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WORLD TRADE
ORGANIZATION

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

(02-4742)

  Original: English

UNITED STATES � CONTINUED DUMPING AND SUBSIDY
OFFSET ACT OF 2000


Report of the Panel

(Continued)


7. Mexico

(a) Introduction

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:

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

(b) The facts

4.197 According to Mexico, the relevant facts can be summarized as follows:

  • On 28 October 2000, the Act was enacted. It amended Title VII of the Tariff Act of 1930, by adding a new section 754 (codified at 19 USC. 1675c):

  • The Act provides that assessed duties received on or after 1 October 2000, pursuant to a countervailing duty order, an anti-dumping duty order or an anti-dumping duty finding must be distributed to certain affected domestic producers for certain qualifying expenditures that these producers incur after the issuance of such an order or finding; and

  • The distribution is known as the continued dumping and subsidy offset.

  • On 29 December 2000, the Chairman of the US International Trade Commission provided US Customs with a list of qualifying domestic producers who may be eligible to receive a disbursement of anti-dumping or countervailing duty assessments under the Act (the "ITC List"). The ITC List includes reference to duties applicable to products of Mexico.

  • On 3 August 2001, US Customs published in the Federal Register a Notice of Intent to Distribute Offset indicating Customs� intention to distribute assessed anti-dumping or countervailing duties that were collected in fiscal year 2001 (the "Notice of Intent to Distribute").

  • On 21 September 2001, US Customs issued the final rule to amend the Customs Regulations to implement the provisions of the Act (the "Final Rule").

  • Assessed duties received in fiscal year 2001 had to be distributed to affected domestic producers by 30 November 2001.

(c) Legal arguments

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.

5. European Communities

(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.


To continue with  9. Korea Return to Table of Contents


86 United States � Continued Dumping and Subsidy Act of 2000, First Written Submission of the United States of America, DS217 and 234, para.92, 14 January 2002.

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.