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UNITED STATES � CONTINUED DUMPING AND SUBSIDY
4.733 Japan understands that the incentive questioned in this dispute is not incentive for the use of a WTO consistent remedy, but incentive for creation of an appearance clearing the legal requirements superficially for the use of WTO consistent remedy. Articles 5.4 of the AD Agreement and 11.4 of the SCM Agreement require a minimum expression of support by domestic producers before a Member legally may initiate an investigation. In other words, the expression of a sufficient degree of industry support is the predicate of a Member�s very right to initiate. A Member may not, in good faith compliance with its obligations under those articles, �purchase� that legal right by offering payments to domestic producers so as to induce them to express support they might not otherwise express.
4.734 The determination of the support under Article 5.4 of the AD Agreement must be based on the examination of true or genuine support to a claim that the domestic industry is injured by dumping. In ordinary situations, the investigation authorities may presume that expressions of support from domestic producers are true or genuine without further scrutiny unless circumstances or other evidence indicates that their expressions would be tainted by other interests. 4.735 The question in this dispute, however, is NOT whether the USG is obliged to scrutinize motives of domestic industries under Article 5.4 at the time of any polling of support. The question is whether a WTO Member may promise to provide financial benefits to domestic producers upon the condition that they support a petition at the time of the polling. 4.736 As discussed in Japan's first written statement, oral statement, and answer to Question 10 above, the USG has an obligation to perform the determination required by Article 5.4 in good faith. Further, Article 4.1 of AD Agreement informs Article 5.4, and makes clear the duty of care required of the investigating authorities to ensure that other interests do not distort expression by domestic producers of their support or opposition to a petition. Japan refers to its first written submission, paragraphs 4.47 through 4.75 for further discussion on this issue. The CDSOA explicitly supplies �other interests� to domestic producers in a manner inconsistent with USG�s obligations under Article 5.4. 4.737 The only way for the USG to perform its obligations under Article 5.4 in good faith and determine the degree of support properly is simply to remove the financial incentives that the CDSOA mandates.
4.738 While Article 8.3 of the AD Agreement does not require the acceptance of undertakings, a good faith application of its terms would require acceptance in those situations in which it is practical or appropriate to do so. Members have an obligation to consider offered undertakings in good faith and must have a proper reason if they are rejected. 4.739 Article 8.3 of the AD Agreement does not justify a Member�s rejection of an offered price undertaking only based on its policy never to accept price undertakings. The Member still would have an obligation to review an offered undertaking and may reject it only when it would have a proper reason to reject the individual offer in all cases. A mere statement that the Member has such a policy is not sufficient for the purpose of Article 8.3. This hypothesis, however, does not apply to the USG because the USG has never taken, or does not claim in its rebuttals, that it will take, such a position.
4.740 A subsidy granted without taking any procedures set forth in Article XVI of the GATT is not an action �under other relevant provisions of the GATT� within the meaning of footnotes 24 and 56. Article XVI does not provide a right to grant subsidies in general, it merely deals with reporting requirements and other procedural issues. Therefore, a Member that simply grants a subsidy is not taking action �under� Article XVI. 4.741 Subsidization further cannot be considered an action �under other relevant provisions of the GATT�, within the meaning of footnote 56 of the SCM Agreement because Article XVI is �the provisions of GATT� under Article 32.1. Article 32.1 prohibits Members from taking specific action against a subsidy of another Member �except in accordance with the provisions of GATT, as interpreted by this Agreement.� (emphasis added.) The SCM Agreement interprets not only Article VI:3 of GATT but also Article XVI. The reference in footnote 56 to �other relevant provisions of GATT� is meant to encompass only those provisions that are not covered by Article 32.1, i.e., provisions that are not interpreted by the SCM Agreement. Therefore, neither Article VI:3 nor Article XVI can be considered �other provisions of the GATT under footnote 56. 4.742 It also bears noting that the distributions under the
CDSOA do not fall in the scope of footnotes 24 and 56 because, as Japan and
other complainants have demonstrated, they are specific actions against
dumping or subsidy covered by Articles 18.1 and 32.1. The Appellate Body in the
1916 Antidumping Act case found that �action� within the meaning of footnote 24
is to be distinguished from �specific action against dumping� within the meaning
of Article 18.1.118 A measure that is considered �specific action against dumping�
is �governed by Article 18.1 itself.�119 Likewise, a measure that is considered
�specific action against a subsidy� is governed by Article 32.1. Also, the Panel
in the 1916 Antidumping Act case specified that footnote 24 does not affect the
conclusion that �when dealing with dumping as such, Members must comply with
Article VI of the GATT 1994 and the Anti-Dumping Agreement.�120 Therefore, the
distributions under the CDSOA, which are specific actions against dumping
or subsidy covered by Articles 18.1 and 32.1, would not fall within the scope of
footnotes 24 or 56. The United States cannot justify the distribution under the
CDSOA based on footnotes 24 and 56.
33. Please provide an example of a "non-specific" action
against dumping.
4.743 A safeguard measure in accordance with Article XIX of GATT 1994 and the Agreement of Safeguard is an example of a non-specific action against dumping. A safeguard measure normally is taken in response to situations in which an unforeseen increase of imports causes serious injury or threat of serious injury to domestic industry. If Japan supposes a case in which dumping is one of the elements causing the serious injury or threat thereof, taking a safeguard measure may, as a result, have effects to address dumping. It is, however, not an action which is specifically addressed to dumping, because a safeguard measure is an action taken in response to the increase of imports that causes serious injury or threat of serious injury, and not in response to dumping.
4.744 As discussed in Japan's answer to Question 14, a Member has an obligation to review an offered undertaking, and may reject it only when it has a proper reason to reject it in all cases. A mere statement that the Member has a policy not to accept price undertakings is not sufficient to justify the rejection for the purpose of Article 8.3.
4.745 The answer is �yes� to both questions. The international law principle of good faith is a basis to consider whether a Member performs its obligations in compliance with specific provisions of the AD Agreement and the SCM Agreement. The Understanding on Rules and Procedures Governing the Settlement of Disputes (the �DSU�) provides that this dispute settlement system serves to clarify the existing provisions of WTO agreements covered by DSU121 �in accordance with customary rules of interpretation of public international law.�122 Article 17.6(ii) of the AD Agreement also provides that the provisions of the AD Agreement shall be interpreted in accordance with customary rules of interpretation of public international law. 4.746 Article 26 of the Vienna Convention on the Law of Treaties, which requires that parties perform every treaty in good faith, has been recognized by the Appellate Body as �a general principle of law and a principle of general international law, that informs the provisions of the Anti-Dumping Agreement, as well as the other covered agreements.�123 4.747 Further, Article 31 of the Convention requires that the treaty, such as the AD Agreement and the SCM Agreement, must be interpreted in good faith in accordance with the ordinary meaning to be given to the terms in the context of the treaty, and in the light of its object and purposes. 4.748 While the good faith performance is not an independent obligation explicitly provided in the WTO Agreement, the administration of national trade laws and regulations in a uniform, impartial and reasonable manner is a Member�s obligation explicitly provided in Article X:3(a) of GATT 1994. Not only must a Member�s anti-dumping laws and regulations conform with the AD Agreement, that Member must also perform its obligations under the AD Agreement in a uniform, impartial and reasonable manner. For example, 732(c)(4)(A) of the Tariff Act of 1930 of the United States, codified at 19 USC. � 1673a(c)(4)(A), provides the same 50 per cent and 25 per cent for industrial support tests as provided in Article 5.4 of the AD Agreement and Article 11.4 of SCM Agreement. The USG thus has an obligation to perform these tests in a uniform, impartial and reasonable manner.
4.749 In addition to Appellate Body�s findings quoted above, Japan wishes the Panel to take note of the following findings by Appellate Body and the Panel. The Appellate Body found that: Article VI, and, in particular, Article VI:2, read in conjunction with the Anti-Dumping Agreement, limit the permissible responses to dumping to definitive anti-dumping duties, provisional measures and price undertakings. (para. 137). 4.750 These findings clarify that no other measures, including the hypothetical subsidy set forth in Question 3 above, are permissible response to dumping. The negotiation history of Article VI strengthens these findings, as the EC Panel Report notes in paragraphs 6.201 and 6.202.124
4.751 Japan does not find any arguments specifically addressing the hypothetical set forth in question 3. Nevertheless, Japan draws the Panel�s attention to the following paragraphs of Japan�s written submission to the Panel and to the Appellate Body in the 1916 Antidumping Act case, regarding Article 18.1 of the AD Agreement:
4.752 No, due to the finding of the Appellate Body in US-1916 Act, it is not possible. 4.753 No, the Appellate Body�s finding does not suggest this. This is because, as a matter of logic (given the Appellate Body�s interpretation in US-1916 Act (para. 122)), if an action is �in response to� dumping it is �against� dumping. The Appellate Body has interpreted �against� dumping to be �in response to situations presenting the constituent elements of �dumping�.�
4.754 The Byrd Amendment does not operate, i.e., it has no effect whatsoever, absent a finding by the US authorities that the constituent elements of dumping have been met. This finding is a necessary condition precedent for operation of the Byrd Amendment and, therefore, the �constituent elements of dumping� have been incorporated into the Byrd Amendment.
4.755 Yes, it would be inconsistent. In response to a finding that dumping or subsidization has occurred in the context of an anti-dumping or countervailing duty investigation, a Member is permitted only to apply the remedies set forth within the relevant agreement, i.e., offsetting duties not to exceed the amount of dumping or subsidy. In general, a Member may, of course, grant a subsidy if it wishes, so long as the subsidy is not inconsistent with the relevant provisions of GATT 1994 and the SCM Agreement.
4.756 Insofar as the domestic subsidy programme would be �in response to situations presenting the constituent elements of �dumping�� or subsidy, the programme would not be permissible.
4.757 With all due respect, the question is irrelevant because criminals are not in a competitive market with their victims. The relationship between a criminal and its victim is completely different from that which exists between imported and domestic goods, which compete in a marketplace day in and day out. Thus, a grant to a victim (or a fine or penalty against a criminal) does not have a similar effect � the two parties are not competing in a marketplace.
4.758 The situation set out in the question is, perhaps, even worse, because the payment would precede an actual finding that the constituent elements exist. (In essence, it would be a specific action against alleged dumping.) It also would act to advantage the petitioners vis-�-vis the allegedly dumped imports. In addition, it certainly would improperly bias the process in favor of petitioners, possibly violating Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement. This said, if one were to strictly apply the Appellate Body�s analysis set forth at paragraph 122 of the US - 1916 Act report, because the measure would not follow a positive finding of dumping, it would not be a �specific action against dumping.�
4.759 No, the payments would not constitute specific action against dumping of exports, because they would have no impact whatsoever on the conditions of competition.
4.760 The payments would be a specific action against dumping under Article 18.1 insofar as the payments would be conditioned on affirmative findings of dumping, injury and causation.
4.761 Yes. In that case (which does not exist here), Article 5.4 would be violated, because US companies still would be spurred by the legislation to file and support petitions, which, absent the legislation, they would not support. The incentive would exist because each US company could not be certain that other US companies would file and support a petition.
4.762 A Member is not acting in good faith when it alters the economic climate so as to encourage trade remedy proceedings. The provisions (e.g., standing) were negotiated with a view toward existing economic incentives (merits of the case), not with a view toward the existing economic incentives, biased by a cash reward. In other words, had the negotiators considered cash rewards permissible, the thresholds likely would be much higher. Moreover, anti-dumping and countervailing measures are not �a WTO-consistent remedy� unless they have been imposed pursuant to an investigation initiated on the basis of an application made �by or on behalf of the domestic industry.� This requirement limits the investigations (and consequently the imposition of measures) to cases where the domestic industry � not a small subset of it � is interested in the imposition of WTO-consistent measures, not cash rewards. Note, also, that in this case, the Byrd Amendment acts to encourage proceedings under a regime (the US anti-dumping regime) which has been found to violate WTO obligations and has yet to be brought into conformance.
4.763 At best, yes. However, Article 5.4 obligates Members, not industries. Nonetheless, when a Member acts to encourage spurious petitions, the Member must also act to ensure that the support is for reasons of the investigation itself rather than the cash reward.
4.764 Yes, the producer�s interest in starting an investigation should arise from market considerations.
4.765 Where a producer would not support a petition absent the possibility of a cash reward, the producer cannot be said to �support� the petition under Article 5.4.
4.766 Yes. A Member has the authority to reject undertakings that are �impractical.� Whether an undertaking is impractical should be decided on a case-by-case basis, considering the context and relevant circumstances.
4.767 The provisions are not related. A Member has the
authority to grant a subsidy, as long as the subsidy complies with the relevant
WTO provisions. This is true regardless of whether the conditions for imposing
anti-dumping duties, countervailing duties or a safeguard measure exist.
33. Please provide an example of a "non-specific" action
against dumping.
4.768 In a situation in which the requirements for imposing either an anti-dumping duty or a safeguard measure are met, a Member might decide to impose a safeguard measure, complying with the relevant WTO provisions.
4.769 A Member might establish a general policy of not accepting undertakings with regard to imports from a country that does not accept undertakings under the same conditions.
4.770 Yes, absent the requirement of �good faith,� the WTO agreements are meaningless. �Good faith� is required for any agreement to have meaning. This has been confirmed by the Appellate Body in US � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (24 July 2001), para. 101.
4.771 The panels and Appellate Body were focusing on whether any type of remedy, other than permitted duties, was acceptable. They concluded �no.�
4.772 The Appellate Body�s finding in United States - Anti-Dumping Act of 1916 does not suggest that "specific action against dumping" is a subset of action "in response to" dumping. The Appellate Body carefully examined the meaning of the phrase "specific action against" and explicitly determined that a "specific action against dumping" is an action taken in response to situations presenting the constituent elements of dumping. In the light of the above finding, there is no basis and, therefore, it is not necessary to create a distinction between �against� and �in response to�.. Applying the test established by the Appellate Body, the Continued Dumping and Subsidy Offset Act of 2000 ("the Act") and its offsets are "in response to situations presenting the constituent elements of dumping". As such, they constitute "specific action against" dumping or subsidization. 4.773 In this dispute, it is not necessary for the Panel to determine definitively the universe of measures that could constitute "specific action against dumping" within the meaning of Articles 18.1 and 32.1. Mexico submits that, at a minimum, the phrase "specific action against" encompasses actions such as the Act and the offsets it distributes. 4.774 As regards paragraph 91 of the United States' first
written submission, even if one were to accept that it is possible for an action
to be "in response to" dumping or a subsidy, but not "against" dumping or a
subsidy, the action at issue in this dispute is undoubtedly "against" dumping or
a subsidy, even using the United States' narrow interpretation of the term
"against".
2. Please explain exactly how you see that the �constituent
elements of dumping� have been incorporated into the CDSOA.
4.775 In Mexico's view, Article 18.1 of the Anti-Dumping Agreement encompasses action that is taken in response to situations presenting the constituent elements of dumping. The Act and the offsets distributed under it are clearly "in response to situations presenting the constituent elements of dumping" or subsidization, because the distribution of offsets is an action that may be taken only when the constituent elements of dumping or subsidization are present. 4.776 Since no funds would be collected and distributed in the absence of an order based on findings of dumping or of subsidization, because the magnitude of the subsidies is linked to the magnitude of the anti-dumping and countervailing duties, the Act is an action in response to situations presenting the constituent elements of dumping (or a subsidy), and therefore constitutes a "specific action against" dumping (or a subsidy).
4.777 Yes. As described, such an action appears to be inconsistent with Articles 18.1 and 32.1 especially if the subsidies equal in magnitude the duties that would otherwise be payable. Irrespective of whether subsidization is in lieu of anti-dumping or countervailing measures or in addition to such measures, it is not a form of action that is authorized under Article VI of the GATT 1994 (as interpreted by the Anti-Dumping Agreement and the SCM Agreement) to respond to situations presenting the constituent elements of dumping or subsidization.
4.778 For the reasons explained in Mexico's reply to question
3 and in Mexico�s other submissions with respect to the meaning of the
expression "specific action against", the hypothetical programme and the
subsidies granted under it could constitute a "specific action against dumping"
or a subsidy.
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?
4.779 In the case of the United States � Anti-Dumping Act
of 1916, the Appellate Body found that the phrase �specific action against
dumping of exports� meant an action that is taken �in response to situations
presenting the constituent elements of dumping�. It is difficult to apply this
finding to the analogy suggested by the Panel. However, Mexico notes that a
victim compensation scheme differs from the CDSOA and its offsets in many
respects. For example, any payment under such a scheme does not directly and
systematically �offset� the crime committed. The payments and their amount
(irrespective of the source of the funds) may not be generated by crime in and
of itself.
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?
4.780 The hypothetical measure described in this question is distinguishable from the Act and its offsets in that the payment of $5,000 to petitioners does not appear caused by and linked to the existence of a finding or order of injurious dumping, nor is it linked to the magnitude of the anti-dumping or countervailing duties collected. As such, in the absence of other elements demonstrating that the payment can only be made where the constituent elements of dumping exist, it appears that the measure would not constitute a "specific action against" dumping.
4.781 In this hypothetical case, the linkages between the action and the dumping and subsidization are not defined. Accordingly, it is difficult to analyze whether it would amount to a specific action against dumping of exports without making further assumption. 4.782 Under the narrow interpretation of �against� proposed by the United States, arguably such an action would not be against dumped imports or the importers.
4.783 Based on the facts described in the question, the payments appear to constitute an action which may be taken only in response to situations presenting the constituent elements of dumping, and therefore would be "specific action against dumping".
4.784 Yes. It appears that under the hypothetical scenario raised by the Panel, an incentive distorting the functioning of the thresholds regarding standing and, therefore, the examination that the investigating authority is required to make in order to determine whether the application has been made "by or on behalf of the domestic industry" would still exist. The distorting incentive would remain, because it would be in the interest of producers to increase the likelihood that an investigation will take place (and therefore the likelihood that subsidies will be granted) by filing or supporting a petition.
4.785 The issue in this dispute is not whether the United States is providing an incentive for the use of a WTO-consistent remedy., Rather, it is whether the incentives that are being provided undermine the requirements of the Anti-Dumping and SCM Agreements. A Member cannot be characterized as acting "in good faith" if its actions undermine the agreements.
4.786 In this dispute the legal issue to be decided under Article 5.4 is not whether the support for an anti-dumping petition is "genuine" or whether the investigating authorities must examine what motivated domestic producers to support a petition. Rather, it is whether the United States has undermined its ability to make determinations in an objective manner when it rewards domestic producers that support the petition and, consequently, penalize those that do not. Distorting expression of support by the domestic industry by providing a new incentive to petition or support a petition is not compatible with the United States obligation to make determinations under Article 5.4 in an objective manner.
4.787 See the reply to question 11.
4.788 See the reply to question 11. In such a situation, a domestic producer�s expression of support is tainted. At the risk of placing their competitors in a more advantageous competitive position, domestic producers must indicate support for the petition.
4.789 Yes. Such a measure appears to violate Article 8.3 of the Anti-Dumping Agreement because it would make it impossible for the investigating authorities of the Member in question to conduct an objective investigation into whether price undertakings would be appropriate in any given case. Therefore, it would render Article 8.3 of the Anti-Dumping Agreement inutile.
4.790 The context of the phrase "in particular" makes it
clear that the reference to "benefits of concessions bound under Article II of
GATT 1994" can be interpreted as the chief type of "benefits accruing
directly or indirectly to other Members under GATT 1994" that are referenced in
paragraph (b). Under this interpretation, benefits under Article II would be
relevant to a paragraph (b) analysis "much more than in other cases" (i.e. much
more than the benefits accruing under other provisions of GATT 1994). However,
the nullification or impairment of benefits accruing under other articles of
GATT 1994 could still be subject to scrutiny under paragraph (b). The phrase "in
particular the benefits of concessions bound under Article II of GATT 1994"
simply presents the chief type of such nullification or impairment.
26. If a subsidy contained eligibility criteria or conditions
that were not "objective" within the meaning of footnote 2 to the SCM Agreement,
would it ipso facto be specific within the meaning of Article 2?
4.791 No. In contrast to paragraph (a) of Article 2.1,
paragraph (b) does not establish requirements for determining when specificity
exists. Rather, it elaborates on a situation where an allegation of specificity
is based on criteria or conditions established by the granting authority or by
the legislation pursuant to which the granting authority operates. In such a
situation, the defending Member can counter the allegation of specificity by
demonstrating that the requirements of paragraph (b) and footnote 2 have been
met.
27. Please explain further the basis for your view that, when
examining the issue of specificity, each offset should be treated as a "separate
and distinct subsidy".
4.792 The United States argues that the Act, in itself, is not specific. The appropriate question is not whether the Act is specific; rather, it is whether the subsidies conferred under the Act are specific. 4.793 Factually, the subsidies conferred by the Act can be distinguished from those conferred under a typical subsidy programme. In the case of the subsidies conferred by the CDSOA, there is no common pool of funds. Rather, discrete "special accounts" are established to fund each offset, which is linked to a specific anti-dumping or countervailing order or finding. Each of the special accounts is funded separately through the assessment and collection of anti-dumping and countervailing duties and the amount of the funds for each account is dependent on the magnitude of the duties assessed and collected under its respective finding or order. Finally, recipients eligible for offsets paid from one special account are not eligible for offsets paid from another special account unless they meet the eligibility requirements for that account. Consequently, the structure and architecture of the Act creates a series of separate and distinct subsidies. 4.794 Legally, this means that the "financial contribution"
and the "benefit" associated with each special account (i.e. with each offset)
are separate and distinct. In other words, each special account or offset
constitutes a separate and distinct subsidy within the meaning of Article 1.1.
28. Mexico advances a number of arguments in support of its
claim that the CDSOA causes non-violation nullification or impairment. Would
Mexico rely on the same arguments to demonstrate non-violation nullification or
impairment in respect of a programme under which the grant of a subsidy is not
contingent on a demonstration of the constituent elements of dumping or
subsidization?
4.795 The basic approach to providing non-violation nullification or impairment would also be applicable generally to nullification or impairment claims pertaining to subsidies. That is, nullification or impairment can be proven based on the design, structure and architecture of the subsidy in question. 4.796 What could differ in the case of non-violation nullification or impairment claims relating to a subsidy that is not linked to the existence of dumping or subsidization is the benefits accruing directly or indirectly under the GATT 1994 which are claimed to have been nullified or impaired. 4.797 In this dispute, the systematic and direct linkage
between dumping and subsidization, the collection of anti-dumping and
countervailing duties and the conferral of subsidies to eligible recipients
creates the nullification or impairment of the benefits accruing to Mexico under
Articles II and VI of the GATT 1994. The arguments underpinning this
nullification or impairment may not be relevant to the challenge of another type
of subsidy.
29. The Oilseeds Panel asserted that countries "must � be
assumed to base their tariff negotiations on the expectation that the price
effect of the tariff concessions will not be systematically offset". That Panel
further asserted that "[a]t issue in the case before it are product-specific
subsidies that protect producers completely from the movement of prices for
imports and thereby prevent tariff concessions from having any impact on
the competitive relationship between domestic and imported oilseeds" (underline
supplied). To what extent, if any, does the CDSOA "systematically offset" the
price effects of tariff concessions granted by the US to Mexico? Please explain.
To what extent, if any, does the CDSOA provide for "product-specific subsidies
that � prevent tariff concessions from having any impact on the
competitive relationship between domestic and imported" (underline supplied)
products? Please explain.
4.798 This question raises two issues: (i) whether the nullification or impairment of a benefit or concession must be 100 per cent (i.e. prevent tariff concessions from having any impact); (ii) the nature of the nullification or impairment caused by the Act. 4.799 Regarding the first of these issues, in the Follow-up on the Panel Report in the case European Economic Community � Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins (BISD 39S/91) (Oilseeds II), it was established that non-violation nullification or impairment can occur in situations where the impairment of the benefit is less than 100 per cent. The key consideration is a �systemic offsetting� of a legitimately expected competitive relationship. 4.800 Regarding the second issue, Mexico is not arguing that the legitimately expected competitive relationship solely accrues from or is being defined by the tariff concessions under Article II of the GATT 1994 (as was the case in Oilseeds I and II). Factually, the competitive relationship at issue is that which is legitimately expected by Mexico when anti-dumping or countervailing duties have been imposed against exports of Mexican products. Legally, the benefits defining this relationship accrue to Mexico from Articles II and VI of the GATT. This is explained in paragraphs 80 to 83 of Mexico's first written submission. 4.801 The systematic nature of the nullification or impairment of the competitive relationship legitimately expected by Mexico arises from the methodical and regular way the subsidies conferred under the CDSOA upset that competitive relationship. As a result of those subsidies, Articles II and VI of the GATT 1994 no longer limit the adverse impact on the expected competitive relationship arising from the application of the anti-dumping and countervailing duties. The benefits accruing from these provisions are manifestly impaired.
4.802 Article XVI does not refer to the positive act of
subsidization. In other words, there is no textual basis for the position that
the subsidy could occur �under� Article XVI.
33. Please provide an example of a "non-specific" action
against dumping.
4.803 The provision of restructuring support to an industry that is facing difficulties and that is being adversely affected by dumped exports where that support is not contingent upon a finding of dumping. In such a situation, the restructuring support is not a specific action against dumping because it is not an action that may be taken only when the constituent elements of dumping are present.
4.804 Two examples would be anti-trust concerns and circumvention concerns related to the undertakings.
4.805 No. The two mentioned Agreements do not impose an independent obligation on WTO Members to act in good faith. However, this does not mean that the principle of good faith is irrelevant. Pursuant to Article 3.2 of the DSU, this principle applies to the interpretation of WTO Agreements, and consequently, to the interpretation, implementation and application of the Agreements by WTO Members.
4.806 Mexico takes the view that there is nothing in the reports of the Panel or the Appellate Body in the US - 1916 Act to suggest that the Panel or the Appellate Body considered the "pure subsidy hypothetical" set forth in question 3.
4.807 No. The "subsidy hypothetical" established in question 3 was not discussed in the submissions made by Mexico during these proceedings.
4.808 With respect to the Panel�s question concerning whether specific action is "against" dumping or subsidization if it is applied to the exporter and is burdensome, the answer of the United States is yes. Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively, concern the type of action taken against dumping or subsidization. As a practical matter, imported goods are produced, exported, and imported by foreign producers, exporters, and importers. Therefore, specific action could be applied to an exporter of a dumped or subsidized import. CDSOA cannot be specific action against dumping or subsidization because it does not (1) authorize action in response to the constituent elements of dumping or subsidization, or (2) apply to and burden imports or their importers, foreign producers, or exporters. 4.809 With respect to the Panel�s question of whether undertakings are specific action "against" dumping or subsidization, the United States recalls that the Appellate Body in United States � Anti-Dumping Act of 1916 explained that the permissible responses to dumping to definitive anti-dumping duties, provisional measures, and price undertakings. The three forms of action are, by definition, specific action against dumping or subsidization. Moreover, undertakings fall within the definition of specific action �against� dumping or subsidization because they (1) are action in response to the constituent elements of dumping or subsidization which can only be entered into with respect to conduct producing a preliminary affirmative determination of dumping or subsidization, and (2) apply to the exporter to limit its ability to export dumped or subsidized products to the importer, or apply to the government of the exporting Member to eliminate or limit the subsidy available to the exporter or take other measures concerning its effects. 4.810 With respect to the Panel�s question of whether severance of diplomatic relations would constitute action �against� dumping or subsidization, such action would not be action "against" dumping or subsidization because it would not apply to imports, or their importers, foreign producers, or exporters. 4.811 With respect to the Panel�s question on the meaning of the phrase �in particular� in Article 5(b) of the SCM Agreement, the phrase "in particular" is a transitional expression used throughout GATT 1994 and the SCM Agreement. The Oxford English Dictionary defines �in particular� as �as one of a number distinguished from the rest; especially� and �one by one, individually.� When used in Article 5(b), the phrase illustrates the meaning of the main phrase it modifies and suggests that tariff concessions under Article II are not the only negotiated benefit which can be nullified or impaired under GATT 1994. Regardless, Mexico has not proved any nullification or impairment of benefits accruing to it under any article of GATT 1994. 4.812 With respect to the Panel�s question concerning whether a subsidy would be ipso facto specific if it contained eligibility criteria or conditions that were not �objective,� Article 2 of the SCM Agreement contains progressive guidelines for the determination of whether a programme is specific or non-specific. Article 2.1(b) describes subsidies that are not specific under Article 2. The fact that a subsidy does not meet the description in Article 2.1(b), however, does not mean that it is therefore deemed specific. 4.813 With respect to the Panel�s question concerning how the criteria for CDSOA eligibility are economic in nature, the term "economic" is defined by the New Shorter Oxford Dictionary as "relating to monetary consideration, financial" and "relating to the management of private, domestic, etc., finances." This definition provides support for a broad interpretation of the term �economic� that encompasses the inclusion of any government or private action related to monetary or financial concerns (e.g. production, consumption, distribution or other such factors). The plain language of footnote 2 and the negotiating history support a broad interpretation of criteria that are "economic in nature." The criteria for receiving CDSOA distributions are within the rubric of the term �economic.� First, in supporting a petition, domestic producers act to protect monetary and financial concerns in a market where they are experiencing unfair competition. Second, the requirement that the producer remain in operation is also based on monetary and financial considerations because by remaining in business, a company deals with those monetary and financial concerns of maintaining profitability and viability in the market. Third, the qualifying expenditures are economic in nature as they relate to operating and production costs. 4.814 With respect to the Panel�s question concerning whether a subsidy would be de jure or de facto specific if it were rendered specific because of eligibility requirements that were not objective, the United States points out that a subsidy is not necessarily specific by virtue of the presence of non-objective criteria. A showing of specificity must still be made under Article 2.1(a) or 2.1(c). Assuming argendo that presence of non-objective criteria makes a subsidy specific, it would not be possible to determine whether it would be de jure or de facto specific without more information about the law. If the law explicitly limited the availability of the subsidy, it would be de jure specific. If it, in practice, limited the subsidy to certain enterprises, it would be de facto specific. 4.815 Concerning the Panel�s request to consider the Appellate Body�s statement in Canada-Autos at para. 100, the request pre-supposes that the discussion in Canada � Autos has relevance to the issue of specificity. The Canada � Autos discussion, however, is not instructive because there is a crucial difference between the specificity provisions of Article 2.1 and the export contingency provisions of Article 3. Article 2.1(a), the "de jure" provision of specificity, states that a subsidy is specific if it "explicitly" limits access to a subsidy. "Explicitly," even under the most relaxed definition, must mean at least that the limitation to certain enterprises must be evident on the face of the legislation. Article 3.1(a), however, does not use the term "explicitly," and, as interpreted by Canada � Autos, could include situations where the underlying legal instrument does not provide expressis verbis, but implicitly, that the subsidy is contingent upon exportation. The use of word "explicitly" in Article 2.1(a) precludes identification of a subsidy as being specific based upon the hypothetical operation of the law rather than the actual words of the law. 4.816 With respect to the Panel�s question of whether imposing sanctions for failure to support a petition would violate AD Agreement Article 5.4, it is difficult to answer this hypothetical question without complete facts, but do not see why it would violate Article 5.4. 4.817 With respect to the Panel�s question of whether the United States has changed the manner in which it performs its assessment of standing as a result of the CDSOA, the answer is no. 4.818 With respect to the Panel�s question concerning the meaning of the Statement of Administration Policy issued on 11 October 2000 referring to "significant concerns regarding the ... consistency with [US] trade policy objectives" of the CDSOA, the US Administration has changed since issuance of the statement. The current Administration cannot detail the �significant concerns� of the prior Administration as that Administration did not memorialize them. 4.819 Concerning the Panel�s request for comment on the EC�s statement that it would be important to know how many undertakings were rejected or not offered in the first place because of industry opposition, the US government could not possibly know how many undertakings were not offered in the first place because of opposition by the domestic industry and does not regularly maintain information concerning the number of undertakings rejected. The United States notes that it provided information concerning suspension agreements effective August 2001 (based on information available on the Department of Commerce website and in its public files) in Exhibit 7 of its First Written Submission. It is the complaining parties who assert that the CDSOA has a particular effect on undertakings and therefore it is their burden to demonstrate that effect. 4.820 Concerning the Panel�s request for comment on concerns raised by Indonesia and other complaining parties about the impact of the CDSOA on developing countries, the United States notes that Article 15 of the Antidumping Agreement is not within this Panel's terms of reference, as it was not identified in any of the panel requests, and therefore cannot be entertained by the Panel. In any case, the United States continues to fulfill its Article 15 "best efforts" commitment. Article 15 only necessitates only that the developed countries "explore" constructive remedies before applying anti‑dumping duties. Indonesia's argument is a misplaced effort to rewrite other Antidumping Agreement provisions, or to insert substantive rules never accepted by negotiators. Moreover, the complaining parties have provided no evidence that the CDSOA will affect the administration of US laws governing undertakings; thus concerns that the CDSOA will somehow affect commitments under Article 15 are similarly unfounded. 4.821 With respect to the Panel�s question about the extent to which subsidization can be considered an action "under" Article XVI of GATT 1994, subsidies provided to a Member�s domestic producer for any reason must be consistent with or, in other words, in accordance with GATT Article XVI. 4.822 With respect to the Panel�s request for an example of a "non-specific" action against dumping, non-specific action against dumping is an action covered by the terms of footnote 24 of the Antidumping Agreement. Non-specific action does not include action against dumping, as such, but would include action against the causes or effects of dumping. It is action, however, that does apply to dumped imports or the importer/exporter/foreign producer. One such example is a safeguard. 4.823 With respect to the Panel�s request for examples of the sort of "other reasons, including reasons of general policy" that Members might invoke under Article 8.3 of the AD Agreement, a Member might conclude that it already has enough undertakings in place and lacks the resources (or does not want to devote the resources) to properly monitor and administer additional undertakings. Or, a Member might consider that negotiating price commitments represents bad policy and that the only desirable form of anti-dumping measure is a duty equal to the full calculated margin of dumping. 4.824 With respect to the Panel�s question of whether a violation of the international law principle of good faith necessarily constitutes a violation of the WTO Agreement, a violation of the good faith principle cannot constitute a violation of the WTO Agreement without a violation of a particular obligation in the agreement. Appendix 1 to the DSU, which defines the covered agreements for purposes of the DSU, does not list an international law principle of good faith. Nor does the WTO distinguish between a breach of an agreement in good faith and a breach in bad faith � in either case it would be a breach of the agreement and would have the consequences provided in the WTO Agreement. Nor is it clear what is meant by a violation of the international law principle of good faith. 4.825 With respect to the Panel�s question of whether the AD Agreement or the WTO Agreement impose an independent obligation on Members to act in good faith, neither agreement nor any other provision of the WTO Agreement imposes an independent obligation on Members to act in good faith. Concerning the present case, there is no WTO provision requiring Members to judge the subjective motivations of domestic producers in supporting an anti-dumping or countervailing duty petition or opposing an undertaking. According to AD Article 5.4 and SCM Article 11.4, the United States is only obligated to meet certain numerical thresholds of domestic industry support before initiating an investigation. According to AD Article 8 and SCM Article 18, undertakings need not be accepted at all. Thus, even if the CDSOA did provide some motivation for domestic producers to support a petition or oppose an undertaking, it would not �threaten� action inconsistent with WTO obligations, or impede the United States from upholding its obligations in good faith under AD Articles 5.4 and 8 and SCM Articles 11.4 and 18. 4.826 With respect to the Panel�s question of whether there is anything in 1916 Act reports 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, there is nothing in the reports to suggest that they considered a subsidy hypothetical. The panels and Appellate Body in that case were concerned with the issue of whether or not civil and criminal penalties imposed on importers were specific action against dumping within the meaning of Article 18.1 of the Antidumping Agreement. 4.827 With respect to the Panel�s question about whether there was anything in the US submissions to the panel or Appellate Body in the 1916 Act proceedings that would have caused the panel or the Appellate Body to address the meaning of Article 18.1 of the AD Agreement in the context of the pure subsidy hypothetical set forth in question 3 above, the answer is no. 4.828 With respect to Chile�s question about the tax and accounting treatment given the money distributed under the CDSOA, the money distributed under the CDSOA is taxable income and should be reflected in the accounting books of the recipients as such. 4.829 With respect to what happens to the funds collected as a result of investigations initiated ex officio by the investigating authority, the US Customs Service has not specifically addressed this issue. The statute, however, states that the Commission shall forward to Customs a list of �petitioners and persons with respect to each order and finding and a list of persons that indicate support of the petition by letter or through questionnaire response.� Even if there is no �petitioner,� Customs will still receive a list of supporters identified by letters or through their questionnaire responses. The relevant letters and questionnaire responses are those filed in the �Commission�s record� or, in select cases, entries of appearances in administrative reviews conduced by the Commerce Department. 4.830 With respect to Chile�s question concerning how the �situation� of the industry investigated differs when in one �scenario� an order is imposed and in the second �scenario� an order is imposed, plus the domestic industry receives money collected on dumped or subsidized imports, it is not clear what is meant by �situation.� If the question intends to ask how the exporting industry is affected by the subsidy to the domestic industry, the answer will depend on the facts. In other words, the exporting industry may or may not be affected. 4.831 With respect to Chile�s question concerning how the �situation� of the domestic industry differs in the two �scenarios,� in the second, the domestic industry receives a subsidy. 4.832 With respect to Chile�s question concerning how the competitive relationship between the two industries differs in the two �scenarios,� the answer will depend on the facts of the case. 4.833 With respect to Chile�s question concerning the difference between the burden or liability to which the investigated industry is subject in the two �scenarios,� in the first scenario, the duty is imposed on the good being produced (or sold) by the exporting industry/foreign producer. Thus, a duty is an additional financial burden to the exporting industry. However, whether the exporting industry is financially burdened by a subsidy to the domestic industry (scenario two above) will depend on the facts. It may or may not be affected. 4.834 With respect to Chile�s question as to whether the CDSOA is an incentive for domestic producers to file or support anti-dumping petitions in order to have access to the �funds,� the CDSOA does not serve as a real incentive to file or support petitions. The costs of participating in an investigation for an industry, already materially injured or threatened with material injury, could be far greater than the disbursements received years later. Moreover, that a petition will result in an order is far from guaranteed and even if an order does result, payments, if any, received are contingent on a number of factors and remote in nature. The "promise" of a remote, uncertain and unknown payment is not an incentive to spend a million plus dollars without knowing whether an order will be issued, the amount of duties that may be collected, or the share of those duties to be received by the company. 4.835 With respect to Chile�s question concerning whether it would be irrational for a company to abstain from stating its position or to express opposition to an investigation, it may or may not be irrational, from an economic point of view, for a domestic producer to abstain from stating a position or expressing opposition in the remote chance of receiving distributions. 4.836 With respect to Chile�s question concerning how many price undertakings were rejected, the United States references its response to Question 23 from the Panel where it indicates that it does not keep information on undertakings that have been rejected.
4.837 With respect to the EC�s question about whether CDSOA offsets have the purpose described in the section of the CDSOA entitled �Findings,� the answer is no. The �findings� are not part of the law and, in any event, do not identify a purpose. If a purpose is not specifically identified in a law, the purpose of the law is reflected in the language of the law itself. Here, the CDSOA is intended to distribute funds to recipients that meet the criteria set forth in the Act. 4.838 With respect to the EC�s hypothetical concerning a monetary fine on domestic producers who do not support an application, this hypothetical is not before the Panel, and the United States believes it is more useful to focus on the measure at issue. Having said that, depending on the actual facts and application of such a measure, it might give rise to a claim of non-violation nullification or impairment. The United States does not see why it would breach Articles ADA 5.4 and SCM 11.4. 4.839 With respect to the EC�s question concerning whether Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement apply to dumping and subsidisation which do not involve imports into the territory of the Member taking the action, first, the premise of this question is incorrect. Articles 18.1 and 32.1 apply to specific action taken against dumping or a subsidy (not to �dumping or subsidization�). Second, Members do not take specific action against dumping or a subsidy which do not involve imports into their territory.
4.840 In its First Submission, Australia demonstrated that the Continued Dumping and Subsidy Offset Act of 2000 (�the Act�) is mandatory legislation that is inconsistent with provisions of the Anti-Dumping Agreement, the SCM Agreement, the GATT 1994 and the WTO Agreement. 4.841 Australia is of the view that the United States has not countered or refuted the prima facie case made by Australia in respect of any of its claims. In it second submission, Australia addresses the defensive arguments put forward by the United States. Australia will show that, contrary to the assertion by the United States that Australia has misunderstood the structure of the Act and the operation of United States trade laws,125 it is the United States which has misunderstood and/or ignored the essential elements of Australia�s case.
4.842 According to the United States:
4.843 In fact, what Australia has done is to ask the Panel to find that the Act is a specific action against dumping or a subsidy otherwise than in accordance with GATT 1994 as interpreted by the Anti-Dumping Agreement and/or the SCM Agreement, contrary to the obligations already accepted by the United States under those Agreements. The assertions by the United States are a clear misrepresentation of Australia�s case. Australia is not arguing that Members can�t distribute anti-dumping or countervailing duties otherwise than to the national treasury. There is nothing in the First Submission of Australia � or any other complainant � to suggest otherwise. Neither is Australia, nor any other complainant, asking the Panel to act ex aequo et bono. The United States has put forward voluminous material to refute arguments that have not been made. That material is not pertinent to this dispute. 4.844 Moreover, the United States recognises that �WTO Members have agreed to exercise their sovereignty according to their WTO Agreement commitments�128, and �Members are free to pursue their own domestic goals through spending so long as they do not do so in a way that violate commitments made in the WTO Agreement�129. Australia endorses these statements wholeheartedly. It is the precise nature of Members� existing commitments under the WTO Agreement in relation to �specific action against dumping/a subsidy� that is at issue in this dispute. 4.845 The issue of restricting a Member�s sovereign right to appropriate lawful revenues ex aequo et bono simply does not arise in this dispute. Rather, this dispute concerns whether the United States is acting in a manner that violates commitments already made in the WTO Agreement.
4.846 Australia asserts that the United States argues that �because it does not mandate the imposition of anti-dumping or countervailing measures, or any other type of specific action against dumping or subsidies, on imports or their importers, the [Act] is not within the scope of GATT Article VI, or the various provisions of the Antidumping and SCM Agreements cited by the complaining parties�.130 The United States further argues that the Act �is simply a statute authorizing governmental payments�131 (emphasis in original). The United States then purports to apply the reasoning of the Appellate Body in US � 1916 AD Act to show that, because the offset payments under the Act are �not based upon� the constituent elements of dumping or a subsidy and because the Act is not an action �against� dumping or a subsidy, the Act does not constitute �specific action against dumping/a subsidy�.132 However, the United States� arguments are unsustainable.
4.847 According to the United States, �Article VI and the Antidumping and SCM Agreements do not apply to the [Act] because it is not based upon the constituent elements of dumping or a subsidy�133 (emphasis added). It is not clear to Australia what the United States means by the phrase �not based upon�, or indeed the authority to which it refers for its interpretation of GATT Article VI and the Anti-Dumping and SCM Agreements. 4.848 In US � 1916 AD Act, the Appellate Body found that the phrase �specific action against dumping� is �action that is taken in response to situations presenting the constituent elements of dumping�134 (emphasis added). The Appellate Body did not say �that the phrase �specific action against dumping� � meant �action that is taken in response to the constituent elements of dumping� �, notwithstanding the United States� repeated assertions otherwise.135 The Appellate Body�s finding clearly recognised that specific action against dumping is not limited to action against the constituent elements of dumping, but that it �encompass[es] action that may be taken only when the constituent elements of �dumping� are present [�]�136 (emphasis in original). It was in this context that the Appellate Body then found that �the constituent elements of �dumping� are built into the essential elements of civil and criminal liability under the 1916 Act�.137 The Appellate Body�s findings in US � 1916 AD Act do not provide any support for the contention that Article VI and the Anti-Dumping and SCM Agreements are not applicable because the Act �is not based upon the constituent elements of dumping or a subsidy�. 4.849 Further, Australia argues, the United States contends that footnote 373 to the Panel Report in the EC complaint in US � 1916 AD Act confirms that �the scope of Article VI and the Antidumping Agreement extends to measures which address dumping as such� and that �dumping as such refers to action based upon the constituent elements of dumping�138 (emphases in original). However, it is clearly evident from the text of footnote 373 that the Panel was distinguishing �dumping as such� from �the effects of dumping� in considering the meaning of footnote 24 to Article 18.1 of the Anti-Dumping Agreement. Again, according to Australia, the United States� contention is not in fact supported by the Panel�s findings. 4.850 The United States concludes that, because the Act is not based upon a test that includes the constituent elements of dumping or a subsidy, the Act does not address dumping or subsidisation as such and is not within the scope of Article VI and the Anti-Dumping and SCM Agreements.139 However, Australia asserts, this conclusion ignores the fundamental fact that there must have existed 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. (Moreover, the United States� argument also ignores that the availability of funds for disbursement as offset payments under the Act is conditional on continued dumping and subsidisation: if no anti-dumping or countervailing duties are collected, no payments are made.) In other words, a prerequisite for an offset payment under the Act is the existence of a situation presenting the constituent elements of dumping or a subsidy: an offset payment under the Act may be made only when the constituent elements of dumping or a subsidy are present.
4.851 According to the United States, �it is clearly possible for an action to be �in response to� dumping or a subsidy but not be �against� dumping or a subsidy�.140 The United States also contends that �to consider a specific action as �against� dumping or subsidization, the action must apply to the imported good or the importer, and it must be burdensome�.141 Again, however, these arguments are not sustainable in a number of respects. 4.852 Firstly, Australia argues that the United States 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. 4.853 Secondly, in the view of Australia, the United States ignores 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 to 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 GATT Article VI as interpreted by the Anti-Dumping and SCM Agreements in accordance with the customary rules of interpretation of public international law. 4.854 Thirdly, Australia submits, the United States� arguments are premised on the repeated misquotation of the Appellate Body�s findings in US � 1916 AD Act that �specific action against dumping� is �action that is taken in response to the constituent elements of dumping�.142 4.855 Fourthly, according to Australia , the United States bases this argument on selective dictionary meanings of the word �against�: it asserts that �the ordinary meaning suggests that the specific action therefore must be in �hostile opposition to� dumping/subsidization, and must �come into contact with� dumping/subsidization�.143 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�.144 Moreover, none of these meanings, including those put forward by the United States, compel the conclusion that a specific action �against� dumping or subsidisation must apply exclusively to the imported good or to the importer, and must be burdensome to those goods or importers. 4.856 Fifthly, Australia posits that the United States� argument is premised on meanings of �dumping� and �a subsidy� that have no basis in the relevant texts. Article 18.1 of the Anti-Dumping Agreement 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�, �against the dumpers of exports� or �against the importers of dumped goods� not in accordance with GATT 1994. Similarly, Article 32.1 of the SCM Agreement proscribes specific action �against a subsidy� not in accordance with GATT 1994. It does not proscribe specific action �against subsidised exports� or �against importers of subsidised goods� not in accordance with GATT 1994. The United States is in effect arguing that the Panel should create new rights and obligations under GATT 1994, the Anti-Dumping Agreement and the SCM Agreement or, in other words, act ex aequo et bono. To read the distinctions requested by the United States into the words of Articles 18.1 and 32.1 would not give the words their ordinary meaning in their context and in light of the object and purpose of the Anti-Dumping Agreement, the SCM Agreement and the GATT,145 and would be contrary to the Panel�s obligation to clarify the provisions in accordance with the customary rules of interpretation of public international law as required by Article 3.2 of the DSU. 4.857 Finally, it is the opinion of Australia that the United States ignores that the offset payments are likely to precipitate changed behaviour on the part of the producers and importers of dumped or subsidised goods, as well on the part of domestic producers, thereby altering the competitive relationship between imported goods and the domestic like products in ways not contemplated by GATT 1994 or the Anti-Dumping or SCM Agreements. (Moreover, the competitive relationship with goods that have not been found to be dumped or subsidised is also likely to be altered.) Thus, it cannot be said that the Act imposes no burden or liability on imported dumped or subsidised goods. 4.858 Contrary to assertions by the United States,146 Australia has not argued that the offset payments under the Act constitute a specific action against dumping or subsidisation because they are paid directly from anti-dumping or countervailing duties. Rather, Australia has argued that the offset payments constitute specific action against dumping or subsidisation because they are conditional on the existence of situations presenting the constituent elements of dumping: they are payments that may be made only when the constituent elements of dumping or a subsidy are present. 4.859 The United States further argues that the �intent� of the law is the sole basis for Australia�s claim that the Act is a specific action against dumping and subsidisation.147 Australia argues that once again, however, the United States has ignored the essential element of Australia�s argument: that the Title of the Act and the accompanying Findings of Congress confirm that the Act is, and was intended to be, specific action against dumping/a subsidy.148 The Act is a �specific action against dumping/a subsidy� on the basis of the substantive provisions of the Act: payments under the Act may be made only when the constituent elements of dumping and subsidisation are present. 4.860 Australia considers that the United States has presented an argument that has no basis in either the texts of GATT 1994, the Anti-Dumping or SCM Agreements or in the clarifications of the relevant provisions provided by previous WTO jurisprudence.
4.861 The United States argues that, even if the Act is determined by the Panel to be �an action against dumping or a subsidy, footnotes 24 and 56 to Articles 18.1 and 32, respectively, operate to permit the [Act]�149 as action under another relevant GATT provision (GATT Article XVI).150 According to Australia, this argument, however, is unsustainable. 4.862 Australia argues that the footnotes to Articles 18.1 and 32.1 clarify the scope of those provisions: they do not create exceptions to that scope. As the Panel in US � 1916 AD Act found in response to the argument by the United States that footnote 24 does not lock a Member into levying anti-dumping duties when faced with a factual situation constituting injurious dumping and leaves the option of taking other measures that are in accordance with the GATT 1994:
4.863 The Panel�s reasoning is equally applicable in the present case. To accept the United States� argument that offset payments under the Act are permitted by footnotes 24 and 56 would be to reduce the prohibition in Articles 18.1 and 32.1 on �specific action against dumping/a subsidy� otherwise than in accordance with GATT 1994 to inutility and redundancy. This of course the Panel may not do.152 4.864 Moreover, Australia submits, GATT Article XVI cannot be an �other relevant provision of GATT 1994� within the meaning of footnote 56, as 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. In US � 1916 AD Act, the Appellate Body found that the provisions of the GATT 1994 �interpreted� by the Anti-Dumping Agreement were those provisions of GATT Article VI concerning dumping, and that the �other relevant provisions of GATT 1994� in footnote 24 �can only refer to provisions other than the provisions of Article VI concerning dumping�.153 By the same rationale, the other relevant provisions of GATT 1994 in footnote 56 can only refer to provisions other than the provisions of Article VI concerning countervailing duties and Article XVI. 4.865 The United States itself said: �In sum, the ordinary meaning of the phrase �not intended to preclude action under other relevant provisions of GATT 1994� in footnotes 24 and 56 is to permit action involving dumping or subsidies (but not specifically against) that is consistent with GATT provisions other than GATT Article VI�154 (emphasis added). Australia agrees. It is the scope of �specific action against dumping/a subsidy� that is the issue and this has already been clarified by the Appellate Body. 4.866 The fact that the offset payments under the Act might not be inconsistent with GATT Article XVI � an issue which need not be addressed here � is irrelevant. For so long as the Act constitutes �specific action against dumping/a subsidy�, that is, action that may be taken only when the constituent elements of dumping are present, it will be inconsistent with Articles 18.1 and 32.1.
4.867 Australia does not intend to pursue further arguments in relation to Articles 4.10 and 7.9 of the SCM Agreement.
4.868 Australia is of the view that the arguments of the United States that the Act is not within the scope of GATT Article VI or the provisions of the Anti-Dumping and SCM Agreements at issue in this dispute and that the Act is simply a government payment programme are without merit. The Act is a clear and systematic extension of the United States� statutory framework for the imposition of anti-dumping and countervailing duties. Offset payments under the Act are conditional, inter alia, on findings that there exist situations presenting the constituent elements of dumping or a subsidy. The Act is a �specific action against dumping/a subsidy� within the meaning of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement respectively that is not in accordance with the provisions of the GATT 1994 as interpreted by the Anti-Dumping/SCM Agreements.
4.869 In its First Submission, Australia argued that:
4.870 The United States has offered little to refute Australia�s argument. The United States says: �It is highly unlikely that the complaining parties could ever summon credible evidence that the [Act] has distorted the decisions of companies in supporting petitions � To establish such distortion, the complaining parties would have to show that, �but for� the distributions, domestic producers would not otherwise have filed a petition or supported an investigation, and that the participation of those producers was necessary to establish standing in that investigation�.155 4.871 Australia asserts that the United States� view of what is necessary to establish distortion of domestic producer decisions cannot be correct. If it were, it would mean that the United States could enact legislation � to the opposite effect of what it has done � imposing substantial monetary penalties on domestic producers who do not support an investigation. Yet in such circumstances it would never be possible to �summon credible evidence� � as defined by the United States � to demonstrate that such legislation has distorted the decisions of companies. 4.872 The United States also argues that it is generally irrational for domestic producers to oppose relief.156 However, Australia is of the view that there could well be occasions when it will be perfectly rational that at least some domestic producers will not support, or will oppose, relief, for example, if a domestic producer considered that a domestic competitor would be likely to receive a higher offset payment and thus gain a financial advantage. 4.873 The United States further argues �it is rare for domestic producers in the United States not to have sufficient industry support in filing anti-dumping or countervailing duty petitions. � Thus, if there is sufficient support anyway, it cannot be said that the [Act] will affect the number of cases meeting the thresholds of Articles 5.4 and 11.4, even if such an increase could constitute a breach of those articles�157 (emphasis added). 4.874 However, according to Australia, the mere possibility that the Act could distort the requirement that an application be made �by or on behalf of the domestic industry� in any circumstances must be a breach of those Articles, notwithstanding that the incidence of insufficient industry support for an investigation is rare. 4.875 In US � Section 301, the Panel found that �the good faith requirement in the Vienna Convention suggests, thus, that a promise to have recourse to and abide by the rules and procedures of the DSU, also in one�s legislation, includes the undertaking to refrain from adopting national laws which threaten prohibited conduct�.158 Australia is of the view that this finding is equally applicable to the current dispute. The principle of good faith �that informs the provisions of the Anti-Dumping Agreement, as well as the other covered agreements�159 suggests that a promise to apply anti-dumping measures �only under the circumstances provided for in Article VI of GATT 1994 and pursuant to investigations initiated [�] and conducted in accordance with the provisions of�160 the Anti-Dumping Agreement includes the undertaking to refrain from adopting national laws which threaten prohibited conduct. 4.876 Australia considers that also pertinent to this dispute is the Appellate Body�s statement in US � Hot-Rolled Steel, in relation to Article 3.1 of the Anti-Dumping Agreement, that �investigating authorities are not entitled to conduct their investigation in such a way that it becomes more likely that, as a result of the fact-finding or evaluation process, they will determine that the domestic industry is injured�.161 It is Australia�s view that the situation in the current dispute is analogous: the United States cannot be entitled to enact legislation that makes it more likely that the needed levels of domestic industry support will be reached in any investigation.
4.877 For the reasons presented in its submission, Australia respectfully maintains its request that the Panel make the findings and recommendations set out at paragraphs 124-125 of its First Submission.
4.878 Brazil asserts that in the Oral Statement of the United States at the First Meeting of the Panel in United States - Continued Dumping and Subsidy Offset Act of 2000, the United States was unable to rebut any of the claims made by the complaining parties in this proceeding. The United States relies principally on the argument that the Continuing Dumping and Subsidy Offset Act of 2000162 (hereinafter the Byrd Amendment) is nothing more than a payment programme and, in the absence of specific WTO obligations with respect to the uses of the revenues from anti-dumping and countervailing duties, it should be viewed as any other payment programme of a government.163 Under this standard, the United States argues, �the disciplines relevant to government payment programmes are contained in the subsidies provisions of the SCM Agreement� and that the �relevant legal question is whether the CDSOA is a prohibited subsidy.�164 4.879 In fact, Brazil is of the view that the relevant legal question is whether the Byrd Amendment payments constitute �specific action against dumping� under Article 18.1 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (hereinafter �AD Agreement�) which is not �in accordance with the provisions of GATT 1994� as interpreted by the AD Agreement. The kind of payments under the Byrd Amendment clearly are not among the actions specified in the AD and SCM Agreements � anti-dumping or countervailing duties, provisional measures, or undertakings. Consequently, if these payments are specific action against dumping they are not in accordance with the GATT 1994, as interpreted by these Agreements. 4.880 Brazil asserts that the United States can only prevail in this proceeding if it convinces the panel to ignore the direct relationship between the Byrd Amendment payments and the dumping and subsidization against which the United States is permitted to take specific measures under the AD and SCM Agreements. The linkages, however, are abundantly clear and include the following:
4.881 Brazil argues that the Byrd Amendment provides that companies which successfully petition for the imposition of anti-dumping or countervailing duties will receive not only the protection that the imposition of these duties affords but also the revenues collected as a result of these duties. 4.882 Brazil's submission will not seek to review the arguments already made by Brazil or to address each and every argument relied upon by the United States. Rather, the submission will be limited to addressing the deficiencies in the principal US arguments as presented in its oral statement on 5 February.
4.883 Brazil asserts that the United States argues that the complaining parties are seeking to expand existing obligations under the covered agreements contrary to Article 19.2 of the Understanding on the Rules and Procedures Governing the Settlement of Disputes (hereinafter DSU). This argument is based on the assertion by the United States that there is �no WTO obligation with respect to the uses to which anti-dumping and countervailing duties might be put, or to distinguish the use of these funds from any other source of government revenue.�165 As with most of the US argumentation, this argument misses the point. 4.884 According to Brazil, while the AD Agreement does not restrict the uses to which anti-dumping duties can be applied once collected, the AD Agreement does contain very specific language in Article 18.1 that prohibits specific action against dumping except in accordance with the GATT 1994 and the AD Agreement. By rewarding the parties requesting the anti-dumping duties with the disbursement of the revenues from those duties under Byrd Amendment, the United States is contravening its WTO obligations. They are contravening these obligations not because the AD Agreement or the GATT 1994 place limitations on how the revenues from anti-dumping duties may be spent, but because the AD Agreement and GATT 1994 place limitations on the actions which may be taken against dumping. 4.885 Thus, Brazil argues, the complaining parties in this proceeding are not seeking to impose any new or additional obligations on Members, rather they are simply seeking to enforce the existing obligations under Article 18.1 of the AD Agreement consistent with the findings of the panel and Appellate Body in United States - Antidumping Act of 1916.166 (hereinafter the �1916 Act�) The obligations at issue are the restrictions on actions against dumping. Whether and how the United States uses the revenues collected from anti-dumping duties is only relevant in the context of whether they are being used for actions against dumping.
4.886 The United States makes much of the fact that no party has claimed that the payments under the Byrd Amendment constitute prohibited subsidies under the SCM Agreement and that only Mexico has made a claim that these payments are actionable subsidies.167 The US rationale is that the disciplines governing payment programmes are contained in the subsidies provisions of the SCM Agreement.168 Brazil asserts that again, the US argument misses the point and should be dismissed as irrelevant. 4.887 According to Brazil, the complaining parties, with the exception of Mexico, did not base their complaint on the issue of whether the Byrd Amendment payments constitute actionable subsidies for a very simple reason: the panel does not need to reach this issue to find the US in violation of its WTO obligations. Again, the US tries to confuse the issue. The issue is not whether there are constraints on how the US spends the revenues from anti-dumping and countervailing duties, but whether rewarding US parties that have supported the imposition of these duties by disbursing the revenues from the duties to these parties is a specific action against dumping or subsidization not authorized under the relevant agreements. 4.888 Thus, Brazil argues, the US discussion of whether the Byrd Amendment payments are actionable subsidies under Article 5 of the SCM Agreement is simply not relevant to the claims under Articles 18.1 and 32.1 of the AD and SCM Agreements respectively. While these payments may be actionable subsidies and may cause adverse effects, this question is wholly independent of the question of whether they constitute specific action against dumping and subsidization.
Contrary to the United States arguments, the relevant question is not whether the Byrd Amendment payments are imposed on imports or importers, but whether they are specific actions against dumping and subsidization, namely actions to �offset or prevent� dumping 4.889 The US claims that the Byrd Amendment payments are not specific actions against dumping and subsidization because they do not �impose any type of measure on imports or importers.�169 The primary basis of this argument is an obscure definition of the word �against� which the US claims indicates that the specific action must be �in hostile opposition to and in contact with dumping or subsidy.�170 To support its position, the United States attempts to read into the relevant agreements, language and definitions that are without merit. 4.890 Brazil asserts that according to Article VI:2 of the GATT 1994, anti-dumping duties are intended to �offset or prevent� dumping. The specific actions permitted to �offset or prevent� dumping are provided for in Articles 7, 8 and 9 of the AD Agreement, specifically provisional measures, anti-dumping duties and price undertakings. Other actions to �offset or prevent� dumping are not permitted under Article 18.1 of the AD Agreement. Thus, the relevant question is not whether the Byrd Amendment constitutes action against imports or importers or even whether the action is in hostile opposition to or in contact with the dumping and subsidy. The relevant question is whether the Byrd Amendment payments constitute specific action to offset or prevent dumping and subsidization. 4.891 Brazil is of the view that the US attempt to read into the language �specific action against dumping� a limitation which defines specific action as action against imports or importers is specifically contradicted by the text, which places no such limitation on actions against dumping, and confirmed by prior panel and Appellate Body decisions. Specifically, the panel report in 1916 Act defined the relevant measures as �measures to counteract dumping.�171 The Appellate Body referenced �any action�against dumping of exports.�172 Neither imposed any limitation in terms of actions imposed upon imports or importers. Rather, according to the Appellate Body, �specific actions against dumping� include �any�action that is taken in response to situations presenting the constituent elements of �dumping�.�173 The Byrd Amendment payments are specific action against dumping 4.892 The United States argues, �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.�174 The United States then argues that �the Panel must look at what the law does, not what its policy purpose is� and urges the panel to reject any consideration of the purpose of the Byrd Amendment.175 The US then makes its most sweeping characterization, stating that the �CDSOA has nothing to do with imported goods or importers.�176 4.893 Brazil asserts that in fact, the relevant inquiry as articulated by the Appellate Body in 1916 Act is whether the action is taken in response to situations presenting the constituent elements of dumping.177 There is no question that the Byrd Amendment mandates an action, specifically the distribution of anti-dumping and countervailing duty revenues to domestic parties that supported the request for the imposition of those duties. 4.894 Is this action �in response to situations presenting the constituent elements of dumping�, Brazil asks? Since the Byrd Amendment payments are only available when an anti-dumping or countervailing duty order is in place, are only available to parties that supported the request for the imposition of those duties; and are only available when specific products are dumped or subsidized and imported into the United States, Brazil finds it is difficult to see how these payments are not in response to a situation presenting the constituent elements of dumping. Indeed, the existence of the constituent elements of dumping is a condition precedent to any payments. 4.895 Brazil asserts that it is true that one could have a situation where payments were triggered by the collection of an anti-dumping or countervailing duty, but the payments are neither �in response to� or �against� dumping. The US flag example is one such situation. Thus, the limitation does not apply to actions that are not against dumping or in response to dumping, but only conditioned on there being revenues from dumping duties. As is clear from Article VI:2, actions against dumping or in response to dumping are actions which seek to �offset or prevent� dumping. Thus, the question is whether the payments under the Byrd Amendment are actions which �offset or prevent� dumping. 4.896 According to Brazil, while the plain language in a statute as to its purpose and the statements of its sponsors as to its purpose may not always be conclusive as to the actual purpose, they certainly are relevant in any evaluation. The United States would have the panel believe that the purpose, both intended and actual, of the Byrd Amendment is a great mystery. However, the purpose is articulated in the title of the legislation itself � the Continued Dumping and Subsidy Offset Act. Thus, the title clearly would lead one to believe that the purpose of the legislation is to �offset� continued dumping and subsidization. 4.897 Similarly, the legislation�s sponsors supported its passage because it would allow parties adversely affected by dumping and subsidization �to recover monetarily�, to be compensated for �damages� and to receive assistance at the expense of their competitors.178 Rather than arguing that the Byrd Amendment has no such purpose and showing that it does not �offset or prevent� dumping, the United States has simply stonewalled the panel: the purpose is a mystery and the programme is simply a payment programme with no apparent purpose, objective or effect. 4.898 Brazil asserts that, in fact, even the most superficial analysis of the Byrd Amendment payments leads one to the conclusion that it is an action to offset or prevent dumping. The dumping duties themselves increase the importer�s costs, while the Byrd Amendment payments decrease the costs of the domestic competitor for the same product. Thus, there is a double offset � duties increase import prices and payments decrease domestic producer costs. There is also a double incentive to prevent dumping � every time a dumping duty is paid it directly benefits a competing domestic producer. Rather than addressing the obvious � that the Byrd Amendment payments offset and prevent dumping � the United States has chosen to obfuscate. 4.899 Finally, although Brazil does not believe it is legally relevant, the United States has asserted that the Byrd Amendment payments �must apply to the imported good or the importer, and it must be burdensome.�179 In fact, Brazil considers that this condition is met. The competitive effect of the payments are felt by the imported product and the importer in the form of competing with a domestic supplier who has lower costs as a result of the payments received or to be received. A new competitive element burdens the conditions of competition in the US market. The competitive effect is identical to the effect of increasing the anti-dumping duties by a comparable amount. You can either increase the importer�s costs or decrease the domestic industry�s costs, the effect is the same. The importer has an added competitive burden.
4.900 Brazil submits that the AD and SCM Agreements represent a negotiated balancing of the interests of Members reflected in rights and obligations under those agreements. By acting unilaterally to provide additional remedies to offset and prevent dumping and subsidization, the US has fundamentally altered the balance of rights and obligations under the agreements. It has provided additional incentives for domestic parties to request anti-dumping and countervailing duties be imposed on imports and that they be maintained even after their remedial purposes are achieved. It has introduced a new form of remedy into the WTO system, monetary rewards or damages, which, if endorsed by this panel, could fundamentally change the nature of the WTO system. Finally, it has created a situation in which use of the �cumulation� provisions of the agreements (Articles 3.3 and 15.3 of the AD and SCM Agreements respectively) will increase to the detriment of marginal suppliers, primarily suppliers in developing countries. 4.901 In the opinion of Brazil, there are reasons that the agreements limit the actions that can be taken against dumping and subsidization. The most obvious is the desire to impose disciplines on the extent to which Members can take measures to offset or prevent dumping or subsidization. The systemic issues illustrate further reasons for these disciplines in that a departure from these disciplines by allowing additional remedies will also create a new, different, and unintended balance between the rights and obligations of Members under these agreements. Industries in importing countries will not only obtain more relief than was intended by the agreements, there will also be more incentive to file cases, more incentive to maintain anti-dumping and countervailing duties in effect, more use of the cumulation provisions, and, ultimately, a greater change in the competitive conditions in the importing market than would be the case if the disciplines of the agreement are enforced.
4.902 Brazil reiterates its requests that the panel find the US in violation of its WTO obligations and findings and recommendations as set forth in paragraphs 43 and 44 of the First Written Submission of Brazil.
4.903 Canada's submission responds to the first Oral Statement of the United States as well as its First Written Submission. According to Canada, none of the arguments raised in those submissions persuasively addresses the legal basis of the challenge against the Continued Dumping and Subsidy Offset Act (the Act or the Byrd Amendment). 4.904 Canada asserts that though not legally relevant for the purposes of this challenge, the harm caused by this Act is significant. For Canada, in one sector alone, over US$490 million is currently held in bonds in clearing accounts.
4.905 According to Canada, the United States argues that:
4.906 Canada is of the view that the Appellate Body has found that Article 18.1 provides a clear prohibition on forms of action against dumping that are not in accordance with Article VI of GATT 1994 as interpreted by the Anti-dumping Agreement. Three forms of action are permitted: definitive anti-dumping duties, provisional duties and price undertakings. Specific action against dumping could take a wide variety of forms. It is action taken in response to, and at minimum only when, the constituent elements of �dumping� are present.� The concept of �specific action against dumping� however could be broader. 4.907 The constituent elements of �dumping� are defined in Article VI:1. There must be products imported and cleared through customs and those imported products must be priced at a price lower than their normal value. Article VI defines conditions under which counteracting dumping as such is allowed. It applies where the practice that triggers the imposition of a measures is �dumping� within the meaning of Article VI:1. Where a Member addresses a practice that meets that definition, it has to abide by WTO rules governing anti-dumping. 4.908 Footnote 24 to Article 18.1 permits action that is allowed under other provisions of GATT 1994 as long as the measure does not address dumping as such. 4.909 According to Canada, the analysis of the Appellate Body in the United States � 1916 Act challenge can be applied to interpret Article 32.1 of the SCM Agreement. Article 32.1 mirrors Article 18.1 of the Anti-dumping Agreement. Therefore, Article 32.1 prohibits all actions that are not in accordance with GATT 1994 as interpreted by the SCM Agreement. The SCM Agreement interprets two relevant provisions of GATT 1994: Articles VI and XVI. Therefore, specific actions against subsidies must accord with these provisions as interpreted by the SCM Agreement. Permissible actions that can be taken against subsidies are limited to one of two recourses: countervailing measures under Part V of the SCM Agreement or countermeasures under Parts II or III of the SCM Agreement. The Act only raises issues in the context of Part V of the SCM Agreement and Article VI:3 of GATT 1994. Those provisions limit remedies to duties, price undertakings and provisional duties. 4.910 Canada argues that �specific action against a subsidy� is any action taken when the constituent elements of subsidisation are present. The constituent elements of a subsidy are defined in Article 1 of the SCM Agreement. Footnote 56 to Article 32.1 does not preclude action against a subsidy as long as the measure taken is not a response to subsidies as such and such action accords with other relevant provisions of GATT 1994 (e.g., action under Article III of GATT 1994).
4.911 According to Canada, the design, architecture and structure of the Act establish that the Act is a direct response to dumping and subsidisation. The Act is now an integral part of the anti-dumping and countervailing duty regime of the United States. Petitioners now receive two remedies when definitive duties are imposed on dumped or subsidised goods: (1) the imposition of the duties with the ensuing beneficial economic impact (i.e. increased sales and higher profits); and (2) a portion of the collected duties in respect of the dumped imports or subsidised imports. 4.912 Canada asserts that the offset payments under the Act act against dumping or subsidies. They operate to offset costs incurred by domestic goods that compete with imports found dumped or subsidised. Moreover, they impose a burden on imports of allegedly dumped or subsidised goods into the United States in addition to anti-dumping and countervailing duties, by changing the competitive relationship between imports and competing domestic products. 4.913 According to Canada, the constituent elements of dumping are incorporated into the operation of the Act. To trigger offset payments under the Act, an Order must be imposed on dumped or subsidised products and duties must be collected. Offset payments are not paid from just any �pot of money�. They originate from a charge on specific imports. Offset payments are funded entirely by anti-dumping and countervailing duties. They are paid out to offset dumping or subsidisation of imports into the United States. Funds collected under Orders are strictly segregated. Expenditures must have been incurred for the production of competing domestic products during the time an Order is in place. Only �affected domestic producers� � those injured by imports who participate in investigations � can make claims pursuant to specific Orders. 4.914 Canada asserts that an offset payment under the Act is not a definitive anti-dumping or countervailing duty, price undertaking or provisional measure. It is a subsidy meant to offset injurious dumping and subsidies. Accordingly, it is not in a form authorized by Article VI of GATT 1994 as interpreted by the Agreements, and violates Articles 18.1 and 32.1 of the Agreements.
Constituent elements 4.915 The United States submits that the Act is not a response to the �constituent elements� of dumping or subsidies because it has two requirements: that the producers making the claim have standing as an �affected domestic producer� and that the claim is for a �qualifying expenditure�. It also alleges a measure can only respond to �constituent elements�, if the elements are �built into� it and that the Act fails this test as well. 4.916 Canada submits that the US arguments are incorrect. The Act is a direct response to situations presenting the constituent elements of dumping and subsidies for the following reasons. 4.917 First, in the view of Canada, there are more than two requirements for the operation of the Act. Most important, to trigger the Act and for it to operate, an Order must be imposed and duties must be collected. This means the eligibility criteria for the distribution of offset payments under the Act are directly and wholly contingent upon imported goods being dumped or subsidised into the United States so that definitive duties are imposed. Without such products and the practice of dumping or subsidies, it does not matter that there are affected domestic producers or qualifying expenditures. 4.918 Moreover, Canada argues, the two requirements under the Act cited by the United States are further evidence that the Act is a direct response to situations presenting the constituent elements of dumping or subsidisation. Neither requirement exists without the presence of those elements. �Affected domestic producers� can only qualify to make claims if the investigations in which they participate result in final determinations. �Qualifying expenditures� are those incurred for the production of domestic goods that compete with imports subject to an Order. 4.919 Second, Canada submits, in the United States � 1916 Act appeal, the Appellate Body determined that while there were additional requirements to those required by Article VI to impose penalties under the 1916 Act, this did not alter the fact that the 1916 Act applied only where constituent elements of dumping were present. Members� practices could not escape discipline by simply characterizing a practice as something other than dumping or subsidisation. This is a fortiori true of the Act. 4.920 In this instance, Canada asserts, there is no question that the conduct targeted by the measure in question � the Act � is dumping or a subsidy; the Act by its very design does not operate otherwise. Rather, the United States appears to argue that Articles 18.1 and 32.1 do not apply to subsidies when they are used as specific action against dumping or a subsidy. Specific action, under those provisions, however is limited to three recourses. It is not permitted if there other requirements that must be met; and it is not permitted if the means chosen is a subsidy. 4.921 Third, the US implication that the �constituent elements� must be built into a measure for it to be inconsistent is incorrect. First, the Act by definition incorporates such �constituent elements�. It does not operate unless there is a dumping or a countervailing duty Order, which is proof of the existence of such constituent elements under US law. 4.922 Moreover, the US interpretation of the United States � 1916 Act Appellate Body report is wrong. There the Appellate Body found that the 1916 Act required the presence of the constituent elements of dumping. It further determined that �[t]he constituent elements of �dumping� are built into the essential elements of civil and criminal liability under the 1916 Act.� However, nowhere did the Appellate Body suggest that a measure is a �specific action against dumping� or subsidies only if the requirements are built into the measure in question. 4.923 Further, other factors also support Canada�s position that the Act constitutes a response to situations presenting the constituent elements of dumping. While not decisive, they are indicative. These factors include the express words of the Act including its title, reference to payments as offsets, and the Findings of Congress stated in Section 1002. They also include the legislative history of the Act. 4.924 According to Canada, the Act, therefore, is not just a �mere government payment programme� nor is it a simple distribution of duties. It is a subsidy designed as a direct response to situations presenting the constituent elements of dumping or subsidies. Accordingly, the only relevant question for the Panel is not, as the United States submits, whether the Act constitutes a prohibited or actionable subsidy. Canada submits that the Act constitutes a specific action that is prohibited under Articles 18.1 and 32.1 of the Agreements. Against 4.925 The United States argues that the Act is not subject to Articles 18.1 and 32.1 because it is not a measure �against� dumping or subsidies. It submits that the �only logical way� for a measure to be against dumping or subsidies is through �com[ing] into contact with� the imported good or importer and imposing a burden. It asserts that the Act does neither. 4.926 The United States also argues that the only evidence the complainants give to prove the measure is �against� dumping or subsidies is the intent, purpose and objective of the measure and that that is irrelevant to prove the claim. Canada argues that the arguments of the United States are incorrect. 4.927 First, Canada asserts that the Act does, in fact, constitute a measure against imported goods and importers. The Act provides for the grant of subsidies funded by anti-dumping or countervailing duties to petitioners in anti-dumping and countervailing actions. An importer must therefore not only pay the duties in question, but also witness the same duties subsidise its direct competitors. An imported good subject to these duties will not only have its price raised by the amount of the duties, but must compete in the market against subsidised domestic goods. 4.928 Indeed, in the Canada - Periodicals case, the Appellate Body found that the grant of indirect subsidies exclusively to domestic goods altered the competitive relationship between those goods and imported like products and, accordingly, acted against imported goods. And the SCM Agreement is structured on the premise that certain subsidies act against imported goods. Byrd Amendment subsidies do act against imported goods and importers. 4.929 Moreover, the United States seems to suggest that the only logical way to come into contact with dumping and subsidies for purposes of these provisions is through direct impact on imports and importers in the sense of a fine, tax, imprisonment or a court judgement. According to Canada, that is incorrect. 4.930 The words of Article 18.1 and 32.1 state that there must be action against the practice of dumping and subsidies rather than a good or an importer. The provisions of GATT Article VI provide guidance regarding the manner in which action can be taken against dumping or subsidies. To take action against dumping or subsidies is to �offset or prevent� the dumping or subsidy. In other words, action taken against dumping or subsidies is action taken to counteract or discourage the practice. Moreover, in this context, the ordinary meaning of �against� and one that is more logically applicable is �in opposition to�. The Act meets these requirements. 4.931 Further, in the view of Canada, the Appellate Body found �specific action� was action taken �in response to� situations presenting the constituent elements of dumping. Read in context, �in response to� is equivalent to �against.� However, nowhere does the Appellate Body limit this to measures against imports and importers. 4.932 In the most ordinary sense of the term, subsidies paid out under the Act constitute specific action �against� dumping or subsidies. The United States asserts that it does not know why it hands out billions of dollars in subsidies to companies already benefiting from the protection of anti-dumping or countervailing duties. According to Canada, the purpose and effect of the Act are evident from its structure. 4.933 Subsidies are paid from charges on imports found dumped or subsidised. They are paid directly to domestic producers for expenditures incurred to produce competing domestic products during the term of an Order. Categories for �qualifying expenditures� relate to capital expenditures for producing domestic goods that compete with imports. Duties are segregated into special accounts to ensure payments target specific imports. Recipients are restricted to those who participate in investigations and are �injured� by the imports. The Act constitutes a second response to counteract dumping and subsidisation in the US trade remedy system. In addition to duties that raises prices to restore conditions of competition, foreign exporters and importers now also see their money go directly to increase the competitiveness of their competitors. 4.934 According to Canada, the United States, therefore, misconstrues the facts in alleging that the complainants rely solely on the intent of the Act to establish that the Act constitutes action �against� dumping or subsidies. The purpose or intent of the Act only confirms what its operation and structure already establish: that the Act is a direct response to dumping or subsidies. 4.935 Finally, Canada argues that there is no logic in the US position that the intent of the Act, as reflected in its clear terms, is completely irrelevant to this dispute. Section 1002 expressly states the intent of Congress in passing this law: to strengthen US trade remedy laws to neutralize continued dumping and subsidies. 4.936 This, Canada asserts, is also supported by the Act�s legislative history. Various statements by the drafters of the legislation are equally explicit in stating this intent of the Act. Indeed, the words of Senator Byrd, the author of the Byrd Amendment, establish the case of the complainants. 4.937 Even under the test proposed by the United States, the Act constitutes action �against� imports and importers that imposes a burden. The Act must therefore meet the restrictions in Articles 18.1 and 32.1 of the Agreements. Footnotes 4.938 The United States submits that footnotes 24 and 56 to Articles 18.1 and 32.1 of the Agreements permit action against dumping or subsidies that is consistent with GATT provisions other than GATT Article VI. In its view, if the Act is found to be an �action�, it is action that addresses the causes and effects of dumping and subsidies within the scope of the footnotes. Since GATT Article XVI permits subsidies, the United States submits �if the CDSOA is considered to be an action against dumping, the distributions are otherwise permitted by the footnotes to Articles 18.1 and 32.1 as action under another relevant GATT provision.� 4.939 According to Canada, if the US position were correct, the prohibition of Articles 18.1 and 32.1 would reach only those measures that are already inconsistent with GATT 1994. This makes no sense. Footnotes 24 and 56 cannot be interpreted to mean that if a measure were consistent with other provisions under GATT 1994, Article 18.1 would be irrelevant or inapplicable. Rather, Article 18.1 (and 32.1) targets �actions� that might otherwise be consistent with GATT 1994 � that is action that may not already be caught by other provisions � to the extent that such action is specifically against dumping or subsidies. 4.940 The United States � 1916 Act panels clarified the distinction between �action� within the meaning of the footnotes and �specific action� within the meaning of Article 18.1 (and 32.1) of the Agreements. �Specific action� is triggered by the practice of dumping (or subsidies) while �action� is triggered primarily by some other occurrence. This is regardless of whether it also affects the practice of dumping (or subsidies). 4.941 Therefore, Canada argues, where a measure is a specific action against dumping, it does not escape the requirements of Article 18.1 of the Anti-dumping Agreement because it might be otherwise consistent with GATT 1994. The analysis is equally applicable to Article 32.1 of the SCM Agreement. The panels in the United States � 1916 Act challenge confirm this in the context of reviewing the negotiating history of Article VI. 4.942 The Act does not merely address the causes or effects of dumping or subsidies. According to Canada, the Act is a direct response triggered by the presence of the constituent elements of dumping and subsidies. The basis for its imposition is objectively the presence of dumping or subsidies. Accordingly, it is �specific action� against dumping or subsidies within the meaning of Articles 18.1 and 32.1 and it must meet the requirements of those provisions. 4.943 The Act constitutes a measure taken against dumping or subsidies as such. Accordingly, it is irrelevant that Byrd Amendment subsidies might otherwise be permitted under Article XVI. In any event, with footnote 56, as it has already been observed, Article XVI cannot be an �other relevant provision of GATT 1994�. Article 32.1 requires that action must accord with the �provisions of GATT 1994 as interpreted by� the SCM Agreement. Since Article XVI constitutes a provision interpreted by the SCM Agreement within the meaning of that provision, it cannot constitute an �other relevant provision� of GATT 1994 within the meaning of footnote 56. The SCM Agreement 4.944 The United States submits that the reasoning in the United States � 1916 Act Appellate Body report is not applicable to the interpretation of GATT Article VI:3 and the SCM Agreement and that GATT Article VI:3 read in conjunction with Article 10 does not limit the permissible remedies for subsidies to duties. 4.945 Canada submits that the US argument is incorrect. Article 32.1 of the SCM Agreement mirrors Article 18.1 of the Anti-dumping Agreement in text, context, and object and purpose. Accordingly, the findings of the Appellate Body in the United States � 1916 Act case are particularly pertinent in the interpretation and application of Article 32.1. 4.946 According to Canada, Article 32.1 prohibits specific action against a subsidy that does not accord with GATT 1994 as interpreted by the SCM Agreement. In this context, the SCM Agreement interprets two provisions of GATT 1994 that are relevant to the issue at hand, Articles VI and XVI. Specific action against a subsidy must therefore accord with Articles VI and XVI as interpreted by the SCM Agreement. These provisions restrict Members� actions against subsidies as such to two sets of recourses. Members may apply countermeasures under Parts II and III of the SCM Agreement. Or they may impose measures under Part V (countervailing duties, provisional measures and price undertakings). Footnote 35 to Article 10 of Part V expressly states that Members may do one or the other to address the effects of a particular subsidy in the domestic market but not both. 4.947 The provisions of Part V elaborate on the countervailing duty provisions contained in Article VI:3 of GATT 1994. Read together, Part V of the SCM Agreement and Article VI:3 restrict the permissible remedies (other than countermeasures) against subsidies to countervailing duties, undertakings and provisional measures. 4.948 The Act operates in the context of the issuance of countervailing duty orders and the assessment and distribution of countervailing duties. As a result, for purposes of this challenge, the Act only raises issues in the context of Part V of the SCM Agreement and Article VI:3 of GATT. Having chosen this avenue, the United States is restricted in its applicable remedies for specific action against a subsidy to duties, undertakings and provisional measures. 4.949 According to Canada, this restriction is confirmed by the negotiating history of Article VI. The United States � 1916 Act panels reviewed this negotiating history in the context of anti-dumping duties. It shows that while the express limitation on actions against subsidies (and dumping) to duties was removed, that did not alter the fact �measures other than compensatory anti-dumping and countervailing duties may not be applied to counteract dumping or subsidization except in so far as such other measures are permitted under other provisions of the General Agreement.� 4.950 This position did not change with the adoption of the SCM Agreement, which elaborated on the countervailing duty provisions of Article VI of GATT 1994. Accordingly, Article VI:3 and Part V of the SCM Agreement limit applicable remedies to duties, provisional measures and undertakings.
4.951 Canada asserts that the issue is not whether there are specific rules in the WTO Agreements dealing with the appropriation of anti-dumping or countervailing duties. Or whether Canada should more appropriately have brought a case under Article 5(c) of the SCM Agreement. A subsidy that is a specific action against dumping or a subsidy within the meaning of Articles 18.1 and 32.1 of the Agreements is not permitted by the Agreements. The source of funds for the subsidies establishes more clearly that they constitute a �specific action�, but where the money comes from is only one element among many that prove the subsidies as �specific action� and as such in violation of Articles 18.1 and 32.1.
4.952 Canada argues that Articles 5.4 and 11.4 of the Agreements set out the thresholds for level of domestic industry support required for a dumping or countervailing duty investigation to be initiated. These Articles require a positive determination based on an examination of the degree of support that the application is �by or on behalf of the domestic industry.� They reflect an agreement by the Members that only applications supported by the majority of industry were intended to be the basis of investigations. Numerical thresholds were introduced to establish greater certainty and predictability. Accordingly, the examination of thresholds must not be pro forma. 4.953 It is the view of Canada that the US position that the thresholds are only quantitative renders the obligation to establish industry support levels meaningless. The threshold in Articles 5.4 and 11.4 is not a simple number: it is, rather, a threshold as to the level of support a particular petition enjoys in the industry. A law that provides incentives for the industry to decide one way or another � monetary rewards for support and the threat of subsidised competition if no support is forthcoming � distorts that support and prevents a proper and accurate determination of support. The Act makes it impossible to determine if industry petitions or support for petitions reflect real injury or the prospect of subsidisation under the Act. It is contrary to the object and purpose of these provisions to remove uncertainty and lack of predictability for imports. According to Canada, it therefore violates Articles 5.4 and 11.4. 4.954 Finally, Canada submits that the Act results in a per se violation of the Agreements. For this reason, Canada considers it is not necessary for Canada to adduce evidence of actual bias. Indeed, as another complainant pointed out, by the very operation of the Act it is now impossible to adduce such evidence.
4.955 Articles 8.1 and 18.1 of the Agreements require that a Member provide administering authorities the ability to enter into �price undertakings� to facilitate the early termination of investigations. Ability must be construed as including not only the legal authority but also the discretion to enter into such agreements: legal authority that is impossible to exercise does not amount to ability. Articles 18 and 26 of the Vienna Convention on the Law of Treaties support this interpretation. 4.956 According to Canada, the United States argues that the obligations contained in Articles 8.1 and 18.1 are formalistic only. The US also argues that domestic industry has little influence in the decisions of the US Department of Commerce (the DOC) to enter into agreements. 4.957 While domestic authorities have discretion to accept or reject undertaking agreements, a Member may not pass a law that undermines and circumvents that discretion. The Act in effect does so. It creates incentives that target and encourage interested parties to thwart proposed undertakings. 4.958 Moreover, the US position that the DOC has �complete discretion� to ignore the domestic industry, does not accord with the pronouncement of the US Court of International Trade (the CIT). The CIT exhaustively examined the legislative history of suspension agreements and ruled that DOC may not dismiss the views of the industry. The United States never addresses these rulings. 4.959 Finally, based on the value of potential offsets payments, Canada submits that it defies common sense to argue, as the United States does, that the prospect of hundreds of millions of dollars in subsidies does not affect the decision of the domestic industry in respect of undertakings. The Byrd Amendment would keep prices, raised by duties, high and divert millions of dollars to the industry. The Act, therefore, procures the dissent of industry from support of undertakings and so fatally compromises the discretion of the investigating authorities to enter into such undertakings.
4.960 Article X:3(a) requires that Members administer their laws in a fair, reasonable, neutral and impartial manner. It establishes minimum standards of procedural fairness. 4.961 The measure at issue is the Act. It causes the unfair, inequitable and unreasonable administration of US anti-dumping and countervailing duty laws, particularly with respect to standing and undertakings. This was in fact stated in Canada�s Panel Request. According to Canada, the United States, in its arguments, makes an improper distinction between the administered measure and the administrative measure at issue. 4.962 Canada argues that the Act alters the manner in which anti-dumping and countervailing duty laws are applied. It is the administrative measure at issue. In Argentina - Leather, the measure at issue was a resolution that permitted domestic industry to become involved with the custom clearance process of the goods of its domestic suppliers. The issue examined by the panel was the effect the administrative measure had on the administration of Customs laws. The administrative measure here is the Act. The Panel must examine whether its impact leads to a fair, reasonable and neutral administration of anti-dumping and countervailing duty laws. 4.963 The Act introduces financial incentives into the US system that are available only where investigations are brought and end with the imposition of a duty. According to Canada, the Act influences the decisions of parties of the industry to bring or support petitions and thwart undertakings by creating a potentially sizeable financial reward. The Act, therefore, creates an inherent danger that imports will face unnecessary anti-dumping and countervailing duty investigations in the US domestic market. This undermines the security that imports can face in the US market. This is neither a fair, reasonable nor neutral administration of laws. Accordingly, the Act violates GATT Article X:3(a). 4.964 Canada is of the view that the Act results in a violation of Article X:3(a) as such; the complainants need not prove actual harm. The Act influences the behaviour of actors in the US anti-dumping and countervailing duty regime. The United States cannot claim that that influence has nothing to do with how the US Customs Service administers US laws.
4.965 Article XVI:4 of the WTO Agreement and Articles 18.4 and 32.5 of the Agreements oblige Members to bring their domestic law into conformity with their obligations under the WTO Agreements. According to Canada, the Act violates Articles 18.1 and 32.1 of the Agreements in conjunction with GATT 1994, Articles 5.4 and 11.4 of the Agreements, Articles 8.1 and 18.1 of the Agreements and Article X:(3)(a) of GATT 1994. Accordingly, it violates Article XVI:4 of the WTO Agreement and Articles 18.4 and 32.5 of the Agreements.
4.966 Canada requests that the Panel find that the Act is inconsistent with the Anti-dumping Agreement, SCM Agreement, GATT 1994 and the WTO Agreement as stated. It requests that the Panel recommend that the United States bring its measure into conformity with those Agreements.
4.967 Japan and Chile assert that they have demonstrated that the Continued Dumping and Subsidy Offset Act of 2000 (hereinafter referred to as the �CDSOA�) is inconsistent with and violates the General Agreement on Tariffs and Trade 1994 (�GATT�), the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (�AD Agreement�), the Agreement on Subsidies and Countervailing Measures (�SCM Agreement�) and the Agreement Establishing the WTO (�the WTO Agreement�).
Mischaracterization of the CDSOA by the United States 4.968 Japan and Chile argue that to say, as the United States does, that the CDSOA is a �payment programme� is to say nothing of its conformity with WTO rules. Even if characterized as a �payment programme� it still violates the United States� obligations under the cited Agreements. The cited provisions of the AD Agreement and the SCM Agreement limit the sovereign power of Members 4.969 According to Japan and Chile, the United States� argument that there is nothing in the WTO Agreements that expressly prohibits the distribution of anti-dumping or countervailing duties to domestic producers is similar to that made by the United States, and rejected by the Panel, in the United States - Antidumping Act of 1916 case (the �1916 Act case�). Specifically, the Panel in that case rejected the United States� argument that �if the measure is of a nature that is simply not regulated by the GATT 1994 (�) the measure is a fortiori consistent with the GATT 1994.� 4.970 The distribution of collected anti-dumping and countervailing duties to domestic producers who (as a condition of eligibility under the CDSOA) supported a petition, is a specific action against dumping or subsidization that violates the AD Agreement, the SCM Agreement and the GATT. Contrary to what the United States alleges, Japan and Chile are not arguing that WTO Members cannot �enact a law which permits the distribution of revenues generated from AD/CVD duties to any recipient other than the national treasury.� 4.971 GATT and WTO jurisprudence, including recent cases, confirm that Members have consented to limit their sovereign right to distribute and allocate revenues. Members agreed to limit that sovereign power when they consented to, inter alia, Articles 18.1 of the AD Agreement, 32.1 of the SCM Agreement and VI of GATT. They undertook an obligation to conform their legislation, past and future, to the provisions of those Agreements. Relevance of the 1916 Act case 4.972 Japan and Chile assert that the interpretation of Article 18.1 of the AD Agreement, 32.1 of the SCM Agreement and Article VI of the GATT in the 1916 Act case confirm that the CDSOA is inconsistent with those provisions. The United States admits that the reasoning in the 1916 Act case applies to the examination of the claims under the AD Agreement, when it argues, albeit incorrectly, that the CDSOA �does not satisfy the test articulated in the 1916 Act.� 4.973 Japan and Chile argue that the Appellate Body�s interpretation of the phrase �specific action against� of Article 18.1 applies to the parallel and identical phrase in Article 32.1. Article 32.1 prohibits Members from taking specific action in response to a situation that presents the constituent elements of subsidization, unless that action is in accordance with Article VI:3, as interpreted by the SCM Agreement. However, the United States objects to the application of the reasoning of the Panel and the Appellate Body in the US - 1916 Act case to the examination of the complainants� claims under the SCM Agreement, based on the incorrect and unsupported arguments contained in footnote 64 of its first written submission. 4.974 Japan and Chile are of the view that the United States misinterprets and misrepresents Article 10 of the SCM Agreement. Footnote 35 of Article 10 states that only one form of relief shall be available to a Member to protect against the effects of a particular subsidy in its domestic market, and specifies that the only possible form of relief is either a countervailing duty or a countermeasure authorized by the DSB, pursuant to Articles 4.10 and 7.9 of the SCM Agreement. Thus, footnote 35 limits the permissible remedies to the effects of subsidies to a countervailing measure or a countermeasure authorized by the DSB. The United States expressly admits that the CDSOA �is not a �countermeasure� within the meaning of Articles 4.10 and 7.9� and concedes that the CDSOA does not mandate the imposition of countervailing duties. Therefore, it must be concluded that the CDSOA is a specific action against subsidy that is not in accordance with Article VI:3. Purpose of the CDSOA 4.975 Japan and Chile believe that the purpose of the CDSOA is relevant for the examination of the measure�s conformity with the WTO Agreements. The purpose of the CDSOA is further evidence of what the CDSOA does: it addresses dumping and subsidization; it mandates specific actions against dumping or a subsidy (i.e., action taken in response to a situation presenting the constituent elements of dumping or subsidization). 4.976 According to Japan and Chile, the purpose of the CDSOA is expressed, in part, in its Section 1002. That Section makes clear that �dumping� and �subsidization� are the target of the distributions. Subparagraph 1 of Section 1002 finds that �injurious dumping is to be condemned and actionable subsidies which cause injury to the domestic industries must be effectively neutralized.� A measure that �neutralizes� injurious dumping and actionable subsidies is a measure �against� that dumping and those subsidies. Section 1002 concludes by proclaiming that Congress, in promulgating the CDSOA, finds that �the United States trade laws should be strengthened to see that the remedial purpose of those laws is achieved.� The purpose of the CDSOA is also reflected and evidenced in its legislative history, including the statements made by the sponsors of the CDSOA, as well as its opponents. 4.977 In its appellant�s submission in the United States�Tax Treatment for �Foreign Sales Corporations,� Recourse to Article 21.5 of the DSU by the European Communities, the United States asked the Appellate Body to rely on the purpose of the law, evidenced in its legislative history. Citing to reports of the United States� House of Representatives, the United States stated that the �legislative history [of the Extraterritorial Income Exclusion Act of 2000] makes clear that it was purposefully drafted to provide tax relief based on export-neutral criteria.� The United States also pointed to the legislative history of the ETI Act to support its argument that the Act fell within the scope of footnote 59 of the SCM Agreement. Citing the legislative history of the Act contained in US Senate reports, the United States argued that �[t]he legislative history accompanying the Act makes the point [that the Act relies on the exemption method to avoid double taxation of foreign-source income].� The Appellate Body referred to and considered the citations by the United States to the legislative history of the Act in reaching its determination. It specifically stated that it took �particular note� of the statements concerning the legislative history of the ETI Act. 4.978 US courts, including the Supreme Court, regularly examine legislative history and other congressional sources of legislative intent (including findings by the US Congress, reports prepared by the legislature, and statements made by members of Congress on the floor of the House of Representatives or the Senate), to assist them in interpreting the meaning of particular words and phrases. For instance, in Crosby v. National Foreign Trade Council (involving a law that was also the object of a formal complaint in the WTO) the United States Supreme Court based its decision, in part, on an examination of the Congress� purpose in passing the law, as expressed, in part, by statements of its sponsors. In FDA v. Brown & Williamson Tobacco Corp. the US Supreme Court stated that the intent of Congress and the legislators was �certainly relevant.� In Olmstead v. Zimring the US Supreme Court arrived at its decision, in part, by reviewing congressional findings contained in the statute at issue. 4.979 Therefore, Japan and Chile submit, the text of the CDSOA that appears at Section 1003 can and should be interpreted by examining the congressional findings in Section 1002 of CDSOA, and by examining the legislative history, which includes statements made by members of the US Congress. The findings by Congress and the statements made by the sponsors and by the opponents of the CDSOA are evidence that the CDSOA mandates specific action that is a violation of the AD Agreement, the SCM Agreement, the GATT and the WTO Agreement. Amount of the distributions under the CDSOA 4.980 According to Japan and Chile, the distributions of the anti-dumping and countervailing duties to domestic producers, regardless of the amount or whether they correspond to the actual amount of the injurious effect of the dumping or subsidization, is a specific action against dumping or a subsidy that violates the AD Agreement, the SCM Agreement and the GATT.
4.981 The CDSOA mandates action that is �taken in response to situations presenting the constituent elements of �dumping�� or subsidization and is thus a specific action against dumping or a subsidy. The CDSOA, therefore, falls within the scope of Article VI, the AD Agreement and the SCM Agreement. 4.982 The United States� definition and interpretation of the word �against� is not only contrary to the Appellate Body and the Panels in 1916 Act case; it is also not supported by the plain dictionary meaning of that word, in any of the three official languages of the WTO, nor is it in accordance with the customary rules of interpretation of public international law. Linkage between the constituent elements of dumping and the distribution of duties under the CDSOA 4.983 Japan and Chile argue that there is an intimate and dependent connection between the CDSOA and dumping or subsidization. This connection, recognized by the United States in its oral statement, further demonstrates that the CDSOA indeed addresses and counteracts dumping and subsidization. It is therefore within the purview of the cited Agreements. 4.984 Japan and Chile assert that the basis for the payments (i.e., the finding of dumping or subsidies), and the eligibility criteria (who the recipients of the distributions are, i.e., �affected� domestic producers that support a petition) are evidence that the distributions are specific action against dumping or a subsidy. They demonstrate that the linkage between dumping or subsidization and the distribution is two-fold: i) the distribution is conditioned upon the constituent elements of dumping or subsidization; and ii) the distribution counteracts dumping or subsidization --in the words of the CDSOA, it �neutralizes� injurious dumping or actionable subsidies. 4.985 The funding of the payments to the domestic producers (i.e., dumping and countervailing duties, which is collected pursuant to finding of dumping and subsidy) is relevant, for it reveals that the distribution is specific action against dumping or subsidization. 4.986 Japan and Chile consider that the close connection is also evidenced by the actual language of the CDSOA, including Section 1002. That Section contains inter alia the following language: �the United States trade laws should be strengthened to see that the remedial purpose of those laws is achieved�; �dumping is to be condemned and actionable subsidies (�) must be effectively neutralized.� Also noteworthy is the fact that the distributions of the collected duties are identified throughout the CDSOA as continued dumping or subsidies �offsets,� meaning that the payments to domestic producers �counterbalance� or �compensate� for dumping and subsidization. Interpretation of the phrase �specific action against dumping [a subsidy]� 4.987 Japan and Chile submit that there is no reason why the Panel should depart from the interpretation of that exact same phrase given by the Panel and the Appellate Body in the case concerning the 1916 Antidumping Act. In that case, the Panel and the Appellate Body correctly interpreted the AD Agreement in accordance with the ordinary meaning of the terms of Article 18.1, in its context and in the light of its object and purpose. It interpreted the phrase �specific action against dumping� to mean action taken �in response to a situation presenting the constituent elements of dumping.� That interpretation applies to the parallel provision in Article 32.1 of the SCM Agreement, as both contain the exact same phrase. 4.988 The dictionary definition of the word �against� is �in opposition to�, in �resistance to�, �counter to.� The distributions under the CDSOA oppose and neutralize dumping and subsidization. The sponsors of the CDSOA expressly described the distributions as a way to �counter�foreign dumping and subsidization.� 4.989 Japan and Chile argue that the word �against� must also be interpreted in the other two authentic languages of the WTO. There is nothing in the Spanish definition of the word �against� (i.e., contra in the Diccionario de la Real Academia Espa�ola) that even remotely suggests that for an action to be considered �against� it must impose a burden or liability on, or be in contact with, the imported good or the importer. Similarly, there is nothing in the French version of the AD Agreement or the SCM Agreement that supports the interpretation offered by the United States of Articles 18.1 and 32.1. 4.990 The United States definition of �against� is unjustified and is not in accordance with the customary rules of interpretation of public international law. It disregards the ordinary meaning of the word �against� in its context and in light of the object and purpose of the AD Agreement and the SCM Agreement. There is nothing in the AD Agreement or the SCM Agreement, or in the dictionary definition of the word �against�, that suggests that, in order for an action to be specifically �against� dumping or subsidization, it must impose a burden or liability on the imported good or the importer. Thus, the primary defense of the United States in this case rests on a fabricated definition and interpretation of the word �against�. 4.991 According to Japan and Chile, nothing requires that the constituent elements of dumping or subsidization be �built into� the CDSOA in order for a violation to occur. Notwithstanding the above, Japan and Chile have demonstrated that the constituent elements of dumping and subsidization are indeed built into or incorporated the CDSOA. Article 32.1 and VI:3 must be read in conjunction with Articles 10, 4.10 and 7.9 of the SCM Agreement 4.992 Japan and Chile argue that Articles 10, 4.10 and 7.9 of the SCM Agreement, which inter alia limit the permissible remedies that a Member may take in response to subsidization, support the claim that the distribution of collected duties mandated by the CDSOA are specific action against a subsidy that is not in accordance with Article VI:3. 4.993 According to Article 32.1, any specific action a Member decides to take against a subsidy must be in conformity with Article VI:3. Article VI:3 is interpreted and elaborated inter alia by Articles 10, 4 and 7 of the SCM Agreement. Footnote 35 to Article 10 specifies that the only possible form of relief available to a Member to protect against the effect of a subsidy in its domestic market is either a countervailing duty or a countermeasure authorized by the DSB. Articles 4.10 and 7.9 explain what countermeasures are authorized by the DSB and under what circumstances. The specific action against a subsidy that is mandated by the CDSOA is, as the United States admits, neither a countervailing duty nor a countermeasure authorized by the DSB. Such specific action, therefore, is not in accordance with Article VI:3 of the GATT and is therefore a violation of Article 32.1. Footnote 24 of the AD Agreement and footnote 56 of the SCM Agreement do not exclude the CDSOA from the scope of Article VI, Article 18.1 of the AD Agreement or Article 32.1 of the SCM Agreement 4.994 Japan and Chile submit that the United States argues, incorrectly, that footnote 24 of the AD Agreement and footnote 56 exclude the CDSOA from the scope of Articles VI, 18.1 and 32.1. 4.995 The Panel in the 1916 Act case found that the meaning of footnote 24 (and, therefore, mutatis mutandis footnote 56) is that a Member �cannot choose to address �dumping� as such with instruments or in ways that are different from those allowed in the WTO Agreement for that purpose.� Also, the Appellate Body in the 1916 Act case found that �action� within the meaning of footnote 24 is to be distinguished from �specific action against dumping� within the meaning of Article 18.1. A measure that is considered �specific action against dumping� is �governed by Article 18.1 itself.� Likewise, a measure that is considered �specific action against a subsidy� is governed by Article 32.1. 4.996 In the view of Japan and Chile, the CDSOA is not excluded from the scope of Articles 18.1 and 32.1 by footnotes 24 and 56, for it is not �action� in the general sense, but rather specific action against dumping or subsidy. 4.997 Moreover, Japan and Chile argue, Article 32.1 requires the specific action to be in accordance with Article VI:3 and XVI (since the SCM Agreement also interprets Article XVI of the GATT). Article XVI, therefore, does not fall within the category of �other relevant provisions of GATT 1994� referred to by footnote 56 of the SCM Agreement. Thus, the United States cannot claim that the CDSOA is excluded from the scope of Article 32.1 based on footnote 56. 4.998 Also, granting a subsidy is not an action that is taken �under� Article XVI, but merely one that has to be in conformity with that provision once it has been granted. Consequently, the fact that the CDSOA grants a subsidy to domestic producers does not mean that the CDSOA falls within the scope of footnote 24 or 56. 4.999 Finally, even if the distribution under the CDSOA is arguendo in conformity with Article XVI, it is still a specific action against dumping or a subsidy that is not in accordance with Article VI:2 or VI:3 and is therefore a violation of Articles 18.1 and 32.1.
4.1000 Japan and Chile posit that the United States� interpretation that the numerical benchmarks in Articles 5.4 and 11.4 impose only a nominal obligation on Members to count heads, while no objective or purpose is to be served by the counting, is incorrect. The benchmarks are a mechanism, a tool to attain the objective of the provisions: to guard against the initiation of unjustified and unwarranted anti-dumping and countervailing investigations. The CDSOA negates and undermines those guarantees. 4.1001 The general principle of pacta sunt servanda imposes the obligation on Members to perform the WTO agreements in good faith. It is an obligation on Members, not on private actors. The United States is simply eluding the real issue when it says that it is not obliged to question the subjective motivation of the domestic producers. The issue is not the subjective motivation of the producers, but the action taken by the United States to affect that motivation by providing a financial inducement for them to support petitions they might not otherwise support.
4.1002 According to Japan and Chile, in light of the Agreements� object and purpose, it is impossible to conclude that the United States is applying Articles 8.1 and 18.1 in a good faith manner when it gives a financial incentive to domestic produces to object to the acceptance of a proposed undertaking, thus making its acceptance more difficult by the competent authority. Even if the Commerce Department retains the formal legal authority to reject or accept undertakings, the voice of the domestic producers will have an effect on the ultimate decision of the Commerce Department. 4.1003 Japan and Chile argue that it is not true that Articles 8.3 and 18.3 do not require the administering authority to determine that the undertaking is �inappropriate� before rejecting it. Articles 8.3 and 18.3 implicitly require Members to accept undertakings if they are practical and appropriate.
4.1004 Japan and Chile posit that the CDSOA is inconsistent with Article X:3(a) in the way it administers the United States� anti-dumping and countervailing duty laws. Therefore, it is not the administration of the CDSOA that the complainants must demonstrate was inconsistent with Article X:3(a), as the United States alleges. 4.1005 According to Japan and Chile, the United States did not address the totality of the claims brought by Japan and Chile against the CDSOA for its failure to administer the United States� trade laws in an reasonable, impartial and uniform manner. 4.1006 Japan and Chile are of the view that there was no need to identify the provisions of US law relating to standing determinations and price undertakings in the request for the establishment of this Panel, because Japan and Chile are not challenging those aspects of the United States legislation. It is the CDSOA that administers those laws that is being challenged and which was sufficiently identified.
4.1007 Japan and Chile argue that the United States has not contested the fact that a finding by this Panel that the CDSOA violates Articles 18.1, 5.4 and 8 of the AD Agreement, Articles 32.1, 11.4 and 18 of the SCM Agreement, and Article X:3(a) of the GATT by the United States, necessarily and inevitably entails a finding that the United States is violating its general obligation under Article XVI of the WTO Agreement, Article 18.4 of the AD Agreement and Article 32.5 of the SCM Agreement, to ensure the conformity of its laws, regulations and administrative procedures with its obligations under the covered agreements.
4.1008 Japan and Chile respectfully request the Panel to find that the CDSOA:
4.1009 Japan and Chile urge the Panel to find, pursuant to Article 3.8 of the DSU, that as a consequence of the infringement of the above cited provisions, the United States has nullified and impaired the benefits accruing to Japan and Chile under these Agreements. Japan and Chile further request the Panel to recommend that the United States withdraw the CDSOA as the only possible way for the United States to implement the recommendations and bring the CDSOA into conformity with the corresponding covered agreements
4.1010 The European Communities, India, Indonesia and Thailand argue that the WTO Agreement contains no provision regulating specifically how anti-dumping and countervailing duties should be spent by Members. But from this it does not follow that any Government action financed from such funds must be necessarily in conformity with the WTO Agreement. In this respect, anti-dumping or countervailing duties are not different from any other sources of Government revenue. The United States is making again the same mistake as in the US - 1916 Act case, where it argued unsuccessfully that since the remedies provided by the 1916 Antidumping Act were not expressly regulated by Article VI of the GATT they were consistent with that provision. 4.1011 Contrary to the US assertions, the Complainants have not argued that �WTO Members cannot enact a law which permits the distribution of revenues generated from AD/CVD duties to any recipient other than the national treasury�. Rather, the Complainants� claim is that the CDSOA is incompatible with the US obligations under the WTO Agreement because such revenue is distributed to the domestic producers �affected� by dumping or subsidisation. The Complainants would not have brought this case if that revenue were donated to a charity, as suggested elsewhere by the United States, or contributed to an �adjustment assistance� programme available to any domestic producer in difficulties. 4.1012 The European Communities, India, Indonesia and Thailand argue that the Complainants� case is not dependent upon the fact that the offset payments are made from the revenue collected pursuant to anti-dumping and countervailing duty orders. Even if the offsets were paid directly from the general US Treasury, and in an amount unrelated to the amount of collected duties, they would still be incompatible with the same WTO provisions. 4.1013 Finally, the Complainants agree that, of course, this Panel may not decide this dispute ex aequo et bono. However, since no complainant has requested the Panel to do so, the arguments to that effect made by the United States are pointless.
4.1014 The United States suggests that any measure that happens to fall within the scope of the definition of �subsidy� in Article 1 of the SCM Agreement is subject exclusively to the disciplines contained in Parts II and III of the SCM Agreement, to the exclusion of any other provisions of the SCM Agreement and of the other covered agreements. The European Communities, India, Indonesia and Thailand assert that this argument is similar to an argument rejected by the panel in Indonesia � Autos, according to which the SCM Agreement would be lex specialis with respect to subsidies and exclude the application of Article III:2 of the GATT. The United States argued at length against that proposition.
4.1015 The European Communities, India, Indonesia and Thailand consider that it is far from clear what the United States means by �based upon�. As concluded by the Appellate Body in United States - 1916 Act, the relevant test for establishing whether a measure constitutes specific action against dumping or subsidisation is whether such measure can be taken only when the constituent elements of dumping are present. If the �based upon� test now put forward by the United States is different from the Appellate Body�s test, the Complainants reject its pertinence. If it is the same test, then the Complainants submit that they have shown beyond doubt that the offset payments can be made only when the constituent elements of dumping or subsidisation are present and, therefore, constitute specific action against dumping or subsidisation. 4.1016 As noted by the United States, the offset payments are made only to the �affected domestic producers�. However, the European Communities, India, Indonesia and Thailand assert that the relevant legal analysis cannot stop at that point. The CDSOA defines the term �affected domestic producers� as referring to the producers which have filed or supported an application leading to the imposition of anti-dumping or countervailing duty measures. Thus, an �affected� domestic producer is a producer �affected� by dumping or subsidisation. A domestic producer �affected� by a surge in fair imports, or by a recession, or by bad weather, to mention but a few examples of the multiple circumstances that may cause injuries to the domestic producers, is not an �affected domestic producer� within the meaning of the CDSOA and is not entitled to the offset payments. 4.1017 In turn, the European Communities, India, Indonesia and Thailand note that the term �qualifying expenses� is defined by the CDSOA as referring to certain categories of expenses incurred by the �affected domestic producers� after the issuance of an anti-dumping or countervailing duty order. Moreover, such expenses must be related to the production of a product that has been the subject of an anti-dumping or countervailing duty order.
The US interpretation cannot be reconciled with the report of the Appellate Body in US - 1916 Act 4.1018 The European Communities, India, Indonesia and Thailand argue that the US interpretation cannot be reconciled with the report of the Appellate Body in 1916 Act. Paragraph 122 of that report leaves no scope for arguing that �specific action against dumping or subsidisation� is a subset of �action in response to dumping�. For the Appellate Body, the two expressions have the same meaning: �specific action against dumping� is �action in response to dumping�. 4.1019 The US contention that the report of the Appellate Body �provides no guidance as to the meaning of the term against� is untenable in the opinion of the European Communities, India, Indonesia and Thailand. By interpreting the notion of �specific action against dumping� as �action taken in response to the constituent elements of dumping�, the Appellate Body was giving meaning also to the term �against�. 4.1020 According to the European Communities, India, Indonesia and Thailand, the US position is based on nothing more than two hypothetical examples. As shown by the Complainants, both examples can be readily distinguished from the offset payments and, in any event, fail to prove the US point. 4.1021 For the above reasons, the European Communities, India, Indonesia and Thailand submit that the Panel should reject the US attempts to re-interpret the term �against�. By arguing now that it is necessary to give meaning to the term �against�, the United States is in reality seeking to replace the Appellate Body�s interpretation of �specific action against dumping� by a narrower, self-serving interpretation of that notion. The US interpretation is not in accordance with the ordinary meaning of �against� 4.1022 At any rate, the European Communities, India, Indonesia and Thailand are of the view that, should the Panel see merit in the US contention that the Appellate Body�s interpretation of �specific action against dumping� needs to be qualified by re-interpreting the term �against�, the Complainants submit that the reading of that term made by the United States is not in accordance with its ordinary meaning, either alone or in its context. 4.1023 According to the European Communities, India, Indonesia and Thailand, the United States cites no authority in support of its reading of the term �against� other than a dictionary definition, according to which one of the ordinary meanings of that term is �into contact with�. The same dictionary used by the United States gives other meanings of the term �against� which are far more pertinent in this context, but have been conveniently omitted from the US submission. These include, for example, �in competition with�, �to the disadvantage of�, �in resistance to� and �as protection from�. These meanings indicate that the notion of action �against� dumping or subsidisation may include not only actions that impose a direct �liability� on dumped imports (or importers), but also actions that afford protection to the domestic producers by giving them an advantage over the dumped or subsidised imports with which they compete. 4.1024 The European Communities, India, Indonesia and Thailand posit that this interpretation is borne out by the relevant context. Article VI:2 of the GATT allows the imposition of anti-dumping duties �in order to prevent or offset dumping�. Similarly, the last sentence of Article VI:3 of the GATT defines the term �countervailing duty� as �a special duty levied for the purpose of offsetting any bounty or subsidy�. This indicates that the notion of action �against� dumping or subsidisation must include, at a minimum, any actions which, like the levying of anti-dumping or countervailing duties, are taken �in order to� or �with the purpose� of �offsetting� (or �preventing�) dumping or subsidisation. In turn, �to offset� means to �set off as an equivalent against; cancel out by something on the other side or of contrary nature; counterbalance, compensate�. This shows that dumping and subsidisation may be �offset� not only directly, by imposing a liability on the dumped or subsidised imports, but also indirectly, by granting an advantage to the domestic producers which cancels out the price advantage enjoyed by the imports as a result of dumping or subsidisation. 4.1025 Unlike distributing anti-dumping duties to a charity or flying the flag at half mast, the European Communities, India, Indonesia and Thailand urge the offset payments are objectively apt to �offset� (or even �prevent�) dumping or subsidisation even if they do not �apply� directly to dumped or subsidised imports. Whether or not they achieve that result in specific instances is irrelevant for the purposes of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement, because those provisions are not subject to an �actual effects� test or to a de minimis requirement. Thus, in US - 1916 Act, neither the panels nor the Appellate Body considered it necessary to examine whether the liabilities imposed by the 1916 Antidumping Act had actually had the effect of preventing or offsetting dumping in specific cases. The stated purpose of the CDSOA confirms that the offset payments are action �against� dumping or subsidisation 4.1026 The European Communities, India, Indonesia and Thailand argue that contrary to the assertions made by the United States at the first meeting with the Panel, the purpose of the offset payments is clearly described in Section 1002 of the CDSOA which contains the �findings� of Congress providing the justification for the enactment of the CDSOA. That section is an integral part of the CDSOA. 4.1027 According to the US Congress, the European Communities, India, Indonesia and Thailand observe the purpose of the offset payments is to �neutralize effectively� dumping and subsidisation by ensuring that prices �return to fair levels�. In other words, the purpose of the CDSOA is to �offset� dumping and subsidisation. The names given by the US Congress to the act (�Continued Dumping and Subsidy Offset Act�) and to the payments made under the act (�offsets�) provide further confirmation of such purpose. 4.1028 The European Communities, India, Indonesia and Thailand assert that the panel reports in US - 1916 Act did not say that the purpose of the measure is �legally irrelevant�, but rather that a measure which is objectively a �specific action against dumping� cannot escape condemnation simply because it has a different stated purpose. The panels in US - 1916 Act were concerned that if the legal characterisation of a measure as �specific action against dumping� were dependent upon its stated purpose, it would be extremely easy for Members to evade the prohibition contained in Article 18.1 of the Anti-Dumping Agreement simply by stating some spurious purpose in the legislation at issue. That concern, however, does not arise in the present case. 4.1029 The Complainants agree that the purpose of the CDSOA is that stated by the CDSOA itself. The US submission refers repeatedly to the CDSOA as a �payment programme�. However, it is obvious that making payments is not an objective in itself, but rather an instrument to achieve some purpose. The United States has not argued that the �findings� made by the US Congress in Section 1002 of the CDSOA are incorrect or false. Nor has the United States argued that the CDSOA is inapt to achieve the purpose reflected in those �findings�. Indeed, had the US submission argued that, it would be tantamount to saying that the US legislators were either incompetent or insincere. In the view of the European Communities, India, Indonesia and Thailand, given that it is not disputed that the purpose of the CDSOA is that stated by the US Congress in the CDSOA, there is no reason why that purpose should be disregarded by the Panel. The US interpretation does not account for dumping and subsidisation which do not involve imports into the territory of the Member taking the action 4.1030 Furthermore, according to the European Communities, India, Indonesia and Thailand, the US interpretation of the term �against� overlooks that Article 32.1 of the SCM Agreement and Article 18.1 of the Anti-Dumping Agreement do not prohibit only specific action against �subsidised imports� or �dumped imports�, but more generally specific action against �a subsidy of another Member� and �dumping of exports from another Member�, respectively, neither of which involves necessarily imports into the territory of the Member taking the action.
4.1031 The United States argue that the offset payments are �permitted� by footnotes 24 and 56 because they are subsidies allowed by Article XVI of the GATT. As explained below, the European Communities, India, Indonesia and Thailand argue that this defence is wrong on several counts. 4.1032 First, the United States appears to have misunderstood the relationship between Articles 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement and their respective footnotes. Footnotes 24 and 56 are not exceptions to Articles 18.1 and 32.1. Rather, they serve to clarify the scope of those provisions. 4.1033 Second, the United States disregards that the SCM Agreement does not interpret only the subsidies provisions of Article VI of the GATT. The SCM Agreement is also an interpretation of Article XVI of the GATT. 4.1034 Third, footnotes 24 and 56 allude to action taken �under other relevant provisions� of the GATT. This is not the same as saying action which is �not prohibited by some other GATT provision�. The �other relevant provisions� referred to in footnotes 24 and 56 are those GATT provisions which confer and regulate the right to take a certain type of remedial action, such as Article VI, Article XIX, or Articles XII and XVIII. Article XVI is not one of such �relevant provisions�. 4.1035 Fourth, the United States disregards that a measure may be compatible with Parts II and III of the SCM Agreement and still be prohibited, on different grounds, by another WTO provision. 4.1036 Finally, according to the European Communities, India, Indonesia and Thailand, the United States misreads the interpretation of footnote 24 made by the two panels in United States - 1916 Act. Those panels have explained that the purpose of footnote 24 is to clarify that Article 18.1 does not prevent Members from taking action against practices that involve dumping, where the existence of dumping is not the �practice that triggers the imposition of the measures�.
4.1037 According to the European Communities, India, Indonesia and Thailand, the United States takes an extremely narrow and formalistic view of what is required by the obligation to conduct an objective examination. In essence, the United States is arguing that the administering authorities should be allowed to manipulate the outcome of the determination by inducing, or even coercing the domestic producers to make declarations of support, provided that they make no arithmetical errors when adding up the declarations in order to calculate the level of support. 4.1038 The Appellate Body takes a very different view in the opinion of the European Communities, India, Indonesia and Thailand. The Appellate Body has said in a recent case that in order to be �objective� an examination must conform to �the dictates of the basic principles of good faith and fundamental fairness�. More precisely, according to the Appellate Body, the obligation to conduct an �objective� examination requires that the relevant facts �� be investigated in an unbiased manner, without favouring the interests of any interested party, or group of interested parties in the investigation�. 4.1039 In the view of the European Communities, India, Indonesia and Thailand, the US submission does not address anywhere the Complainants� claim that the CDSOA is incompatible with the obligation to conduct an objective examination of whether an application is made �by or on behalf of the domestic industry� because it fails to conform to the �dictates of the basic principles of good faith and fundamental fairness� as those dictates have been interpreted by the Appellate Body.
4.1040 The European Communities, India, Indonesia and Thailand submit that the Complainants� claim is firmly grounded on the wording of Articles 5.4 and 11.4. A formal declaration of support is not always evidence of �support� within the meaning of those provisions. If the domestic producers declare their support for the application in order to qualify for an unrelated advantage, such as the offset payments, that declaration cannot be considered as �support� for the application within the meaning of Articles 5.4 and 11.4. Rather, it is �support� for the offset payments. 4.1041 In the view of the European Communities, India, Indonesia and Thailand, the formalistic interpretation of the term �support� made by the United States would lead to absurd and unacceptable results and cannot be correct. If, as argued by the United States, it did not matter whether support is �genuine�, the authorities (or the petitioners) could take any action within their reach in order to coerce or induce the domestic producers to make or support applications, so as to ensure that the quantitative thresholds of Articles 5.4 and 11.4 are reached. For example, a Member could enact a legal provision to the effect that, once a domestic producer has made a petition, all the other domestic producers must support such petition. 4.1042 The Complainants are not suggesting that the authorities must ascertain the �subjective motivations� behind each and every declaration of support. In the absence of evidence to the contrary, the authorities must assume that, if a domestic producer has declared formally its support for the application, such support is �genuine�, just like the electoral authorities of all countries assume that, in the absence of any evidence to the contrary, the ballots cast by the voters are the genuine expression of their political choices. However, if the authorities are presented with evidence that a declaration of support is not �genuine� they cannot disregard such evidence. To do so would be a violation of their duty to conduct an objective examination of the existence of support. 4.1043 The European Communities, India, Indonesia and Thailand assert that by its very existence, the CDSOA destroys the presumption that a formal declaration of support is evidence of genuine support. The CDSOA provides a strong incentive to file �non-genuine� applications and to make �non-genuine� declarations of support. As a result, it renders suspect all applications and declarations of support made by the US producers. If the authorities could read the minds of the US producers, they could disregard the �non-genuine� declarations of support and make a proper determination of support, notwithstanding the incentives provided by the CDSOA. Since this is impossible, the CDSOA has the necessary consequence that the US authorities are prevented from reaching a proper determination of support, whether positive or negative. 4.1044 In the opinion of the European Communities, India, Indonesia and Thailand, the United States concedes that the US authorities cannot tell the genuine applications/declarations of support from those induced by the CDSOA, but fails to draw the appropriate consequence from this. According to the United States, since the U.S authorities cannot ascertain whether the support is genuine or induced by the CDSOA, it would follow that the whole issue is irrelevant. This argument puts logic on its head. It is like saying that the buying of votes should be permitted because the authorities cannot exclude that those voters who have been bribed by a candidate would have voted for that candidate anyway. It is precisely because the motivations of voters cannot be ascertained that all democracies ban the buying of votes per se, regardless of its actual impact on the outcome of the election. 4.1045 Contrary to the US assertions, the European Communities, India, Indonesia and Thailand argue it may be perfectly rational for a domestic producer to oppose (or at least not to support) a petition, for example in order to avoid retaliation in its export markets, or because it reckons that the anti-dumping or countervailing measures will provide an advantage to a domestic rival, which is more exposed to dumped or subsidised imports. Indeed, if it were irrational to oppose an application, Articles 5.4 and 11.4 would be superfluous. The European Communities, India, Indonesia and Thailand submit that the interpretation of those two provisions cannot start from the premise that they are useless. 4.1046 In the view of the European Communities, India, Indonesia and Thailand, the fact that all the petitions filed in the year preceding the enactment of the CDSOA met the legal thresholds for support does not prove the point made by the United States, because the very existence of legal thresholds for support may, of itself, discourage the filing of applications in those cases where the petitioners have reasons to believe that they will not obtain the necessary support. 4.1047 The European Communities, India, Indonesia and Thailand assert that the indisputable fact is that the CDSOA provides a strong financial incentive to file or support applications. It may well be that in some cases such incentive will be inconsequential because, as argued by the United States, the domestic producers would in any event have filed or supported an application. However, in an indefinite number of other cases, the financial incentive provided by the CDSOA may have a decisive effect. That possibility is enough to find that the CDSOA is inconsistent with Articles 5.4 and 11.4.
4.1048 The European Communities, India, Indonesia and Thailand are of the view that it is implicit in the obligation to perform a treaty provision in good faith that the parties �must abstain from acts that are calculated to frustrate the object and purpose of the treaty�. As explained in the Complainants� submission, the CDSOA frustrates the object and purpose of Articles 5.4 and 11.4 because it encourages the opening of investigations and the imposition of measures in cases where the domestic industry is not interested in such measures. For that reason, the CDSOA is incompatible with the obligation of the United States to comply in good faith with the requirements of those articles. The US submission does not address this argument.
4.1049 The European Communities, India, Indonesia and Thailand argue that while the administering authority enjoys certainly a wide degree of discretion, such discretion is not unlimited. The first sentence of Article 8.3 and Article 18.3 makes it clear that the administering authority must have a �reason� for rejecting an undertaking and, therefore, that the decision to reject an undertaking is not within the authority�s �complete discretion�. 4.1050 Articles 8.3 and 18.3 do not limit a priori the types of reasons which may be invoked by the authority. But this does not mean that the authority can invoke all sorts of motives. For example, it would be contrary to Articles 8.3 and 18.3 to reject an undertaking on the ground that the name of the exporter begins with the letter �A�, or that it was raining when the undertaking was offered. Those grounds are not proper �reasons� within the meaning of Articles 8.3 and 18.3 because they are not pertinent for deciding whether the acceptance of an undertaking is �appropriate�. 4.1051 The European Communities, India, Indonesia and Thailand note that the petitioners� opposition may be a pertinent �reason� for rejecting an undertaking where it reflects the legitimate concern that the undertaking will not provide equivalent protection. On the other hand, the pecuniary interest of the petitioners in securing the windfall of the offset payments is a totally extraneous consideration which cannot be regarded as a pertinent �reason� for rejecting an undertaking. 4.1052 The Complainants have argued that the CDSOA is not in conformity with the obligation to make an objective assessment of whether the acceptance of an undertaking would be appropriate because, under the CDSOA, the US authorities provide a financial incentive to the petitioners for opposing the undertakings and then rely upon such opposition in order to reject the undertaking. The US submission does not address this argument. Likewise, the US submission fails to address the Complainants� argument that the CDSOA frustrates the object and purpose of Articles 8 and 18. 4.1053 The European Communities, India, Indonesia and Thailand observe that the stated policy of the US authorities is to accord a �considerable weight� to the petitioners� opposition. The United States does not dispute that this is in fact the established policy of its authorities. That policy goes clearly beyond granting merely procedural rights. 4.1054 According to the European Communities, India, Indonesia and Thailand, in order to have a complete picture of the US practice, it would be indispensable to know, in addition, how many undertakings were rejected, or simply were not offered in the first place, because of the opposition expressed, formally or informally, by the domestic industry. 4.1055 The European Communities, India, Indonesia and Thailand submit that the CDSOA provides an almost irresistible financial incentive to oppose the acceptance of any undertakings offered by the exporters. It may well be that, as argued by the United States, the petitioners� primary concern is �a return to the conditions of fair trade�. But that objective may be achieved as well through the imposition of duties. The CDSOA allows the petitioners to have it both ways: they can have a �return to conditions of fair trade� and, in addition, the windfall of the offset payments. 4.1056 Finally, the Complainants note that the US submission fails to address their argument that the CDSOA is particularly detrimental to developing country Members because it effectively deprives them of the �constructive remedy� par excellence envisaged in Article 15 of the Anti-Dumping Agreement.
4.1057 According to the European Communities, India, Indonesia and Thailand, this claim is not concerned with the administration of the CDSOA. Instead, the claim submitted by the Complainants is that the CDSOA results in an unreasonable and partial administration of the provisions of the US anti-dumping and countervailing duty laws and regulations governing the initiation of investigations and the acceptance of undertakings. Thus the �administrative� measure at issue is the CDSOA, whereas the �administered� measures are the US anti-dumping laws and regulations. 4.1058 The European Communities, India, Indonesia and Thailand consider that this claim was clearly stated in the request for the establishment of a panel. Therefore, the United States� suggestion to the effect that it is outside the terms of reference of the Panel is groundless. 4.1059 As explained by the panel in Argentina � Hides and Skins, Article X.3 (a) is not concerned only with individual acts of enforcement or with �unwritten� administrative practices. It may apply as well with respect to generally applicable measures of an administrative nature. Thus, the fact that CDSOA is a generally applicable measure does not bring it outside the scope of Article X.3 (a). 4.1060 According to the European Communities, India, Indonesia and Thailand, the same panel found that the administrative measure at issue was incompatible with Article X:3 (a) because it gave rise to an �inherent danger� that the administered customs laws, regulations and rules would be applied in a partial manner. The Panel did not consider it necessary to consider whether, in practice, the administrative measure at issue had actually resulted in an impartial application of the administered laws, regulations and rules in specific instances. 4.1061 The European Communities, India, Indonesia and Thailand argue that they have demonstrated that the CDSOA creates an �inherent danger� that the provisions of the US anti-dumping and countervailing duty laws and regulations concerning determinations of support and the acceptance of undertakings will be applied by the US authorities in a partial and unreasonable manner. Such �inherent danger� is sufficient to find that the CDSOA is inconsistent with Article X:3 (a) of the GATT.
118 1916 Appellate Body, para. 123. 119 1916 Appellate Body, para. 123. 120 1916 Panel report, WT/DS136/R, footnote 374. 121 WTO agreements covered by DSU include the AD Agreement and the SCM Agreement. See Article 1 and Appendix I of the DSU. 122 The DSU Article 3.2. 123 United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, para. 101 and footnote 56. See also Argentina � Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R para. 6.14, (25 November 1997, adopted as modified) 124 WT/DS136/R, 31 March 2000. 125 First Submission of the United States, paragraph 2. 126 First Submission of the United States, paragraph 19. 127 First Submission of the United States, paragraph 28. 128 First Submission of the United States, paragraph 20. 129 First Submission of the United States, paragraph 25. 130 First Submission of the United States, paragraph 77. 131 First Submission of the United States, paragraph 77. 132 First Submission of the United States, paragraph 83. 133 First Submission of the United States, paragraph 86. 134 US � 1916 AD Act, Report of the Appellate Body, paragraph 122. 135 First Submission of the United States, paragraphs 81 and 84, referring to paragraph 122 of the Appellate Body Report in US � 1916 AD Act, and repeated in paragraphs 86, 87 and 89. 136 US � 1916 AD Act, Report of the Appellate Body, paragraph 122. 137 First Submission of the United States, paragraph 87, referring to paragraph 130 of the Appellate Body Report in US � 1916 AD Act. 138 First Submission of the United States, paragraph 88. 139 First Submission of the United States, paragraph 89. 140 First Submission of the United States, paragraph 91. 141 First Submission of the United States, paragraph 92. 142 See paragraph 9 above. 143 First Submission of the United States, paragraph 92. 144 The New Shorter Oxford English Dictionary, 1993, pp. 38-39, (L. Brown ed). 145 United States � Standards for Reformulated and Conventional Gasoline, AB-1996-1, Report of the Appellate Body, WT/DS2/AB/R, page 17. 146 See, for example, First Submission of the United States, paragraph 19. 147 First Submission of the United States, paragraph 95. 148 First Submission of Australia, paragraphs 43-45 and 53. 149 First Submission of the United States, paragraph 101. 150 First Submission of the United States, paragraph 111. 151 US � AD 1916 Act, Report of the Panel (Complaint by the EC), paragraph 6.199. 152 In United States � Standards for Reformulated and Conventional Gasoline, page 23, the Appellate Body said: �One of the corollaries of the �general rule of interpretation� in the Vienna Convention is that interpretation must give meaning and effect to all the terms of a treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.� 153 US � AD 1916 Act, Report of the Appellate Body, paragraph 124-5. 154 First Submission of the United States, paragraph 108. 155 First Submission of the United States, paragraph 123. 156 First Submission of the United States, paragraph 124. 157 First Submission of the United States, paragraph 125. 158 United States � Sections 301-310 of the Trade Act of 1974, Report of the Panel, WT/DS152/R, paragraph 7.68. 159 United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, AB-2001-02, Report of the Appellate Body, WT/DS184/AB/R, 24 July 2001, adopted 23 August 2001, paragraph 101. 160 Anti-Dumping Agreement, Article 1. 161 United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, Report of the Appellate Body, paragraph 196. 162 19 USC. 1675 c. 163 Oral Statement of the United States at the First Meeting of the Panel, United States � Continued Dumping and Subsidy Offset Act of 2000 (DS217 & 234), 5 February 2002 (hereinafter US Statement) at paras. 3 and 8. 164 Id. at paras. 8 and 9. 165 US Statement at para. 9. 166 United States � Antidumping Act of 1916, Report of the Appellate Body, WT/DS/136/AB/R, WT/DS162/AB/R, adopted 26 September 2000 and Report of the Panel, WT/DS136/R, 31 March 2000 and WT/DS163/R, 29 May 2000. 167 US Statement at para. 9. 168 Id. 169 US Statement at para 24. 170 Id. at para. 29 171 Panel Report, 1916 Act, at para.6.230 172 Appellate Body Report, 1916 Act, at para126. 173 Id. 174 US Statement at para. 30 175 Id. 176 Id. at para 31. 177 Appellate Body Report, 1916 Act, at para. 126. 178 146 Cong. Rec. S10697 (daily e. 18 October 2000) (statement of Senator Robert Byrd); 144 Cong. Rec. S7883-7884 (daily ed. 9 July 1998) (statement of Senator DeWine). 179 First Written Submission of the United States of America, United States � Continued Dumping and Subsidy Offset Act of 2000, (DS217&234), 14 January 2002 at para. 92. |
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