SICE - WTO - United States- WT/DS217/R

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

9. Korea
(a) Introduction

4.431 Korea considers that the Appellate Body in US – Anti-Dumping Act of 1916 already has adjudicated the primary issue in this proceeding, i.e., Members may take one and only one action against dumping--they may impose duties equal to or less than the margin of dumping. This logic extends without modification to countervailing duty proceedings.

(i) The Byrd Amendment constitutes an impermissible “specific action”

4.432 In Korea's view, just like the 1916 Act, the Continued Dumping and Subsidy Offset Act of 2000 (the CDSOA or Byrd Amendment) creates a specific action, other than imposition of AD or CVD duties, to be taken where imports are found to be dumped or subsidized. That action is that the US authority must transfer the duties collected from imports directly to the US companies that supported the petition. This “specific action against dumping” (or subsidy) is inconsistent with Article VI of GATT 1994, Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.

4.433 According to Korea, the counter-arguments contained in the First Submission of the United States do not withstand scrutiny and are not supported by the language of the relevant provisions.

4.434 First, in Korea’s view, the US interpretation of “[t]he ordinary meaning of the term ‘against’” is contrary to the interpretation of “against” in Article 18.1 of the AD and Article 32.1 of the SCM. Only on the basis of an irrelevant ordinary meaning of “against” does the US argue that “the actual elements or requirements of the CDSOA do not act ‘against’ dumping or subsidization because they do not apply to (have any contact with) imported goods or importers.” The proper interpretation is that Article 18.1 stipulates “specific action against dumping”, a process, rather than “specific action against (dumped) imported goods or importers” as argued by the US. Thus, the available ordinary meaning of “against” shows that the CDSOA is a specific action “against” dumping (or subsidy). This interpretation is confirmed by the panels and the Appellate Body in US-1916 Act.

4.435 Second, the US claims that the AB report in US- 1916 Act provides no guidance as to the meaning of the term “against”. The US seems to argue that the CDSOA, even though it is “in response to” dumping, is not “against” dumping. The examples presented by the United States do not support this argument.

4.436 Third, the US argues that constituent elements of dumping are not built into the CDSOA. Again, in Korea’s view, the AB’s consideration of this issue in US–1916 Act shows that the US argument cannot withstand scrutiny. In addition, contrary to the US argument, the constituent elements of dumping are “built into” the CDSOA and the amount of the distributions under the CDSOA is closely related to the extent to which a US producer has been affected by dumping or subsidization of imports.

4.437 Fourth, the US argues that, if the Panel determined that the CDSOA is an action against dumping or a subsidy, footnotes 24 and 56 to Articles 18.1 and 32 operate to permit the CDSOA. In Korea’s view, the US argument would be valid on only one condition, which is if footnotes 24 and 56 provided an exemption for the violation of Articles 18.1 and 32 in the nature of Article XX or Article XXIV of GATT. But, there is no textual basis to argue that footnotes 24 or 56 provide such an exemption. Moreover, the US itself inadvertently admits that footnotes 24 and 56 cannot provide a safe harbour for an action which has already been found to be an action against dumping.

4.438 In short, Korea submits that like the 1916 Act, the Byrd Amendment mandates an impermissible “specific action.” It profoundly alters the conditions of competition to favour US producers in all US markets for all products. This analysis is confirmed by the opinions of the President who signed the Amendment into law and of various other US government officials.

(ii) The Byrd Amendment violates the standing threshold

4.439 Korea argues that the Byrd Amendment is inconsistent with Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement. It distorts and undermines the standing threshold, encouraging abuse of otherwise permissible actions, and rendering these WTO provisions meaningless. These thresholds were designed to balance carefully a number of competing rights and interests, primarily the right of an industry to seek relief from unfair trade practices versus the interest in ensuring that it is the industry, and not a sector of it, or for that matter, an individual company, that is seeking relief.

4.440 First, Korea asserts, the US argues that the obligation arising under Article 5.4 is limited to verifying the number of companies expressing support for the petition. Under Article 26 of the Vienna Convention on the Law of Treaties and Article X:3(a) of GATT, this cannot be a good faith implementation of a treaty obligation.

4.441 Second, according to Korea, the US argues that the complaining parties offer no empirical support for their contention that the CDSOA encourages domestic companies to support a petition. The Appellate Body has repeatedly stated that an “effects test” is irrelevant if the measure has been found to violate the provisions of the WTO. The United States also improperly supports its argument by claiming that it is “generally” irrational for domestic companies to “oppose” relief. The quantitative target envisaged in Article 5.4 is not the number of companies “opposing” the petition, but the number of companies “supporting” the petition. Moreover, it is not irrational for domestic companies not to support a petition.

4.442 Korea submits that, by enacting the Byrd Amendment, the US government has improperly influenced the very facts that the US authority is supposed to examine in making its determination. Thus, the US has violated its obligation to conduct an objective examination under Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement.

(iii) The Byrd Amendment violates provisions on undertakings

4.443 Korea is of the view that the Byrd Amendment is inconsistent with Article 8 of the AD Agreement and Article 18 of the SCM Agreement because it impermissibly deters agreements on undertakings. The Byrd Amendment creates an incentive for the US industry to oppose undertakings. By supporting the imposition of duties, the domestic industry may receive not merely the imposition of the duties as allowed by the WTO agreements and US law (which, in essence, results in price levels consistent with a price undertaking), but also the direct transfer of the duties collected.

(iv) Violation of Article X:3(a)

4.444 In the opinion of Korea, the US argues that Article X:3(a) addresses only the administration of national laws and not national laws themselves. The CDSOA violates Article X:3(a) because it prevents the US from uniform, impartial and reasonable administration of US laws concerning standing threshold determinations and the acceptance of undertakings.

(b) Conclusion

4.445 Korea requests the Panel to recommend that the United States bring its laws into conformity with its obligations under the relevant WTO provisions and to suggest that the United States repeal the Byrd Amendment.

10. Mexico
(a) Introduction

4.446 In its oral statement, Mexico concentrates on the key features of Mexico's claims under Article 5 of the SCM Agreement. The other claims made by Mexico have been dealt with in its first written submission and in the other claimants' first written submissions. Mexico agrees with the oral statements of the other complaining parties with respect to those claims and incorporates them into its arguments.

4.447 Mexico will be providing a detailed elaboration on all of its claims in its written rebuttal submission.

(b) The negative economic impact of the Act

4.448 Before addressing its claims regarding Article 5, Mexico wishes to comment on the negative economic impact of the Continued Dumping and Subsidy Offset Act, which Mexico refers to as the “Act”.

4.449 Mexico argues that when anti-dumping and/or countervailing duties are imposed, the relative competitive relationship between the affected exports and competing US products is modified. WTO Members have agreed to this modification. It requires exporters who remain competitive in the US market to adjust their pricing practices to either avoid the duties or to enable continued sales in situations where the duties are applied In such circumstances, any additional modifications in the relative competitive relationship will reduce the ability of the exporter to compete and, therefore, its ability to sell into the US market.

4.450 Mexico is of the view that the subsidies conferred by the Act as so destructive because the modify further the relative competitive relationship in an adverse and direct manner which was not agreed to by the WTO Members. The subsidies are generated by the duties collected and are then granted to the direct competitors of the Mexican exporters. They are used exclusively to subsidize the production of the like US products. Finally, only those direct competitors that filed or support the petition for the original investigation receive the subsidies. This is why the subsidies conferred by the Act are so destructive.

4.451 In this way, Mexico submits, the subsidies fundamentally and systematically alter the relative conditions of competition between Mexican exporters and producers of like US products in a manner that goes beyond the maximum protection permitted under GATT Articles II and VI.

4.452 According to Mexico, since the date of entry into force of the Act, its adverse effects were manifest because the granting of the subsidies was explicitly mandated and the subsidies would be granted with respect to qualifying expenditures that were made by the recipients on or after the date of issuance of the order or finding in question.

(c) The legal dimensions of Mexico’s Article 5 claim

4.453 Mexico believes its claim under Article 5 of the SCM Agreement is straight forward. In order for it to prevail, Mexico must demonstrate that, through the use of a subsidy, the Act causes adverse effects in the form of nullification or impairment of benefits accruing directly or indirectly to Mexico under the GATT 1994.

4.454 Mexico asserts that it has established all the elements of this claim:

The offsets distributed under the Act constitute financial contributions that confer benefits and, therefore, amount to subsidies within the meaning of Article 1 of the SCM Agreement.

The Act explicitly limits access to the subsidies to certain enterprises and, therefore, the subsidies are specific within the meaning of paragraph (a) of Article 2.1 of the SCM Agreement. Consequently, the subsidies are actionable under Part III of the SCM Agreement which includes Article 5.

By virtue of the fact that Article 7 of the SCM Agreement entitles a WTO Member to invoke Article 5 where a subsidy is granted or maintained, the meaning of “use of” any subsidy in Article 5 includes the granting or maintaining of a subsidy in the circumstances of this dispute.

Through the use of the subsidies, the Act causes adverse effects in the form of nullification or impairment of benefits accruing directly or indirectly to Mexico under the GATT 1994:

Nullification or impairment under paragraph (b) of Article 5 can take the form of “violation” nullification or impairment and “non-violation” nullification or impairment. Mexico is pleading both forms of nullification or impairment.

With respect to violation nullification or impairment, to the extent that the Act violates provisions of the GATT 1994 and the violation is caused by the “use of” a subsidy, violation nullification or impairment will occur.

Mexico’s non-violation nullification or impairment claim consists of two elements:

- By mandating the granting of actionable subsidies in the circumstances of this dispute, the Act will necessarily cause nullification or impairment. Upon granting, the subsidies will upset the competitive relationship between Mexican and like US products that is legitimately expected by Mexico under GATT Articles II and VI when its products face anti-dumping or countervailing duties. The competitive relationship in such circumstances should be modified by an amount, at most, equal to the maximum anti-dumping and countervailing duties allowable under the Articles. The subsidies alter the competitive relationship in excess of that amount.
- By maintaining actionable subsidies in the circumstances of this dispute, the Act also causes nullification or impairment. The Act impairs the predictability needed to plan for future trade that is legitimately expected by Mexico under GATT Articles II and VI in situations when its products face anti-dumping or countervailing duties. The benefits accruing to Mexico under these Articles apply to actual trade and to the predictability needed to plan future trade. It is that predictability that is being impaired.

4.455 Mexico argues that the United States acknowledges that the offsets distributed under the Act are subsidies. However, the United States raises several arguments to attempt to rebut Mexico’s claim under Article 5(b) of the SCM Agreement. I will address each argument in turn.

(i) Specificity

4.456 The US argues that the Act does not confer specific subsidies because the Act does not limit the subsidies to certain enterprises and that there is no evidence that the subsidies are specific “in fact”.

4.457 In Mexico's view, the US mischaracterizes Mexico’s arguments regarding specificity. Mexico’s position is simple – “in law”, the subsidies conferred under the Act are specific. There is no need for this Panel to examine whether the subsidies are specific “in fact”. All of the arguments of the United States that are based on paragraphs (b) and (c) of Article 2.1 of the SCM Agreement – which concern specificity “in fact” – are legally irrelevant to this proceeding.

4.458 Mexico submits that the test under paragraph (a) of Article 2.1 of the SCM Agreement is plain – does “the legislation pursuant to which the granting authority operates, explicitly limit access to a subsidy to certain enterprises”?

4.459 The answer, according to Mexico, is clearly “yes”.

4.460 The funds that form the “financial contribution” element of each subsidy are deposited and maintained in separate special accounts that are, themselves, limited to the products that are the subject of each order or finding. Thus, the subsidies are inherently specific from the outset. Moreover, access to each subsidy is explicitly limited to certain enterprises that produce a like product or worker representatives. Finally, access is further restricted to those enterprises that were petitioners in the original investigation that led to the duties or those enterprises that supported the petition.

4.461 Thus, Mexico asserts, by legal requirement, the Act explicitly limits access to the subsidies it confers to certain enterprises.

(ii) Adverse effects

4.462 The United States argues that Mexico has failed to demonstrate “adverse effects” within the meaning of Article 5.

4.463 It seems that the central argument that the US is making in this regard is that that the Act must be applied before there can be a violation under Article 5 which, in its view, means that subsidies must be granted under the Act. This is manifestly incorrect.

4.464 Mexico is raising two types of nullification or impairment claims under its Article 5 challenge: (i) “violation” nullification or impairment; and (ii) “non-violation” nullification or impairment.

4.465 Since “violation” nullification or impairment presumes that the Panel finds a violation of a provision of the GATT 1994 in one of the other claims before it and therefore does not give rise to an independent ground for challenge, Mexico decides to focus on Mexico’s “non-violation” nullification or impairment claims.

4.466 With respect to non-violation nullification or impairment and the US claims that the Act must be “applied”, Mexico is presenting two arguments.

Granting of actionable subsidies

4.467 The US argues that the Act must be applied—i.e., that subsidies must be granted under the Act— before a non-violation nullification or impairment claim can made under paragraph (b) of Article 5. This entire line of argument is based on GATT and WTO jurisprudence related to claims brought under GATT Article XXIII:1(b).

4.468 Mexico is of the view that, in making this argument, the US ignores the substantive nature of Article 5. It also misconstrues the “legislation as such” element of Mexico’s Article 5 claim. Finally, it confuses a procedural matter with a substantive one.

4.469 The US argues that footnote 12 to the SCM Agreement prevents Mexico from challenging the Act on the basis that the existence of nullification or impairment is to be established in accordance with the practice of application of Article XXIII:1(b). Mexico argues that, as is clear from the text of the footnote, it relates to the determination of the existence of nullification or impairment, not the question of when a challenge can be brought under Article 5.

4.470 Mexico asserts that what is really at issue is the procedural question of when Mexico can challenge the Act under Article 5. Does Mexico have to wait until a subsidy has been granted? Clearly, the answer to this question, according to Mexico, is “No”.

4.471 Mexico argues that Article 5, like any other substantive provision of the WTO Agreements, is subject to the doctrine governing a legislation as such challenge. If legislation mandates action that will necessarily violate a WTO provision, that legislation can be challenged. There is no legal or logical reason to conclude otherwise. By focusing on GATT Article XXIII:1(b) and excluding any consideration of the substantive nature of Article 5, the US has failed to recognize this.

4.472 Mexico is of the view that under the legislation as such element of Mexico’s Article 5 claim, Mexico is simply arguing that the Act mandates the granting of actionable subsidies and that, when granted, such subsidies will cause nullification or impairment. In other words, when the subsidies are granted—an action that even the US acknowledges as amounting to “application”—a violation will occur.

4.473 Thus, under Article 5, Mexico can challenge the actionable subsidies conferred by the Act prior to those subsidies being granted.

Maintaining of actionable subsidies

4.474 Mexico is also arguing that the Act is maintaining actionable subsidies and that the maintenance of those subsidies in the circumstances is nullifying or impairing benefits that accrue to Mexico under the GATT 1994.

4.475 Subsidies can be challenged under Article 7 of the SCM Agreement (the remedy provision for Article 5), when a Member maintains a subsidy. A violation of Article 5 can be found where the maintenance of a subsidy amounts to the “use of” that subsidy and it causes one of the specified adverse effects.

4.476 Mexico asserts that in the circumstances of this dispute, the Act “maintains” subsidies in that it provides the means for the creation and conferral of those subsidies. The meaning of “use of” includes maintaining a subsidy in the circumstances of this dispute where other actions related to the subsidies have been taken. These actions include mandating the granting of the subsidies, creating the special accounts and depositing funds into them, and establishing a list of eligible recipients.

4.477 In the opinion of Mexico, even before subsidies are granted under the Act, the maintenance of subsidies under the Act nullified or impaired benefits accruing to Mexico under GATT Articles II and VI that concerned the creation of predictability needed to plan future trade. Given the certainty that any anti-dumping and countervailing duties that will be collected will be re-distributed to the producers of directly competitive products and the uncertainty as to the magnitude of the subsidies, it is impossible for Mexican exporters to predict the relative conditions of competition between their products and like US products. This is particularly problematic with respect to products that require significant lead time between order and delivery.

(iii) Competitive relationship

4.478 The US argues that Mexico has failed to demonstrate that the competitive relationship between US products and Mexican products has been upset by a subsidy.

4.479 Mexico is of the view that a great part of the US argument on this point is based on its mistaken belief that subsidies must be granted under the Act before Mexico can bring an Article 5(b) challenge.

4.480 Mexico posits that it seems that the US is also arguing that Mexico must prove adverse trade effects in order to establish nullification or impairment, which according to Mexico is not the case. As was made clear at paragraph 150 of the report of the Panel in Oilseeds I, the focus is on whether there has been an adverse change in conditions of competition legitimately expected by Mexico and not on trade flows or volumes of trade.

4.481 The United States argues the Panel in Oilseeds I “carefully analyzed” the evidence presented in making its finding and that, in this dispute, no such evidence has been presented by Mexico. Mexico argues that this is incorrect.

4.482 In assessing whether there was an adverse change in conditions of competition that led to a finding of nullification or impairment, the Panels in Oilseeds I and Oilseeds II examined the framework, mechanisms, essential features, characteristics and operations of the schemes in question. That was the evidence “carefully analyzed” by the panels. In other words, the panels made their findings based on the structure and architecture of the schemes.

4.483 This is exactly what Mexico has done in this dispute. By virtue of the structure and architecture of the Act:

- upon granting, the subsidies conferred by the Act will adversely change the relative conditions of competition that Mexico legitimately expected; and
- prior to the granting of subsidies, the Act per se interferes with the predictability related to those relative conditions of competition that was legitimately expected by Mexico.

(iv) “Floodgates” argument

4.484 The US argues that acceptance of Mexico’s argument would “automatically” convert any specific domestic subsidy programme which is related to a product on which there is a tariff concession into a non-violation nullification or impairment (para. 68, US First Submission).

4.485 According to Mexico, this argument is incorrect. At paragraph 81 of the Panel report in Oilseeds II, the Panel stated that GATT contracting parties must “be assumed to base their tariff negotiations on the expectation that the price effect of the tariff concession will not be systematically offset”. Thus, the mere fact that a subsidy may offset the effect of a tariff binding or any other benefit accruing under the GATT is not enough to amount to nullification or impairment. The upsetting of the benefit must be systematic, as it is in this dispute.

4.486 Moreover, Mexico asserts, at paragraph 10.82 of the Panel report in Film, it is stated that a “clear correlation” between the measure at issue and the adverse effect on the relevant competitive relationship must be shown. In order for this to occur, there must be “specific linkages” between the subsidy and the nullification or impairment of the benefit in question. This will occur only in exceptional circumstances.

4.487 Mexico argues that the facts of this dispute are exceptional. The benefits accruing to Mexico under the GATT 1994 are being systematically upset by the subsidies and a clear correlation and linkages exist. This is exemplified by the fact that the amount of the offsets equals the amount of the duties collected and the beneficiaries of the offsets are the same as the petitioners and supporters who initiated the investigation that led to those duties.

(v) Reasonable expectations

4.488 Finally, the US argues that Mexico could have reasonably expected the Act on the basis that compensation proposals had been suggested in the past.

4.489 Mexico is of the view that the evidence cited by the US supports Mexico’s position that it could not have reasonably anticipated the introduction of the Act. In every case where such a measure has been proposed in the past, it has been adamantly opposed by the US administration and it has not been passed into law. In fact, the US administration opposed the introduction of the Act. In this context, Mexico could have assumed and did assume that any attempt to introduce a similar legislative scheme would, once again, fail.

(d) Conclusion

4.490 For the foregoing reasons, Mexico believes that the US has failed to rebut the prima facie case presented by Mexico with respect to its Article 5 claim.

11. Thailand
(a) Introduction

4.491 Thailand notes that the following arguments contained in its oral statement are complementary and supplementary to the arguments made by other complaining parties.

(b) Rebuttal to the Legal Arguments Challenged by the United States

4.492 According to Thailand, it is crystal clear that Members shall have sovereign rights to appropriate lawfully assessed and collected duties within the purview of international law. However, the United States has made an argument from paras. 18 to 35 which concludes that “this panel proceeding is not the appropriate forum to address these issues ex aequo et bono.”

4.493 In Thailand's view, this argument has no role to play in this dispute because of the following reasons:

- 1. Nothing is said in Thailand's request about requesting the Panel to make any rulings on the basis of the notion of ex aequo et bono ;
- 2. The complaining parties merely request the Panel to make rulings and recommendations that the “Continued Dumping and Subsidy Offset Act of 2000”(hereinafter referred to as “CDSOA”) is inconsistent with US obligations under the WTO Agreement by clarifying the existing provisions of the WTO Agreement and any other covered agreement in accordance with customary rules of interpretation of public international law, as stipulated in Article 3.2 of the DSU.

4.494 Thailand argues that the United States argues in bullet 2 of paragraph 33 of the first submission, if read a contrario, that the legislation “may” violate WTO obligations. In fact, Article XVI.4 of the WTO Agreement or the Marrakesh Agreement as well as Article 18.4 of the Anti-dumping Agreement and Article 32.5 of the Subsidies and Countervailing Measures Agreement (hereinafter referred to as “SCM”) clearly requires Members to ensure the conformity of their laws, regulations and administrative procedures with their obligations. In this light, the CDSOA may be subjected to interpretation and brought to dispute settlement mechanisms if its application is found to be in violation of the WTO Agreement. Moreover, the language used in Article 5 of the SCM that “[n]o member should cause … adverse effects…” should be construed to mean that any action, be it legislative or administrative, which “may” cause adverse effects to the interests of other Members falls within the scope of Article 5 of the SCM.

4.495 In Thailand’s view, paragraph 37 of the US first submission implies, if not indicates, that the CDSOA is somewhat a subsidy, but argues further that it may or may not be prohibited under the SCM. Thailand argues that this line of argument made by the United States should be dismissed as contended by other complaining parties. More important than that, the US Customs Service in its news release on 30 January 2002 states that “[t]his legislation, also known as the Byrd Amendment, required US customs to disburse anti-dumping and countervailing (AD/CV) duties to domestic producers injured by foreign dumping and subsidies. The claimants have received more than $200 million to date.”

4.496 Thailand is of the view that paragraphs 77 to 89 of the US first submission underscores the nature of the CDSOA that it is not based upon the constituent elements of dumping or a subsidy. In Thailand's view, domestic producers will be affected if there are importations of products which are priced at prices lower than normal value. If so, the test for the constituent elements are satisfied.

4.497 Thailand asserts that the argument in paragraph 86 that any qualified applicant will be granted an amount of the distributions which is not the recovery of damages is arguendo in absurdum because it goes without saying that when a domestic producer is “affected” , he or she is then considered as having “adverse” effects referred to in Article 5 of the SCM.

4.498 According to Thailand, even though paragraphs 90 to 100 of the US first submission attempt to convince the Panel that the CDSOA is not meant to become a specific action “against” dumping or a subsidy within the scope of Article 18 of the Anti-dumping Agreement and Article 32 of the SCM , it is up to the Panel to rule, based on GATT/WTO jurisprudence, whether the term “against” has its broad or narrow meaning, taking into account the object and purpose of such covered agreements, in accordance with the general rule of interpretation under international law, and whether any action attributable to discouragement of dumping or a subsidy is an action against dumping or a subsidy.

(c) Political consideration

4.499 Thailand fully shares the concern expressed by Indonesia that if this kind of legislation is permitted it would not only set debate-provoking precedent, but also huge burdens for developing countries to bear when their products are subject to both competition policy and other measures imposed by the importing Member in question.

(d) Conclusion

4.500 Thailand submits that the arguments appearing in the US first submissions may be valid in other cases. Yet, they have failed to respond to many issues raised in the complaining parties’ submission.

D. FIRST ORAL STATEMENT OF THE UNITED STATES
(a) Introduction

4.501 The United States considers that at issue in this case is a law entitled the “Continued Dumping and Subsidy Offset Act of 2000” or, in short, the CDSOA. The CDSOA is a government payment programme. Like all governments, the US federal government makes payments to individuals or groups for all sorts of purposes such as health care, public welfare, agriculture, etc. Other WTO Members, including the complaining parties, maintain similar programmes for their nationals.

4.502 According to the United States, The CDSOA has nothing to do with the administration of the anti-dumping and countervailing duty laws. The CDSOA instructs the US Customs Service to distribute funds in an amount not to exceed the duties collected pursuant to anti-dumping and countervailing duty orders to eligible domestic producers. The amount of the distributions have nothing to do with the injury to the domestic producer or the recovery of “damages” by the domestic producer. Rather, the amount depends upon the applicant’s qualifying expenditures and whether other applicants also had qualifying expenditures.

4.503 The United States argues that as a subsidy programme, one would expect that the issues in this case would center on Article 3 or Article 5 of the SCM Agreement. While the United States has heard today general assertions of supposed harm that CDSOA will cause to the complaining parties’ companies that compete with US producers, none of the complaining parties have backed up their allegations by pursuing an Article 5(c) claim. In the view of the United States, this is tantamount to an admission by the complaining parties that they cannot show the harm they complain of.

4.504 Except for Mexico, the complaining parties’ primary argument is that because the source of the funds for the distributions under CDSOA are AD/CVD duties, the CDSOA is, on its face, inconsistent with the Antidumping and SCM Agreements. The reality is that, because money is fungible, the only real connection between the funds distributed under CDSOA and the orders is that the duties collected serve to cap or limit the amount of the annual distributions.

4.505 According to the United States, there is simply no WTO obligation with respect to the uses to which AD/CVD duties might be put, or to distinguish the use of these funds from any other source of government revenue. Other than considering whether the CDSOA is an impermissible subsidy, a panel proceeding is simply not the appropriate forum to address the complaining parties’ concern about the use of duties as a source of funds for domestic expenditures.

(i) The CDSOA is not an actionable subsidy

4.506 In the view of the United States, it is elementary that the granting of a subsidy is not, in and of itself, restricted under the SCM Agreement. The Appellate Body recently recalled this point in its report in United States – FSC. To be actionable, as claimed by Mexico, the complaining party must demonstrate that the subsidy is “specific” within the meaning of Article 2 of the SCM Agreement. Mexico, however, has failed to show that the CDSOA is a specific subsidy. There is no question that CDSOA is not de jure specific under Article 2.1(a) as its text does not expressly limit access to certain enterprises, industries, or groups. Mexico does not even claim de facto specificity.

4.507 The United States argues that even if Mexico passed the specificity hurdle, Mexico has failed to establish that the CDSOA has caused 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). Mexico, however, has not established that there is a presumption in Article 5(b) that a subsidy that violates another WTO provision is an actionable subsidy without showing adverse effects. Regardless, the CDSOA is not inconsistent with any other WTO provision.

4.508 The United States is of the opinion that Mexico does not satisfy the following requirements to establish a claim of non-violation nullification or impairment either: 1) the application of a measure; 2) a benefit accruing under the relevant agreement; and 3) the nullification or impairment of the benefit as a result of the application of the measure that was not reasonably anticipated. According to the United States, Mexico has failed to establish the first and third elements at least.

4.509 First, the United States argues, Mexico’s claim is insufficient on its face as Mexico does not challenge the application of the CDSOA. Second, Mexico has failed to demonstrate that the competitive relationship between any US products and Mexican imports has been upset by a subsidy. Mexico has presented no evidence that US producers of products that compete with Mexican products have actually received a distribution under the CDSOA, let alone a “clear correlation” between the distributions and any disruption of a competitive relationship. Indeed, Mexico cannot present such evidence as it has challenged the CDSOA on its face, not the actual distributions under the CDSOA. Finally, the United States has shown that Mexico could have reasonably anticipated that AD/CVD duties would be distributed to the domestic industry given proposed legislation in the US Congress in 1988, 1990, 1991, and 1994.

4.510 According to the United States, Mexico’s argument that CDSOA will per se nullify or impair benefits under GATT Articles II and VI flies in the face of the notion that a non-violation claim is an exceptional remedy, renders the causation requirement meaningless, and automatically converts any specific domestic subsidy programme with any connection to a product on which there is a tariff concession into a non-violation nullification or impairment of benefit. In sum, Mexico has failed to sustain its burden of demonstrating that the CDSOA is a “specific” subsidy that is causing adverse effects within the meaning of Articles 2 and 5 of the SCM Agreement.

(ii) CDSOA is not specific action against dumping or a subsidy

4.511 The United States submits that the CDSOA cannot be inconsistent with US obligations under the Antidumping and SCM Agreements, when read with Article VI of GATT 1994, because the statute is not within the scope of those agreements. The CDSOA does not impose any type of measure on imports or importers. The CDSOA is a statute authorizing government payments. The United States notes that the it is not challenging the conclusion of the Appellate Body in the US - 1916 Act dispute that duties, provisional measures and undertakings are the exclusive remedies for dumping. Thus, the United States is not contradicting the US statements in the Norwegian - Salmon dispute cited by some of the complaining parties today. The question is whether the CDSOA is a specific action against dumping and a subsidy.

4.512 The United States is of the view that the complaining parties’ entire argument in this regard is built upon the Appellate Body’s reasoning in United States – Antidumping Act of 1916. The United States notes that most, if not all, of the complaining parties offer only a cursory analysis of whether the reasoning of the Appellate Body in US – 1916 Act is applicable to the SCM Agreement. For the complaining parties to prevail on their claims under GATT Article VI:3 and the SCM Agreement, however, this Panel must find that it does. For the reasons explained in footnote 64 of the US' written submission, it does not. Even assuming arguendo that it does, the CDSOA is not inconsistent with the SCM Agreement for the same reason that it is not inconsistent with the Antidumping Agreement – it does not constitute a specific action against dumping or a subsidy.

4.513 In US – 1916 Act, the Appellate Body concluded that Article 18.1 of the Antidumping Agreement applies to actions based upon the constituent elements of dumping. The constituent elements of dumping are: (1) products imported and cleared through customs, which are (2) priced lower than their normal value.

4.514 In the opinion of the United States, the CDSOA, however, simply fails to satisfy the test articulated in the 1916 Act. Without question, the CDSOA distributions are not based upon the constituent elements of dumping or a subsidy. As explained in the US' written submission, the distributions are based upon the applicant’s qualification as an “affected domestic producer” who has incurred “qualifying expenditures.” The Appellate Body’s conclusion that the 1916 Act was a specific action against dumping was very clearly based upon the fact that the “constituent elements of dumping were built into the essential elements of civil and criminal liability under the 1916 Act.”

4.515 The United States argues that the statute at issue in this dispute, the CDSOA, is completely different from the 1916 Act. The CDSOA is a government payment programme based upon the definition of “affected domestic producer” and “qualifying expenditures.” The Act has nothing to do with measuring the extent to which a US producer has been injured or “damaged” by dumping or subsidization of imports. In contrast, the 1916 Act is a statute imposing criminal and civil liability upon importers for practices that specifically include the constituent elements of dumping.

4.516 The US is perplexed by the complaining parties’ repeated statements that disbursements under the CDSOA require the existence of a AD/CVD order. The complaining parties are simply restating the obvious. There is no question that this is the case - of course AD/CVD duties will not be collected without an order and presumably the complaining parties would not want it any other way. Thus, the action against dumping or a subsidy has already been taken.

4.517 According to the United States, the question in this case is whether the Antidumping Agreement or the SCM Agreement limit what a government can do with these revenues once collected. Nothing in these agreements speaks to this, nor is there any ban on spending this revenue. Spending this money cannot per se be action against dumping or a subsidy - otherwise duties once collected could never be spent. The complaining parties’ reliance on the existence of AD/CVD orders is thus misplaced.

4.518 The United States asserts that in addition to not being based upon the constituent elements of dumping or a subsidy, the CDSOA is not “against” dumping or subsidies. This Panel must consider the proper interpretation of the term “against” as a matter of first impression. The ordinary meaning of the word “against” suggests that the specific action must be in hostile opposition to and in contact with dumping or a subsidy. Here, the CDSOA imposes no additional liability or burden on imported goods or importers and, therefore, cannot be considered an action “against” dumping or a subsidy.

4.519 The United States notes that some of the complaining parties have criticized the use of the New Shorter Oxford English Dictionary’s definition of the term “against.” They take issue with the United States’ position that to be considered “against” dumping or a subsidy, the action must impose or apply a burden or liability on the importer or imported good. They are amused by the example of the government flags flying at half-mast. Yet, according to the United States, the reality is that under their test, which is action taken in response to dumping, the fictitious flag law would constitute a specific action against dumping and a subsidy.

4.520 According to the United States, the sole basis of the complaining parties’ argument that the CDSOA is “against” dumping and subsidies is the supposed intent or purpose of the law. Many complaining parties refer to statements by various members of the US Congress and the title of the law itself. However, this Panel must look to the actual operation of the law. As emphasized by the panel in the 1916 Act dispute, the purpose of a measure is not relevant to determining whether it falls within the scope of GATT Article VI and the Antidumping Agreement. A panel must look at what the measure actually does. The complaining parties rely heavily on the reasoning in 1916 Act. They should not be permitted to do so in a self-serving selective manner.

4.521 The United States posits that, as explained in paragraphs 101-111 of its written submission, in the event that the Panel concludes that the CDSOA is an action against dumping or a subsidy, footnotes 24 and 56 to the Antidumping and SCM Agreements, respectively, operate to allow the CDSOA as an “action” otherwise permitted. In sum, the complaining parties have failed to establish that the CDSOA is even within the scope of, let alone violates, Articles 1 and 18 of the Antidumping Agreement; Articles 4.10, 7.9, 10, and 32 of the SCM Agreement; or Article VI:2 and 3 of the GATT 1994.

(iii) The CDSOA is not inconsistent with any obligations related to standing, undertakings or GATT Article X:3

4.522 In the view of the United States, the complaining parties choose to ignore the fact that the standing provisions of the Antidumping and SCM Agreements do not include any requirement that the investigating authorities examine a statement of support to determine the subjective motivation or reason that the domestic industry supported the initiation of an anti-dumping or countervailing duty investigation. Articles 5.4 and 11.4 simply require authorities to follow certain quantitative benchmarks in determining whether an investigation should be initiated. There is no allegation in this dispute that the US investigating authority is failing to follow those numerical benchmarks.

4.523 Likewise, the United States argues, the undertaking provisions of the Antidumping and SCM Agreements do not require investigating authorities to accept a proposed undertaking in the first place. Nor do those provisions limit the types of reasons that may cause the administering authority to decline a proposed undertaking. The decision to accept or reject a proposed undertaking is within the complete discretion of the investigating authorities. Thus, even if the CDSOA could be viewed as distorting the consideration of undertakings, the decision to reject a proposed undertaking cannot form the basis of a violation of Articles 8 and 18.

4.524 In any event, the United States asserts that, as explained in paragraphs 123-125 of its written submission, the complaining parties have offered no empirical support for their contention that the CDSOA has a distorting effect on standing determinations and the consideration of undertakings. The complaining parties’ allegations are based on nothing more than mere speculation.

4.525 The United States argues that with regard to GATT Article X:3, the complaining parties have offered no arguments or evidence concerning the actual administration of the CDSOA, which is the measure at issue in this dispute. 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. Here, the complaining parties do not even argue that the CDSOA is being administered in an unreasonable, impartial or non-uniform manner. Nor did they identify the provisions of US law relating to standing determinations and price undertakings as measures in their panel requests. Thus, even if it were concluded that the CDSOA does somehow affect the administration of US laws relating to standing and price undertakings, this could not conceivably form the basis of an Article X:3(a) finding against the CDSOA, which is the only measure at issue in this dispute.

(b) Conclusion

4.526 In closing, the United States submits that there cannot be a breach of an obligation that does not exist – and such an obligation is not created by virtue of the number of complaining parties. The CDSOA simply distributes government revenue. Contrary to Mexico’s contention, the CDSOA does not meet the requirements of an actionable subsidy under Article 5(b). Unlike the 1916 Act, the CDSOA imposes no liability or burden on imported goods or importers. Furthermore, it is not based upon the constituent elements of dumping or a subsidy. In other words, it does not address dumping or subsidies as such. Accordingly, it is not a “specific action against” dumping or subsidies. Likewise, the CDSOA has nothing to do with standing determinations or the consideration of price undertakings. As a legal matter, the complaining parties have not identified any inconsistency with the obligations contained in the standing and undertaking provisions. As a factual matter, the complaining parties would have this Panel engage in sheer speculation.

E. ANSWERS OF COMPLAINANTS TO QUESTIONS FROM THE PANEL
1. Australia
(a) Questions to complaining parties
1. Please comment on para. 91 of the US first written submission. Do you agree that "it is clearly possible for an action to be 'in response to' dumping or a subsidy but not be 'against' dumping or a subsidy"? Please explain, taking into account the Appellate Body's finding that "'specific action against dumping' … is action that is taken in response to situations presenting the constituent elements of 'dumping'" (1916 Act, para. 122). Does the Appellate Body's finding suggest that "specific action against dumping" is necessarily a subset of action "in response to" dumping? Please explain.

4.527 Australia considers that the statement by the United States is unsustainable:⁹⁵

it ignores that the Appellate Body’s finding on the meaning of the phrase ‘specific action against dumping’ gave meaning to the word ‘against’, and did so in a way that encompasses other ordinary meanings of the word in context;

it ignores also that, consistent with the requirement of Article 3.2 of the DSU, the Appellate Body’s finding on the meaning of ‘specific action against dumping’ gave meaning to the phrase, as well as the word ‘against’, in their context and in light of the object and purpose of the broader framework of rules governing the imposition of anti-dumping and countervailing measures provided by Article VI of GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements in accordance with the customary rules of interpretation of public international law. (See also reply to Question 35 below);

it is premised on a misquotation of the Appellate Body finding in US – 1916 AD Act. The US statement at issue is preceded by numerous references to the Appellate Body having said that ‘specific action against dumping’ is ‘action that is taken in response to the constituent elements of dumping’.⁹⁶ In fact, the Appellate Body said that ‘specific action against dumping’ is ‘action that is taken in response to situations presenting the constituent elements of dumping’.⁹⁷ The two statements are not equivalent;

it is based on selective quotations of the meaning of ‘against’.⁹⁸ However, the word ‘against’ has other, equally valid, ordinary meanings, including ‘in competition with’, ‘to the disadvantage of’, ‘in resistance to’ and ‘as protection from’⁹⁹;

it presupposes a meaning of ‘dumping’ (and ‘a subsidy’) that has no basis in the relevant texts.¹⁰⁰ Article 18.1 proscribes ‘specific action against dumping of exports from another Member’ not in accordance with GATT 1994. It does not proscribe specific action ‘against dumped exports’ or specific action ‘against the importers of dumped exports’ that is not in accordance with the GATT 1994.

4.528 It follows that Australia does not agree that the Appellate Body’s finding suggests that ‘specific action against dumping’ is necessarily a subset of action ‘in response to’ dumping. In Australia’s view, the Appellate Body’s finding equated the meaning of the two expressions.

2. Please explain exactly how you see that the "constituent elements of dumping" have been incorporated into the CDSOA.

4.529 For offset payments to be made pursuant to the Act:

- a domestic producer must have supported an application for an anti-dumping (or countervailing) duty investigation; and
- there must have been a finding of dumping (or subsidisation), as well as injury and a causal link, for an anti-dumping (or countervailing) duty order to have been issued;¹⁰¹ and
- a domestic producer must have incurred qualifying expenditure after the issue of the anti-dumping duty finding or order (or countervailing duty order).

4.530 In other words, the existence of a situation presenting the ‘constituent elements of dumping’ (or a subsidy) is integral to a domestic producer’s potential entitlement under the Act. Contrary to US assertions,¹⁰² Australia has not argued that the offset payments under the Act constitute ‘specific action against dumping/a subsidy’ because they are paid directly from anti-dumping or countervailing duties: offset payments under the Act are ‘specific action against dumping/a subsidy’ because they constitute action that may be taken only when the constituent elements of dumping or a subsidy are present.

3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement for a Member to provide subsidies in response to a finding of dumping or subsidization, where that subsidization was in lieu of anti-dumping or countervailing measures? If not, please explain in light of your view that these provisions prohibit any action taken in response to situations presenting the constituent elements of dumping.

4.531 To the extent that entitlement to the subsidies as described is conditional on the existence of situations presenting the constituent elements of dumping of subsidisation, such subsidies would be inconsistent with Articles 18.1 and 32.1.

4. Assume that a Member (which has no legal framework for the conduct of anti-dumping/ countervail investigations or imposition of anti-dumping countervailing measures) implements a domestic subsidy programme with the explicit purpose and design of offsetting the injurious effects of dumped or subsidized imports. Would that programme constitute a "specific action against dumping" (or subsidy)?

If not, please explain, and provide a reasoned explanation as to how Article 18.1 of the AD Agreement (or Article 32.1 of the SCM Agreement) can be interpreted to distinguish between this hypothetical subsidy programme and the CDSOA regime.

4.532 It is not possible to provide a clear answer to this hypothetical question. The key issue in determining whether such a measure would be ‘specific action against dumping/a subsidy’ within the meaning of Articles 18.1 and 32.1 would be whether entitlement is conditional on the existence of situations presenting the constituent elements of dumping or subsidisation, in other words, whether the presence of dumping or subsidisation is a necessary condition.

5. Would a victim compensation scheme (funded from central treasury resources, rather than penalties imposed on convicted criminals) constitute a "specific action against" crime? Please explain. Would your answer be any different if the scheme were funded from penalties imposed on convicted criminals? Why?

4.533 With respect, Australia questions the relevance of this scenario to the matter at issue in this dispute.

6. Assume that a Member enacts legislation mandating the payment of $5,000 to petitioners to compensate them for the cost of making the petition and participating in the anti-dumping investigation. Would that payment constitute a "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.534 See reply to Question 4.

7. Assume that a Member enacts legislation requiring that any anti-dumping duties collected be paid to state retirement homes. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.535 See reply to Question 4.

8. Assume that the US restricted offset payments under the CDSOA to cases where the US found the existence of dumping, injury and causation but did not impose an anti-dumping order, and that such payments equalled the amount of anti-dumping duty that would have been collected had an anti-dumping order been put in place. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT 1994" within the meaning of note 24? Why, or why not?

4.536 See reply to Question 4.

9. Would the CDSOA violate AD Article 5.4 if offset payments were made to all domestic producers of the product under investigation, and not merely those domestic producers supporting the petition? Please explain.

4.537 Yes, because offset payments as described would still make it easier for the needed levels of industry support to be reached. The offset payments as described would continue to provide an incentive to domestic producers to support a petition until such time as the standing thresholds for initiation of an investigation have been met, thereby distorting, or threatening to distort, the requirement that the application be made ‘by or on behalf of the domestic industry’.

10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-consistent remedy? Please explain.

4.538 While it may be possible in some circumstances for a Member to act in good faith while providing incentives for the use of a WTO-consistent remedy, the question is incorrectly premised in the context of the present dispute. A remedy cannot be WTO-consistent if a Member takes action that distorts the application of one of the necessary conditions for the availability of that remedy: in this case, that an application be made ‘by or on behalf of the domestic industry’.

11. Does support for an anti-dumping petition have to be genuine (i.e., based on the actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement? If so, how could an investigating authority ensure that support is genuine in all cases?

4.539 The negotiating history of Article 5.4 confirms that its intent was to ensure that an application was being made ‘by or on behalf of the domestic industry’.¹⁰³ Moreover, Article 5.4, read in the context of Article 5 as a whole, provides that support for an anti-dumping investigation be expressed by the domestic industry on the basis of evidence of dumping, injury and a causal link between the dumping and injury. (In that context, Australia notes that the premise of the question, “i.e., based on the actuality or expectation of injury”, is misleading.) A variety of factors may of course influence a domestic producer’s decision whether or not to support a petition. The basis of Australia’s claim in this dispute, however, is that a Member government may not take action that distorts that decision in ways not permitted by GATT Article VI and the Anti-Dumping and SCM Agreements.

4.540 Absent evidence to the contrary, an investigating authority must presume that the views expressed by domestic producers are genuine. If, however, an investigating authority has evidence to indicate that the expression of views by domestic producers may not be genuine, the investigating authority may not ignore that evidence. By its very existence and nature, the financial incentive provided by the Act to ‘affected domestic producers’ must be presumed to affect, at least to some degree, the genuine expression of views by domestic producers in ways not contemplated by the Anti-Dumping Agreement. In such circumstances, the investigating authority must either suspend or nullify the examination of domestic industry views pending further investigation of the possible effect of the extraneous influence or, if the investigating authority is not empowered to take such action, to bring the matter to the attention of those authorities who are so empowered.

12. Does a domestic producer only "support" an anti-dumping application for the purpose of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure? Please explain.

4.541 See reply to question 11.

13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an application if such support is motivated - in part, at least - by a domestic producer's desire to be eligible for CDSOA offset payments?

4.542 See reply to question 11.

14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of general policy, never to accept price undertakings? Please explain.

4.543 Australia is not pursuing a claim concerning voluntary undertakings under Article 8.1 of the Anti-Dumping Agreement.

(b) Question to Canada
30. At para. 44 of its oral submission, Canada states that the Offset Act is a "specific action against dumping" because inter alia "payments are made only to those producers 'affected' by dumping". Does Canada consider that the Offset Act would be a "specific action against dumping" if payments were made to all domestic producers, and not only those that had supported the petition? Please explain.

4.544 Even if eligibility for the offset payments were extended to all domestic producers, including those who did not support an investigation, they would still be a ‘specific action against dumping’ (or ‘a subsidy’) because the payment would still be conditional on the existence of a finding of dumping (or subsidisation).

(c) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM Agreement, to what extent can subsidization be considered an action "under" Article XVI of GATT 1994?

4.545 Footnotes 24 and 56 clarify the scope of Articles 18.1 and 32.1: they do not create exceptions to the scope of those provisions. In the same way that a subsidy may be consistent with GATT Article XVI but inconsistent with, for example, GATT Article III:2, for so long as the Act constitutes ‘specific action against dumping/a subsidy’ within the meaning of Articles 18.1 and 32.1, that is, action that may be taken only when the constituent elements of dumping are present, it will be inconsistent with those provisions.

4.546 Moreover, GATT Article XVI is one of the provisions of GATT 1994 interpreted by the SCM Agreement, in particular in Part III, within the meaning of Article 32.1 of the SCM Agreement. It cannot also be an ‘other relevant provision of GATT 1994’ within the meaning of footnote 56 to the SCM Agreement.¹⁰⁴

33. Please provide an example of a "non-specific" action against dumping.

4.547 Australia considers it is unclear what the Panel means by ‘non-specific’ action in the context of the present dispute. As indicated in response to Question 1 above, the Appellate Body has clarified the meaning of the entire phrase ‘specific action against dumping’. If the Panel means action that may be taken in a situation where there may or may not be dumping or subsidisation, then such action could be a tariff or safeguard action, subject to that action being consistent with other relevant WTO provisions.

34. Please give examples of the sort of "other reasons, including reasons of general policy" that Members might invoke under Article 8.3 of the AD Agreement.

4.548 Australia is not pursuing a claim concerning voluntary undertakings under Article 8.1 of the Anti-Dumping Agreement.

35. Does the violation of the international law principle of good faith necessarily constitute a violation of the WTO Agreement? Does either the AD Agreement or the WTO Agreement impose an independent obligation on Members to act in good faith?

4.549 Pursuant to Article 3.2 of the DSU,¹⁰⁵ the provisions of the covered agreements are to be clarified in accordance with customary rules of interpretation of public international law, which the Appellate Body has found are expressed in Articles 31 and 32 of the Vienna Convention on the Law of Treaties¹⁰⁶. Article 31.1 provides:

A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

4.550 Accordingly, Article 3.2 of the DSU requires that the provisions of the covered agreements, including the Anti-Dumping and the SCM Agreements, are to be interpreted in good faith.

4.551 Moreover, ‘the principle of good faith, which is, at once, a general principle of law and a principle of general international law, … informs the provisions of the Anti-Dumping Agreement, as well as the other covered agreements’.¹⁰⁷

4.552 Thus, while there is no specific provision dealing with the principle of good faith, the covered agreements must be interpreted by Members and in the dispute settlement system in accordance with that principle.

36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest that either the panel or the Appellate Body, when addressing the meaning of Article 18.1 of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3 above?

4.553 Australia notes that the Appellate Body, at paragraph 81 of its Report, expressly stated that ‘specific action against dumping could take a wide variety of forms’. Australia notes, too, that the Appellate Body continued to be mindful of the possible variety of possible actions in its subsequent examination of the scope of GATT Article VI at paragraphs 109-126. In particular, footnote 66 to paragraph 122 would seem to indicate that the Appellate Body was concerned that its finding in relation to the meaning of the phrase “specific action against dumping” might in fact be too limiting.

4.554 However, Australia is not in a position to speculate on what other forms the Appellate Body may have actually considered that specific action against dumping could take when making its finding.

2. Brazil
(a) Questions to complaining parties
1. Please comment on para. 91 of the US first written submission. Do you agree that "it is clearly possible for an action to be 'in response to' dumping or a subsidy but not be 'against' dumping or a subsidy"? Please explain, taking into account the Appellate Body's finding that "'specific action against dumping' … is action that is taken in response to situations presenting the constituent elements of 'dumping'" (1916 Act, para. 122). Does the Appellate Body's finding suggest that "specific action against dumping" is necessarily a subset of action "in response to" dumping? Please explain.

4.555 A “response” is defined as an “answer or reply” in the New Shorter Oxford English Dictionary. As an alternative, it defines response as “an action or feeling caused by a stimulus or influence; a reaction.” There is a link between the stimulus (i.e. the question or the action) and the response (i.e. the reply or reaction). The two are necessarily related.

4.556 The Appellate Body in paragraph 122 of US - 1916 Act describes “specific action against dumping” as being “action taken in response to situations presenting the constituent elements of dumping.” There may, of course, be actions taken in “response” to dumping which are not necessarily “against” dumping. As such, “specific action against dumping” is a subset of actions which may be taken in response to the constituent elements of dumping. Indeed, “specific action against dumping” read in the context of Article VI:2 of the GATT 1994 means action “to offset or prevent dumping.” An action “in response to the constituent elements of dumping” is an action which is in reaction to dumping, but not necessarily an action which is “against” dumping. For example, the flying of flags at half-mast after the issuance of anti-dumping duty order is arguably “in response” to dumping. It is a symbolic response. It is not, however, an action “against” dumping because it neither offsets nor prevents the dumping.

4.557 Brazil would also distinguish between actions “in response” to dumping and actions which are “contingent” on dumping. Here Brazil would refer to the US example of giving anti-dumping duty revenues to charity. While providing revenues to charity is “contingent” on the collection of anti-dumping duties because these are the source of revenues for the charitable giving, this action is not “in response” to dumping. Providing the revenues to charity may be “in response” to a high poverty level in the country or to lack of funding from other sources, but it is not “in response” to the constituent elements of dumping. Brazil would concede that this is nothing more than a payment programme which is contingent on the collection of anti-dumping duties.

4.558 Unlike the two examples provided by the United States – flying the flag at half-mast and giving dumping revenues to charity – the Byrd Amendment is clearly not only “in response” to the constituent elements of dumping, it is “against” dumping in that it seeks to “offset or prevent dumping” which are precisely the objectives of anti-dumping measures specified in Article VI:2 of the GATT 1994.

2. Please explain exactly how you see that the "constituent elements of dumping" have been incorporated into the CDSOA.

4.559 The text of the CDSOA itself indicates the linkage between the statute and the constituent elements of dumping when it states: “duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis…to the affected domestic producers for qualifying expenditures.” The events which trigger payments under the CDSOA are identical to the events that trigger anti-dumping measures. As such, there is no question that the constituent are incorporated in the CDSOA. This is evident from the following:

- CDSOA payments are directly linked to a determination of dumping and injury and the subsequent imposition of anti-dumping measures. Similarly, they are also directly linked to determination of subsidization and injury. Thus, without the existence of the constituent elements of dumping (or subsidization) and injury, the statute provides for no action by the US Government.
- Payments under the CDSOA are further linked to the determination of dumping (or subsidization) and injury because they are provided only to those parties that have requested the imposition of anti-dumping (or countervailing) measures and have been determined to have been injured by the dumping (or subsidization).
- Payments under the CDSOA are further linked to the determination of dumping (or subsidization) and injury because the payments are directed at “qualifying expenses” related to the product which has been found to be dumped (or subsidized).

4.560 There is a total overlap between the CDSOA and the constituent elements of dumping (or subsidization). This includes not only the criteria under which payments become available, but also eligibility in terms of parties and products. If the CDSOA does not represent a situation where the constituent elements of dumping are present, it is difficult to conceive of a situation where they would be present other than in legislation implementing the terms of the relevant agreements.

4.561 Brazil cautions against confusing the “constituent elements of dumping” with the questions of whether the subsequent action is “specific action” and is “in response” to or “against” dumping (or subsidization). The constituent elements of dumping (or subsidization) are present whenever an action is based on determinations of dumping (or subsidization) and injury, as is the case with the CDSOA. It then remains to be determined whether the action is “specific” and whether it is “against” dumping. All three criteria are met in the case of the CDSOA.

3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement for a Member to provide subsidies in response to a finding of dumping or subsidization, where that subsidization was in lieu of anti-dumping or countervailing measures? If not, please explain in light of your view that these provisions prohibit any action taken in response to situations presenting the constituent elements of dumping.

4.562 Articles 18.1 and 32.1 are not equivocal. They clearly specify “no action” except action “in accordance” with the GATT 1994 and the respective agreements may be taken against dumping and subsidization. The GATT 1994 and the respective agreements do not authorize any actions in lieu of the measures specified in those agreement. These Articles do not state that, should a member decide not to impose measures under these agreements, it may impose other measures in lieu of these measures. Under Articles 18.1 and 32.1, the question then is a very restricted question: are subsidies provided in lieu of anti-dumping or countervailing measures specific actions against dumping or subsidization. If they are, then these subsidies are inconsistent with the terms of the GATT 1994, the AD Agreement and the SCM Agreement.

4.563 Article VI:2 of the GATT 1994 informs the meaning of “against” by use of the words “offset or prevent.” Thus, measures that offset or prevent dumping are measures against dumping. Subsidies are clearly measures which offset dumping. In essence, all or a portion of the price advantage gained by the exporter as a result of the dumping is offset by the subsidy to the industry in the importing country. Rather than forcing the import price upward as is the mechanism of anti-dumping duties to offset or prevent dumping, subsidizing the domestic industry simply provides the domestic industry with the ability to offset the dumping by lowering its own price and, thereby, becoming more competitive with the imported dumped (or subsidized) product. As such, subsidies provided in situations where the constituent elements of dumping are present (i.e. where there is dumping and injury) are measures against dumping.

4. Assume that a Member (which has no legal framework for the conduct of anti-dumping/countervail investigations or imposition of anti-dumping countervailing measures) implements a domestic subsidy programme with the explicit purpose and design of offsetting the injurious effects of dumped or subsidized imports. Would that programme constitute a “specific action against dumping” (or subsidy)?
If not, please explain, and provide a reasoned explanation as to how Article 18.1 of the AD Agreement (or Article 32.1 of the SCM Agreement) can be interpreted to distinguish between this hypothetical subsidy programme and the CDSOA regime.

4.564 Yes. This situation simply compounds the inconsistencies of the action taken. In addition to taking specific action against dumping or subsidization not provided in the GATT 1994, the AD Agreement or the SCM Agreement, the Member has not followed the procedures for determining dumping, subsidization, and injury required under the relevant Articles of the agreements. Consequently, the Member is not only taking action against dumping or subsidization not in accordance with the action permitted by the agreements, it is also taking action inconsistent with the procedural and substantive rules of the agreements. For example, the action being taken is not in accordance with the required determinations of injury under Article 2 of the AD Agreement and Article 15 of the SCM Agreement.

4.565 Brazil notes that the fact that a Member has no legal framework for addressing dumping and subsidization of imports does not alter that Member’s obligations under the AD and SCM Agreements or under Article XVI of the Marrakesh Agreement. Simply put, a Member cannot use the absence of a legal framework for anti-dumping and countervailing measures as an escape from the disciplines of the agreements.

5. Would a victim compensation scheme (funded from central treasury resources, rather than penalties imposed on convicted criminals) constitute a "specific action against" crime? Please explain. Would your answer be any different if the scheme were funded from penalties imposed on convicted criminals? Why?

4.566 This question cannot be answered in the abstract. For example, murder is a very different situation than, say, insurance fraud or accounting fraud. Brazil would note, however, that the remedies at issue in the 1916 Act proceeding potentially involved both criminal fines and damages to the victims. Both seek to “prevent” a violation. The latter, damages, also seeks to offset the effects of the violation.

6. Assume that a Member enacts legislation mandating the payment of $5,000 to petitioners to compensate them for the cost of making the petition and participating in the anti-dumping investigation. Would that payment constitute a "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.567 While such legislation might be challenged on other grounds, it is not apparent that it would constitute specific action against dumping. Specifically, the payment is not dependent on establishing the constituent elements of dumping.

7. Assume that a Member enacts legislation requiring that any anti-dumping duties collected be paid to state retirement homes. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.568 No. As explained in response to question 1, such a payment is neither in response to or against dumping. Rather, such a payment is simply contingent on the collection of anti-dumping duties, since these duties are established as the source of the funding.

8. Assume that the US restricted offset payments under the CDSOA to cases where the US found the existence of dumping, injury and causation but did not impose an anti-dumping order, and that such payments equalled the amount of anti-dumping duty that would have been collected had an anti-dumping order been put in place. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT 1994" within the meaning of note 24? Why, or why not?

4.569 It is not clear how this situation is different from the in lieu of situation in question 3. Members cannot take specific action either in lieu of or in addition to the measures provided in the relevant agreements. This would appear to be a measure against dumping in lieu of those measures set forth in the AD Agreement.

9. Would the CDSOA violate AD Article 5.4 if offset payments were made to all domestic producers of the product under investigation, and not merely those domestic producers supporting the petition? Please explain.

4.570 Yes. It would still be impossible to determine the extent to which support of the petition was motivated by the prospect of anti-dumping measures rather than the prospect of receiving offset payments. The prospect of receiving offset payments would still be a factor, perhaps the only factor, influencing supporters of the petition.

10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-consistent remedy? Please explain.

4.571 The issue before the panel is not whether Members are acting in good faith if they provide incentives for the use of WTO consistent remedies. The issue is whether the provision of the CDSOA payments frustrates the objectives of Article 5.4, namely the requirement of determining the level of support for a request for the imposition of anti-dumping measures. The CDSOA monetary incentive for requesting the imposition of anti-dumping measures makes it impossible for the requisite determination to be made under Article 5.4.

11. Does support for an anti-dumping petition have to be genuine (i.e., based on the actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement? If so, how could an investigating authority ensure that support is genuine in all cases?

4.572 It is not clear what is meant by “genuine” support. The issue before the panel is not whether the support is or is not genuine, but whether the US authorities can distinguish between the support contemplated by the AD Agreement, namely support based on the prospects for imposition of anti-dumping measures, and support not contemplated by the AD Agreement, namely support based on the prospects of monetary reward. Brazil is not asking the panel to decide the broader question of whether support must be “genuine” and under what circumstances support may be deemed genuine. This is a more complex issue and one likely to be resolved by the facts of a particular case. For example, if one requesting party bribes other potential requesting parties to support the request for anti-dumping measures, does that support qualify under Article 5.4? This issue is not before the panel. The only issue before the panel is whether the US authorities can distinguish between support for a petition conditioned on the receipt of CDSOA payments and support that would exist independent of the prospects for CDSOA payments.

12. Does a domestic producer only "support" an anti-dumping application for the purpose of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure? Please explain.

4.573 As indicated in the response to Question 11 above, this issue is not before the panel.

13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an application if such support is motivated - in part, at least - by a domestic producer's desire to be eligible for CDSOA offset payments?

4.574 Again, the issue is being misconstrued. The question is really a “but for” question. That is, would there be sufficient support for the request for the imposition of anti-dumping measures “but for” the prospect of receiving payments under the CDSOA. If there is insufficient support absent the prospect of receiving payments under the CDSOA, then a determination that support is sufficient under Article 5.4 is not in accordance with Article 5.4. Brazil's position is that the prospect of CDSOA payments makes it impossible for US authorities to determine the level of support that would exist absent the prospect for CDSOA payments. As a result, the authorities cannot meet their obligations under Article 5.4.

14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of general policy, never to accept price undertakings? Please explain.

4.575 Yes. While Article 8 provides authorities with broad discretion in accepting or rejecting price undertakings, it does impose an obligation on the authorities to allow undertakings to be offered and to provide a rationale for rejecting such offers. Brazil contrasts the language in Article 8 with the language in Article 9:1 which states that whether to impose anti-dumping duties and whether to impose duties at or below the margin of dumping “are decisions to be made by the authorities.” Although minimal, there are conditions associated with the Article 8 decision on whether or not to accept an undertaking. In contrast, in Article 9, there are no conditions.

(b) Questions to all parties
32. With reference to footnote 24 of the AD Agreement and footnote 56 to the SCM Agreement, to what extent can subsidization be considered an action "under" Article XVI of GATT 1994?

4.576 Footnote 24 of the AD Agreement and 56 of the SCM Agreement are straight forward clarifications of the limitations of Articles 18.1 and 32.1 respectively. In essence, they clarify that while specific actions against dumping of exports or subsidies by members are limited to the actions permitted under the Agreements, this does not preclude actions taken based on other provisions of the GATT 1994. This provision is necessary so as not to preclude actions which are independently authorized under other provisions of the GATT, such as Articles XIX, XII, or XVIII, which may impact the same products or the same Members as are impacted by anti-dumping or countervailing measures. These footnotes, for example, permit the imposition of anti-dumping and countervailing measures on the same products, or safeguards and anti-dumping measures on the same products. They do not, however, provide the basis for broadening the scope of action against dumping beyond those specific actions authorized under the AD and SCM Agreements.

33. Please provide an example of a "non-specific" action against dumping.

4.577 Non-specific action against dumping is action which may have an effect on the competitive dynamics in situations in which dumping is involved but which are not specifically targeted at offsetting or preventing dumping. For example, a country may have a programme which provides assistance to industries or workers, as does the US, which have been adversely impacted by imports, irrespective of whether the imports are dumped. The programme is to facilitate adjustment to imports. It may incidentally impact the competitive dynamics between products which have been found to be dumped and the domestic like product, but the action is not specific to these products or to this situation.

4.578 Another example would be the process of restructuring under the US bankruptcy laws. Many US steel mills, for example, are now in the process of such restructuring. These are the same steel mills that have filed many anti-dumping and countervailing duty petitions and are currently seeking safeguards protection. While they attribute their bankruptcies in large part to dumped and subsidized imports, this does not mean that the US cannot act to assist these companies through normal legal processes to restructure and emerge from bankruptcy as competitive entities. While the restructured companies will be stronger competitors and the restructuring will have altered the competitive dynamics, the action of encouraging the restructuring is not specifically a response to dumping.

4.579 Similarly, there has recently been a proposal that a tax be levied on all sales of steel in the United States and that the revenues from the tax be used to reduce unfunded obligations of US steel mills to retired workers. Many believe that these so-called “legacy” costs make the industry vulnerable to import competition, including competition from dumped imports. However, neither the proposed tax nor the distribution of revenues is specific to dumping. Obviously, US competitors will be in an improved position to compete against imports, including dumped imports, if the programme is implemented. However, it is not specific to dumping.

34. Please give examples of the sort of “other reasons, including reasons of general policy” that Members might invoke under Article 8.3 of the AD Agreement.

4.580 As a general matter, the US is reluctant to enter into undertakings for two reasons. First, they are viewed as being more difficult to administer than anti-dumping duties. Second, they are viewed as being less beneficial to the importing industry in terms of protection than are anti-dumping duties. In fact, the US has rejected consideration of undertakings offered for these reasons in the past.

35. Does the violation of the international law principle of good faith necessarily constitute a violation of the WTO Agreement? Does either the AD Agreement or the WTO Agreement impose an independent obligation on Members to act in good faith?

4.581 The obligation of “good faith” arises out of Article 31(1) of the Vienna Convention on the Law of Treaties which sets forth the rules of treaty interpretation. With respect to the Vienna Convention, the Appellate Body stated in United States - Antidumping Measures on Certain Hot-Rolled Steel Products from Japan:

We observe that the rules of treaty interpretation in Articles 31 and 32 of the Vienna Convention apply to any treaty, in any field of public international law, and not just to the WTO agreements. These rules of treaty interpretation impose certain common disciplines on treaty interpreters, irrespective of the content of the treaty provision being examined and irrespective of the field of international law concerned. Appellate Body Report at para. 60.

4.582 As such, the obligation of “good faith” is an obligation related to the interpretation of substantive obligations contained in a treaty. It requires that the relevant treaty be interpreted and the obligations be observed in “good faith.” It does not create new or additional obligations beyond the underlying obligations in the treaty. Rather, it serves to inform those obligations.

4.583 The WTO agreements, including the AD and SCM Agreements, do not impose any independent “good faith” obligation on Members. However, as indicated by the Appellate Body in the language quoted above, the rules of treaty interpretation impose common disciplines on all such instruments. Furthermore, Article 3:2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) specifically refers to the clarification of obligations in the WTO Agreements “in accordance with customary rules of interpretation of public international law.” Thus, the “good faith” obligation is applicable to the interpretation of obligations under the WTO Agreements.

4.584 A “good faith” obligation in interpreting a treaty provision would be meaningless unless it carried over into the implementation of the substantive obligations of the treaty. Whether the interpretation of a provision is in “good faith” only becomes an issue in the context of actions implementing the interpretation. Thus, for example, the obligation to determine the extent of industry support under Article 5.4 must be interpreted and implemented in “good faith.”

36. Is there anything in the panel or Appellate Body reports in the 1916 Act case to suggest that either the panel or the Appellate Body, when addressing the meaning of Article 18.1 of the AD Agreement, had in mind the pure subsidy hypothetical set forth in question 3 above?

4.585 The pure subsidy hypothetical does not appear to have been addressed by the Panel or the Appellate Body in the 1916 Act.

3. Canada
(a) Questions to complaining parties
1. Please comment on para. 91 of the US first written submission. Do you agree that "it is clearly possible for an action to be 'in response to' dumping or a subsidy but not be 'against' dumping or a subsidy"? Please explain, taking into account the Appellate Body's finding that "'specific action against dumping' … is action that is taken in response to situations presenting the constituent elements of 'dumping'" (1916 Act, para. 122). Does the Appellate Body's finding suggest that "specific action against dumping" is necessarily a subset of action "in response to" dumping? Please explain.

4.586 The Appellate Body interpreted the phrase “specific action against dumping” to mean “action taken in response to situations presenting the constituent elements of dumping.” The interpretation of the Appellate Body is not treaty language, but an elaboration of it. Therefore, the issue of one being a subset of another does not arise.

4.587 The Appellate Body in fact found that “specific action” was action that operated against, or in response to, a situation presenting the presence of those constituent elements. In this case, the Byrd Amendment subsidies are paid out to “condemn” dumping and “neutralise” subsidies.¹⁰⁸ “Condemn”, “neutralise” and “offset” denote acting against something. These subsidies are paid out only where dumping and/or a subsidy is present and not otherwise. In this way the Act is a specific action against dumping or a subsidy.

2. Please explain exactly how you see that the "constituent elements of dumping" have been incorporated into the CDSOA.

4.588 Article 18.1 and 32.1 of the Agreements has been interpreted by the Appellate Body as referring to actions that are taken in response to situations presenting the constituent elements of dumping. This is true of the Byrd Amendment.

4.589 The panels in the United States – 1916 Act challenge clarified that these elements require that goods enter into the commerce of the United States and are priced below normal value. The Byrd Amendment is triggered by an order – a finding of injurious dumping or subsidisation – and the collection of duties when under-priced goods actually enter into the commerce of the United States. Where the dumped goods do not enter the United States, no offset payments will be available for distribution.

4.590 Moreover, special accounts segregate funds on the basis of specific situations of the constituent elements of dumping (represented by the imposition of an order); recipients are those “affected” by the presence of constituent elements of dumping who participate in investigations. Qualifying expenditures are those incurred by “affected domestic producers” during the time an order is in place for costs related to the production of a domestic product that competes with an import that has been the subject of an order.

4.591 The Byrd Amendment is part and parcel of the US anti-dumping and countervailing duty regime and is not severable from it. It is a specific action against dumping or subsidisation as required by the specific terms of Articles 18.1 and 32.1 because it is an action that could not, and would not, be triggered unless a finding of dumping or a subsidy is made, and it is an action that seeks to “condemn” dumping and “neutralise” subsidies.

3. In your view, would it be inconsistent with Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement for a Member to provide subsidies in response to a finding of dumping or subsidization, where that subsidization was in lieu of anti-dumping or countervailing measures? If not, please explain in light of your view that these provisions prohibit any action taken in response to situations presenting the constituent elements of dumping.

4.592 Yes. The obligation contained in Articles 18.1 and 32.1 of the Agreements is that any action taken against situations presenting the constituent elements of dumping or subsidies must be in an authorized form. These are limited to anti-dumping or countervailing duties, undertakings and provisional duties (or countermeasures) in very specific circumstances. Subsidisation is not an authorised form of response. Therefore, such a response is inconsistent with Articles 18.1 and 32.1.

4.593 “Specific action against dumping” and/or a subsidy was thoroughly dealt with in both Agreements. Articles 18.1 and 32.1 represent the express intention of the Members of the WTO that only certain types of anti-dumping and countervailing measures were to be permitted under the Agreements, and such actions were to be governed by detailed rules. In this context, Canada underlines the importance of maintaining the integrity of the Anti-dumping and SCM Agreements. There are detailed rules governing the initiation of investigations, imposition of provisional measures, determination of the level of permissible duties, duration of duties and so on. To suggest that Members may use subsidies as “specific action against dumping” or a subsidy, is to say that Members may counteract dumping or subsidies by measures not subject to the disciplines set out in the Anti-dumping or SCM Agreements.

4. Assume that a Member (which has no legal framework for the conduct of anti-dumping/ countervail investigations or imposition of anti-dumping countervailing measures) implements a domestic subsidy programme with the explicit purpose and design of offsetting the injurious effects of dumped or subsidized imports. Would that programme constitute a "specific action against dumping" (or subsidy)?

4.594 Yes. Specific action against dumping or subsidies may be taken by a Member only in accordance with its obligations under the Anti-dumping and SCM Agreements. Articles 18.1 and 32.1 of the Agreements have been interpreted by the Appellate Body to limit those responses to duties, provisional measures and undertakings. A domestic subsidy programme is, therefore, not a permissible response.

4.595 As noted above, Members agreed at the time of the conclusion of the WTO Agreement that such specific action may be taken only in accordance with detailed anti-dumping and countervailing duty rules. If Members had considered counter-subsidies an appropriate “specific action”, they could have included this in the SCM Agreement – and negotiated rules for the proper amount and duration of such counter-subsidies. They did not do so. They limited “specific action” to only those measures for which they had negotiated detailed rules. Any other interpretation of Articles 18.1 and 32.1 of the Agreements would mean that the substantive rules negotiated to govern those “specific actions” are rendered meaningless where a Member decides to counter-subsidise, rather than impose anti-dumping or countervailing duties.

If not, please explain, and provide a reasoned explanation as to how Article 18.1 of the AD Agreement (or Article 32.1 of the SCM Agreement) can be interpreted to distinguish between this hypothetical subsidy programme and the CDSOA regime.

4.596 Not applicable.

5. Would a victim compensation scheme (funded from central treasury resources, rather than penalties imposed on convicted criminals) constitute a "specific action against" crime? Please explain. Would your answer be any different if the scheme were funded from penalties imposed on convicted criminals? Why?

4.597 The answer to the first part of the question is no.

4.598 Under normal circumstances, a victim compensation scheme funded from the general treasury is not a specific action against crime. Such compensation schemes are not intended to reduce crime, nor do they in fact do so. Such schemes are generally not devised to “condemn” or “neutralise” crime; they compensate the victim. In this respect, victim compensation funds may be compared to general adjustment policies or programmes.

4.599 The answer would be yes in respect of the second part of the question. A scheme funded by penalties imposed on criminals would, by contrast, constitute a “specific action against crime.” “Restitution” is a generally accepted part of the criminal justice system as a measure against crime. By making payments to the victim, the criminal is reminded of the harm he or she has done and is required to make good the damage caused. Indeed, in some jurisdictions, monetary penalties are a perfectly acceptable “punishment” for most crimes, especially crimes against property and the person. In these circumstances, it should be noted, the “compensation” in question is imposed in lieu of rather than in addition to incarceration or other punishment.

4.600 In this respect, such a scheme is to be contrasted with the Byrd Amendment. The United States first “punishes” the importer by imposing countervailing or anti-dumping duties on its goods. In doing this, the United States also, by definition, readjusts the competitive balance between imported goods and domestic like products. The Byrd Amendment is a “punishment” in addition to the duties imposed and collected, to the extent that it subsidises the domestic competitors of the importer.

6. Assume that a Member enacts legislation mandating the payment of $5,000 to petitioners to compensate them for the cost of making the petition and participating in the anti-dumping investigation. Would that payment constitute a "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.601 This payment does not appear to be triggered by or depend on a finding of dumping. Therefore, it would not be “specific action against dumping of exports” within the meaning of Article 18.1 as articulated by the Appellate Body.

7. Assume that a Member enacts legislation requiring that any anti-dumping duties collected be paid to state retirement homes. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement? Why, or why not?

4.602 No. For a measure to fall within Article 18.1, it must be a “specific action against dumping”. Specific action against dumping is action triggered by situations presenting the constituent elements of dumping or subsidies and action that is in “response to” such practices. Payments to retirement homes do not “respond” to the practice of dumping of exports. Therefore, the payment of anti-dumping duties to retirement homes is not an action against dumping or a subsidy. Nothing in such payment intrinsically offsets, counteracts, “condemns” or “neutralises” dumping or a subsidy.

8. Assume that the US restricted offset payments under the CDSOA to cases where the US found the existence of dumping, injury and causation but did not impose an anti-dumping order, and that such payments equalled the amount of anti-dumping duty that would have been collected had an anti-dumping order been put in place. Would such payments constitute "specific action against dumping of exports" within the meaning of Article 18.1 of the AD Agreement, or "action under other relevant provisions of GATT 1994" within the meaning of note 24? Why, or why not?

4.603 Yes. Article 18.1 of the AD Agreement limits responses to situations presenting the constituent elements of dumping to duties, provisional measures and undertakings. Offset payments are not a permitted response. This is regardless of their amount or whether or not they follow an order.

4.604 First, a finding that the Byrd Amendment is a specific action against dumping does not depend on whether anti-dumping duties are otherwise imposed. As noted above, Members negotiated and agreed on an extensive and detailed set of rules governing the imposition of those “specific actions” expressly provided for in the Anti-dumping and SCM Agreements. They did not contemplate, and accordingly did not negotiate, rules governing the use of other measures such as subsidies as “anti-dumping” or “countervailing” measures. In this respect, the question of the Panel contains its own answer: if subsidies were permitted as “anti-dumping” measures, other WTO Members must depend on the good will of the subsidising Member not to exceed the level of dumping found to exist, not to grant subsidies retroactively, not to grant them for more than five years, etc. Therefore, it is irrelevant that the United States would not be imposing anti-dumping duties. If the measure it does impose is not a contemplated “specific action”, it is not permitted.

4.605 Second, a finding that the Byrd Amendment is a specific action against dumping or a subsidy does not depend on these subsidies being funded by anti-dumping or countervailing duties. That they are so funded establishes even more clearly the logical and inescapable conclusion that the Byrd Amendment subsidies are “specific action”, but the source of the funds is not a necessary condition for the purposes of Articles 18.1 and 32.1.

4.606 (One can speculate that the Byrd Amendment would never have succeeded legislatively had the American taxpayer been asked to directly subsidise US industries to the tune of billions of dollars a year. One can further speculate that the special accounts for the duties collected were necessary not to limit the amount of the subsidies, as the United States alleges, but to ensure that the duties collected never show up on the General Accounts of the United States, thus hiding from the American taxpayer the opportunity costs of the Byrd Amendment. But such speculations would not be relevant for the purposes of the Panel’s legal analysis.)

9. Would the CDSOA violate AD Article 5.4 if offset payments were made to all domestic producers of the product under investigation, and not merely those domestic producers supporting the petition? Please explain.

4.607 Yes. Such payments would continue to provide incentives to bring or support petitions in anticipation of a potential cash payout in addition to the duties imposed. This incentive distorts the determination of threshold levels. Accordingly, it violates Article 5.4. This issue is that the payments distort/undermine the obligation by obscuring the meaning of threshold determinations under Article 5.4 and making it more likely that positive determinations will result.

10. Is a Member not acting in good faith when it provides incentives for the use of a WTO-consistent remedy? Please explain.

4.608 Article X:(3)(a) of GATT 1994 requires that Members administer their laws, regulations, decisions and rulings in a “uniform, impartial and reasonable manner”. The Appellate Body has stated that this obligation creates minimum standards of procedural fairness in the administration of trade regulations. It would follow that incentives for any form of remedy against imports could potentially not result in a fair, neutral administration of laws.

11. Does support for an anti-dumping petition have to be genuine (i.e., based on the actuality or expectation of injury) for the purposes of Article 5.4 of the AD Agreement? If so, how could an investigating authority ensure that support is genuine in all cases?

4.609 The question at issue in this dispute – indeed, in any dispute before a WTO Panel – is the conduct of the Member in respect of its obligations. A good faith implementation of an obligation requires, at the very least, that the implementing Member does not actively undermine the obligation it purports to implement. Where a Member is required to determine a level of support, it may not set that level by, for example, legally requiring support. Nor may it distort a level of support by providing for cash payment incentives. If the thresholds in Articles 5.4 and 11.4 are to mean anything, they must not be subject to overt or covert manipulation by the Member required to determine whether they have been met.

12. Does a domestic producer only "support" an anti-dumping application for the purpose of Article 5.4 if its support is motivated solely by its desire for the imposition of an anti-dumping measure? Please explain.

4.610 The question before the Panel is the obligations of the United States under Articles 5.4 and 11.4. The United States has an obligation to determine the level of support in accordance with thresholds set out in those Articles. Where the United States provides a cash incentive for the industry to support a petition, it moves to distort its own determination under Article 5.4 and 11.4.

13. Is it your view that there is no "support" (within the meaning of Article 5.4) for an application if such support is motivated - in part, at least - by a domestic producer's desire to be eligible for CDSOA offset payments?

4.611 The question before the Panel is the obligations of the United States under Articles 5.4 and 11.4. The United States has an obligation to determine the level of support in accordance with thresholds set out in those Articles. Where the United States provides a cash incentive for the industry to support a petition, it moves to distort its own determination under Article 5.4 and 11.4.

14. Would a Member violate Article 8.3 of the AD Agreement if it decided, as a matter of general policy, never to accept price undertakings? Please explain.

4.612 Yes. An interpretation that permitted such a course of action would render the Article 8.3 obligation meaningless. Members undertook to give their investigating authorities the ability to enter into undertakings. An ability to do something mu

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