Order Code RL33045
CRS Report for Congress
Received through the CRS Web
The Continued Dumping and Subsidy Offset Act
(“Byrd Amendment”)
Updated September 19, 2005
Jeanne J. Grimmett
Legislative Attorney
American Law Division
Vivian C. Jones
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

---

The Continued Dumping and Subsidy Offset Act
(“Byrd Amendment”)
Summary
The Continued Dumping and Subsidy Offset Act (CDSOA), commonly known
as the “Byrd Amendment,” is a U.S. law providing for the distribution of import
duties collected as a result of antidumping (AD) or countervailing duty (CVD) orders
to petitioners and other interested parties in the investigations that resulted in the
orders. CDSOA disbursements amounted to $231 million in FY2001, $330 million
in FY2002, $190 million in FY2003 (with an additional $50 million held in reserve
pending the outcome of a legal challenge), and $284 million in FY2004. The
CDSOA was successfully challenged in a World Trade Organization (WTO) dispute
proceeding brought by 11 WTO Members including Canada, the European Union,
and Japan. In late 2004 eight of the complaining parties were authorized to “suspend
concessions” (retaliate) until the United States complies, most readily by repealing
the law. Canada and the European Union began retaliating on May 2, 2005, by
placing a 15% additional import duty on selected U.S. exports. Mexico imposed
higher tariffs on U.S. milk products, wine, and chewing gum as of August 18 and
Japan placed an additional tariff of 15% on 15 steel and industrial products as of
September 1. Canada is particularly concerned that well over $3 billion in AD and
CV duty deposits on softwood lumber may eventually be available for distribution
to U.S. lumber producers under the CDSOA.
While legislation has been introduced to repeal or limit implementation of the
CDSOA, the current law has strong congressional support in both chambers. H.R.
1121 (Ramstad), a bill to repeal the statute, has been listed by the Trade
Subcommittee of the House Ways and Means Committee for possible inclusion in
House miscellaneous tariff legislation. Two proposals related to the CDSOA were
offered by Senator Grassley on September 9, 2005, as amendments to H.R. 2682, the
Department of Commerce and Justice, Science, and Related Agencies Appropriations
Act, 2006, but were not voted on during Senate consideration of the bill; S.Amdt.
1680 would have limited implementation of the CDSOA, while S.Amdt 1681 would
have struck a provision in the Senate-reported bill requiring WTO negotiations aimed
at preserving the CDSOA.
In the United States, controversy over the CDSOA is part of a larger ongoing
debate in Congress, and in the country as a whole, on the future direction of U.S.
trade policy. Proponents of the CDSOA argue that U.S. producers are facing an
uneven playing field due to price discrimination and artificial competitive advantage
brought about by unfairly dumped or subsidized imports. Continued dumping of the
targeted merchandise causes U.S. products to remain less competitive, despite the
additional AD or CV duties assessed. Opponents believe that the CDSOA may
encourage additional AD or CVD actions, thus introducing a greater level of
economic inefficiency into the trading system. They also maintain that other U.S.
industries could be damaged by higher prices for intermediate goods used in
production, and that exporters could be adversely affected by retaliatory sanctions on
their products. The CDSOA and other international trade issues are expected to
receive continued attention in the 109th Congress. This report will be updated as
events warrant.

---

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CDSOA Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Analysis of Prior CDSOA Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Domestic and International Legal Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Domestic Court Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
WTO Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
WTO Panel and Appellate Body Decisions . . . . . . . . . . . . . . . . . . . . . 10
Request to Suspend Concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Retaliation Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Actions to Implement Authorized Retaliation . . . . . . . . . . . . . . . . . . . 14
The CDSOA and the U.S.-Canada Softwood Lumber Dispute . . . . . . . . . . 15
Administration and Congressional Response . . . . . . . . . . . . . . . . . . . . . . . 17
Debate on Pros and Cons of Repeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Economic Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Opposing Viewpoints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Supporting Viewpoints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
WTO and Other Trade Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Dispute Panels Overreached? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Discourages Suspension Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 25
Concern of Emulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Doha Development Agenda Negotiations . . . . . . . . . . . . . . . . . . . . . . 27
Other Trade Agreements and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conclusion and Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
List of Tables
Table 1. Ratio of CDSOA Claims to Amounts Disbursed,
FY2001-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. CDSOA Disbursements by Top 10 Industry Sectors,
FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. Top 10 CDSOA Disbursements by Company,
FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 4. Top 10 States Receiving CDSOA Disbursements,
FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

---

The Continued Dumping and Subsidy Offset
Act (“Byrd Amendment”)
Introduction
The Continued Dumping and Subsidy Offset Act (CDSOA, 19 U.S.C. 1675c1),
commonly known as the “Byrd Amendment,” requires that duties collected due to
antidumping or countervailing duty orders must be distributed to petitioners and
interested parties in the investigations that resulted in the imposition of the orders.
Eight countries successfully challenged the CDSOA in a World Trade
Organization (WTO) dispute settlement proceeding, and in August 2004 a WTO
arbitrator determined the level of “suspension of concessions” (retaliation) that the
co-complainants may claim until the United States complies with the WTO ruling.
In late November 2004, the European Union, Japan, Korea, India, Brazil, Mexico,
Canada, and Chile received formal authorization to retaliate. After warnings by the
co-complainants of unified retaliation by July 2005, four have or are about to impose
increased tariffs on selected U.S. goods. The European Union and Canada have
imposed tariff surcharges since May 2, 2005, and Mexico began doing so on August
18, 2005; Japan introduced its measures effective September 1, 2005.2
Congressional action is required in order for the United States to comply with
the WTO determinations. H.R. 1121 (Ramstad), a bill seeking to repeal the measure,
has been introduced in the House, but no action has been taken on the bill. Two
amendments to H.R. 2682 offered by Senator Grassley would have, respectively,
limited implementation of the CDSOA (S.Amdt. 1680) and removed a negotiation
requirement in the Senate-reported bill aimed at preserving the statute (S.Amdt.
1681); neither was voted upon, however. The CSDOA measure has strong
congressional support in both chambers, however, and its proposed repeal faces
intense opposition in the Senate where more than 70 Senators have indicated their
support for retaining current law.3
In Congress, the controversy over the Byrd Amendment is one component of a
larger debate over the future direction of U.S. trade policy. Although many in
Congress acknowledge that benefits are received through liberalizing trade, there is
sometimes disagreement over the proper balance between these benefits and the costs
incurred to domestic industries, firms, and workers by the resulting increase in global
competition — especially if unfair foreign competition is perceived or found to be
1 P.L. 106-387 (Title X, § 1002), 114 Stat. 1549.
2 See infra notes 54-60 and accompanying text.
3 See infra note 76 and accompanying text.

---

CRS-2
the cause of job losses and plant closings. An overall assessment of the United
States’ WTO membership, including issues of U.S. compliance with certain WTO
dispute settlement rulings deemed controversial by some, has already received
significant attention in the 109th Congress.
This report discusses the controversy over the CDSOA in three parts. First, it
covers briefly the background of the law, its effects, and the WTO dispute settlement
case. Second, it discusses the congressional debate on the pros and cons of repealing
the measure. Third, options for Congress are discussed.
Background
Antidumping (AD) and countervailing duty (CVD) investigations are triggered
by a petition filed by an interested party on behalf of an industry4 alleging that the
industry is injured or threatened with material injury by reason of imports that are,
respectively, sold in the U.S. market at less than fair value (dumped), or subsidized.
In order for the industry to obtain relief, two things must happen: (1) the International
Trade Administration (ITA), an agency of the Department of Commerce, must find
dumping or subsidization and (2) the International Trade Commission (ITC) must
find that the domestic industry is materially injured or threatened with material injury
due to the dumped or subsidized imports. These agencies conduct preliminary and
final investigations in a detailed administrative process with specific time lines.5
According to the findings in the CDSOA, the legislative intent of the act is to
address the issue of foreign products which continue to be dumped or subsidized
sales to the U.S. market after an AD or CV duty has already been assessed, and, in
so doing, to strengthen the remedial purpose of antidumping and countervailing duty
laws. One of the findings underlying the law stated that continued dumping or
actionable subsidies “can frustrate the remedial purpose of the [trade remedy] laws
by preventing market prices from returning to fair levels” which can lead to domestic
producers’ reluctance to rehire employees or otherwise invest in the business in order
to remain competitive.6
The CDSOA is also somewhat unique as a trade policy concept because it holds
that “the revenue from unfair trade should be used to help those hurt by trade.”7 Prior
to its enactment, revenue collected as a result of AD or CVD orders was deposited
in the General Fund of the U.S. Treasury. Instead, the CDSOA directs the Bureau
4 Defined in 19 U.S.C. 1677(9)(C)-(G) as manufacturers, producers, wholesalers, certified
union or group of workers representative of an industry, trade or business association, or
producers and growers.
5 For a more thorough discussion of U.S. antidumping and countervailing duty laws and
administrative procedures, see CRS Report RL32371, Trade Remedies: A Primer, by Vivian
C. Jones.
6 19 U.S.C. 1675c note.
7 Snowe, Olympia. Remarks in the Senate. Congressional Record Daily Edition, v. 149,
June 19, 2003, p. S8234.

---

CRS-3
of Customs and Border Protection of the Department of Homeland Security (CBP)
to disburse these duties directly to petitioners and interested parties in the
investigations that resulted in the orders. Many find the measure controversial,
therefore, because they believe that it adds a level of “protection” on subject U.S.
products in addition to the ameliorative action afforded by trade remedies.
Some also find the measure controversial because it was enacted without
committee or floor amendment in either House. The measure was inserted into the
Agriculture, Rural Development, Food and Drug Administration, and Related
Agencies Appropriations Act 2001 (P.L. 106-387) by Senator Robert Byrd, a
conferee to the appropriations bill. Similar legislation had been introduced in the
105th Congress (H.R. 2509, Regula; S. 2281, DeWine) and the 106th Congress (H.R.
842, Regula; S. 61, DeWine), but these bills died in committee. When President
Clinton signed the appropriations measure, he noted the insertion of the amendment,
saying “this bill will provide select U.S. industries with a subsidy above and beyond
the protection level needed to counteract foreign subsidies,” and called on Congress
to repeal or amend the provision.8
CDSOA Procedure
The CDSOA requires CBP to distribute all duties collected pursuant to AD or
CVD orders to “affected domestic producers,” defined in the act as any manufacturer,
producer, farmer, rancher, or worker representative (including associations of these
individuals) that was (1) a petitioner or interested party in support of a petition that
resulted in an AD or CVD order, and (2) remains in operation.9
Distributions under the act may be used to offset “qualifying expenditures”
within the following categories that the domestic producer incurred between the
issuing of an AD or CVD order and its termination : (1) manufacturing facilities; (2)
equipment, (3) research and development; (4) personnel training; (5) acquisition of
technology; (6) health care benefits for employees paid by the employer; (7) pension
benefits for employees paid by the employer; (8) environmental equipment, training,
or technology; (9) acquisition of raw materials and other inputs; or (10) working
capital or other funds needed to maintain production.10
In the first stage of the CDSOA distribution process, the International Trade
Commission sends a list to CBP of petitioners and interested parties in support of
each investigation (generally indicated by letter of support for AD or CVD petitions
or through affirmative responses to ITC questionnaires). CBP then publishes a notice
of intent to distribute the offset, along with a list of affected domestic producers
eligible for distributions and the estimated amount available to them at least 30 days
8 Statement on Signing the Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act, 2001. Public Papers of the Presidents, William
J. Clinton — 2000, Vol. 3, pp. 2359-2361.
9 19 U.S.C. 1675c(b)(1).
10 19 U.S.C. 1675c(b)(4).

---

CRS-4
prior to the offset distribution date.11 In order to receive a payment, each company
on the list must demonstrate that it is eligible to receive an offset disbursement, and
must certify that it has qualifying expenditures incurred for which distributions have
not yet been paid.12
CBP places all estimated antidumping and countervailing duties that are
deposited with CPB directly into “Clearing Accounts.” An account is assigned
individually to each antidumping or countervailing duty order under which duties are
collected.13 When the goods are liquidated and the duty is finally paid, the funds are
distributed into “Special Accounts,” also identified by the individual AD or CVD
orders, from which offset payment to individual claimants are paid. The total amount
of offset payments disbursed is limited by the total amount of duties in the Special
Account for each case.14 As a consequence of this limitation, the actual payments
made often cover only a minimal portion of each claim involved. For example, in
FY2004, more than $1.9 trillion in claims from certified interested parties were
received, while $284 million, or 0.01 percent of the total claims, was available for
disbursement (see Table 1).
Table 1. Ratio of CDSOA Claims to Amounts Disbursed,
FY2001-2004
Total Certified
Total Amount
Fiscal Year
% Disbursed
Claims
Disbursed
2001
$1,189,592,904,866
$231,201,891
0.02
2002
$1,416,828,122,356
$329,871,464
0.02
2003
$1,187,504,594,797
$190,247,425
0.02
2004
$1,948,769,519,521
$284,044,599
0.01
Source: U.S. Department of Homeland Security. Bureau of Customs and Border Protection.
Continued Dumping and Subsidy Offset Act Disbursement Report for FY 2004.
The CBP is required to distribute annual offset payments within 60 days of the
first day of the next fiscal year.15 A final annual report, listing all claims and
11 19 C.F.R. 159.62.
12 19 C.F.R. 159.63.
13 19 C.F.R. 159.64(a)(2).
14 19 U.S.C. 1675c(d)(3). If the certified net claims exceed the amount available in the
corresponding Special Account, the payment will be made on pro rata basis based on each
producer’s total certified claim. 19 C.F.R. 159.64(c)(2).
15 19 U.S.C. 1675c(c).

---

CRS-5
disbursements, is made available after all payments have been completed for the
fiscal year.16
Analysis of Prior CDSOA Distributions
Pursuant to the act, CBP collected and distributed about $231 million in
FY2001, $330 million in FY2002, $190 million in FY2003 (an additional $50
million in FY2003 funds was held in reserve pending resolution of a legal challenge),
and $284 million in FY2004. FY2005 amounts available to distribute per case were
published on June 1, 2005.17
U.S. industries that received the largest CDSOA disbursements in FY2004
included producers of ball bearings, steel, petroleum wax candles, cement, food
products (including pineapple, crawfish, honey, pasta, and mushrooms), computer
chips, polyester fiber, pencils, softwood lumber, and industrial belts, representing
about 93 percent of total disbursements (see Table 2).18
Table 2. CDSOA Disbursements by Top 10 Industry Sectors,
FY2004
Amount Disbursed
Industry Sector
(millions)
Bearings
$77.2
Steel products
$58.1
Candles
$51.3
Cement
$21.3
Food products
$16.7
Computer chips
$12.0
Polyester fiber/film products
$10.2
Pencils
$6.7
Softwood lumber
$5.4
Industrial belts
$5.4
Source: U.S. Department of Homeland Security. Bureau of Customs and Border Protection.
Continued Dumping and Subsidy Offset Act Disbursement Report for FY 2004.
16 19 C.F.R. 159.64(g). CDSOA Annual Reports are available on the CBP website at
[http://www.cbp.gov/xp/cgov/import/add_cvd/cont_dump/].
17 See CBP website [http://www.cbp.gov/xp/cgov/import/add_cvd/cont_dump/].
18 U.S. Department of Homeland Security, Customs and Border Protection. Continued
Dumping and Subsidy Offset Act, FY2004 Annual Disbursement Report at
[http://www.cbp.gov/xp/cgov/import/add_cvd/cont_dump/ cdsoa_04/fy2004_annual/].

---

CRS-6
Continued dumping of some commodities — bearings and steel products in
particular — may indicate that firms who continue to export products subject to AD
or CV orders are multinational firms moving factors of production across borders to
U.S. affiliates. In any case, in order for U.S. sales of an item to continue to be
profitable despite the assessment of additional AD or CV duties, the price of the
targeted good or end-use product must still be competitive in the receiving market,
and/or there must continue to be demand for the product. These factors may cause
the importer to decide to absorb the additional duties as a cost of doing business, as
opposed to pursuing other alternatives such as purchasing the similar U.S. product
or ordering from a foreign supplier not subject to the AD or CV order.
Individual companies that received disbursements of over $10 million each in
FY2004 were the Timken Company and associated businesses, producers of
bearings; Lancaster Colony Corporation, producers of petroleum wax candles;
Micron Technology, semiconductor manufacturers; Emerson Power Transmission,
bearings manufacturers; and the International Steel Group (see Table 3).19
Table 3. Top 10 CDSOA Disbursements by Company,
FY2004
Amount Disbursed
Company
Products
(millions)
The Timken Companya
Bearings
$65.9
Lancaster Colony Corp.
Candles
$26.2
Micron Technology
D-RAMS
$12.0
Emerson Power
Bearings
$11.6
Transmission Corp.
International Steel Group
Steel products
$10.4
Home Fragrance Holdings
Candles
$8.4
Wellman, Inc.
Polyester staple fibers
$7.9
United States Steel Corp.
Steel products
$7.1
AK Steel
Steel products
$6.8
Holcim U.S., Inc.
Grey portland cement
$4.7
Source: U.S. Department of Homeland Security. Bureau of Customs and Border Protection.
Continued Dumping and Subsidy Offset Act Disbursement Report for 2004.
a. Includes Timken US Corporation of CT, Timken Company of OH, and MPB Corporation of NH.
19 Id.

---

CRS-7
By state, domestic companies in Ohio received the largest amount in CDSOA
funds in FY2004,20 followed by Connecticut, Pennsylvania, New York, Texas, and
New Hampshire (see Table 4). Some other states received much less; for example,
a Vermont received only $1,130.81, which went to a honey producer. No companies
in Nevada or New Mexico received CDSOA offset payments.21
Table 4. Top 10 States Receiving CDSOA Disbursements,
FY2004
Amount
State
Disbursed
Major Products
(millions)
Ohio
$72.8
Bearings, Steel and associated products, Petroleum
wax candles, industrial belts
Connecticut
$33.8
Bearings, steel, paper products
Pennsylvania
$23.1
Steel and associated products, foundry coke, apple
juice concentrate
New York
$18.7
Bearings, steel and associated products, petroleum
wax candles, honey
Texas
$15.9
Grey portland cement, steel and associated products,
petroleum wax candles, softwood lumber, honey
New
$13.2
Bearings, softwood lumber, cast iron pipe fittings
Hampshire
Idaho
$12.1
Softwood lumber, honey
New Jersey
$11.6
Steel and associated products, petroleum wax
candles, foundry coke, pasta, cased pencils, honey
Louisiana
$8.5
Crawfish tail meat, steel and associated products,
softwood lumber, honey
Illinois
$7.8
Steel and associated products, softwood lumber,
cased pencils, television receivers
California
$6.1
Steel and associated products, grey portland cement,
honey, softwood lumber, preserved mushrooms, fresh
garlic
Source: U.S. Department of Homeland Security. Bureau of Customs and Border Protection.
Continued Dumping and Subsidy Offset Act Disbursement Report for 2004.
20 U.S. Customs and Border Protection. Disbursement Report for 2004, March 2005.
21 U.S. Department of Homeland Security. Bureau of Customs and Border Protection.
CDSOA - Amount Paid by State.

---

CRS-8
Domestic and International Legal Challenges

Domestic Court Cases
The CDSOA has been subject to challenges in U.S. courts on constitutional
grounds as well as on issues of statutory interpretation. A suit alleging that the
CDSOA violates the First Amendment is pending in the U.S. Court of International
Trade, where the plaintiff is arguing that the statute infringes free speech rights by
conditioning eligibility for CDSOA funds on support of the relevant antidumping or
countervailing duty investigation, thus placing an unconstitutional condition on the
receipt of a government benefit.22 A claim that the CDSOA turned statutory
antidumping provisions into a penal law, thereby granting the plaintiff a Fifth
Amendment right to a neutral judicial hearing before antidumping duties could be
imposed, was rejected by the U.S. Court of Appeals for the Federal Circuit in March
2003.23
In July 2004, the Federal Circuit held that a company that opposed an
antidumping investigation may not make CDSOA claims on behalf of an otherwise
qualified producer that the company has acquired.24 At issue was 19 U.S.C. §
1675c(b)(1), which provides that “companies, businesses or persons ... who have
been acquired by a company or business that is related to a company that opposed the
investigation shall not be an affected domestic producer.” Characterizing the
provision as “hardly a model of clarity,”25 the court nonetheless found that the
purpose of the law was “quite clear — to bar opposers of antidumping investigations
from securing payments either directly or through the acquisition of supporting
parties.”26 As a result, the court concluded that the provision should be interpreted
to “bar claims on behalf of a company that was acquired by a company that opposed
the investigation or, broadly, a company acquired by any ‘business’ related to such
a company.”27
In March 2005, the Federal Circuit held that the CDSOA did not supersede the
confidentiality provisions of § 777 of the Tariff Act of 1930, 19 U.S.C. § 1677f,
which generally prohibit the ITC from disclosing information deemed business
proprietary by the person submitting it without that person’s consent.28 Plaintiff
companies had been denied distributions under the Byrd Amendment based on duties
22 PS Chez Sidney, L.L.C. v. U.S. International Trade Commission, No. 02-00635 (Ct. Int’l
Trade); “Trade Court Considers Constitutionality of Byrd Law,” Inside U.S. Trade, June 6,
2003, at 10.
23 Huaiyin Foreign Trade Corp. v. United States, 322 F.3d 1369 (Fed. Cir 2003), aff’g 201
F.Supp.2d 1351 (Ct. Int’l Trade 2002).
24 Candle Corp. of America v. U.S. Int’l Trade Comm’n, 374 F.3d 1087 (Fed. Cir. 2004).
25 Id. at 1093.
26 Id. at 1094.
27 Id. at 1093, 1094.
28 Cathedral Candle Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352 (Fed. Cir. 2005).

---

CRS-9
collected on petroleum wax candles from China in 2000 and 2001 as they had not
submitted requests in a timely fashion. The court upheld the ITC’s interpretation of
the statute, finding that the Commission had properly excluded plaintiffs from its list
of “affected domestic producers” for the periods in question because the firms had
claimed confidentiality for their support for the petition and had not consented to
release of this information for these time frames.
On April 19, 2005, Canada, along with Canadian industry groups, filed suit
against the United States in the U.S. Court of International Trade alleging that the
CDSOA, as it applies to Canada, is in violation of § 408 of the North American Free
Trade Agreement (NAFTA) Implementation Act, P.L. 103-182, 19 U.S.C. § 3438.29
This provision states, in pertinent part, that “any amendment ... that is made to ...
title VII of the Tariff Act of 1930” enacted after the NAFTA entered into force for
the United States “shall apply to goods from a NAFTA country only to the extent
specified in the amendment.” The plaintiffs are arguing that because the CDSOA
was enacted as a provision of Title VII and does not specify that it applies to
Canadian goods, the United States acted unlawfully when it applied the CDSOA to
distribute antidumping and countervailing duties assessed on imports from Canada
to U.S. producers.30
WTO Dispute
Eleven WTO Members, the largest group of co-complainants in WTO history,
initiated a WTO dispute settlement proceeding against the CDSOA shortly after it
was enacted. The statute was found to violate WTO agreements and, absent U.S.
action to comply with the WTO rulings by the December 2003 compliance deadline,
eight of the Members received authorization to impose retaliatory measures based on
a formula determined in an earlier WTO arbitration. The European Union and
Canada have been imposing retaliatory tariffs on certain U.S. products as of May 2,
2005,31 and Mexico began doing August 18, 2005.32 Japan has announced that it will
increase tariffs on selected items on September 1, 2005.33
29 “Canadian Government, Industry Groups Launch Attacks on Byrd Law,” Inside U.S.
Trade, May 6, 2005, at 5; “Canada, Lumber Groups File Lawsuit Against U.S. for Applying
Byrd Amendment,” 22 Int’l Trade Rep. 752 (BNA 2005).
30 E.g., Complaint at 4-5, 8-9, Government of Canada v. United States, No. 05-00327 (Ct.
Int’l Trade). Section 408 of the NAFTA Implementation Act was enacted to implement
Article 1902 of the NAFTA, which provides that each NAFTA Party reserves the right to
change or modify its antidumping or countervailing duty law, provided that in case of an
amendment certain requirements must be met, including that the amendment will apply to
goods from another Party only if the amending statute specifically states that it so applies,
and that the amendment as it applies to the other Party is “not inconsistent with” specified
GATT and now WTO obligations. See NAFTA Statement of Administrative Action, H.Doc.
103-159, v. 1, at 652.
31 See infra notes 50-51 and accompanying text.
32 See infra note 55-56 and accompanying text.
33 See infra notes 53-54 and accompanying text.

---

CRS-10
WTO Panel and Appellate Body Decisions. In December 2000, the
European Communities (EC), along with Australia, Brazil, Chile, India, Indonesia,
Japan, Korea, and Thailand, requested WTO consultations with the United States on
the CDSOA, arguing that it violated the WTO Antidumping Agreement, the
Agreement on Subsidies and Countervailing Measures (SCM Agreement), and other
WTO obligations. Canada and Mexico filed a separate complaint in May 2001. The
complainants based their argument in part on provisions in the Antidumping and
SCM Agreements prohibiting WTO Members from maintaining any “specific action
against” dumping and subsidization, as the case may be, except for action taken in
accordance with the GATT 1994, as interpreted by the respective Agreement.34 The
complainants also argued that the payments provided “a strong incentive to the
domestic producers to file or support petitions for anti-dumping or anti-subsidy
measures, thereby distorting the application of the standing requirements” in the
Antidumping and SCM Agreements.35 These provisions require a specified level of
domestic industry support for an antidumping or countervailing petition before an
investigation may be initiated. Complainants further argued that the CDSOA “makes
it more difficult for exporters subject to an antidumping or countervailing duty order
to secure an undertaking with the competent authorities [i.e. suspension agreement],
since the affected domestic producers will have a vested interest in opposing such
undertakings in favor of the collection of anti-dumping or countervailing duties.”36
In addition to the arguments just described, Mexico also challenged the statute
“as such,” claiming that the payments distributed under the act constituted “specific
subsidies” as defined in Article 1 of the SCM Agreement, which may cause “adverse
effects” to Mexico’s interests in the form of nullification and impairment of
benefits.37 Article 5 of the SCM Agreement allows WTO Members to challenge so-
called “actionable” subsidies, that is, subsidies other than those prohibited under the
Agreement where the subsidy is shown to be specific to an industry and causes the
type of “adverse effects” specified in the Article.38
34 United States — Continued Dumping and Subsidy Offset Act of 2000; Request for the
Establishment of a Panel by Australia, Brazil, Chile, the European Communities, India,
Indonesia, Japan, Korea and Thailand, at 1 (WT/DS217/5)(July 13, 2001)[hereinafter cited
as US — Offset Act; Panel Request by Australia et al.]. See also Panel requests by Canada
(WT/DS234/12)(August 10, 2001) and Mexico (WT/DS234/13)(August 10, 2004).
Previously, the “no specific action” provision of the Antidumping Agreement (Art.
18.1) had been successfully used by the EC and Japan in challenges filed in 1998 and 1999,
respectively, to the U.S. Antidumping Act of 1916, which allowed criminal penalties and
a private right of action against dumping (WTO cases DS136/DS162). The act was repealed
in late 2004; the repeal was prospective, that is, it does not apply to any suits that were
pending on the date of enactment. P.L. 108-429, § 2006.
35 US — Offset Act; Panel Request by Australia et al., supra note 34, at 1-2.
36 Id. at 2. A suspension agreement is an agreement made by administrative authorities to
suspend an AD or CV investigation if certain commitments are made by exporters or the
exporting country. See 19 U.S.C. 1671c(b),(c), 1673c(b),(c).
37 US — Offset Act; Request for the Establishment of a Panel by Mexico, at 2
(WT/DS234/13)(August 10, 2001).
38 The SCM Agreement prohibits export subsidies and subsidies contingent on the use of
(continued...)

---

CRS-11
The WTO panel found that the CDSOA did create an impermissible “specific
action against” dumping and subsidization, and that it provided a financial incentive
for domestic producers to file or support antidumping and countervailing duty
petitions, thereby undermining the industry support requirements in the Antidumping
and SCM Agreements.39 At the same time, the panel rejected complainants’
argument that the act would make it more difficult for the United States to enter into
suspension agreements, along with Mexico’s claim that the act itself constituted a
subsidy.
The Appellate Body upheld the panel’s finding that the statute created a
“specific action against” dumping and subsidization not allowed under WTO
agreements, but reversed the panel on its conclusion regarding industry support
requirements.40 The Appellate Body concluded that a “specific action against”
dumping and subsidization existed for purposes of Article 18.1 of the Antidumping
Agreement and Article 32.1 of the SCM Agreement because the statute fulfilled two
basic elements of the above-quoted phrase. First, the CDSOA constituted “specific”
action because offset payments were found to be “inextricably linked to, and strongly
correlated with a determination of dumping ... or a determination of a subsidy” or,
as alternatively characterized by the AB, the payments “can be made only following
a determination that the constituent elements of dumping or subsidization are
present.”41 Second, the AB stated that a measure would be considered to be an action
“against” dumping or subsidization if it “has the effect of dissuading the practice of
dumping or the practice of subsidization, or creates an incentive to terminate such
practices.”42 The AB found that, given its “design and structure,” the CDSOA
“effects a transfer of financial resources from the producers/exporters to their
domestic competitors” and as a result the requisite incentives are created.43 Since the
CDSOA did not take the form of the responses to dumping or subsidization permitted
under WTO agreements, the AB concluded that the statute fell within the scope of
the prohibitions in above-cited articles.44 The Appellate Body recommended only
38 (...continued)
domestic over foreign goods. Where actionable subsidies are alleged, “adverse effects”
may take the following forms: (1) injury to the WTO Member’s domestic industry, (2)
nullification or impairment of benefits accruing to the Member under the GATT 1994, in
particular, benefits accruing from bound tariff concessions, or (3) serious prejudice (e.g.,
displacement of imports of another WTO Member into the subsidizing Members’s market
or an increase in the world market share of the subsidizing Member in a particular primary
product or commodity).
39 US — Offset Act; Report of the Panel (WT/DS217/R)(WT/DS234/R)(September 16,
2002)[hereinafter cited as US — Offset Act; Panel Report]; report at [http://www.wto.org].
40 US — Offset Act; Report of the Appellate Body (WT/DS217/AB/R)(WT/DS234/AB/R)
(January 16, 2003)[hereinafter cited as US — Offset Act; AB Report]; report at
[http://www.wto.org].
41 Id. at ¶ 242.
42 Id. at ¶ 254.
43 Id. at ¶¶ 256.
44 Id. at ¶¶ 264-274. The AB stated that three responses to dumping were allowed under
(continued...)

---

CRS-12
that the United States “bring the CDSOA into conformity with its obligations” under
WTO agreements and did not follow the panel’s broader recommendation that the
statute be repealed.
The appellate and modified panel reports were adopted January 27, 2003, and
the compliance period was subsequently determined by arbitration to expire
December 27, 2003. The Arbitrator emphasized that it is for the United States to
decide on the manner of implementation, which may be through modification or
repeal of the law.45
Request to Suspend Concessions. Under the WTO Dispute Settlement
Understanding, complainants in a dispute proceeding may seek authorization to
suspend concessions — or retaliate — if the defending Member has not withdrawn
its measure by the end of the agreed upon compliance period.46 Countermeasures,
which generally take the form of duty surcharges on products imported from the
defending country, may be imposed until the Member has complied or a mutually
agreed upon settlement of the dispute has been reached.47 Since the United States did
not comply by the December 2003 deadline, eight complaining Members — Brazil,
Chile, EC, India, Japan, Korea, Canada, and Mexico — asked the WTO Dispute
Settlement Body (DSB) for authorization to impose retaliatory measures. The United
States objected to the requests, sending them to arbitration. The remaining three
complainants — Australia, Indonesia, and Thailand — agreed to give the United
States until December 27, 2004, to comply.
Under WTO rules, the level of suspension of concessions authorized by the
DSB must be equivalent to the level of the nullification or impairment of WTO
benefits caused by the infringing measures.48 Each of the eight Members seeking to
retaliate proposed the imposition of additional tariffs on U.S. goods in an amount to
be determined each year that was equal to: (1) the amount of offset payments
attributable to antidumping and countervailing duties collected on the Member’s
products and (2) except for Chile, a proportionate amount of the balance of offset
payments less those attributed to the products of the other Members authorized to
retaliate. The United States contested the requests on the ground that the proposed
44 (...continued)
Article VI of the GATT and the Antidumping Agreement: definitive antidumping duties;
provisional measures (i.e. a provisional duty or security imposed in the event of a
preliminary affirmative dumping determination); and price undertakings (suspension
agreements). Id. at ¶ 264. The AB found that four responses to a countervailable subsidy
were permitted under GATT Article VI and the SCM Agreement: definitive countervailing
duties; provisional measures; price undertakings; and multilaterally-sanctioned
countermeasures under the WTO dispute settlement system. Id. at ¶ 269.
45 US — Offset Act; Award of the Arbitrator, at ¶ 50 (WT/DS217/14)(WT/DS234/22)(June
13, 2003).
46 WTO Understanding on Rules and Procedures Governing the Settlement of Disputes
(WTO Dispute Settlement Understanding), Art. 22.1.
47 Id. at Art. 22.8.
48 Id. at Art. 22.4.

---

CRS-13
retaliation was not based on actual harm to the complainants’ exports and noted as
particularly troublesome the use of the amount of duties imposed on goods of
countries that were not party to the WTO proceeding as a basis for determining the
amount of permissible retaliation.49
Retaliation Authorized. In awards issued August 31, 2004, the WTO
Arbitrator (a panel of three) determined that each of the eight Members could impose
countermeasures on an annual basis in an amount equal to 72% of the CDSOA
disbursements for the most recent year for which official data are available relating
to antidumping and countervailing duties paid on imports from the Member at that
time.50 The Arbitrator stated that the disbursements “operate, in economic terms, as
subsidies that may generate import substitution production” and used an economic
model to determine the level of nullification or impairment of benefits, or what the
Arbitrator characterized as “a value of trade” affected by application of the
CDSOA.51 The Arbitrator also made clear that each Member would need to ensure
that the total value of U.S. trade subject to the proposed duty increase did not exceed
the total value of trade determined to constitute the level of nullification or
impairment, or else propose other forms of suspending concessions to the DSB that
were less likely to have trade effects exceeding this level in terms of value of U.S.
exports to the country involved. For example, of the $190 million collected in
FY2003, about $121 million was collected (and distributed pursuant to the CDSOA)
in duties on imports of the co-complainants. Based on the formula determined by the
Arbitrator, $87.12 million in FY2003 funds was available to be distributed among
the eight parties.52
Seven of the complainants — the European Union, India, Japan, Korea, Brazil,
Canada, and Mexico — requested and received formal authorization to impose
retaliatory measures in late November 2004; Chile was authorized to retaliate in
December 2004. In contrast, Thailand, Indonesia, and Australia have entered into
agreements with the United States under which they will not seek authorization to
suspend concessions at this time, but retain the right to pursue retaliation in the
future.53

49 WTO Dispute Settlement Body, Minutes of Meeting, January 26, 2004, at ¶ 23
(WT/DSB/M/164)(March 12, 2004); “U.S. Initiates WTO Arbitration on Byrd Sanctions,
Hits Out at Trading Partners,” 21 Int’l Trade. Rep. 204 (BNA 2004).
50 See, e.g., US — Offset Act (Original Complaint by the European Communities), Recourse
to Arbitration by the United States under Article 22.6 of the DSU; Decision by the
Arbitrator, at ¶¶ 5.1-5.2 (WT/DS217/ARB/EEC)(August 31, 2004).
51 Id. at ¶¶ 3.41, 3.72, 3.80-3.151, 4.7.
52 U.S. Customs and Border Protection CDSOA FY2004 Annual Disbursement
Report,[http://www.cbp.gov/xp/cgov/impor t / add_cvd/cont_dump/cdsoa_04/
fy2004_annual/].
53 “Australia, Indonesia, Thailand Delay Seeking Sanctions on U.S. Imports in Byrd
Dispute,” 22 Int’l Trade Rep. 42 (BNA 2005); “U.S. Strikes Byrd Retaliation Agreement
with Three WTO Members,” Inside U.S. Trade, January 14, 2005, at 7.

---

CRS-14
Actions to Implement Authorized Retaliation. On April 25, 2005, the
Council of the European Union adopted a Council Regulation establishing additional
customs duties of 15 percent on certain products from the United States. As of May
1, 2005, these duties applied to U.S. exports of certain apparel, binders and
notebooks, crane trucks, sweet corn, and wire spectacle frames from the United
States.54 On May 5, 2005, the Canadian government issued a final order
implementing a 15 percent surtax on live swine, ornamental fish, oysters, certain
cigarettes, and certain fish items, effective May 1, 2005.55
On June 3, 2005, representatives of all eight complaining parties met with the
Deputy United States Trade Representative (USTR) to express concerns about the
statute and, in a memorandum to the USTR, conveyed their view of “the urgency of
the repeal of the CDSOA.” They noted that the six remaining members were
contemplating the imposition of retaliatory measures by July 2005 and that as a result
“a broad range of U.S. industries will be subject to increased duties by major U.S.
trading partners.”56
On August 1, 2005, Japan announced that it would impose additional tariffs of
15% on 15 categories of U.S. goods beginning September 1, 2005; the imposition of
tariffs was approved by the Prime Minister’s cabinet on August 12.57 According to
Japan, the level of retaliation would not exceed $52 million, which, it stated, is the
amount authorized by the WTO based on the amount of CDSOA disbursements
involving Japanese goods in fiscal 2004.58 The products that will be subject to the
tariff are: seven types of ball bearings, three types of flat-rolled steel products;
navigational instruments; machinery accessories; printing machines; forklift trucks;
and industrial belts.
In addition, Mexico has announced that it is imposing $20.9 million in
retaliatory tariffs effective August 18, 2005; specifically, it is placing a tariff of 30%
on certain prepared milk products, 20% on wine, and 9% on chewing gum.59 The
54 Council of the European Union. Council Regulation (EC) No. 63/2005 of 25 April 2005
Establishing Additional Customs Duties on Imports of Certain Products Originating in the
United States of America. Official Journal L110, 30/04/2005, pp. 0001-0005.
55 Government of Canada. Order Suspending the Application of Concessions on Imports of
Certain Products Originating in the United States. Canada Gazette, 139:9, May 4, 2005.
56 Embassies of Brazil, Canada, Chile, India, Japan, Korea, Mexico, and Delegation of the
European Commission. “Aide Memoire on Behalf of Brazil, Canada, Chile, the European
Union, India, Japan, Korea, and Mexico.” June 3, 2005.
57 US — Offset Act; Communication from Japan (WT/DS217/48)(August 19, 2005); Japan,
Ministry of Economy, Trade and Industry, “US Byrd Amendment: Japan Decides to Start
R e t a l i a t i o n , ” P r e s s R e l e a s e , A u g u s t 1 , 2 0 0 5 , a t
[http://www.meti.go.jp/english/information/data/WTOByrd050801e.html][hereinafter cited
as METI Press Release]; “Japan OKs Countervailing Duties on 15 U.S. Products Because
of Byrd Amendment,” 22 International Trade Reporter 1344 (BNA 2005).
58 METI Press Release, supra note 57.
59 “Decreto por el que se modifica temporalmente el artículo 1 del Decreto por el que se
(continued...)

---

CRS-15
official Mexican Government notice states that the tariff decree will remain in effect
for 12 months, and that it will no longer apply when the Ministry of the Economy
places a notice in the Diario Oficial that the United States has complied with the
WTO decision, at which time tariffs will return to their original rates.60

The CDSOA and the U.S.-Canada Softwood Lumber Dispute
For Canada, the CDSOA is also tied to the longstanding U.S.-Canadian dispute
over trade in softwood lumber, which itself has resulted in WTO and NAFTA
complaints by Canada challenging U.S. agency actions. The dispute has also been
the subject of negotiations between the two countries.61 The United States has been
imposing antidumping and countervailing duties on imports of softwood lumber from
Canada since May 2002, with almost $3 billion in estimated duties having been
deposited with Customs and Border Protection as of October 1, 2004,62 and
additional duty deposits accumulating since. Canada has contested the final
Department of Commerce dumping and subsidy determinations and the final
International Trade Commission (ITC) threat of injury determination in WTO dispute
settlement proceedings and before binational panels established under Chapter
Nineteen of the North American Free Trade Agreement (NAFTA), an option
available in lieu of judicial review in the United States.

Among other decisions, both the WTO and the NAFTA panels have ruled
against the ITC affirmative threat of injury determination, with the NAFTA panel
having directed the ITC to issue a “no threat” determination and the ITC doing so,
but under protest, in September 2004. The United States appealed the NAFTA panel
decision to a NAFTA Extraordinary Challenge Committee (ECC), which upheld the
panel decision in an August 10, 2005, ruling.63 At the same time, the ITC continued
to find threat of material injury in response to the WTO decision and, in November
2004, issued a determination to this effect under § 129 of the Uruguay Round
59 (...continued)
establece la Tasa Aplicable durante 2003, del Impuesto General de Importación, para las
mercancías originarias de América del Norte, publicado el 31 de diciembre de 2002, por lo
que respecta a las mercancías originarias de América del Norte, publicado el 31 de
diciembre de 2002, por lo que respecta a las mercancías originarias de EE.UU.,” Diario
Oficial, 17 de agosto de 2005, as printed in [http://www.insidetrade.com][hereinafter cited
as Decreto]; “Mexico Announces $20.9 Million in Byrd Retaliation Against U.S. Exports,”
Inside U.S. Trade, August 19, 2005, at 1.
60 Decreto, supra note 59, “Transitorios.”
61 For further information on the dispute, including Canada’s trade complaints, see CRS
Issue Brief IB10081, Softwood Lumber Imports from Canada: Issues and Events, by Ross
Gorte and Jeanne J. Grimmett.
62 See Clearing Account Balances as of October 1, 2004, in U.S. Customs and Border
P r o t e c t i o n , C D S O A F Y 2 0 0 4 A n n u a l R e p o r t , S e c t i o n I I I , a t
[http://www.cbp.gov/xp/cgov/import/add_cvd/cont_dump/ cdsoa_04/fy2004_annual/].
63 In the Matter of Certain Softwood Lumber from Canada; Opinion and Order of the
Extraordinary Challenge Committee (Secretariat File No. ECC-2004-1904-01USA)(August
10, 2005), at [http://www.nafta-sec-alena.org].

---

CRS-16
Agreements Act.64 Canada has challenged the § 129 determination in a WTO
compliance proceeding,65 and has requested authorization from the WTO Dispute
Settlement Body to impose sanctions against the United States in the amount of $3.4
billion, an amount based on accumulated softwood duty deposits, if the United
States is ultimately found not to have complied.66 As reported by the press and
confirmed by USTR, however, an interim panel report, issued August 29, 2005, has
upheld the U.S. threat determination.67 Either party may appeal a compliance panel
report once it is publicly circulated.
Canada expects that as a result of the affirmative ECC decision, the United
States will have no basis for maintaining the antidumping and countervailing duty
orders on softwood lumber and would thus need to revoke them.68 However, Canada
is also concerned that even if the orders are ultimately revoked, the United States will
not refund the accumulated duty deposits and instead will make them available for
distribution to U.S. lumber producers under the CDSOA.69 To date, the United States
64 Section 129 of the Uruguay Round Agreements Act, P.L. 103-465, 19 U.S.C. § 3538,
establishes authorities and procedures for the Executive Branch to use in responding to
adverse WTO decisions involving agency determinations in antidumping and countervailing
duty proceedings.
65 United States — Investigation of the International Trade Commission in Softwood
Lumber from Canada; Recourse to Article 21.5 of the DSU by Canada
(WT/DS277/8)(February 15, 2005).
66 Canada stated in its retaliation request that the proposed retaliation represents the total
amount of antidumping and countervailing duty cash deposits collected and not refunded as
a result of the United States’ failure to revoke the May 2002 CVD and antidumping duty
orders, which Canada views as proper implementation of the WTO ruling in the case. Under
Article 22.4 of the WTO Dispute Settlement Understanding, the level of retaliation
authorized by the WTO must be “equivalent” to the level of nullification or impairment of
benefits suffered by the complaining country. The amount has been sent to arbitration, an
action required under WTO rules because the United States has objected to Canada’s
proposal. Under an agreement between the parties, however, the arbitration has been
suspended until the compliance panel process is concluded. The arbitration may be revived
by either party if the United States is ultimately found not to have complied in the case. See
the following WTO documents: WT/DS277/9 (February 15, 2005)(Canada’s retaliation
request); WT/DS277/10 (February 25, 2005)(U.S. request for arbitration); WT/DS277/11
(February 25, 2005)(U.S.-Canada procedural agreement). See also World Trade
Organization, Update of WTO Dispute Settlement Cases, at 50 (WT/DS/OV/24)(June 15,
2005).
67 Statement of USTR Spokesperson Neena Moorjani Regarding the WTO panel report on
Softwood Lumber,” August 30, 2005, at [http://www.ustr.gov]; “WTO Compliance Panel
Rules in Favor of U.S. on ITC Lumber Duty Determination,” Daily Report for Executives,
August 31, 2005, at A-19 (BNA).
68 See Canada, Dep’t of Foreign Affairs and Int’l Trade, “ECC Rules No Justification for
Softwood Lumber Duties,” News Release, No. 145, August 10, 2005 at [http://www.dfait-
maeci.gc.ca].
69 See, e.g., “Backgrounder: The Byrd Amendment,” as attached to Canada, Dep’t of Foreign
Affairs and Int’l Trade, “Byrd Amendment: Canada to Retaliate Against United States,”
(continued...)

---

CRS-17
has resisted agreeing to a return of these funds.70 Moreover, the United States is
maintaining that, notwithstanding the ECC decision, the September 2004 “no threat
of injury” determination has been superseded by the November 2004 § 129
determination and that, with the latter in place, the United States may continue to
collect antidumping and countervailing duties on dumped and subsidized softwood
lumber.71
Along with the earlier-mentioned judicial challenge to the CDSOA as violative
of the NAFTA Implementation Act, Canada and Canadian producers have also filed
a suit in the U.S. Court of International Trade (USCIT) in which, in light of the
NAFTA panel ruling, they are challenging the United States Trade Representative’s
direction to the Department of Commerce to implement the § 129 determination 72
The latter litigation was stayed pending the outcome of the ECC proceeding73 and
Canada will now reactivate the case.74
Administration and Congressional Response
The Bush Administration proposed repeal of the CDSOA in the FY2004 -
FY2006 budget requests. In addition, then-U.S. Trade Representative (USTR)
Robert B. Zoellick notified WTO officials in late 2004 that the United States intends
to comply with the WTO ruling, but that “complex issues like these often take
time.”75
69 (...continued)
News Release No. 56, March 31, 2005, at [http://www.dfait-maeci.gc.ca]; “U.S., Canada Set
to Resume Lumber Talks with NAFTA Decision Looming,” Inside U.S. Trade, July 15,
2005, at 1, 17 [hereinafter cited as “Lumber Talks”].
70 “Lumber Talks,” supra note 69, at 17; “U.S. Canada Reengage in Lumber Talks, Industry
Meeting Planned,” Inside U.S. Trade, April 1, 2005, at 6; “Difficulties Seen with Canada
WTO Request for Lumber Sanctions,” Inside U.S. Trade, February 11, 2005, at 1; “Aldonas
Says U.S. Will Not Return Lumber Duty Deposits Without Deal,” Inside U.S. Trade,
January 28, 2005, at 1.
71 Office of the United States Trade Representative, Statements of Spokesperson Neena
Moorjani of August 10, 2005, and August 12, 2005, at [http://www.ustr.gov].
72 E.g., Complaint, Tembec Inc. v. United States, No. 05-00028 (Ct. Int’l Trade January 19,
2005). Canadian producer Tembec also requested NAFTA binational panel review of the
§ 129 determination; panel review was stayed as of March 22, 2005, pending the outcome
of the Extraordinary Challenge Committee proceeding 70 Fed Reg. 5166 (2005); id. at
20104.
73 Tembec Inc. v. United States, No. 05-00028, slip op. 05-79 (Ct. Int’l Trade July 5,
2005)(mem. order).
74 “Comments from Jacqueline LaRocque, Spokesperson for International Trade Minister
Jim Peterson,” as printed in World Trade Online, September 2, 2005, at
[http://www.insidetrade.com]; “WTO Compliance Panel Rules in Favor of U.S. on ITC
Lumber Duty Determination,” Daily Report for Executives, August 31, 2005, at A-19
(BNA).
75 United States Trade Representative, Press Release, November 10, 2004.

---

CRS-18
At the same time, there is considerable opposition in Congress to repealing the
CDSOA. On February 4, 2003, shortly after the WTO Appellate Body report was
released, a letter signed by 70 Senators was sent to the White House urging
negotiations with U.S. trading partners to find a positive resolution rather than
making any attempt to change the law. The letter said that the CDSOA’s “continued
operation is critical to preserve jobs that will be otherwise lost as the result of illegal
dumping or unfair subsidies and to maintain the competitiveness of American
industry.”76
Also, in response to the Bush Administration’s efforts to repeal the law in the
FY2004 and 2005 budgets, more than half of the members of the Senate
Appropriations Committee, including Senator Byrd, sent letters (dated June 4, 2003
and June 1, 2004, respectively) to the chairman and ranking member of the Senate
Transportation, Treasury, and General Government Subcommittee warning them
against any attempt to repeal the law.77
CDSOA supporters in Congress also inserted provisions in the Consolidated
Appropriations Acts, 2004 (P.L. 108-199, signed January 23, 2004) and 2005 (P.L.
108-447, signed December 8, 2004) directing the USTR and the Department of
Commerce to initiate WTO negotiations aimed at recognizing the right of WTO
members to distribute monies collected from antidumping and countervailing
duties.78 On April 26, 2004, U. S. negotiators complied, in part, by proposing in a
submission to the WTO Negotiating Group on Rules that negotiators should consider
addressing “the right of WTO members to distribute monies collected from
antidumping and countervailing duties” as part of its work in the Doha Round.79 The
agencies were directed to continue negotiations on the issue in their appropriation act
for FY2005, P.L. 108-447.80 H.R. 2862, 109th Cong., 1st Sess. (2005), the Science,
State, Justice, Commerce, and Related Agencies Appropriations Act, 2006, as
reported in and passed the Senate, contains a CDSOA negotiation requirement for
USTR and the Department of Commerce for FY2006.81
Congressional support for the CDSOA is not unanimous, however. Some
Members introduced legislation in the 108th Congress seeking to repeal the measure.
76 Letter to President George W. Bush, signed by seventy Senators, including Robert C.
Byrd, Max Baucus, and Mike DeWine, February 4, 2003.
77 Letter to Senators Richard C. Shelby and Patty Murray signed by Senators Mike DeWine,
Robert C. Byrd, and 13 other members of the Senate Committee on Appropriations, June 4,
2003. Letter to Senators Richard C. Shelby and Patty Murray signed by Senators Mike
DeWine, Robert C. Byrd, and 13 other members of the Senate Committee on
Appropriations, June 1, 2004.
78 U.S. Congress, House. Conference Report to Accompany H.R. 2673, Making Further
Appropriations for the Fiscal Year Ending September 30, 2004, and for Other Purposes.
H.Rept. 108-401, p. 573.
79 WTO Negotiating Group on Rules, Three Issues Identified for Discussion by the
Negotiating Group on Rules; Submission of United States (TN/RL/W/153)(April 26, 2004).
80 See H.Rept. 108-792, pp. 65, 67-68, 780, 782. See also S.Rept. 108-344, pp. 70, 73.
81 151 Cong. Rec. S9762 (daily ed. September 8, 2005).

---

CRS-19
S. 1299 (Snowe, introduced June 19, 2003) sought to repeal the CDSOA and use AD
and CVD duties to establish a trust fund to aid communities negatively impacted by
trade. H.R. 3933 (Ramstad, introduced March 10, 2004) sought to repeal the act and
direct that any special accounts established under the law be deposited in the general
fund of the U.S. Treasury.
A bill seeking to repeal the CDSOA has also been introduced in the 109th
Congress (H.R. 1121, Ramstad, introduced March 3, 2005) with the co-sponsorship
of Ways and Means Trade Subcommittee Chairman Clay Shaw. On July 25, 2005,
the Subcommittee included H.R. 1121 in a long list of bills that it announced may be
included in a miscellaneous duty suspension and technical corrections trade package.
The announcement gave members of the public until September 2, 2005, to submit
comments on bills proposed for inclusion. In determining which bills are to be
included, the announcement stated that the Subcommittee would consider the extent
to which bills “create a revenue loss, operate retroactively, attract controversy or are
not administrable.”82
In addition, S.Amdt. 1680 to Senate-reported H.R. 2862, introduced September
9, 2005 by Senator Grassley, would have directed the USTR to determine and report
to Congress as to whether distribution of CDSOA funds is consistent with U.S. WTO
obligations, and, if found not to be, would prohibit the distribution of CDSOA funds
unless USTR later found and reported that changed circumstances rendered such
distributions not inconsistent with these obligations.83 S.Amdt. 1681, also introduced
September 9, 2005, by Senator Grassley, would have struck the CDSOA negotiation
requirement in Senate-reported H.R. 2862 noted above.84 Neither amendment was
voted upon during Senate consideration of the underlying bill.
Debate on Pros and Cons of Repeal
The Byrd Amendment controversy is one component of a larger debate in
Congress concerning the overall direction of U.S. trade policy. Although many
Members acknowledge that there are benefits received by liberalizing trade flows,
there is sometimes disagreement on the proper balance between these benefits and
the transition costs incurred to domestic industries, firms, and workers by increased
global competition. Because the added welfare from trade tends to be diffused over
the population as a whole, while losses fall disproportionately on import-competing
industries and regions, Members’ perceptions of free market policies differ. With
regard to the CDSOA, supporters maintain that the measure helps level the playing
field by compensating U.S. producers adversely affected by unfair trading practices.
Now that some co-complainants have assessed WTO-authorized retaliatory duties on
U.S. exports, however, Congress may later face as much pressure to repeal the
82 U.S. Congress. Committee on Ways and Means, Subcommittee on Trade. “Shaw
Announces Request for Written Comments on Technical Corrections to U.S. Trade Laws
and Miscellaneous Duty Suspension Bills.” Advisory No. TR-3, July 25, 2005.
83 151 Cong. Rec. S9887 (daily ed. September 9, 2005).
84 Id.

---

CRS-20
measure from U.S. exporters as it does from the domestic producers who benefit
from the measure.
The debate over CDSOA compliance is also related to the issue of differing
viewpoints in Congress on the merits of WTO membership, a topic which has also
been addressed in the 109th Congress.85 As an international organization designed
to ensure that global trade flows more easily, predictably and freely, the WTO serves
as a forum for multilateral trade negotiations and the settlement of disputes.86
Questions may arise as to the overall benefit of WTO dispute settlement, which the
United States has used to ensure that U.S. exporters receive open access and fair
treatment in foreign markets,87 but which has also resulted in rulings that various U.S.
laws, regulations, and regulatory actions, particularly in the trade remedy area, are
violative of WTO agreements.88
U.S. trade policy is also inextricably related to U.S. foreign policy interests.
Some observers are concerned that U.S. leadership in this arena could be
compromised by U.S. noncompliance with certain WTO obligations and may cause
strains in U.S. relations with nations that are essential for achieving other foreign
policy objectives.
This section provides an analysis of issues Congress is likely to consider as it
debates the pros and cons of repealing the CDSOA from these perspectives.
Economic Considerations
Trade remedy actions in general are a source of controversy among economists
and other policy makers. Some believe that the CDSOA increases the level of
economic inefficiency brought about by these actions, while others assert that the
small amount of inefficiency brought about by the measure is worth the cost of
preserving U.S. industries and jobs adversely affected by unfair trading practices.
85 Section 125 of the Uruguay Round Agreements Act, P.L. 103-465, requires the U.S. Trade
Representative to present to Congress a report that includes an analysis of the costs and
benefits of U.S. participation in the WTO beginning March 1, 2000, and every five years
thereafter. Congress may also vote on a joint resolution disapproving U.S. participation in
the WTO at this time. See CRS Report RL32700, Seeking Withdrawal of Congressional
Approval of the WTO Agreement: Background, Legislative Procedure, and Practical
Consequences, by Vladimir Pregelj; and CRS Report RL32918, World Trade Organization
(WTO): Issues in the Debate on U.S. Participation, by Ian F. Fergusson and Lenore Sek.
Withdrawal Resolution H.J.Res 27, 109th Cong., 1st Sess, (2005), was defeated in the House
on June 9, 2005.
86 CRS Report 98-928, The World Trade Organization: Background and Issues, by Lenore
Sek.
87 See, e.g., Office of the United States Trade Representative, 2005 Trade Policy Agenda
and 2004 Annual Report 101-110 (2005), at [http://www.ustr.gov/Document_Library/
Reports_Publications/2005/2005_Trade_Policy_Agenda/Section_Index.html].
88 For a discussion of recent WTO cases with rulings adverse to the United States, see CRS
Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases,
by Jeanne J. Grimmett.

---

CRS-21
What follows is an analysis of the economic arguments by both supporters and
opponents of the CDSOA.
Opposing Viewpoints. Most economists support the most efficient
allocation of resources in an economy. Therefore, they believe that trade
liberalization provides for optimal domestic and global economic welfare because
nations are able to specialize in the production and export of products in which they
have a comparative advantage in terms of costs and resources, and buy or import
products for which they do not have an advantage. Economic theory indicates that
these benefits accrue even if a country unilaterally lowers its barriers to trade, and
that countries that impose trade barriers are the ones that are harmed the most
economically.89
Therefore, most economists believe that trade remedy actions (the vast majority
of which are AD or CVD cases) in and of themselves introduce inefficiencies in both
domestic and international economies that result in decreased economic welfare.
Some economists hold that if other countries and firms decide to subsidize or dump
goods at lower cost in the U.S. market, it amounts to an additional benefit to the U.S.
economy in the long run, especially if the practice continues over time.
Most analysts, however, acknowledge that allowances for a certain amount of
inefficiency resulting from trade remedies must be made in order to maintain public
support for trade liberalization. Others argue that efficiency is secondary when
preserving industries considered critical to U.S. national and economic security
interests. However, opponents of the CDSOA assert that the measure provides a type
of “double” remedy to domestic producers, thus enhancing the economic inefficiency
of AD and CVD actions.
Injury to Downstream Industries. Trade remedy actions often lead to price
increases on targeted goods — many of which are industrial inputs used by other
domestic industries. To the extent that the CDSOA encourages domestic producers
to file additional AD or CVD claims, the measure also contributes to these price
increases. Downstream industries (for example, the automobile and housing
industries which use steel and lumber to manufacture their products) bear the cost of
trade remedies in the form of higher-cost inputs for their products. As a result, these
industries may have to raise the price of their goods. At a recent House Small
Business Committee hearing, for example, a manufacturer of specialty automotive
parts complained that inflated prices for steel inputs, brought about in part by trade
remedy actions, caused unintended “collateral damage” which threatened his
business.90
In addition, since the EU and Canada have already begun retaliating against U.S.
exports, products targeted for increased duties may also become uncompetitive in the
89 Baghwati, Jagdish, “Free Trade: Old and New Challenges,” Economic Journal, Mar.
1994, p. 231.
90 U.S. Congress. House. Committee on Small Business. “Trade Fairness Hearing: How We
Can Make Our Trade Laws Work for America’s Small Businesses,” Remarks of Mr.
Wallace Smith, E & E Manufacturing Company, Inc.

---

CRS-22
receiving market. Therefore, many economists contend that the CDSOA, while
providing a benefit to many domestic firms injured by dumping or subsidies, may
in turn cause injury to U.S. downstream producers, exporters, and ultimately,
consumers.
Distribution of Benefits. According to a Congressional Budget Office
(CBO) memorandum on the CDSOA, the statute may lead to unequal distribution of
benefits within an industry that could give some firms an advantage over domestic,
as well as global, competitors.91
First, according to the CDSOA, only the firms in support of an AD or CVD
petition resulting in an AD or CV duty order are eligible to receive disbursements.
Therefore, even though all companies in an industry that producing the targeted
product may benefit from the remedial effect of trade remedy action, companies are
only eligible for CDSOA payments if they are able to certify that they supported the
initial investigation. Those producers within the industry who decide not to support
the trade remedy action could be placed at a disadvantage vis a vis their domestic
competitors.92
Additionally, due to the considerable transaction costs involved in filing and
supporting trade remedy petitions (estimated to range from $500,000 for the simplest
case to millions of dollars for more complex ones), it is possible that more efficient
firms in an industry might be less likely to support a trade remedy petition. Thus,
opponents argue the CDSOA mechanism could adversely affect the more efficient
firms in a domestic industry, while more inefficient firms receive a benefit.93
For these reasons, the decisions of U.S. manufacturers in some industries to
pursue AD or CVD investigations have caused intense and vocal debate within the
domestic industry as a whole. For example, when some U.S. furniture makers and
worker unions decided to file a petition on wooden bedroom furniture from China,
many larger furniture retailers strongly objected, saying that they would lose jobs and
business on the retail side if the petition went forward, while producers maintained
that far more manufacturing jobs were being lost than would be lost on the retail side
of the business.94 In this particular case, many U.S. furniture manufacturers in
support of the investigation speculated that the cost of lost business from U.S.
retailers in retaliation for their support may well exceed the combined benefit of the
AD order and CDSOA disbursements.95
91 Economic Analysis of the Continued Dumping and Subsidy Act of 2000. Congressional
Budget Office, March 2, 2004. [http://www.cbo.gov].
92 Id.
93 Id.
94 See Notice of Amended Final Determination and Antidumping Duty Order: Wooden
Bedroom Furniture from the Peoples’ Republic of China, 70 Fed. Reg. 329 (2005).
95 Becker, Denise. “Government Delays Ruling on Tariffs; the Furniture Industry Must Wait
Until June 17 for Action, if Any, on China,”Greensboro News and Record, April 13, 2004.

---

CRS-23
According to the CBO, CDSOA payments may also reduce the receiving
industry’s incentive to take the necessary steps to remain competitive, such as
changing the product mix or developing more efficient methods of production. Since
the affected industry only qualifies for disbursements as long as it manufactures a
particular product, firms may decide to produce the good longer than it is efficient
to do so, rather than allocating resources to producing alternative products that could
help firms return to competitiveness.96 Because CDSOA payments are also linked
to production costs, firms may be encouraged to increase output beyond the levels
signaled by market incentives, ultimately driving down the cost of the product.97
Supporting Viewpoints. Many Members have witnessed the substantial
benefits that the CDSOA has conferred on industries and workers in their states and
congressional districts. In a February 2005 hearing before the U.S.- China Economic
and Security Review Commission, some Members testified that the CDSOA enabled
U.S. firms — many of them small, family-run companies — to purchase new
machinery, hire more workers, and compete head-to-head with unfairly traded
imports from China.98
Supporters of the CDSOA believe that U.S. producers are facing an uneven
playing field due to price discrimination and artificial competitive advantage brought
about by unfairly dumped or subsidized imports. Continued dumping of the targeted
merchandise causes U.S. products to remain less competitive, despite additional
duties assessed. Therefore, supporters believe that the CDSOA creates an additional
disincentive for foreign exporters to continue dumping and compensates domestic
producers with financial resources that can be used to maintain competitiveness.
Proponents of this view believe that trade remedies, combined with the added
benefit provided by the CDSOA, are worth the cost of the economic inefficiency
because they promote trade fairness, restore competitive balance, and preserve
critical U.S. industries and jobs. Supporters believe that many countries limit outside
competition in their economies by creating “sanctuary markets” — limiting both
domestic and international competition — thus enabling chosen firms to charge
higher prices for goods at home to offset the lower prices charged in the foreign
market — at the expense of industries abroad that produce similar merchandise.
Therefore, some supporters believe that trade remedy actions, combined with the
CDSOA may actually encourage international trade by providing an “interface
mechanism” between two radically different economic systems.99
96 Economic Analysis of the Continued Dumping and Subsidy Act of 2000. Congressional
Budget Office, March 2, 2004. [http://www.cbo.gov].
97 Id.
98 U.S.-China Economic and Security Review Commission. Hearing on China and the
WTO: Assessing and Enforcing Compliance. February 3-4, 2005, [http://www.uscc.gov/
hearings/2005hearings/hr05_02_3_4.htm].
99 Mastel, Greg, Antidumping Laws and the U.S. Economy. Armonk, NY: M.E. Sharpe,
1998, p. 67.

---

CRS-24
Some recent economic research also suggests that the CDSOA could actually
lead to higher welfare for the domestic economy, as well as lower overall
antidumping duties, if the goal of administrative authorities is to provide affected
domestic industries with higher CDSOA payments. According to this theory, since
the CDSOA gives the duty revenue to the domestic industry, the affected industry is
interested in receiving the proceeds from AD or CVD action as well as profits. If
administrative authorities and policy makers are, in turn, concerned about the
affected industry, they may actually choose to assess lower AD or CV duties so that
imports of the subject merchandise will continue. Thus, greater revenues could be
collected by the industry, and lower trade remedy duties could reduce the overall
economic inefficiency of the actions.100 However, since the congressional intent of
the CDSOA and trade remedy actions in general seems to be to discourage, rather
than encourage, continued dumping of subject merchandise, modifications to the
existing statutes would be required if increased duty proceeds were desired.
WTO and Other Trade Concerns
Many policymakers believe that a multilateral, rules-based trading system that
enhances predictability and progressively reduces barriers to trade is desirable. Many
also believe that the WTO dispute settlement mechanism, of which the United States
was a primary architect, is a unique and effective means toward achieving that end,
because it helps ensure that WTO members’ trade practices are consistent with their
GATT/WTO commitments. Those who share this view believe that U.S. compliance
with WTO rulings is an important demonstration of U.S. credibility and leadership
in the global economy, and will in turn generate increased confidence in the
multilateral trading system.
Dispute Panels Overreached? Although CDSOA supporters do not
necessarily disagree with the value of the WTO or its dispute settlement mechanism,
some believe that in the CDSOA ruling, WTO panels overreached by creating
obligations for the United States beyond those agreed to. According to this view, the
panels violated Article 3.2 of the WTO Dispute Settlement Understanding (DSU),
which states that recommendations and rulings of the Dispute Settlement Body
cannot add to or diminish rights and obligations in the covered agreements. These
supporters believe that the WTO panels infringed on U.S. sovereignty by mandating
an uncalled-for change to U.S. laws, and in addition encroached on the constitutional
authority of the U.S. Congress to decide how government revenues should be
spent.101 Moreover, supporters argue that since the complaining parties were unable
to demonstrate sufficiently that their economies suffered “nullification or
100 Collie, David R. and Vandenbussche, Hylke. Antidumping Duties and the Byrd
Amendment. London: Center for Economic Policy Research, Discussion Paper 4780,
December 2004 [http://www.cepr.org/pubs/dps/DP990.asp].
101 U.S.-China Economic and Security Review Commission. Hearing on China and the
WTO: Assessing and Enforcing Compliance. Testimony of Senator Robert Byrd, February
3, 2005.

---

CRS-25
impairment” through CDSOA implementation, the measure should have been found
to be in compliance with WTO obligations.102
Those who favor CDSOA repeal respond that the United States, along with
other WTO members, agreed voluntarily to limit the means by which they would
shield affected industries from the effects of import competition (including unfair
trade) when they agreed to join the WTO. Furthermore, as the Appellate Body report
states, the DSU provides that where a violation of any WTO agreement is found,
there is normally a presumption that the violation has an adverse impact on other
parties to the agreement. Thus, they say, the panel properly found that the CDSOA
nullifies or impairs benefits accruing to the complaining parties even if they could not
demonstrate actual economic impairment.103
Discourages Suspension Agreements. Some who favor CDSOA repeal
also believe that the law may discourage administrative authorities from accepting
alternative arrangements to trade remedy actions, such as mutually agreed-upon
suspension agreements or quantitative restrictions — also called “price undertakings”
in the WTO agreements. These observers believe that if the affected industry expects
to receive CDSOA disbursements, petitioners might put pressure on administrative
authorities not to negotiate or accept suspension agreements.
Such alternative arrangements are favored by many WTO members because they
seem to inflict a lesser amount of economic damage on the exporting industry, and
by many economists because they may reduce the overall level of economic
inefficiency in the global trading system.104 The United States, for example, has in
force ten such agreements (known in U.S. law as suspension agreements), including
alternative measures on hot-rolled steel imports from Brazil and Russia; cut-to-length
carbon steel plate from Russia and Ukraine; and tomatoes imported from Mexico.105
102 U.S.-China Economic and Security Review Commission. Hearing on China and the
WTO: Assessing and Enforcing Compliance. Testimony of Alan Wolff, February 3, 2005.
103 US — Offset Act; AB Report, supra note 40, at 104; US — Offset Act; Panel Report,
supra note 39, at ¶¶ 8.1, 8.4. See WTO Dispute Settlement Understanding, Art. 3.8, which
states:
In cases where there is an infringement of the obligations assumed under a
covered agreement, the action is considered prima facie to constitute a case of
nullification or impairment. This means that there is normally a presumption that
a breach of the rules has an adverse impact on other Members parties to that
covered agreement, and in such cases, it shall be up to the Member against whom
the complaint has been brought to rebut the charge.
104 Increased use of price undertakings is a focal point during discussions of proposals to
amend the Antidumping Agreement in the Doha Development Agenda. See WTO
Negotiating Group on Rules, Compilation of Issues and Proposals Identified by Participants
in the Negotiating Group on Rules (TN/RL/W/143)(August 22, 2003), pp. 46-48.
105 U.S. International Trade Administration. “Suspension Agreements in Effect.”
[http://ia.ita.doc.gov/stats/suspensions/index.html].

---

CRS-26
Some of the complaining parties in the WTO dispute argued that the United
States violated this provision in the WTO agreements. However, the dispute
settlement panel rejected their arguments on the grounds that both the Antidumping
and SCM Agreements stipulate that member countries’ acceptance of such alternative
measures is strictly voluntary. Additionally, WTO panels found that U.S. law
requires the consideration of the interests of all parties, including downstream
industries and consumers, before accepting such an agreement.106
Concern of Emulation. When the CDSOA was enacted, some supporters
of trade liberalization predicted that the availability of CDSOA disbursements would
provide a direct incentive for U.S. import-competing industries to file AD and CVD
petitions in a country that was already one of the most aggressive users of trade
remedies.107 Initially, it seemed as if this prediction might be accurate, as U.S. AD
and CVD initiations jumped from 54 in 2000 to 94 in 2001. However, U.S.
initiations actually dropped in 2002 to 39, and the number was only slightly higher
in 2003 with 41 initiations.108 Therefore, there is little evidence to suggest that the
CDSOA, in itself, has led to an escalation of total U.S. AD or CVD petitions.
One reason that the number of U.S. trade remedy initiations has not increased
may be that, for most industries, the transaction costs involved in filing AD and CVD
petitions far outweigh the additional benefits received, even if CDSOA payments are
factored in. Although a few businesses have received millions of dollars in annual
payments (including the roller bearings, steel, seafood, pineapple, and candle
industries), the vast percentage of companies received much less. For example, of
the more than 500 companies that received CDSOA payments in FY2004, only about
100 received more than $100,000. A few companies that filed for disbursements in
FY2004 found that they had been overpaid in previous years and were liable to pay
back the difference.
Some observers have also expressed concern that other countries might follow
the U.S. example and establish similar laws, thus exacerbating an already apparent
increase in trade remedy actions worldwide prior to 2001. In this view, such increases
could be harmful to U.S. exports and increase the decline in international economic
welfare already brought about by trade remedy actions. However, to date, no other
WTO member has adopted similar laws, and AD and CVD initiations have declined
worldwide, from a total of 393 in 2001, to 319 in 2002, and to 246 in 2003.109 Some
observers believe that the decline in trade remedy actions is only temporary, however,
and attribute it to international restraint pending talks on trade remedies in the Doha
Round.
106 US — Offset Act; Panel Report, supra note 39, at 318.
107 Economic Analysis of the Continued Dumping and Subsidy Act of 2000. Congressional
Budget Office, March 2, 2004, [http://www.cbo.gov], p. 5.
108 For a more complete discussion of AD statistics worldwide, see CRS Report RL32810,
WTO: Antidumping Issues in the Doha Development Agenda, by Vivian C. Jones.
1 0 9 World Trade Organization statistics on trade remedy action,
[http://www.wto.org/english/tratop_e/adp_e/adp_e.htm#statistics].

---

CRS-27
Doha Development Agenda Negotiations. Some believe that it may be
in the U.S. interest to comply with the Byrd Amendment ruling in view of larger U.S.
goals in the ongoing Doha round of WTO multilateral negotiations, especially if the
United States seeks to fend off major modifications to the Antidumping or SCM
Agreements. Since many countries regard trade remedy reform as a “make or break”
issue in terms of their acceptance of any final Doha Development Agenda (DDA)
agreement, some observers believe that lack of action on CDSOA repeal could
weaken the U.S. position in the ongoing trade remedy negotiations. This could be
problematic because the gap in negotiating positions between the United States and
other WTO countries on trade remedies is large and may be difficult to narrow.
Some in Congress are also concerned about the ability of the USTR to negotiate
on trade remedy modifications in a manner favorable to their manufacturing
constituents, because they believe that the USTR did not expend very much effort in
attempting to keep trade remedy negotiations off the table in the DDA.110 This
perception, combined with the Bush Administration’s repeatedly declared support for
CDSOA repeal, may have contributed to increased resistance in of some in Congress
toward WTO rulings and proposals that might weaken U.S. trade remedy laws in
general, and repeal of the CDSOA in particular.
Many CDSOA supporters favor seeking a negotiated change to the Antidumping
Agreement in DDA talks that would permit all WTO members to distribute duties
collected pursuant to AD or CVD action.111 This is the approach Congress instructed
the Bush Administration to take as part of the 2004 and 2005 Omnibus
Appropriations. Many CDSOA supporters believe that this is the proper approach
to follow if there is genuine concern that dispute settlement panels created additional
obligations for the United States in the CDSOA ruling.
Other Trade Agreements and Issues. The United States has entered into
free trade agreements (FTAs) with four of the complaining parties in the CDSOA
dispute — Canada, Mexico, Australia, and Chile — and is actively pursuing trade
agreements with others, including Thailand. U.S. trade remedy policy in general, and
the CDSOA in particular, might dampen the economic welfare effects accruing to
U.S. businesses, investors, and consumers from these FTAs due to higher costs
brought about by the measure (and eventual retaliation), even as these FTAs have led
to significant tariff reductions on both sides. With respect to Canada, the possible
availability for disbursement to U.S. lumber producers of several billion dollars in
antidumping and countervailing duties on Canadian softwood lumber has added
complexities to the resolution of the ongoing dispute between the United States and
Canada over lumber trade.
Secondly, the Bush Administration has often used access to the U.S. market in
general, and trade agreements, in particular, to promote economic growth and
110 “Rockefeller Attacks Zoellick for Doha, Failure to Appear at Markup,” Inside U.S. Trade,
December 14, 2001.
111 U.S.-China Economic and Security Review Commission. Hearing on China and the
WTO: Assessing and Enforcing Compliance. Testimony of Senator Mike DeWine,
February 3, 2005.

---

CRS-28
development in lesser developed countries. Preferential market access is provided
to many countries, including some of the complaining parties in the CDSOA dispute,
through the Generalized System of Preferences (GSP) and other programs with a
view toward fostering economic and governmental stability. For example, Indonesia
and Thailand, both complainants in the CDSOA dispute, are also countries that the
9/11 Commission identified as vulnerable to penetration by anti-American Islamic
terrorist groups.112 Although it is unclear that these or other nations have actually
suffered monetary “nullification or impairment” as a result of the CDSOA, the act
is seen by some as potentially counterproductive to U.S. economic development
goals in some developing nations.
Conclusion and Options for Congress
The adoption of WTO panel and Appellate Body reports by the WTO Dispute
Settlement Body cannot in itself effect a change in U.S. law.113 In this case a statute
has been found to be in violation of WTO agreements. Since the Executive Branch
cannot amend or remove the measure under existing statutory authorities,
congressional action would be needed to do so. Under WTO rules, withdrawal of a
violative measure is ordinarily the main objective of a WTO dispute settlement
proceeding. Nevertheless, a defending Member may choose to seek other avenues
of resolving a dispute. If the Member does not comply by the end of an established
compliance period, however, it may also become subject to sanctions until the
measure is removed. According to WTO rules, however, any retaliation must be
temporary, lasting only as long as a Member is not in compliance or until a mutually
satisfactory arrangement is reached.
If the CDSOA remains in force in its current form, it will continue to be a part
of U.S. trade remedy law, and import-competing industries that are parties to
successful AD and CVD petitions will continue to receive benefits under the act.
However, since two of the complaining parties (accounting for a large percentage of
U.S. exports) have already taken steps toward retaliation, U.S. exporters could begin
to experience the effects of retaliation in mid-to-late 2005. These exporters may then
begin to lobby Congress for CDSOA repeal.
Were the statute to be repealed, the United States would be in compliance with
the WTO rulings and any retaliation that has begun would need to cease. At the same
time, CDSOA repeal could lead to additional, if temporary, instability to import-
competing industries already identified as vulnerable because they may have become
dependent on CDSOA disbursements to some degree. Were Congress to consider
a gradual reduction of benefits over time, complaining parties may still view the
remaining benefits as WTO-inconsistent and may continue to retaliate as long as the
amended measure remains in place. However, the Administration might be able to
112 National Commission on Terrorist Attacks Upon the United States, Final Report, July 22,
2004, p. 378-379.
113 For further discussion, see CRS Report RS22154, WTO Decisions and Their Effect in
U.S. Law, by Jeanne J. Grimmett.

---

CRS-29
negotiate a mutually satisfactory arrangement with the complaining parties, provided
full repeal of the measure were assured at the end of the process. Repeal of the
CDSOA itself would do nothing to affect other U.S. AD or CVD laws, procedures
or actions, and domestic industries would continue to benefit from these measures.
In the event the CDSOA were repealed, Congress might at the same time
establish another program in its place that would deal in some other way with the
adverse effects of international trade on firms, workers, and communities in a way
that might be considered WTO-compliant. S. 1299 (Snowe), the “TRADE for
America’s Communities Act,” introduced in the 108th Congress, sought to repeal the
CDSOA and deposit the duties instead into a “Community Trade Readjustment and
Development Enhancement Trust Fund” that would assist communities adversely
affected by unfair trade. Many CDSOA supporters maintained that this approach
(along with similar proposals to expand Trade Adjustment Assistance for firms and
workers with AD and CV duties) was not acceptable, however, because protection
afforded by the CDSOA could keep firms operating and workers in the jobs they
currently have, rather than reacting to job losses and economic dislocation after
damage had occurred.
As evident in recent appropriations legislation, Congress has also favored
negotiations leading to recognition of the existing right of WTO Members to
distribute collected AD and CV duties in a manner similar to the CDSOA. This
course of action is favored by many import-competing business associations,
according to industry sources.114 If WTO Members agreed, the United States, along
with all other Members, would have the option, expressly supported by the WTO, of
disbursing AD or CV duties to affected companies or earmarking them for other uses.
Many economists are concerned, however, that replication of the measure by other
countries could lead to a multiplication of inefficient trade remedy actions
worldwide.
Because the CDSOA has strong congressional support on both sides of the aisle,
many observers think that legislation to amend or repeal the measure may not receive
serious consideration in the 109th Congress. However, if exporters begin to feel the
effects of retaliation by key U.S. trading partners, it is possible that pressure to seek
a legislative or negotiated solution to the measure may intensify.
114 “White House Quiet on Plans for Complying with WTO Byrd Decision,” Inside U.S.
Trade, January 14, 2005, at 1.

---