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UNITED STATES – CONTINUED DUMPING AND SUBSIDY
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
4.1088 According to Mexico, no ex æquo 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.
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.
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.
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.
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.
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.
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
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.
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. |
