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WORLD TRADE
ORGANIZATION

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

(02-4742)

  Original: English

UNITED STATES � CONTINUED DUMPING AND SUBSIDY
OFFSET ACT OF 2000


Report of the Panel

(Continued)


6. Korea

(a) Introduction

4.1062 Korea submits that the United States has failed to rebut the prima facie case advanced by the complainants in this dispute settlement proceeding. Before turning to each of Korea�s claims, Korea wishes to address some general, systemic issues. First, regarding the �power of the purse,� Members do have the power of the purse, but when they joined the WTO, they agreed to limit that power where exercising it would conflict with WTO provisions.180 Second, a Member may not avoid its WTO obligations by altering the incentive structure that served as the basis of the negotiations leading to the WTO agreements. Here, the United States offers a cash reward that profoundly affects the decision-making of domestic industries regarding whether to pursue or support a petition and whether to accept an undertaking. The end result is that the relevant WTO provisions are reduced to inutility. Finally, the provision of cash rewards to domestic industries that successfully pursue trade remedy actions improperly distorts trade and, thus, should be condemned.

4.1063 Korea asks the Panel to find that, by maintaining the Byrd Amendment181, the United States is in violation of Articles VI and X:3(a) of GATT 1994; Articles 5.4, 8 and 18.1 of the AD Agreement; and Articles 11.4, 18 and 32.1 of the SCM Agreement. Korea requests the Panel both to recommend that the United States bring its laws into conformity with its obligations under these WTO provisions and to suggest that, to meet its WTO obligations, the United States should repeal the Byrd Amendment.

(b) The Byrd Amendment is an impermissible specific action against dumping and subsidization

4.1064 Before responding to the various points raised by the United States, Korea wishes to set out the points which the United States has not contested in its first written submission.

(a) The Byrd Amendment is mandatory legislation. The authorities have no discretion; they must distribute anti-dumping and countervailing duties collected to the domestic companies that qualify under a specific order.

(b) Absent a finding that the constituent elements of dumping (or impermissible subsidy) are met and imposition of an order and collection of duties, no funds are distributed under the Byrd Amendment. A finding of the constituent elements is a condition precedent to distribution of the duties.

(c) All of the duties collected under a specific order must be distributed to qualifying producers and, until distribution, are kept in separate, order-specific accounts.

(d) The duties are not distributed to all injured producers, but only to those that brought or supported the petition.

(e) Payments are tied directly to qualifying expenses for producing the like product.

(f) As indicated by the title of the Byrd Amendment, the duties are distributed specifically in order to �offset� �continued dumping or subsidy�, i.e., to counter harm suffered due to dumping or subsidization.

4.1065 Korea argues that, as this list shows, the United States has conceded all of the facts necessary for the Panel to conclude that the Byrd Amendment is an impermissible specific action against dumping and subsidization.

(i) The Byrd Amendment is a specific action against dumping and subsidization

4.1066 Korea argues that the US interpretation is not based on the ordinary meaning of the words. The US relies on the least appropriate definition of �against� � �into contact with�. This particular definition is not relevant to the interpretation of �against� in Article 18.1 of the AD or Article 32.1 of the SCM Agreement. �Into contact with� is used to describe physical contact: �[b]reakers crashed against the wall of the promenade.�182 This cannot be the ordinary meaning of �against� as it is used in the WTO provisions at issue and, therefore, the US interpretation must be rejected.

4.1067 According to Korea, the US argument is not supported by other text in the relevant provisions. Article 18.1 refers to �specific action against dumping.� But, to fit this text to its distorted interpretation of �against,� the United States is forced to argue that �dumping� refers to �specific action against (dumped) imported goods or importers.� As noted by the Appellate Body in US-1916 Act, �dumping� is a situation or process, not an object,183 and, thus, it is not a candidate for physical contact.

4.1068 In the view of Korea, contrary to the US argument, the available ordinary meaning of �against� shows that the Byrd Amendment is a specific action �against� dumping (or subsidization). The first entry in the definition of �against� is �[o]f motion or action in opposition�.184 This is the most appropriate definition for �against�. When �against� is used in the context of action �against� a situation or other non-physical process, �against� must be interpreted as meaning �in opposition�.

4.1069 Korea asserts that the relationship between the specific action and the dumping (or subsidization) must, as a matter of logic, be one of the following three: (i) �in opposition to�; (ii) �in support of�; or (iii) neutral (neither �in opposition to� nor �in support of�). The constituent elements of dumping include: (i) introduction into commerce of imported products; and (ii) the gap between the import price and the normal value (where import price is less than normal value).185 One of the measures the authorities can take �in opposition to� dumping is to impose anti-dumping duties on the imports. Another measure they can take is to provide support to the affected domestic industries, which compete with the imports. Both of these actions are �in opposition to� the introduction into commerce of unfairly traded imports. The Byrd Amendment acts �in opposition to� dumping through the second modality, since it provides support to the affected186 domestic industry, competing with the imports. Thus, the Byrd Amendment acts �in opposition to� dumping (or subsidy), and is a �specific action against dumping�.

4.1070 In US � 1916 Act, Korea asserts, the Appellate Body interpreted this language as �action that is taken in response to situations presenting the constituent elements of �dumping�.�187 The US argument misstates and, ultimately, ignores this holding. Contrary to the US assertion, there, the Appellate Body interpreted �against� and its context, holding that ��specific action against dumping� of exports within the meaning of Article 18.1 is action that is taken in response to situations presenting the constituent elements of �dumping.��188 But, when the United States quotes this passage, Korea argues that it omits two key words: �situations presenting�.189 The United States does this, presumably, to narrow the Appellate Body�s holding and avoid its application to this case. But, the situation faced in the US � 1916 Act proceeding was much less clear than that presented by the Byrd Amendment here. Thus, the US examples190 are irrelevant because, unlike the Byrd Amendment, they do not affect competition in the marketplace.

4.1071 In addition, the United States argues that constituent elements of dumping are not built into the Byrd Amendment.191 Again, Korea submits, the United States is incorrect. The operation of the Byrd Amendment demonstrates conclusively that it is a specific action against dumping or subsidization:

- one, the Byrd Amendment does not operate unless the US authorities have found that the constituent elements of dumping or subsidization exist and have imposed an order;

- two, the only parties that can collect the cash reward are the �affected domestic producers,� i.e., the US producers that brought or supported the petition and were part of the underlying investigation that led to imposition of the order192; and

- three, the funds are distributed only for �qualifying expenditures�, which are limited to certain expenses for producing a product covered by the order.193

4.1072 In Korea�s view, the United States further argues that, because the Byrd Amendment imposes two requirements in addition to the constituent elements of dumping,194 under the holding of the Appellate Body in US - 1916 Act, the Byrd Amendment cannot be a specific action against dumping or subsidization. This argument is completely contrary to the Appellate Body�s interpretation. In its appeal of the 1916 Act panel reports, the United States argued that the measure targeted predatory pricing, not dumping, and that the additional tests in the measure (for intent and injurious effects) removed the measure from the scope of Article 18.1, i.e., given the additional tests, the measure could not be a specific action against dumping.195 The Appellate Body rejected this argument, finding that the addition of requirements did not alter the fact that the measure applied only where the constituent elements of dumping were found to exist.196

4.1073 Korea asserts that the fallacy of the US argument is also demonstrated by the US statement that �[t]he amount of the distributions under the CDSOA have nothing to do with measuring the extent to which a US producer has been affected by dumping or subsidization of imports.�197 But, under the Byrd Amendment, the amount of distributions is decided by the amount of duties collected, which is determined by the measurement of the dumping (or subsidization) found to exist.

4.1074 Finally, Korea is of the view that the above analysis is confirmed by the purpose of the Byrd Amendment. The United States argues that the �purpose� of the Byrd Amendment is �not relevant.�198 This is incorrect. In the US-1916 Act proceeding, the panel held merely that the stated purpose of a measure is not always dispositive. The purpose, therefore, is relevant, even though it is the effect of the measure that is key.199 Finally, the statements quoted in Korea�s First Submission serve not merely as statements of purpose, but also as evidence of the operation and impact of the Byrd Amendment.200 They are evidence not merely of the fact that the Byrd Amendment was intended to provide a specific remedy against dumping and subsidization, but also of the fact that this is precisely what the Byrd Amendment actually does.

(ii) The Byrd Amendment is not protected by footnotes 24 and 56

4.1075 In the opinion of Korea, contrary to the US argument,201 if a measure is a specific action against dumping or subsidization, the measure is prohibited by Articles 18.1 and 32.1 and is not �saved� by Footnotes 24 and 56. This reading is supported by the very jurisprudence cited by the United States. As the US-1916 Act panel found, �reading footnote 24 as permitting actions other than anti-dumping actions allowed under other provisions, as long as the measure does not address dumping as such, is fully consistent with the principle of useful interpretation.�202 In other words, Footnote 24 works only as long as the measure does not address dumping as such. Thus, when this Panel determines that the Byrd Amendment is an action against dumping or a subsidy, Footnotes 24 and 56 cannot save the Byrd Amendment, contrary to the US assertion.

4.1076 Korea asserts that the United States should also heed the fact that �action�, as it appears in Footnotes 24 and 56, refers to actions addressing causes or effects of dumping (or subsidization), rather than the dumping (or the subsidy) itself. As the 1916 Act panel found, Footnote 24 allows a Member to �address the effects of dumping, e.g. increased imports, or its causes (e.g., subsidization) through other legitimate means under the WTO Agreement, such as countervailing or safeguard measures.�203 But, the Byrd Amendment does not address simply the cause or the effects of dumping (or subsidization). The measure addresses dumping (or subsidization) as such.

(c) The Byrd Amendment violates Article 5.4 of the AD Agreement and Article 11.4 of the SCM Agreement

4.1077 Korea argues that if one were to accept the US argument,204 then a Member planning to impose an anti-dumping measure could do anything � including imposing mandatory legislation as in the instant case � to encourage domestic companies to support the petition and still meet the obligation arising under Articles 5.4 and 11.4 where a sufficient number of companies �supported� the petition. This shows that the US position does not rest on good faith implementation of its treaty obligations. Good faith implementation is a general principle of law and a principle of good international law, which is reflected, inter alia, in Article 26 of the Vienna Convention on the Law of Treaties and Article X:3(a) of GATT.205

4.1078 By arguing that Complainants should have provided �empirical support�,206 the United States seems to suggest that Complainants are required to demonstrate the actual effect of the Byrd Amendment. This, Korea submits, is incorrect. As the Appellate Body repeatedly has stated, an effects test is irrelevant where, as here, a measure violates the provisions of the WTO.207

4.1079 Finally, according to Korea, even if one assumes, as the United States does, that it is �generally� irrational for domestic companies to �oppose� relief,208 the assumption confirms Korea�s position � in some cases, the Byrd Amendment will lead US companies to support petitions they �generally� would not support. Thus, the cash reward affects the initiation of investigations under Articles 5.4 and 11.4 in the cases which do not fall under the �general� category of the US argument.

(d) The Byrd Amendment violates Article 8 of the AD Agreement and Article 18 of the SCM Agreement

4.1080 The United States criticizes Complainants for failing to provide �evidence that the CDSOA has had or will have any actual effect on the Commerce Department�s consideration of proposed undertakings.�209 Korea is of the view that this criticism is ill-founded. First, as discussed in detail at paragraph 4.1078, above, because this is an �on its face� claim, such proof is not required.210 Second, the Byrd Amendment obviously creates a very strong incentive for all petitioners to oppose all undertakings because, if the Commerce Department does accept an undertaking, the Department will not impose an order and duties will not be collected and distributed to petitioners via the Byrd Amendment.

4.1081 Moreover, according to the United States, a Member is free to reject any and all undertakings, for any and all reasons. Korea submits that this interpretation would read out of the Agreements the first sentence of Articles 8.1 and 18.1, and the third sentence of Articles 8.3 and 18.3, giving authorities complete and utter authority to reject even the most reasonable, practical and appropriate undertakings. Moreover, this obligation of Articles 8.3 and 18.3 is subject to the �good faith� requirement set out by the Appellate Body.211 Therefore, the US interpretation must be rejected.

(e) The Byrd Amendment results in unreasonable and biased administration of US law, in contravention of Article X:3(a) of GATT 1994

4.1082 Korea asserts that the US argument that Article X:3(a) addresses only the administration of national laws and not national laws themselves212 is flawed. The Byrd Amendment itself prevents the United States from uniform, impartial and reasonable administration of US laws concerning the threshold investigation and the acceptance of undertakings. As did the measure at issue in Argentina � Hides and Leather, the Byrd Amendment creates an �inherent danger� that the United States will apply its anti-dumping and countervailing duty laws in a partial and unreasonable manner.213 The Byrd Amendment thus is inconsistent with Article X:3(a) of GATT 1994.

7. Mexico

(a) Introduction

4.1083 Mexico argues that in its first written submission to and oral statement at the first substantive meeting with the Panel, Mexico established prima facie that the Continued Dumping and Subsidy Offset Act of 2000 (the "CDSOA") is inconsistent with certain provisions of the WTO Agreements.

4.1084 In its rebuttal submission, Mexico elaborates upon its arguments and responds to the arguments raised by the United States. Accordingly, Mexico requests that the Panel grant the relief requested at paragraphs 123 and 124 of Mexico�s first submission.

(b) The Characterization Of The CDSOA

4.1085 Mexico submits that the CDSOA is not "simply a statute authorizing government payments", as the United States contends.

4.1086 The subsidy programmes referred to by the United States to justify the existence of the CDSOA are clearly distinguishable from the CDSOA and its offsets.

4.1087 From the time of their creation to the time of their disbursement, the structure and architecture of the subsidies conferred by the CDSOA is unique. For example, the financial contributions are not pooled in a general account for the CDSOA as a whole and then disbursed to any eligible recipient from that general account.

(c) Ex aequo et bono

4.1088 According to Mexico, no ex �quo et bono issues arise in this dispute. The measure at issue � the CDSOA � is disciplined by the provisions cited in the claims brought by Mexico and the other complaining Members. Mexico is simply asking the Panel to interpret and apply the disciplines negotiated by the WTO Members and incorporated in the relevant agreements. Indeed, correctly interpreted and applied, the provisions encompass the measure at issue.

(d) Article 18.1 of the Anti-dumping Agreement and Article 32.1 of the SCM Agreement

4.1089 Contrary to the arguments of the United States, Mexico argues that the CDSOA and the distribution of offsets under the CDSOA is a specific action "against" the dumping of exports from another Member within the meaning of Article 18.1 and a specific action against a subsidy of another Member within the meaning of Article 32.1 of the SCM Agreement.

(i) "Situations Presenting" The Constituent Elements Of Dumping

4.1090 Mexico notes that the Appellate Body did not state that "specific action against dumping" refers to "action that is taken in response to the constituent elements of dumping". The Appellate Body stated that specific action against dumping of exports within the meaning of Article 18.1 is "action that is taken in response to situations presenting the constituent elements of dumping". The omission of the words "to situations presenting" is significant because it contradicts the US argument that the  CDSOA must be based upon a test that includes the constituent elements of dumping or subsidy.

4.1091 Clearly, Mexico argues, the CDSOA and the offsets distributed under it are "in response to situations presenting the constituent elements of dumping [and subsidization]" and such action "may be taken only when the constituent elements of dumping [and subsidization] are present". If there was no dumping or subsidization, there would be no offsets because there would be no funds to distribute.

(ii) Specific Action "Against" Dumping And Subsidization

4.1092 Mexico posits that, contrary to the arguments of the United States, there is no requirement that, in order to constitute a specific action "against" dumping or subsidization, the action must: (i) apply to the imported good or the importer; and (ii) it must be burdensome.

4.1093 In Mexico's view, there is no legal basis for the interpretation proposed by the US. The Appellate Body directly put its mind to the meaning of the phrase "specific action against dumping of exports" and established that an action "against" dumping of exports is an "action that is taken in response to situations presenting the constituent elements of dumping". There is no requirement that punitive action must be taken against imports or the importer.

4.1094 Furthermore, in the opinion of Mexico, the US argument is contradicted by the wording of Article 18.1 of the Anti-dumping Agreement and Article 32.1 of the SCM Agreement. Article 18.1 refers to specific action "against dumping of exports" not "against dumped exports" (i.e., the physical exports themselves) and not "against importers of dumped exports".

4.1095 Mexico argues that the fact that the focus is not on imports or importers is even clearer in the context of Article 32.1 of the Anti-dumping Agreement. The Article refers to specific action "against a subsidy of another Member", not "against the subsidization of exports" or "against subsidized exports" or �against importers of subsidized exports�.

4.1096 Even if the US argument had legal merit, Mexico notes, the facts in this dispute do not support it. The distribution of offsets under the CDSOA does have a "burdensome" effect on "imports" because it systematically upsets the relative conditions of competition between imports and like domestic products.

(iii) Footnotes 24 And 56

4.1097 According to Mexico, footnote 24 to the Anti-dumping Agreement and footnote 56 to the SCM Agreement do not, as suggested by the US, create an exception to Articles 18.1 and 32.1. The footnotes simply clarify the scope of their associated provisions.

4.1098 Moreover, Mexico is of the view that the footnotes refer only to action taken "under other relevant provisions of GATT 1994". The Appellate Body interpreted this phrase in Anti-Dumping Act of 1916. It reasoned that those provisions did not include action taken under Article VI of GATT 1994.

4.1099 In Mexico's opinion, applying this reasoning to the SCM Agreement, it is clear that the phrase "provisions of GATT 1994, as interpreted by this Agreement" in Article 32.1 refers to Articles VI and XVI of GATT 1994. Accordingly, the "other relevant provisions" referred to in footnote 56 of the SCM Agreement do not include Articles VI and XVI. Thus, even if the US is correct that its action has been brought under GATT Article XVI, action under that provision is not encompassed by footnote 56.

4.1100 Finally, Mexico argues that the CDSOA is not an "appropriate" action within the meaning of footnotes 24 and 56, because it amounts to an actionable subsidy that is inconsistent with Article 5(b) of the SCM Agreement, by virtue of the fact that it nullifies or impairs benefits accruing to Mexico under the GATT 1994. Moreover, it is inconsistent with Articles 5.4, 8 and 18.4 of the Anti-Dumping Agreement, Articles 11.4, 18 and 32.5 of the SCM Agreement, Article X:3(a) of the GATT 1994 and Article XVI:4 of the WTO Agreement.

(e) Article 5(b) Of The SCM Agreement

4.1101 Mexico considers that the issue to be decided under Article 5(b) of the SCM Agreement is whether, through the use of a subsidy, the CDSOA causes adverse effects in the form of nullification or impairment of benefits accruing directly or indirectly to Mexico under the GATT 1994. In this regard, it is not disputed that the offsets distributed under the Act constitute financial contributions that confer benefits and, therefore, amount to subsidies within the meaning of Article 1 of the SCM Agreement.

(i) The Granting Of Subsidies Is Mandated

4.1102 In the view of Mexico, the US has not contested that the CDSOA mandates the granting of subsidies. Indeed, the US acknowledges that the "CDSOA instructs the United States Customs Service to distribute funds in an amount not to exceed the duties collected pursuant to anti-dumping and countervailing duty orders to eligible domestic producers".214

(ii) Specificity

The appropriate focus is on the subsidies not the act

4.1103 Mexico asserts that by focusing on Mexico�s alleged failure to "show that the CDSOA is a specific subsidy", the United States misses the point. Under Article 2 of the SCM Agreement, Mexico does not have to show that the CDSOA, itself, is a specific subsidy. Rather, it has to establish that subsidies exist and that such subsidies are specific within the meaning of Article 2.1 of the SCM Agreement.

4.1104 In Mexico's view, pursuant to paragraph 1 of Article 1, a subsidy shall be deemed to exist if there is a financial contribution by a government that confers a benefit. In the circumstances of this dispute, in and of itself, the CDSOA is not a subsidy as defined by the SCM Agreement. Rather, it is the offsets distributed under the CDSOA that constitute financial contributions conferring benefits that amount to subsidies. Thus, in accordance with Article 2, the Panel must determine whether the offsets (i.e., the subsidy), not the CDSOA, are specific to "certain enterprises".

The subsidies are specific

4.1105 It is Mexico�s position that the subsidies conferred under the CDSOA are specific within the meaning of Article 2.1(a) of the SCM Agreement on the basis that the legislation pursuant to which the granting authority operates explicitly limits access to a subsidy to certain enterprises.

4.1106 An important characteristic of the CDSOA is that it governs the administration of a series of separate and distinct subsidies. By design and legal requirement, each offset is a separate and distinct subsidy. The funds that form the "financial contribution" element of each subsidy are deposited and maintained in separate special accounts that are, themselves, linked to the products that are the subject of each order or finding.

4.1107 Another important characteristic of the CDSOA is that access to each distinct subsidy is explicitly limited to certain enterprises who are producers of products that are like the product subject to the order or finding in question or worker representatives of those producers. Finally, access is further restricted to those enterprises that were petitioners in the original investigation that led to the duties or those enterprises that supported the petition. In Mexico's view, that, in law, an enterprise will not be eligible to receive offsets collected with respect to a product it does not produce, even if there are funds in the special account for that offset, is positive evidence of specificity within the meaning of Article 2.1(a) of the SCM Agreement.

4.1108 Mexico submits that the subsidies are, therefore, actionable under Part III of the SCM Agreement. The fact that the CDSOA governs a series of separate and distinct subsidies, each of which is specific, does not mean that the subsidies are non-actionable. Such a determination would mean that a WTO Member could avoid the disciplines governing actionable subsidies simply by administering otherwise specific subsidies through "different special accounts" provided for under a single piece of legislation.

Specificity under Article 2.1(b) and (c)

4.1109 Mexico argues that the US arguments regarding specificity under Article 2.1(b) and (c) are not relevant to this dispute because the subsidies are specific under Article 2.1(a).

4.1110 According to Mexico, even if Article 2.1(c) was relevant to this dispute, any criteria or conditions established by the CDSOA are not "objective criteria or conditions" as defined in footnote 2 to the SCM Agreement. Such criteria or conditions are not neutral, they favour certain enterprises over others, they are not economic in nature and they are not horizontal in application. Accordingly, they do not fall within the definition set out in footnote 2 of the SCM Agreement.

(iii) Adverse Effects

4.1111 Mexico is raising two types of nullification or impairment claim under its Article 5 challenge: (a) "violation" nullification or impairment; and (b) "non-violation" nullification or impairment.

"Violation" nullification or impairment

4.1112 It is Mexico�s position that "violation" nullification or impairment presumes that the Panel finds a violation of a provision of the GATT 1994 in one of the other claims before it. Therefore, this type of nullification or impairment does not give rise to an independent ground for challenge.

4.1113 Contrary to what is suggested by the United States, Mexico asserts that its position on "violation" nullification or impairment under Article 5(b) will not create a new class of prohibited subsidies. Mexico�s position is that where a subsidy violates a provision of the GATT 1994, nullification or impairment is automatic under paragraph (a) of Article XXIII:1 because a WTO Member has failed to carry out its obligations under the GATT 1994. Therefore, where the violation in question occurs as a result of the "use of" a subsidy within the meaning of Article 5(b) of the SCM Agreement, a violation of that provision will also occur. The implication of a violation of Article 5(b) in such circumstances is that the SCM Agreement provides for a specific remedy.

"Non-violation" nullification or impairment

4.1114 With respect to "non-violation" nullification or impairment and the US argument that the CDSOA must be "applied", Mexico is presenting two arguments: (i) The granting of actionable subsidies under the CDSOA nullifies or impairs benefits accruing to Mexico under the GATT 1994; and (ii) the maintaining of the subsidies through the CDSOA also nullifies or impairs benefits accruing to Mexico under the GATT 1994.

Granting of actionable subsidies

4.1115 Mexico is arguing that the CDSOA mandates the granting of actionable subsidies and that such subsidies per se will cause adverse effects when they are granted.

4.1116 Mexico�s position is that the phrase �through the use of a subsidy� encompasses the action of granting a subsidy. The US argues that in order to demonstrate nullification or impairment under Article 5(b), Mexico must present evidence of actual disbursements under the CDSOA. This argument is flawed because, in the circumstances of this dispute, subsidies under the CDSOA can be challenged under Article 5(b) prior to their actual granting.

4.1117 Mexico argues that by virtue of Article 5, a limited subset of "non-violation" nullification or impairment (i.e., that caused through the use of an actionable subsidy) can give rise to a violation of a provision of the SCM Agreement � namely, Article 5. Such a violation gives rise to the remedies in Article 7.4 of the SCM Agreement.

4.1118 Mexico is of the view that this difference between "non-violation" nullification or impairment under Article 5 and under Article XXIII:1(b) has important implications on when a measure can be challenged. The US position that Article XXIII:1(b) requires the application of a measure is not relevant to when a challenge can be brought under a substantive article in a WTO Agreement, such as Article 5. The issue of when a measure can be challenged under a substantive article of a WTO Agreement is governed by the "mandatory/discretionary" doctrine which allows a Member to challenge legislation on an "as such" basis. The doctrine allows parties to challenge measures "that will necessarily result in action inconsistent with GATT/WTO obligations, before such action is actually taken".

4.1119 In its challenge of the granting of actionable subsidies under the CDSOA, Mexico�s position is that the Act mandates the granting of actionable subsidies and that, when granted, such subsidies will cause nullification or impairment. In other words, when the subsidies are granted, an action that even the US acknowledges as amounting to application, a violation will occur.

4.1120 Thus, Mexico considers that it is clear that Mexico can challenge the CDSOA prior to the granting of subsidies under the Act. The only question is whether the Act will "necessarily result in action" that is inconsistent with Article 5(b) � i.e., will nullification or impairment automatically be caused or automatically "exist" when subsidies are granted under the Act. The issue of how the distribution of offsets will necessarily upset the relative conditions of competition between Mexican and like US products is discussed below.

Maintaining of actionable subsidies

4.1121 Mexico is also arguing that the CDSOA maintains actionable subsidies and that the maintenance of those subsidies in the circumstances is currently nullifying or impairing benefits that accrue to Mexico under the GATT 1994.

4.1122 In Mexico's view, the CDSOA "maintains" subsidies because it provides the means for a subsidy, i.e., it establishes a framework for its conferral. Furthermore, the CDSOA does not simply maintain subsidies in that sense. It establishes special accounts, provides for the deposit of funds in such accounts, provides for the identification of eligible recipients and the issuance of a list thereof, and mandates the distribution of the funds.

4.1123 Thus, Mexico asserts that it can challenge the CDSOA prior to the granting of subsidies under the Act on the basis that the Act is maintaining subsidies in a manner that amounts to the "use of a subsidy" within the meaning of Article 5 and in a manner that causes nullification or impairment. The nature of the nullification or impairment caused by the maintenance of the subsidies is addressed below.

The nullification or impairment caused by the subsidies under the CDSOA

(i) Nullification or impairment that will be caused by the granting of the subsidies

4.1124 By virtue of the design, structure and architecture of the CDSOA, Mexico argues that it has demonstrated that the offsets will systematically upset the competitive relationship between Mexican products and like United States products legitimately expected by Mexico. As discussed at paragraphs 101 and 102 of Mexico�s first submission, Mexico asserts that the nullification or impairment caused by the subsidies is systematic.

4.1125 As discussed at paragraphs 89-91 of Mexico�s first submission, Mexico is of the view that it is well established in GATT 1947 jurisprudence that the introduction or increase of a subsidy will have an adverse effect on negotiated concessions. This principle goes as far back as the 1955 decision of the GATT Contracting Parties.215 The GATT Panel in EEC - Oilseeds I characterized the 1955 decision as creating an "assumption".216 Thus, in presenting its case, Mexico considers it is entitled to rely on the assumption that the introduction of a subsidy by the CDSOA will have an adverse effect on negotiated concessions.

4.1126 In EEC � Oilseeds I and EEC � Oilseeds II, the GATT Panels carefully analysed the mechanisms, framework, essential features, characteristics and operations of the schemes in question in order to determine whether the subsidies systematically upset the expected competitive relationship. Their findings of nullification or impairment were not based on evidence of specific trade effects of subsidies on imported products, but on evidence pertaining to the design and operation of the measures at issue. In assessing whether the competitive relationship was impaired, the Panel focused on the systematic relationship between the subsidies and the tariff bindings in question. It found that the tariff bindings were systematically undermined by the subsidy.

4.1127 Mexico asserts that in this dispute, the benefits accruing to Mexico under Articles II and VI of the GATT are likewise being systematically undermined. This is clearly illustrated by the fact that the maximum duties that are permitted to be collected are being passed on to the prime beneficiaries of the duties, systematically and automatically enhancing the relative competitive position of US products compared to like Mexican products.

4.1128 Moreover, in Mexico's opinion, by virtue of the design, structure and architecture of the CDSOA, there is a clear correlation between the offsets and the adverse effect on the expected competitive relationship. The subsidies are created by the existence of dumping and subsidization and the assessment of resulting duties. The duties are passed on to the prime beneficiaries of the duties, who are also direct competitors of Mexican exporters facing the anti-dumping and countervailing duties.

4.1129 Thus, according to Mexico, there is a clear and systematic linkage between the granting of actionable subsidies and the nullification or impairment of benefits at issue in this dispute.

(ii) Nullification or impairment caused by the maintenance of the subsidies

4.1130 Mexico argues that even before subsidies are granted under the CDSOA, the maintenance of subsidies under the Act nullifies or impairs benefits accruing to Mexico under GATT Articles II and VI that concern the creation of predictability needed to plan future trade. Given the certainty that any anti-dumping or countervailing duties that will be collected will be re-distributed to the producers of directly competitive products and the uncertainty as to the magnitude of the subsidies, it is impossible for efficient Mexican exporters who can still sell into the US market when facing duties to predict the relative conditions of competition between their products and like US products. This is particularly problematic in the view of Mexico with respect to products that require significant lead time between order and delivery.

4.1131 Mexico submits that through the introduction of this new factor, the predictability needed to plan future trade that is legitimately expected by Mexico under Articles II:2(b) and VI of the GATT 1994 is nullified or impaired by the maintenance of actionable subsidies by the CDSOA.

(iii) Reasonable expectations

4.1132 Contrary to the US argument, Mexico argues that it could not have reasonably expected the CDSOA and the basis that compensation proposals had been suggested in the past.

4.1133 In the view of Mexico, the evidence cited by the US supports Mexico�s position that it could not have reasonably anticipated the introduction of the CDSOA. In every case where such a measure has been proposed in the past, it has been adamantly opposed by the US administration and it has not been passed into law. In fact, the US administration opposed the introduction of the CDSOA.

4.1134 According to Mexico, the evidence actually demonstrates that the US administration itself could not have reasonably anticipated the introduction of the CDSOA.

(f) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

4.1135 Mexico posits that the United States is clearly under an obligation to make its determinations under Articles 5.4 and 11.4 in an "objective manner". The CDSOA directly interferes with this obligation by rewarding domestic producers who support the petition and penalizing those who do not (by denying them subsidies that their domestic competitors will receive).

4.1136 According to Mexico, the CDSOA has manifestly changed the ability of the United States to make its determinations in an objective manner. It has "tilted the balance" away from opposition or neutrality towards petitioning or supporting a petition.

(g) Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement

4.1137 Mexico is of the view that the United States is under an obligation to make its determinations under Articles 8 and 18 in an "objective manner". The CDSOA directly interferes with this obligation by rewarding domestic producers who oppose undertakings.

4.1138 Again, Mexico argues, the CDSOA has fundamentally transformed the nature of the decision that must be made by the individual members of a domestic industry. In order to maximize the economic effect of the imposition of anti-dumping and countervailing duties and thereby act in the best interests of their owners or shareholders, domestic producers will have to oppose undertakings.

4.1139 Mexico asserts that in this way, the CDSOA has "tilted the balance" away towards the opposition of undertakings. Thus, contrary to the position of the United States, the CDSOA clearly affects the operation of the domestic law provisions implementing Articles 8 and 18.

(h) Article X:3(a) of the GATT 1994

4.1140 According to Mexico, the CDSOA interferes with the reasonable and impartial administration of United States' laws and regulations implementing the provisions of the Anti-Dumping Agreement and SCM Agreement. Therefore, it is inconsistent with Article X:3(a) of the GATT 1994.

(i) Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement

4.1141 Mexico submits that as a consequence of being inconsistent with the above-noted provisions of the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994, the CDSOA is inconsistent with Article XVI:4 of the WTO Agreement, Article 18.4 of the Anti-dumping Agreement and Article 32.5 of the SCM Agreement.

H. SECOND WRITTEN SUBMISSION OF THE UNITED STATES

(a) Introduction

4.1142 In this submission, the United States responds to arguments raised in their oral statements during the first meeting of the Panel. The United States submits that despite their insistence that the Continued Dumping and Subsidy Offset Act (�CDSOA�), as a subsidy programme, will cause or has caused substantial adverse effects, none of the complaining parties have challenged the Act as an actionable subsidy under Article 5(c) of the SCM Agreement, for which even a showing of threat of harm is sufficient. According to the United States, this fact alone casts serious doubt on the credibility of the complaining parties� claims of harm. Instead of pursuing the most relevant legal claim given the allegations in this dispute, the complaining parties argue that the CDSOA constitutes a �specific action against� dumping or a subsidy.

4.1143 In the view of the United States, like their allegations of harmful effects, the complaining parties� argument that the CDSOA distorts the administration of standing and undertaking provisions is without any supporting evidence. More importantly, their argument would require this Panel to rewrite the WTO obligations regarding standing determinations and the acceptance of price undertakings. In short, the complaining parties have failed to satisfy their burden of establishing a prima facie case of a WTO violation. A WTO violation cannot be created out of unwritten obligations and pure speculation. For these and the reasons explained more fully below, the United States respectfully requests that the Panel reject the complaining parties� claims.

(i) The CDSOA is not an actionable subsidy

4.1144 Under Article 2.1 of the SCM Agreement, the determination of specificity turns on whether the subsidy is limited �to an enterprise or industry or group of enterprises or industries.� The phrase �certain enterprises� is defined for purposes of Article 2.1 as �an enterprise or industry or group of enterprises or industries.� Thus, Article 2.1(a) covers subsidies that are explicitly limited to an enterprise or industry or group of enterprises or industries.

4.1145 The United States argues that, for obvious reasons, Mexico does not claim that the CDSOA is limited to a single enterprise or industry. Thus, for the Panel to find that the CDSOA is a de jure specific subsidy, it would have to conclude that the universe of industries and enterprises which could in principle receive CDSOA payments can be considered a �group of enterprises or industries� under Article 2.1.

4.1146 Although there is no WTO precedent providing interpretative guidance regarding how small and homogenous a group of beneficiaries must be in order to qualify as �a group of enterprises or industries� in the context of Article 2.1, the CDSOA does not present a close case. The United States asserts that CDSOA benefits are not limited to an enterprise, industry, or group thereof. Any producer that meets the objective and neutral criteria is eligible for distributions. As illustrated by the language of the statute, CDSOA benefits are available in principle to any producer of any product on which anti-dumping or countervailing duty duties could be collected. Narrower groups than this, such as �all manufacturing� and �all agriculture,� are too broad to qualify as a �group of enterprises or industries� for specificity purposes. CDSOA payments are available to all agricultural producers and manufacturers, creating a universe of potential recipients far too large and varied to be considered a �group� in this context.

4.1147 Mexico argues that each CDSOA distribution is a de jure specific subsidy because the money is kept in separate accounts, is capped by the duties collected under a particular AD/CVD order, and is only distributed to enterprises that produce the domestic like product and were among the petitioners in the original proceeding. The United States argues specificity analysis, however, must be carried out for the challenged subsidy programme (here the CDSOA) as a whole rather than by focusing on individual disbursements. Otherwise, no matter how broadly available and broadly distributed benefits under a government programme may be, each disbursement would be considered a specific subsidy � a result that would render Article 2 of the SCM Agreement a nullity and one that Mexico cannot really mean to endorse. Mexico certainly provides no legal support or precedent for its unusual �one-outlay-at-a-time� analysis.

4.1148 Mexico also implicitly argues that the CDSOA cannot meet the �objective criteria� standard of Article 2.1(b) and, for that reason, can be found de jure specific under Article 2.1(a). The United States is of the view that, contrary to Mexico�s assertion, CDSOA distributions are based on objective criteria, and eligibility is automatic if the criteria are met. An affected domestic producer is eligible to receive a distribution for qualifying expenditures if (1) it was a petitioner or interested party in support of the petition, and (2) it remains in operation. The enterprises eligible for distributions will vary from year to year as new cases are brought; as entries are liquidated and duties are, or are not, assessed; and as orders are revoked. The list of qualifying expenditures is also neutral, objective, and applies across-the-board for all domestic industries.

4.1149 The United States argues that even if the criteria of the CDSOA were not considered to meet the description in Article 2.1(b), however, that would not mean that the CDSOA is automatically specific. Mexico would still have to demonstrate by positive evidence that the CDSOA constitutes a de jure specific subsidy, which it has not done.

4.1150 In the view of the United States, the Panel need not reach the question of adverse effects in this dispute. Nevertheless, the United States submits, Mexico has failed to meet its burden of proving adverse effects in the form of nullification or impairment of benefits. Pursuant to footnote 12 in Article 5(b), the existence of nullification or impairment under Article 5 of the SCM Agreement is to be established in accordance with the practice of application of GATT Article XXIII. Under GATT and WTO practice, the non-violation provisions of GATT Article XXIII:1(b) have offered an exceptional remedy that panels have approached with caution. There are three requirements of a non-violation nullification or impairment claim under Article XXIII:1(b): (1) the application of a measure; (2) a benefit accruing under the relevant agreement; and (3) the nullification or impairment of the benefit as a result of the application of the measure that was not reasonably anticipated.

4.1151 According to the panel in Japan � Film, the first requirement means that Article XXIII:1(b) limits non-violation claims to measures that are currently being applied. Furthermore, this interpretation is supported by DSU Article 26.1 which also states that a non-violation finding must be based on �application� of the measure.

4.1152 According to the United States, Mexico argues that footnote 12 does not prevent it from challenging the CDSOA as such under a non-violation nullification or impairment theory because Mexico has brought the claim under Article 5(b). A simple review of the text of footnote 12 confirms that it does not distinguish between �procedural� issues and �substantive� issues, as asserted by Mexico. The practice in determining the existence of non-violation nullification or impairment under GATT Article XXIII:1(b) includes the requirement that the measure be currently applied. In this sense, Mexico�s argument is circular because the determination of the existence of nullification or impairment is based upon the application of the measure, not the measure itself.

4.1153 The United States argues that with respect to this third requirement, Mexico has simply speculated that the distributions will reduce the ability of the Mexican exporter to compete and sell in the US market. Yet, Mexico does not even identify the affected Mexican imports. Indeed, Mexico cannot identify such imports as it chose to challenge the law as such.

4.1154 In the view of the United States, the nullification or impairment of benefits cannot be presumed in a non-violation claim. In its oral statement, Mexico cites the EEC � Oilseeds case for the proposition that it need not produce any evidence demonstrating the nullification or impairment because it is allegedly �systematic,� and can instead �focus� on �whether there has been an adverse change in conditions of competition legitimately expected by Mexico.� The United States argues that this argument misreads EEC � Oilseeds, where the Panel sustained the non-violation claim on the basis that the complainant had shown that the competitive relationship was actually upset. The Panel did not simply accept the proposition that the EEC subsidy upset that relationship per se. Nor did the Panel state that nullification or impairment may be presumed if it is �systematic� in nature. In fact, the United States submitted voluminous data detailing the operations and mechanisms of the subsidy programmes and adverse effects to show that its exporters of the particular goods in question suffered from the change in the competitive relationship. In the end, the Panel sustained the claim, having �carefully analyzed� the data. Mexico has submitted no such detailed data and, in fact, as explained above, has not even managed to identify any particular products for which the competitive relationship has been or will of necessity be upset.

4.1155 The United States posits that Mexico's expectations with respect to US tariff concessions are only reasonable with respect to the products covered by those tariff concessions. Here, the CDSOA is not a product-specific subsidy and Mexico, having challenged the law as such, did not (indeed, cannot) identify any products to which benefits accrue. The CDSOA itself does not identify any specific product but can apply to any product subject to an anti-dumping or countervailing duty order. The amount of money received under the CDSOA is not linked to the level of production or sale of that product or designed to supplement those levels. As the CDSOA is not a product-specific subsidy, Mexico's claims that CDSOA per se nullifies or impairs benefits under GATT Articles II and VI should be rejected.

4.1156 The United States submits that there is no reason to believe that the CDSOA will cause �more than a de minimis contribution� to any nullification or impairment either. Mexico provides no justification for its assumption that offsets will be used to lower domestic prices or have any effect on the domestic market. Under the CDSOA, domestic producers may use their offset for any purpose, including making gifts to charity, compensating workers, developing non-subject products, or paying creditors. How any of these activities could affect Mexican producers of the products subject to orders has not been established.

4.1157 The United States is of the view that Mexico has also failed to establish the third requirement when it claims that it could not have reasonably anticipated the introduction of the CDSOA because previous legislative proposals had not been enacted into law. The question is whether Mexico was on notice that the United States could pass such a measure. The answer to that question is �yes.� Discussions in Congress concerning measures similar to the CDSOA took place prior to and during the Uruguay Round negotiations. Thus, Mexico could have reasonably anticipated that such a measure could become law in the United States.

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

4.1158 Based on the ordinary meaning of the text and the limited guidance provided by the 1916 Act reports, the United States submits that the test to determine whether a measure is "specific action against" dumping or subsidization is whether a measures authorizes: (1) specific action: a measure based upon the constituent elements of dumping or a subsidy, i.e., action based upon imported products being sold at less than normal value, or a financial contribution and a benefit is granted; (2) against: which burdens (e.g. imposes a liability); (3) dumping or subsidization: the dumped or subsidized imported good, or an entity connected to in the sense of being responsible for the dumped or subsidized good such as the importer, exporter or foreign producer.

4.1159 The United States argues that the complaining parties all avoid the important distinction noted by the Appellate Body between the words "specific action" in the main provision and "action" in the footnote. The absence of the word "specific" in footnotes 24 and 56 means that the modifier "specific" has meaning which must be given effect. This distinction was also recognized by the panels in 1916 Act. The panels repeatedly stated that �specific action� is action based upon �dumping as such.� In the view of the United States, the panels meant what they said, meaning, that the action must be based directly upon the constituent elements.

4.1160 The United States asserts that, unlike the 1916 Act, the CDSOA is not based upon the constituent elements of dumping or a subsidy. The plain language of the CDSOA does not instruct Customs to take action in the form of disbursements in response to situations or conduct presenting the constituent elements of dumping or subsidization.

4.1161 It is the view of the United States that the complaining parties ignore these important distinctions and argue that the CDSOA is "specific action" because distributions are linked, however remotely, to anti-dumping and countervailing duty orders. Not only do the complaining parties� arguments broaden the definition of �specific action� beyond that established in the 1916 Act case, they broaden the definition to such a degree that it would impose a whole host of new obligations on Members, including the requirement that all legal subsidies provided from the general revenue should not be derived from AD/CVD duties, especially if the recipients of those legal subsidies are industries who competed with products subject to AD/CVD orders.

4.1162 Nor is the fact that CDSOA distributions are funded by AD/CVD duties legally relevant. The text of Articles 18.1 and 32.1 does not refer to duties or the uses to which the duties collected may be put. There was no linkage between duties and the civil and criminal actions in the 1916 Act case. It is not clear why CDSOA would be acceptable if only the payments were made through the general Treasury accounts rather than the special accounts.

4.1163 According to the United States, the complaining parties have also failed to establish that the CDSOA is an action �against� dumping or a subsidy. The ordinary meaning of the term �against� suggests that the action must operate directly on the imported good or the importer. This interpretation is supported by the definition of dumping in GATT Article VI:1. That provision defines dumping as products of one country being introduced into the commerce of another country at less than normal value. Thus, under Article 18.1, specific action against dumping is specific action against products being introduced into the commerce of another country at less than normal value. In other words, the action must be against imported products.

4.1164 Indeed, in the United States' view, the complaining parties agree that the impact of the specific action must be on the imported good or an entity responsible for the dumping or subsidized good such as the importer, exporter or foreign producer. They would, however, have this Panel rewrite Articles 18.1 and 32.1 to read �no specific action with a presumed negative effect on import goods or foreign producers...� in contravention of DSU Article 3.2. Further, such a test is overly broad and unworkable by including any type of domestic legislation which improves the position of the domestic industry.

4.1165 The United States argues that if the complaining parties could show the harmful effects from the CDSOA that they allege, they would have brought a claim under SCM Agreement Article 5(c). Reading a presumed effects test into Articles 18.1 and 32.1 is not only not supported by the text of those provisions but would convert an actionable subsidy claim into a prohibited subsidy, thereby allowing the complaining parties to circumvent the requirements of Articles 3 and 5 of the SCM Agreement.

4.1166 Finally, some complaining parties claim that the CDSOA is a specific action against dumping or a subsidy because the recipient is a domestic producer that is "affected" by dumping or subsidization. The United States argues that the statute, however, does not require producers to show they are injured by dumped or subsidized imports to receive distributions.

4.1167 The United States agrees that Footnotes 24 and 56 serve to clarify the scope of obligations under Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively. Actions against dumping and subsidies as such must proceed under the Antidumping or SCM Agreement; other actions, however, such as actions under GATT Article XVI to address the effects of dumping and/or subsidies, are explicitly permitted by footnotes 24 and 56. The CDSOA, to the extent that the Panel were to find it to be an action against dumping and/or subsidies, is nevertheless clearly an action under GATT Article XVI to address the effects of such practices.

4.1168 According to the EC, action under GATT Article XVI is not covered by the footnotes because the SCM Agreement interprets Article XVI. Yet, the EC does not allege that GATT Article XVI limits the form of specific action that can be taken against dumping or subsidization within the meaning of Articles 18.1 and 32.1. Nor is the EC correct that the SCM Agreement necessarily interprets GATT Article XVI. The United States argues that even if such "interpretation" were a valid ground to exclude GATT Article XVI under footnote 56, the EC offers absolutely no reason why action under GATT Article XVI should not be permitted under footnote 24 in the Antidumping Agreement.

4.1169 The United States asserts that the EC argues that the term �under� actually means �confer and regulate positively the right� to take action. Yet, according to the United States, the ordinary meaning of the term �under� suggests that action �in accordance with� other GATT provisions is permissible. This is also consistent with both panel reports in the 1916 Act case which interpreted the word �under� in footnote 24 to mean �compatible with.�

4.1170 The EC further states that footnote 24 clarifies that Article 18.1 "does not prevent Members from taking action in response to situations that involve dumping, where the existence of dumping is not the event that triggers such action." The panels in the 1916 Act case and Indonesia � Auto Industry, however, recognized that action could be taken to address dumping and subsidization (including its effects or causes) as long as it did not address dumping and subsidization, as such. Thus, in the view of the United States, footnotes 24 and 56 address actions against dumping and subsidies. If the Panel were to conclude that the CDSOA is action against dumping or a subsidy, footnotes 24 and 56 would operate to permit the CDSOA.

(iii) The CDSOA does not violate WTO standing obligations

4.1171 With respect to WTO obligations on standing, the complaining parties� theories are not grounded in the language of Articles 5.4 and 11.4. The United States argues that to express �support� for something means to �[u]phold or maintain the validity or authority of (a thing)�; �give assistance in (a course of action)�; �[s]trengthen the position of (a person or community) by one�s assistance or backing�; �uphold the rights, opinion, or status of�; �stand by, back up�; �[p]rovide authority for or corroboration of (a statement etc.)�; �bear out, substantiate�; �speak in favor of (a proposition or proponent).� The word �support� as used in Articles 5.4 and 11.4 does not require an inquiry into the reasons for that support. Even if relevant, however, the complaining parties again fail to submit any evidence to support their claims. Speculation about what a statute may do or not do is not sufficient to support a claim of inconsistency.

4.1172 The United States is of the view that Articles 5.4 and 11.4 contain identical standing requirements for initiating investigations which are expressed as numerical benchmarks. Articles 5.4 and 11.4 are implemented in US law in sections 702(c)(4) and 732(c)(4) of the Tariff Act of 1930, as amended. These provisions were not modified in any way by the CDSOA. On its face, the CDSOA does not make it any more likely that any investigation will be initiated by the Commerce Department. In addition, it is undisputed that the Commerce Department continues to apply the numerical industry support benchmarks set forth in the Antidumping and SCM Agreements and that the CDSOA has not had any impact on the manner in which the Commerce Department applies those benchmarks.

4.1173 According to the United States, there is no requirement for administering authorities to determine the reasons for the positions taken by members of the domestic industry. Arguments from the complaining parties that the �object and purpose� of the standing provisions or their Uruguay Round negotiating history support reading a qualitative assessment requirement into the standing provisions are similarly unavailing. There is no stated purpose of the standing provisions. Moreover, the negotiating history reflects the objection of certain countries to (1) initiations by the government, (2) petitions from a single producer or Congressman, or (3) presumptions of support. The concern was about whether assertions of support made by one party (or a government) were representative of the domestic industry as a whole. The underlying reasons for that support was not an issue during the negotiations and is not relevant under Articles 5.4 and 11.4.

4.1174 The United States does not deny that WTO Members must uphold their obligations under the covered agreements in good faith. The United States argues that it has done so both pre- and post-CDSOA enactment. The complaining parties, however, provide no support for their claim that the CDSOA �by its very operation precludes the possibility of an examination in good faith of industry support under Articles 5.4 and 11.4.� The complaining parties do not assert that the CDSOA prevents the United States from calculating in good faith whether these numerical thresholds are met, but rather that this good faith calculation is not enough. The United States must second guess whether producers� expression of support are �true.� This is an unworkable requirement and one that would render it impossible for any Member to exercise its standing obligations in �good faith.�

4.1175 Even assuming, arguendo, that the CDSOA provides some inducement to file or support petitions, the United States submits that the mere provision of such an inducement is not contrary to the Antidumping Agreement or the SCM Agreement. The very existence of the Antidumping and SCM Agreements gives domestic interests a strong financial inducement to file, and support, petitions. If the mere provision of an inducement to file or support petitions is found to violate Articles 5.4 and 11.4, however, Members will lose control over the implementation of their own AD and CVD laws. Simply stated, any change in methodology that favours the domestic industry may induce a domestic party to file or support a petition. Such a one-sided interpretation is unreasonable.

4.1176 Finally, the United States notes that the CDSOA conditions eligibility for disbursements on whether the domestic party indicated such support to the International Trade Commission. The information submitted by domestic parties to the International Trade Commission on this issue has no bearing whatsoever on the Commerce Department's standing determination.

4.1177 The United States argues that, as a practical matter, it is highly improbable that CDSOA is a factor at all in a domestic company�s or union�s consideration of whether to support a petition. Payments received under the CDSOA are not a consequence or quid pro quo of an expression of support for an anti-dumping or countervailing duty petition. For distributions even to be possible, the petition must prove (1) dumping or subsidization, (2) injury, and (3) causation, and an order must be imposed. That a petition will result in an order is far from guaranteed: from 1980 to 2000, only 36.1 per cent of the petitions filed resulted in affirmative determinations by both the US Department of Commerce (dumping or subsidization) and the US International Trade Commission (injury and causation). Whether the producer will then receive payments under the CDSOA is then further contingent on (1) the level of imports, (2) the level of the margins, (3) the number producers supporting the petition, (4) the number of producers filing certifications, and (5) the amount of qualifying expenditures.

4.1178 The United States asserts that any payments made under the CDSOA as a result of a successful petition would be at some unknown, future date. The time from filing a petition until duties are assessed and eligible for distribution under the CDSOA is measured in years and dependent on a series of factors: (1) whether an administrative review is requested (by a foreign producer, importer, domestic producer); (2) whether an appeal is taken to the US Court of International Trade and then to the US Court of Appeals for the Federal Circuit; and (3) whether there are remands to the agency for further consideration of particular issues and re-examination by the reviewing court(s). While entries can be liquidated in as little as two years after merchandise enters the United States, liquidation in many cases is 3 to 5 years after entry and can be as long as 10 years in unusual situations. The "promise" of a remote, uncertain and unknown payment is hardly worth gambling a million plus dollars on a "frivolous" anti-dumping or countervailing duty case as complaining parties suggest.

(iv) The CDSOA does not violate WTO undertaking obligations

4.1179 The United States argues that the Antidumping and SCM Agreements do not create an obligation for administering authorities to enter into undertakings. Moreover, when a Member chooses to consider a proposed undertaking, the agreements are quite clear that the undertaking may be rejected because it is �impractical� or for any other �policy reason.� Indeed, the complaining parties are well aware of this gap in their argument.

4.1180 Further, according to the United States, the complaining parties� argument misrepresents the significance under US law of domestic industry views regarding proposed undertakings. US law merely requires that the Commerce Department, to the extent practicable, consult the consuming and domestic industries before determining whether an undertaking is in the �public interest.� Moreover, the law stipulates that, in analyzing the public interest, the Commerce Department is to take into account the following factors: US international economic interests, the impact on consumer prices and supplies of merchandise, and the impact on the competitiveness of the domestic industry. Thus, the views of the domestic industry do not in any way dictate the outcome of the public interest analysis and, for this reason, they do not determine the decision to accept or reject a proposed undertaking. Indeed, the domestic industry has opposed more than 75 per cent of the undertakings which the United States has accepted since 1996.

4.1181 Finally, the oral statements of Indonesia, India, and Argentina focus on the impact on developing countries of the alleged �disincentives� created by the CDSOA with respect to undertakings. The United States argues that none of these statements refers to any evidence that the CDSOA creates �disincentives� for the United States to enter into undertakings with developing country Members. US law stipulates that a key factor in the decision to accept an undertaking is the international economic interests of the United States. It is without question that the advancement of the economies of developing countries is an important international economic interest of the United States. Moreover, Argentina�s claims regarding Article 15 of the Antidumping Agreement are simply not within the Panel�s terms of reference and therefore cannot be considered.

(v) The CDSOA does not violate GATT Article X:3

4.1182 The United States argues that the complaining parties have made it perfectly clear that the allegedly offending measure with respect to Article X:3(a) is US implementation of its AD and CVD laws, not US implementation of CDSOA. The complaining parties� panel requests allege WTO breaches by means of CDSOA, not by means of the provisions of US law under which US authorities determine the adequacy of industry support for petitions or consider whether to accept price undertakings. Because US implementation of its AD and CVD laws is not within the terms of reference of this dispute, the Panel should reject the Article X:3(a) claims.

4.1183 In the view of the United States, the complaining parties have not produced any evidence that any particular AD or CVD investigation has been handled by the United States in a non-uniform, partial, or unreasonable manner as a result of the CDSOA. The complaining parties� entire Article X:3(a) argument rests on their belief that the CDSOA will influence domestic producers to bring or support an investigation, or oppose an undertaking, they otherwise would not. They have, however, not even provided evidence that, �but for� the CDSOA, domestic producers would not otherwise have supported a petition or opposed an undertaking. Moreover, even if they had brought forth such evidence, it would not implicate the actions of the United States in implementing the Antidumping and SCM Agreements. The United States argues that there is no requirement in those agreements that the administering authorities (1) examine the reasons behind industry support for petitions or (2) accede to domestic industry opposition to an undertaking.

4.1184 The complaining parties rely on Bovine Hides to support their claim that a law can be inconsistent with Article X:3(a) if it gives rise to the �inherent danger� of partial administration. Yet, The United States argues, in that case, the Argentine law concerned access to confidential information and the law had been applied. In this case, the complaining parties have attempted to use Article X:3(a) to challenge the CDSOA as such. Unlike the Argentine law, the CDSOA will hardly give rise to an �inherent danger� of partial administration because it does not affect Commerce�s administration of US standing and undertaking provisions.

4.1185 Finally, in regard to the claim that the CDSOA-type laws will proliferate, the United States notes that, even if this were true, it would have no bearing on Article X:3(a). Moreover, to the extent that the complaining parties maintain that such proliferation will cause more AD or CVD cases to be pursued, complaining parties are simply reiterating their unsubstantiated claims about the impact of the CDSOA on standing inquiries and undertaking decisions.

I. SECOND ORAL STATEMENTS OF THE COMPLAINING PARTIES

1. Australia

4.1186 The central claim made by Australia is that the Continued Dumping and Subsidy Offset Act of 2000 is a specific action against dumping and a subsidy otherwise than in accordance with the provisions of GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements.

4.1187 In its Second Written Submission, the United States asserts that findings in the United States � Antidumping Act of 1916 case provide only limited guidance in this dispute. The United States submits that the test to determine whether a measure is �specific action against� dumping or a subsidy is whether the measure authorises (1) action based upon the constituent elements of dumping or a subsidy (2) which burdens (3) the dumped or subsidised goods of an entity connected to the dumped or subsidised goods. The United States then argues that the Byrd Amendment is not based upon the constituent elements of dumping or a subsidy and does not burden dumped or subsidised goods or entities responsible for those goods.

4.1188 Australia submits that the United States� proposed test ignores that the Appellate Body�s findings on the meaning of the phrase �specific action against dumping� in the 1916 Act case gave meaning to the full phrase, as well as to the word �against�. The Appellate Body�s findings did so in the context, and in light of the object and purpose, of the broader framework of rules governing the imposition of anti-dumping measures provided by GATT Article VI as interpreted by the Anti-Dumping Agreement.

4.1189 According to Australia, the United States� proposed test is based on selective dictionary meanings of the word �against�. It ignores other, equally valid, ordinary meanings. Moreover, none of the meanings, including those put forward by the United States, compel the conclusion that a specific action �against� dumping or a subsidy must apply exclusively to the imported good or to an entity connected to those goods, and must be burdensome to those goods or to that entity.

4.1190 The United States� proposed test 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 governs specific action against �dumping of exports� from another Member. It does not govern specific action against �dumped exports� or �the dumpers of exports�. Neither does the definition of dumping in GATT Article VI:1 � �by which products of one country are introduced into the commerce of another country at less than the normal value of the products� � compel such a conclusion.

4.1191 Similarly, Australia submits, Article 32.1 of the SCM Agreement governs specific action against �a subsidy� of another member. It does not govern specific action against �subsidised exports� or �the importers of subsidised exports�. Moreover, �a subsidy� is expressly defined in Article 1 of the SCM Agreement: a financial contribution by a government, or any form of income or price support in the sense of GATT Article XVI, that confers a benefit. The meaning of �a subsidy� within the context of Article 32.1 put forward by the United States is incompatible with the definition of a subsidy in Article 1.

4.1192 The United States argues that the Byrd Amendment is not based upon the constituent elements of dumping or a subsidy and does not burden dumped or subsidised goods or entities responsible for those goods.

4.1193 Australia is of the view that the United States� argument is premised on a new misquotation of the Appellate Body�s findings in the 1916 Act case. The United States substitutes �based upon� for the words �in response to� used by the Appellate Body. These two phrases are not equivalent in meaning.

4.1194 According to Australia, the United States� argument continues to ignore that the existence of the constituent elements of dumping or a subsidy is a necessary condition to a domestic producer�s potential entitlements under the Byrd Amendment. Yet, the United States says at paragraph 90 of its Second Written Submission: �For distributions � to be possible, the petition must prove (1) dumping or subsidisation � Whether the producer will then receive payments under the [Byrd Amendment] is then further contingent on (1) the level of imports, (2) the level of the margins ...�. In the context of this statement, margins means the anti-dumping or countervailing duties to be applied. Thus, according to the United States itself, offset payments under the Byrd Amendment are in fact twice conditional on the existence of the constituent elements of dumping or a subsidy.

4.1195 The United States argues that specific action against dumping and a subsidy must be burdensome. Australia does not consider that this argument is correct. The Byrd Amendment is of course the measure at issue in this dispute. It is in that context that Australia has said that offset payments under the Byrd Amendment alter the competitive relationship between dumped or subsidised goods and domestically-produced like products in ways not contemplated by GATT 1994 and the Anti-Dumping and SCM Agreements. That does not mean, however, that Australia agrees that the impact of specific action against dumping or a subsidy must necessarily be on the imported good or an entity responsible for the imported good as the United States asserts. Australia argues that once again, the United States is misrepresenting Australia�s arguments and refuting arguments that Australia has not made.

4.1196 The United States also argues that, even if the Byrd Amendment is an action against dumping or a subsidy, footnotes 24 and 56 would operate to permit the Byrd Amendment. However, as detailed in Australia�s First and Second Written Submissions, Australia is of the view that footnotes 24 and 56 do not create exceptions to the scope of Articles 18.1 and 32.1. For so long as the Byrd Amendment constitutes specific action against dumping and a subsidy, it is governed exclusively by Articles 18.1 and 32.1.

4.1197 Concerning the �Findings of Congress�, even deferring to the United States on the status in domestic law of the �findings� section, the second sentence of section 754(a) of the Byrd Amendment states: �Such distribution shall be known as the �continued dumping and subsidy offset�.� In the words of the United States in answer to the question from the European Communities, the purpose of the Byrd Amendment is specifically identified in the law, and reflected in the language of the law itself. As set out in Australia�s First Written Submission, the purpose of the Byrd Amendment � as specifically identified in the Act and reflected in the language of the law itself � is to counterbalance, act against and remedy continued dumping and subsidisation.

4.1198 Australia argues the Byrd Amendment is a specific action against dumping and a subsidy other than in accordance with the provisions of GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements. It is thus inconsistent with Article 18.1 of the Anti-Dumping Agreement, in conjunction with GATT Article VI:2 and Article 1 of the Anti-Dumping Agreement, and with Article 32.1 of the SCM Agreement, in conjunction with GATT Article VI:3 and Article 10 of the SCM Agreement.

4.1199 Australia has also claimed that the Byrd Amendment in inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

4.1200 The United States seems to be asserting that Australia�s argument would mean that any change in methodology that might benefit the domestic industry in any particular case could provide an incentive for domestic industry to support a petition in that case and thus violate Articles 5.4 and 11.4. Australia observes that implementation of anti-dumping and countervailing duty laws by the United States is not before the Panel in this dispute. Whether a change in methodology might provide an incentive for domestic industry to support a petition would need to be assessed in the circumstances of a particular case. As a general observation, however, Australia recalls the Appellate Body�s statement in United States � Hot-Rolled Steel 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�. Australia considers this statement to be applicable to any action by a Member to implement anti-dumping and countervailing duty laws.

4.1201 The United States argues at length that the process leading to the imposition of anti-dumping or countervailing duties is in any case so difficult, time-consuming and expensive that the Byrd Amendment is unlikely to affect the determination of standing. According to Australia, even if that were so, the mere possibility that the Byrd Amendment could affect the standing requirement in any circumstances must be a violation of Articles 5.4 and 11.4.

4.1202 In the opinion of Australia, the United States has not rebutted the prima facie case made by Australia that the Byrd Amendment constitutes specific action against dumping and a subsidy not permitted by GATT 1994 as interpreted by the Anti-Dumping and SCM Agreements. Neither has the United States rebutted the prima facie case made by Australia that the Byrd Amendment frustrates the intent of Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement to establish whether an application for an anti-dumping or countervailing duty investigation is truly being made by or on behalf of the domestic industry.

2. Brazil

(a) Introduction

4.1203 The systemic concerns raised by Brazil in this case are: first, the introduction of the notion of monetary compensation to aggrieved parties into the remedial structure of the specific agreements at issue and, more generally, into the WTO structure. Brazil submits that the endorsement of this practice would create an entirely new remedial structure to address dumping and subsidization not contemplated by either the agreements at issue in this proceeding or in any of the WTO agreements. The US cannot point to a single word, phrase, or provision that authorizes the use of such remedies and ignores the very specific language in the agreements limiting the remedies available to address dumping and subsidization. Second, Brazil believes that the CDSOA will substantially increase both the burden on developing country companies and the incidence of anti-dumping and countervailing measures applied to these companies.

(i) CDSOA: Payment programme, subsidy or specific action against dumping and subsidies?

4.1204 At paragraph 2 of its second submission, the US makes the claim that �the complaining parties do not dispute� that the CDSOA is a payment programme. To the extent that a payment programme is defined as any programme that transfers money from the government to a private party, then the CDSOA would fall within this definition. Similarly, the CDSOA might be characterized as a subsidy programme in that it makes a �financial contribution� which �benefits� the recipient company. However, these are not the issues before the panel. Brazil asserts that no one is asking the panel to define a payment programme and determine whether the CDSOA is a payment programme. Indeed, Brazil can find no relevance to such a determination under the GATT 1994, the AD Agreement or the SCM Agreement.

4.1205 Brazil asserts that in the 1916 Act case, both the panel and Appellate Body found that specific actions against dumping and subsidization other than those specifically authorized in the AD and SCM Agreements are inconsistent with the obligations of the United States under these agreements. The sole question is one of interpretation of Article 18.1 of the AD Agreement and Article 32.1 of the SCM Agreement.

(ii) A determination that the CDSOA is specific action against dumping does not involve a �presumed negative effects test.�

4.1206 The US also asserts in paragraph 5 of its second submission that the complaining parties are relying on a �presumed negative effects test� for which there is no authority under Article 18 of the AD Agreement or Article 32 of the SCM Agreement. In fact, Brazil argues, it is the US that has suggested this test, not the complaining parties. In paragraph 92 of the first submission of the United States, the US affirms 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�. Brazil�s arguments proved that even under the US test � which finds no support whatsoever in the relevant Agreements � the CDSOA payments must be considered to be �against� dumping or subsidization.

4.1207 According to Brazil, the US position, as summarized in paragraph 5 of its second submission, is that the purpose, intent, objective, operation, and effect of the CDSOA is irrelevant. This position inevitably leads to one of two possible conclusions in interpreting Articles 18.1 and 32.1. If one is not permitted under the agreements to determine the purpose of specific actions taken when the constituent elements of dumping and subsidization are present in order to determine whether these actions are �against� dumping and subsidization, then all actions taken when the constituent elements of dumping and subsidization are present must be considered �against� dumping. Or, if to establish whether the actions are �against� dumping, one is not permitted to determine the purpose of specific actions taken when the constituent elements of dumping and subsidization are present, then Articles 18.1 and 32.1 provide limitations which can never be evaluated and are, therefore, meaningless. Thus, in Brazil's view, the US is suggesting a limitation on interpretation of the agreements that prevents any meaningful evaluation of the action at issue, namely the CDSOA.

4.1208 Brazil argues that Article VI:2 of the GATT 1994 specifically permits the use of anti-dumping measures �in order to offset or prevent dumping�. Articles 7, 8 and 9 of the AD Agreement permit the use of provisional measures, undertakings and anti-dumping duties respectively to offset or prevent dumping. Article 18.1 of the AD Agreement specifically limits measures against dumping to those specified in Article 7, 8 and 9. In combination, these articles restrict measures to offset or prevent dumping to provisional measures, undertakings and anti-dumping duties. Brazil wonders how one determines whether or not actions are to offset or prevent dumping, if one cannot, as the US suggests, look at the purpose, intent, operation or effects of such actions taken when the constituent elements of dumping are present ? Brazil submits that, in essence, the US is requesting the panel to read the limitations of Articles 18.1 and 32.1 out of the agreements.

(iii) The CDSOA payments are not �remotely� linked, but directly linked, to the constituent elements of dumping and subsidization

4.1209 In paragraph 43 of its second submission, the US argues that the complaining parties are suggesting that any linkage between actions and dumping or subsidization, no matter how remote, satisfy the requirement that the action be �specific action�. The US then goes on to characterize the position of the complaining parties as including within the definition of �specific action against dumping� all actions where an AD or CVD order are a �necessary prerequisite� or a �condition� or �contingency� for action�. Brazil argues that this characterization is simply false.

4.1210 According to Brazil, the US has attempted to use examples where either the levying of anti-dumping and countervailing duties are a �necessary prerequisite� to an action or where an action is �contingent� on the collection of such duties as the basis to assert that the complaining parties are attempting to broaden the limitations of Articles 18.1 and 32.1. In fact, the opposite is true. Distributing revenues from anti-dumping and countervailing duties to charities is clearly contingent on the collection of such duties. However, such action is in response to a stimulus other than dumping or subsidization � for example, the need of the society for the activities performed by the charity. The distribution is irrelevant in terms of remedying dumping or subsidization. The action is neither against nor in response to dumping or subsidization. Similarly, flying the flag at half-mast after determinations of dumping and subsidization is an action that is contingent on or conditioned on such determinations. However, it is irrelevant to the purposes of offsetting or preventing dumping or subsidization and, therefore, not against dumping or subsidization. Thus, contrary to the assertion by the United States, Brazil is not seeking to proscribe all payments contingent on or conditioned on the constituent elements of dumping or subsidization. It is simply seeking to proscribe, as do Articles 18.1 and 32.1, actions which are �against� dumping and subsidization, including payments which offset or prevent dumping but which are not authorized measures under either the AD or SCM Agreements.

4.1211 Finally, Brazil refers the panel to the language of Articles 18.1 and 32.1. In the view of Brazil, the language does not, as the US would have the panel believe, state that no specific action may be taken against the imported product, the importer or the exporter to prevent or offset dumping or subsidization. There is no such qualification. Rather, these provisions state that �no specific action� at all is authorized against dumping or subsidization except the actions specified in the agreements. The only limitations are that the action must be �specific� and it must be �against� dumping and subsidization. Thus, the relevant inquiry is not whether the action is imposed on the product, the importer or the exporter, but rather whether the action is �specific� and �against� dumping and subsidization.

(iv) Are actions against dumping and subsidization proscribed by Articles 18.1 and 32.1 limited to actions that are related to the revenues from anti-dumping and countervailing duties?

4.1212 In paragraph 45 of its second submission, the United States asserts that: �Brazil claims not to challenge the right of the United States to choose how its revenues are disbursed in general, but just its right to disburse anti-dumping and countervailing duties�. Brazil asserts that it has never taken the position that CDSOA payments are �specific action against dumping and subsidization� solely because these payments are derived from the revenues of anti-dumping and countervailing duties. Rather, Brazil has stated that one of the factors linking the CDSOA payments to the constituent elements of dumping is the fact that no such payments would be available absent anti-dumping and/or countervailing duty orders.

4.1213 Brazil notes, however, that while the source of the funds is a factor in evaluating the CDSOA, Brazil has not represented this as either the primary factor or the exclusive factor linking the CDSOA payments to the constituent elements of dumping. Indeed, the linkage emphasized by Brazil is between the �entitlement� to such payments and the anti-dumping and countervailing duty orders, not the source of the funding for such payments. Brazil argues that the fact that both the entitlement to payment and the source of revenues for the payment under the CDSOA are dependent on anti-dumping and countervailing duty orders simply strengthens the linkage. Entitlement to CDSOA payments are based on the existence of anti-dumping and countervailing duty orders. Similarly, the CDSOA payments themselves are only available if there are anti-dumping and countervailing duty orders in place because, otherwise, there would be no revenues to distribute. Whether or not entitlement to payments from revenues other than anti-dumping and countervailing duties would represent a �specific action against dumping or subsidization� would depend on the facts in such a case.

(v) CDSOA payments are totally dependent on the constituent elements of dumping and subsidization

4.1214 Brazil asserts that in paragraph 42 of its second submission, the US again argues that distributions under the CDSOA �have nothing to do with the constituent elements of dumping� because they are �based on certifications from an �affected domestic producer� regarding its �qualifying expenditures��. According to Brazil, the US argument begs the question of what is �affecting� the producer. If the answer to this question is the dumping or the subsidization, then the text of the CDSOA makes abundantly clear what the intent of the measure is. The US ignores the fact that whether the recipient is an �affected domestic producer� or has a �qualifying expenditure� is irrelevant if there is no anti-dumping or countervailing duty order against a product produced by that �affected domestic producer�. Similarly, the existence of a �qualifying expenditure� is irrelevant unless there is an anti-dumping or countervailing duty order on the product to which that �qualifying expenditure� applies. These are simply additional conditions that must be satisfied in order to receive the CDSOA payments. However, without the existence of anti-dumping or countervailing duty orders, these conditions become irrelevant.

4.1215 In the view of Brazil, the existence of additional criteria to qualify for the CDSOA payments is similar to the additional criteria at issue in the 1916 Act dispute. There, an additional requirement to demonstrate �antitrust intent� was required beyond demonstration of dumping and injury to qualify for the treble damages provided under the law or to be subject to the criminal penalties. Notwithstanding these additional requirements beyond demonstration of dumping and injury, the panel and Appellate Body found these remedial actions to be specific actions against dumping not authorized under the AD Agreement and, therefore, inconsistent with Article 18.1. Similarly, the fact that entitlement to remedial actions under the CDSOA are dependent on demonstrating more than the existence of dumping and injury do not make these actions any less actions against dumping or subsidization.

(vi) Balance of concessions negotiated in the Uruguay Round

4.1216 It is the view of Brazil that the AD and SCM Agreements represent a balance of concessions negotiated by WTO Members. Changes in any of the material terms of the agreements can upset this balance of concessions. The remedies permitted under the agreements are among the most important terms of the agreements. Specifically, the position of Members on the appropriate thresholds for determinations of injury, causation, dumping, subsidization, and the duration of measures will vary depending on the nature of the remedy being imposed. From the perspective of Members with concerns about the adverse effects of anti-dumping and countervailing measures on exports, if more severe measures are permitted, higher thresholds for application of those measures should be required. Conversely, Members with concerns about the adverse effects of dumping and subsidization on domestic industries will likely seek more severe measures and will want lower thresholds for application of those measures as the protection afforded by these measures for domestic industries decline.

4.1217 Brazil argues that Articles 18.1 and 32.1 clearly demonstrate that Members did not agree to open-ended remedies when negotiating the AD and SCM Agreements. Members agreed to specific remedies. Had Brazil understood that in addition to the application of anti-dumping and countervailing duties, Members were permitted to provide CDSOA type payments to industries in the importing country, Brazil�s position on �sunset� of anti-dumping and countervailing duty measures or on undertakings might have been different. After all, injury might be eliminated more quickly if industries are receiving monetary awards in addition to the protection of the measures agreed to in the agreements. In addition, exporters might have a greater interest in undertakings and want such undertakings to be mandatory if they understood that the revenues from anti-dumping duties would benefit their competitors in the export market.

4.1218 Brazil submits that as part of the balance of concessions made in negotiating the AD and SCM Agreements, Members put limits on the remedies available to authorities in importing countries to address dumping and subsidization. Brazil is of the view that the United States should not be permitted to unilaterally upset this balance of concessions.

(b) Conclusion

4.1219 According to Brazil, a finding by the panel that the CDSOA is not action against dumping and subsidization would render Articles 18.1 and 32.1 of the AD and SCM Agreements respectively meaningless. In so doing, it would permit Members to take remedial measures against dumping and subsidization, which are not provided for in the GATT 1994, the AD Agreement, and the SCM Agreement. This, in turn, would eliminate the core disciplines imposed by these agreements contrary to the specific terms of Articles 18.1 and 32.1. Resolution of whether the CDSOA is an impermissible specific action against dumping and subsidization does not require the panel to draw a line between permissible and impermissible actions to be applied to the many possible claims based on alternative factual scenarios. Rather, the panel needs only to address the specific facts at issue in this proceeding and evaluate those facts in light of the limitation imposed on remedial measures in Articles 18.1 and 32.1 of the AD and SCM Agreements respectively. The CDSOA payments are specific action to offset or prevent dumping and are not authorized by the relevant agreements.

3. Canada

(a) Introduction

4.1220 Canada argues that none of the arguments advanced by the United States has persuasively responded to the submissions made by the complainants. Canada considers that the US attempts to divert the Panel�s attention from the issues by, in effect, arguing past the complainants.

(b) Specific action against dumping or a subsidy

(i) �Subsidy� or not, the Byrd Amendment as a �specific action� is subject to the disciplines of Articles 18.1 and 32.1

4.1221 Canada believes that as a first step, it is important to recall again what this case is about. The measure at issue, the Byrd Amendment, provides for the distribution of subsidies. Indeed, the defence of the United States seems to rest entirely on this point. But, Canada argues, subsidies are subject to a range of disciplines under the WTO Agreement. These disciplines include Article 3 of the SCM Agreement, Article III of GATT 1994, and so on. And the United States agreed with this proposition in response to a direct question at the First Hearing. Finally, the source of funding of a subsidy does not shield it from scrutiny by a panel. That is, whether a subsidy is funded out of special taxes, duties or general revenue does not render an otherwise illegal subsidy consistent with the WTO Agreement. The United States expressly admitted as much when it forcefully stated, also at the First Hearing, that there is nothing special about anti-dumping or countervailing duties as sources of funds.

4.1222 And so, according to Canada, the �sovereign right� to appropriate anti-dumping or countervailing duties is not absolute. That right is subject to obligations negotiated and undertaken by the Members of the WTO. Canada submits that US protestations concerning its �sovereign rights� are, therefore, irrelevant in this context.

4.1223 The issue before this Panel is whether these subsidies � these offset payments � granted under the Byrd Amendment constitute �specific action against dumping� or a subsidy.

(ii) US arguments on �specific action ��

4.1224 The United States dismissed the Appellate Body�s findings in the 1916 Act case as being of �limited guidance�. The United States then proposes its own three-part test for determining compliance with Articles 18.1 and 32.1.

(iii) US arguments are incorrect

4.1225 Articles 18.1 and 32.1 prohibit �specific action against dumping� or a subsidy except those in accordance with the provisions of GATT 1994.

4.1226 In Canada's view, nothing in the treaty language requires that the measure at issue � the �specific action� � itself contain the �constituent elements of dumping�. Nothing in Articles 18.1 and 32.1 limits the scope of that Article to measures that �operate directly on the imported good or the importer.� [emphasis added] And Articles 18.1 and 32.1 address dumping and a subsidy as practices; there is no mention in either article of dumped goods, or �an entity connected� to those goods. In other words, the test proposed by the United States has no basis in the text of the Articles.

4.1227 Canada asserts that the interpretation of the Appellate Body in the 1916 Act case of Article 18.1 is fully faithful to the words of the treaty. �Specific action against dumping�, it said, refers to �action in response to situations presenting the constituent elements of dumping.� That the Act might have had other purposes or other requirements did not change its basic operation. That the United States might have called the practice something other than dumping � predatory pricing, for example � did not alter the thrust of that measure. The 1916 Anti-Dumping Act was an action in response to (against, countering, condemning, offsetting) a practice, and that practice presented the constituent elements of dumping.

4.1228 In the opinion of Canada, the language of the treaty is clear; and there is nothing �limited� in the �guidance� of the Appellate Body. If anything, the Byrd Amendment falls more squarely within Articles 18.1 and 32.1 of the Agreements as interpreted by the Appellate Body than the 1916 Anti-Dumping Act:

- the full title of the Act is the Continuing Dumping and Subsidies Offset Act;

- the Byrd Amendment is designed with the purpose of condemning dumping and neutralising subsidies;

- it is part and parcel of the US trade remedy regime � its provisions do not come into operation unless there has been an anti-dumping or countervailing order determining the existence of �constituent elements of dumping� or a subsidy; and

- every aspect of the Byrd Amendment operates to offset (counteract, respond to, act against) dumped or subsidised goods that enter into the United States.

4.1229 Contrary to what the United States argues in paragraph 43 of its Second Submission, the link between the Byrd Amendment and dumping or a subsidy is not �remote�; it is not other requirements that trigger the distributions under the Byrd Amendment. The relationship between the Byrd Amendment and �dumping� or �a subsidy� is direct and substantial; the impact on imported goods is incontrovertible.

4.1230 Canada now turns to the arguments of the United States with respect to footnotes 24 and 56.

4.1231 According to Canada, the United States argues that any �action� consistent with GATT 1994 is excluded from the scope of Articles 18.1 and 32.1. This necessarily implies that Articles 18.1 and 32.1 prohibit only those actions that are already inconsistent with GATT 1994. To state the proposition is to underline its absurdity.

4.1232 Canada submits that the better view is that Articles 18.1 and 32.1 prohibit actions in response to dumping or subsidies as such that are not set out in Article VI (as interpreted by the Agreements) and this includes subsidies.

4.1233 In this respect � and to close off the argument in this section � Canada recalls the context and object and purpose of Articles 18.1 and 32.1. Each article is a �final provision� at the end of agreements setting out detailed rules for the permitted �specific actions.� The Anti-dumping Agreement contains no less than eleven articles governing the initiation of investigations, consideration of evidence, imposition of provisional measures, acceptance of undertakings, collection of duties, duration and review of anti-dumping measures, and so on. The SCM Agreement has similarly detailed rules on the imposition of countervailing measures.

4.1234 Canada asserts that the scheme of the Agreements is therefore not open to doubt. In drafting the Anti-dumping and SCM Agreements, the Members considered the range of �specific actions� possible against dumping or a subsidy, agreed upon three of those, negotiated rules governing those �specific actions�, and prohibited the rest. Footnotes 24 and 56 should not be interpreted so as to undermine the basic structure of the Agreements. If a measure falls within Articles 18.1 and 32.1, it is not exempted by virtue of those footnotes.

4.1235 Accordingly, WTO Members must not imprison or fine importers that dump, for that reason, even though such action would be �consistent with GATT 1994�. They must not impose additional domestic levies on dumped or subsidies goods. They must not prohibit retailers from selling dumped or subsidised goods. And they must not grant subsidies to �condemn�, �neutralise� and offset dumping or subsidisation.

(c) Standing

4.1236 Canada argues that, in its second submission, the United States repeats that its obligation under Articles 5.4 and 11.4 is simply to calculate a number. It adds that inducements to file or support petitions are not contrary to the Agreements. It also adds that offset payments cannot really be inducements because they rest on many contingencies.

4.1237 First, Canada submits that the United States misinterprets Articles 5.4 and 11.4. The application of basic principles of treaty interpretation, set out in Article 31 of the Vienna Convention, shows that thresholds are more than a simple number. They set out the level of support needed from domestic industry that is affected by imports. And that level of support must not be artificially inflated, through either inducements or penalties, to meet those thresholds.

4.1238 According to Canada, the ordinary meaning of the terms of Articles 5.4 and 11.4 is that authorities may not initiate investigations unless they determine requisite thresholds have been met. They form part of the essential procedural requirements for initiation in Articles 5 and 11 of the Agreements. Their object and purpose are to create certainty and predictability. The negotiating history set out in Canada's First Submission clarifies this. The United States itself acknowledges that Articles 5.4 and 11.4 were drafted to establish industry support through numerical and objective thresholds. Threshold levels reflect the careful balance in the Agreements between the right of foreign importers to access a market and the domestic industry to be safe from unfair trade practices. Together, this means that the standing obligation in Articles 5.4 and 11.4 should not be reduced to a meaningless number.

4.1239 In Canada's view, the issue here is not whether the US must inquire into reasons for industry support. Rather, the issue is whether the US can meet its obligations to examine support where it has enacted a law that undermines the validity of thresholds. The Byrd Amendment actively encourages domestic industry support. And it interferes with a basic assumption for industry support - that that support reflects harm caused. This necessarily results in the US being unable to fulfill its obligation. This violates Articles 5.4 and 11.4.

4.1240 Second, Canada argues that, contrary to US assertions, inducements that actively encourage support for petitions violate a Member's obligations. These inducements influence the judgement of participants in investigations. This prevents a fair and neutral administration of laws contrary to GATT Article X:3(a). It also distorts industry support levels under Articles 5.4 and 11.4. The United States claims that payments under the Amendment offer the same inducement as providing information on dumping and countervail laws. But, getting information is not the same as getting money.

4.1241 Third, Canada is of the opinion that offset payments are not a remote possibility for industry. For simply filing a certification under an Order, two companies in one industry received almost half of the entire US$206 million given out so far.

4.1242 Finally, Canada considers that the contingencies cited by the United States only further prove that the Byrd Amendment is specific action against dumping and subsidies. As indeed the United States notes in its Second Written Submission, for distributions even to be possible, the petition must prove dumping and subsidisation and an Order must be imposed.

(d) Undertakings

4.1243 The United States, in its Second Submission, also repeats its arguments regarding its obligations under Articles 8 and 18. It reiterates that it has no obligation to enter into undertakings, that it has complete discretion to reject undertakings, and that the complainants have provided no evidence that the Amendment influences US producers.

4.1244 Canada argues that the question at issue is whether the United States can meet its obligations under Articles 8 and 18 where it introduces a law that undermines its real discretion to enter into undertakings. The requirement under Articles 8 and 18 is that Members provide for their authorities the ability to enter into undertaking agreements to terminate investigations early. The purpose of these provisions is to restore the competitive relationship between imports and domestic products with minimal disruption to trade, including that caused by imposing duties. To fulfill this obligation, a Member may not undermine the real discretion of its authorities to complete agreements. That would render Articles 8 and 18 meaningless.

4.1245 Canada submits that the Byrd Amendment creates a monetary interest for domestic industry to thwart undertakings. This interest has been reinforced by the distributions by US Customs. As Canada demonstrated in its First Submission, domestic industry approval is necessary to complete undertakings. Under US law, the Court of International Trade has ruled that US investigating authorities may not dismiss the opposition of its domestic industry to enter into undertakings. The United States has not disputed these findings.

4.1246 Accordingly, in the Amendment, the United States has introduced a law that undermines the ability of its authorities to enter into undertaking agreements. As such, Canada submits, it violates Articles 8 and 18.

(e) Administration of laws

4.1247 Finally, Canada is of the view that, in its second submission, the United States again misunderstands the claim under Article X:3(a) of GATT 1994. Following its jurisdictional arguments, the United States asserts that the complainants fail to provide evidence of the administration of the Byrd Amendment or its effect on domestic producers. The United States also argues that the complainants must show that producers would not have supported a petition or opposed an undertaking �but for" the Amendment. The US cites no authority for this proposition.

4.1248 Canada argues that Article X:3(a) requires a fair, neutral and reasonable administration of laws. It requires an examination of the effect of an administrative measure on the administration of laws. The Panel in Argentina-Hides noted that this may involve an examination of whether there is a possible impact on the competitive situation for traders but it does not require evidence of trade damage. It found that a measure that creates an inherent danger that laws will be administered in a partial or unreasonable manner gives rise to a violation. These findings are applicable here.

4.1249 Canada posits that the Byrd Amendment creates a strong monetary inducement for domestic industry. The Amendment encourages domestic industry to file petitions and thwart undertakings to receive payments. This is an influence on participants in domestic anti-dumping and countervailing duty proceedings that is contrary to a neutral and impartial administration of laws. It affects the access that imports have to the US markets - access that was duly negotiated. It also creates the potential for the proliferation of investigations. This undermines the security that imports face in the US market. Accordingly, the Amendment leads to an administration of laws that is not fair, reasonable or neutral in violation of GATT Article X:3(a).

(f) Conclusion

4.1250 Canada recalls that its request for findings has been set out in its submissions.

4. Chile

(a) Introduction

4.1251 Chile will not repeat arguments that it has stated in its two written submissions with Japan and during the first hearing. Instead Chile will respond to some arguments of the second submission of the United States.

(ii) The CDSOA is indeed a specific action against dumping or a subsidy

4.1252 Chile argues that contrary to the US assertion, Chile, in its second submission with Japan provided evidence of the importance in US and International Law of the intention of the legislator. Even though the US may claim the contrary, the intention of the proponents of the CDSOA, as expressly stated in the findings of the Act and the statement of purposes of US Congressmen either, as supporters or detractors, is to provide for an additional remedy to anti-dumping and countervailing duties, in situations were the constituent elements of dumping or subsidisation are present. In support, Chile quotes from the findings of the Act: �United States trade laws should be strengthened to see that the remedial purpose of those laws is achieved�

4.1253 Chile submits that for most if not all legal systems the objectives of statute as well as the records of legislative discussion are a fundamental source for the interpretation of laws when they are at issue and their legal nature and effects are questioned.

4.1254 Furthermore, Chile is of the view that the achievements and effects of the CDSOA simply confirms the intention and purpose of the Act. The objective is being fulfilled, or Chile wonders, was it not the intention of the proponents of the Byrd Amendment to give million of dollars to �affected� domestic producers, as the US Customs Service began to do last month in order to strengthen the trade remedy laws and further offset dumping and or subsidies?

4.1255 Chile asserts that the US continues to interpret the concept �against� in a manner that not only is doubtful in English but certainly inconsistent with the Spanish and French versions of the ADA. In its second submission the US only repeats its very tortuous understanding of the word �against� without even mentioning the arguments of Chile and Korea regarding the Spanish and French versions of the Agreements. The three texts must be read harmoniously. And the French and Spanish support one clear reading and meaning of the English version. It seems that the US would instead like to use an unreasonable interpretation which, in addition, is in contradiction with the other two authentic texts.

4.1256 In Chile's view, the US�s understanding of the word �against� is not supported by the Spanish meaning of �en contra de�. Chile argues that that concept cannot be understood as meaning that the action must operate directly on the imported good or the importer. As Chile stated in the first hearing, �en contra de� in Spanish means in opposition to or contrary to. Chile considers it is as simple as that, no need to look for twisted meanings. In that sense, and as Chile asserts it explained in its response to the Panel's second question the CDSOA is a specific action in opposition to dumping and subsidisation since it provides for the distribution of duties assessed among the �affected producers� and for �qualified expenditures�. If there is no request, investigation and determination of dumping or subsidy the CDSOA would not operate. And for an authority to reach a determination of existence of the constituent elements of dumping (subsidy) it has to find and base it on evidence.

4.1257 In addition, Chile argues, the CDSOA provides that the distribution will cover �qualifying expenditures�. Not any expenditure but those incurred after the issuance of the AD duty finding or order or CVD order.

4.1258 According to Chile, even the US recognises that the link is much stronger than the mere fact that the AD Duties or CVD constitute a cap to the funds distributed. Indeed, in its answer to Chile's question number 4, the US indicates that the payments under the CDSOA are contingent on (2) the level of the margins. That assertion is in Chile's view in contradiction with the statement that injury is neither a requirement nor a consideration under the CDSOA. Certainly the latter.

4.1259 Moreover, in paragraph 58 of its second submission, the US insists that �distributions are not related to domestic producers� injury from dumped and subsidised imports�. Chile asserts that this is not true. It if was, it simply means that the ITC would have recommended anti-dumping measures or countervailing duties without the existence of injury. Chile would be grateful to know details.

4.1260 Finally, regarding this issue, Chile brings to the Panel�s attention that contrary to what the US states in par. 46 of its second submission, the CDSOA would still be an action against dumping or subsidies and hence unacceptable if the payments were made through the general Treasury. It is not the fact that the money comes from AD Duties or CVD what makes the CDSOA inconsistent with WTO. It is the provision of specific action against dumping and subsidy which makes the CDSOA inconsistent with Articles 18.1 and 32.1. Precisely, what Chile would like to clarify is that the CDSOA will never be WTO consistent by changing the source of funds.

4.1261 Regarding the arguments on footnote 24 and 56, Chile will let other co complainants elaborate on this issue. Chile would only like to remind the Panel that the issue here is not if the measure could be authorised by those footnotes but the fact that even if it is concluded that the CDSOA is permitted under them, none of those footnotes authorises a Member to adopt at the same time two measures or remedies to repair or prevent the same injury.

4.1262 Chile argues that the US is trying to confuse the Panel arguing that the CDSOA is authorised by footnotes 24 or 56. The real point is that the CDSOA provides for double remedy against dumping and/or subsidisation. And in that sense, if the authority decided to remedy or prevent the injury though one measure, in this case an AD Duty and or a CVD, it can not apply a second measure under other relevant provision of the WTO. Chile considers that it is one or the other, but not both. As Chile clearly stated in its responses, it could be an internal political decision that even though the authority can make a dumping determination, it is preferable to use another trade defence measure. Notwithstanding that the requirements to apply that other measure as provided in the respective WTO provisions are complied with.

(iii) The CDSOA alters standing requirements

4.1263 Chile posits that the United States misses the point again. Chile has not questioned that the CDSOA changes the standing requirements in US Trade Laws. Chile's contention is much simpler. The CDSOA does not allow the US authorities to comply with the standing requirements in Article 5.4 of the ADA and 11.4 of the SCM.

4.1264 Chile thinks that Articles 5.4 of the ADA and 11.4 of the SCM not only provide for a numerical representation of the industry but also for qualitative criteria. Article 5.2 of the ADA indicates that an application by or on behalf the domestic industry to initiate an investigation shall include evidence of a) dumping, b) injury and c) a causal link. It adds that a simple assertion is not enough. The ADA goes on and in the following paragraph mandates the investigating authority to examine the accuracy and adequacy of the evidence provided in the application to determine whether there is sufficient evidence to justify the investigation. In other words, a requirement to determine if the application is well founded and the petitioner has the reasons to request an investigation that that article specifies. Article 11 of the SCM has similar provisions.

4.1265 According to Chile, this implies that the expression of support established in paragraph 4 must be reached by factors inherent to the ADA (SCM) and not by external factors such as economic incentives. Even worse if those factors are consequence of a governmental decision or programme. These external factors without question introduce a bias to the analysis that each producer will make when deciding to support or not an application. But also, if the support is based on other factors, such as the incentive provided by the CDSOA the request would not be authentic under Article 5.2 and the investigating authority would not comply in an impartial, objective and reasonable way with the obligation under Article 5.3.

4.1266 In the case of the CDSOA, Chile can agree with the US that it does not change the numerical requirements of US Trade Laws regarding standing. Chile argues that unquestionably the US government by means of the economic incentives provided by the CDSOA, is introducing external factors in a decision that under Article 5 has to be taken on the merits of each case and based on the three essential requirements stipulated in paragraph 2 of that Article: dumping, injury and causality. In that sense, the CDSOA is inconsistent with Articles 5 and 11 and the US is acting inconsistently with Article X:3(a) of GATT 1994 since it is not administering its laws and regulations in the way provided for in that provision by introducing an element of distortion in the decision process that private citizens make before deciding to support or not an investigation.

4.1267 Chile is of the view that the US in this section of its second submission misses the point again and tries to divert the Panel away from the real issue. In paragraph 72 the US may have a point since there is no evidence yet that the CDSOA has caused domestic producers to file or support petitions. But first, the CDSOA indeed provides a significant incentive for producers to file or support petitions in order to have access to the �subsidy�. And second, and most important, if a producer decides to request an investigation � for any motivation that may have, even if he wishes to stop imports and not receive the �subsidy� � the support of the rest of the domestic industry is almost automatically assured. Not supporting the petition means loosing competitive advantage not with foreign producers � since the AD Duties or CVD will �affect� them as well even if they oppose the investigation � but vis � vis their own domestic competitors that will receive the �subsidy�. Or putting it in other terms, nobody wants to be left outside. And everybody wants to earn more. Chile considers that this is a point that the US cleverly avoided to touch.

(iv) Violation of Article X:3 of GATT 94

4.1268 Article X:3 reads, �each contracting party shall administer in a uniform, impartial and reasonable manner its laws, regulations, decisions and rulings�. Chile is not claiming that the implementation of the CDSOA is inconsistent with that provision nor that the measure in question is the implementation of the US AD and CVD laws. Chile considers that the US is trying to confuse the Panel again.

4.1269 According to Chile, the measure challenged is the CDSOA. And it is challenged because it provides for the administration of the US laws, regulations, decision and rulings in a way that it is not uniform, impartial and reasonable. And in that sense the US is in breach of its obligation under Article X:3. Chile simply cannot understand the logic behind the US argument. Chile or other complainants could not have challenged the implementation of US Trade Laws as such without a measure or without an act that is a function of a political State in exercising its governmental duty.217 The CDSOA is just such an act of the US exercising its governmental duty and in that sense it is the way that that Member is administering its Laws and regulations. Chile asserts that as it has explained, the US is doing so in a way that is unreasonable, partial and not uniform.

(b) Conclusion

4.1270 Chile submits that the US has tried by all means to avoid getting to the points raised by the complainants deviating the Panel�s attention to secondary issues. It uses tortuous interpretation of concepts contrary to the spirit of the provisions and the text of the other authentic versions of WTO Agreements. It ignores the fact that the CDSOA calls for an additional remedy to dumping and subsidy and it claims that the complainants are challenging US Laws on standing as well as the implementation of such Laws. In Chile's view, the CDSOA provides not only for additional remedy to AD measures or CVD but for specific action against dumping and subsidy. In that sense it is inconsistent with Articles VI of GATT 94, 18.1 of ADA and 32.1 of SCM. The CDSOA by providing an incentive to file or support AD or CVD investigations is against the requirements of Articles 5.4 and 11.4, as it introduces an external factor to a decision that should be solely based on elements mentioned in Article 5 and 11. Finally, according to Chile, the US through the CDSOA is not administering it laws, regulations, decisions and rulings in an uniform, impartial and reasonable manner as prescribed by Article X:3 of GATT 1994.

5. European Communities

(a) Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

4.1271 According to the European Communities, the United States asserts that the interpretation of �specific action against dumping� made by the Appellate Body in 1916 Act offers only �limited guidance� and then puts forward a new test which is plainly at odds with the Appellate Body�s own test. The EC notes that the relevance of the interpretation made by the Appellate Body in 1916 Act is not limited to the type of measures at issue in that case. It would be presumptuous to assume that the Appellate Body failed to consider the implications of that interpretation in other situations. In fact, the report in 1916 Act suggests that, if anything, the Appellate Body was concerned that its interpretation might be too narrow.

(i) Articles 18.1 and 32.1 do not require that the action be �based directly upon� dumping or a subsidy

4.1272 The European Communities considers that the first element of the US� test is that the �action must be based directly upon the constituent elements� of dumping or a subsidy. According to the European Communities, this requirement has no basis in the wording of Articles 18.1 and 32.1 and is inconsistent with the interpretation made by the Appellate Body in 1916 Act. According to the Appellate Body, the relevant test is whether the action at issue �may be taken only when the constituent elements of dumping are present�. The European Communities asserts that the complainants have shown beyond doubt that the offset payments meet that test.

4.1273 The European Communities posits that, contrary to the US assertion, the EC does not argue that the offset payments are a specific action against dumping or subsidisation simply because they are funded with anti-dumping or countervailing duties. The offset payments are a specific action against dumping or subsidisation because they are made exclusively to domestic producers which have filed or supported a petition leading to the imposition of an anti-dumping or a countervailing measure for �qualifying expenses� incurred after the imposition of such anti-dumping or countervailing measure with respect to the production of the same product which is the subject of the anti-dumping or countervailing measure in question.

(ii) The meaning of �against�

4.1274 The second element of the US test, which the United States derives from the term �against�, is that the action must �apply directly� to the dumped or subsidised goods (or to the importer or the exporter) and must be �burdensome�. In the EC�s view, by interpreting the notion of �specific action against dumping� as �action taken in response to a situation presenting the constituent elements of dumping�, the Appellate Body gave meaning also to the term �against�.

4.1275 The European Communities argues that the reading of the term �against� made by the United States is not supported by its ordinary meaning, either on its own or in its context. The notion of action �against� dumping or subsidisation may encompass any action, which is objectively capable of offsetting or preventing dumping or subsidisation, whether by imposing a direct burden on the importer or by giving an advantage to the domestic producers of like products.

4.1276 According to the European Communities, the United States accuses the EC and other complainants of reading into Article 18.1 and 32.1 a �presumed effects test�. The same is true of the United States� own test because the action must be �burdensome�. Yet, whether or not an action is �burdensome� will depend on its �effects� (�actual� or �assumed�). The only difference between the US test and the interpretation made by the EC is that the United States assumes a priori that only those actions which apply directly to the importers are capable of being �burdensome�, whereas the EC submits that giving an advantage to the domestic producers can be as effective, if not more, in order to offset or prevent dumping or subsidisation.

4.1277 The United States� argument that if the complainants �could show the harmful effects from the CDSOA that they allege, they would have brought a claim under Article 5 (c)� , in the view of the European Communities, misrepresents the EC�s claim. The EC does not allege that the offset payments are causing harm to the EC exporters. Rather, the EC claims that the type of action provided for in the Byrd Amendment is objectively capable of offsetting or preventing dumping or subsidisation. Whether or not the offset payments achieve that objective in specific instances is irrelevant for the purposes of establishing a violation of Articles 18.1 and 32.1. Those two provisions do not require showing that the action at issue has actually had any �harmful effects�.

4.1278 The United States argues that the complainants� interpretation would �convert an actionable subsidy claim into a prohibited subsidy, thereby allowing the complaining parties to circumvent the requirements of Articles 3 and 5 of the SCM Agreement�. The European Communities asserts that this argument is based upon the erroneous premise that Parts II and III of the SCM Agreement are lex specialis with respect to subsidies. Parts II and III do not exclude the application of other WTO provisions to any measures, which happen to fall within the definition of subsidy. A measure, which is neither prohibited under Part II nor actionable under Part III may still be prohibited by a different provision of the WTO Agreements on different grounds. The offset payments are not prohibited by Articles 18.1 and 32.1 because they are subsidies, but because they are specific action against dumping or subsidisation.

(iii) Footnotes 24 and 56

4.1279 The United States alleges that, what it calls �the EC�s trigger test�, is inconsistent with the panel reports in US - 1916 Act. The EC recalls that it has not invented the �trigger test� but rather the panels established that test in US �1916 Act. This was confirmed by the Appellate Body at paragraph 122 of its report in the same case. The reason why the offset payments are not �permitted� by the footnotes is the same as the reason why they constitute specific action against dumping or subsidisation, i.e. because they can be made only when the elements of dumping or subsidisation are present.

4.1280 The EC considers that it has explained that Article XVI of the GATT is one of the provisions �interpreted� by the SCM Agreement and, consequently, cannot be one of the �other provisions� cited in footnote 56. While the EC would agree that Parts II and III of the SCM Agreement �do not strictly interpret Article XVI�, the EC notes that the term �interpreted� is not used �strictly� in Article 32.1. Indeed, if it were, Article 32.1 would become inapplicable because, �strictly� speaking, the SCM Agreement does not �interpret� any GATT provision.

4.1281 The SCM Agreement contains no express language similar to Article 10 with regard to Article XVI. But the same was true also under the Tokyo Round Subsidies Code which, nevertheless, was called �Agreement on the Interpretation and Application of Articles VI, XVI and XXIII of the GATT�. Moreover, the SCM Agreement makes no less than eight express references to Article XVI. No similar references are made to any other substantive provision of the GATT, with the only exception of Article VI.

4.1282 The European Communities asserts that the United States' argument that the EC �does not allege that GATT Article XVI limits the form of specific action that can be taken against dumping or subsidisation� is incorrect. The EC and other complainants have claimed that Article XVI, as interpreted by Parts II and III of the SCM Agreement, allows Members to take only two types of action against subsidisation: countermeasures under Article 4 or countermeasures under Article 7.

4.1283 The EC notes that �action under other relevant provisions of GATT 1994�, the phrase used in footnotes 24 and 56, is not the same as �action which is not prohibited by some other provision of the GATT 1994� and that the �relevant provisions� cited in footnotes 24 and 56 are those that confer a positive right to take action, such as Articles VI or XIX. Article XVI is not one of such �relevant provisions�.

4.1284 According to the European Communities, the United States� argument that the term �under� means �compatible with� cannot be correct because it would have the consequence that footnote 56 would allow action which is �compatible� with Article XVI even where such action is not �compatible� with Parts II and III of the SCM Agreement. Furthermore, on the US interpretation, Articles 18.1 and 32.1 would become wholly redundant, as they would prohibit only action, which is already inconsistent with some other GATT provision.

4.1285 In the European Communities� view, the other linguistic versions of the agreement confirm that the US reading of the term �under� as �compatible with� is incorrect. Both the French term �au titre de� and the Spanish term �al amparo de� indicate clearly that the �action� alluded in the footnotes must be taken on the basis of a positive right conferred by the �other relevant GATT provision� in question, rather than being merely �compatible� with such provision.

(b) Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

4.1286 The European Communities argues that the United States seems to concede that the administering authorities must conduct an objective examination. Nevertheless, it takes an extremely narrow view of what is involved in such obligation. In essence, the United States is arguing that the authorities should be allowed to manipulate the outcome of the examination 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.

4.1287 In the view of the European Communities, the Appellate Body takes a very different view. According to the Appellate Body, in order to be �objective� an examination must conform to �the dictates of the basic principles of good faith and fundamental fairness�. The relevant facts must be investigated �in an unbiased manner, without favouring the interests of any interested party, or group of interested parties in the investigation�.

4.1288 The European Communities asserts that the United States does not address anywhere the argument that the Byrd Amendment makes it impossible for the US authorities to conform to the �dictates of the basic principles of good faith and fundamental fairness�, as such �dictates� have been interpreted by the Appellate Body.

4.1289 According to the European Communities, the very existence of the Byrd Amendment renders suspect any applications and expressions of support made by the US producers and, as a result, makes it impossible for the US authorities to reach a proper determination of support, whether positive or negative, before initiating an investigation.

4.1290 The US response to this is that Articles 5.4 and 11.4 do not require assessing the �subjective motivations� of the producers. In this regard the EC notes a contradiction between the US second submission and its reply to one of the Panel�s questions. On the one hand, the United States considers that a measure by which sanctions would be imposed on the domestic producers, which failed to support a petition, might give rise to a non-violation claim of nullification or impairment. On the other hand, the United States concedes that legislation, which made it mandatory for the domestic producers to support an application, would breach Articles 5.4 and 11.4.

4.1291 The European Communities submits that this admission undermines the US argument that it is irrelevant whether or not a declaration of support is �genuine�. Contrary to the US submission, the measure described in the EC�s example does not �preclude� an �examination� of the degree of support, because the domestic producers may still decide not to support the application and bear the sanctions imposed by the law. The reason why that measure breaches Articles 5.4 and 11.4 is the same that makes the Byrd Amendment inconsistent with those provisions: a declaration of support extracted with the threat of legal sanctions, like a declaration of support induced by the promise of the offset payments, does not constitute �support� for the purposes of Articles 5.4 and 11.4.

4.1292 The United States alleges that �WTO Members routinely encourage their industries to file anti-dumping petitions� and that, for that reason, the �mere provision of an inducement to file or support petitions� cannot be considered contrary to Articles 5.4 and 11.4. According to the European Communities, it is obvious, however, that one thing is to inform the domestic producers about how to make an application, another thing is to �encourage� them to do so, and yet another thing is to pay them for filing or supporting applications.

4.1293 The United States argues that �any change in methodology that favours the domestic industry may induce a domestic party to file or support a petition�. The European Communities asserts that this argument relies upon the erroneous assumption that a domestic producer will always be interested in the imposition of duties, at least provided that the duties are high enough. Yet, it may be perfectly rational for a domestic producer to oppose an application. If a domestic producer is against the initiation of an investigation, a �change in methodology� which leads to a higher margin of dumping or subsidisation will not make him change his mind and support the application. To the contrary, it will reinforce his opposition.

4.1294 Finally, as regards the argument that the payments under the Byrd Amendment are �remote, uncertain and unknown�, the EC recalls that on 30 January 2002 the US Customs announced the distribution of offset payments totalling 206 millions USD.

(c) Article 8.3 of the Anti-Dumping Agreement and Article 18.3 of the SCM Agreement

4.1295 The EC considers that, in order to have a complete picture of the US practice regarding the acceptance of undertakings, it is necessary to know not only how many undertakings have been accepted since 1996 despite the petitioners� opposition, but also how many undertakings have been rejected because of such opposition. The Panel requested the United States to comment on this, which the US did only in a limited way. Although the information requested was pertinent, available to the US authorities, even if its is not �regularly maintained�, and not confidential. The European Communities invites the Panel to draw appropriate inferences from the US reply.

(d) Article X.3 (a) of the GATT

4.1296 The EC claims that the �administrative� measure (i.e. the Byrd Amendment) and not the �administered� measure (i.e. the US anti-dumping and countervailing duty laws) violates Article X.3(a). The �measure at issue� within the meaning of Article 6.2 of the DSU is the Byrd Amendment. This measure as well as the �administered� measure was clearly identified in the panel request.

4.1297 According to the European Communities, the United States misreads the findings of the Panel in Argentina � Hides and Skins. The �administration� measure at issue in that case was Resoluci�n 2,235 of the Administraci�n Nacional de Aduanas. The EC claimed that Resolution 2,235 resulted in a partial administration of Argentina� s customs laws. The EC did not provide, and the panel did not consider, any evidence regarding the actual administration of Resolution 2,235. Nor did the panel consider any evidence that the �administered� measures (the customs laws) had actually been applied partially. The panel found that Resolution 2,235 as such, and not its administration, violated Article X.3 (a) because, by its very existence, it created an inherent risk that the �administered� customs laws would be applied in a partial manner. In the EC's view, likewise, in the case at hand, the very existence of the Byrd Amendment gives rise to an inherent risk that the US anti-dumping and countervailing duty laws will be applied unreasonably and partially and is, therefore, inconsistent per se with Article X.3 (a).

6. India

4.1298 In its submissions India along with certain other complainants, EC, Indonesia, and Thailand has offered a comprehensive factual framework and legal arguments establishing why the Continued Dumping and Subsidy Offset Act 2000 (CDSOA or Byrd Amendment) violates the obligations of US under WTO Agreements. India's statement will be confined to certain crucial issues in the dispute.

4.1299 The United States asserts that the CDSOA is not an action against dumping or subsidization. In India�s view the offset payments are a specific action against dumping or subsidisation because they are made exclusively to domestic producers that have filed or supported a petition leading to the imposition of an anti-dumping or a countervailing measure for �qualifying expenses� incurred after the imposition of such anti-dumping or countervailing measure with respect to the production of the same product which is the subject of the anti-dumping or countervailing measure in question. The offset payments would still be dependent upon a finding of dumping or subsidisation and, consequently, �specific action against dumping or subsidisation� even if they were paid from the US Treasury or from any other source of Government revenue.

4.1300 According to India, the United States has also argued that Article 5.4 of the Anti-dumping Agreement and Article 11.4 of the Subsidies and Countervailing Measures Agreement do not require the administering authorities to assess the subjective motivation of the producers� expression of support for the petition seeking initiation of an investigation. According to the United States the only obligation of the administering authorities is to determine whether the quantitative benchmarks have been met.

4.1301 In India�s view the authorities may presume that if a domestic producer has formally declared its support for the application, such support would normally be genuine. The CDSOA however calls into question such a presumption. The CDSOA provides a strong incentive to file �non-genuine� applications and to make �non-genuine� declarations of support. As a result, it may render suspect all applications and declarations of support made by the US producers. The CDSOA has the necessary consequence that the US authorities are prevented from reaching a proper determination of support, whether positive or negative, before initiating an investigation, thereby violating Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

4.1302 India recalls that the complainants have submitted that the availability of offsets have an adverse impact on acceptability of price undertakings. The United States has asserted that Articles 8 and 18 allow the administering authorities to reject an undertaking for any reason. While Articles 8.3 of the ADA and 18.3 of the SCM Agreement do not limit a priori the types of reasons which may be invoked by the authority, it is India�s contention that the authority cannot invoke all sorts of motives for rejecting an undertaking. 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� Such grounds are not proper �reasons� within the meaning of Articles 8.3 and 18.3 because they are not pertinent to consider the �acceptance of an undertaking as inappropriate�.

4.1303 India argues 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, according to India, 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.

4.1304 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.

4.1305 India is of the view that its joint submissions have highlighted the pernicious consequences of the offsets for developing countries. The Marrakesh Agreement has recognized the need for positive efforts designed to ensure that developing countries secure a share in the growth in international trade. By enabling the authorities to violate obligations under the Anti-dumping Agreement and the SCM Agreement, the CDSOA would adversely affect exports from developing countries and hence would be contrary to the letter and spirit of the preamble of the Marrakesh Agreement.

7. Indonesia

4.1306 Indonesia associates itself with the statement made by the distinguished Delegate of the EC on various legal arguments in further rebutting arguments made by United States in the second submission and its oral statement. Indonesia will restrict this statement to specific issues especially relating to developing countries� interests as a follow-up to Indonesia's first oral statement.

4.1307 The United States argues in its written answer to the panel�s question no.24 and paragraph 102 of its second submission that Article 15 of the Anti Dumping Agreement is not within the Panel�s terms of reference as it was not identified in the Panel requests. Although Indonesia recognizes that Article 15 of the Anti Dumping Agreement is not within the Panel�s term of reference, nevertheless, Indonesia recalls that Article 12.11 of the Dispute Settlement Understanding regarding the panel procedure states that: �Where one of the parties is a developing country member, the panel�s report shall explicitly indicate the form in which account has been taken of relevant provisions on differential and more-favourable treatment for developing country members that form part of the covered agreements which have been raised by the developing country members in the course of the dispute settlement procedures.�

4.1308 In Indonesia�s view it contains an obligation to the Panel to give consideration to the special and differential treatment provision in the covered agreement raised by a developing country, even though this provision is not specifically indicated in the Panel�s terms of reference. The mere fact that a developing country does not raise the special and differential treatment provision is irrelevant to make Panel not to make its judgment to this specific issue.

4.1309 Indonesia and other complainants in this dispute have already raised the Anti Dumping Agreement as a covered agreement. Article 15 of the Anti Dumping Agreement is already identified as �relevant provisions on differential and more-favourable treatment�. For that reason, Indonesia considers that the Panel should take into account Article 15 of the Anti Dumping Agreement in its report.

4.1310 Indonesia asserts that the CDSOA will provide a financial incentive for petitioners to reject the proposed undertakings because the petitioners would expect to receive money from the distribution of duties. Indonesia recalls that it has been recognized in the previous Panel proceeding that undertakings are a constructive remedy par excellence. Consequently, by introducing CDSOA, it will frustrate the object and purpose of Article 15 of the Anti Dumping agreement.

4.1311 Indonesia argues that Article 15 of the Anti Dumping Agreement is part of general rules of special and differential treatment that carry an obligation for all members, especially the developed ones, to fulfil it. Article 15 of the Anti Dumping Agreement is not a specific provision in the context of the whole WTO agreement. Similar provisions exist in all WTO Agreements as part of the balance of rights and obligations of all WTO members. Thus, it contains no exclusion for the United States from performing this specific obligation.

4.1312 The United States also argues that Article 15 of the Anti Dumping Agreement is a �best effort� commitment. Indonesia disagrees with the United States interpretation as it has been stated by the �Doha Decision on Implementation-related issues and concerns� that Article 15 of the Anti Dumping Agreement is a mandatory provision. As a mandatory provision, the United States, as a developed country member, is not exempted from carrying out this specific obligation. By implementing the CDSOA, the United States is not in a position to fulfil its obligation under Article 15 of the Anti Dumping Agreement as the domestic industry will be inclined to oppose undertakings as they anticipate receiving distribution of duties.

8. Japan

(a) The purpose of the CDSOA is legally relevant

4.1313 Japan submits that the purpose of the CDSOA and its legislative history are legally relevant and should be considered by the Panel. Contrary to the assertion made by the United States, US courts do rely on legislative history or consider the intended purpose of the legislation.

4.1314 The actual language of the CDSOA states that dumping and subsidies are to be �condemned� and �effectively neutralized� and that �United States trade laws should be strengthened�, since the �continued dumping or subsidization can frustrate the remedial purpose� of those laws. The distributions, according to the CDSOA, �offset� continued dumping and subsidization. The principal sponsors of the CDSOA described the distributions as a way to �counter (�) foreign dumping and subsidization.� Japan considers that these statements are relevant for the Panel�s examination of the CDSOA.

4.1315 Japan asserts that, contrary to the United States� assertion, Japan and the EC did not argue in the 1916 Act case that a purpose of a law is irrelevant. A purpose of a law is significant evidence of what a law actually does. However, when the WTO inconsistency is established by the text alone, a stated purpose of a law does not cure the inconsistency. In this dispute, the purpose of the CDSOA is provided by the complainants as additional evidence that the CDSOA violates Articles 18.1 and 32.1 and the other cited provisions.

(b) The United States� interpretation of �specific actions against dumping or a subsidy� is not in accordance with customary rules of interpretation

4.1316 Japan argues that the United States� interpretation of Articles 18.1 and 32.1 is out of context, disregards the ordinary meaning of those terms, and is not in accordance with other customary rules of interpretation of public international law. The Appellate Body in the 1916 Act case correctly interpreted the language of Articles 18.1 and 32.1 and explained that �specific actions against dumping� means �specific actions taken in response to situations presenting the constituent elements of dumping.�

4.1317 In the view of Japan, there is no mention in the Appellate Body�s interpretation or in the AD Agreement of �action based directly upon� the constituent elements of dumping. The Appellate Body�s interpretation clearly states that the action is in response to �situations� presenting the constituent elements of dumping, and not to the �constituent elements� of dumping.

4.1318 The United States interprets the word "against" as requiring imposition of a burden or liability on the imported good or the importer. Japan submits that the United States� interpretation: a) is not supported by the ordinary meaning of the word �against�; b) is not in accordance with the customary rules of interpretation of public international law because it ignores, among other things, the context of Article VI, the AD Agreement and the SCM Agreement; and c) disregards the interpretation developed by the Panel and the Appellate Body in the 1916 Act case. The Appellate Body in the 1916 Act case correctly interpreted the word �against� in its proper context.

4.1319 The United States defines �dumping or subsidization� as the �dumped or subsidized imported goods.� According to Japan, the US states, incorrectly, that Article VI of GATT defines dumping as �products of one country being introduced into the commerce of another country at less than normal value.� This interpretation is incorrect. As the Appellate Body in the 1916 Act case notes, Article VI:1 defines �dumping� as a conduct, by which products of one country are introduced into the commerce of another country at less than normal value. It makes abundantly clear that dumped or subsidized goods or products are to be distinguished and cannot be equated to �dumping� and �subsidization.�

4.1320 Japan submits that the United States revision of its interpretation to add �exporters or foreign producers� shows only that the US definition of specific action against dumping is arbitrary and not based on treaty text.

(c) The CDSOA mandates specific actions against dumping and a subsidy

4.1321 In Japan's view, the United States erroneously argues that the CDSOA�s �criteria upon which the distributions are made have nothing to do with the constituent elements of dumping or subsidization� and alleges that the distributions are only �remotely� linked to the anti-dumping and countervailing duty orders. This, Japan argues, is factually incorrect. The distributions under the CDSOA necessitate a finding of dumping or subsidization. That finding, in turn, positively requires that the constituent elements of dumping or a subsidy be present. Thus, the distributions are, as a matter of fact, undeniably taken in response to situations presenting the constituent elements of dumping and subsidization.

4.1322 Contrary to the United States allegations, Japan has not argued for a so-called �presumed negative effects� test. Rather, the claims are based inter alia on the actual effects of the CDSOA. The evidence on file is enough to establish a prima facie case of non-conformity. The arguments made by the United States regarding the alleged and �presumed negative effects� test are simply another attempt to misrepresent and distort the arguments and claims presented by the complainants against the CDSOA.

4.1323 Japan submits that the distributions of duties under the CDSOA are a specific action against dumping or a subsidy in violation of Article 18.1 and 32.1, even if the amount of the distributions does not correspond to the amount of the damage or injurious effect of dumping or a subsidy. Also, the relation between the distributions and the injury is already present and implicit in the intimate connection between the distributions and the anti-dumping and countervailing measures.

(d) Footnotes 24 and 56 do not exclude the CDSOA from the coverage of Articles 18.1 and 32.1

4.1324 Japan considers that 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. It added that a measure that is considered �specific action against dumping� is �governed by Article 18.1 itself.� Since the CDSOA is specific action against dumping and a subsidy, it cannot possibly fall within the coverage of footnotes 24 and 56, and is thus not excluded from the prohibition of Articles 18.1 and 32.1.

4.1325 According to Japan, footnote 35 explicitly provides that the only relief that shall be available to protect from the effects of a particular subsidy are either countervailing duties or countermeasures under Articles 4 or 7 of the SCM Agreement. According to this footnote, no other action may be taken to provide a relief from the effects of continuous subsidization in the US market.

4.1326 Japan argues that the interpretation by the United States of the word �under� within footnotes 24 and 56 (e.g. �compatible" with) is not in accordance with the ordinary meaning of that word in its context. In footnotes 24 and 56, �under� is preceded by the word �action� and followed by reference to identifiable provisions. In the WTO Agreements, the same phrase of �action under� followed by particular provisions appears in Article 5.7 of Agricultural Agreement and Article 6.11 of the Textiles and Clothing Agreement. In these examples, the phrase �action under� alludes to a right positively conferred by the cited provision.

4.1327 Japan recalls that the United States also argues that the SCM Agreement does not interpret Article XVI. Various provisions of the SCM Agreement, including Article 1, which defines a subsidy, refer to Article XVI. Article XVI sets forth procedures and certain disciplines with respect to subsidies and nothing more.

(e) The CDSOA is inconsistent with Articles 5.4 and 11.4 concerning the standing to initiate requirement

4.1328 In Japan's view, the CDSOA itself, independently from its application, is evidence of the violation on the part of the United States of Articles 5.4 and 11.4. Actual application of the CDSOA will only confirm what the measure, on its face, already demonstrates.

4.1329 According to Japan, the fact that the CDSOA does not modify the US trade laws regarding standing requirements or voluntary undertakings is irrelevant and does not alter the fact that the CDSOA violates the cited provisions.

4.1330 Japan notes that the United States argues that there is no requirement in Articles 5.4 and 11.4 of inquiry into the motivations of the support of domestic producers. Japan considers that there is a requirement, however, of performance of treaty obligations in good faith. To increase the likelihood of �disingenuous� support by domestic producers to petitions, or opposition to undertakings, cannot, by any standard of public international law, be considered a good faith application of the provisions concerning standing requirements and voluntary undertakings.

4.1331 Japan argues that the United States did not present any rebuttals to the arguments pertaining to Articles 4.1 and 16.1, which inform and confirm the object and purpose of Articles 5.4 and 11.4. The object and purpose of those provisions, of which the numerical benchmarks are but a tool, are frustrated by the CDSOA. As a consequence, even if the numerical benchmarks remain unaltered and the investigating authority goes through the charade of counting heads, the CDSOA makes it unavoidably impossible for the United States to perform its obligations under Articles 5.4 and 11.4 in good faith.

4.1332 Japan asserts that by pretending that the promise of a distribution of collected duties will not induce a domestic producer to file or support a petition or oppose an undertaking, the United States is wilfully ignoring the economic reality of competitive markets.

4.1333 Assuming arguendo that anti-dumping and countervailing duty laws provide an incentive to support a petition, Japan submits that they would still not be comparable to the CDSOA. To the extent that these laws correctly implement the AD Agreement and the SCM Agreement, they would not constitute a violation of the WTO Agreements. In stark contrast, the CDSOA�s additional financial incentives are inconsistent with Articles 5.4 and 11.4.

4.1334 Japan notes that a decision by the United States to make distributions available to all of the domestic producers, and not only those that supported a petition, would not cure the CDSOA of its inconsistencies with the WTO Agreements. The CDSOA would, even under those circumstances, still induce domestic producers to support a petition or oppose an undertaking. Producers would still want to assure themselves that the level of support meets the minimum numerical benchmark so that they can obtain the windfall of the distributions under the CDSOA. Consequently, they would support the petition, lest no other domestic producer does.

(f) By enacting and maintaining the CDSOA, the United States violates Article X:3(a) of GATT 1994.

4.1335 Japan's claim under Article X:3(a) is simple and straightforward: the CDSOA, which is the measure under examination in this disputes, administers the United States� trade laws in a manner that is unreasonable, not uniform and not impartial. The CDSOA has been sufficiently and adequately identified and is within the terms of reference of the Panel.

9. Korea

(a) Introduction

4.1336 Korea notes that it has already set out its position in the First and Second Submissions.

(b) The Byrd Amendment is an impermissible specific action against dumping and subsidies

4.1337 Korea recalls that the United States criticizes the complainants for offering an interpretation �not supported� by the text of Articles 18.1 and 32.1 and the 1916 Act Appellate Body and panel reports. At the same time, Korea argues, the US advances an interpretation that is self-serving and that disregards the text. Moreover, the US ignores the fact that the Appellate Body already has interpreted �against.�218 As Korea demonstrated at paragraph 19 of its Second Submission, in the 1916 Act proceeding at paragraph 122, the Appellate Body defined �against� as �in response to.�

4.1338 Korea further asserts that, regarding �constituent elements of dumping,� if an action (in this case, giving cash rewards) cannot, as a matter of law, be taken absent a finding that the constituent elements of dumping have been met, then the requirement set out in 1916 Act reports is met. This �but for� interpretation is reasonable, and the US attempt to mischaracterize it should be rejected.

4.1339 Korea notes further that, in this case, the issue is even more clearly presented than in the 1916 Act proceeding. There, the measure set out its own prerequisites that differed in some respects from the primary US anti-dumping law. So, the panels and Appellate Body were forced to parse the text of the 1916 Act to determine if the Act sets out the constituent elements of dumping. Here, in stark contrast, there is no similar dispute. The action of granting cash rewards cannot be taken absent a pre-existing finding by the authorities that the constituent elements of dumping or subsidy, as they are defined by the US anti-dumping and countervailing duty laws, have been met.

4.1340 Korea notes that the United States tries to derail the debate by pretending that the required order and the cash reward are �remotely� linked.219 Further, the US posits that the only two requirements for receiving the cash reward are, one, that the recipient be an �affected domestic producer� that, two, has submitted �qualifying expenditures.�220

4.1341 Korea submits that again, the United States is incorrect. The link is quite strong � indeed, the existence of an anti-dumping or countervailing duty order is a pre-condition to the cash reward. The additional requirements are irrelevant absent a finding that the constituent elements are met, followed by imposition and collection of duties. Thus, they are additional factors similar to the intent and injurious effects requirements in the 1916 Act. In the 1916 Act proceeding, the Appellate Body rejected the US assertion that the presence of additional elements meant that the 1916 Act could not be a specific action against dumping.221 The Panel should do the same here.

4.1342 Korea asserts that, regarding the word �against�, the United States continues to ignore the plain meaning of �against dumping� and �against a subsidy,� claiming that Complainants� interpretations are not supported by the text.222 The US interpretation is based on a definition of �against� that requires physical contact, which cannot occur as a matter of physics with a non-physical process or noun such as �dumping� or �a subsidy.� To make matters worse, the United States ignores the actual text, which is �against dumping� and substitutes a self-serving re-writing: �against imported products.�223 It is forced to do so in order to support its flawed definition of �against�, which requires a physical object, as opposed to a process, such as dumping.

4.1343 Korea is of the view that, because the text does not support its flawed interpretation, the United States is forced to attack Complainants� position by mis-characterizing it as �presuming� a negative effect on imported goods or foreign producers.224 In so doing, the United States would have the Panel and US trading partners ignore not only the statements by the US officials that supported the legislation, but also basic economic principles: if two companies, foreign company X and domestic company Y, are competing in the marketplace, one can act against � or disadvantage � foreign company X in the market by imposing costs on foreign company X or by giving money to domestic company Y. Not satisfied with either the former or, even, the latter, alone, the United States has decided to do both, using the Byrd Amendment to accomplish the latter.

4.1344 In short, Korea argues that the effects of the Byrd Amendment are not presumed, they are known. The Byrd Amendment indisputably alters the conditions of competition. Moreover, as Korea�s analysis shows, the US flag-flying and other examples, which are presented to frighten the Panel into accepting the US view, are irrelevant.225 Here, the action by the United States directly disadvantages imports in the US market.

4.1345 Finally, the United States asserts that the cash rewards are not related in any way to domestic producers� injury.226 Korea submits that this is incorrect. According to Korea, the cash rewards cannot exceed the anti-dumping or countervailing duties collected. Moreover, before the US authorities can grant the cash rewards, they must find that the constituent elements of dumping or subsidy are met and that the dumping or subsidy is causing injury to the US industry. Only then may they impose the duties. The duties are specifically designed to offset the dumping or subsidy and, thus, to prevent continuing injury from the dumping or subsidy. So, the ceiling of the cash reward amount is defined by the total duties collected to offset and prevent future injury. The US statement to the contrary, therefore, is incorrect.

(c) Footnotes 24 and 56 do not save the Byrd Amendment

4.1346 Korea asserts that footnotes 24 and 56 are not relevant to this proceeding. Because the Byrd Amendment is a specific action against dumping and subsidization, it does not fall within the scope of these Footnotes. Korea argues that, as Complainants have demonstrated, in the 1916 Act report the Appellate Body concluded at paragraphs 122-126 that Footnotes 24 and 56 clarify that a Member may select a WTO-consistent remedy other than applying duties pursuant to the Anti-Dumping Agreement and the Subsidies Agreement even where the conditions for applying duties exist. Korea presents the following example: considering Country X subsidizes an industry and, due to the subsidy, its industry is able to dump products in Country Y, resulting in increased imports to Country Y. In this example, depending upon the precise facts, Country Y might be able to apply an anti-dumping duty or a countervailing duty or a safeguard measure, as long as the application of the measure by Country Y complies with the relevant WTO provisions.

4.1347 The United States also claims that the Byrd Amendment is justified as an action under Article XVI of GATT 1994. According to the United States, even if the Panel were to find the Byrd Amendment �to be an action against dumping and/or subsidies,� the Amendment �is nevertheless clearly an action under GATT Article XVI to address the effects of such practices.�227 Korea posits that this is nothing more than a claim that, in response to dumping or a subsidy as such, a Member may grant a subsidy. This position is directly contrary to the holding of the Appellate Body in the 1916 Act proceeding. Therefore, Korea believes the Panel should reject this US assertion as well.

4.1348 In short, concerning the US argument regarding Footnotes 24 and 56, Korea considers it suffices to point out that the actions envisaged in these Footnotes are limited to actions that are not actions in response to dumping or subsidization, as such. Therefore, it is clear that the Byrd Amendment is not saved by these Footnotes.

(d) The Byrd Amendment violates the provisions of the Anti-Dumping Agreement and the Subsidies Agreement regarding standing and undertaking determinations

4.1349 According to Korea, the United States bases its rebuttal on whether or not the Byrd Amendment alters the US administration of US laws regarding standing and undertaking determinations.228 In doing so, the United States ignores the thrust of Korea's argument.

4.1350 According to Korea, a Member can undo or disregard the results of WTO negotiations in at least two ways. First, it can pass a law that is directly contrary to the text of a WTO provision. This is what the United States has done regarding Article 18.1 and Article 32.1. Second, it can pass a law that so alters the incentive structure in which private actors make decisions that the negotiated text has been distorted and reduced to inutility - it no longer can perform as the negotiators intended it to. This is precisely what the United States has done with respect to the WTO provisions regarding standing and undertaking determinations. This is why, in this case, the fact that the law actually used to administer a WTO provision has not changed is irrelevant.

4.1351 In short, Korea considers that the United States urges this Panel to adopt an interpretation that would permit all Members to pass laws that would undermine and reduce to inutility any WTO provision which regulates or is dependent on private conduct (by altering the incentives that determine that conduct). Korea argues that this should not be permitted.

4.1352 Korea notes that the United States claims that Complainants have not introduced evidence that the Byrd Amendment affects determinations regarding standing229 and undertakings.230 Korea submits that this claim is both irrelevant and inaccurate. It is irrelevant because, where, as here, a measure is inconsistent with a WTO provision, the complaining party is not required to meet an effects test.231 It is inaccurate because Complainants have shown beyond doubt that the Byrd Amendment definitely does affect decision-making. Korea considers it has demonstrated that US government officials proposed and passed it to give US companies a second, additional remedy to help them combat allegedly unfair trade. The United States cannot credibly argue that the provision of a second remedy in the form of a cash reward does not encourage both filing and support of petitions and opposition to undertakings.

4.1353 Moreover, Korea considers that the United States concedes its case by agreeing that incentives � such as duties � do operate to encourage petitions. In the words of the United States:

the very existence of the Antidumping and SCM Agreements gives domestic interests a strong financial inducement to file, and support, petitions.232

4.1354 In Korea's view, that statement is 100 per cent correct. Like a cash reward, potential duties do create an incentive to bring and support cases. The flaw in the US presentation is that the United States pretends that, as opposed to potential duties, cash rewards for some reason do not create an incentive to bring and support cases. Obviously, the cash reward does exactly this. It also functions as an incentive for the domestic industry to oppose undertakings.

4.1355 Korea asserts that this analysis also shows the weakness of the US argument that the Byrd Amendment does nothing more than to encourage the use of a permissible remedy.233 According to Korea, it does not; instead, it creates a new, impermissible remedy. Moreover, by creating an impermissible remedy in the form of a cash reward, it improperly encourages additional use of US anti-dumping and countervailing duty laws.

4.1356 The United States further asserts that, in any case, the imposition of duties (and receipt of cash rewards) is too speculative to support Complainants� argument.234 Again, according to Korea, the United States has conceded its case. At the very least, even accepting the US position, the provision of cash rewards will have an effect on marginal cases where a US company otherwise would not file or support a petition or oppose an undertaking. Of course, in the view of Korea, the Byrd Amendment affects cases in general, not merely marginal cases.

4.1357 Finally, regarding the US argument on undertakings, Korea contends that the United States continues to assert that the provisions on undertakings are merely hortatory. Korea argues that this interpretation is flawed and must be rejected. Articles 8 and 18 each comprise six separate paragraphs setting out a host of requirements that apply specifically to producers regarding undertakings. They therefore most assuredly are not hortatory, as they impose requirements. Most relevant are those set out in paragraphs 1 and 3 of the Articles. As Complainants have demonstrated, read together, these provisions allow a Member to reject a proposed undertaking only where it would be �impractical� or for a reason that otherwise is relevant. And, of course, this obligation of Articles 8.3 and 18.3 is subject to the general �good faith� obligation.235

(e) The Byrd Amendment violates Article X:3 of GATT 1994

4.1358 Korea submits that the Complainants have established that the Byrd Amendment so alters the incentives that previously determined whether a US company would file or support a petition or oppose an undertaking that it constitutes a violation of relevant WTO provisions. There is a secondary effect as well. The Byrd Amendment precludes the United States from applying its laws regarding standing and undertaking determinations in a �reasonable, impartial and uniform manner.�

4.1359 According to Korea, and contrary to US claims,236 this violation is within this Panel�s terms of reference. The violation here is not created by the US laws regarding standing and undertakings but by the Byrd Amendment. The Panel should reject this US attempt to limit the Panel�s authority.

(f) The Byrd Amendment undermines the Multilateral Trading System

4.1360 Korea, before concluding, comments on the implications of this case for the multilateral trading system. The system has never suffered from a lack of protectionist forces. In fact, the multilateral trading system, in large part, developed in response to challenges from protective forces. Given the evolution of the multilateral trading system, beginning with the GATT and followed by the WTO, obviously the multilateral trading system has succeeded to a large extent in overcoming protectionism. But, even so, the system is still beset by protectionist forces, which can be pretty creative at times. Korea asserts that the Byrd Amendment is a perfect example of protectionist forces trying to nullify the purpose of the WTO agreements on Anti-Dumping and Subsidies through the back door. If this Panel does not check the Byrd Amendment, then protectionist forces may be emboldened to develop additional creative initiatives aimed at weakening the free trade system that WTO Members for years have been working so hard to create and, now, to protect. Korea considers that to guard against this possibility, a clear ruling on this case is required.

(g) Conclusion

4.1361 In conclusion, Korea respectfully asks the Panel to find that the US is in violation of Article VI and X:3(a) of GATT 1994; Articles 5.4, 8 and 18.1 of the AD Agreement; and Articles 11.4, 18 and 32.1 of the SCM Agreement. Korea requests the Panel both to recommend that the United States bring its laws into conformity with its obligations under these WTO provisions and to suggest that, to meet its WTO obligations, the United States should repeal the Byrd Amendment.

10. Mexico

(a) Introduction

4.1362 In this oral statement, Mexico will respond to the main arguments that are invoked by the United States in its rebuttal submission against Mexico's claims under Article 5 of the SCM Agreement. Mexico will also briefly address certain issues that are raised by the United States regarding the claims under Article 18.1 of the Anti-Dumping Agreement and the analogous provisions in Article 32.1 of the SCM Agreement.

4.1363 As for the other claims made by Mexico, they have been dealt with in its prior submissions and in the other claimants� written and oral submissions. Mexico agrees with the submissions of the other complaining parties with respect to those claims and incorporates them in its arguments.

(b) Preliminary Remarks

4.1364 First, Mexico emphasizes the importance of Mexico�s Article 5(b) claim. The remedies available to Mexico in the case of an Article 5(b) violation differ from those available in the case of its other claims in this dispute. Where a violation of Article 5(b) is found, under Article 7.9 of the SCM Agreement the United States will at most have six months to withdraw the subsidy or remove its adverse effects. This goes beyond the requirement in Article 19 of the DSU that the US "bring the measure into conformity" with its WTO obligations.

4.1365 Second, Mexico notes that the United States argues that Article 5(b) of the SCM Agreement should be interpreted in a manner that is identical to Article XXIII:1(b) of the GATT 1994. Mexico is of the view that such an interpretation cannot be accepted by this Panel because it would render Article 5(b) inutile. As explained in Mexico�s previous submissions, Article 5(b) differs from Article XXIII:1(b) in important respects.

(c) Claim Under Article 5(b) of the SCM Agreement

(i) Specificity

Subsidy versus programme

4.1366 Mexico notes that at paragraphs 10-20 of its written rebuttal submission, the US argues that the CDSOA, as a programme, is not a specific subsidy.

4.1367 Mexico asserts , as discussed at paragraphs 37-41 of Mexico�s written rebuttal submission, that it is legally incorrect for the US to focus the specificity analysis on the CDSOA as a programme without regard to the nature of the subsidies that are conferred under the Act.

4.1368 Mexico is of the view that a careful reading of Article 2.1(a) demonstrates that it supports Mexico�s arguments. The Article refers to situations in which legislation explicitly limits access to a subsidy. The "legislation" in this dispute is the Continued Dumping and Subsidy Offset Act of 2000 ("the Act") and the subsidies are the offsets distributed under it. Since specificity arises as a result of the provisions of the Act, it can only be said that the subsidies conferred under the Act are specific, not the Act in itself. Accordingly, it is inappropriate for the US to argue that the Act is or is not specific. The legal question is whether the subsidies conferred under the Act are or are not specific.

4.1369 If Mexico�s approach is not accepted, a WTO Member could shield otherwise-specific subsidies from challenge by conferring those subsidies under a single legislative instrument or programme. In order to prevent the disciplines in the SCM Agreement from being undermined in this way, the nature of the subsidies conferred under a programme (i.e., separate and independent subsidies) must be taken into account in the specificity analysis.

4.1370 Thus, it is Mexico�s position that the CDSOA explicitly limits access to the subsidies to certain enterprises, within the meaning of Article 2.1(a) of the SCM Agreement. Specificity is manifest in the actual words of the law. In particular, Mexico refers to the following subsections of the CDSOA: 754(a), 754(b)(1) and (4), and 754(c).

Disbursements and outlays

4.1371 At paragraph 16 of its written rebuttal submission, the US argues that the specificity analysis must be carried out for the challenged subsidy programme as a whole rather than by "focusing on individual disbursements".

4.1372 Mexico is not arguing that the test for assessing specificity should be applied to each �disbursement� under the CDSOA. Mexico�s position is that the test for assessing specificity must be applied to each �subsidy� conferred under the programme.

4.1373 Mexico asserts that the Panel must determine whether Separate and independent subsidies are being conferred under the CDSOA. If it determines that this is the case, it must then apply the specificity test to each subsidy. This approach to specificity must be applied in all instances where a programme confers separate subsidies. Otherwise, a WTO Member will be able to insulate from challenge otherwise-specific subsidies simply by administering them under a single programme. From the outset, the financial contributions are targeted to specific products and, therefore, specific industries

4.1374 In the view of Mexico, from the outset, the financial contributions are targeted. The targeting begins even before a financial contribution exists, because there must be an underlying anti-dumping or countervailing duty order or finding with respect to which a special account is established. Moreover, the funding mechanism for each subsidy is completely independent of the funding mechanism for the other subsidies. This is because the funding mechanism � i.e., the collection of anti-dumping and countervailing duties � is, itself, tied to the specific products that are subject to the anti-dumping or countervailing duty order or finding in question.

4.1375 Thus, according to Mexico, the amount of funding for a particular subsidy does not in any way affect the amount of funding for a subsidy that is linked to another order or finding.

4.1376 This, in Mexico's view, fundamentally distinguishes the subsidies conferred under the CDSOA from subsidies that are conferred under a typical subsidy programme where the nature of the financial contribution is horizontal (i.e., the same for all recipients) and the funding of that financial contribution is horizontal (i.e., a common budget). Under a normal subsidy programme, the disbursements or outlays may give the appearance of specificity; however, those disbursements or outlays do not amount to discrete subsidies, nor are they the result of discrete subsidies. Under the CDSOA, the unique nature of the "financial contribution" element of the subsidies creates a separate and distinct subsidy that inherently results in limiting eligibility to each subsidy to a specific industry.

Other arguments

4.1377 Mexico notes that, in addressing the "objective criteria" issue, the US does not refer to the fact that such criteria must be "horizontal in application" and to the fundamental criterion for eligibility for a subsidy conferred under the CDSOA, which is that the recipient must be a petitioner in the investigation that led to the order or finding that forms the foundation of the subsidy in question, or that the recipient support that petition.

4.1378 It is Mexico�s position that this fundamental criterion of the CDSOA is not "horizontal", nor is it "economic", even within the broad meaning proposed by the US in its response to Question 18 from the Panel.

4.1379 Finally, the US argues that Mexico has not presented "positive evidence" that the CDSOA is specific. Mexico submits that the positive evidence that Mexico relies upon to demonstrate specificity is the design, structure, and architecture of the CDSOA, which has been fully documented in the evidence before this Panel.

(ii) Adverse Effects

Circular argument

4.1380 At paragraph 26 of its written rebuttal submission, the US argues that "Mexico�s argument is circular because the determination of the existence of nullification or impairment is based upon the application of the measure, not the measure itself".

4.1381 Mexico considers that the US argument on this point is unclear. With respect to Mexico�s challenge regarding the "granting" of subsidies under the CDSOA, it is Mexico�s position that when subsidies are granted (i.e., "applied" even under the restrictive US interpretation) nullification or impairment will exist. Thus, Mexico�s position faithfully follows the wording of footnote 12 to the SCM Agreement.

4.1382 In Mexico's view, what is really at issue in these paragraphs of the US rebuttal submission is "when" Mexico can challenge the CDSOA under Article 5(b). To answer this issue, this Panel must determine whether the well established doctrine governing legislation as such challenges applies to Article 5(b).

Evidence of the upsetting of the expected competitive relationship

4.1383 As noted in Mexico�s prior submissions, with respect to its challenge of the "granting" of subsidies under the CDSOA, Mexico posits that the subsidies conferred by the CDSOA will automatically upset the expected competitive relationship when they are granted. As discussed at paragraphs 78-92 of Mexico�s rebuttal submission, the upsetting of the expected competitive relationship is demonstrated by the design, structure and architecture of the CDSOA, which is well documented in the evidence before this Panel. On this issue, Mexico refers to paragraphs 81-89 of its rebuttal submission.

Affected Mexican imports

4.1384 At paragraph 28 of its rebuttal submission, the US argues that Mexico "does not even identify the affected Mexican imports". Mexico asserts that although it is not necessary for Mexico to identify such exports with respect to its legislation as such challenge of the "granting of subsidies" under the CDSOA, Mexico is also arguing that, through the maintenance of subsidies, the CDSOA is currently nullifying or impairing benefits accruing to Mexico related to the predictability of conditions for future trade (Mexico�s rebuttal submission, paragraphs 93-98). Mexico has also identified products of Mexico which are currently subject to anti-dumping and countervailing duty orders and findings (Exhibit Mexico-5) and with respect to which predictability has been nullified or impaired. At paragraph 32 of its written rebuttal submission, the US makes a related argument with respect to tariff concessions that the CDSOA "is not a product-specific subsidy". As noted in Mexico�s submissions on specificity, the subsidies conferred by the CDSOA are inherently "product-specific" and, therefore, industry-specific.

Interpretation of the Panel reports in Oilseeds I and II

4.1385 At paragraph 30 of its written rebuttal submission, the US interprets the Panel report in EEC � Oilseeds as turning on the fact that the "complainant has shown that the competitive relationship was actually upset". While Mexico does not take issue with the fact that the complainant in that dispute may have put forward considerable evidence regarding the effect that the EEC programme had on its products, Mexico considers that a review of paragraphs 147, 148, 152 and 154 of the Panel Report indicates that the Panel was concerned with the "price mechanism" in the challenged measure and the operation of the "scheme" that was established. In other words, notwithstanding the possible other evidence before it, the Panel focused on the design, structure and architecture of the subsidies before it. The Panel Report in EEC � Oilseeds II supports this focus.

Other arguments

4.1386 Mexico notes that at paragraph 33 of its written rebuttal submission, the US argues that Mexico must demonstrate that the CDSOA will cause more than a de minimis contribution to any nullification or impairment. It cites paragraph 10.84 of the Panel Report in Japan � Film for this proposition. Paragraph 10.84 addressed the issue of the causal linkage between the measure and the alleged nullification or impairment. According to Mexico, that causal linkage is clearly established in this dispute, therefore, the passage from Japan � Film has no application to the facts of this dispute.

4.1387 The US also argues at paragraph 33 of its written rebuttal submission that, "[u]nder the CDSOA, domestic producers may use their offset for any purpose, including making gifts to charity, compensating workers, developing non-subject products, or paying creditors". Mexico argues that this argument ignores the terms of the CDSOA and its implementing regulations. Under the definition of "qualifying expenditure" in the Act and regulations, the subsidy is granted after the expense is incurred. According to section 159.61(c) of the Regulations, the qualifying expenditures "must be related to the production of the same product that is the subject of the related order or finding".

4.1388 At paragraph 35 of its written rebuttal submission, the US submits that "Mexico was on notice that the United States could pass such a measure". Mexico is of the view that the mere fact that a WTO Member "could" take action is not enough to demonstrate that another WTO Member could reasonably have anticipated that action. The legal question is not whether the US could implement the CDSOA, because the US "could" conceivably do anything. The proper legal question is whether Mexico could reasonably have anticipated the CDSOA. On this issue, Mexico simply repeats paragraph 106 of its written rebuttal submission.

(d) Claims Under Articles 18.1 of the Anti-Dumping Agreement and 32.1 of the SCM Agreement

4.1389 At paragraphs 40-69 of its written rebuttal submission, the United States raises three arguments to support its position that the CDSOA is not a specific action against dumping or a subsidy.

4.1390 Mexico considers that it has already demonstrated at paragraphs 9-32 of its rebuttal submission that the three general arguments raised by the United States are incorrect and must, therefore, be rejected. Mexico agrees with the arguments of the other complaining parties as they further demonstrate the legal flaws in the US interpretation of the relevant provisions.

(e) Conclusion

4.1391 For the foregoing reasons and those espoused in Mexico�s previous submissions, Mexico requests that the Panel find that the CDSOA is inconsistent with the provisions of the Anti-Dumping Agreement, the SCM Agreement, the GATT 1994 and the WTO Agreement at issue in this dispute. Mexico also requests that the Panel grant the relief described at paragraph 124 of Mexico�s first written submission.

11. Thailand

4.1392 At this juncture, Thailand reiterates its common views as previously expressed by other complaining parties in their oral statements made today.

4.1393 Thailand notes that the United States has argued in paragraph 2 of its Second Submission that �none of the complaining parties have challenged the Act as an actionable subsidy under Article 5(c) of the SCM Agreement, for which even a showing of threat of harm is sufficient.� However, Thailand argues that it is crystal clear as claimed in paragraphs 23-29 of the First Written Submission of the European Communities, India, Indonesia and Thailand that the Byrd Amendment constitutes a specific action against dumping and subsidization which is not in accordance with the GATT. In Thailand's view, there is no requirement to argue further, should it prove necessary need to institute proceedings, that adverse effects take place as stipulated in Article 5 of the SCM.

4.1394 Thailand argues that, pertaining to paragraph 5 of the US Second Submission, one could claim that there is no distinction regarding the use of AD/CVD duties and also the source of government revenue. This is, Thailand submits, a misled point of argument made by the U. S. and is not the point made by the complaining parties.

4.1395 Another point raised in paragraph 5, Thailand further argues, is the identity of the recipient which, in the U. S. perspective, is tied up with the words �presumed negative effects� In fact, the terms �identity� and �presumed negative effects� would have certain bearing if the action in question is considered as specific action against dumping or subsidization in accordance with Articles 18 and 32 of the AD and CVD Agreements, respectively.

4.1396 Thailand notes that in European Communities � Regime for the Importation, Sale and Distribution of Bananas, the Panel pronounced that the infringement of obligations is a prima facie case of nullification or impairment of benefits, which as a result, has shifted the burden of proof to the alleged party. Thailand is of the view that the statement made by the U. S. in paragraph 7 of its Second Submission should therefor be rejected.

4.1397 Thailand then turns to paragraph 57 of the U. S. Second Submission which presumably underlines that Thailand is mistaken when interpreting the word � affected� to convey the same meaning as �adversely affected�. In response, Thailand would have been easily convinced if any measure taken under the CDSOA had been given effect as a result of a stand-alone legislation having no links whatsoever with dumping or subsidization in nature. Moreover, Thailand finds it is relatively difficult to understand why any domestic producer who is �affected� in a positive manner would be good enough to issue a certification so that the Customs Authority may take action in accordance with the CDSOA, while those who are �affected� in a negative manner may not get any action as a response, as explained in paragraph 42 of the US Second Submission. To put it in another way, the question is whether those who had got payment so far under the CDSOA which amounts to more than 200 million dollars falls within which category.

4.1398 Thailand submits that another invalid point is raised in paragraphs 89 and 92 of the US Second Submission that �it is highly improbable that CDSOA is a factor at all in a domestic company�s or union�s consideration of whether to support a petition� when time has lapsed before payment is made. In fact, when payment is made is not a factor recognized at all under the AD and SCM Agreements.

4.1399 For the reasons given, Thailand respectfully requests that the Panel consider this case based on GATT/WTO jurisprudence and thereby make findings and recommendations in favor of the complaining parties.

J. SECOND ORAL STATEMENT OF THE UNITED STATES

(a) Article 5(b) of the SCM Agreement

4.1400 The United States argues that Mexico�s Article 5(b) argument should be rejected because the CDSOA is not a �specific� subsidy and because Mexico has not demonstrated nullification or impairment or any other form of �adverse effects� under SCM Article 5. According to Mexico, the CDSOA is de jure specific because each offset is a �separate and distinct subsidy.� Specificity analysis, however, must be carried out for the challenged subsidy programme (here the CDSOA) as a whole rather than by focusing on individual disbursements. Otherwise, no matter how broadly available and broadly distributed benefits under a government programme may be, each disbursement would be considered a specific subsidy � a result that would render Article 2 a nullity.

4.1401 The United States submits that a textual analysis of Articles 1 and 2 does not support Mexico�s interpretation either. Article 2.1(a) expressly states, in relevant part, that if the �legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises,� the subsidy is specific. Therefore, the focus is not on each subsidy disbursed but on the legislation establishing the subsidy programme.

4.1402 Although the Panel need not reach the question of adverse effects in this dispute, the United States asserts that Mexico has failed to meet its burden of proving adverse effects in the form of nullification or impairment of benefits under Article 5(b) of the SCM Agreement. Mexico�s theory that an �actionable� subsidy can be established without any showing of adverse effects is inconsistent with the structure and design of the SCM Agreement and would eliminate the primary distinction between Articles 3 and 5 of the SCM Agreement. In any event, because the CDSOA does not violate any WTO Agreement provision, this point is moot.

4.1403 According to the United States, Mexico�s theory of a non-violation nullification or impairment claim should also be rejected. Mexico fails to understand that the application of a measure is a requirement to establish the existence of nullification or impairment. While Mexico may have the right to bring a challenge based on the mandatory/discretionary doctrine, that doctrine does not allow Mexico to bypass the required elements of a non-violation nullification or impairment claim.

4.1404 The United States is of the view that Mexico has also failed to demonstrate that the competitive relationship in the US market between domestic and Mexican products has been upset by a subsidy which was not reasonably anticipated. Mexico�s argument is squarely contradicted by the relevant provisions and jurisprudence. First, GATT Article XXIII:1(b) requires that a benefit �is being nullified or impaired,� not that it will be in the future. Second, Mexico mis-cites the EEC � Oilseeds case.

4.1405 The United States considers that in any event, Mexico�s per se argument misunderstands the nature of a non-violation claim. Per se nullification or impairment by definition exists only where a complainant proves an actual WTO violation. Mexico does claim a current nullification or impairment by the �maintaining� of subsidies under the CDSOA, but it is with regard to a different benefit allegedly accruing to Mexico under GATT Articles II and VI. Yet, �predictability� in planning future sales has never been recognized as a benefit accruing under GATT Articles II and VI.

4.1406 The United States notes that Mexico says not to worry about opening the flood gates for non-violation nullification or impairment claims because Article 5(b) only covers subsidies that �systematically� nullify or impair benefits. However, in the United States' view, there is simply no basis in Article 5(b) for limiting non-violation nullification or impairment claims in this way.

(b) Specific action against dumping or subsidies

4.1407 The United States asserts that under the subsidies provisions of SCM Agreement and GATT Article XVI, a Member�s right to use subsidies is subject to other Members� rights to impose countervailing duties on imports, or to take authorized countermeasures. There is no �fourth� right to bring a WTO challenge to circumvent those provisions as the complaining parties are attempting to do in this case by mounting a per se attack on a domestic subsidy using Articles 18.1 or 32.1 of the Antidumping and SCM Agreements, respectively.

4.1408 According to the United States, the test to determine whether a measure is "specific action against" dumping or subsidies is whether the measure is (1) based upon the constituent elements of dumping or a subsidy, and (2) burdens, (3) the dumped or subsidized imported good, or an entity connected to, in the sense of being responsible for, the dumped or subsidized good such as the importer, exporter or foreign producer. In other words, there are three criteria and just because a measure may be based upon the constituent elements of dumping does not necessarily mean that it is �against� dumping or subsidies.

4.1409 The United States notes that some parties claim that the CDSOA is specific action �based upon� the constituent elements of dumping or a subsidy because an AD/CVD order is a condition precedent to distributions. However, according to the United States, funding CDSOA distributions with AD/CVD duties is not any different than funding state retirement homes in terms of the presence of the constituent elements. What makes �specific action� in the main provisions of Articles 18.1 and 32.1 different from �action� in the footnotes is that it is action based directly upon the constituent elements. Whether or not a law authorizes specific action can only be determined by examining the actual requirements of that law.

4.1410 Other complaining parties argue that the CDSOA is �specific action� because the recipient is a domestic producer that is "affected" by dumping or subsidization. The United States asserts that the statute, however, does not require producers to show they are injured by dumped or subsidized imports to receive distributions and the amount of the distribution has nothing to do with measuring or recovering damages. In any event, is it not clear to the United States why that fact, if true, would even be relevant to whether distributions are �specific action� under Articles 18.1 and 32.1.

4.1411 According to the United States, the complaining parties have also failed to establish that the CDSOA is an action �against� dumping or a subsidy. The ordinary meaning of the term �against� suggests that the action must operate directly on the imported good or the entity connected to it. This interpretation is supported by the definition of dumping in GATT Article VI:1 which defines dumping as products of one country being introduced into the commerce of another country at less than normal value. The object of �specific action� under Articles 18.1 and 32.1 extends to the entity connected to, in the sense of being responsible for, the dumped or subsidized good such as the importer, exporter or foreign producer. This is consistent with the panel and Appellate Body reports in the 1916 Act case.

4.1412 The United States is of the view that the complaining parties� alternative definitions of the word �against� are not informed by its context in Articles 18.1 and 32.1. In that context, there are already four examples of measures that are �specific action against� dumping as identified by the Appellate Body in the 1916 Act case: (1) duties on imports, (2) provisional measures on imports, (3) price undertakings for imports, and (4) civil and criminal penalties on importers. Each one of the measures imposes a limitation or burden directly on the imported goods or the entity connected to, in the sense of being responsible for, the dumped or subsidized good. None of the measures apply indirectly in ways unrelated to the imported dumped or subsidized good.

4.1413 The United States notes that many of the complaining parties argue that the CDSOA is a specific action against dumping or subsidies because of its supposed effect on the competitive relationship or the conditions of competition between imported and domestic goods. In the view of the United States, there is no basis in the text of Articles 18.1 and 32.1 for a conditions of competition test. Even if the subsidy is considered to have changed the conditions of competition between the producers of the good that received the distribution and all other producers, both foreign and domestic, that did not, it does not mean that measure acts against dumping or subsidies. A presumed negative effects test or a conditions of competition test is overly broad as it would cover any other type of domestic legislation that improved the position of the domestic industry.

4.1414 To support their �effects� argument, the complaining parties urge this Panel to rely on the CDSOA�s legislative history. The United States is of the view that the CDSOA�s legislative history would only be relevant to its interpretation if the statute were ambiguous and the Panel then needed it to determine the fact of the CDSOA. Nothing about the operation of the CDSOA is ambiguous, and Articles 18.1 and 32.1 of the Antidumping and SCM Agreements, respectively, only limit specific action against dumping or subsidies.

4.1415 In conclusion, the United States argues that under the complaining parties� argument that a Member cannot grant domestic subsidies in response to another Member�s subsidies, the first Member to subsidize can prevent, other Members from granting subsidies just by virtue of the fact that they were first. The United States submits that this reading cannot reasonably be a proper construction of Article 32.1 and would lead to perverse results. It is also not supported by the structure of the SCM Agreement including footnote 35 as well as the distinction between prohibited and actionable subsidies. The complaining parties are attempting to insert another category of prohibited subsidies, besides export subsidies, into the SCM Agreement, i.e. counter-subsidies. The Panel should reject such a distorted interpretation.

4.1416 If this Panel finds that the CDSOA is an �action against� dumping or subsidies, then the United States submits that it is otherwise permitted under footnotes 24 and 56 to the Antidumping and SCM Agreements, respectively as action under GATT Article XVI to address the effects dumping and/or subsidies. No party disputes that the CDSOA authorizes �action� in the form of a subsidy, and no party disputes that the CDSOA is consistent with GATT Article XVI. The complaining parties have themselves argued that the CDSOA is intended to offset the effects of continued dumping or subsidies. Therefore, if the Panel finds that the CDSOA authorizes action against dumping and/or subsidies, it is nevertheless action under GATT Article XVI to address the effects of such practices.

(c) Standing

4.1417 The United States asserts that the text of Articles 5.4 and 11.4 do not contain a requirement that �support� for a petition must be �genuine� or �true,� but rather establish objective, numerical benchmarks. The United States has implemented these benchmarks which have not been modified in any way by the CDSOA.

4.1418 According to the United States, the complaining parties have provided no support for their claim that the CDSOA precludes a good faith examination of industry support under Articles 5.4 and 11.4. Complaining parties do not assert that the CDSOA prevents the United States from calculating in good faith whether these numerical thresholds are met, but rather that this good faith calculation is not enough. The United States must second guess whether producers� expressions of support are �true.� This is not required by the agreements and is an unworkable requirement.

4.1419 The United States is of the view that it is highly improbable that CDSOA is a factor in a domestic company�s or union�s consideration of whether to support a petition. CDSOA distributions, if any, are contingent on a number of factors and made at some unknown, future date. The "promise" of a remote, uncertain and unknown payment is hardly worth gambling a million plus dollars on a "frivolous" anti-dumping or countervailing duty case. Moreover, petitioners who file frivolous anti-dumping and countervailing duty cases subject themselves to potential antitrust scrutiny.

4.1420 The United States argues that, even assuming arguendo, that the CDSOA has an effect on the domestic producers� decision to support or oppose a petition, it is not clear what effect that would necessarily be. Whatever the effect, it remains the case that the mere provision of such an inducement is not contrary to the Antidumping Agreement or the SCM Agreement.

(d) Undertakings

4.1421 The United States asserts that US law merely requires that the Commerce Department, to the extent practicable, consult with the domestic industry before determining whether an undertaking is in the �public interest.� Views of the domestic industry do not in any way dictate the outcome and, for this reason, they do not determine the decision to accept or reject a proposed undertaking. The Bethlehem Steel cases do not hold otherwise. Indeed, the only evidence presented to this Panel establishes that the domestic industry has opposed more than 75 per cent of the undertakings which the United States has accepted since 1996.

4.1422 The United States submits that the complaining parties do not seem to understand why petitioners would ever support undertakings after the CDSOA. Given that only 36.1 per cent of the petitions filed result in affirmative final determinations by Commerce and the Commission, a petitioner has ample incentive to support a suspension agreement which is likely to provide relief than take its chances on affirmative final determinations. In sum, the complaining parties have failed to make a prima facie case that the CDSOA violates the standing or undertaking obligations in the Antidumping and SCM Agreements.

(e) GATT Article X:3(a)

4.1423 In the view of the United States, the complaining parties made it perfectly clear that the allegedly offending measure with respect to Article X:3(a) is US implementation of its anti-dumping and countervailing duty laws, not US implementation of the CDSOA. The complaining parties did not, however, explain where in their requests for the establishment of a panel the allegedly offending measures are cited. Complaining parties� Article X:3(a) claims are thus, not within this Panel�s terms of reference and must be rejected.

4.1424 Some complaining parties assert that the CDSOA �administers� the trade laws. The United States administers its trade laws, not the CDSOA. In fact, the Department of Commerce, which handles standing and undertakings determinations, does not administer the CDSOA, the Customs Service does. Argentina - Hides provides no guidance on this issue.

4.1425 The United States argues that even if the complaining parties can overcome the jurisdictional defect, their arguments rest entirely on the unsupported belief that the CDSOA will influence domestic interests to bring or support an investigation, or oppose an undertaking. Moreover, there is no requirement in the agreements that the administering authority (1) examine the reasons behind industry support for petitions or (2) accede to domestic industry opposition to an undertaking. In contrast to US-301, in the instant case the complaining parties have been unable to demonstrate that the CDSOA requires, or permits a Member to engage in, any prohibited conduct.


180 See United States � Tax Treatment for �Foreign Sales Corporations,� WT/DS108/AB/R (24 February 2000), para. 177 (US measures regarding foreign sales corporations held inconsistent with the SCM Agreement).

181 Public Law 106-387 (28 October 2000), 114 Stat. 1549, Title X � Continued Dumping and Subsidy Offset (Byrd Amendment or CDSOA), Section 754(a).

182 The New Shorter Oxford English Dictionary (Clarendon Press, 1993).

183 United States � Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000) (US-1916 Act), paras. 122 and 126 (finding �dumping� to be a situation in which two constituent elements are satisfied � (i) introduction into commerce of imported products (ii) where the import prices is less than normal value).

184 The New Shorter Oxford English Dictionary (Clarendon Press, 1993).

185 US � 1916 Act, WT/DS136/R (31 March 2000) (EC Panel Report), para. 6.104; WT/DS162/R (29 May 2000) (Japan Panel Report), para. 6.117.

186 Byrd Amendment, Section 754(b)(1). The use of the word �affected� inextricably ties the payments to the underlying investigation and order. An �affected� domestic producer is a producer that has been affected by the dumping or subsidization in question.

187 US � 1916 Act, para. 126 (emphasis added).

188 US � 1916 Act, para. 122.

189 See First Written Submission of the United States, United States � Continued Dumping-Subsidy Offset Act of 2000, WT/DS217, WT/DS234 (14 January 2002) (US First Submission), para. 84.

190 See id., para. 91.

191 Id., para. 83.

192 Byrd Amendment, Section 754(b)(1).

193 Id., Sections 754(a) and 754(b)(4).

194 These are the �affected domestic producer� and �qualifying expenditure� requirements.

195 US � 1916 Act, paras. 104 and 107.

196 Id., para. 122.

197 US First Submission, para. 86.

198 Oral Statement of the United States at the First Meeting of the Panel, United States � Continued Dumping and Subsidy Offset Act of 2000, WT/DS217, WT/DS234 (5 February 2002), para. 30.

199 See, e.g., Japan Panel Report, para. 6.150 (noting that legislative history, including statements regarding purpose, confirm prior analysis of effect of 1916 Act).

200 See First Submission of the Republic of Korea, United States � Continued Dumping and Subsidy Offset Act of 2000, WT/DS217, WT/DS234 (6 December 2001) (Korea�s First Submission), paras. 16, 17, 34-36 and 44.

201 US First Submission, para. 101.

202 Japan Panel Report, para. 6.132 (emphasis added).

203 EC Panel Report, n.373.

204 US First Submission, para. 120.

205 See United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (24 July 2001) (US � Hot-Rolled Steel), para. 101. See also United States � Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R (15 February 2002), para. 110.

206 US First Submission, para. 122.

207 Japan � Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (4 December 1996), pages 15-16; Korea � Taxes on Alcoholic Beverages, WT/DS75/AB/R, WT/DS84/AB/R (18 January 1999), paras. 128-133.

208 US First Submission, para. 124.

209 US First Submission, para. 138.

210 See also US � 1916 Act, paras. 60-61 (noting right of a Member to bring claim against �legislation as such� and finding violation not based on trade effects).

211 US � Hot-Rolled Steel, para. 101.

212 US First Submission, para. 151.

213 See Argentina � Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WT/DS155/R (19 December 2000), paras. 11.71 and 11.100.

214 Oral Statement of the United States at the First Meeting with the Panel, para. 4 (emphasis added).

215 First Written Submission of Mexico, para. 89.

216 European Economic Community � Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins ("EEC - Oilseeds I"), adopted on 25 January 1990, BISD 37S/86, at para. 148. The Panel stated that "the case before it does not require the Panel to address the question of whether the assumption created by the 1955 decision of the CONTRACTING PARTIES applies to all production subsidies�" [emphasis added]. The Panel also stated at para. 154 of its Report that "the CONTRACTING PARTIES considered in 1960 that 'it is fair to assume that a subsidy which provides an incentive to increased production will, in the absence of offsetting measures, e.g. a consumption subsidy, either increase exports or reduce imports'".

217 Definition of administration in the Webster�s Encyclopedic Unabridged Dictionary.

218 First Written Submission of the United States, United States � Continued Dumping and Subsidy Offset Act of 2000, WT/DS217, WT/DS234 (14 January 2002) (US First Submission), para. 90.

219 Second Written Submission of the United States, United States � Continued Dumping and Subsidy Offset Act of 2000, WT/DS217, WT/DS234 (27 February 2002) (US Second Submission), para. 43.

220 Id., para. 42.

221 United States � Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R (28 August 2000), paras. 104, 107 and 122.

222 US Second Submission, paras. 47-59.

223 Id., para. 48.

224 Id., para. 52.

225 Id., para. 53.

226 Id., para. 58.

227 Id., para. 61.

228 Id., paras. 70-75.

229 Id., paras. 88-95.

230 Id., para. 100.

231 See, e.g., Japan � Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (4 December 1996), pp. 15-16; Korea � Taxes on Alcoholic Beverages, WT/DS75/AB/R (18 January 1999), paras. 128-133.

232 US Second Submission, para. 85.

233 Id., paras. 84-87.

234 Id., paras. 88-95.

235 See, e.g., United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R (24 July 2001), para. 101.

236 US Second Submission, paras. 104-111.