WTO Dispute Settlement United States

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WTO Dispute SettlementUnited States Continued
Dumping and Subsidy Offset Act of 2000 (Byrd)
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Table of Contents

• Background
• Pleadings
• Findings and Conclusions
• Procedural Issues
• Substantive Issues
• Subsequent Developments

3
Background

• U.S. Continued Dumping and Subsidy Offset Act
  of 2000
• Duties assessed pursuant to a countervailing duty
  order, an antidumping duty order, or a finding
  under the Antidumping Act of 1921 shall be
  distributed on an annual basis to the affected
  domestic producers for qualifying expenditures.
• The Commissioner of Custom shall establish in the
  U.S. Treasury a special account with respect to
  each order or finding and deposit into such
  account.
• The Commissioner shall distribute all funds from
  the assessed duties to affected domestic
  producers based on a certification.

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Pleadings

• The complainants claimed that the Offset Act is
  inconsistent with
• AD Agreement Article 18.1, SCM Agreement Article
  32.1, and GATT Article VI2, VI3
• AD Agreement Article 5.4 and SCM Agreement
  Article 11.4
• AD Agreement Article 18.4, and SCM Agreement
  32.5, WTO Agreement Article XVI4
• AD Agreement Article 8.3 and SCM Agreement
  Article 18.3
• AD Agreement Article 15
• SCM Agreement Article 5(b)
• GATT Article X3(a)

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Findings and Conclusions

• Panel Stage The Offset Act violates
• AD Agreement Article 18.1, SCM Agreement Article
  32.1, and GATT Article VI2, VI3
• AD Agreement Article 5.4 and SCM Agreement
  Article 11.4
• AD Agreement Article 18.4, and SCM Agreement
  32.5, WTO Agreement Article XVI4
• Appellate Body Stage
• Reverse the Panels conclusion that the Offset
  Act violates AD Agreement Article 5.4 and SCM
  Agreement Article 11.4
• Uphold the other two conclusions.

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Procedural Issues--Issuance of Separate Panel
Reports

• Panel Stage
• DSU Article 9.2 requires the panel to submit
  separate reports if one of the parties so
  requests. However, any request under this
  provision should be made in a timely manner.
• In this present case, the U.S. request was
  received two months after the issuance of the
  descriptive part of the Panels report.
• Appellate Body Stage Uphold the Panel
• Article 9.2 must not be read in isolation from
  the overall object and purpose of the DSU to a
  prompt settlement expressed in Article 3.3.
• In EC-Hormones, AB noted that the DSU leaves
  panels a margin of discretion to deal with
  situations that are not explicitly regulated.

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Procedural IssuesTerms of Reference

• Panel Stage
• Other U.S. Laws Since other U.S. laws are
  administered by the Offset Act and this was
  mentioned in the requests, the claim of other
  U.S. laws was within the Panels terms of
  reference.
• AD Article 15 Although this article is not
  referred to in the requests of the complaining
  parties, the Panel still is bound to consider it
  because DSU Article 12.11 requires panels to take
  more favorable treatment for developing country
  Members.
• Appellate Body Stage Upheld the Panel

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Procedural IssuesSufficiency of Notice of Appeal

• Appellate Body Stage
• Rule 20(2)(d) of the Working Procedures for
  Appellate Review requires the appellant to
  provide notice of the claims of error that the
  appellant intends to argue on appeal.
• In Mexico HFCS, Article 21.5, AB explained that
  the issue of a panels jurisdiction is so
  fundamental that it is appropriate to consider
  claims that a panel has exceeded its jurisdiction
  even if such claims were not raised in the Notice
  of Appeal.
• In this case, although the U.S. did not provide
  enough notice, the AB still agreed to examine the
  two U.S. claims.

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Procedural IssuesScope of Appellate Review

• Appellate Body Stage
• DSU Article 17.6 requires the appeal to be
  limited to issues of law covered in the panel
  report and legal interpretations developed by the
  panel.
• The AB has no authority to consider new facts on
  appeal. Moreover, the fact the documents are
  available on the public record does not excuse it
  from this limitation.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• AD Agreement Art.18.1 and SCM Agreement Art.32.1
  state that no specific actions against
  dumping/subsidy can be taken except in accordance
  with GATT.
• Two conditions
• A measure must be specific to dumping or
  subsidization.
• A measure must be against dumping or
  subsidization.
• A measure must not be in accordance with the
  provisions of the GATT 1994.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• Specific
• Panel Stage The Offset Act is specific.
• Although the Offset Act contains no reference to
  the constituent elements of dumping, it is
  nevertheless clear that the offset payment may
  only be in situations where the constituent
  elements of dumping are present.
• Offset payments follow from the collection of
  anti-dumping duties, which in turn may only be
  collected following the imposition of
  anti-dumping orders, which may only be imposed
  following a determination of dumping.
• Therefore, there is a clear connection between
  the determination of dumping and offset payments.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• Appellate Body Stage upheld the Panel
• Specific means, at a minimum, measures
  encompass action that may be taken only when the
  constituent elements of dumping or subsidy are
  present. In other words, the measure must be
  inextricably linked to, or have a strong
  correlation with the constituent elements of
  dumping or subsidy.
• From the text of the Offset Act, the AB upheld
  the findings of the Panel, and the same is true
  for subsidization.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• Against
• Panel Stage The Offset Act is against dumping.
• The Panel considers that action in response to
  dumping will not always be against dumping and
  will constitute action against dumping to the
  extent that it has an adverse bearing on
  dumping, be it direct or indirect.
• The Offset Act has an adverse bearing on dumping
• A. The Act leads to a distortion of competition
  between dumped products and domestic products.
• B. The Act provides a financial incentive for
  domestic producers to file anti-dumping duty
  applications, thereby disrupting the trading
  environment. (rejected by AB because a measure
  cannot be against dumping simply because it
  induces the exercise of WTO-consistent rights)

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• Appellate Body Stage Uphold the Panel
• An action does not need to have direct contact
  with the imported good or responsible entity.
• It is necessary to assess whether the design and
  structure of a measure is such that the measure
  has an adverse bearing on, or has the effect of
  dissuading the practice of dumping.
• The Offset Act is against dumping
• Payments are financed from the anti-dumping
  duties paid by the exporters.
• Payments are made to an affected domestic
  producer.
• The qualifying expenditures must be related to
  the production of the same product.
• The recipients are entitled to use this money to
  bolster their competitive position.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• AD Agreement Footnote 24, SCM Agreement Footnote
  56
• Panel Stage
• Since the Panel had found that the Offset Act is
  an specific action against dumping, To introduce
  these footnotes to argue whether such measures
  constitute action against dumping is then
  irrelevant.
• Appellate Body Stage
• The footnotes only confirm what is implicit in
  the text of main provisions an action that is
  not specific but is related to dumping is not
  prohibited by these provisions.

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Substantive IssuesSpecific Action Against
Dumping/ Subsidy

• Whether the Offset Act conforms to the GATT
• Appellate Body Stage
• In U.S. 1916 Act, AB found that Article VI2
  read with the AD Agreement limits the permissible
  responses to dumping to definitive anti-dumping
  duties, provisional measures and price
  undertakings.
• Offset payments are not these three permissible
  responses, therefore, the Act is not in
  accordance with the provisions of GATT 1994.

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Substantive IssuesBy or on Behalf of the
Domestic Industry

• AD Agreement Article 5.4, SCM Agreement Article
  11.4
• Panel The Offset Act violates such provisions
• The significance of the tests in these provisions
  is that there will be sufficient support for an
  application before a Member may initiate an
  investigation and investigations will not proceed
  where there is a small proportion of the domestic
  industry affected.
• The Offset Act will cause financial incentive for
  domestic producers to initiate petitions,
  therefore renders the quantitative tests in these
  provisions irrelevant, thus denying parties a
  meaningful test of whether the petition has the
  required support of the industry.

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Substantive IssuesBy or on Behalf of the
Domestic Industry

• Appellate Body Stage reversed the Panels
  opinion
• Articles 5.4, 11.4 must be based on the
  principles of interpretation in the VCLT which
  focus on the ordinary meaning of the words of a
  provision.
• There is no requirement that an investigating
  authority examine the motives of domestic
  producers that elect to support an investigation.
• The Panel dismissed the textual analysis of those
  provisions. These provisions require no more than
  a formal examination of whether a sufficient
  number of domestic producers have expressed
  support for an application.
• A measure provides an incentive to act in a
  certain way does not mean that it in effect
  mandates or requires a certain form of action.

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Substantive Issues --Good Faith

• Panel Stage The Act is not in good faith
• The importance of the principle of good faith as
  a general rule of conduct in international
  relations is well established.
• Good faith requires a party to refrain from
  acting in a manner which would defeat the object
  and purpose of treaty.
• Article 5.4 and 11.4 has the object and purpose
  to require the authority to examine the degree of
  support and to determine whether the application
  was filed by or on behalf of the domestic
  industry.
• The Offset Act implies a return to the situation
  which existed before the Uruguay Round Agreement,
  therefore does not act in good faith under
  Article 5.4 and 11.4.

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Substantive Issues --Good Faith

• Appellate Body Stage reverse the Panel
• VCLT Article 31(1) directs a treaty interpreter
  to interpret a treaty in good faith in accordance
  with the ordinary meaning, object and purpose of
  the treaty.
• Under VCLT 26, performance of treaties is also
  governed by good faith.
• In U.S.shrimp and U.S.Japan Hot-Rolled Steel,
  AB also adopts the principle of good faith.
• However, nothing supports the conclusion that
  simply because a Member is found not to have
  violated a substantive treaty provision, it has
  therefore not acted in good faith.
• The evidence in the Panel record does not support
  that U.S. has not acted in good faith.

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Substantive IssueAD 18.4, SCM 32.5, WTO XVI4

• Panel Stage The Act violates these provisions
• Violation of AD Agreement Articles 18.1, 5.4 or
  8.3, SCM Agreement Articles 32.1, 11.4 and 18.3
  would also violate AD Agreement Article 18.4, SCM
  Agreement Article 32.5 and WTO Agreement Article
  XVI4.
• The Panel has found the violation of AD Agreement
  Articles 18.1, 5.4 or 8.3, SCM Agreement Articles
  32.1, 11.4 and 18.3, therefore also find the
  violation here.
• Appellate Body Stage Uphold the Panel
• AD Agreement Article 18.4, SCM Agreement Article
  32.5 and WTO Agreement Article XVI4 all require
  that Members ensure the conformity with the
  relevant WTO agreements.

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Substantive IssuePrice Undertakings

• Panel The Offset Act violates no provisions
  below
• AD Agreement 8.3 and SCM Agreement 18.3 state
  that undertakings offered need not be accepted if
  the authorities consider their acceptance
  impractical for the reasons such as general
  policy.
• Inconsistency with these provisions exists only
  when the Act mandates a violation of these
  provisions, such as the authority cannot possibly
  comply with these obligations.
• Under the Offset Act, the objection of the
  petitioners to the acceptance of an undertaking
  is only one factor in the authoritys assessment
  of whether it is in the public interest to accept
  an undertaking. The authority remains free to
  decide whether to accept.

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Substantive Issue AD Agreement Article 15

• Panel The Offset Act has no violation here
• AD Agreement Article 15 states that special
  regard must be given by developed country Members
  to the special situation of developing country
  Members when considering the application of
  anti-dumping measures.
• India and Indonesia claims that the Act will
  cause the domestic industry to oppose the
  acceptance of price undertakings, therefore lead
  the U.S. to reject such undertakings.
• The Panel reject this claim because there is no
  factual basis for the premise above. The USDOC
  remains free to accept an undertaking.

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Substantive Issue SCM Agreement Article 5(b)

• Panel The Offset Act has no violation here
• SCM Agreement prohibits actionable subsidies.
• As to specific, SCM Agreement Article 2.1(a)
  refers to measures that explicitly limit access
  to a subsidy to certain enterprises.
• The measure at issue is the Offset Act, rather
  than disbursement made thereunder. Mexico, one of
  the complainants only based their arguments on
  the actual disbursement, therefore there was no
  basis to find that the Offset Act per se is
  specific.
• Besides, the Panel also find that the Offset Act
  does not violate SCM Agreement Article 5(b),
  therefore does not bring adverse effects.

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Substantive Issue GATT Article X3(a)

• Panel The Offset Act has no violation here
• GATT Article X3(a) provides that each Member
  shall administer in a uniform, impartial and
  reasonable manner all its laws.
• In Argentina-Bovine Hides, the Panel noted that
  Article X3(a) applies only in respect of
  measures that are administrative in nature.
  Merely providing a certain manner of applying
  substantive rules is not included.
• The Offset Act is substantive in nature. Domestic
  producers participation in proceedings only
  arise because the Offset Act contains substantive
  rules governing the provision of offset payments.

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Subsequent Developments--Factual Background

• The U.S. informed the DSB that it intended to
  implement the DSBs recommendation.
• Consultation between the parties as to the
  reasonable period of time has failed. Therefore,
  arbitration under DSU Article 21.3(c) is
  requested.
• U.S. failed to take action to implement the
  ruling, therefore eight requesting parties
  requested authorization from the DSB to suspend
  concessions or other obligations with respect to
  trade with the U.S. pursuant to DSU Article 22.2.

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Subsequent Developments--Arbitration under DSU
Art.21.3(c)

• The Arbitrator awarded EC a 11-month period
• The 15-month period in 21.3(c) is only a
  guideline.
• The term reasonable should be interpreted as
  including the notions of flexibility and balance.
• This period should be the shortest period
  possible within the legal system, on the basis of
  normal legislative procedures.
• The implementing Member shall establish the
  shortest period possible.
• Implementation by legislative measures will often
  require a longer period.
• Although the U.S. legislative process is
  characterized by flexibility, Congress could use
  its normal legislative procedure, rather than
  being required to utilize extraordinary
  procedures.

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Subsequent Developments--Arbitration under DSU
Art.22.6

• The suspension covers a total value of
  trade not exceeding the amount of disbursements
  under CDSOA for the most recent year relating to
  anti-dumping or countervailing duties paid on
  imports from the Requesting Party multiplied by
  0.72
• The Arbitrator would review the approach
  advocated by the requesting parties to determine
  if it is consistent with the DSU. If it is not,
  the Arbitrator would determine the level by
  applying a methodology appropriate to this case.
• To specify the level of suspension
• the request must set out the specific level of
  suspension, which is expressed in monetary items.
• the request must specify the agreement and sector
  under which concessions of other obligations
  would be suspended, pursuant to DSU Article 22.3.

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Subsequent Developments--Arbitration under DSU
Art.22.6

• nullification or impairment and violation are
  clearly separate concepts, therefore the
  assertion of the requesting parties that the
  level of nullification or impairment corresponds
  to the total amount disbursed by U.S. under the
  Offset Act is not upheld.
• It would be appropriate to identify and apply an
  economic model reflecting those factors and allow
  us to assess the extent to which those payments
  could nullify or impair benefits accruing to the
  Requesting Parties.
• The basic relationship of the trade effect can be
  expressed as follows
• Trade effect(value of disbursement) pass
  through) (import penetration) (elasticity of
  substitution)

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Subsequent Developments--Arbitration under DSU
Art.22.6

• The trade effect of the disbursement is more
  likely to be on the U.S. market than abroad,
  therefore limited the analysis to the imports
  into the U.S.
• As to value of payments, it should rely on
  figures published by the U.S. authorities when
  assessing the value of CDSOA disbursement.
• As to elasticity of substitution, it decided to
  vary the elasticity values submitted by the
  Requesting Parties by 20 percent.
• As to pass-through, footnote 97 of U.S.-FSC
  stated that it relates to the degree to which a
  company use a subsidy it receives to lower the
  price of the product that it exports. The
  Arbitrator used the range of 25 to 100 percent
  derived from the comments of the parties.