2000.
The CDSOA is a government payment programme administered by the US Customs
Service. The CDSOA instructs Customs to establish special accounts for funds to
be distributed annually to eligible domestic producers. Because the special
accounts are sourced with duties collected by Customs on pre-existing
anti-dumping (AD) or countervailing (CVD) duty orders, complainants filed this
case alleging that the CDSOA is, on its face, inconsistent with US obligations
under the WTO Agreement. Complainants, however, have failed to make a prima
facie case of a WTO violation for the following reasons.
4.232 According to the United States, the complaining parties
are essentially arguing that WTO members cannot enact a law which permits the
distribution of revenues generated from AD/CVD duties to any recipient other
than the national treasury. No word, phrase, or paragraph in the entire WTO
Agreement, however, supports their argument. A review of the negotiating history
since 1947 confirms that a specific restriction on how Members can spend or
distribute moneys received as AD/CVD duties was not raised or addressed during
negotiations. As the Appellate Body cautioned in India � Patents, the
panel�s role is limited to the words and concepts used in the treaty. Under the
WTO Agreement, Members retain the right to control their treasury, allocate
their resources, and disburse funds for a wide range of purposes. A Member�s
sovereign right to appropriate lawfully assessed and collected duties cannot be
restricted by this Panel ex aequo et bono.
(b) Article 5 of the SCM Agreement
4.233 The United States argues that Mexico claims that
Article 5(b) of the Agreement on Subsidies and Countervailing Measures
(�SCM Agreement�) limits the ability of the United States to disburse funds
under the CDSOA. The granting of a subsidy is not, in and of itself, prohibited
under the SCM Agreement. On the contrary, a subsidy must be �specific� within
the meaning of Article 2. Mexico, however, has failed to establish that the
CDSOA is �specific� on the basis of positive evidence as required by Articles 1
and 2 of the SCM Agreement.
4.234 First, according to the United States, there is no
question that the CDSOA is not de jure specific because it does not
expressly limit access to certain enterprises, industry, or groups. It is
potentially applicable to any producer in any industry in the United
States that has filed a petition or supported an anti-dumping or countervailing
duty investigation resulting in the collection of duties and remains in
operation. Consistent with Article 2.1(b), eligibility for the CDSOA
distributions is based on objective criteria, and eligibility is automatic if
the criteria are met. Second, Mexico provided no positive evidence that the
CDSOA is de facto specific within the terms of Article 2.1(c). Given that
distributions are potentially available to any producer in any industry and
recipients will change over time, it is doubtful that Mexico could ever show
de facto specificity. Subsidies that are not �specific� are not actionable
under Article 5 of the SCM Agreement.
4.235 The United States argues that Mexico does not even try
to make a prima facie case that the CDSOA has caused actual adverse
effects to its interests as required by Article 5 of the SCM Agreement. Instead,
Mexico claims that the CDSOA as such causes per se adverse effects
in the form of nullification or impairment of benefits under Article 5(b). It is
not clear to the United States, however, that Article 5(b) creates a presumption
that a subsidy that violates another WTO provision is an actionable subsidy
without any showing of adverse effects. Such an interpretation would eliminate
the primary distinction between prohibited subsidies under Article 3 where
effects are presumed and actionable subsidies under Article 5 where the
complaining party must demonstrate adverse effects. Regardless, the CDSOA does
not violate any other WTO provision.
4.236 The United States asserts that Mexico�s claim does not
satisfy the three requirements articulated in Japan � Film to establish a
non-violation nullification or impairment either. First, Mexico has failed to
challenge the application of the CDSOA. Second, Mexico has failed to
demonstrate that the competitive relationship between US products and Mexican
imports has been upset by a subsidy, and that the subsidy was not reasonably
anticipated by Mexico.
4.237 In the United States' opinion, Mexico has presented no
evidence that US producers of products that compete with Mexican products have
actually received a distribution under CDSOA, let alone a �clear correlation�
between the distributions and any disruption of a competitive relationship.
Without such evidence, the �relevant competitive relationship� has not even been
established.
4.238 The United States posits that Mexico�s related argument
that distributions under the CDSOA will per se nullify or impair benefits
under Articles II and VI of the General Agreement on Tariffs and Trade 1994
(�GATT 1994�) is unreasonable and must be rejected. Not only does it fly in the
face of the notion that a non-violation claim is an exceptional remedy, but such
an interpretation would render the causation requirement meaningless and
automatically convert any specific domestic subsidy programme related to a
product on which there is a tariff concession into a non-violation nullification
or impairment of benefits.
4.239 Finally, the United States submits that Mexico could
have reasonably anticipated, before the tariff concession negotiated during the
Uruguay Round entered into force on 1 January 1995, that anti-dumping and
countervailing duties would be distributed to the domestic industry. In fact,
there was proposed legislation in the US Congress for the distribution of duties
in 1988, 1990, 1991, and 1994. In sum, Mexico has failed to sustain its burden
of demonstrating that the CDSOA is a �specific� subsidy that is actionable
within the meaning of Articles 1, 2, and 5 of the SCM Agreement.
(c) GATT Article VI, the Antidumping Agreement and the
SCM Agreement
4.240 The United States is of the view that claims that the
CDSOA is a specific action against dumping or a subsidy contrary to GATT 1994
Article VI or the Agreement on the Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (�Antidumping Agreement�) and SCM Agreement
must also fail. Assuming that the reasoning of United States � Antidumping
Act of 1916 applies to the facts of this case, it is clear that the CDSOA
does not constitute a �specific action against dumping� or a �specific action
against a subsidy.�
4.241 First, the United States submits, the distributions are
not based upon a test that includes the constituent elements of dumping or a
subsidy. Rather, the distributions are based upon the applicant�s qualification
as an �affected domestic producer� who has incurred �qualifying expenditures.�
The CDSOA does not provide for the recovery of �damages�: the amount of the
distributions have nothing to do with measuring the extent to which a US
producer has been affected by dumping or subsidization of imports.
4.242 Second, according to the United States, the CDSOA is
not an action �against� dumping or a subsidy. Because there was no question in
United States � Antidumping Act of 1916 that civil or criminal penalties
under the 1916 Act applied to importers, neither the panels nor the Appellate
Body in that case discussed whether the specific action was �against� dumping.
In contrast, this Panel must consider the proper interpretation of the term
�against� in Articles 18.1 and 32.1 of the Antidumping and SCM Agreements,
respectively.
4.243 The United States asserts that the ordinary meaning of
the term �against� suggests that the specific action must be in �hostile
opposition to� dumping/subsidization and must �come into contact with�
dumping/subsidization. Thus, to consider a specific action �against� dumping or
subsidization, the action must apply to the imported good or the importer, and
it must be burdensome. Unlike the 1916 Act, the CDSOA imposes no burden or
liability on imported goods or importers. The CDSOA has nothing to do with
imported goods or importers; it is a payment programme. Therefore, this Panel
should find that Article VI of the GATT 1994, Articles 1 and 18 of the
Antidumping Agreement, and Articles 10 and 32 of the SCM Agreement do not apply
to the CDSOA.
4.244 It is the view of the United States that in the event
that the Panel concludes that the CDSOA is an action against dumping and a
subsidy, footnotes 24 and 56 to the Antidumping and SCM Agreements,
respectively, operate to exclude the CDSOA from the scope of Article VI and the
Antidumping and SCM Agreements. Footnotes 24 and 56 clarify the meaning of
Articles 18.1 of the Antidumping Agreement and 32.1 of the SCM Agreement,
respectively, by stating that they are �not intended to preclude action under
other relevant provisions of GATT 1994 � .�
The general reference to �action� in footnotes 24 and 56 is not the same type of
focused and directed action which applies to oppose dumping or subsidies as
such within the meaning of Articles 18.1 and 32.1. The ordinary meaning of
the phrase �not intended to preclude action� within the context of Articles 18.1
and 32.1 is that action is permitted. According to the panel in United
States � Antidumping Act of 1916, Members are free to address the causes or
effects of dumping (and subsidies) through other trade policy instruments that
are consistent with GATT 1994 provisions other than GATT 1994 Article VI.
4.245 The United States argues that the CDSOA is an action
consistent with GATT 1994 Article XVI entitled �Subsidies.� Article XVI is a
�relevant provision of GATT 1994� which recognizes that Members have the general
right to use subsidies and may provide non-export subsidies to the extent that
they do not cause serious prejudice to the interests of other Members. The
complaining parties do not argue that disbursements under the CDSOA have caused
or will cause serious prejudice to their interests. Therefore, if the CDSOA is
considered to be an action against dumping, the distributions are otherwise
permitted by the footnotes to Articles 18.1 and 32.1 as action under another
relevant GATT provision.
4.246 The United States posits that the complaining parties
also overlook the fact that Articles 4.10 and 7.9 of the SCM Agreement do not
contain an obligation or prohibition on Members and, therefore, cannot form the
basis of a violation of the SCM Agreement. Even if the Panel could somehow
construe Articles 4.10 and 7.9 as containing such an obligation, the CDSOA is
not a �countermeasure� within the meaning of Articles 4.10 or 7.9. The CDSOA is
not a specific action against dumping or a subsidy. Nor was it enacted in order
to induce another Member to implement DSB recommendations and rulings: it has
nothing to do with the actions of other Members. The CDSOA is a payment
programme.
(d) Standing, undertakings and GATT Article X:3
4.247 According to the United States, claims that the CDSOA
breaches Article 5.4 of the Antidumping Agreement and Article 11.4 of the SCM
Agreement by compromising the ability of US authorities to make objective
assessments of whether AD and CVD petitions have the support required for
initiation are unsupported and must be rejected. Complaining parties offer no
evidence that the CDSOA in any way affects how US authorities apply the
objective criteria set forth in Articles 5.4 and 11.4 for determining industry
support for petitions. Instead, the complaining parties engage in speculation on
the impact of the CDSOA on the willingness of private companies to support
AD/CVD petition and attempt to read into Article 5.4 and 11.4 a non-existent
requirement for authorities to undertake subjective analyses of the motives of
domestic companies.
4.248 Contrary to the complaining parties� arguments, the
United States submits, there is no requirement in Articles 5.4 and 11.4 that the
administering authority determine the reason for the domestic industry�s
support. The obligation is to determine whether the quantitative
benchmarks have been met. The objective, quantitative nature of the analysis of
industry support leaves little or no scope for an improper analysis: either the
number of companies expressing support for the petition meet the threshold, or
they do not.
4.249 According to the United States, a requirement to
determine the subjective motivations of private parties would be unworkable.
Even if relevant, it is highly unlikely that complaining parties could ever
summon credible evidence that �but for� the distributions, domestic producers
would not otherwise have filed a petition or supported an investigation, and
that the participation of those producers was necessary to establish standing in
that investigation. It is rare for domestic producers in the United States not
to have sufficient industry support in filing anti-dumping or countervailing
duty petitions. Thus, if there is sufficient support anyway, it cannot be
said that the CDSOA will affect the number of cases meeting the thresholds of
Articles 5.4 and 11.4, even if such an increase could constitute a breach of
those Articles.
4.250 The United States asserts that claims that the CDSOA
breaches Article 8 of the Antidumping Agreement and Article 18 of the SCM
Agreement by making it more difficult for exporters to secure an undertaking
with the competent authorities are likewise unsupported and must be rejected.
There is no obligation in Articles 8 and 18 to accept a proposed undertaking.
Moreover, and more importantly, neither Article circumscribes the reasons that
may cause an administering authority to decline to accept a proposed undertaking
as �impractical.� The Articles do not require the administering authority to
determine that the undertaking is �inappropriate� before rejecting it. The
sentence in Article 8.3 and 18.3 containing the term �inappropriate� addresses
the circumstances under which the exporter is to be provided the reasons for the
rejection. It does not change the standard for accepting or rejecting an
undertaking.
4.251 The United States is of the view that it is within the
complete discretion of the administering authority to accept or reject an
undertaking. Thus, even assuming arguendo that the CDSOA renders it more
difficult for exporters to secure price undertakings, there is no WTO violation
because there is no obligation to enter into a price undertaking in the
first place.
4.252 The United States argues that again the complaining
parties have provided no evidence that the CDSOA has had or will have any actual
effect on the Commerce Department�s consideration of proposed undertakings.
Domestic producers do not enjoy an �effective� veto over proposed undertakings �
only the competent authority and the exporters determine whether to agree to an
undertaking. The vast majority of undertakings in the United States since 1996
have been entered into over the vehement opposition of domestic producers. Nor
is there any reason to believe that the domestic industry will oppose an
undertaking as a result of the CDSOA. If conditions of fair trade can be
achieved through an undertaking, domestic producers who file petitions will be
supportive of an agreement. Even if the CDSOA were to change the position of
domestic producers, however, there is nothing to suggest a change in the
Commerce Department�s independent action.
4.253 In the view of the United States, the complaining
parties have offered no arguments or evidence concerning the actual
administration of the CDSOA and, therefore, cannot allege a violation of Article
X:3(a) of the GATT 1994. Consistent with the plain language of Article X:3(a),
various panel and Appellate Body reports have concluded that Article X:3(a) only
addresses the administration of national laws. The complaining parties,
however, have provided no evidence at all concerning the day-to-day
administration of the CDSOA. Even if it were concluded that the CDSOA somehow
affects the administration of laws relating to the initiation of anti-dumping
and countervailing duty investigations and to price undertakings, this could not
conceivably form the basis of an Article X:3(a) finding against the CDSOA.
4.254 Finally, the United States submits, because the CDSOA
is not inconsistent with any WTO Agreement provision, the complaining parties�
claims under Article XVI:4 of the Marrakesh Agreement Establishing the World
Trade Organization, Article 18.4 of the Antidumping Agreement, and Article
32.5 of the SCM Agreement must also fail.
C. FIRST ORAL STATEMENTS OF THE COMPLAINING PARTIES 1. Australia (a) Introduction
4.255 In its statement, Australia identifies the core legal
claims made in this case and addresses some of the specific arguments made by
the United States. Australia notes that Australia's written submission sets out
these claims in greater detail.
(b) First Claim: Article 18.1 of the Anti-Dumping
Agreement in conjunction with GATT Article VI:2 and Article 1 of the
Anti-Dumping Agreement
4.256 The first claim made by Australia is that the United
States has violated Article 18.1 of the Anti-Dumping Agreement, read in
conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement,
because the Act constitutes a specific action against dumping in a manner
inconsistent with the Anti-Dumping Agreement.
4.257 In the case United States � Anti-dumping Act of 1916,
the Appellate Body found that �specific action against dumping� of exports
within the meaning of Article 18.1 is action that is taken in response to
situations presenting the constituent elements of �dumping�. The Appellate Body
also found that Article 18.1 of the Anti-Dumping Agreement prohibits the taking
of any such action when it is not in accordance with the provisions of GATT 1994
as interpreted by the Anti-Dumping Agreement.
4.258 According to Australia, it is readily apparent, and
indeed confirmed by the United States' first written submission, that the Act
mandates a specific action in response to situations presenting the constituent
elements of dumping, and that this action is not in accordance with the
provisions of GATT 1994 as interpreted by the Anti-Dumping Agreement.
4.259 Australia argues that under the Act, an anti-dumping
order is a necessary prerequisite for the automatic disbursement of collected
anti-dumping duties to affected domestic producers. An anti-dumping order is
also a formal determination by the United States that there exists a situation
presenting the constituent elements of dumping.
4.260 According to Australia, in its first submission, the
United States confirms that, in order to make an anti-dumping order, there must
have been a petition from the domestic industry, an examination by the US
Commerce Department of the standing requirements, an initiation of an
investigation, a determination of injury, and a determination of dumping.
4.261 Australia posits that there is a clear linkage and
contingency between the disbursement under the Act and the constituent elements
of dumping (that is, the investigation, finding of injury and positive
determination of dumping and the imposition of duties). The US Customs Service
has no discretion in establishing special accounts to disburse the funds
collected to affected domestic producers for qualifying expenditures.
4.262 Australia argues that as a result of the Act, the
disbursement of anti-dumping duties to affected domestic producers is now part
and parcel of the process of any successful anti-dumping application, and as the
disbursement does not fall within the specific actions covered by the Anti
Dumping Agreement, it is therefore action that is inconsistent with Article 18.
4.263 Australia asserts that in its first submission, the
United States has sought to argue that the �offsets� are nothing more than a
government payment programme, and are simply a distribution of government monies
collected. The United States also claims that the only connection between the
duties collected and the funds paid is that the duties collected cap the amount
of payments.
4.264 Australia submits that these arguments are without
merit. If, as the United States says, the Act is simply a government payment
system based on eligible expenditure, why has the United States not distributed
the payments to those who did not support the trade remedy action? Why are not
all domestic producers of the like product entitled to the payments? The Act
does not simply disburse revenues or cap payments in any case: it is a clear and
systematic extension of the United States' framework of rules for the imposition
of anti-dumping duties. It is a prohibited specific action against dumping.
(c) Second Claim: Article 32.1 of the SCM Agreement in
conjunction with GATT Article VI:3 and Articles 4.10, 7.9 and 10 of the SCM
Agreement
4.265 Australia�s second claim is that the United States has
violated Article 32.1 of the Agreement on Subsidies and Countervailing Measures
(the SCM Agreement), in conjunction with GATT Article VI:3 and Articles 4.10,
7.9 and 10 of the SCM Agreement, because the Act constitutes a specific action
against subsidisation in a manner inconsistent with the SCM Agreement and
GATT 1994.
4.266 Australia is of the view that the Appellate Body�s
reasoning in the United States � Anti-Dumping Act of 1916 in relation to dumping
applies equally to the obligations relating to actions against subsidisation. In
other words, the Act mandates a prohibited specific action in response to
situations presenting the constituent elements of subsidisation.
4.267 Australia argues that once a countervailing duty order
or finding is issued, the Act mandates a number of subsequent actions that have
the effect of providing an additional remedy against the effects of a subsidy.
That additional remedy is the distribution of assessed duties pursuant to a
countervailing duty order to the affected domestic producers for qualifying
expenditures.
4.268 Australia is of the opinion that this distribution of
assessed duties is not simply payment of subsidies to producers as the United
States argues. If that were so, why does the United States not distribute the
payments to those producers who do not support the trade remedy action? Again,
the Act is a clear and systematic extension of the United States' framework of
rules for the imposition of countervailing duty orders. It is an action in
response to situations presenting the constituent elements of subsidisation and
it is an action that is not in accordance with the United States' WTO
obligations.
4.269 According to Australia, it has shown in its first
submission that the Act mandates action not permitted under the SCM Agreement or
GATT Article VI to counteract or offset the effects of a subsidy.
(i) Article 10 of the SCM Agreement
4.270 Australia asserts that the SCM Agreement expressly
provides for specific action to be taken against subsidies. However, Article 10
of the SCM Agreement only permits certain forms of relief � either a
countervailing duty or a countermeasure. Further, footnote 35 to Article 10
makes clear that relief, whether a countervailing duty or countermeasure, must
be in relation to the �effects� of a particular subsidy in the domestic market
of an importing Member.
4.271 Australia posits that in the context of the SCM
Agreement, the United States measure is particularly pernicious because it
penalizes non-subsidized exports. In its first submission, Australia argues, it
has shown that the Act operates as a countermeasure against products from other
WTO Members that were included in the original countervail investigation but
were not subjected to the countervailing duty orders. The assessed duties
distributed under the Act to the affected domestic producers are based on
qualifying expenditure incurred in relation to the product which has been the
subject of a countervailing duty order. As such, the Act provides
counter-subsidies which affect the competitive relationship between the domestic
products and products of other WTO Members not subject to the original
countervailing duty order.
(ii) GATT Article VI:3
4.272 Australia argues that similarly, the only remedy
available under GATT Article VI:3 is a countervailing duty. Moreover, GATT
Article VI:3 determines the level of the countervailing duty that can be imposed
against subsidised imports. Australia considers that it has shown that, contrary
to GATT Article VI:3, the Act provides, indeed ensures, that there is a remedy
to affected domestic producers that is in addition to the countervailing duties
imposed by the United States. Having assessed duties pursuant to a
countervailing duty order, the Act mandates the provision of additional measures
to counteract or offset a subsidy over and above the level of subsidisation.
4.273 Australia considers that the United States thereby
imposes a remedy which exceeds the level of subsidisation that has been
determined by the Commerce Department. Affected domestic producers receive a
benefit from both the levied countervailing duty and the payment to them
of the assessed duties thereby providing a remedy at a level in excess of the
level of subsidy assessed under the countervailing duty order.
4.274 Australia asserts that the United States always imposes
the full margin of duty. Even if the United States imposed the lesser duty rule,
the payments disbursed to affected domestic producers would exceed the assessed
levels of subsidisation and injury.
(d) Third Claim: Article 5.4 of the Anti-Dumping
Agreement/Article 11.4 of the SCM Agreement
4.275 The third claim made by Australia is that the Act
distorts, or threatens to distort, the degree of support for, or opposition to,
an application for an anti-dumping or countervailing duty investigation among
domestic producers of the like product. As such it is inconsistent with Article
5.4 of the ADA and Article 11.4 of the SCM Agreement.
4.276 According to Australia, the Act creates a systemic bias
in favour of supporting domestic producers through the provision of a financial
incentive or reward. It contravenes the fundamental principle that the legal
framework of a rules-based system must itself be established in an impartial and
objective manner. It frustrates the intent of Articles 5.4/11.4 to establish
whether an application is truly being made by or on behalf of domestic industry.
(e) Fourth Claim: Article XVI:4 of the WTO Agreement,
Article 18.4 of the Anti-Dumping Agreement and Article 32.4 of the SCM
Agreement
4.277 Australia argues that by violating any of the
provisions as outlined above, the United States has also in its view violated
Article XVI:4 of the WTO Agreement, as well as Article 18.4 of the Anti-Dumping
Agreement and Article 32.5 of the SCM Agreement.
(f) United States� arguments
4.278 Australia submits there are some significant flaws in
the US arguments, particularly in misquoting the Appellate Body in the case of
United States � Anti-Dumping Act of 1916.
4.279 Australia asserts that the Appellate Body found that
�specific action against dumping" of exports within the meaning of Article 18.1
is action in response to situations presenting the constituent elements of
dumping. The United States has omitted two key words that formed part of the
Appellate Body�s statement � �situations presenting�.
4.280 In other words, according to Australia, specific action
against dumping is any action taken in response to conduct by which products of
one country are introduced into the commerce of another country at less than the
normal value of the products.
4.281 Further, according to Australia, the United States
argues that in order for a specific action to be characterised as action against
dumping or subsidisation, the action must apply to the imported goods or
importer and it must be �burdensome�. The Act, the United States says, imposes
no burden or liability on imported goods and importers.
4.282 Australia rejects these arguments. The United States in
effect argues for an overlay of conditions and criteria to be read into the
Anti-Dumping Agreement and the SCM Agreement and GATT Article VI which is
clearly not there. The offset payments under the Act alter the competitive
relationship between such goods and the domestically-produced like products in
ways not contemplated by the GATT, the Anti-Dumping Agreement or SCM Agreement.
Indeed, it also affects the competitive position of exporters to the US market
for products that have been found not to have been subsidised or dumped.
(g) Conclusion
4.283 In conclusion, according to Australia, the number of
co-complainants, and third parties, involved in this dispute reflects the
breadth of concern by the WTO membership over the actions of the United States
in promulgating this mandatory legislation.
4.284 Australia argues that the WTO Agreements provide the
framework for a secure and predictable multilateral trading system. They also
provide a system of permissible trade remedies against dumping and subsidisation
which respect the rights and benefits of all WTO Members. The United States
legislation constitutes action which is both inconsistent with those Agreements
and seriously undermines the proper functioning of the multilateral trading
system.
4.285 Australia is of the view that, if permitted to stand,
the United States legislation would precipitate an undermining of trade remedy
rules and encourage the proliferation of remedy actions.
2. Brazil
(a) Introduction
(i) Systemic concerns
4.286 Brazil believes the panel should consider three
systemic concerns in its deliberations.
4.287 First, to what extent does the promise of monetary
rewards to the complaining party encourage the filing of cases which otherwise
would never have been filed? Or to what extent does it promote the pursuing of
reviews of the amounts of anti-dumping and countervailing duties in order to
maximize revenues even when the desired protection has been achieved? Brazil
believes that it is inevitable that monetary rewards will encourage more cases
and will encourage domestic industries to pursue these cases, once filed, more
vigorously than in the absence of the potential receipt of these monetary
rewards. Brazil submits that these cases already cost the Brazilian industries
hundreds of thousands of dollars to defend. In addition, each annual review
costs a responding company similar amounts. With the Byrd Amendment, even if a
domestic industry has obtained the measure of relief necessary to eliminate the
injury, there remains the incentive to pursue reviews in order to increase
revenues. Thus, according to Brazil, the real costs to exporting industries will
increase, both in terms of higher defense costs and higher duties. In short,
according to Brazil, with an incentive to maximize the duties because it means
higher revenues for the domestic industry, the narrow objectives of the AD and
SCM Agreements no longer define the process or the remedy. An additional
objective � creating the maximum revenue possible for the complaining domestic
industry � has been introduced.
4.288 The second concern of Brazil relates to the message
that would be conveyed if this panel endorsed the notion that monetary rewards
were an appropriate remedy under the WTO. Brazil argues that if this panel
endorsed the Byrd Amendment payments, it would be making a finding that,
irrespective of restrictions on remedies available under WTO agreements, a
government may unilaterally take whatever additional steps it deems appropriate.
The US believes that, so long as it does not directly increase the financial
burden on the offending party, any action should be permitted, even those linked
directly to the WTO authorized remedy, in serving the same objectives.
4.289 Brazil argues that, as pointed out in Brazil�s
submission, the US steel industry in a pending safeguards action has suggested
that the revenues from higher duties imposed as safeguard measures be used to
finance the government assumption of liabilities that are responsible for many
of the problems of the industry. Monetary rewards or �damages� have never been a
part of the WTO or GATT systems for enforcing obligations. Brazil submits that
this panel should not open the door to this possibility.
4.290 Finally, Brazil argues that, as a developing country,
it has additional concerns about the disproportionate new burdens created by the
Byrd Amendment for developing country exporters. According to Brazil, both the
AD and SCM Agreements provide for the cumulative assessment of the effects of
imports from multiple sources on injury to the domestic industry in the
importing country. This approach, commonly referred to as �cumulation�, is
permitted under Article 3.3 of the AD Agreement and Article 15.3 of the SCM
Agreement. In effect, cumulation allows for inclusion of marginal suppliers in
anti-dumping and countervailing measures in circumstances under which these
suppliers alone would not be causing injury to the importing country industry.
4.291 Brazil asserts that the effects of cumulation are felt
mostly by developing countries because industries in these countries tend to be
the smaller, newer, marginal suppliers to major markets. Yet, the use of the
cumulation provisions of the agreements has been tempered by the need to balance
the marginal costs of adding additional suppliers with the marginal benefit of
including those suppliers. However, the Byrd Amendment is likely to encourage
the filing of more cases against marginal suppliers, primarily developing
country suppliers, under the cumulation provisions of the agreements in order to
create maximum revenues for distribution to the complaining industries. As such,
the Byrd Amendment is likely to have a disproportionate impact on developing
country industries, exactly the opposite of the special and differential
treatment which is encouraged under Article 27 of the SCM Agreement and Article
15 of the AD Agreement.
(ii) The United States attempts to mischaracterize the
issue in this proceeding as one of sovereign rights rather than one of
sovereign obligations
4.292 Brazil posits that the essence of the US argument in
support of the Byrd Amendment is captured in paragraph 20 of the First
Submission of the United States:
While it is true that WTO Members have agreed to exercise
their sovereignty according to their WTO Agreement commitments, the converse
is also true. A commitment not made cannot be broken. When the agreement is
silent on an issue, a panel cannot find a violation.
4.293 The US continues in paragraph 25 by claiming:
Members are free to pursue their own domestic goals
through spending so long as they do not do so in a way that violates
commitments made in the WTO Agreement.
4.294 Brazil argues that it is clear from these two examples
that the US wishes to characterize the issue in this proceeding as an
unwarranted intrusion on the ability of a Member to spend its revenues as it
sees fit, including assisting industries injured by imports. In fact, Brazil
asserts, this is not the issue. The issue before the panel is very specific,
namely whether the distribution of anti-dumping and countervailing duty revenues
by the US is inconsistent with the limitations on anti-dumping and
countervailing measures specified in the AD and SCM Agreements and, therefore,
in violation of US WTO obligations.
4.295 Brazil is of the view that no one is challenging the
right of the US to choose how its revenues are disbursed. The issue is whether
in the particular situation of the Byrd Amendment, the US distribution of
anti-dumping and countervailing duty revenues to the requesting parties is
consistent with US WTO obligations. There is a direct link between the
imposition of anti-dumping and countervailing duties under the Tariff Act of
1930 (the US law authorizing investigation of dumping and subsidization and the
imposition of anti-dumping and countervailing duties) and the entitlement to
payments under the Byrd Amendment. Without a finding of dumping and
subsidization and the collection of anti-dumping and countervailing duties,
there are no payments under the Byrd Amendment. Thus, the question is not
whether the US is free to spend the revenues from anti-dumping and
countervailing duties as it sees fit, but rather whether there is a direct
relationship between the payments under the Byrd Amendment and US WTO
obligations under the AD and SCM Agreements such that those payments are linked
to and become part of the remedies for dumping and subsidization.
4.296 Brazil argues that one needs to distinguish between
payments which benefit domestic parties injured by imports and payments which
are linked directly to and are part of the anti-dumping and countervailing
measures permitted by the agreements. For example, the US has an extensive
programme of so-called Trade Adjustment Assistance intended to help companies
and workers that are injured by import competition. However, there is no direct
linkage between the entitlement to or the revenues for such assistance and the
collection of anti-dumping and countervailing duties, as is the case with the
Byrd Amendment. Indeed, according to Brazil, that is precisely what
distinguishes the Byrd Amendment, namely the direct relationship between the
entitlement and distribution of revenues and anti-dumping and countervailing
measures.
4.297 Brazil asserts that the US takes the position that the
language of Articles 18.1 and 32.1, respectively, of the AD and SCM Agreements �
�specific action against� dumping and subsidies � means that the action must
�apply to the imported good or the importer, and it must be burdensome.�86 Brazil
addresses its view of the interpretation of this language below, but argues that
even using the US interpretation, the Byrd Amendment is specific action against
an importer and is burdensome. The parties requesting the imposition of
anti-dumping and countervailing duties must be, after all, direct competitors
with the imported product and, therefore, with the importers and exporters of
that product. If they were not direct competitors, then they would not have
standing to request the imposition of duties. These same parties then receive
the proceeds of the duties paid on the competing imported product and can use
these payments in competition with the imported product, the importers and the
exporters. They can use the funds for a variety of activities which enhance
their competitiveness, including research and development, capital expenditures,
and for the purchase of equipment and raw materials. Costs that they would
otherwise incur are now covered by the Byrd Amendment payments. The assumption
through the Byrd Amendment payments of some of the costs of the domestic
industry in the importing country necessarily increases their competitiveness.
The imported product, the importer and the exporter are, therefore, all facing a
greater competitive burden, namely domestic competitors in the import market
that are more competitive as a result of the Byrd Amendment payments. As such,
there is an additional burden on imported products, importers and exporters as a
result of the Byrd Amendment, precisely the criteria specified by the US as
falling within the language �specific action against.�
(iii) The Byrd Amendment provides remedies to counter
dumping and subsidization of imports which are in addition to remedies
authorized by the relevant agreements
4.298 The panel and Appellate Body in United States -
Anti-dumping Act of 1916 (�1916 Act�)87 addressed the parameters of measures
permitted under the AD Agreement. Specifically, two issues were addressed: (1)
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; and (2) whether additional measures targeted at dumping were
within the scope of the limitations imposed by Article VI and the AD Agreement.88
4.299 Brazil argues that the starting point of the analysis
of both the panel and Appellate Body was Article 18.1 of the AD Agreement. As
the panel knows, Article 18.1 prohibits �specific action against dumping�.
except in accordance with the provisions of the GATT 1994, as interpreted by
this [AD] Agreement.� The Appellate Body defined �specific action against
dumping� as �action that is taken in response to situations presenting the
constituent elements of �dumping�.�89
4.300 According to Brazil, the first question this panel
must address is whether actions under the Byrd Amendment are actions taken in
response to situations presenting the constituent elements of �dumping.� The
answer to this question in the case of the Byrd Amendment is even clearer than
it was in the case of the 1916 Act.
4.301 Brazil posits that the 1916 Act proceeding involved:
(i) a statute that was wholly independent of the statute under which
anti-dumping duties are imposed in the United States (i.e., the anti-dumping
provisions of the Tariff Act of 1930); (ii) standards that were different than
the standards under which anti-dumping duties are determined (for example, the
1916 Act also includes �intent to destroy or injure� as part of the substantive
finding on which relief is based, an element not present in the Tariff Act of
1930 or the AD Agreement); and (iii) remedies which were not dependent on or
linked to actions or determinations related to the imposition of anti-dumping
measures under the anti-dumping provisions of the Tariff Act of 1930.
Notwithstanding the above,90 the statute was found to be inconsistent with US
obligations under the AD Agreement.
4.302 Brazil asserts that in contrast, the Byrd Amendment
only applies in situations where there have been affirmative determinations of
dumping and injury under the anti-dumping provisions of the Tariff Act of 1930
and an anti-dumping duty order has been issued. Thus, entitlement to the
Byrd Amendment remedies is directly dependent on establishing the �constituent
elements of �dumping�� because the entitlement arises out of the same
determination of dumping and injury, made under the same statute, in the same
proceeding, and by the same authorities as do the underlying anti-dumping
measures which give rise to the entitlement. In short, there are no Byrd
Amendment remedies unless there is an anti-dumping duty order under the
provisions of the Tariff Act of 1930 that implement the AD Agreement. The very
same elements must be established to obtain anti-dumping measures and Byrd
Amendment remedies.
4.303 Brazil submits that having established that the Byrd
Amendment provides remedies based on the �constituent elements of �dumping��,
the second question for the panel is whether the distribution of the revenues
from anti-dumping duties under the Byrd Amendment constitutes �a specific action
against dumping�not in accordance with the AD Agreement.� In the words of
the panel in the 1916 Act proceeding, does the Byrd Amendment provide �for other
remedies than anti-dumping duties.�91
4.304 Brazil believes that the statements by the sponsors and
supporters of the Byrd Amendment are quite persuasive on the issue of whether
the Byrd Amendment payments are an additional remedy. Senator Byrd stated:
The US agriculture and manufacturing sectors have been
able to avail themselves of legal remedies to challenge foreign actions, but
have not had adequate means to recover from the losses resulting from those
actions. Now, such a mechanism will be in place and US farmers and workers
of all trades affected by unfair trade practices will be able, in essence,
to recover monetarily�.92
4.305 Senator DeWine, who originally conceived of the idea of
distributing the revenues of anti-dumping and countervailing duties to
complaining parties, very specifically stated that the payments contemplated
under the Byrd Amendment are intended to �compensate for damages� and to have
the effect of discouraging �foreign companies from dumping and subsidization,
since it would actually assist US competitors at their expense.�93 Brazil notes
that he calls the distribution of duties under the Byrd Amendment a �double
hit.�94
4.306 Brazil is of the opinion that while the intention of
the WTO agreements is not to intrude on the ability of sovereigns to spend their
tax revenues as they see fit, there are constraints on spending tax revenues in
a manner which leads to violations or non-violation nullification and impairment
of obligations under those agreements. There are numerous situations in which
WTO obligations, whether specific limitations or general obligations, affect the
freedom of Members to spend or forego revenues when such actions are
inconsistent with WTO obligations.
4.307 Brazil argues that the objective of anti-dumping
measures is clearly articulated in Article VI:2 of the GATT 1994. It is to
�offset or prevent� dumping. Antidumping duties impose a penalty on products
that are dumped; this ultimately discourages or prevents dumping. If
anti-dumping duties do not discourage or prevent dumping, then their assessment
in cases where dumping continues offsets the effects of dumping. Similarly,
anti-dumping measures in the form of price undertakings prevent dumping because
the exporter agrees to eliminate all of the margin of dumping or at least as
much as is necessary to eliminate the injurious effects of dumping.
4.308 According to Brazil, the AD Agreement authorizes
anti-dumping duties and price undertakings as the only measures to offset or
prevent dumping. Logically, this means that any measures other than anti-dumping
duties and price undertakings that offset or prevent dumping are not authorized
by the AD Agreement. Article 18.1 does not qualify the actions that are not
permitted; rather it states �no specific action.� It does not say that no
specific action shall be taken with respect to the imported product or that no
specific action may be taken with respect to the exporter or importer. It says
�no specific action.� Thus, any actions which have the effect of offsetting or
preventing dumping, other than anti-dumping duties and price undertakings
authorized by the AD Agreement fall within the prohibition of Article 18.1. It
is immaterial whether the action imposes an additional burden on the export
product or the exporter. What is relevant is whether the actions go beyond those
authorized in the agreement and have the effect of further offsetting or
preventing dumping.
4.309 Clearly, in Brazil's view, the Byrd Amendment payments
have the effect of offsetting and preventing dumping. First, they provide
additional incentive for the exporting entity not to dump because every time an
exporter dumps a product the revenues from the anti-dumping duties go to his
competitors in the importing country market. Second, they provide an additional
offset for the industry in the importing country by rewarding that industry with
what are, in effect, damages. Indeed, what motivated the Byrd Amendment was the
desire to provide additional penalties for dumping to discourage dumping and
additional �offsets� in the form of damages to the aggrieved companies in the
importing country if the dumping continues.
4.310 Brazil considers that the Byrd Amendment payments are
additional actions that prevent and offset the effects of dumping. These
payments are not authorized by the AD Agreement and, as such, are inconsistent
with the agreement.
(iv) The Byrd Amendment payments are also specific action
against subsidies not authorized by the Agreement on Subsidies and
Countervailing Measures
4.311 Brazil asserts that Article 32.1 of the SCM Agreement
is the counterpart of Article 18.1 of the AD Agreement. It prohibits Members
from taking any �specific action against a subsidy� unless that action is
consistent with Article VI:3 of the GATT 1994, as interpreted by the SCM
Agreement. As such, the arguments that Byrd Amendment payments are inconsistent
with the SCM Agreement are identical to the arguments that these payments are
inconsistent with the AD Agreement.
3. Canada
(a) Introduction
4.312 Canada argues that the measure before the Panel is the
Continued Dumping and Subsidy Offset Act of 2000, also known as the Byrd
Amendment. Canada�s oral submission addresses four central substantive issues,
but first it sets out what this dispute is not about.
(b) �Request� for adjudication ex aequo et bono
4.313 Canada does not seek adjudication ex aequo et bono,
or to establish a �new legal relationship�. It asks the Panel to interpret and
apply disciplines duly incorporated into the subject agreements and determine
whether those disciplines encompass the measure at issue. Correctly interpreted
and applied, those disciplines prohibit measures like the Byrd Amendment. In so
finding, the Panel will not be acting ex aequo et bono but holding the
United States to the legal obligations it negotiated and undertook.
(c) The Byrd Amendment violates GATT 1994 and the
Anti-Dumping and SCM Agreements
4.314 Canada asserts that five elements in the operation of
the Byrd Amendment are crucial to the way it should be viewed, and assessed, by
the Panel. None of these elements is contested by the United States.
- first, anti-dumping and countervailing
duties collected must be distributed to the producers that qualify
under a specific order;
- second, all duties collected following an
affirmative determination of the existence of dumping or a subsidy
causing injury are distributed to qualifying producers, and it is
only anti-dumping and countervailing duties under a specific order
that are so distributed;
- third, the duties are distributed to only
those producers that have brought or supported a petition for the
imposition of those duties;
- fourth, Byrd Amendment payments reimburse
expenditures related to the product that competes with the imported
products covered by an order; and
- fifth, the Byrd Amendment �offsets� what it
characterises as �continued dumping or subsidy�. Duties collected
pursuant to a determination are distributed to producers supporting
that particular investigation or determination, for harm they have
suffered because of dumping and subsidisation of products against
which they compete.
4.315 According to Canada, the Byrd Amendment thus adds a new
element to the anti-dumping and countervailing duty regime of the United States.
It is not a general subsidy that could have been present in any legislation but
rather a specific action against dumping or a subsidy in breach of the
obligations of the United States under the WTO Agreement.
4.316 Canada posits that the legal provisions at issue are
Articles 18.1 of the Anti-dumping Agreement, 32.1 of the SCM Agreement and VI of
GATT 1994. Each requires that specific action against dumping or subsidies
accord with Article VI of GATT 1994.
4.317 In Canada's view, in the 1916 Anti-Dumping Act
case the Appellate Body made two findings that are relevant to this case. First,
it found that a �specific action� against dumping taken in a form other than a
form authorized under Article VI of GATT 1994, as interpreted by the
Anti-Dumping Agreement violates Article 18.1. These forms are limited to
definitive anti-dumping duties, provisional measures, and price undertakings.
4.318 Second, Canada argues, the Appellate Body noted,
�specific action against dumping � at a minimum encompass[es] action that may be
taken only when the constituent elements of �dumping� are present.� The Japan
panel findings in the 1916 Anti-Dumping Act case clarify this point. It
notes that to the extent that a measure responds to the constituent elements of
dumping, it constitutes a �specific action against dumping.�
4.319 According to Canada, Article 32.1 of the SCM Agreement
similarly contains a prohibition on �specific action against a subsidy of
another Member� when such action is not taken in accordance with Article VI of
GATT 1994 as interpreted by the SCM Agreement.
4.320 Canada asserts that the basic operating elements of the
measure place it squarely within the term �specific action against dumping [or a
subsidy].� The United States mentions only two, but in fact three elements must
be present for the Byrd Amendment to operate. All three relate to and are
dependent on one another: first, an order imposed after a finding that there is
a situation presenting the constituent elements of dumping or a subsidy; second,
an affected domestic producer must have brought or supported the originating
petition; third, a qualifying expenditure must relate to a product covered by
the order.
4.321 According to Canada, these three elements have one
thing in common: the order. Payments under the Byrd Amendment have one purpose:
to respond to, counteract, and specifically act against dumping or a subsidy.
The Byrd Amendment has one object: to further harass goods found to be dumped or
subsidised. Though a �specific action�, the Byrd Amendment is not an
anti-dumping or countervailing duty, a provisional measure or an undertaking and
therefore violates Articles VI of the GATT, 18.1 of the Anti-dumping Agreement
and 32.1 of the SCM Agreement.
(d) US arguments are without merit
4.322 Canada argues that the legislative history of the Byrd
Amendment simply establishes what section 1002 of the Byrd Amendment sets out
expressly: that its purpose is to condemn injurious dumping and to
neutralize subsidies that cause injury. It clarifies the nature of the measure
before the Panel.
4.323 Canada asserts that the United States quotes the
1916 Anti-Dumping Act panel and the Appellate Body finding that �the scope
of Article VI and the Antidumping Agreement extends to measures that address
dumping as such� and states that the Byrd Amendment does not. Canada considers
it is worthwhile recalling the context in which that particular finding was
made. The United States had argued that the 1916 Act �did not �specifically
target� dumping, but rather predatory pricing,� and had additional requirements
and therefore it was not against dumping �as such�. The Appellate Body concluded
that Members� practices should not escape discipline by simply characterising a
practice as something other than dumping or subsidisation, by adding other
requirements. It went on to find that the ordinary meaning of the phrase
�specific action against dumping� of exports within the meaning of Article 18.1
is action that is taken in response to situations presenting the constituent
elements of �dumping�.
4.324 According to Canada, the Byrd Amendment is action that
may only be taken when the constituent elements of dumping (or a subsidy) are
present. The primary trigger for the application of the Byrd Amendment is a
finding of dumping or subsidy causing injury and the imposition of an order. An
order is only imposed in US anti-dumping and countervailing duty laws where the
elements of dumping or a subsidy have first been established. The logical
conclusion is inescapable: the Byrd Amendment is an action that takes place only
where the constituent elements of dumping or a subsidy are present.
4.325 Canada posits that the text of the relevant legal
provisions also militates against the US interpretation of the word �against�.
Articles 18.1 and 32.1 describe a �specific action� against a practice � dumping
or a subsidy � rather than a good or an importer. The terms of the Byrd
Amendment as well as its operation show that it is �specific action against
dumping� or a subsidy. Payments � called �offsets� � are, by the express terms
of the act, made to �condemn� and �neutralize� dumping or subsidies; payments
are made only to those producers �affected� by dumping or subsidization;
payments must relate directly to harm due to dumping and subsidization; and
duties collected following each determination are segregated to ensure that
payments are tied to particular dumping or subsidy findings. Byrd Amendment
payments are thus a response to, or an action against, a particular set of
practices, dumping and subsidies.
4.326 Finally, Canada submits, the US arguments concerning
footnotes 24 and 56 turn Articles 18.1 and 32.1 into logical nonsense. The
United States argues that Articles 18.1 and 32.1 discipline �specific actions
against dumping� or a subsidy other than actions consistent with the GATT 1994.
But if the US argument is correct, the prohibition of Articles 18.1 and 32.1
reaches only those measures that are already inconsistent with the GATT 1994.
Canada asserts that this makes no sense: if the drafters saw a need to prohibit
�specific action against dumping� or a subsidy other than those set out in
�Article VI�, it was to target �actions� that might otherwise be consistent with
the GATT 1994 � that is, action that is not caught by other provisions. Any
other reading of footnotes 24 and 56 would lead to the conclusion that Article
18.1 and 32.1 prohibited only those measures that were already inconsistent with
the GATT 1994.
(e) Standing, undertakings and administration of laws
(i) Standing
4.327 Canada argues that for the obligation in Articles 5.4
and 11.4 to have any meaning, �examination� and �determination� ought to be
objectively verifiable. It is not enough that the investigating authority
satisfy itself of the support of the domestic industry. Rather, at minimum, the
�determination� must be based on an objective �examination� of the �degree of
support� of the domestic industry for an application.
4.328 Canada is of the view that the US arguments do not
address the substance of the complainants� submissions. The Byrd Amendment�s
monetary rewards render suspect producers� participation in a petition and, as a
result, the real degree of support of the domestic industry. The Byrd Amendment
in effect makes it impossible for the United States to complete the examination
required of it under Articles 5.4 and 11.4. An obligation to determine
�quantitative� thresholds is meaningless where the law provides incentives to
participants to decide one way or another � monetary reward for support and the
threat of subsidised competition if no support is forthcoming.
4.329 Finally, Canada challenges the Byrd Amendment as such.
Canada asserts that the United States has an obligation to examine and determine
in good faith that a petition is supported by the domestic industry. Providing a
monetary reward for producers to support an anti-dumping or a countervailing
duty petition by its very operation precludes the possibility of an examination
in good faith of industry support under Articles 5.4 and 11.4.
(ii) Undertakings
4.330 Canada asserts that Articles 8.1 of the Anti-dumping
Agreement and 18.1 of the SCM Agreement require that a Member provide
administering authorities the ability to enter into �price undertakings� to
facilitate the early termination of investigations. Neither provision requires
investigating authorities to accept undertakings, however, a good faith
implementation of this obligation must mean that having granted such an
authority, such discretion, Members must not subsequently undermine it.
4.331 According to Canada, under US law and pursuant to
judicial decisions, views of the injured domestic industry must be given
enormous weight by the authorities in accepting undertakings � weight that
amounts to an effective veto for the industry. The Byrd Amendment provides a
monetary reward for a domestic industry that sees anti-dumping and
countervailing duty investigations taken to completion. The prospect of monetary
reward does affect the decision of domestic producers to support an ongoing
investigation over an undertaking. The Byrd Amendment renders the discretion to
enter into undertakings meaningless, undermines the US obligation to consider
undertakings in good faith and therefore violates Articles 8.1 of the
Anti-dumping Agreement and 18.1 of the SCM Agreement.
(iii) The Byrd Amendment violates Article X:3 of the GATT
1994
4.332 Canada argues that Article X:3 of the GATT 1994
requires that Members administer their laws in a fair, reasonable and impartial
manner. Where, because of certain requirements, the administration of a measure
can be demonstrated to be necessarily unfair or unreasonable, a complainant does
not need to adduce evidence of actual harm. That is, Members of the WTO should
be permitted to prevent harm to their interests under Article X, rather than
complain about it after the fact.
4.333 Canada is of the opinion that the Byrd Amendment
mandates the payment of a monetary reward for supporting an anti-dumping and
countervailing duty petition and penalises those domestic producers that do not.
It necessarily encourages more petitions and makes it more likely that industry
support will be established. It encourages domestic industry to thwart
undertaking agreements. A law cannot be said to be or appear to be reasonable,
neutral, fair and objective if there is an incentive that encourages a
particular objective. The Byrd Amendment is, therefore, in breach of Article
X:3(a) of GATT 1994.
(f) Conclusion
4.334 Canada asks the Panel to find the United States in
violation of the specified WTO obligations and, as a consequence, in violation
of Articles XVI:4 of GATT 1994, 18.4 of the Anti-dumping Agreement and 32.5 of
the SCM Agreement.
4. Chile
(a) Introduction
4.335 Chile wishes to reaffirm each and every one of the
arguments presented in the first written submission by Japan and Chile, and
reiterates its conviction that the Continued Dumping and Subsidy Offset Act of
2000, is incompatible with GATT 1994; the Anti-Dumping; the SCM Agreement; and
the WTO Agreement.
4.336 First, Chile argues, the Byrd Amendment is yet another
on the long list of measures applied by the United States Government to restrict
imports of certain products on the grounds that they constitute dumped and/or
subsidised imports.
4.337 Chile asserts that according to the Annual Report
(2001) of the WTO Dispute Settlement Body, 34 disputes over anti-dumping and/or
countervailing measures have been initiated to date, of which 41 per cent were
against the United States � i.e. more than one quarter of the disputes brought
to the WTO against this country.
4.338 Chile considers that there are two reasons for these
figures. The first is the considerable number of anti-dumping and countervailing
measures applied by the United States. Between 1990 and 2000, there was an
annual average of more than 30 final determinations of dumping and above six
final determinations of subsidisation. Statistics also show that anti-dumping
and countervailing measures affect � or, rather, benefit � only a small number
of sectors, i.e. mainly the iron and steel, chemicals, textiles and agricultural
sectors. Indeed, 56 per cent of anti-dumping duties in force on 1 December 2001
were being levied on steel or metal products. The figure for countervailing
measures is even more significant, with 73 per cent of countervailing duties in
force on 1 December last imposed on steel products, most of which are also
subject to anti-dumping duty.
4.339 Chile is of the view that the figures indicate that the
United States trade defence legislation is frequently used for purposes
extremely different from the original objectives, as enshrined in the WTO
Agreements. Chile's experience seems to substantiate such a view. Over the past
20 years, more than 50 per cent of Chile's exports to the United States have
been � and some continue to be � subject to trade defence investigations,
actions and measures.
4.340 Chile argues that the figures issued last week by the
United States Customs Service reveal the perverse impact of this Act not only on
international trade but potentially also on the North American market itself. 61
per cent of the US$206 million distributed during the fiscal year 2001 went to
firms in the iron and steel and metallurgic industries. And among them, two
firms in the same line of business received more than US$90 million, that is,
almost half of the total amount distributed. Over the preceding 12 months, one
of those firms had reportedly posted losses in an amount almost equivalent to
the funds received under the Amendment. In other words, a firm that had incurred
losses is now able to show profits.
4.341 Chile asserts that this raises a whole number of
questions. For example, what is the tax treatment applicable to funds
distributed under the Byrd Amendment? How are firms required to account for such
funds? Is the additional income divided among the shareholders?
4.342 According to Chile, competitors must certainly be most
concerned to see firms receiving not inconsiderable amounts � as high as US$60
million in some cases � from the US tax authorities. This represents a massive
transfer of funds from exporters/importers to producers by decision and action
of the government, which, in normal circumstances, would have credited such
revenues to the Treasury's general accounts. This is why Chile finds interesting
the analysis conducted by Mexico, which views this mechanism also as a subsidy
incompatible with the WTO.
4.343 Chile believes that another way of quantifying what the
Byrd Amendment implies is to compare the amount distributed and the WTO budget
(US$85 million) as well as the budget of General Directorate of International
Economic Relations of the Chilean Ministry of Foreign Affairs, DIRECON (US$35
million) The sums distributed during the fiscal year 2001 would be enough to
finance the WTO for a period of almost two and a half years. Or would finance
Chile's entire foreign trade policy and export promotion programmes, including
salaries and maintenance of offices in Chile and abroad for almost 6 year.
4.344 Chile asserts that the second point that emerges from
its analysis is the inconsistency of certain provisions of US legislation, and
the practice of its investigating authorities, with the obligations undertaken
by the United States in the WTO. A number of panels as well as the Appellate
Body have repeatedly revealed a pattern of inconsistencies in the legislation
and practice of the United States, which interpret and apply the provisions of
the Anti-Dumping Agreement in a manner that is not consistent with the meaning
and scope of the provisions, as they were negotiated.
4.345 Chile is of the view that for US firms, the situation
is as follows. Filing anti-dumping and countervailing duty petitions gives them
a twofold advantage, by depriving imports of their competitive advantage while
the firms themselves receive frequently substantial financial contributions, as
evidenced by the figures. Moreover, legislation and practice make it easier � if
not highly likely � to secure a favourable outcome, since even the weak
disciplines of the WTO are not being respected.
4.346 According to Chile, the Byrd Amendment has turned into
an easy, speedy and almost certain way of appropriating federal funds. Moreover,
this is an almost compulsory step if a firm is not to lose its competitive edge
in the domestic market. It is not therefore a matter of "subjective motivation",
as suggested by the United States, but a quasi-obligation.
4.347 Chile posits that anti-dumping measures in particular
constitute interference in decisions reached on the basis of market forces. The
Byrd Amendment constitutes additional interference. It is like adding insult to
injury. Instead of using federal government funds to help adjust the domestic
industry to the new terms of competition, the Byrd Amendment is an incentive for
beneficiaries to continue producing with less competition and an invitation or
incitement to other firms to follow a similar course and seek to appropriate
federal funds without giving up or providing anything in exchange.
4.348 Second, Chile argues that the sovereign authority of
nations to use the revenues they collect is restricted by the commitments and
obligations undertaken under WTO Agreements.
4.349 Chile has not questioned the sovereign right of the US
to freely use the tax revenues it collects. Chile's argument is that such a
right is restricted by international commitments, a fact that the United States
itself recognises. There are commitments expressly undertaken in the field of
taxation or allocation of tax revenues, such as those made under the Agreements
on Agriculture, Trade in Services, Subsidies and Countervailing Measures and the
GATT 1994, but others as well, as Chile states it pointed out in the first
written submission with Japan.
4.350 Chile asserts that the sovereign right of the United
States to use revenues from the levy of anti-dumping and countervailing duties
is restricted by the commitment not to apply measures against dumping or
subsidies other than those expressly prescribed in the Anti-Dumping and SCM
Agreements. This sovereign right is also restricted by the fact that if funds
are used in the manner contemplated in the Byrd Amendment, the investigating
authorities will not be able to fulfil, in an objective and impartial manner,
the obligations imposed by the two aforementioned Agreements, inter alia
those set forth in Articles 5.4 and 8.1 of the Anti-Dumping Agreement and
Articles 11.4 and 18.1 of the SCM Agreement.
4.351 And third, according to Chile, contrary to what the
United States argues, the Byrd Amendment is indeed an action against dumping and
subsidisation.
4.352 The preamble to the Amendment is clear. It states that
continued dumping or subsidisation after the issuance of anti-dumping orders or
countervailing duty orders can frustrate the remedial purpose of United States
trade laws, adding that the purpose of the latter is the restoration of
conditions of fair trade. This is why Congress deemed it necessary to strengthen
trade legislation and achieve that remedial purpose.
4.353 Chile does not question the fact that the ultimate goal
of legislation may not be successfully achieved. The issue at stake is, as the
United States itself emphasises when it refers to the Report of the Panel in
United States � Anti-Dumping Act of 1916 and the Panel's finding that the
purpose of a law does not exclude the latter from the scope of Article VI and
hence from the scope of the WTO Agreements. What is more, as case law clearly
demonstrates, there is no requirement whatsoever to prove that a tax measure has
a particular impact on trade. Therefore, Chile believes it should not await the
impact the Byrd Amendment in order to determine whether the Amendment is
incompatible with the WTO.
4.354 Chile argues that the object of the Byrd Amendment is
to strengthen US trade laws in order to achieve the remedial purpose
contemplated in those laws.
4.355 Chile asserts that according to the Diccionario de
la Real Academia de la Lengua Espa�ola, the term "remedy" means "a measure
taken in order to redress an injury or disadvantage". This is precisely the
purpose stated by the US legislature in the preamble to the Amendment. And this
is precisely what, according to WTO case law, is limited to anti-dumping duties,
provisional measures and prices undertakings, and hence, in the case of
subsidies, to countervailing duties and countermeasures authorised by the
Dispute Settlement Body.
4.356 According to Chile, the United States cleverly uses a
definition of the word "against" that differs entirely from the meaning given by
those who negotiated the Anti-Dumping Agreement. The Spanish version of the
Agreement uses the expression "en contra de", which in English means
"against". In Spanish the term could never be equated with "en contacto con"
("in contact with"). Chile argues that this is not the first time that the
United States has used an English-language dictionary to make its own
interpretation of the provisions of the WTO Agreements. The Agreements are in
force in three languages, all three versions being equally authentic. Hence, in
order for panels to determine the meaning and scope of the provisions of the
covered Agreements, the intent of those who negotiated them must be taken into
account in a manner that it does not contradict the wording of the different
versions.
4.357 Chile submits that in this particular case, the wording
of the Spanish and English versions is clear, "against" and "en contra" meaning
"in opposition to, contrary to" and "en oposici�n a, en contraposici�n
con".
(b) Conclusion
4.358 Chile asserts that the Continued Dumping and Subsidy
Offset Act of 2000 is yet another example of the inconsistency of the
legislation and practice of the United States with the commitments undertaken in
the WTO. Not only it provides for a perverse incentive to initiate dumping and
countervailing duty investigations but also violates certain provisions of the
WTO Agreements by providing for action against dumping and subsidies which both
the Agreements and case law restrict to specific measures. Likewise, the
Amendment contravenes the obligation of the United States investigating
authorities to apply US anti-dumping and countervailing duty laws in a
reasonable, impartial and uniform manner, and to proceed in an objective and
impartial manner in determining the domestic industry's degree of support and
analysing price undertaking proposals. Consequently, the United States is also
in breach of its obligations to ensure the conformity of its laws, regulations
and administrative procedures with the covered Agreements.
4.359 Chile respectfully requests the Panel to confirm the
above violations and inconsistencies and expressly to recommend that the United
States repeal the Amendment in question. It thanks the Panel for the opportunity
to express its views.
(a) A Member�s Right to appropriate anti-dumping and
countervailing duties must be exercised in conformity with its WTO
obligations
4.360 According to the European Communities, the United
States argues that, since the WTO Agreement contains no provisions addressing
the appropriation of anti-dumping and countervailing duties, Members have an
unrestricted right to spend those funds as they wish.
4.361 The European Communities submits that it is not
disputed that the WTO Agreement contains no such provision. But from this it
does not follow that any action financed from �lawfully assessed and collected�
anti-dumping and countervailing duties must be necessarily in conformity with
the WTO Agreement. A measure that constitutes �specific action� against dumping
or subsidisation does not escape the prohibition contained in Articles 18.1 of
the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, respectively,
simply because it is financed from �lawfully assessed and collected�
anti-dumping or countervailing duties. The US argued unsuccessfully already in
1916 � Act that, since the Anti-Dumping Agreement did not regulate specifically
the type of measures provided by the 1916 Antidumping Act, such measures were
not subject to the Anti-Dumping Agreement.
4.362 The EC agrees that this Panel may not decide this
dispute ex aequo et bono. However, since no complainant has requested the Panel
to do so, the arguments to that effect made by the United States are pointless.
(b) Articles 18.1 of the Anti-Dumping Agreement and 32.1
of the SCM Agreement
4.363 The United States argues that the Byrd Amendment is not
�based upon the constituent elements of dumping or subsidisation�, but instead
upon the applicant�s qualification as an �affected domestic producer� with
�qualifying expenditures�. It is the view of the European Communities that the
relevant analysis cannot stop at that point but must also take account of the
meaning of the notion of �affected domestic producer�. Under the Byrd Amendment,
an �affected domestic producer� is a producer �affected� by dumping or
subsidisation, which has been the subject of an anti-dumping or a countervailing
duty order. Thus, it is undeniable that the offset payments are not just �based
upon�, but indeed conditional upon a finding of dumping or subsidisation.
4.364 According to the European Communities, the United
States further alleges that the Byrd Amendment is not action �against� dumping
or subsidisation because it does not �apply� directly to the imported goods or
the importers. In the view of the European Communities, the United States cites
no authority in support of this proposition, other than a dictionary definition,
according to which one of the ordinary meanings of the term �against� is �into
contact with�. The same dictionary gives other meanings of the term �against�
which are far more pertinent in this context, but have been conveniently omitted
from the US submission. These include, for example, �in competition with�, �to
the disadvantage of�, �in resistance to� and �as protection from�. These
meanings evidence that the notion of action �against� dumping or subsidisation
may include not only action that imposes a direct �liability� on dumped or
subsidised imports (or importers), but also action that affords protection to
the domestic producers by giving them an advantage over the dumped or subsidised
imports with which they compete.
4.365 In the opinion of the European Communities, the reason
why distributing duties to a charity or raising the flag at half-mast are not
�specific action against dumping or subsidisation� is because they are
manifestly inapt to have any impact whatsoever on dumping or subsidisation, and
not because they do not �apply� directly to imports or importers. The same
cannot be said of the offset payments under the Byrd Amendment. Even if the
offset payments do not �apply� directly to dumped or subsidised imports, they
are objectively apt to affect such imports. Whether or not they achieve that
result in specific instances is irrelevant because Article 18.1 and 32.1 are not
subject to any �actual effects� test.
4.366 Moreover, according to the European Communities, the
complainants have shown that the stated purpose of the Byrd Amendment is to
provide an additional remedy against dumping and subsidisation. The United
States argues that the purpose of the Byrd Amendment is �legally irrelevant� by
citing the two panel reports in United States - 1916 Act. Yet those
reports do not stand for the proposition that the purpose of a measure is always
irrelevant, but rather for the proposition that the stated purpose of a measure
is not necessarily decisive.
4.367 The European Communities argues that the panels in 1916
Act were concerned that if the characterisation of a measure as �specific action
against dumping� were dependent upon its stated purpose, it would become
extremely easy for Members to escape the prohibition contained in Article 18.1.
This concern does not arise here. There appears to be no disagreement between
the parties regarding the purpose of the Byrd Amendment. The US submission
denies the legal relevance of the purpose of a measure in the abstract, but does
not argue that the Byrd Amendment has a different purpose from that shown by the
complainants. Nor has the United States argued that the Byrd Amendment is inapt
to achieve its stated purpose. Indeed, to argue that would be tantamount to
accusing the US legislators of being either insincere or incompetent.
4.368 The European Communities asserts that the United States
contends that the offset payments are �permitted� by footnotes 24 and 56 because
they are subsidies allowed by Article XVI of the GATT. This argument is flawed
on several counts. First, the United States appears to have misunderstood the
relationship between Articles 18.1 and 32.1 and their respective footnotes.
Footnotes 24 and 56 are not exceptions to Articles 18.1 and 32.1. Rather, they
serve to clarify the scope of those two provisions. If a measure constitutes
specific action against dumping or subsidisation, it stands prohibited by those
Articles and cannot be �permitted� by the footnotes. Second, the United States
disregards that the SCM Agreement does not interpret only the subsidies
provisions of Article VI of the GATT. The SCM Agreement is also an
interpretation of Article XVI. Therefore, Article XVI cannot be one of the
�other relevant provisions of GATT 1994� mentioned in footnote 56. Third,
footnotes 24 and 56 allude to action taken �under other relevant provisions� of
the GATT. This is not the same as action �consistent with some other GATT
provision�. The �other relevant provisions� referred to in footnotes 24 and 56
are those GATT provisions which confer and regulate positively the right to take
a certain type of remedial action, such as Article VI, Article XIX, or Articles
XII and XVIII. Article XVI is not one of such �relevant provisions�. Fourth, the
United States disregards that a measure may be consistent with Parts II and III
of the SCM Agreement and still be prohibited, on different grounds, by another
WTO provision (e.g. with Article III:2 of the GATT).
4.369 Finally, in the view of the European Communities, the
United States misconstrues the findings of the two panels in 1916 Act. Those
panels have explained that the purpose of footnote 24 is to clarify that Article
18.1 does not prevent Members from taking action in response to situations that
involve dumping, where the existence of dumping is not the event that triggers
such action. For example, Article 18.1 does not preclude the adoption of
safeguard measures under Article XIX of GATT against an increase in imports,
even if such increase is the result of dumping, because the reason for imposing
the safeguard measure is the increase in imports as such, and not the existence
of dumping. Unlike safeguard measures, the offset payments are conditional upon
a finding or subsidisation. For that reason, it is indisputable that they
constitute specific action against dumping of subsidisation rather than the type
of �non-specific� action envisaged in footnotes 24 and 56.
(c) Article 5.4 of the Anti-Dumping Agreement and Article
11.4 of the SCM Agreement
4.370 The European Communities posits that the US�s
submission nowhere addresses the EC� argument that the Byrd Amendment is
incompatible with the obligation to conduct an objective, good faith,
examination of whether an application is made �by or on behalf of the domestic
industry� because, through the offset payments, the US authorities are unduly
influencing the very facts which they are supposed to examine.
4.371 The EC also argues that, by its very existence, the
Byrd Amendment calls into question the credibility of any applications and
expressions of support made by the US producers and, as a result, makes it
impossible for the US authorities to reach a proper determination of support,
whether positive or negative. In response to this second argument, the United
States contends that Articles 5.4 and Article 11.4 do not require that the
administering authorities assess the �subjective motivations� of the producers�
expressions of support. The only requirement is �to determine whether the
quantitative benchmarks have been met�.
4.372 However, according to the European Communities, those
two requirements cannot be dissociated. A formal declaration of support is not
always evidence of �support� within the meaning of Articles 5.4 and 11.4. The EC
is not suggesting that the authorities must seek actively to ascertain what the
United States calls the �subjective motivations� of the domestic producers in
each and every investigation. As a general rule, the authorities may
legitimately assume that a producer who declares formally its support for an
application does indeed support the application. But if there is evidence
calling into question the credibility of a declaration of support, the
administering authorities cannot ignore such evidence without violating Articles
5.4 and 11.4. The same is true, and indeed a fortiori, where, as in the
case at hand, the declarations of support have been influenced by the action of
the authorities themselves, which therefore cannot pretend to ignore the effects
of those actions. Therefore, the formalistic position taken by the United States
would lead to absurd and unreasonable results and cannot be correct.
4.373 The European Communities argues that the United States
further contends that, in any event, the complainants have not provided any
evidence showing that, in practice, �producers are supporting investigations
they would have opposed in the absence of the CDSOA and that their support was
necessary to initiate the investigation�. The reason why the complainants cannot
provide such evidence is precisely because, as a result of the Byrd Amendment,
it has become impossible, both for the complainants and for the US authorities,
to tell whether a domestic producer supports the imposition of measures as such
or the distribution of the offset. The appropriate consequence to be drawn from
this is not that the Byrd Amendment can have no effects on the level of support,
but rather that the US authorities are no longer in a position to make a proper
determination of support, whether positive or negative, before initiating an
investigation, contrary to the requirement imposed by Articles 5.4 and 11.4.
4.374 In the opinion of the European Communities, the
indisputable fact is that the Byrd Amendment provides a strong financial
incentive to file or support applications. It may well be that in some cases
such incentive will be inconsequential because, as argued by the United States,
the domestic producers would have filed or supported the application anyway. But
in an indefinite number of other cases the Byrd Amendment will have a decisive
impact on the outcome of the support determination. Such possibility is enough
to conclude that the Byrd Amendment is inconsistent with Articles 5.4 and 11.4.
(d) Article 8.3 of the Anti-Dumping Agreement and Article
18.3 of the SCM Agreement
4.375 The European Communities asserts that the United States
alleges that the Byrd Amendment cannot violate Article 8 of the Anti-Dumping
Agreement and Article 18 of the SCM Agreement because, in any event, the
administering authority enjoys �complete discretion� in order to decide whether
or not to accept an undertaking. The EC disagrees. The first sentence of
Articles 8.3 and 18.3 makes it clear that the administering authority must have
a �reason� for rejecting an undertaking and, hence, that such rejection is not
within the authority�s �complete discretion�. Although Articles 8.3 and 18.3 do
not limit a priori the types of reasons which may be invoked by the authority,
this does not mean that the authority can invoke all sorts of motives. The
petitioner�s opposition may be a pertinent �reason� for rejecting an undertaking
where it reflects the legitimate concern that the undertaking will not provide
equivalent protection. On the other hand, the interest of the petitioners in
securing the windfall of the offset payments is an extraneous consideration,
which cannot be regarded as a pertinent �reason� for rejecting an undertaking.
4.376 The United States also argues that the rights afforded
to the petitioners in the context of a proposed undertaking are procedural in
nature, not substantive. According to the European Communities, it remains,
nevertheless, that no other party enjoys the same rights. Moreover, the United
States does not dispute that the stated policy of its authorities is to accord a
�considerable weight� to the petitioners� opposition. Clearly, this policy goes
beyond granting merely procedural rights.
4.377 The United States further alleges that, in practice,
the majority of undertakings accepted by the US authorities since 1996 were
entered into over the opposition of the petitioners. However, in the view of the
European Communities, in order to have a complete and meaningful picture of the
relevant US practice, it would be essential to know also how many undertakings
were rejected, or were not offered in the first place, because of the opposition
expressed, formally or informally, by the domestic industry.
4.378 Finally, the United States argues that there is no
reason to believe that the domestic industry will oppose an undertaking as a
result of the Byrd Amendment. However, it may well be that, as argued by the
United States, the petitioners� primary main concern is �a return to the
conditions of fair trade�. According to the European Communities, that objective
can be achieved as well through the imposition of duties. The Byrd Amendment
allows the petitioners to have it both ways: they can have a �return to
conditions of fair trade� and, in addition, the windfall of the offset payments.
(e) Article X:3 (a) of the GATT
4.379 The European Communities argues that the reply given by
the United States to the complainants� claim under Article X:3 (a) suggests that
the United States has misunderstood this claim. First, this claim is not
concerned with the administration of the Byrd Amendment. The EC�s claim is that
the Byrd Amendment results in an unreasonable and partial administration of the
provisions of the US anti-dumping and countervailing duty laws and regulations
governing the initiation of investigations and the acceptance of undertakings.
Thus, the �administrative� measure at issue is the Byrd Amendment, whereas the
�administered� measures are the US anti-dumping laws and regulations. Second,
this claim was clearly stated in the request for the establishment of a panel.
4.380 Third, the United States alleges that the complainants
have provided no evidence concerning the �day-to-day administration�. This, the
European Communities asserts, suggests that the United States has misunderstood
also the scope of the obligations imposed by Article X:3 (a). As explained by
the panel in Argentina � Hides and Skins, Article X.3 (a) is not concerned only
with individual acts of enforcement or with �unwritten� administrative
practices. It may apply as well with respect to generally applicable measures.
The same panel concluded that the administrative measure at issue was
incompatible with Article X:3(a) because it gave rise to an �inherent danger�
that the administered measures would be applied in a partial manner.
4.381 The European Communities submits that the complainants
have demonstrated that the Byrd Amendment creates an �inherent danger� that the
US anti-dumping and countervailing duty laws will be applied in a partial and
unreasonable manner. Such �inherent danger� is of itself sufficient to find that
the Byrd Amendment is inconsistent with Article X:3 (a) of the GATT.
(f) Article 5 (b) of the SCM Agreement
4.382 The European Communities argues that the United States
argues, among other things, that the offset payments are not �specific�. This is
clearly incorrect. The Byrd Amendment explicitly limits access to the offset
payments to �certain enterprises�: the �affected domestic producers�, which are
defined as those which have filed or supported an application for the imposition
of anti-dumping or countervailing duties. This condition is not �economic in
nature� and, therefore, is not an �objective� condition or criterion within the
meaning of Article 2.1 (b) of the SCM Agreement.
6. India
4.383 In its first submission India along with certain
complainants had offered a comprehensive factual framework and legal arguments
establishing why the Continued Dumping and Subsidy Offset Act (CDSOA/Byrd
Amendment) violates the obligation of US under WTO Agreements. In order to avoid
unnecessary repetition, India in its statement offers some preliminary remarks
on some of the assertions made by the United States in its first written
submission.
4.384 The United States asserts that the CDSOA is not an
action against dumping or subsidisation because �it imposes no burden or
liability on imports or importers�. However, in India's view, there is no basis
either in the Anti-dumping Agreement or in the SCM Agreement for this
requirement in order to take specific action against dumping or subsidization.
The Appellate Body has in the 1916 Anti dumping Act case held that �specific
action against dumping� is �action that is taken in response to situations
presenting the constituent elements of dumping�. It is not clear the basis on
which the United States seeks to introduce an additional requirement of an
action imposing a burden or liability on imports or importers for it to be
characterized as an action against dumping.
4.385 India is of the view that on the basis of certain
findings of the Appellate Body in the 1916 Anti dumping Act case the United
States argues that the constituent elements of dumping or subsidization be
�built into� the act for a violation to occur. While the Appellate Body had
found that �the constituent elements of dumping are built into the essential
elements of civil and criminal liability under the 1916 Act�, it did not
anywhere specify that the constituent elements of dumping should be built into
the Act to arrive at a finding that the Act provides for specific action against
dumping.
4.386 According to India, although there is no requirement
for the constituent elements of dumping to be built into the Act for a violation
to occur, in fact such elements are built into the CDSOA. Under the CDSOA the
offsets crucially depend upon �duties assessed pursuant to a countervailing duty
order, an anti dumping duty order or a finding under the Anti dumping Act of
1921�. Absent any such order or finding, there will be no duties collected and
no offsets granted. Thus the CDSOA requires the constituent elements of dumping
and subsidization to be present as an absolute condition for the distribution of
the duties. The offsets are clearly contingent on the presence of anti dumping
duties or countervailing duties. The United States cannot deny that the
constituent elements of dumping and subsidization are built into the CDSOA.
4.387 India notes that due to the CDSOA the domestic
producers in the United States have a financial incentive to support anti
dumping or countervailing duty investigations as the offset is to be paid only
to the petitioners and those interested parties who support the petition. Thus
the CDSOA has the effect of stimulating the filing of applications and making it
easier for the applicants to obtain the support of other domestic producers so
as to meet the threshold requirements in Article 5.4 and 11.4 .
4.388 The United States asserts that �Article 8 and 18 allow
the administering authority to reject an undertaking for any reason�. It is
India's submission that Article 8 does not provide such rejections to be made
for any arbitrary reason. The availability of the offsets gives the petitioners,
whose views are taken, substantial pecuniary incentive to oppose the acceptance
of undertakings. Thus the offsets would result in a greater probability of
rejection of offer of undertakings, which does not accord with the test of
practicability or appropriateness envisaged in Article 8.3 of the Anti-dumping
Agreement.
4.389 India considers that its joint submission has clearly
pointed out that the consequence of the Byrd Amendment would be particularly
pernicious for developing country members as the offsets would virtually make
impossible the acceptance or price undertakings, which, as may be recalled, have
been recognized as a possible constructive remedy under Article 15 of the
Anti-dumping Agreement.
4.390 India submits that, while the United States has chosen
not to respond to this point on the plea that violation of Article 15 was not
included in the Panel request, the fact remains that the CDSOA would be
particularly detrimental to the interests of developing countries.
7.
Indonesia
4.391 Indonesia supports the EC�s statement on various legal
issues in which Indonesia together with the EC and other complainants have
previously presented joint submissions. Indonesia wishes in addition to raise
some points regarding the effect of the �Continued Dumping and Subsidy Offset
Act of 2000� (hereinafter referred to as �CDSOA�) to developing countries.
4.392 Indonesia considers that the issues raised in the first
written submission of the United States on the Byrd Amendment largely mirrors
those covered in the dispute settlement proceeding on the United States
Anti-dumping Act of 1916. These arguments have already been addressed and
answered by the Panel with the Appellate Body subsequently recommending that the
DSB request the United States to bring the 1916 Act into conformity with its
obligations under Article VI of the GATT 1994.
4.393 Bearing in mind the financial, human resources and time
involved, Indonesia regrets that a further dispute settlement procedure is found
necessary when most of the issues being raised have already been the subject of
extensive consideration by a previous Panel and Appellate Body.
4.394 Indonesia wishes also to refer to the multilateral
trade context, in which this dispute settlement procedure is taking place. In
the past few years, one of the most prominent features of international trade
has been the increased use of the anti-dumping and subsidies laws as instruments
of trade defence; and in order to ensure that these instruments do not represent
a guise for protectionism, Indonesia considers that it is in the general
interest of all members to ensure that their national laws are consistent with
the WTO Agreements concerned.
4.395 Indonesia argues that the CDSOA is obviously
protectionist as it offers an incentive for the US domestic industry to file
applications and seek protection through the application of anti-dumping duties.
The effect of this amendment will also be to undermine trade flows to the United
States, and the uncertainty resulting will contribute to the creation of trade
harassment, which is often complained by Indonesian exporters.
4.396 Overall, according to Indonesia, the role model being
projected by the US does not bode well for the future, given that no other
Members of the WTO regulate distribution of duties directly to the affected
domestic industry. The case that was filed by 11 Members of the WTO has
significantly pointed out that concerns over such a Law have already spread out
to many WTO members.
4.397 From Indonesia's point of view, the introduction of the
CDSOA serves to detract from the problems of developing countries to participate
more fully in international trade. As Indonesia is aware, even with normal and
fair trade conditions, developing countries have already had many internal
problems to cope with such as in the area of financial and human resources, as
well as infrastructure. These problems must not be added by unfair practices
introduced by Indonesia's trading partner such as CDSOA.
4.398 Indonesia would like to emphasize that the effect of
the CDSOA on developing countries is very detrimental, as the CDSOA further
disadvantages developing countries� products after the imposition of anti
dumping or countervailing duties. Domestic industries in developing countries
are clearly being treated unfairly in foreign markets such as the US, if they,
then, have to encounter another difficult problem where their competitors in the
US receive such a payment.
4.399 Indonesia argues that, recognizing the different levels
of development, the WTO has already provided the concept of �special and
differential treatment� to facilitate participation of developing countries in
the Multilateral Trading System. However, this measure is not sufficient, if not
followed by a conducive trade environment in the markets of Indonesia's trading
partners such as United States.
4.400 As has been stated in Indonesia's first written
submission, the impact of the CDSOA also undermines the provisions of Article 15
of the Anti Dumping Agreement on special and differential treatment for
developing countries. Indonesia considers that the Byrd Amendment not only
undermines price-undertakings as a constructive remedy, but it also severely
affects the prospects of the forthcoming trade negotiations where other possible
remedies other than duties might also be raised.
4.401 According to Indonesia, the need to take effective
action also reflects the major concern of developing countries of the importance
of implementing existing commitments. In this respect, the need to effectively
implement the special and differential treatment provisions in the WTO
Agreements has been underscored on several occasions, and the future commitment
to do so underpins the decision reached by the Ministerial Conference in Doha as
contained in the documents on the �Implementation � Related Issues and
Concerns� (WT/MIN(01)/17), as well as the �Ministerial Declaration�
(WT/MIN(01)/DEC/1). Taken together, the commitment of all Members is clear that
there is a reaffirmation that the provisions for special and differential
treatment are an integral part of the WTO Agreement, and Article 15 of the Anti
Dumping Agreement is a mandatory provision.
4.402 Indonesia argues that with the CDSOA there is little
doubt that the US authorities are unable to implement the mandatory provisions
of Article 15 of the Anti-dumping Agreement, bearing in mind the offset
provisions concerned and the fact that the application of duties is not the
constructive remedy envisaged in the Agreement.
4.403 In conclusion, Indonesia respectfully requests the
Panel to recommend that the United States bring the CDSOA into full conformity
with its obligations under the WTO Agreements.
8. Japan
4.404 Japan asserts it has made every effort to present a
clear and straightforward case that would allow this Panel to reach a decision
as expeditiously as possible. In its first written submission, Japan offered a
complete factual framework and legal arguments that demonstrate 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. Japan is now offering some preliminary remarks concerning some of
the assertions made by the United States in its first written submission.
4.405 According to Japan, the United States argues, at great
length, that the complainants request this Panel to make a finding ex aequo et
bono. At no time has Japan requested or sought a finding ex aequo et bono.
4.406 The United States also claims, erroneously Japan
argues, that there are no legal provisions in the WTO agreements that in any way
curtail the ability of a Member to appropriate funds collected through import
duties. Japan has pointed to specific and unequivocal treaty language in the
GATT 1994 and the Annex 1 WTO agreements that limit the right of a Member to
allocate revenues. As elaborated in Japan�s first submission, Article 18.1 and
32.1 are two clear examples of provisions that circumscribe the ability of a
Member to appropriate collected anti-dumping and countervailing duties. The
Panel and the Appellate Body decisions in the US-Foreign Sales Corporation case
are the most recent illustration of the limitation that the WTO rules impose on
a Member�s sovereign power to spend or forego revenue.
4.407 Japan argues that together with the other complaining
parties, it has shown that the distribution of assessed anti-dumping and
countervailing duties mandated by the Act does violate WTO commitments,
including the commitment not to take specific action against dumping or
subsidization that is not in accordance with the GATT or consistent with the
Antidumping Agreement and the SCM Agreement.
4.408 Japan also draws the Panel�s attention to the
observations made by the United States at paragraph 75 in the panel report of
the Norwegian Salmon anti-dumping case. The United States referred to the
negotiating history of Article VI, and explicitly noted �that injurious dumping
had been viewed with such concern during the original GATT negotiations that
proposals had been considered to permit imposition of tougher countermeasures
than merely offsetting duties.� The United States went on to note that, in the
end, the negotiators chose to limit the remedy for injurious dumping to
offsetting duties. With the Act, the United States unilaterally has reversed,
for itself, the consensus reached by the negotiators of Article VI and resorted
to other forms of countermeasures.
4.409 Japan argues that the United States insists on drawing
analogies and offering hypothetical situations that significantly alter the
factual framework under which the Panel must conduct its analysis. Japan is not
challenging the distribution of anti-dumping and countervailing duties in the
abstract. The Act mandates the distribution of duties specifically and
exclusively to domestic producers that supported the petition. This limitation
is not irrelevant or incidental. The identity of the recipients of the
distribution is crucial. The argument by the United States that nothing in the
WTO could curtail a Member�s right to apportion collected duties is based on
different circumstances and simply irrelevant to this case. The Panel must
examine the conformity of the measure, in light of the existing circumstances.
4.410 In the opinion of Japan, the United States also
misrepresents the relevance that the stated purpose of the Act has in this case.
The statements of the sponsors are evidence of what the Act actually does and
how it operates. Those statements demonstrate that the Act provides a specific
remedy against dumping and subsidization. The findings by Congress, contained in
Section 1002 of the Act, are evidence that the Act is a �response� to dumping or
subsidization that in fact �counters� and �addresses� dumping and subsidization
as such.
4.411 Japan asserts that the United States acknowledges the
close connection between actions mandated by the Act and the dumping and
subsidization, but goes to great lengths to try to lessen its importance. Japan
argues that it is clear, however, that there is an intimate and dependent
connection between them. The degree of proximity and nature of this connection
further demonstrate that the Act indeed addresses and counteracts dumping and
subsidization as such, and is therefore within the purview of GATT Article VI
and the Antidumping and the SCM Agreement.
4.412 Japan notes that the United States argues that the Act
does not provide for the recovery of damages, and that a description to the
contrary is incorrect. Japan wishes to recall that the main co-sponsors of the
Act, not the complainants, first described the Act as a means of �compensation
for damages caused by dumping or subsidization�, explicitly declaring before
Congress that the Act would transfer the duties to US companies �to compensate
for damages.� Moreover, whether the �damages� provided for by the Act cover the
entire amount of the injury caused by dumping or subsidization is not relevant
to the issue of whether the payments provided for by the Act are a form of
damages. The fact is that the Act provides monetary benefits to injured domestic
producers as a countermeasure against dumping or subsidization.
4.413 Japan recalls that in the 1916 Antidumping Act case,
the United States tried to narrow the scope of Article VI:2. It failed, both at
the Panel and at the Appellate Body. Here again the United States tries,
unsuccessfully, to narrow the scope of Article VI:2 by fabricating a test that
has no legal or textual basis in Article VI and that relies on the presence or
causation of a �burden or liability� to �imports or importers� to determine
whether a measure falls within the scope of Article VI:2.
4.414 According to Japan, the United States also misconstrues
the language of Art. 18.1. Contrary to the United States assertion, �specific
action against dumping� does not require action based on the constituent
elements of dumping, imposing a burden or liability on importers or imports.
There is simply no textual basis for this interpretation of the phrase �specific
action against dumping.� The Appellate Body interpreted that phrase in the 1916
Antidumping Act case as �action taken in response to situations presenting the
constituent elements of �dumping�.�
4.415 Japan is of the view that the United States� attempt to
extract the word �against� from its context and re-interpret it are equally
grave. The ordinary meaning of that word in Articles 18.1 and 32.1 was made
abundantly clear by the Appellate Body. According to the Appellate Body and the
Panel in the 1916 Act case, actions that �address� or �counteract� dumping or
are taken �in response to situations that present the constituent elements of
dumping,� fall within the scope of Article VI of the GATT. Even by the United
States own admission �the scope of Article VI and the Antidumping Agreement
extends to measures which address dumping as such.� In trying to re-interpret
that word, the United States also admits that the actions mandated by the Act
are indeed a �response� to dumping.
4.416 Japan argues that nothing requires that the constituent
elements of dumping or subsidization be �built into� the Act in order for a
violation to occur, as the United States argues. The Appellate Body�s statement
quoted by the United States is a description of the 1916 Antidumping Act. The
fact that the 1916 Act had those elements �built in� and that, on that basis the
Panel found that it was specific action against dumping, does not mean that
under all circumstances, those elements need to be built into the measures in
order for a violation to be found.
4.417 Notwithstanding the above, Japan and the other
complainants have demonstrated that the constituent elements of dumping and
subsidization are indeed built into the Act. The Appellate Body in the 1916
Antidumping Act case interpreted �built in� to mean �required�. Japan recalls
that the Act requires the constituent elements of dumping and subsidization to
be present as an absolute condition to the distribution of the duties.
4.418 In Japan's view, the United States argument that the
action against dumping in this case is permitted or excused under footnote 24
and footnote 56 of the Antidumping and the SCM Agreement, respectively, should
also be rejected. Footnote 24, as interpreted by the Panel and the Appellate
Body in the 1916 Antidumping Act case, and footnote 56, which parallels footnote
24, allow actions under other provisions of the GATT only where such actions are
not taken to counter or address dumping as such. As the actions mandated by the
Act are clearly taken to address dumping or subsidization as such, the United
States cannot pretend to exempt them from the disciplines laid down in the
Antidumping and the SCM Agreement.
4.419 Japan submits that most of the arguments made with
respect to dumping apply as well to Article 32.1 of the SCM Agreement. Japan
asserts that in its written submission, it explains how the Act mandates
specific action that constitutes a form of relief that is neither contemplated
nor authorized by the GATT Article VI:3 or the SCM Agreement and is, therefore,
a violation of Article 32.1 of the SCM Agreement.
4.420 Japan is of the opinion that the misrepresentation by
the United States of Japan�s and Chile�s arguments regarding the parallelism
between Articles 18.1 and 32.1, however, should not go unanswered. Japan asserts
that it has not argued that the interpretation by the Appellate Body of Article
VI:2 applies or can be extended to Article VI:3. What Japan did say is that the
Appellate Body�s interpretation of the phrase �specific action against� of
Article 18.1 applies to the parallel phrase in Article 32.1.
4.421 The United States asserts that �GATT Article VI:3 read
in conjunction with Article 10 of the SCM Agreement does not limit the
permissible remedies for subsidies to duties.� According to Japan, footnote 35
of that provision, however, states 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
United States expressly admits in its submission that the Act �is not a
�countermeasure� within the meaning of Articles 4.10 and 7.9.� The United States
also concedes that the Act does not mandate the imposition of countervailing
duties. It must be concluded, therefore, that the Act is not in accordance with
Article VI:3, for it is a specific action taken in response to subsidization
that is neither a countervailing duty nor a countermeasure. As such, the
distributions mandated by the Act are specific action against a subsidy, in
violation of the SCM Agreement.
4.422 Japan turns to its claims concerning the so-called
�standing requirement� and the �voluntary undertaking� provisions of the
Antidumping and the SCM Agreement.
4.423 Japan argues that no matter how the United States
wishes to characterize its measure, the fact is that the United States is
offering a financial incentives to domestic producers to support anti-dumping or
countervailing investigations. Even if the objective numerical benchmarks,
carefully negotiated and inscribed in Articles 5.4 and 11.4, remain unchanged in
US statues, the Act has made it impossible for the United States authorities to
apply these benchmarks in a good faith manner.
4.424 According to Japan, the percentages that serve as
thresholds in Articles 5.4 and 11.4 are neither arbitrary nor aleatory. The Act,
however, eliminates the effectiveness of these multilaterally negotiated
benchmarks. They will no longer be an effective protection against frivolous
suits. The decision by domestic producers to support or oppose a petition must
not be distorted by Government-sponsored financial incentives. The Act, however,
distorts those provisions and is, therefore, a violation by the United States of
its obligations.
4.425 In the view of Japan, the United States arguments
addressed Articles 5.4 and 11.4 only superficially. It did not rebut the
fundamental inconsistencies identified by Japan and the other complainants. It
avoided responding to the complainant�s arguments concerning the object and
purpose of Articles 5.4 and 11.4. Those provisions do more than simply establish
a meaningless obligation to count numbers. Instead, they utilize percentages as
tools to protect imports from unwarranted and unjustified remedial action by
determining whether there is true support by domestic producers for the adoption
of trade remedies. The United States did not respond either to the evidence
presented by Japan and Chile on the level of determination required for the
negative and positive tests. As noted by Japan and Chile, Articles 4.1 and 16.1
inform Articles 5.4 and 11.4. Consequently, offering a financial incentive to
domestic producers renders meaningless the guarantees established by the
Antidumping and SCM Agreement to protect against expression of support by biased
domestic producers.
4.426 Japan submits that the Act is also inconsistent with
the voluntary undertaking provisions of Articles 8.1 of the ADA and 18.1 of the
ASCM. The availability of offsets under the Act gives US petitioners a
substantial financial incentive to frustrate the acceptance and maintenance of
undertakings.
4.427 Japan believes it is not necessary for Japan to provide
evidence that the Act has already caused domestic producers to oppose an
undertaking that they would otherwise have supported, since Japan challenges the
WTO-consistency of the Act as such. Nevertheless, Japan has provided evidence
that the financial incentive has played a role in the negotiations regarding
undertakings in the case of Canadian exports of softwood lumber.
4.428 Finally, Japan submits it also demonstrated that the
United States acts inconsistently with Article X:3(a) of the GATT 1994 because
the Act prevents the United States from administering its anti-dumping and
countervailing duty laws in a reasonable, impartial and uniform manner.
4.429 According to Japan, the United States misrepresents
Japan�s claims under Article X:3(a) by saying that �complaining parties have
failed to present any evidence of the actual administration of the [Act]�. As
Japan made clear in its submission, it is not evidence of the administration of
the Act that needs to be provided, but rather evidence of the administration of
the United States anti-dumping and countervailing duty laws. That evidence is
the Act itself, which prevents the United States from administering its
anti-dumping and countervailing duty laws in a reasonable, impartial and uniform
manner.
4.430 Japan is of the view that the United States did not
address most of claims by Japan and Chile under Article X:3(a). Rather, it
commented only on the complainant�s claims under Article X:3(a) that relate to
undertakings and standing. However, Japan�s challenge of the Act�s consistency
with Article X:3(a) is not limited to those two issues. Neither did the United
States rebut the charge that the Act is inherently unreasonable as demonstrated
by the fact that the application of similar measures by all WTO Members would
lead to an intolerable situation in the multilateral trading system and a
spiralling circle of zero-sum �subsidy/countervailing duty� measures.
87 United States � Anti-Dumping Act of 1916, Report of
the Appellate Body, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000 and
Report of the Panel, WT/DS136/R, 31 March 2000 and WT/DS162/R 29 May 2000.
88 Id. Report of the Appellate Body at paras. 127-133
89 Id. at para. 126
90 Id. at paras. 127-133.
91 Id. Report of the Panel at paras. 204-205.
92 146 Cong. Rec. S10697 (daily ed. 18 October 2000) (statement
by Senator Robert Byrd). See, Common Exhibit 11.
93 144 Cong. Rec. S7883-7884 (daily ed. 9 July 1998) (Statement
of Senator DeWine). Senator DeWine�s bill was introduced as S. 2281 in the
Senate on 9 July 1998 and by Representative Regula as H.R. 2509 in the House of
Representatives on 18 September 1997.
94 Id.
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