Order Code RL32014
CRS Report for Congress
Received through the CRS Web
WTO Dispute Settlement:
Status of U.S. Compliance
in Pending Cases
Updated January 22, 2007
Jeanne J. Grimmett
Legislative Attorney
American Law Division
Congressional Research Service ˜ The Library of Congress
WTO Dispute Settlement:
Status of U.S. Compliance in Pending Cases
Summary
Although the United States has complied with adverse rulings in many past
World Trade Organization (WTO) disputes, 10 cases are pending in which rulings
have not yet been implemented or the United States has taken action and the dispute
has not yet been resolved. A WTO Member found to have violated a WTO
obligation will generally be given a reasonable period of time to comply. While the
Member is expected to withdraw the offending measure, compensation and
temporary retaliation are available if the Member has not complied by the established
deadline.
The United States has not yet settled disputes with the European Communities
(EC) involving a music copyright statute and a trademark provision affecting
property confiscated by Cuba. H.R. 217 (Serrano) and H.R. 624 (Rangel) would
repeal the trademark statute, as well as remove the current trade embargo on Cuba.
Also unresolved is a dispute with Japan regarding a provision of U.S. antidumping
law involving the calculation of dumping rates for producers and exporters who are
not individually investigated. The WTO-inconsistent Continued Dumping and
Subsidy Offset Act was repealed in P.L. 109-171, but antidumping and
countervailing duties imposed on goods entered before October 1, 2007, may still be
distributed to U.S. firms. Complainants EC, Canada, Japan, and Mexico, who had
retaliated against selected U.S. products, have expressed concerns about the
continued payments allowed under the new law; the EC and Japan are continuing to
impose sanctions. P.L. 109-171 also repealed a WTO-inconsistent cotton program
at issue in a dispute with Brazil over U.S. cotton subsidies; other U.S. programs were
also faulted, and Brazil has since secured a compliance panel, whose report is
expected in July 2007. The United States reported to the WTO in April 2006 that it
had complied in Antigua and Barbuda’s challenge of U.S. cross-border gambling
measures by announcing an administrative clarification of U.S. law; a compliance
panel subsequently requested by the complainant expects to issue a report in March
2007.
Four pending cases, each involving the imposition of antidumping or
countervailing duties (CVDs), require administrative action under existing
authorities. The cases involve CVDs on EC, antidumping duties on oil country
tubular goods from Argentina and Mexico, and the Commerce Department’s practice
of “zeroing,” under which it disregards non-dumped sales when calculating dumping
margins. While the United States took administrative action in the first three cases,
compliance panel proceedings were undertaken in each. With a compliance deadline
of April 9, 2007, in the zeroing case, the Department of Commerce has announced
that it will discontinue the practice in original investigations when applying its most
commonly used price comparison methodology. The modification will apply to
redeterminations in the specific antidumping proceedings at issue in the WTO case,
as well as to all current and future antidumping investigations. Responding to
congressional concerns, the Department announced on January 22, 2007, that it will
delay the effective date of the modification until February 22, 2007. This report will
be updated.
Contents
WTO Dispute Settlement Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Uruguay Round Agreements Act (URAA): Statutory Requirements
for Implementing WTO Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 102 of the URAA: Domestic Legal Effect of WTO Decisions . . . . . 4
Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
State Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Preclusion of Private Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Implementation of WTO Decisions Involving Administrative Action . . . . . 8
Section 123 of the URAA: WTO Cases Involving Regulatory
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 129 of the URAA: WTO Cases Involving Trade
Remedy Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Implementation of WTO Rulings in Pending Cases . . . . . . . . . . . . . . . . . . . . . . 14
Pending Cases Involving Legislative Action . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 110(5)(B) of the Copyright Act (Music Copyrights)
(DS160) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 211 of the Omnibus Appropriations Act of 1998
(Trademark Exclusion Involving Property Confiscated
by Cuba) (DS176) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Antidumping Measures on Hot-Rolled Steel Products from Japan
(DS184) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Continued Dumping and Subsidy Offset Act (DS 217/DS234) . . . . . 23
Subsidies on Upland Cotton (DS267) . . . . . . . . . . . . . . . . . . . . . . . . . 28
Measures Affecting Cross-Border Supply of Gambling and
Betting Services (DS 285) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Pending Cases Involving Administrative Action . . . . . . . . . . . . . . . . . . . . . 41
Countervailing Measures Concerning Certain Products from the
European Communities (DS212) . . . . . . . . . . . . . . . . . . . . . . . . . 41
Sunset Reviews of Anti-Dumping Measures on Oil Country
Tubular Goods from Argentina (DS268) . . . . . . . . . . . . . . . . . . . 46
Antidumping Measures on Oil Country Tubular Goods (OCTG)
from Mexico (DS282) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Laws, Regulations and Methodology for Calculating Dumping
Margins (“Zeroing”)(DS294) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
WTO Dispute Settlement:
Status of U.S. Compliance
in Pending Cases
This report provides a summary of the status of U.S. compliance efforts in
pending World Trade Organization (WTO) disputes that have resulted in adverse
rulings against the United States.1 Although the United States has complied with
adverse rulings in many past WTO disputes, a number of cases are currently pending
in which the United States has not fully implemented adopted WTO panel and
Appellate Body reports or the United States has taken action but the dispute is not,
or does not appear to have been, definitively resolved. In some cases, original or
subsequently extended compliance deadlines have expired; in others, the original
deadline will lapse in 2007. Compliance in these cases may implicate either
legislative or administrative action by the United States.
The report begins with an overview of WTO dispute settlement procedures,
focusing on the compliance phase of the process, followed by a discussion of U.S.
laws relating to WTO dispute proceedings. The report then lists pending WTO
disputes in the compliance phase, with a brief discussion of major issues and the U.S.
compliance history in each.
WTO Dispute Settlement Procedures
WTO disputes are conducted under the terms of the WTO Understanding on the
Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement
Understanding or DSU).2 The DSU, which entered into force with the establishment
1 The case histories in this report are primarily based on WTO documents, available at
[http://www.wto.org] or the WTO dispute settlement website indicated below. This report
does not address the cases in which the United States has implemented adverse reports to
the satisfaction of the complaining party and thereby settled the disputes, nor does it discuss
the compliance history of other WTO Members. For further information on WTO disputes,
see Office of the United States Trade Representative, “Dispute Settlement Update” at
[http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settle
ment/asset_upload_file343_5697.pdf] and “Snapshot of WTO Cases Involving the United
States,” at [http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute
_Settlement/WTO/asset_upload_file291_5696.pdf?ht=]; the annual Trade Policy Agenda
and Annual Report of the President of the United States on the Trade Agreements Program,
at [http://www.ustr.gov] under “Reports”; and WTO, Update of WTO Dispute Settlement
Cases (updated regularly) at [http://www.wto.org/english/tratop_e/dispu_e/ dispu_e.htm].
2 For additional information on WTO dispute settlement procedures, see “Dispute
Settlement Gateway,” at the WTO website, supra note 1, and CRS Report RS20088, Dispute
(continued...)
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of the World Trade Organization on January 1, 1995, carries forward and expands
upon dispute settlement practices developed under the General Agreement on Tariffs
and Trade (GATT). The DSU is administered by the WTO Dispute Settlement Body
(DSB), which is composed of all WTO Members. Where individual WTO
agreements contain special or additional dispute settlement rules that differ from
those in the DSU, the former will prevail. A list of these agreements and rules (e.g.
special timelines for subsidy disputes in the Agreement on Subsidies and
Countervailing Measures) is contained in Appendix 2 of the DSU.
WTO dispute settlement may be characterized as a three-stage process: (1)
consultations; (2) panel and, if requested, Appellate Body (AB) proceedings; and (3)
implementation. Within this framework, the DSB establishes panels; adopts panel
and appellate reports; authorizes countermeasures when requested; and monitors the
implementation of dispute settlement results. The establishment of panels, adoption
of panel and AB reports, and authorization of countermeasures are decisions that are
subject to a “reverse consensus” rule under which the DSB agrees to the proposed
action unless all DSB Members object. In effect, these decisions are virtually
automatic.
After the DSB adopts an adverse panel and any Appellate Body report, the
defending Member must inform the DSB of its compliance plans. If it is
impracticable for the Member to comply immediately, the Member will be allowed
a “reasonable period of time” to do so. Where a timeframe proposed by the Member
is not approved by the DSB, the disputing parties may negotiate a compliance period;
if this fails, the period will be arbitrated. A WTO Member found to have violated
WTO obligations is expected to comply by withdrawing the offending measure, with
compensation and temporary retaliation available to the prevailing party as
alternative remedies. Full compliance is the preferred outcome, however, so as to
ensure that negotiated rights and obligations are preserved and maintained.
Article 22 of the DSU provides that if the prevailing Member in a dispute
believes that the other Member has not implemented the WTO rulings and
recommendations by the end of the compliance period, it may request the other
Member to negotiate a compensation agreement or may ask the DSB for
authorization to suspend WTO concessions (usually to impose higher tariffs on items
from the other country). The Member may choose the latter option without first
seeking compensation.
Under the DSU, the DSB is to authorize the retaliation request, subject to the
reverse consensus rule, within 30 days after the compliance period expires. If the
defending Member objects to the request, however, the proposed retaliation will be
arbitrated and the 30-day deadline for approving the retaliation request effectively
extended. The objection may relate to the level of nullification or impairment of
benefits involved or whether DSU rules as to the choice of retaliatory measures have
been followed. Under the DSU, the arbitration is to be carried out by the original
panel, if members are available, or by an arbitrator appointed by the WTO Director
2 (...continued)
Settlement in the World Trade Organization: An Overview, by Jeanne Grimmett.
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General. The arbitration is ordinarily to be completed within 60 days after the
compliance period expires. The DSB then meets to authorize the retaliation request
to the extent the proposed retaliation is consistent with the arbitrator’s decision.
In addition, Article 21.5 of the DSU provides for further dispute settlement
proceedings in the event the disputing parties disagree as to whether the defending
Member has implemented the WTO rulings and recommendations in a particular
case. Once a compliance panel is convened, it has 90 days to issue a report; the
report may then be appealed. Since the DSU fails to incorporate Article 21.5
proceedings into the 30-day period for approving countermeasures and the timeframe
for any subsequent arbitration, a procedural problem, referred to as “sequencing,” has
resulted. Members have often filled the gap, however, by entering into ad hoc
bilateral agreements. Such agreements may provide, for example, that the prevailing
party will request authorization to impose countermeasures, the defending party will
request arbitration of the proposal, and the arbitration will be suspended until the
compliance panel procedure is completed.3
The DSU provides that any suspension of concessions or other obligations is
temporary and may only be applied by the prevailing Member until the WTO-
inconsistent measure is removed, the defending Member provides a solution to any
trade injury at issue, or a mutually satisfactory resolution of the dispute is reached.4
Moreover, if a prevailing Member is ultimately authorized to impose
countermeasures, the Member is not required to implement them and, as shown in
the cases below, Members may manage disputes in a variety of ways at the
compliance phase, short of imposing sanctions.
Uruguay Round Agreements Act (URAA): Statutory
Requirements for Implementing WTO Decisions
The legal effect of Uruguay Round agreements and WTO dispute settlement
results in the United States is comprehensively dealt with in the Uruguay Round
Agreements Act (URAA), P.L. 103-465, which addresses the relationship of WTO
agreements to federal and state law and prohibits private remedies based on alleged
3 See Sylvia A. Rhodes, The Article 21.5/22 Problem: Clarification Through Bilateral
Agreements? 3 J. Int’l Econ. L. 553 (2000).
4 The DSU does not expressly set out a procedure for obtaining the removal of
countermeasures, though Members may obtain a ruling on whether continued imposition is
warranted either through a compliance panel or a new dispute settlement proceeding. The
EC has complained against the United States and Canada for continuing to apply the
increased tariffs on EC products that they had originally imposed in 1999 in response to the
EC’s failure to comply with a WTO decision faulting European Union (EU) import
restrictions on beef produced with growth hormones, arguing that the EU had taken adequate
compliance measures by adopting a new Directive on the matter in 2003. The panel has not
yet issued its report. For a procedural history of the dispute, see Request for the
Establishment of a Panel by the European Communities, United States — Continued
Suspension of Obligations in the EC-Hormones Dispute, WT/DS320/6 (Jan. 14, 2005).
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violations of WTO agreements.5 The statute also requires the United States Trade
Representative (USTR) to keep Congress informed of disputes challenging U.S. laws
once a dispute panel is established, any U.S. appeal is filed, and a panel or Appellate
Body report is circulated to WTO Members.6 In addition, the URAA places
requirements on regulatory action taken to implement WTO decisions and contains
provisions specific to the implementation of panel and appellate reports that fault
U.S. actions in trade remedy proceedings.
Section 102 of the URAA: Domestic Legal Effect of WTO
Decisions
Section 102 of the URAA and its legislative history establish that domestic law
supersedes any inconsistent provisions of the Uruguay Round agreements and that
congressional or administrative action, as the case may be, is required to implement
adverse decisions in WTO dispute settlement proceedings.
Federal Law. Section 102(a)(1), 19 U.S.C. § 3512(a)(1), provides that “[n]o
provision of any of the Uruguay Round Agreements, nor the application of any such
provision to any person or circumstance, that is inconsistent with any law of the
United States shall have effect.” The URAA further provides, at § 102(a)(2), 19
U.S.C. § 3512(a)(2), that nothing in the statute “shall be construed ... to amend or
modify any law of the United States ... or ... to limit any authority conferred under
any law of the United States ... unless specifically provided for in this act.”
As explained in Statement of Administrative Action (SAA) accompanying the
Uruguay Round agreements when they were submitted to Congress in 1994, “[i]f
there is a conflict between U.S. law and any of the Uruguay Round agreements,
section 102(a) of the implementing bill makes clear that U.S. law will take
precedence.”7 Moreover, section 102 is further intended to clarify that all changes
to U.S. law “known to be necessary or appropriate” to implement the WTO
agreements are incorporated in the URAA and that any unforeseen conflicts between
U.S. law and the WTO agreements “can be enacted in subsequent legislation”8
Congress has traditionally treated potential conflicts with prior GATT agreements
5 For background discussions regarding the effect of treaties and international agreements
in domestic law, see CRS Report RL32528, International Law and Agreements: Their Effect
Upon U.S. Law, by Michael Garcia and Arthur Traldi; Ronald A. Brand, Direct Effect of
International Economic Law in the United States and the European Union, 17 Nw. J. Int’l
L. & Bus. 556 (1996-97); and John H. Jackson, Status of Treaties in Domestic Legal
Systems: A Policy Analysis, 86 Am. J. Int’l L. 310 (1992).
6 Uruguay Round Agreements Act (URAA), § 123(d)-(f), 19 U.S.C. § 3533(d)-(f).
7 Uruguay Round Agreements, Statement of Administrative Action, H.Doc. 103-316(I) at
659 (1994)[hereinafter cited as Uruguay Round SAA]. The SAA, which was expressly
approved in the URAA, is “regarded as an authoritative expression by the United States
concerning the interpretation and application of the Uruguay Round Agreements and ... [the
URAA] in any judicial proceeding in which a question arises concerning such interpretation
or application.” URAA, § 102(d), 19 U.S.C. § 3512(d).
8 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13.
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and free trade agreements in this way, treatment that it also deems to be “consistent
with the Congressional view that necessary changes in Federal statutes should be
specifically enacted, not preempted by international agreements.”9
This approach carries over into the implementation of WTO dispute settlement
results, a situation explained as follows in URAA legislative history:
Since the Uruguay Round agreements as approved by the Congress, or any
subsequent amendments to those agreements, are non-self-executing, any dispute
settlement findings that a U.S. statute is inconsistent with an agreement also
cannot be implemented except by legislation approved by the Congress unless
consistent implementation is permissible under the terms of the statute.10
State Law. Where a state law is at issue in a WTO dispute, the URAA
provides for federal-state cooperation in the proceeding and limits any domestic legal
challenges to the law to the United States.11 The act’s general preclusion of private
remedies (discussed below) further centralizes the response to adverse WTO
decisions involving state law in the federal government.12
Section 102(b) provides as follows:
No State law, or the application of a such a State law, may be declared invalid
as to any person or circumstance on the ground that the provision or its
9 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13.
10 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13, and the Uruguay Round SAA,
supra note 7, at 1032-33. The latter states as follows:
Reports issued by panels or the Appellate Body under the DSU have no binding
effect under the law of the United States and do not represent an expression of
U.S. foreign or trade policy. They are no different in this respect than those
issued by GATT panels since 1947. If a report recommends that the United
States change federal law to bring it into conformity with a Uruguay Round
agreement, it is for the Congress to decide whether any such change will be
made.
11 In the current challenge by Antigua and Barbuda to both federal and state laws affecting
the cross-border supply of gambling and betting services, the United States prevailed on the
issue of whether the state measures infringed market access obligations under the General
Agreement on Trade in Services (GATS). The WTO Appellate Body found that the panel
had erred in considering whether the eight laws at issue violated the Agreement because the
complainant had not presented sufficient evidence and legal arguments to establish a prima
facie case. United States — Measures Affecting the Cross-Border Supply of Gambling and
Betting Services, WT/DS285. See infra text accompanying notes 157-181 for further
discussion of this case.
A challenge by Brazil to Florida’s equalizing excise tax on processed orange and
grapefruit products (WT/DS250) was resolved in 2004 without panelists having been
appointed after Florida amended its statute. Notification of Mutually Agreed Solution,
United States — Equalizing Excise Tax Imposed by Florida on Processed Orange and
Grapefruit Products, WT/DS250/3 (June 2, 2004); U.S. Brazil Settle Long-standing Dispute
Over Florida Tax to Promote Citrus Products, 21 Int’l Trade Rep. (BNA) 945 (2004).
12 For further discussion, see Uruguay Round SAA, supra note 7, at 676.
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application is inconsistent with any of the Uruguay Round Agreements, except
in an action brought by the United States for the purposes of declaring such law
or application invalid.13
According to legislative history, the provision “makes clear that the Uruguay Round
agreements do not automatically preempt State laws that do not conform to their
provisions, even if a WTO dispute settlement panel or the Appellate Body were to
determine that a particular State measure was inconsistent with one or more of the
Uruguay Round agreements.”14 The statute also contains certain restrictions in any
such legal action brought by the United States, including that the report of the WTO
dispute settlement panel or the Appellate Body may not be considered binding or
otherwise accorded deference.15 Any such suit by the United States is expected to be
a rarity.16
Preclusion of Private Remedies. Private remedies are prohibited under
§ 102(c)(1) of the URAA, 19 U.S.C. § 3512(c)(1), which provides that “[n]o person
other than the United States ... shall have a cause of action or defense under any of
the Uruguay Round Agreements or by virtue of congressional approval of such an
agreements” or “may challenge, in any action brought under any provision of law,
any action or inaction by any department, agency, or other instrumentality of the
United States, any State, or any political subdivision of a State, on the ground that
such action or inaction is inconsistent with such agreement.”
13 URAA, § 102(b)(2)(A), 19 U.S.C. § 3512(b)(2)(A). The term “State law” is defined to
include “any law of a political subdivision of a State, as well as any State law that regulates
or taxes the business of insurance.” URAA, § 102(b)(3), 19 U.S.C. § 3512(b)(3). The term
is intended to encompass “any provision of a state constitution, regulation, practice or other
state measure.” Uruguay Round SAA, supra note 7, at 674.
14 S.Rept. 103-412, at 15; see also H.Rept. 103-826(I), at 25, and Uruguay Round SAA,
supra note 7, at 670.
15 URAA, § 102(b)(2)(B), 19 U.S.C. § 3512(b)(2)(B). In addition, the United States will
have the burden of proving that the State law or its application is inconsistent with the WTO
agreement in question; any State whose interests may be impaired or impeded by the suit
will have the unconditional right to intervene as a party, and the United States will be
entitled to amend its complaint to include a claim or cross-claim concerning the law of a
State that does intervene; and any State law that is declared invalid will not be considered
to have been invalid in its application during any period before the court’s judgment
becomes final and all timely appeals are exhausted. The statute also requires the United
States Trade Representative to notify Congress before bringing any such suit. URAA, §
102(b)(2)(C), 19 U.S.C. § 3512(b)(2)(C).
16 Uruguay Round SAA, supra note 7, at 674; H.Rept. 103-826(I), at 26; S.Rept. 103-412,
at 15. The SAA states, inter alia, that the Attorney General “will be particularly careful in
considering recourse to this authority where the state measure involved is aimed at the
protection of human, animal, or plant health or of the environment or the state measure is
a state tax of a type that has been held to be consistent with the requirements of the U.S.
Constitution. In such a case, the Attorney General would entertain use of this statutory
authority only if consultations between the President and the Governor of the State
concerned failed to yield an appropriate alternative.” Uruguay Round SAA, supra note 7,
at 674.
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Congress has additionally stated in § 102(c)(2) of the URAA, 19 U.S.C. §
3512(c)(2), that it intends, through the prohibition on private remedies:
to occupy the field with respect to any cause of action or defense under or in
connection with any of the Uruguay Round Agreements, including by precluding
any person other than the United States from bringing any action against any
State or political subdivision thereof or raising any defense to the application of
State law under or in connection with any of the Uruguay Round Agreements —
(A) on the basis of a judgment obtained by the United States in an action
brought under any such agreement; or
(B) on any other basis.
The House Ways and Means Committee report on the URAA discusses the
rationale and implications of § 102(c) as follows:
For example, a private party cannot bring an action to require, preclude, or
modify government exercise of discretionary or general “public interest”
authorities under other provisions of law. These prohibitions are based on the
premise that it is the responsibility of the Federal Government, and not private
citizens, to ensure that Federal or State laws are consistent with U.S. obligations
under international agreements such as the Uruguay Round agreements.17
The SAA notes, however, that § 102(c) “does not preclude any agency of
government from considering, or entertaining argument on, whether its action or
proposed action is consistent with the Uruguay Round agreements, although any
change in agency action would have to be authorized by domestic law.”18 In addition,
federal courts have not viewed the provision as precluding them from considering
U.S. WTO obligations in challenges to agency actions implicating WTO
agreements.19
17 H.Rept. 103-826(I), at 26.
18 Uruguay Round SAA, supra note 7, at 676.
19 E.g., SNR Roulements v. United States, 341 F.Supp.2d 1334, 1341 (Ct. Int’l Trade 2004);
Timken v. United States, 240 F.Supp. 2d 1228, 1238 (Ct. Int’l Trade 2002); Gov’t of
Uzbekistan v United States, 2001 WL 1012780, at *3 (Ct. Int’l Trade Aug. 30, 2001). As
stated in Timken, which reviewed a challenge to a final Department of Commerce dumping
determination: “[Foreign producer] Koyo ... is not bringing this action under any WTO
agreement; rather, Koyo is arguing that the Department’s application and interpretation of
U.S. law violates its international obligations pursuant to a WTO agreement. Koyo is
certainly ‘free to argue that Congress would never have intended to violate an agreement it
generally intended to implement, without expressly saying so.’” 240 F.Supp. at 1238,
quoting Gov’t of Uzbekistan, supra, at *3.
For discussions of the relationship of WTO decisions and U.S. administrative and
judicial actions, see Dan Nichols, Use of WTO Panel Decisions in Judicial Review of
Administrative Action under U.S. Antidumping Law, 1 Int’l L. & Mgmt. Rev. 237 (2005);
Gregory Husisian, When a New Sheriff Comes to Town: The Impending Showdown Between
the U.S. Trade Courts and the World Trade Organization, 17 St. John’s J. Legal Comment.
457 (2003); Roger P. Alford, Federal Courts, International Tribunals, and the Continuum
(continued...)
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Implementation of WTO Decisions Involving Administrative
Action
In addition to the URAA provisions that limit the direct effect of WTO rules and
decisions in U.S. law, the URAA also places requirements on agencies in their
implementation of WTO panel and Appellate Body reports. These provisions apply
to regulatory action in general and to new agency determinations in response to WTO
decisions involving trade remedy proceedings.
Section 123 of the URAA: WTO Cases Involving Regulatory Action.
Section 123(g) of the URAA, 19 U.S.C. § 3533(g), provides that in any WTO case
in which a departmental or agency regulation or practice has been found to be
inconsistent with a WTO agreement, the regulation or practice may not be rescinded
or modified in implementation of the decision “unless and until” the USTR and
relevant agencies meet congressional consultation and private sector advice
requirements, the proposal has been published in the Federal Register with a request
for public comment, and the final rule or other modification has been published in
the Federal Register.20 Section 123(g) does not apply to any regulation or practice
of the U.S. International Trade Commission.
Regarding congressional consultation, the USTR is required to consult with “the
appropriate congressional committees” regarding the proposed contents of the final
rule or other modification. Along with the general condition stated above, § 123(g)
provides that the final rule or other modification may not take effect until 60 days
after the USTR has begun committee consultations, unless the President determines
that an earlier effective date is in the national interest. The House Ways and Means
Committee and the Senate Finance Committee may vote to indicate the disagreement
19 (...continued)
of Deference, 43 Va. J. Int’l L. 675, 731-46 (2003); Julie Dunne, Delverde and the WTO’s
British Steel Decision Foreshadow More Conflict Where the WTO Subsidies Agreement,
Privatization, and United States Countervailing Duty Law Intersect, 17 Am. U. Int’l L. 79
(2001); Michael F. Williams, Charming Betsy, Chevron, and the World Trade Organization:
Thoughts on the Interpretive Effect of International Trade Law, 32 Law & Pol’y Int’l Bus.
677 (2001); Jane A. Restani & Ira Bloom, Interpreting International Trade Statutes: Is the
Charming Betsy Sinking? 24 Fordham Int’l L. J. 1533 (2001), Sixteenth Annual Judicial
Conference of the United States Court of Appeals for the Federal Circuit, 193 F.R.D. 263,
403-416 (1999); Thirteenth Annual Judicial Conference of the United States Court of
Appeals for the Federal Circuit, 166 F.R.D. 515, 609-638 (1995).
20 The provision first came into play in 1996 when the United States took regulatory action
to comply with the adverse WTO decision in United States — Standards for Reformulated
and Conventional Gasoline, WT/DS2, WT/DS4. See World Trade Organization (WTO)
Decision on Gasoline Rule (Reformulated and Conventional Gasoline), 61 Fed. Reg. 33703
(1996). The U.S. Court of Appeals for the District of Columbia Circuit upheld the final
issued by EPA to resolve the dispute, finding, inter alia, that the agency was not statutorily
precluded from considering factors other than air quality in issuing rules under the
antidumping provision of the Clean Air Act and could thus consider the effect of the
proposed rule on U.S. treaty obligations. George E. Warren Corp. v. U.S. Environmental
Protection Agency, 159 F.3d 616 (D.C.Cir. 1998).
CRS-9
of the committee with the proposed action during the 60-day period. Any such vote
is not binding on the agency or department involved.
Section 129 of the URAA: WTO Cases Involving Trade Remedy
Proceedings. Section 129 of the URAA, 19 U.S.C. § 3538, sets forth authorities
and procedures under which the U.S. International Trade Commission (ITC) and the
Department of Commerce (DOC) may issue new determinations in implementation
of adverse WTO decisions involving U.S. safeguards, antidumping, and
countervailing duty proceedings. Section 129 does not authorize the ITC and DOC
to issue new determinations on their own motion, but instead grants the United States
Trade Representative (USTR) the discretion to direct the agency to do so in a given
case.
In antidumping and countervailing duty investigations, which are carried out
under authorities in Title VII of the Tariff Act of 1930, the Department of Commerce
(DOC) determines the existence and level of dumping or subsidization, as the case
may be, and the ITC determines whether the dumped or subsidized imports cause
material injury, or a threat of material injury, to domestic industries. Under U.S.
safeguards law, set forth in Title II of the Trade Act of 1974, the ITC conducts
investigations to determine whether or not increased imports, whether or not they are
fairly traded, are a substantial cause of serious injury to a domestic industry. If the
ITC makes an affirmative injury determination, it recommends remedial measures
to the President, who ultimately determines whether or not to take action.
Implemented Section129 determinations in antidumping and countervailing duty
cases are reviewable in the U.S. Court of International Trade and by binational panels
established under Chapter 19 of the North American Free Trade Agreement
(NAFTA).21 Chapter 19 panels are available to review final agency determinations
in antidumping and countervailing duty investigations involving NAFTA countries
in lieu of judicial review in the country in which the determination is made.
21 URAA, § 129(e), adding Tariff Act of 1930, § 516A(a)(2)(B)(vii), 19 U.S.C. §
1516a(a)(2)(B)(vii)), and amending Tariff Act of 1930, § 516A(g)(8)(A)(i), 19 U.S.C. §
1516a(g)(8)(A)(i).
The Uruguay Round SAA states the following regarding the legal implications of
possible parallel judicial proceedings regarding the same agency determinations :
Since implemented determinations under section 129 may be appealed, it
is possible that Commerce or the ITC maybe in the position of simultaneously
defending determinations in which the agency reached different conclusions. In
such situations, the Administration expects that courts and binational panels will
be sensitive to the fact that under the applicable standard of review, as set forth
in statute and case law, multiple permissible interpretations of the law and the
facts may be legally permissible in any particular case, and the issuance of a
different determination under section 129 does not signify that the initial
determination was unlawful.
Uruguay Round SAA, supra note 7, at 1027.
CRS-10
U.S. International Trade Commission. If an interim WTO panel report
or a WTO Appellate Body report concludes that an action by the ITC in connection
with a trade remedy proceeding is inconsistent with U.S. obligations under the WTO
Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures,
or the Agreement on Safeguards, the USTR may request the ITC to issue an advisory
report on whether U.S. antidumping, countervailing duty, or safeguards law, as
appropriate, allows the ITC to take steps with respect to the proceeding at issue that
would render its action “not inconsistent with” the panel or AB findings.22
The ITC is to report to the USTR within 30 calendar days of the USTR’s request
where an interim report is involved, and within 21 calendar days in case of an AB
report.23 These deadlines are aimed at ensuring that the USTR will receive the
requested advice in time to decide whether to appeal a panel’s interim report or to
implement an adverse report, and to estimate how long of a period for implementing
the WTO decision may be needed.24
If a majority of the Commissioners have found that action may be taken under
existing law, the USTR must consult with the House Ways and Means Committee
and the Senate Finance Committee and may request the ITC in writing to issue a new
determination in the underlying proceeding that would render the ITC action “not
inconsistent with” the WTO findings.25 The new determination must be issued
within 120 days of the USTR’s request.26 The time limitation is intended to allow
the USTR to propose a reasonable period of time for implementation to the WTO
once a panel and any appellate report is adopted.27
Further Action in Antidumping and Countervailing Duty Proceedings. If
the ITC issues a new negative injury or threat of injury determination and the
antidumping or countervailing duty order must thus be revoked in whole or in part
because it is no longer supported by an affirmative ITC determination, the USTR is
authorized to direct DOC to revoke the order to the extent needed.28 The USTR must
consult with the House Ways and Means and Senate Finance Committees before the
ITC’s new determination is implemented.29
22 URAA, § 129(a)(1), 19 U.S.C. § 3538(a)(1).
23 URAA, § 129(a)(2), 19 U.S.C. § 3538(a)(2).
24 Uruguay Round SAA, supra note 7, at 1023.
25 URAA, § 129(a)(3),(4), 19 U.S.C. § 3538(a)(3),(4).
26 ITC authority to issue a new determination is granted “notwithstanding any provision of
Tariff Act of 1930 ... or title II of the Trade Act of 1974.” The Uruguay Round SAA
explains that “[m]any of the ITC’s proceedings are time-limited by statute, and the ITC
cannot revisit its actions in those proceedings in the absence of the authority provided by
subsection (a)(4) or a remand.” Uruguay Round SAA, supra note 7, at 1024.
27 Id.
28 URAA, § 129(a)(6), 19 U.S.C. § 3538(a)(6).
29 URAA, § 129(a)(3),(5), 19 U.S.C. § 3538(a)(3),(5).
CRS-11
Section 129(c)(1) provides that determinations that are implemented under this
authority apply prospectively, that is, to unliquidated entries of the subject
merchandise that are entered, or withdrawn from warehouse for consumption, on or
after the date on which the USTR directs the Commerce Department to revoke the
order in question.30 Notices of the implementation of Section 129 determinations
must be published in the Federal Register.31
The Uruguay Round SAA explains the operation of § 129(c)(1), which sets an
implementation date both for ITC and DOC determinations, as follows:
Consistent with the principle that GATT panel recommendations apply only
prospectively, subsection 129(c)(1) provides that where determinations by the
ITC or Commerce are implemented under subsections (a) or (b), such
determinations have prospective effect only. That is, they apply to unliquidated
entries of merchandise entered, or withdrawn from warehouse, for consumption
on or after the date on which the Trade Representative directs implementation.
Thus, relief available under subsection 129(c)(1) is distinguishable from relief
available in an action brought before a court or a NAFTA binational panel,
where, depending on the circumstances of the case, retroactive relief may be
available. Under 129(c)(1), if implementation of a WTO report should result in
the revocation of an antidumping or countervailing duty order, entries made prior
to the date of Trade Representative’s direction would remain subject to potential
duty liability.32
Further Action in Safeguards Proceedings. Where a safeguard proceeding
is at issue, the President is authorized, after receiving a new ITC determination, to
reduce, modify, or terminate the safeguard notwithstanding other statutory
requirements regarding changes in existing safeguard measures.33 The President is
required to consult with the House Ways and Means Committee and Senate Finance
Committee before acting under this authority.34 The USTR must publish a notice of
the implementation of any ITC determination in the Federal Register.35
Department of Commerce. A procedure for USTR and agency interaction,
including congressional consultation requirements, is also set forth with respect to
DOC determinations in antidumping and countervailing duty proceedings, though
without the requirement for an initial agency advisory report regarding the extent of
its statutory discretion. Instead, promptly after the issuance of a WTO panel or
appellate report finding that a DOC action in an antidumping or countervailing duty
30 URAA, § 129(c)(1), 19 U.S.C. § 3538(c)(1). Unliquidated entries are those for which the
Customs Service has not ascertained a final rate and amount of duty. U.S. Customs and
Border Protection, Importing into the United States; A Guide for Commercial Importers
105-106 (2002 ed.), at [http://www.customs.gov/xp/cgov/toolbox/publications/trade].
31 URAA, § 129(c)(2), 19 U.S.C. § 3538(c)(2).
32 Uruguay Round SAA, supra note 7, at 1026. See also H.Rept. 103-826(I), at 39; S.Rept.
103-412, at 27.
33 URAA, § 129(a)(7), 19 U.S.C. § 2254(b)(3).
34 Id.
35 URAA, § 129(c)(2)(B), 19 U.S.C. § 3538(c)(2)(B).
CRS-12
proceeds is inconsistent with U.S. obligations under the WTO Antidumping
Agreement or the SCM Agreement, the USTR is to consult with DOC and the House
Ways and Means and Senate Finance Committees, and may request DOC in writing
to issue a determination in connection with the underlying proceeding that would
render its action “not inconsistent with” the panel or appellate findings.36 DOC must
issue a determination within 180 days of the request.37
After consulting with DOC and the above-named congressional committees,
USTR may direct DOC to implement its determination in whole or in part.38 As is
the case with implemented ITC determinations, DOC determinations under § 129
also apply prospectively, that is, to unliquidated entries of the subject merchandise
that are entered, or withdrawn from warehouse for consumption, on or after the date
on which the USTR directs the Commerce Department to implement the
determination.39
Legal Challenges to § 129 of the URAA. Canada unsuccessfully
challenged § 129(c)(1) in a WTO dispute settlement proceeding, where it argued that
the provision violated the WTO Dispute Settlement Understanding and various WTO
antidumping and countervailing duty obligations in effectively prohibiting the United
States from refunding estimated duties deposited with Customs and Border
Protection — that is, duties on entries that were unliquidated at the time the Section
129 determination was implemented or the antidumping or countervailing duty order
revoked — in the event a determination in the underlying investigation had been
found to be inconsistent with WTO obligations.
In response, the United States maintained that § 129(c)(1) addresses only the
treatment of imports entered after the implementation date and does not govern the
treatment of prior entries for which final duties have not yet been calculated, referred
to in the dispute as “prior unliquidated entries.” The United States further argued
that, as such, the statute does not mandate any particular treatment of prior
unliquidated entries and that the United States has other legal options for dealing
with these entries, including establishing a new dumping or subsidy margin by using
a WTO-consistent methodology in an administrative review of the entries or, in the
event the duty order or orders were revoked as a result of the WTO proceeding,
36 URAA, § 129(b)(1),(2), 19 U.S.C. § 3538(b)(1),(2). Senate legislative history indicates
that USTR is expected to “consult closely with Commerce in order to ensure that it benefits
from Commerce’s expertise with respect to both the panel or Appellate Body reports and
the appropriate implementing action (if any), including the implications of any such action
on the administration of the antidumping or countervailing duty law.” S.Rept. 103-412, at
27. The Senate Finance Committee has further stated that it “expects to be consulted closely
by the Administration throughout this process, and to be informed and provided an
explanation should USTR decide to implement an adverse panel or Appellate Body decision
notwithstanding a contrary recommendation by Commerce.” Id. If USTR directs
Commerce to implement the new determination, “Commerce may do so even if litigation
is pending with respect to the initial agency determination.” H.Rept. 103-826(I), at 39.
37 URAA, § 129(b)(2), 19 U.S.C. § 3538(b)(2).
38 URAA, § 129(b)(3),(4), 19 U.S.C. § 3538(b)(3),(4).
39 URAA, § 129(c)(1), 19 U.S.C. § 3538(c)(1).
CRS-13
revising the duty rate in response to a domestic court decision involving the earlier
entries.40
In a report issued in July 2002, the WTO panel concluded that Canada failed to
establish that the statute either required WTO-inconsistent action on the part of the
United States or precluded the United States from taking action in accordance with
its WTO obligations.41 Canada did not appeal, and the panel report was adopted by
the DSB in late August 2002.
Canada and Canadian lumber producers subsequently challenged the
Administration’s use of an affirmative threat of injury determination rendered by the
ITC under § 129 to maintain antidumping and countervailing duty orders on
softwood lumber imports from Canada, notwithstanding the existence of an earlier
“no threat” determination issued by the ITC at the direction of the NAFTA binational
panel. In January 2005, plaintiffs filed suit in the U.S. Court of International Trade
(USCIT) arguing that the USTR’s order to DOC to implement the new ITC Section
129 determination was ultra vires (i.e., beyond the scope of USTR’s authority under
the statute). Plaintiffs argued that § 129 authorizes the USTR to order only the
revocation of an AD or CVD order in response to a new negative ITC determination,
and thus, where a new determination does not legally undermine an existing order,
no further administrative action is authorized.
On July 21, 2006, the USCIT ruled in Tembec, Inc. v. United States that the
USTR was not authorized to issue the order to DOC to implement the ITC’s
affirmative Section 129 determination and that, as a result, the May 2002
antidumping and countervailing duty orders on softwood lumber were not supported
by an affirmative finding of injury or threat thereof, a requirement for imposing and
collecting such duties.42 In a subsequent decision on remedies, the court ruled that
all unliquidated softwood entries were to be liquidated in accordance with the final
negative decision of the NAFTA injury panel and thus without the imposition of the
duties.43
40 Second Written Submission of the United States, United States — Section 129(c)(1) of the
Uruguay Round Agreements Act, ¶¶ 17-20, WT/DS221 (Mar. 8, 2002), available at
[http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settle
ment/WTO/Dispute_Settlement_Listings/asset_upload_file327_6455.pdf].
41 Panel Report, Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R
(July 15, 2002).
42 Tembec, Inc. v. United States, 441 F.Supp.2d 1302 (Ct. Int’l Trade 2006), available at
[http://www.cit.uscourts.gov/slip_op/Slip_op06/06-109.pdf].
43 Tembec, Inc. v. United States, Consol. Ct. No. 05-00028, slip. op 06-152 (Ct. Int’l Trade
Oct. 13, 2006), at [http://www.cit.uscourts.gov/slip_op/Slip_op06/06-152.pdf]. The United
States retroactively revoked the antidumping and countervailing duty orders on October 12,
2006, the effective date of the 2006 U.S-Canada Softwood Lumber Agreement (2006 SLA)
and the day before the court’s decision. Also on October 12, Canada had stipulated to the
dismissal of its complaint in the USCIT proceeding and the United States filed a motion to
dismiss on the ground that retroactive revocation and liquidation in accordance with the
revocation rendered the action moot. The United States subsequently asked the court to
(continued...)
CRS-14
Implementation of WTO Rulings in Pending Cases
Six WTO dispute proceedings that involve federal statutes are in the compliance
phase — that is, panel and appellate reports adverse to the United States have been
adopted by the DSB and compliance issues have not yet been fully resolved.44 At
issue are challenges to
! § 110 of the Copyright Act, a statute affecting music licensing;
! § 211 of the Omnibus Appropriations Act of 1998, a statute affecting
trademarks affecting property confiscated by Cuba;
! a provision of antidumping law involving the calculation of dumping
rates for producers and exporters who are not individually
investigated by the Commerce Department;
! the now repealed Continued Dumping and Subsidy Offset Act
(CDSOA), which required the distribution of collected antidumping
and countervailing duties to petitioners and interested parties in the
underlying trade proceedings, and whose repeal legislation mandates
the distribution of duties on goods entered through September 30,
2007;
! statutes providing cotton subsidies to U.S. producers and exporters;
and
! federal laws governing the remote supply of gambling services.
While the WTO proceeding involving U.S. cotton subsidies, United States —
Subsidies on Upland Cotton (WT/DS267), also implicates regulatory action by the
United States, this report focuses on statutory aspects of U.S. compliance.
Four pending cases involve regulatory action in trade remedy proceedings under
existing statutory authorities. At issue are the following:
! whether the Department of Commerce (DOC) properly determined
if subsidies were provided to privatized European Union steel
companies;
43 (...continued)
vacate its October 13 decision; Canada and Canadian producers have opposed the granting
of this later motion. U.S., Canada Lumber Groups Oppose Dismissal of NAFTA Case,
Inside U.S. Trade, Dec. 1, 2006, at 8, 9. The case is still in litigation. For further discussion
this case and the previously discusssed WTO proceeding involving § 129, see CRS Report
RL33752, Softwood Lumber Imports from Canada: Issues and Events, by Ross W. Gorte
and Jeanne J. Grimmett.
44 Further information on these disputes is available at the USTR and WTO sources listed
at supra note 1.
CRS-15
! the implications of waiving participation in sunset (five-year)
reviews of antidumping orders;
! DOC findings in a sunset review that dumping was likely to
continue or recur if the antidumping order were revoked; and
! use of the practice of “zeroing” (i.e., the exclusion of non-dumped
sales) by DOC in determining dumping margins in antidumping
investigations and reviews of existing antidumping orders.
In the second bulleted case, United States — Sunset Reviews of Anti-Dumping
Measures on Oil Country Tubular Goods from Argentina (WT/DS268), the panel
found both a U.S. statute and its related regulations to be inconsistent with WTO
obligations. In implementing the ruling, however, the United States has only taken
regulatory action to comply.
One longstanding dispute, United States — Tax Treatment for “Foreign Trade
Income” (DS108), was settled in 2006 with the enactment of a legislation in May
2006 and the subsequent termination of sanctions that had been imposed by the EC
on U.S. products but that were suspended at the time.45 The new statute, P.L.109-
222, § 513(b), repealed a “grandfather” provision in the American Jobs Creation Act,
(AJCA), P.L. 108-357. Section 101 of the AJCA had repealed a tax benefit for
export income that had been ruled to be WTO-inconsistent, but did so with an overall
two-year transition period for the phaseout of the benefit, as well as a “grandfather”
provision that continued the benefit for transactions in the ordinary course of
business pursuant to a binding contract between the taxpayer and an unrelated person
in effect on September 17, 2003. The EC formally discontinued the sanctions, even
though the two-year transition period remained in force, noting that full compliance
would be achieved with the expiration of the transition provision at the end of 2006.46
In addition, three pending proceedings brought by Canada challenging U.S.
agency actions in antidumping and countervailing duty investigations involving
Canadian softwood lumber were settled by the United States and Canada in October
2006 as part of the U.S.-Canada Softwood Lumber Agreement.47 The United States
45 See Dispute Settlement Body, Minutes of Meeting, May 17, 2006, at 18, WT/DSB/M/212
(June 20, 2006).
46 Id. For additional information on the history of this dispute and the statutes involved, see
the following: CRS Report RL31660, A History of the Extraterritorial Income (ETI) and
Foreign Sales Corporation (FSC) Export Tax-Benefit Controversy, by David L. Brumbaugh;
CRS Report RL32652, The 2004 Corporation Tax and FSC/ETI Bill: the American Jobs
Creation Act of 2004, by David L. Brumbaugh; and CRS Report RS20746, Export Tax
Benefits and the WTO: The Extraterritorial Income Exclusion and Foreign Sales
Corporations, by David L. Brumbaugh.
47 The cases were United States — Final Countervailing Duty Determination with Respect
to Certain Softwood Lumber from Canada (DS257); United States — Final Dumping
Determination on Softwood Lumber from Canada (DS264); United States — Investigation
of the International Trade Commission in Softwood Lumber from Canada (DS277). For
(continued...)
CRS-16
also reported to the DSB in March 14, 2006, that it had complied in Korea’s
challenge to the U.S. countervailing duty order on dynamic random access memory
semiconductors from that country (DS296) with the issuance of a new determination
by the International Trade Commission in February 2006 in which the Commission,
elaborating on its earlier analysis regarding the effects of a decline in the rate of
growth in demand and addressing the panel’s concerns regarding nonattribution to
subject imports of any effects that may have been caused by the decline, continued
to find material injury.48 Although Korea stated at the March 2006 DSB meeting
that the United States had not fully implemented the WTO ruling,49 it has not raised
the issue in subsequent meetings.50
Pending Cases Involving Legislative Action
Section 110(5)(B) of the Copyright Act (Music Copyrights)(DS160).
This dispute involves legislation enacted in 1998 (17 U.S.C. § 110(5)(b), as added
by P.L. 105-298, § 202(a)), which provides that it is not a copyright infringement for
bars and restaurants and other retail outlets to play radio and television music without
authorization from the copyright holder or the payment of fees so long as the
establishments meet certain size limitations or equipment requirements.51
Challenged by the EC in 1999, this so-called “small business” exemption was found
to be an improper rights limitation in violation of Article 13 of the Agreement on
Trade-Related Intellectual Property Rights (TRIPS).
In the absence of U.S. legislative action by the end of the initial compliance
period (July 27, 2001), complainant EC agreed to extend the period to the end of
2001, and to consider U.S. compensation for the EC music industry based on an
amount of trade injury determined by arbitration under Article 25 of the DSU, a free-
standing arbitration provision. A November 9, 2001 arbitral award determined that
some $1.1 million in EC trade benefits are affected annually.
47 (...continued)
further discussion, see CRS Report RL33752, Softwood Lumber from Canada: Issues and
Events, by Ross. W. Gorte and Jeanne J. Grimmett.
48 Dispute Settlement Body, Minutes of Meeting, Mar. 14, 2006, at 7, WT/DSB/M/206 (Apr.
4, 2006)[hereinafter DSB Minutes (Mar. 14, 2006)]; see U.S. Int’l Trade Comm’n, DRAMs
and DRAM Modules from Korea; Investigation No. 701-TA-431 (Section 129 Consistency
Determination)(Feb. 2006)(Pub. 3839).
49 DSB Minutes (Mar. 14, 2006), supra note 48, at 8
50 The ITC material injury determination was also challenged by the Korean producer Hynix
in the U.S. Court of International Trade. In December 2006, the court sustained an ITC
determination submitted on remand in which the Commission, again directed to address the
issue of decline in demand, continued to find material injury to the U.S. industry from
subsidized Korean imports. Hynix Semiconductor, Inc. v. United States, No. 03-00652,
2006 WL3924180 (Ct. Int’l Trade Dec. 7, 2006); see also Hynix Semiconductor, Inc. v.
United States, 431 F.Supp.2d 1302 (Ct. Int’l Trade 2006).
51 For further discussion of this provision, see CRS Report RS21107, Copyright Law’s
“Small Business Exception”: Public Performance Exemptions for Certain Establishments,
by Todd B. Tatelman.
CRS-17
Notwithstanding the arbitration, the EC on January 7, 2002, requested
authorization to impose countermeasures on the ground that the United States had not
fully complied by the extended deadline, proposing to suspend concessions under the
TRIPS Agreement by “levying a special fee from US nationals in connection with
border measures concerning copyright goods.” While the United States asked for
arbitration of the proposal, the United States and the EC on February 26, 2002, asked
that the arbitration be suspended, with the understanding that it could be reactivated
by either party after March 1, 2002.
In April 2003, Congress appropriated $3.3 million for a “one-time only, lump-
sum payment” to the EC to cover a three-year period of nullification and impairment
of benefits in the dispute (P.L. 108-11).52 The parties notified the WTO in late June
2003 that the payment, which will be made into a fund for EC performers, constitutes
a temporary settlement of the dispute.53 They also agreed that the EC may request
that the suspended arbitration be resumed any time after December 20, 2004, or if the
United States fails to pay within 45 days after being notified that the fund has been
established.
Recent developments. Shortly before the three-year U.S.-EC agreement
expired, the EC complained to the DSB that the United States had taken only
minimal steps to secure the passage of legislation that would bring the United States
into full compliance in the case.54 The EC regularly raises the issue of U.S.
noncompliance at DSB meetings, noting that it has reserved its right to reactivate the
52 See H.Rept. 108-76 at 33, 92. As does the House report on the enacted appropriation, the
House report on the House-passed FY2004 appropriation for the USTR (H.R. 2799) points
out that approval of the payment was intended as a “one-time only” funding measure and
further states that “[t]here is a long-established practice of using suspension of tariff
concessions to resolve trade disputes and the Committee does not intend to appropriate
funds to settle these matters.” H.Rept. 108-221 at 65. In addition, the Committee “cautions
U.S. negotiators that there should be no commitments made within trade agreements to use
funds from the U.S. Treasury that have neither been requested nor appropriated to resolve
trade disputes.” Id.
53 Notification of a Mutually Satisfactory Temporary Arrangement, United States — Section
110(5) of the US Copyright Act, WT/DS160/23 (June 26, 2003).
54 Dispute Settlement Body, Minutes of Meeting, Nov. 24 and 26, 2004, at 7,
WT/DSB/M/178 (Jan. 17, 2005). The continued existence of the provision is also routinely
cited in the European Union’s annual report on US. trade barriers. E.g., European
Commission, Report on United States Barriers to Trade and Investment 2005 at 69, 90
(Mar. 2006), at [http://trade.ec.europa.eu/doclib/docs/2006/march/tradoc_127632.pdf]. See
also European Commission, Directorate-General for Trade, General Overview of Active
WTO Dispute Settlement Cases Involving the EC as Complainant or Defendant, 01
December 2006, at 18, at [http://trade.ec.europa.eu/doclib/docs/2006/november/tradoc
_129465.pdf].
CRS-18
arbitration on its retaliation request at any time,55 while the United States continues
to report to the DSB that it is working with Congress on the matter.56
Section 211 of the Omnibus Appropriations Act of 1998 (Trademark
Exclusion Involving Property Confiscated by Cuba) (DS176). This case
involves a statute (P.L. 105-277, 112 Stat. 2681-88), which prohibits the registration
or enforcement in the United States, without the consent of the original owner or
successors, of a trademark that is the same or substantially the same as one used in
connection with a business or assets confiscated by the Cuban government.
Challenged by the EC in 1999, the law was ultimately found to violate national
treatment and most-favored-nation obligations in the TRIPS Agreement in that it
limited the prohibition on registration and enforcement of rights to rights asserted by
Cuba and Cuban nationals or their successors-in-interest. Panel and Appellate Body
reports in the case were adopted January 2, 2002.57
Recent developments. The original compliance period, as agreed upon by
the United States and the EC, expired December 31, 2002; it was extended four
times, also by agreement, most recently to June 30, 2005.58 The United States did not
comply by this date. Instead of agreeing to an extension of the deadline or,
alternatively, requesting authorization to retaliate, the EC entered into an agreement
with the United States regarding rights and procedures involving any future EC
retaliation request.59 The EC agreed not to request authorization from the DSB to
suspend concessions for the time being, but has pledged to notify and consult with
the United States before making any such request in the future. For its part, the
United States has agreed not to block any retaliation request by the EC on the ground
that the request is outside the 30-day window provided for in Article 22.6 of the
DSU; the United States also retains the right to object to a proposed retaliation
request and to refer the matter to arbitration.
As the EC and Cuba continue to raise the issue of U.S. noncompliance at recent
DSB meetings,60 the United States has regularly reporting to the DSB that legislative
proposals related to § 211 have been introduced in the House and Senate and that it
is working with the Congress “with respect to appropriate statutory measures that
55 E.g., Dispute Settlement Body, Minutes of Meeting, Sept. 28, 2006, at 5-6,
WT/DSB/M/220 (Nov. 2, 2006)[hereinafter DSB Minutes (Sept. 28, 2006)].
56 E.g., id. at 4; see also Status Report by the United States, Addendum, United States —
Section 110(5) of the US Copyright Act, WT/DS160/24/Add.25 (Jan. 12. 2007).
57 For more detailed information on the legal issues involved in this case, see CRS Report
RS21764, Restricting Trademark Rights of Cubans: WTO Decision and Congressional
Response, by Margaret Mikyung Lee.
58 Modification of the Agreement under Article 21.3(b) of the DSU, United States —
Section 211 Omnibus Appropriations Act of 1998, WT/DS176/15 (Dec. 21, 2004).
59 Understanding between the European Communities and the United States, United States
— Section 211 Omnibus Appropriations Act of 1998, WT/DS176/16 (July 1, 2005).
60 E.g., DSB Minutes (Sept. 28, 2006), supra note 55, at 2-3. Cuba and other WTO Members
have also made note of U.S. non-compliance. Id. at 3-4.
CRS-19
would resolve this matter.”61 A number of bills either repealing or amending the
provision were introduced in the 109th Congress.62 H.R. 217 (Serrano), introduced
January 2, 2007, and H.R. 624 (Rangel), introduced January 22, 2007, would repeal
§ 211, as well as remove the current trade embargo on Cuba.
Antidumping Measures on Hot-Rolled Steel Products from Japan
(DS184). This case involves a challenge to preliminary and final agency
determinations issued in 1998 and 1999 in an antidumping investigation of hot-rolled
steel products from Japan. The panel, as upheld by the Appellate Body, found that
the United States was in violation of the WTO Antidumping Agreement because (1)
U.S. law, specifically § 735(c)(5)(A) of the Tariff Act of 1930, requires the
Commerce Department to include dumping margins based in part on “facts
available,” including those contained in petitions, in calculating the antidumping duty
rate for companies not investigated individually in a case (all-others rate); (2) the
Commerce Department improperly applied facts available in calculating dumping
margins for specific producers; and (3) the Department had improperly excluded
from the calculation of the normal value of the products under investigation certain
home market sales to parties affiliated with the exporter involved.63 The Appellate
Body also ruled against the United States with respect to the ITC’s injury
determination, reversing panel findings that the ITC had properly applied a captive
production provision and that the agency had found a causal link between the
dumped imports and material injury to the industry involved. With regard to Japan’s
causation claim, however, the AB found that there was an insufficient factual record
to allow completion of the required analysis.64
61 See, e.g., the most recent status report submitted by the United States to the DSB
regarding the dispute, Status Report by the United Status, Addendum, United States —
Section 211 Omnibus Appropriations Act of 1998, WT/DS176/11/Add.50 (Jan. 12, 2007).
62 Two 109th Congress bills would have amended § 211 to make it applicable to all persons
claiming rights in trademarks confiscated by Cuba, whatever their nationality (S. 691
[Domenici]; H.R. 1689 [Feeney]). See 151 Cong. Rec. S3153 (daily ed. Apr. 4,
2005)(remarks of Mr Domenici). Two other 109th Congress bills would have repealed the
provision (H.R. 3372 [Flake] and S. 1604 [Craig]). S. 328 (Craig) and H.R. 719 (Moran)
would have repealed § 211 along with enacting various Cuba-related trade facilitation
provisions. An amendment to S. 600, foreign relations authorization legislation for FY2006
and FY2007, would have done the same (S.Amdt. 281 [Baucus]). Other 109th Congress
legislation would have repealed § 211 along with removing the current trade embargo on
Cuba (H.R. 208 [Serrano]; H.R. 579 [Paul]). No action was taken on any of the legislation.
The Senate Judiciary Committee held a hearing on Section 211 issues on July 13, 2004. See
An Examination of Section 211 of the Omnibus Appropriations Act of 1998, at
[http://judiciary.senate.gov/hearing.cfm?id=1261] for witness lists, testimony and Members
statements.
63 Panel Report, United States — Anti-dumping Measures on Certain Hot-Rolled Steel
Products from Japan, WT/DS184/R (Feb. 28, 2001)[hereinafter Hot-Rolled Steel Panel
Report]; Appellate Body Report, United States — Anti-dumping Measures on Certain Hot-
Rolled Steel Products from Japan, WT/DS184/AB/R (July 24, 2001)[hereinafter Hot-Rolled
Steel AB Report].
64 Hot-Rolled Steel AB Report, supra note 63, at ¶ 235-236.
CRS-20
The arbitrated compliance period in the case expired November 23, 2002.
While Japan had threatened trade retaliation earlier in November because it found it
unlikely that the United States would comply with each element of the ruling by this
deadline, the deadline was extended until December 31, 2003, or the end of the 108th
Congress, 1st Session (whichever was earlier), to comply fully with the panel and
appellate reports in the case.65
Administrative compliance. In partial implementation of the WTO rulings,
the Commerce Department modified the test that it uses to determine which
transactions are made by an exporter or producer to an affiliate at arm’s length and
are therefore “in the ordinary course of trade” 66 The panel, as upheld by the
Appellate Body, found that the test that the United States had applied in the dumping
investigation at issue violated Article 2.1 of the Antidumping Agreement, which
provides that a product “is to be considered dumped, i.e. introduced into the
commerce of another country at less than its normal value, if the export price of the
product exported from one country to another is less than the comparable price, in the
ordinary course of trade, for the like product when destined for consumption in the
exporting country.”67 Sales that are outside the “ordinary course of trade” are thus
to be excluded by national authorities when calculating normal value.
Under past practice, the Department considered sales of a product to an affiliate
to be at arm’s length if the prices charged were on average at least 99.5 percent of the
prices charged to unaffiliated comparison market customers. The Department’s new
test provides that for affiliate sales to be considered, the sales prices “must fall, on
average, within a defined range, or band, around sales prices of the same or
comparable merchandise sold by that exporter or producer to all unaffiliated
customer’s. The band applied for this purpose will provide that the overall ratio
calculated for an affiliate be between 98 percent and 102 percent, inclusive, of prices
to unaffiliated customers ....”68
65 After consultations with Japan, the United States requested that deadline be extended to
the dates noted; the DSB approved the extension on December 5, 2002. See Status Report
by the United States, Addendum, United States — Anti-dumping Measures on Certain Hot-
Rolled Steel Products from Japan, WT/DS184/15/Add.3 (Dec. 9, 2002).
The United States and Japan had reportedly been in disagreement regarding
implementation of the ruling as it relates to the ITC’s application of the statutory captive
production provision. See Japan Threatens Retaliation Against U.S. For Hot-Rolled Steel
Antidumping Duties, 19 Int’l Trade Rep. (BNA) 1965 (2002); U.S. Response Leaves WTO
Ruling on Hot-Rolled Injury Claims Untouched, Inside U.S. Trade, Nov. 15, 2002, at 3; U.S.
Gets Extra Year to Comply with WTO Hot-rolled Steel Decision, Inside U.S. Trade, Dec. 6,
2002, at 13. No action has been taken by the ITC in response to the WTO decision.
66 Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67 Fed.
Reg. 69186 (Nov. 15, 2002)[hereinafter Modification of Antidumping Methodology]. See
also Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade, 67
Fed. Reg. 53339 (Aug. 15, 2002)(request for public comment).
67 Hot-Rolled Steel Panel Report, supra note 77, at ¶¶ 7.91-7.120, Hot-Rolled Steel AB
Report, supra note 63, ¶¶ 131-173.
68 Modification of Antidumping Methodology, supra note 70, 67 Fed. Reg. at 69186. The
(continued...)
CRS-21
According to the Department, the regulatory revision “is consistent with the
view, expressed by the WTO Appellate Body, that rules aimed at preventing the
distortion of normal value through sales between affiliates should reflect, ‘even-
handedly,’ that ‘both high and low-price sales between affiliates might not be ‘in the
ordinary course of trade.’”69 The Department stated that the new methodology would
be used to implement the WTO findings regarding the Japan hot-rolled steel AD
proceeding, and applied in all investigations and reviews initiated on or after
November 23, 2002.70
On December 3, 2002, the Department announced a new dumping determination
in the AD proceeding at issue, stating that in implementation of the WTO rulings and
recommendations, it had recalculated dumping margins for three affected Japanese
producers using the new methodology; addressed issues related to the use of adverse
facts available; and recalculated the all-others rate based on the new rates for the
respondent companies.71 The recalculations resulted in reduced dumping margins for
the three companies as well for all other exporters.
Legislative compliance. As noted earlier, the dispute panel, as upheld by
the Appellate Body, concluded that the United States was in violation of its WTO
obligations because of its use of dumping margins based in part on facts available in
determining the all-others rate in antidumping proceedings. Article 9.4 of the WTO
Antidumping Agreement provides, in pertinent part, that the all-others rate may not
exceed the weighted average margin established with respect to individually
investigated producers or exporters, excluding any zero and de minimis margin and
“margins established under the circumstances referred to in” Article 6.8 of the
Agreement, that is, “made on the basis of facts available.”72 Section 735(c)(5)(A)
of the Tariff Act of 1930, 19 U.S.C. § 1673d(c)(5)(A) states that, for purposes of
preliminary and final dumping determinations, the estimated dumping rate for
68 (...continued)
Department noted that its modification was the same as that proposed in August 2002, “with
the exception of comparing prices of ‘similar’ products where an identical comparison
product was not sold to unaffiliated parties ....” Id. at 69187.
69 Id.
70 Id.
71 Notice of Determination Under Section 129 of the Uruguay Round Agreements Act:
Antidumping Measures on Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products
from Japan, 67 Fed. Reg. 71936 (Dec. 3, 2002).
72 Article 6.8 provides, in full text, as follows:
In cases in which any interested party refuses access to, or otherwise does not
provide, necessary information within a reasonable period or significantly
impedes the investigation, preliminary and final determinations, affirmative or
negative, may be made on the basis of facts available. The provisions of Annex
II shall be observed in the application of this paragraph.
Annex II, titled “Best Information Available in Terms of Paragraph 8 or Article 6,” provides
guidelines for the collection and use of information by investigating authorities in
antidumping proceedings.
CRS-22
producers not investigated individually “shall be an amount equal to the weighted
average of the estimated weighted average dumping margins established for exporters
and producers individually investigated, excluding any zero and de minimis margins,
and any margins determined entirely under section 776.”73 Section 776 of the Tariff
Act governs the use of facts available by the DOC and ITC in making dumping,
subsidy, and injury determinations.74 The WTO panel, as affirmed on appeal,
concluded that § 735(c)(5)(A) is inconsistent with Article 9.4 because it requires
DOC to consider dumping margins based in part on facts available in determining
the all-others rate, while the cited WTO article was found to require the exclusion of
dumping margins based either in whole or in part on such facts.75
Recent developments. Absent legislative compliance by the United States,
the December 2003 deadline referred to earlier was extended twice, most recently to
July 31, 2005.76 The deadline lapsed without U.S. action; in an understanding
between the disputing parties reached earlier in the month, Japan stated that it would
not request authorization to retaliate at the time but might choose to do so in the
future.77
H.R. 2473 (Shaw), introduced in the 109th Congress, would have amended §
735(c)(5) of the Tariff Act of 1930 to remove the word “entirely” each time it
appears in the provision. Although the text of H.R. 2473 was listed for possible
73 (Emphasis added).
74 The Tariff Act generally directs the Commerce Department and the International Trade
Commission to use “the facts otherwise available” in reaching their subsidy, dumping, and
injury determinations if: (1) necessary information is not available on the record or (2) an
interested party or any other person withholds requested information, fails to provide such
information by the deadline or in the form and manner requested, significantly impedes an
antidumping or countervailing duty proceeding, or provides information that cannot be
verified. Tariff Act of 1930, § 776(a), 19 U.S.C. § 1677e(a). Before using “facts available,”
however, the agencies must enable a person submitting information in response to an agency
request to remedy or explain any deficiencies in the original response. Tariff Act of 1930,
§ 782(d), 19 U.S.C. § 1677m(d). The agencies are allowed to use adverse inferences in
selecting from fact available where an interested party “has failed to cooperate by not acting
to the best of its ability” to comply with an agency information request.” Tariff Act of 1930,
§ 776(b), 19 U.S.C. § 1677e(b). As noted by the U.S. Court of International Trade, the
ability of an agency to use “facts available” in an investigation acts as “an inducement for
respondents to provide complete and accurate information in a timely manner.” Maui
Pineapple Company v. United States, 264 F.Supp. 2d 1244, 1257 (Ct. Int’l Trade 2003).
75 Emphasis added. See Hot-Rolled Steel Panel Report, supra note 63, at ¶¶ 7.83-7.90,
8.1(b); Hot-Rolled Steel AB Report, supra note 63, ¶¶ 111-130.
76 See Dispute Settlement Body, Minutes of Meeting, Aug. 31, 2004, at 6-7, WT/DSB/M/175
(Sept 24, 2004).
77 Understanding between Japan and the United States, United States — Anti-dumping
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/19 (July 28, 2005).
The United States has agreed not to block any retaliation request on the ground that the 30-
day period for requesting authorization to suspend concessions in Article 22.6 has expired,
but has reserved the right to have any retaliation request referred to arbitration.
CRS-23
inclusion in 109th Congress miscellaneous tariff legislation,78 the bill was neither
made part of the latter nor acted upon as stand-alone legislation.
Japan continues to seek legislative action on the issue,79 as the United States
continues to state its support for legislative amendments that would achieve full
compliance in the case.80 At the same time, the United States has submitted a
proposal to the Doha Round Negotiating Group on Rules that the WTO Antidumping
Agreement be clarified to allow the invalidated practice.81
Continued Dumping and Subsidy Offset Act (DS 217/DS234). The
Continued Dumping and Subsidy Offset Act (CDSOA), 19 U.S.C. § 1675c, also
known as the Byrd Amendment, required the annual disbursement of antidumping
and countervailing duties to petitioners and interested parties in the underlying trade
remedy proceedings.82 The EC and ten other WTO members challenged the October
2000 statute shortly after enactment as violative of the WTO Antidumping
Agreement, the WTO Agreement on Subsidies and Countervailing Measures (SCM
Agreement), and other WTO obligations. The complainants based their argument
78 Comments submitted to the Trade Subcommittee of the House Ways and Means
Committee on the possible inclusion of this legislation in a future bill are available at
[http://waysandmeans.house.gov/hearings.asp?formmode=comment&hearing=440&com
m=5].
79 E.g., DSB Minutes (Sept. 28, 2006), supra note 55, at 5.
80 Id.; Status Report by the United States, Addendum, United States — Anti-dumping
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/15/Add.50 (Jan.
12, 2007).
81 U.S. Seeks to Reverse WTO Ruling on ‘Facts Available’ Dumping Rates, 21 Int’l Trade
Rep. (BNA) 1540 (2004); Negotiating Group on Rules, All-Others Rate (Article 9.4 ADA);
Communication from the United States, TN/RL/GEN/16 (Sept. 15, 2004), as corrected
[hereinafter U.S. Communication]. See also Negotiating Group on Rules, Identification of
Certain Major Issues Under the Anti-Dumping and Subsidies Agreements; Submission by
the United States, TN/RL/W/72, at 2-3 (March 19, 2003).
In presenting its proposal to WTO negotiating partners, the United States has explained
that it interpreted Article 9.4 of the Antidumping Agreement as providing that only margins
based entirely on facts available are to be excluded from calculating the all-others rate
ceiling because “the United States believed that this was a reasonable interpretation of the
statute and because, in the United States’ experience, some level of facts available is often
necessary to determine a company’s dumping margin.” U.S. Communication, supra, at 1.
In the U.S. view, whether the “facts available” data used with respect to a firm are small or
substantial, “the resulting margin represents the best estimate of the level of dumping by that
particular company” and it is thus “appropriate to use such a margin when establishing a
duty rate for unexamined firms based on the dumping found to exist for firms actually
examined.” Id. It continued: “We therefore interpreted the Agreement as distinguishing
those situations from situations in which a firm’s data are so flawed or unreliable that it is
necessary to base its antidumping duty entirely on facts available.” Id.
82 For more detailed examination of the statute and additional discussion of the WTO
proceeding, see CRS Report RL33045, The Continued Dumping and Subsidy Offset Act
(“Byrd Amendment”), by Jeanne J. Grimmett and Vivian C. Jones. See also U.S.
Government Accountability Office, International Trade: Issues and Effects of Implementing
the Continued Dumping and Subsidy Offset Act (Sept. 2005)(GAO-05-979).
CRS-24
in part on the prohibitions in Article 18.1 of the Antidumping Agreement and Article
32.1 of the SCM Agreement against Members’ taking any “specific action against”
dumping and subsidization, respectively, except for action taken in accordance with
the GATT 1994 as interpreted by the respective Agreement.83
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. At the same time, the panel rejected complainants’ argument
that the act would make it more difficult for the United States to enter into subsidy
and price undertakings with foreign governments allowing the suspension of
investigations (“suspension agreements”), along with Mexico’s claim that the act
constituted a subsidy in and of itself.84 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.85 The reports were adopted January 27,
2003, and the compliance period was subsequently determined by arbitration to
expire December 27, 2003.86
Because 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 in January 2004 for authorization to impose retaliatory
measures.87 The United States objected to the requests, sending them to arbitration.88
The remaining three complainants — Australia, Indonesia, and Thailand — agreed
to give the United States until December 27, 2004, to comply.89
83 Article 18.1 of the Antidumping Agreement had been successfully used by EC and Japan
in their WTO challenges of the U.S. Antidumping Act of 1916, 15 U.S.C. § 72, which
provided a private right of action and criminal penalties against dumping. See Appellate
Body Report, United States — Anti-Dumping Act of 1916, ¶¶ 103-138, WT/DS136/AB/R,
WT/DS162/AB/R (Aug. 28, 2000)(adopted Sept. 26, 2000). The 1916 Act statute was
prospectively repealed in late 2004. P.L. 108-429, § 2006.
84 Panel Report, United States — Continued Dumping and Subsidy Offset Act, WT/DS217/R,
WT/DS234/R (Sept. 16, 2002).
85 Appellate Body Report, United States — Continued Dumping and Subsidy Offset Act, ¶¶
224-299, WT/DS217/AB/R, WT/DS234/AB/R (Jan. 16, 2003).
86 Award of the Arbitrator, United States — Continued Dumping and Subsidy Offset Act of
2000; WT/DS217/14, WTDS234/22 (June 13, 2003). The arbitrator emphasized in his
award that it is for the United States to decide on the manner of implementation, which may
be through repeal or modification of the law. Id. ¶ 50.
87 See WTO documents WT/DS217/20 (Brazil); WT/DS217/21(Chile); WT/DS217/22 (EC);
WT/DS217/23 (India); WT/DS217/24 (Japan); WT/DS217/25 (Korea); WT/DS234/25
(Canada); WT/DS234/26 (Mexico).
88 See Dispute Settlement Body, Minutes of Meeting, Jan. 26, 2004, WT/DSB/M/164 (Mar.
12, 2004).
89 See WTO documents WT/DS217/17 (Thailand); WT/DS217/18 (Australia); and
(continued...)
CRS-25
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 U.S. data are available relating to antidumping and
countervailing duties paid on imports from the Member at that time.90 The Arbitrator
stated that the disbursements “operate, in economic terms, as subsidies that may
generate import substitution production”91 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.92 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 does 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 are less likely to have trade
effects exceeding this level in terms of value of U.S. exports to the country involved.
The eight complainants received formal authorization from the DSB to impose
retaliatory measures in late 2004.93 The EC and Canada began to impose
countermeasures in the form of higher tariffs and surcharges on selected U.S.
products, respectively, as of May 1, 2005.94 Mexico began to impose $20.9 million
89 (...continued)
WT/DS217/19 (Indonesia).
90 E.g., Decision by the Arbitrator, Recourse to Arbitration by the United States under
Article 22.6 of the DSU; United States — Continued Dumping and Subsidy Offset Act of
2000 (Original Complaint by the European Communities), at ¶¶ 5.1-5.2,
WT/DS217/ARB/EEC (Aug. 31, 2004).
91 Id. at ¶ 3.41.
92 Id. at ¶¶ 3.72, 3.80-3.151, 4.7.
93 Absent action to repeal or modify the statute by December 27, 2004, the compliance
deadline agreed to by Australia, Indonesia, and Thailand, the three Members entered into
entered into new agreements with the United States in which they reserved the right to take
further action against U.S. goods in the future. See WTO documents WT/DS217/44
(Australia), WT/DS217/45 (Thailand), and WT/DS217/46 (Indonesia).
94 Communication from the European Communities, United States — Continued Dumping
and Subsidy Offset Act, WT/DS217/47 (May 4, 2005); Canada Implements Retaliatory
Surtax on U.S. Goods Due to Byrd Amendment, 22 Int’l Trade Rep. (BNA) 796 (2005).
CRS-26
in retaliatory tariffs effective August 18, 2005.95 In addition, Japan imposed
additional tariffs of 15% on 15 categories of U.S. goods as of September 1, 2005.96
Recent developments. A provision repealing the CDSOA, but providing
for the distribution of “duties on entries of goods made and filed before October 1,
2007,” was enacted in the Deficit Reduction Act of 2005, signed by the President on
February 8, 2006 (P.L. 109-171).97 While the United States informed the WTO that
95 “Decreto por el que se modifica temporalmente el artículo 1 del Decreto por el que se
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
Decreto]; “Mexico Announces $20.9 Million in Byrd Retaliation Against U.S. Exports,
Inside U.S. Trade, Aug. 19, 2005, at 1.
The official Mexican Government notice stated that the tariff decree would remain
in effect for 12 months and that it would no longer apply when the Ministry of the Economy
placed a notice in the Diario Oficial that the United States has complied with the WTO
decision, at which time tariffs would return to their original rates. Decreto, supra,
“Transitorios.”
96 Communication from Japan, United States — Continued Dumping and Subsidy Offset Act
of 2000, WT/DS217/48 (Aug. 19, 2005); Japan, Ministry of Economy, Trade and Industry,
“US Byrd Amendment: Japan Decides to Start Retaliation,” Press Release, August 1, 2005,
at [http://www.meti.go.jp/english/information/data/WTOByrd050801e.html][hereinafter
METI Press Release]; Japan OKs Countervailing Duties on 15 U.S. Products Because of
Byrd Amendment, 22 Int’l Trade Rep. (BNA) 13424 (2005). According to Japan, the level
of retaliation would not exceed $52 million, which, it stated, was the amount authorized by
the WTO based on the amount of CDSOA disbursements involving Japanese goods in fiscal
2004. METI Press Release, supra.
97 The repeal, contained in § 7601(a) of the Act, is to be effective “upon the date of
enactment.” Section 7701 of the Act provides that Title VII, which contains the CDSOA-
related provisions, “shall take effect as if enacted on October 1, 2005.” The provision for
future duty distributions, set forth at § 7601(b), states as follows:
All duties on entries of goods made and filed before October 1, 2007, that would,
but for subsection (a) of this section, be distributed under section 754 of the
Tariff Act of 1930, shall be distributed as if section 754 of the Tariff Act of 1930
had not been repealed by subsection (a).
At the same time Congress again directed the Commerce Department and USTR to
conduct negotiations in the WTO “to recognize the right of members to distribute monies
collected from antidumping and countervailing duties” in P.L. 109-108, the Science, State,
Justice, Commerce and Related Agencies Appropriations Act, 2006, which became law
November 22, 2005, marking the third time that such a requirement has appeared in statute.
The President’s signing statement on the legislation appears to indicate that the Executive
Branch will treat the provision (inasmuch as it affects the Commerce Department) as
“advisory” on the ground that it interferes with the President’s foreign affairs authority. The
statement provides in pertinent part:
The executive branch shall construe as advisory the provisions of the Act that
(continued...)
CRS-27
it had taken the actions necessary to implement the WTO rulings, and complaining
Members expressed support for the repeal, Members also stated their concerns that
the provision requiring the continued distribution of duties through 2007 and possibly
afterward would prevent the United States from complying fully with its WTO
obligations in the case.98
In April 2006, the U.S. Court of International Trade ruled that the CDSOA did
not apply to imports from Canada or Mexico,99 and on September 28, 2006, Customs
and Border Protection announced that it was withholding FY2006 and subsequent
years’ distributions on imports from the two countries pending the outcome of any
appeal.100
97 (...continued)
purport to direct or burden the Executive’s conduct of foreign relations,
including the authority to ... negotiate international agreements on behalf of the
United States .... These provisions include ... language under the headings
[Department of Commerce] “International Trade Administration, Operations and
Administration” ....
As noted earlier, the USTR had submitted a proposal regarding the recognition of a right to
distribute antidumping and countervailing duties to the Doha Round Negotiating Group on
Rules in 2004. See supra note 95.
98 Dispute Settlement Body, Minutes of Meeting, Feb. 17, 2006, at 5-10, WT/DSB/M/205
(Mar. 31, 2006) [hereinafter DSB Minutes (Feb. 17, 2006)].
99 Canadian Lumber Trade Alliance v. United States, 425 F.Supp.2d 1321 (Ct. Int’l Trade
2006). Canada and Canadian industry groups had challenged CDSOA distributions based
on goods from Canada, arguing that, because of a provision in the NAFTA Implementation
Act stating after the NAFTA enters into force for the United States, an amendment that is
made to Title VII of the Tariff Act of 1930 may apply to goods from a NAFTA country only
to the extent specified in the amendment, the CDSOA, in not expressly referring to Canada,
did not apply to imports of Canadian products. The provision is set out at P.L. 103-182, §
408, 19 U.S.C. § 3438. While ruling that Canada did not have standing to sue in the case,
the USCIT agreed with industry plaintiffs that the statutory provision applied to the
CDSOA, which is contained in Title VII of the 1930 act along with authorities for U.S.
antidumping and countervailing duty investigations. Since the CDSOA did not refer either
to Canada or Mexico, the court ruled that imports from both countries were exempt. On
July 14, 2006, the court permanently enjoined CBP from making any CDSOA payments to
the extent they derive from duties imposed on softwood lumber and two other Canadian
products. Canadian Lumber Trade Alliance v. United States, 2006 WL 2168520 (Ct. Int’l
Trade July 14, 2006), at [http://www.cit.uscourts.gov/slip_op/Slip_op06/06-48.pdf]; see also
CIT Issues Permanent Injunction On Some Byrd Amendment Distributions, 23 Int’l Trade
Rep. (BNA) 1108 (July 20, 2006).
Canadians had been concerned that antidumping and countervailing duties collected
on softwood lumber imports, which had at the time of the suit totaled over $4 billion and
whose underlying duty orders had been heavily litigated by Canada, might eventually be
distributed to U.S. lumber producers. For further information on the U.S.-Canada softwood
lumber dispute, which was settled in 2006, see CRS Report RL33752, Softwood Lumber
Imports from Canada: Issues and Events, by Ross W. Gorte and Jeanne J. Grimmett.
100 Notice of Withholding of Certain Distributions on Continued Dumping and Subsidy
Offset to Affected Producers, 71 Fed. Reg. 57000 (Sept. 28, 2006).
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Canada allowed its retaliatory tariffs to terminate as of April 30, 2006,101 and
Mexico, after a month’s lapse, imposed increased tariffs on U.S. dairy products from
September 18 through October 31, 2006.102 The EC and Japan are continuing to
impose sanctions are U.S. products.103 Complaining Members also regularly state at
DSB meetings that in prospectively repealing the statute the United States has not
adequately complied with its WTO obligations in the case.104
Subsidies on Upland Cotton (DS267). In September 2002, Brazil
requested consultations with the United States regarding U.S. statutes and programs
that it claimed provided prohibited and actionable subsidies to U.S. producers, users,
and exporters of upland cotton. Brazil alleged violations of the Agreement on
Subsidies and Countervailing Measures (SCM Agreement), the Agreement on
Agriculture, and national treatment obligations in the GATT,105 adding in its
subsequent panel request in February 2003 a claim based on subsidy obligations in
GATT Article XVI.106
Members have made commitments in the WTO Agreement on Agriculture to
reduce, and in some cases eliminate, domestic support programs in favor of
agricultural producers and export subsidies on agricultural products. A Member’s
commitments are listed in a Schedule that is attached to the Agreement.107 The
Agreement as a whole applies to products listed in Annex I of the Agreement.
Article 6 of the Agriculture Agreement sets out obligations regarding Members’
domestic support reduction commitments, with Annex 2 of the Agreement setting out
criteria for domestic measures that are not subject to such commitments. The
commitments are expressed in terms of Total Agreement Measurement of Support
(AMS) and Annual and Final Bound Commitment Levels. A Member will be
considered to be in compliance with its domestic support reduction commitments in
any year in which its domestic support for agricultural producers expressed in terms
of Current Total AMS does not exceed the corresponding annual or final bound
101 Canada’s tariff surcharge expired April 30, 2006 and was not renewed. See Canada,
Dept. of Foreign Affairs and International Trade, Dispute Settlement: Questions and
Answers - Expiration of Retaliatory Measures, at [http://www.dfait-maeci.gc.ca/tna-
nac/disp/byrdqa-en.asp].
102 U.S. Dairy Industry Expects Hit from Short-term Mexican Byrd Retaliation, Inside U.S.
Trade, October 6, 2006; DSB Minutes (Sept. 28, 2006), supra note 55, at 9.
103 Communication from the European Communities, United States — Continued Dumping
and Subsidy Offset Act of 2000, WT/DS217/49 (May 2, 2006); Communication from Japan,
United States — Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/50 (Aug.
24, 2006).
104 E.g., Dispute Settlement Body, Minutes of Meeting, Oct. 26, 2006, at 10-12,
WT/DSB/M/221 (Dec. 2, 2006); DSB Minutes (Sept. 28, 2006), supra note 55, at 8-11.
105 Request for Consultations by Brazil, United States — Subsidies on Upland Cotton,
WT/DS267/1 (Oct. 3, 2002).
106 Request for the Establishment of a Panel by Brazil, United States — Subsidies on Upland
Cotton, WT/DS267/7 (Feb. 7, 2003).
107 Agreement on Agriculture, Art. 3.1.
CRS-29
commitment level specified in its Schedule. Members agree in Article 3.2 of the
Agreement not to provide support in favor of domestic producers in excess of the
these specified commitment levels.
Article 9.1 expressly lists export subsidies that are subject to reduction
commitments under the Agreement. Members agree in Article 3.3 not to provide
Article 9.1 subsidies regarding agricultural products or groups of products specified
in the Member’s Schedule (“scheduled products”) in excess of the budgetary outlay
and quantity commitments specified in the Schedule.108 Moreover, a Member may
not provide Article 9.1 export subsidies with respect to any agricultural product that
is not specified in the Schedule (“unscheduled products”).109 In addition, Article 10.1
of the Agreement provides, in pertinent part, that export subsidies that are not listed
in Article 9.1 “shall not be applied in a manner which results in, or which threatens
to lead to, circumvention of export subsidy commitments....”
Agricultural subsidies may be challenged under the SCM Agreement, which
prohibits export subsidies and subsidies contingent on the use of domestic over
imported products (“import substitution” subsidies) (Art. 3) and makes any subsidy
“actionable” if it is alleged to cause certain types of trade injury to the Member’s
interests, including what the Agreement deems “serious prejudice” (Art. 5).110 The
United States argued in the case that certain of its agricultural programs were covered
by the now-expired Article 13 of the WTO Agreement on Agriculture — the so-
called Peace Clause — which provides that certain domestic support measures and
export subsidies that conformed fully with specified Agreement requirements were
“exempt from actions” under specified subsidy-related provisions in the GATT and
the SCM Agreement through the end of 2003.
In a panel report issued September 8, 2004, the panel found that the United
States was maintaining prohibited export and import substitution subsidies as well
as actionable subsidies that caused serious prejudice to the interests of Brazil.123
First, the panel found that three U.S. export credit guarantee programs — as they
applied to exports of upland cotton and other unscheduled agricultural commodities
supported under the programs, and to exports of rice (a scheduled commodity) — are
export subsidies applied in a manner that illegally circumvents U.S. export subsidy
commitments in the Agriculture Agreement.124 The three programs are the
Commodity Credit Corporation (CCC) Export Credit Guarantee Program (GSM
108 Agreement on Agriculture, Art. 3.3.
109 Id.
110 Agreement on Subsidies and Countervailing Measures (SCM Agreement), at
[http://www.wto.org/english/docs_e/legal_e/ legal_e.htm].
123 Panel Report, United States — Subsidies on Upland Cotton, WT/DS267/R (Sept. 8,
2004)[hereinafter Cotton Panel Report]. For further information on the agricultural
programs at issue and the bases for the panel and Appellate Body findings, see CRS Report
RL32571, Background on the U.S.-Brazil WTO Cotton Subsidy Dispute, by Randy Schnepf.
See also Eliza Patterson, The WTO Decision on U.S. Cotton Subsidies, ASIL Insight (Mar.
2005), at [http://www.asil.org/insights/2005/ 03/insights050323.html].
124 Cotton Panel Report, supra note 123, at ¶¶ 7.787-7.948, 8.1(d)(i).
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102), providing export credit guarantees for up to 3 years; the CCC Intermediate
Export Credit Guarantee Program (GSM 103), providing export credit guarantees for
up to 10 years; and the Supplier Credit Guarantee Program (SCGP). As these
programs did not conform fully to export subsidy obligations in the SCM Agreement,
they were found not to be covered by the Peace Clause and thus subject to
challenge.125 The panel went on to find that these programs are prohibited export
subsidies under Article 3.1(a) of the SCM Agreement.126
Second, the panel found that § 1207(a) of the Farm Security and Rural
Investment Act of 2002, 7 U.S.C. § 7937(a), or the so-called Step 2 program, to the
extent that it provides for payments to exporters for their purchase of higher priced
upland cotton, constitutes an export subsidy for that product that was not scheduled
by the United States, and therefore inconsistent with U.S. obligations under the
Agreement on Agriculture.127 As such, this part of the Step 2 program was also
found not to be covered by the Peace Clause, to be subject to challenge, and, as
further found by the panel, to constitute a prohibited export subsidy under the Article
3.1(a) of the SCM Agreement.128 Similarly, the panel also determined that § 1207(a),
insofar as it provides for payments to domestic users of upland cotton, constitutes an
import substitution subsidy prohibited under Article 3.1(b) of the SCM Agreement.129
Third, the panel found that various U.S. domestic support programs, including
counter-cyclical payments, market loss assistance payments, market loan program
payments, and Step 2 payments for U.S. cotton producers, granted support to a
“specific commodity in excess of that decided during the1992 marketing year” and
thus were not covered by a provision of the Peace Clause that could be invoked only
if such support was not being provided.130 The panel then found that the four above-
cited programs — characterized as mandatory price-contingent subsidies — caused
serious prejudice to Brazil’s interests for purposes of Article 5(c) of the SCM
Agreement, in the form of significant price suppression in the world upland cotton
market.131 Among other things, the panel also found that an agricultural program
could be challenged in the WTO even though it had expired so long as the program
was in force during the nine-year Agreement implementation period beginning in
1995 and continued to have an adverse effect on the complaining Member,132 a
finding that allowed Brazil to challenge flexibility contract payments (FCP) and
market loss assistance payments, the legislative basis of which had expired in 2002.
Brazil was unable, however, to show serious prejudice from the FCP program.
125 Id. ¶¶ 7.943-7.944, 8.1(d)(i).
126 Id. ¶¶ 7.946-7.948, 8.1(d)(i).
127 Id. ¶¶ 7.692-7.749, 8.1(e)(i).
128 Id. ¶¶ 7.751-7.761, 8.1(e)(ii)-(iii).
129 Id. ¶¶ 7.1030-7.1098, 8.1(f).
130 Id. ¶ ¶ 7.415-7.608, 8.1(c).
131 Id. ¶¶ 7.1109-7.1416, 8.1(g)(i).
132 Id . ¶¶ 7.528-7.530.
CRS-31
The panel recommended that the prohibited subsidies be removed “without
delay” and specified that this be done at the latest within six months of the date of
adoption of the panel report or July 1, 2005, whichever was earlier.133 The panel
cited Article 4.7 of the SCM Agreement, which requires that where an export subsidy
is found, the panel recommend expeditious removal and specify a time period for
such action. The panel also recommended that the adverse effects of the actionable
subsidies, or alternatively, the subsidies themselves, be removed, as provided in
Article 7.8 of the SCM Agreement.134 The United States appealed, and the Appellate
Body, in a March 5, 2005, report, largely upheld the panel.135 The reports were
adopted at the DSB meeting of March 21, 2005.136
Along with the deadline for removal of the prohibited subsidies, the finding of
serious prejudice implicated a deadline for actionable subsidies provided for in
Article 7.9 of the SCM Agreement. This provision accords a prevailing Member the
right to request authorization to retaliate with regard to an actionable subsidy in the
event the defending Member “has not taken appropriate steps to remove the adverse
effects of the subsidy or withdraw the subsidy within six months” after the date the
panel or Appellate Body report is adopted, or, in this case September 21, 2005,
provided there is no agreement between the disputing parties on compensation.137
The United States told the Dispute Settlement Body on April 20, 2005, that it
would implement the WTO rulings, but that it would need a reasonable period to
comply and that it had begun to consider its options for doing so.138 Brazil
complained that the U.S. statement was not sufficiently detailed and made reference
to the panel’s recommended compliance date.139 The EC noted that because the
subsidies at issue were found to infringe both the SCM Agreement and the
133 Id. ¶ 8.3(b)-(c). Article 4.7 of the SCM Agreement provides that, in the event a panel
finds that a prohibited subsidy exists, the panel “shall recommend that the subsidizing
Member withdraw its measure without delay” and “shall specify in its recommendation the
time-period within which the measure must be withdrawn.”
134 Id. ¶ 8.3(d).
135 Appellate Body Report, United States — Subsidies on Upland Cotton, WT/DS267/AB/R
(March 3, 2005).
136 Dispute Settlement Body, Minutes of Meeting, Mar. 21, 2005, at 7-13, WT/DSB/M/186
(Apr. 14, 2005).
137 Article 7.9 further provides that the DSB “shall grant authorization to the complaining
Member to take countermeasures, commensurate with the degree and nature of the adverse
affects determined to exist,” subject to the reverse consensus rule. Article 7.10 of the SCM
Agreement provides that if arbitration is requested, the arbitrator is to determine “whether
the countermeasures are commensurate with the degree and nature of the adverse effects
determined to exist.”
138 Dispute Settlement Body, Minutes of Meeting, Apr. 20, 2005, at 7, WT/DSB/M/188 (May
18, 2005)[hereinafter DSB Minutes (Apr. 20, 2005)].
139 Id. at 8.
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Agreement on Agriculture, the United States was entitled to a reasonable period to
comply with the latter.140
Recent Developments. In response to the WTO finding that fees charged
by the Commodity Credit Corporation (CCC) guarantee programs be risk-based, the
United States Department of Agriculture (USDA) announced that as of July 1, 2005,
CCC would use a risk-based fee structure for both the GSM-102 and SCGP program,
and that CCC would no longer accept applications for payment guarantees under the
GSM-103 program.141 In addition, USDA announced that to further comply with the
WTO decision, it was sending proposed statutory changes to Congress to eliminate
the Step 2 cotton program, to remove a 1% cap on fees that can be charged under the
export credit programs, and to terminate the GSM-103 program.142 According to
USDA, repealing the Step 2 program “would remove both the export subsidies and
import substitution subsidies that the WTO cited and address issues related to
suppression of cotton prices in world markets.”143
Because prohibited export subsidies had not been removed by July 1, 2005,
Brazil requested that the DSB meet on July 15 to consider its request for
authorization to impose countermeasures against the United States. Brazil proposed
to suspend tariff concessions as well as obligations under the WTO Agreement on
Trade-Related Intellectual Property Rights (TRIPS) and the General Agreement on
Trade in Services (GATS) until the United States withdrew the exports subsidies
identified by the WTO, in an amount corresponding to (1) the Step 2 payments made
in the most recent concluded marketing year and (2) the total of exporter applications
received under the GSM-102, GSM-103 and SGCP programs, for all unscheduled
commodities and for rice, for the most recent concluded fiscal year.144 Brazil
estimated the annual total for both to be $3 billion.145
On July 5, 2005, Brazil and the United States notified the DSB that they had
entered into a procedural agreement which, along with specifying steps that could or
could not be taken by the disputing parties in the implementation phase of the
dispute, recognized the changes to the CCC programs announced June 30, 2005, and
the legislative proposal that had been sent to Congress to repeal the Step 2
program.146 Pursuant to the agreement, the United States requested arbitration of
140 Id.
141 Id.
142 Id.
143 Id.
144 Recourse to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU by Brazil,
United States — Subsidies on Upland Cotton, WT/DS267/21 (July 5, 2005).
145 Brazil stated that this amount represented “Step 2 payments estimated for marketing year
2004-2005 and total amount of applications received for export credit guarantees under
GSM 102, GSM 103, and SGCP during fiscal year 2004.” Id. at 2, note 1.
146 Understanding between Brazil and the United States Regarding Procedures under Articles
21 and 22 of the DSU and Article 4 of the SCM Agreement, United States — Subsidies on
Upland Cotton, WT/DS267/22 (July 8, 2005). It was agreed, among other things, that Brazil
(continued...)
CRS-33
Brazil’s retaliation proposal; the DSB referred the matter to arbitration at the July 15
meeting of the DSB;147 and the two countries, on August 17, 2005, requested that the
arbitration be suspended.148 The agreement also provides that Brazil may request an
Article 21.5 compliance panel at any time after the July 15 meeting.
Further, because the United States had not complied with its WTO obligations
regarding the actionable subsidies by September 21, 2005, Brazil on October 6
proposed to suspend tariff concessions as well as obligations under the Agreement
on TRIPS and the GATS in the annual amount of $1.037 billion until the United
States withdrew the four domestic subsidies enumerated above or removed their
adverse effects.149 The United States objected to the proposal on October 17,150 and
the matter was referred to arbitration at the DSB meeting held the following day.151
On November 21, 2005, the parties requested that the arbitration be suspended,
“noting that the United States reaffirmed” at the November 18 DSB meeting “its
commitment to implement the recommendations and rulings of the DSB in this
disputes, and in light of the preference for WTO-consistent solutions mutually
acceptable to the parties to a dispute set out in DSU Article 3.7.”152 The parties also
agreed that if either desired to resume the arbitration, that party would inform the
other 30 days before making such a request.
146 (...continued)
would make its retaliation request at the July 15 DSB meeting; the United States would
object to the retaliation request (thus sending it to arbitration); the two would request shortly
thereafter that the arbitration be suspended; Brazil would be entitled to request an Article
21.5 compliance panel, which either party could appeal; were the United States found to be
out of compliance, Brazil could request that the arbitration of its retaliation request be
resumed; if the United States were found to be in compliance, Brazil would withdraw its
retaliation request; and a mutually agreed solution, if reached, would be notified to the DSB,
whereupon Brazil would withdraws its retaliation request, an action that would terminate
the arbitration.
147 Dispute Settlement Body, Minutes of Meeting, July 15, 2005, WT/DSB/M/193 (July 28,
2005).
148 See Communication from the Arbitrator, Recourse by the United States to Article 22.6
of the DSU and Article 4.11 of the SCM Agreement, United States — Subsidies on Upland
Cotton, WT/DS267/25 (Aug. 18, 2005). Regarding possible future action by Brazil, see
With U.S. Inaction on Parts of WTO Ruling Brazil May Restart Cotton Subsidy Dispute,
Daily Rep. for Executives (BNA) No. 13, at A-1 (Jan. 20, 2006); Brazil Threatens to Renew
WTO Arbitration Proceeding on Cotton, Inside U.S. Trade, Jan. 20, 2006, at 1.
149 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by Brazil,
United States — Subsidies on Upland Cotton, WT/DS267/26 (Oct. 7, 2005).
150 Request by the United States for Arbitration under Article 22.6 of the DSU and Article
7.10 of the SCM Agreement, United States — Subsidies on Upland Cotton, WT/DS267/27
(Oct. 18, 2005).
151 See Note by the Secretariat, Constitution of the Arbitrator, Recourse by the United States
to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement, United States —
Subsidies on Upland Cotton, WT/DS267/29 (Dec. 7, 2005).
152 See Communication from the Arbitrator, Recourse by the United States to Article 22.6
of the DSU and Article 7.10 of the SCM Agreement, United States — Subsidies on Upland
Cotton, WT/DS267/29 (Dec. 7, 2005).
CRS-34
As part of the congressional budget reconciliation process, the Senate
Agriculture Committee, on October 19, 2005, approved legislation repealing the Step
2 program, effective August 1, 2006; a repeal provision was also approved by the
House Agriculture Committee on October 28, 2005.153 Repeal of the Step 2 program,
effective August 1, 2006, was ultimately enacted in § 1103 of P.L. 109-171, the
Deficit Reduction Act of 2005, signed by the President on February 8, 2006. 154
Brazil requested a compliance panel in August 2006, claiming WTO violations
stemming from the U.S. failure to repeal the Step 2 program as of the implementation
period (i.e., September 21, 2005), the continued existence of the marketing loan and
counter-cyclical payments programs, and continued WTO-related defects in the
export credit guarantee programs at issue in the case.155 The panel was established
September 28, 2006, and expects to issue its report in July 2007.156
153 See Senate Agriculture Narrowly Approves $3 Billion in Cuts to Agriculture Spending,
Daily Rep. for Executives (BNA) No. 202, at A-23 (Oct. 20, 2005); House Agriculture
Committee Approves $3.7 Billion in Cuts for Reconciliation Plan, Daily Rep. for Executives
(BNA) No. 209, at A-12 (Oct. 31, 2005).
154 For further information on U.S. actions taken in response to the WTO decision, see CRS
Report RS22187, U.S. Agricultural Policy Response to WTO Cotton Decision, by Randy
Schnepf.
155 Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by Brazil,
United States — Subsidies on Upland Cotton, WT/DS267/30 (Aug. 21, 2006).
In its panel request, Brazil states that entry into effect of the Step 2 program after the
compliance deadline resulted in the lack of a U.S. compliance measure in the interim and
cites the failure of the United States to take any measures involving the U.S. marketing loan
and counter-cyclical payments programs under the Farm Security and Rural Investment Act
of 2002. Brazil claims that as a result the United States has not removed the adverse effects
of or withdrawn the subsides as required by the WTO decision. The continued existence
of the programs, Brazil alleges, has caused two adverse effects — significant price
suppression in the world market for upland cotton and an increase in the U.S. share in the
world market for upland cotton in marketing year 2005 — each of which constitute “serious
prejudice” for purposes of Article 6.3 of the SCM Agreement. Brazil further argues that
even with the repeal of the Step 2 program the adverse effects resulting from the existence
of the other two programs continue.
Regarding the export credit guarantee (ECG) programs, Brazil claims that the United
States has not fully withdrawn the prohibited subsidies related to these programs as called
for by the WTO decision and as a result maintains prohibited export subsidies in violation
of the Agreement on Agriculture and the SCM Agreement. Brazil argues the GSM102 and
Supplier Credit Guarantee programs fulfil the definition of an export subsidy for purposes
of the SCM Agreement, and moreover fail to impose premium rates sufficient to cover the
long-term operating costs of the programs for purposes of the Illustrative List of Export
Subsides contained in the SCM Agreement. Brazil also argues that the ECGs under the
programs have been applied to circumvent U.S. export subsidy commitments for purposes
of Article 10 of the Agreement on Agriculture, citing concerns that ECGs have been
provided after July 1, 2005, the deadline for removing the prohibited export subsidies, to
support the export of upland cotton and other agricultural products in excess of U.S.
reduction commitments levels for those products.
156 Communication from the Chairman of the Panel, Recourse to Article 21.5 of the DSU by
Brazil, United States — Subsidies on Upland Cotton, WT/DS267/32 (Jan. 11, 2007).
CRS-35
Measures Affecting Cross-Border Supply of Gambling and Betting
Services (DS 285). In a March 21, 2003, complaint, Antigua and Barbuda
(Antigua) requested consultations with the United States regarding federal, state, and
local laws affecting the remote supply of gambling and betting services, alleging that
the overall effect of these laws was to prevent the supply of gambling and betting
services from the territory of one WTO Member into the United States in violation
of U.S. market access commitments in Article XVI of the General Agreement on
Trade in Services (GATS).157 Article XVI(a) of the GATS prohibits a WTO
Member, in sectors where it undertakes market access commitments, from
maintaining or adopting, unless specified in its Schedule, “limitations on the number
of service suppliers whether in the form of numerical quotas, monopolies, exclusive
service suppliers or the requirements of an economic needs test.” Article XVI(c)
prohibits a Member, in any such sectors, from maintaining or adopting, unless
specified in its Schedule, “limitations on the total number of service operations or on
the total quantity of service output expressed in terms of designated numerical units
in the form of quotas or the requirement of an economic needs test.”
While the United States did not expressly identify gambling and betting services
in its Schedule of Specific Commitments to the GATS, the WTO panel, in its
November 2004 report, interpreted the services sub-sector titled “Other Recreational
Services (except sporting)” as including gambling and betting services, and
concluded that the United States, by not placing any limitations on the supply of such
services from the territory of one WTO Member into the United States, had made
market access commitments in the area.158 The panel then found that three federal
statutes and provisions of four state laws conflicted with these obligations. The
federal statutes were the Wire Act, the Travel Act, and the Illegal Gambling Business
Act (IGBA);159 the state laws were those of Louisiana, Massachusetts, South Dakota,
157 Request for Consultations by Antigua and Barbuda, United States — Measures Affecting
the Cross-Border Supply of Gambling and Betting Services, WT/DS285/1 (Mar. 27, 2003).
158 Panel Report, United States — Measures Affecting the Cross-Border Supply of Gambling
and Betting Services, WT/DS285/R (Nov. 10, 2004)[hereinafter Gambling Panel Report].
Each Party to the General Agreement on Trade in Services (GATS) submits a Schedule
of Specific Commitments to the Agreement, in which it inscribes the service sectors for
which it is making commitments and lists any terms, limitations, and conditions on the
supply of services in these sectors for each of four modes of service supply: (1) from the
territory of one Member into the territory of any other Member; (2) in the territory of one
Member to the service consumer of any other Member; (3) by a service supplier of one
Member, through commercial presence in the territory of any other Member; and (4) by a
service supplier of one Member, through presence of natural persons of a Member in the
territory of any other Member. See General Agreement on Trade in Services (GATS), Arts.
I, XX, at [http://www.wto.org/english/docs_e/legal_e/ legal_e.htm]. The first mode of
supply is at issue in this dispute. GATS obligations regarding market access (Article XVI)
and national treatment (Article XVII) are applicable only with respect to scheduled
commitments, subject to the terms, limitations and conditions outlined in the Member’s
Schedule. Other GATS obligations apply to all services-related measures maintained by a
Member.
159 The Wire Act, P.L. 87-216, § 2, as amended, 18 U.S.C. § 1084, prohibits the transmission
of wagering information. The Travel Act, P.L. 87-228, § 1(a), as amended, 18 U.S.C. §
(continued...)
CRS-36
and Utah. The panel found that by preventing one, several, or all means of delivering
gambling and betting services, the statutes constituted impermissible limitations on
the number of service suppliers for purposes of Article XVI:2(a) of the GATS or,
alternatively, on the total number of total number or service operations or total
quantity of service output for purposes of Article XVI:2(c).
The panel further found that, with regard to the federal laws, the United States
could not successfully invoke exceptions in GATS Article XIV for “measures
necessary to protect public morals or to maintain public order” (Article XIV(a)) or
for “measures necessary to secure compliance with” GATS-consistent laws and
regulations (Article XIV(c)) because the United States had not shown that the
measures were “necessary” to achieve the stated end or that they were consistent with
the Article XIV proviso, which requires that measures justified under the exception
not be applied “in a manner which would constitute a means of arbitrary or
unjustifiable discrimination between countries where like conditions prevail.” Under
WTO jurisprudence, discrimination may occur not only between the different
exporting Members but also between an exporting Member and the importing
Member and thus in this case between foreign and domestic providers of Internet
gambling services.160
On appeal, the WTO Appellate Body, using a different mode of analysis than
the panel, nonetheless determined that the United States had made sectoral
commitments regarding gambling and betting services.161 Though the AB upheld the
panel’s finding of a violation of GATS market access obligations,162 it reversed the
panel on its finding that the United States could not justify the federal measures
under GATS exceptions.163 The AB also reversed the panel’s finding that four state
laws were inconsistent with the GATS, finding that because Antigua had not made
a prima facie case that eight state measures violated the Agreement, the panel had
improperly examined their GATS-consistency.164
159 (...continued)
1952, prohibits interstate and foreign travel or transportation in aid of certain unlawful
activities, including business enterprises involving gambling in violation of U.S. or state
law. The Interstate Gambling Business Act, P.L. 91-452, § 803(a), as amended, 18 U.S.C.
§ 1955, prohibits illegal gambling businesses, as defined in the statute.
160 See Gambling Panel Report, supra note 158, at ¶ 6.578.
161 Appellate Body Report, United States — Measures Affecting the Cross-Border Supply
of Gambling and Betting Services, ¶¶ 158-213,373(B),WT/DS285/AB/R (Apr. 7, 2005)
[hereinafter Gambling AB Report].
162 Id. ¶¶ 214-265, 373(C)(i)-(ii). Inter alia, the AB stated that “limitations amounting to a
zero quota are quantitative limitations and fall within the scope of Article XVI:2(a)” and
that prohibitions on service supply “amount to a ‘zero quota’ on service operations or output
with respect to such services ... [and a]s such fall within the scope of Article XVI:2(c).” Id.
¶¶ 238, 251.
163 Id. ¶¶ 300-327, 335-336, 373(D)(iii)(b),(iv)(a).
164 Id. ¶¶ 133-155, 373(A)(iii),(C)(iii).
CRS-37
With respect to the GATS exceptions, the AB found that the panel had
erroneously concluded that the three federal statutes could not be considered
“necessary” for purposes of Articles XIV(a) and XIV(c) because the United States
had not entered into consultations with Antigua to find a less trade-restrictive
alternative. The AB ultimately found that statutes were “necessary to protect public
morals or to protect public order” for purposes of Article XVI(a) and that they thus
fell within the scope of this exception.165 At the same time, the AB also found that,
in light of a provision in the Interstate Horseracing Act (IHA) that might facially
continue to allow the remote supply of wagering on horseracing by domestic firms,
the United States had not shown that the Wire Act, the Travel Act, and the IGBA
were being applied consistently with the Article XVI proviso, that is, that they may
possibly be used to prosecute foreign, but not domestic, providers of remote
horserace gambling services.166
Antigua had based its argument that the United States was applying the three
statutes inconsistently with the Article XIV proviso on two aspects of the IHA, a
statute allowing the acceptance of interstate off-track wagers provided certain
conditions are met, making violators civilly liable for damages to named entities,
including the state in which the subject horserace takes place, and authorizing certain
civil suits against violators.167 First, Antigua cited § 5 of the act, which it
characterized as expressly allowing an interstate off-track wager to be accepted by
an off-track betting system, where consent is obtained from certain organizations.168
Second, it cited the statutory definition of “interstate off-state wager,” which, in
pertinent part, includes pari-mutuel wagers “placed or transmitted by an individual
in one State via telephone or other electronic media and accepted by an off-track
betting system in the same or another State,” provided the wagers are lawful in the
States involved.169 In the words of the AB, Antigua thus argued that:
the IHA, on its face, authorizes domestic service suppliers, but not foreign
service suppliers, to offer remote betting services in relation to certain horse
races. To this extent, in Antigua’s view, the IGHA “exempts” domestic service
suppliers from the prohibitions of the Wire Act, the Travel Act, and the IGBA.170
165 Because it had found that the U.S. statutes were “necessary” for purposes of XVI(a), the
AB did not address whether the statutes fulfilled the “necessity” test of Article XIV(c). Id.
¶¶ 337, 373(D)(iv)(b).
166 Id. ¶¶ 338-372, 373(v),(vi).
167 Interstate Horseracing Act of 1978 (IHA), P.L. 95-515, 15 U.S.C §§ 3001-3006. See
Gambling AB Report, supra note 159, at ¶ 361.
168 Section 4 of the IHA, 15 U.S.C. § 3003, prohibits a person from accepting an “interstate
off-track wager” except as provided in the act. Section 5(a) of the IHA , 15 U.S.C. §
3004(a), states that “[a]n interstate off-track wager may be accepted by an off-track betting
system only if consent is obtained from — (1) the host racing association ...; (2) the host
racing commission; (3) the off-track racing commission.”
169 IHA, § 3(3), 15 U.S.C § 3002(3).
170 Gambling AB Report, supra note 159, ¶ 361 (footnotes omitted)(emphasis in original).
CRS-38
As further described by the AB, “[t]he Panel found that the evidence provided by the
United States was not sufficiently persuasive to conclude that, as regards wagering
on horseracing, the remote supply of such services by domestic firms continues to be
prohibited notwithstanding the plain language of the IHA.”171 The AB concluded that
the panel did not err in making this finding.
The Appellate Body report and the panel report, as modified by the AB, were
adopted April 20, 2005.172 The United States reported at the May 19, 2005, meeting
of the DSB that it intended to implement the rulings and had begun to consider
options for doing so, but that it would need a reasonable period to comply.173
Recent developments. After the disputing parties had failed to agree on a
reasonable period of time for compliance, Antigua requested that the compliance
period be arbitrated.174 In its submission to the Arbitrator, the United States stated
that compliance would be achieved “by further clarifying the relationship between
the IHA and preexisting federal criminal laws” and that clarification would be sought
“through legislation.”175 The United States sought a 15-month compliance period,
stressing that such legislative action would be “technically complex.”176 In an award
171 Id. ¶ 364 (emphasis in original).
172 DSB Minutes (Apr. 20, 2005), supra note 138, at 15.
173 Dispute Settlement Body, Minutes of Meeting, May 19, 2005, at 9, WT/DSB/M/189 (June
17, 2005)[hereinafter DSB Minutes (May 19, 2005)].
174 Request from Antigua and Barbuda for Arbitration under Article 21.3(c) of the DSU,
United States — Measures Affecting the Cross-Border Supply of Gambling and Betting
Services, WT/DS285/11(June 9, 2005).
175 Submission of the United States, Arbitration under Article 21.3 of the DSU, United States
— Measures Affecting the Cross-Border Supply of Gambling and Betting Services,
WT/DS285, July 12, 2005, at 5, at [http://www.ustr.gov/assets/Trade_Agreements/
Monitoring_Enforcement/Dispute_Settlement/WTO/Dispute_Settlement_Listings/asset_
upload_file504_5581.pdf].
176 The United States argued as follows regarding the nature of the foreseen legislative
action:
... It requires consideration of the relationship between the IHA and three
different federal criminal statutes — the Wire Act, the Travel Act, and the Illegal
Gambling Business statute The Appellate Body has made no finding as to
whether the activity that is prohibited by these statutes is permitted under the
IHA. Instead the Appellate Body has emphasized the need to “demonstrate[] that
— in the light of the existence of the Interstate Horseracing Act — the Wire Act,
the Travel Act, and the Illegal Gambling Business Act are applied consistently
with the requirements of the [Article XIV] chapeau.” Accordingly a reasonable
legislative option would have the effect of clarifying that relevant U.S. federal
laws entail no discrimination between foreign and domestic service suppliers in
the application of measures prohibiting remote supply of gambling and betting
services.
... There will be ample room for reasonable and principled disagreements among
legislators as to precisely how to achieve such a clarification in the context of
(continued...)
CRS-39
made public August 19, 2005, the Arbitrator determined that the compliance period
would last 11 months and 2 weeks from the date of adoption of the panel and AB
reports, thus expiring April 3, 2006.177
Legislative action was not taken before the deadline; instead, the United States
reported to the DSB that it had complied in the case based on the position of the
Department of Justice (DOJ) regarding remote gambling on horse racing, articulated
as follows in April 5 DOJ testimony before a House committee:
The Department of Justice views the existing criminal statutes as prohibiting the
interstate transmission of bets or wagers, including wagers on horse races. The
Department is currently undertaking a civil investigation relating to a potential
violation of law regarding this activity. We have previously stated that we do not
believe that the Interstate Horse Racing Act, 15 U.S.C. §§ 3001-3007, amended
the existing criminal statutes.178
Antigua disagreed that the United States was in compliance, and in May 2006,
the parties entered into a procedural agreement regarding the possible seeking by
Antigua of a compliance panel and countermeasures in the case.179 Antigua requested
176 (...continued)
Internet gambling. ...
... A legislative clarification will be further complicated by the fact that , starting
in the 105th Congress (1997-98), and continuing in each subsequent Congress
through the 108th Congress (2003-04), U.S. federal lawmakers have considered
a wide range of proposals to address Internet gambling. Members of Congress
are actively considering introduction of Internet gambling bills in the current
109th Congress (2005-06), and will undoubtedly find it necessary to consider the
need for compliance with the DSB’s recommendations and rulings in the context
of this continuing debate, and the variety of broader proposals already supported
by different groups of legislators. The issue of how to achieve compliance with
the DSB’s recommendations and rulings is thus further complicated by its
potential to affect, and be affected by, elements of an already complex legislative
debate that has gone unresolved over the past four Congresses.
Id. at 5-7.
177 Award of the Arbitrator, Arbitration under Article 21.3 of the Understanding on Rules
and Procedures Governing the Settlement of Dispute, United States — Measures Affecting
the Cross-Border Supply of Gambling and Betting Services, WT/DS285/13 (Aug. 19, 2005)
178 Status Report by the United States, Addendum, United States — Measures Affecting the
Cross-Border Supply of Gambling and Betting Services, WT/DS285/15/Add.1 (Apr. 11,
2006). See Statement of Testimony of Bruce G. Ohr, Chief, Organized Crime and
Racketeering Section, Criminal Division, U.S. Department of Justice, Before the Committee
of the Judiciary, Subcommittee on Crime, Terrorism, and Homeland Security, U.S. House
of Representatives, Concerning H.R. 4777. the “Internet Gambling Prohibition Act,”
Presented on April 5, 2006, at 2, at [http://judiciary.house.gov/media/pdfs/ohr040506.pdf].
179 Agreement between Antigua and Barbuda and the United States Regarding Procedures
under Articles 21 and 22 of the DSU, United States — Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/16 (May 26, 2006). Note also
(continued...)
CRS-40
a compliance panel in July 2006, claiming that the United States had failed to bring
the Wire Act, the Travel Act and the Illegal Gaming Business Act into conformity
with U.S. GATS obligations and that then-pending legislation — H.R. 4777 and H.R.
4411 — was “expressly contrary “ to the WTO ruling in that each bill “would further
institutionalise the discriminatory effect” of the three cited statutes. It also
questioned whether the DOJ statement was a “measure” or a “measure taken to
comply” for purposes of the DSU, noting that the position had been maintained by
the United States during the course of the dispute and was later rejected by the panel
and Appellate Body. It further argued that regardless of the nature of the DOJ
statement for purposes of the DSU, the United States remained out of compliance
with the GATS because of, inter alia, the existence of reasonable technical
alternatives to prohibitions on remote gambling and betting services and
governmental enforcement problems regarding domestic and cross-border service
providers.180 The compliance panel was established July 19, 2006, and expects to
issue a report in March 2007.181
179 (...continued)
Dispute Settlement Body, Minutes of Meeting, April 21, 2006, at 8-10, WT/DSB/M/210
(May 30, 2006)
180 Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by
Antigua and Barbuda, United States — Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/18 (July 7, 2006). Antigua also made separate
arguments regarding the inconsistency of the then-pending bills with U.S. GATS
obligations, faulting in particular their exclusions for transactions made in accordance with
the Interstate Horseracing Act (IHA), intrastate transactions, and remote gambling
conducted by Native American tribes in accordance with existing federal laws applicable
to Native American gaming.
In October 2006, the President signed into law the SAFE Port Act, which contains an
Internet gambling title that generally following the House-reported language of H.R. 4411.
Unlawful Internet Gambling Enforcement Act (UIGEA), P.L. 109-437, Title VII. The
statute prohibits gambling business from accepting checks, credit cards, electronic transfers
and similar forms of payment in connection with illegal Internet gambling, while exempting
intrastate and intratribal Internet gambling operations that include age and location
verification requirements imposed as a matter of law. The legislation also leaves unresolved
questions as to the extent to which the Interstate Horseracing Act restrains the reach of other
federal statutes. For further information, see CRS Report RS22418, Internet Gambling:
Two Approaches in the 109th Congress, by Charles Doyle; CRS Report 97-619 A, Internet
Gambling: Overview of Federal Criminal Law, by Charles Doyle; CRS Report RS21984,
Internet Gambling: An Abridged Overview of Federal Criminal Law, by Charles Doyle.
The United States has argued in the compliance proceeding case that the UIGEA is not
within the terms of reference of the compliance panel and, noting that the new statute
“prohibits certain financial transactions associated with activities already deemed illegal
under existing state or federal laws,” that the legislation “is not instructive as to whether the
United States has made its showing that the IHA does not exempt domestic suppliers of
betting on horse racing from the prohibition in U.S. criminal laws.” Second Written
Submission of the United Stated before the World Trade Organization, United States —
Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Recourse
to Article 21.5 of the DSU by Antigua and Barbuda, Nov. 13, 2006, at 13-16, at
[http://www.ustr.gov/assets/Trade_Agr e e me n t s / M o n i t o r i n g_ E n f o r cement/
Dispute_Settlement/WTODispute_Settlement_Listings/asset_upload_file354_5581.pdf].
181 Communication from the Chairman of the Panel, Recourse to Article 21.5 of the DSU by
(continued...)
CRS-41
Pending Cases Involving Administrative Action
Countervailing Measures Concerning Certain Products from the
European Communities (DS212). The European Communities (EC) in a
November 2000 complaint alleged violations of the WTO Agreement on Subsidies
and Countervailing Measures (SCM Agreement) stemming from methodologies used
by the Department of Commerce in 12 countervailing duty (CVD) proceedings
involving steel or stainless steel products to determine whether a countervailable
subsidy existed subsequent to the privatization of a firm. The 12 cases cited by the
EC included 6 original CVD investigations, 2 administrative reviews of the CVD
orders, and 4 sunset reviews ( i.e., statutorily mandated five-year reviews) of the
orders. In its panel request, the EC claimed that the United States had imposed duties
without first establishing that a benefit was received by the producers under
investigation, all of which were privatized steel companies.182 Article 1.1 of the
SCM Agreement, a subsidy is “deemed to exist” if there is a “financial contribution”
by a government or public entity and “a benefit is thereby conferred.”
The EC argued that the Department had applied a methodology in 11 CVD cases
after the methodology was successfully challenged in an earlier WTO proceeding;
that it had applied a revised methodology in a twelfth case that replicates the
violative aspects of the prior approach; and that § 771(5)(F) of the Tariff Act of 1930,
setting forth a statutory rule for considering change in ownership, impermissibly
allows the Department to impose countervailing duties without initially determining
181 (...continued)
Antigua and Barbuda, United States — Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/20 (Dec. 21, 2006).
182 Request for the Establishment of a Panel by the European Communities, United States
— Countervailing Measures Concerning Certain Products from the European
Communities, WT/DS212/4 (Aug.10, 2001).
CRS-42
the existence of a countervailable subsidy.183 Section 771(5)(F), codified at 19
U.S.C. § 1677(5)(F), states as follows:
A change in ownership of all or part of a foreign enterprise or the productive
assets of a foreign enterprise does not by itself require a determination by the
administering authority that a past countervailable subsidy received by the
enterprise no longer continues to be countervailable, even if the change in
ownership is accomplished through an arm’s length transaction.
183 The U.S. privatization methodology first faulted by the WTO was at issue in the EC’s
successful challenge of countervailing duties imposed on lead and carbon steel products
produced and exported by a British firm. United States — Imposition of Countervailing
Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the
United Kingdom, WT/DS138. The British firm had originally been created as a joint
venture between the state-owned British Steel Corporation (BSC) and a private company,
and was eventually fully owned by a British Steel PLC, the privatized BSC; both parties in
the WTO dispute had agreed that the privatization, which had taken place through a sale of
shares, “was ‘at arm’s length, for fair market value and consistent with commercial
considerations.’” Panel Report, United States — Imposition of Countervailing Duties on
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United
Kingdom, ¶ 2.3, WT/DS/138/R (Dec. 23, 1999)[hereinafter UK Steel Panel Report].
Under the challenged methodology, the Commerce Department treated nonrecurring
subsidies provided to the seller as “potentially allocable to the production transferred to the
purchaser in a privatization or other change-in-ownership transaction.” First Written
Submission of the United States, United States — Imposition of Countervailing Duties on
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United
Kingdom, ¶ 46, WT/DS138 (May 18, 1999), as printed in UK Steel Panel Report, supra, at
162-205. The methodology was based on the principle that the benefit of a subsidy exists
at the time the subsidy is bestowed, and thus the determination that a benefit exists, once
made, was not to be reconsidered; instead, the Department of Commerce would take into
account a change in ownership by reallocating the subsidy benefit. Id. ¶¶ 9-10. The
unamortized subsidies could, however, be repaid. Id. ¶¶ 47-48.
The WTO panel, as upheld by the AB, found that the United States had not shown that
a benefit was conferred on the privatized company as required by the SCM Agreement.
Panel and Appellate Body reports in the case were adopted in June 2000. When the United
States presented its implementation plan to the DSB in July 2000, it announced that it was
considering a change in CVD regulations governing its change-in-ownership methodology
in response to both the adverse WTO reports in the case and recent U.S. legal developments.
Because the challenged duty order had been revoked, however, the United States considered
that it had complied with the DSB rulings and recommendations in the proceeding. Dispute
Settlement Body, Minutes of Meeting, July 5, 2000, at 9, WT/DSB/M/85 (Sept. 25, 2000),
as corrected; see also “U.S. Tells WTO Commerce CVD Rules Under Review After British
Steel Decision, 17 Int’l Trade Rep. (BNA) 1090 (2000).
The referenced domestic legal development was the February 2000 federal court
decision in Delverde, SrL v. United States), 202 F.3d 1360 (Fed. Cir. 2000), reh’g denied
(2002), a case involving a CVD investigation in which the Commerce Department had
analyzed a private-to-private sale of a company using its “spin-off” methodology for
corporate restructurings. The U.S. Court of Appeals for the Federal Circuit held that “the
Tariff Act as amended does not allow Commerce to presume conclusively that the subsidies
granted to the former owner of Delverde’s corporate assets automatically ‘passed through’
to Delverde following the sale,” but instead “requires that Commerce make such a
determination by examining the particular facts and circumstances of the sale and
determining whether the new owner received a financial contribution and benefit from the
government.” Id. at 1364.
CRS-43
The panel report, circulated to the WTO Members July 31, 2002, concluded that
the United States had violated the SCM Agreement in imposing and maintaining
countervailing duties in the 12 challenged proceedings without determining whether
a benefit continues to exist.184 The panel not only found that the U.S. privatization
methodologies were inconsistent with the SCM Agreement, but also concluded that
the Agreement required a per se rule under which a sale concluded at fair market
value or an arm’s-length transaction always extinguishes earlier subsidies.185 The
panel further found that while the plain wording of § 771(5)(F) did not mandate a
violation of the Agreement, the statute, in light of its legislative history, object and
purposes, and judicial interpretation, prohibited the Commerce Department from
adopting a general rule applicable in all cases and was thus inconsistent with the
Agreement.186
Following a U.S. appeal, the Appellate Body (AB) upheld the panel’s
determination that the CVD orders were improperly based, but reversed the finding
that the SCM Agreement required the privatization rule articulated by the panel and
the panel’s conclusion that § 771(5)(F) was inconsistent with the Agreement.187 The
AB stated that it agreed with both the United States and the EC that § 771(5)(F) does
not dictate any particular methodology and thus “as such, does not prevent the
USDOC from determining whether a ‘benefit’ continues to exist, as required by the
SCM Agreement.”188
The appellate and modified panel reports in the WTO proceeding were adopted
by the DSB January 8, 2003. The United States informed the DSB at its January 27,
2003, meeting that it would implement the rulings but that it needed a reasonable
184 Panel Report, United States — Countervailing Measures Concerning Certain Products
from the European Communities, WT/DS212/R (July 31, 2002).
185 Id . ¶¶ 7.60-7.89.
186 Id. ¶¶ 7.129-7.158
187 Appellate Body Report, United States — Countervailing Measures Concerning Certain
Products from the European Communities, WT/DS212/AB/R (December 9, 2002). The AB
found, however, that WTO Members must maintain a presumption against the existence of
a continued benefit where an arm’s length, fair market value privatization has occurred,
characterizing the obligation under the SCM Agreement as follows:
... privatization at arm’s length and for fair market value ... presumptively
extinguishes any benefit received from the non-recurring financial contribution
bestowed upon a state-owned firm. The effect of such a privatization is to shift
to the investigating authority the burden of identifying evidence which
establishes that the benefit from the previous financial contribution does indeed
continue beyond privatization. In the absence of such proof, the fact of the arm’s-
length, fair market value privatization is sufficient to compel a conclusion that
the ‘benefit’ no longer exists for the privatized firm, and, therefore, that
countervailing duties should not be levied.
Id. ¶ 126 (emphasis in original).
188 Id. at ¶ 159.
CRS-44
period of time to do so. The disputing parties later agreed on a compliance deadline
of November 8, 2003.
In implementation of the WTO rulings, the Commerce Department issued a
Federal Register notice March 21, 2003, announcing a proposed revision of its
privatization methodology and seeking comments on the revisions.189 As described
by the Department, the new methodology is “structured as a series of rebuttable
presumptions,” which starts with the “‘baseline presumption’ ... that non-recurring
subsidies can benefit the recipient over a period of time (i.e., allocation period)
normally corresponding to the average useful life of the recipient’s assets.”190 The
Commerce Department issued a final notification of its methodology June 23, 2003,
stating that the revised analytical approach would be used in reviewing the 12 cases
at issue, as well as in all CVD investigations and reviews initiated on or after June
30, 2003.191
On October 23, 2003, the Commerce Department issued 12 determinations
under § 129 of the Uruguay Round Agreements Act (Section 129 determinations) in
response to the WTO rulings.192 Once implemented, the determinations resulted in
revised cash deposit rates for certain companies in five CVD orders, full revocation
of two CVD orders on imports from France, and revocation of a CVD order on
imports from Italy with respect to the subject privatized company. The remaining
four Section 129 determinations, which concerned sunset reviews of CVD orders on
goods from France, Germany, Spain, and the United Kingdom, resulted in no changes
to the existing orders. The United States did not apply its revised privatization
methodology with respect to orders because, as it later explained to the DSB, the
Department had determined that application of the new methodology “would not
change its original conclusions that continued subsidization was likely.”193 As a
result of its actions regarding the 12 orders, the United States considered that it had
fully complied in the case.194
189 Notice of Proposed Modification of Agency Practice Under Section 123 of the Uruguay
Round Agreements Act and Request for Public Comment, 68 Fed. Reg. 13897 (Mar. 21,
2003).
190 Id. at 13899.
191 Notice of Final Modification of Agency Practice Under Section 123 of the Uruguay
Round Agreements Act, 68 Fed. Reg. 37125 (June 23, 2003).
192 See Notice of Implementation Under Section 129 of the Uruguay Round Agreements Act;
Countervailing Measures Concerning Certain Steel Products from the European
Communities,” 68 Fed. Reg. 64858-59 (Nov. 17, 2003)[hereinafter EC Steel Products
Implementation Notice]. Regarding Section 129 determinations, see supra pp. 8-12.
193 Dispute Settlement Body, Minutes of Meeting, Nov. 7, 2003, at 6, WT/DSB/M/157 (Dec.
18, 2003)[hereinafter DSB Minutes (Nov. 7, 2003)]. See EC Steel Products Implementation
Notice, supra note 187, 68 Fed. Reg. at 64859.
194 DSB Minutes (Nov. 7, 2003), supra note 189, at 6.
CRS-45
Recent developments. In September 2004, a compliance panel was
established at the request of the EC, which disputed the results of the sunset reviews
involving products from the France, the United Kingdom, and Spain.195
Sunset reviews are provided for in Article 21.3 of the SCM Agreement, which
requires that any definitive countervailing duty be terminated five years after
imposition (or after an earlier sunset review) unless domestic authorities determine
in a review initiated before that date, either on their own motion or upon industry
request, that termination of the duty “would be likely to lead to continuation or
recurrence” of subsidization and injury. U.S. law requires DOC to revoke a CVD
order as the result of a sunset review unless (1) DOC determines that a
countervailable subsidy would be likely to continue to recur and (2) the International
Trade Commission determines revocation would be likely to lead to termination or
recurrence of material injury within a reasonably foreseeable period of time.196
In a report publicly circulated August 17, 2005, the compliance panel upheld the
Section 129 determination involving French imports, but faulted the two others,
finding that the Commerce Department had failed to apply its new privatization
methodology in the sunset review and thus determine in each whether the
privatization involved was at arm’s length and for fair market value and whether the
privatized producer received any benefit from the previous nonrecurring
subsidization of the state-owned firm.197 The panel thus concluded that, by not
properly determining the likelihood or recurrence of subsidization before deciding
to maintain the CVD orders, the United States violated obligations under both the
SCM Agreement and the GATT. The panel also found that the United States had
acted inconsistently with the SCM Agreement in refusing to consider new evidence
submitted during the Section 129 proceeding involving imports from the United
Kingdom.
195 See Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by
the European Communities, United States — Countervailing Measures Concerning Certain
Products from the European Communities, WT/DS212/15 (September 19, 2004). The EC
claimed that in the sunset review involving French imports the Commerce Department had
“failed to properly examine the existence, continuation or likelihood of recurrence of
subsidization,” basing this assertion on the Department’s alleged improper analysis of
whether, in the privatization involved, the price for employees’ and retirees’ shares
constituted a subsidy or that it led to any continuation of a countervailiable subsidy.” Id. at
2. The EC further claimed that in the reviews involving the United Kingdom and Spain the
Department had “failed to properly determine whether ... there was continuation or
recurrence of subsidization and injury, because it did not examine the nature of the
privatizations in question and their impact on the continuation of the alleged subsidization
“ Id. The EC also stated in its panel request that it “continues to reserve its rights in respect
of all other aspects of the United States’ purported compliance with its obligations in this
case,” and that “[i]n particular, the European Communities reserves it right to challenge the
revised methodology in the light of the eventual outcome of a number of court challenges
seeking to overturn it.” Id.
196 Tariff Act of 1930, § 751(d)(2), 752(a)(1), 19 U.S.C. § 1675(d)(2), 1675a(a)(1).
197 Panel Report, Recourse to Article 21.5 of the DSU by the European Communities, United
States — Countervailing Measures Concerning Certain Products from the European
Communities, WT/DS212/RW (Aug. 17, 2005).
CRS-46
The United States did not appeal, and the panel report was adopted on
September 27, 2005. The United States reported to the DSB in January 2006 that the
USTR on November 29, 2005, had requested the Commerce Department to issue in
an expeditious manner revised determinations with respect to the two outstanding
sunset reviews and that the Department had initiated such proceedings shortly
thereafter.198 In addition, new sunset reviews of both orders had been announced
November 1, 2005.199
The Commerce Department, on October 4, 2006, announced that it had
determined that revocation of the UK order would not be likely to lead to
continuation or recurrence of a countervailable subsidy and that it was revoking the
order effective December 15, 2006.200 Although DOC made an affirmative
determination in the sunset review involving steel products from Spain,201 the ITC
announced December 14, 2006, that all six Commissioners had made negative
determinations in the case and that thus the CVD order would also be revoked.202
Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular
Goods from Argentina (DS268). Argentina requested consultations with the
United States in October 2002 regarding affirmative determinations by the
Commerce Department and the ITC in a sunset review of an antidumping duty order
on oil country tubular goods (OCTG) from that country.203 The determinations
198 Dispute Settlement Body, Minutes of Meeting, Jan. 20, 2006, at 19, WT/DSB/M/203
(Feb. 24, 2006).
199 Initiation of Five-year (“Sunset”) Reviews, 70 Fed. Reg. 65884 (Nov. 1, 2005).
200 Cut-to-Length Carbon Steel Plate from the United Kingdom: Final Results of Full Sunset
Review, 71 Fed. Red. 58587 (Oct. 4, 2006). The full text of the underlying DOC Issues and
Decision Memorandum is available at [http://ia.ita.doc.gov/frn/summary/uk/
E6-16393-1.pdf].
201 Cut-to-Length Carbon Steel Plate from Spain: Final Results of Expedited Five-Year
(“Sunset”) Review of the Countervailing Duty Order, 71 Fed. Reg. 32523 (June 6, 2006).
The full text of the underlying DOC Issues and Decision Memorandum is available at
[http://ia.ita.doc.gov/frn/summary/spain/E6-8757-1.pdf]. Following the issuance of the
compliance panel report, the Commerce Department conducted a second Section 129 review
regarding the CVD order and, as explained in the Issues and Decision Memorandum, took
these findings into account in its sunset review. DOC applied its new privatization
methodology in the second Section 129 review as directed by the panel and determined that
the privatization of the subject producer, Aceralia, did not extinguish the non-recurring,
allocable subsidies provided to it before its privatization. DOC also determined that it had
been provided substantial evidence that some programs that were originally found
countervailable were had been terminated. At the same time, it found that countervailable
programs continued to exist and that thus revocations would likely lead to continuation or
recurrence of a countervailable subsidy.
202 U.S. Int’l Trade Comm’m, News Release 06-119, Dec. 14, 2006, at
[http://www.usitc.gov/ext_relations/news_release/2006/er1214dd1.htm].
203 Request for Consultations by Argentina, United States — Sunset Reviews of Anti-
Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/1 (Oct 10,
2002).
CRS-47
resulted in the continued imposition of antidumping duties in the amount of 1.36%.204
The rate applied to one individually investigated company (Siderca SAIC) as well as
to all other exporters (all others rate).
The WTO Antidumping Agreement, at Article 11.3, and, as noted earlier, the
Agreement on Subsidies and Countervailing Measures, at Article 21.3, require that
antidumping or countervailing duties, as the case may be, be terminated after five
years unless domestic authorities determine in a review initiated before that date on
their own motion, or “upon a duly substantiated request made by or on behalf of the
domestic industry within a reasonable period of time prior to that date,” that
termination of the duties “would be likely to lead to continuation or recurrence” of
dumping or subsidization and injury.
Sunset reviews are provided for in U.S. law in § 751(c)-(e) of the Tariff Act of
1930, 19 U.S.C. § 1675(c)-(e). In a sunset review, the ITC determines whether
revocation of an antidumping or CVD order “would be likely to lead to continuation
or recurrence of material injury within a reasonably foreseeable time,”205 while DOC
determines, as the case may be, whether revocation of a countervailing duty order
“would be likely to lead to continuation or recurrence of a countervailable
subsidy,”206 or whether revocation of an antidumping duty order “would be likely to
lead to continuation or recurrence of sales of the subject merchandise at less than fair
value.”207 Special rules to be followed by the agencies in making these determinations
are set forth in § 752 of the act, 19 U.S.C. § 1675a. Regulations are set forth at 19
C.F.R. § 351.218(d) and elsewhere in 19 C.F.R. Part 351. In addition, DOC has
issued a document known as the Sunset Policy Bulletin (SPB), which contains a set
of departmental policies regarding the conduct of sunset reviews pursuant to §§ 751
and 752 and related regulations.208 As described by the Department, the policies set
out in the SPB are “intended to complement the applicable statutory and regulatory
provision by providing guidance on methodological or analytical issues not explicitly
addressed by the statute and regulations.”209
Section 751(c)(4) of the act, 19 U.S.C § 1675(c)(4), provides for the waiver of
participation in reviews by certain interested parties. Under § 751(c)(4)(A), parties
that produce, export or import the subject merchandise (respondent parties) may elect
not to participate in the DOC portion of a sunset review and to participate only in the
portion conducted by the ITC.210 Section 751(c)(4)(B) provides that in a review in
204 See Final Results of Expedited Sunset Reviews: Oil Country Tubular Goods from
Argentina, Italy, Japan, and Korea, 65 Fed. Reg. 66701, 66703 (Nov. 7, 2000).
205 Tariff Act of 1930, § 752(a)(1), 19 U.S.C. § 1675a(a)(1)(2000).
206 Tariff Act of 1930, § 752(b)(1), 19 U.S.C. § 1675a(b)(1(2000).
207 Tariff Act of 1930, § 752(c)(1), 19 U.S.C. § 1675a(c)(1)(2000).
208 Policies Regarding the Conduct of Five-year (“Sunset”) Reviews of Antidumping and
Countervailing Duty Orders: Policy Bulletin, 63 Fed. Reg. 18871-77 (Apr. 16, 1998).
209 Id. at 18871.
210 Tariff Act of 1930, § 751(c)(4)(A), 19 U.S.C. § 1675(c)(4)(A)(2000). The parties who
(continued...)
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which any such party waives its participation, DOC “shall conclude that revocation
of the order ... would be likely to lead to continuation or recurrence of dumping or
a countervailable subsidy (as the case may be) with respect to that party.”
Under the so-called “deemed” waiver regulation, 19 C.F.R. §
351.218(d)(2)(iii),211 the Commerce Department treated “the failure by a respondent
interested party to file a complete substantive response to a notice of initiation [of a
sunset review] ... as a waiver of participation in a sunset review before the
Department.” Under 19 C.F.R. § 351.218(e)(1)(ii), the Department generally makes
its determination of the adequacy of responses by a respondent party on a case-by-
case basis, but the Department will normally conclude that an adequate response is
provided where it receives complete substantive responses under the DOC regulation
prescribing the information to be filed.212 Where interested parties provide
“inadequate responses” to a notice of initiation of a sunset review, the statute
provides for so-called “expedited” sunset reviews. In such cases, DOC, within 120
days after the review is initiated, or ITC, within 150 days after initiation, “may issue,
without further investigation, a final determination based on facts available,” as
provided for in § 776 of the Tariff Act, 19 U.S.C. § 1766e.”213
In its panel request, Argentina maintained that § 751(c)(4) of the Tariff Act and
related regulations “operate in certain instances to preclude the Department from
conducting a sunset review and making a determination as to whether termination of
an anti-dumping duty measure would be likely to lead to continuation or recurrence
of dumping,” in violation of various articles of the WTO Antidumping Agreement.214
Argentina claimed that when a respondent party is deemed to have waived
participation, U.S. law requires the Department to find that termination of the order
would be likely to have this effect “without requiring the Department to conduct a
substantive review or to make a determination based on the substantive review.”215
Argentina argued that the application of expedited review procedures in the
sunset review at issue was inconsistent with the Agreement because one individually
210 (...continued)
may waive participation in the sunset review are: (1) a foreign manufacturer, producer or
exporter of the subject merchandise; (2) the U.S. importer of the subject merchandise; (3)
a trade or business association a majority of whose members are producers, exporters or
importers of such merchandise; and (4) the government of a country in which such
merchandise is produced or manufactured or from which such merchandise is exported. See
Tariff Act of 1930, § 771(9)(A), (B), 19 U.S.C. § 1677(9)(A), (B)(2000).
211 See Procedures for Conducting Five-year (“Sunset”) Reviews of Antidumping and
Countervaiilng Duty Orders, 54 Fed. Reg. 13516, 13521 (Mar. 20, 1998).
212 See 19 C.F.R. §§ 351.218(d)(3).
213 Tariff Act of 1930, § 751(c)(3)(B), 19 U.S.C, § 1675(c)(3)(B). Regarding statutory
authorities governing the use of “facts available, see supra note 78.
214 Request for the Establishment of a Panel by Argentina, United States — Sunset Reviews
of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina, at 2,
WT/DS268/20 (Apr. 4, 2003).
215 Id.
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investigated company (Siderca) was deemed to have waived its right to participate
in the review “despite its full cooperation” with the Commerce Department; that the
Department did not conduct a “review” as contemplated in Article 11.3 of the
Agreement; and that the Department failed to “determine” whether or not future
dumping was likely as required under Article 11.3.216 Among other arguments,
Argentina claimed that the Department’s sunset determination in the case was based
on a “virtually irrefutable presumption under US law as such” (i.e., on its face, rather
than as applied) that termination of the antidumping order would likely lead to more
dumping, given DOC’s consistent practice in such reviews, as based on U.S. law and
the Department’s Sunset Policy Bulletin.217
Regarding the ITC, Argentina alleged, among other things, that the
Commission had improperly used a lower standard than the “likely” standard in
assessing whether termination of the order was likely to lead to continuation or
recurrence of injury; that it failed both to conduct an objective injury examination
and to use “positive evidence” as the basis for its injury determination; and that the
Antidumping Agreement did not provide for the ITC’s use of “cumulative” injury
analysis in sunset reviews.218
The panel, in a report issued in July 2004, concluded that provisions of §
751(c)(4)(B) related to affirmative waivers and the related DOC regulation regarding
“deemed waivers” (19 U.S.C. § 351.218(d)(2)((iii) were inconsistent with Article
11.3 of the Antidumping Agreement.219 It also found that the regulation was
inconsistent with Article 6.1, which requires that parties be given notice of the
information required by authorities and ample opportunity to present the evidence
they consider relevant to an investigation, and with Article 6.2, which requires that
all parties to a proceeding have a full opportunity to defend their interests.220
Regarding the “irrefutable presumption” alleged by Argentina, the panel found that
the Sunset Policy Bulletin (SPB) was a “measure” that could be challenged in a WTO
dispute settlement proceeding,221 and that provisions of the SPB were inconsistent
with the Department’s obligation under Article 11.3 to determine the likelihood of
continuation or recurrence of dumping.222 The panel also found that, in making its
determinations in the sunset review at issue, DOC had acted inconsistently with
Articles 11.3 and 6.2 of the Agreement, but had not violated Article 6.1 or other
agreement obligations allowing the use of facts available in certain circumstances and
requiring public notice of antidumping investigations and explanation of
216 Id. at 3.
217 Id. at 3.
218 Id. at 3-4.
219 Panel Report, United States — Sunset Review of Anti-Dumping Measures on Oil Country
Tubular Goods from Argentina, ¶¶ 7.80-7.103, 8.1(a)(i)-(ii), WT/DS268/R (July 16, 2004).
220 Id. ¶¶ 7.107-7.128, 8.1(a)(iii).
221 Id. ¶ 7.136.
222 Id. ¶¶ 7.134-7.144, 7.152-7.173, 8.1(b).
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determinations.223 In addition, the panel upheld the U.S. legal standards for finding
a likelihood of the continuation or recurrence of injury and ITC’s affirmative
likelihood of injury determination in the case.224
The United States appealed the panel’s conclusions regarding the WTO-
inconsistency of U.S. law relating to affirmative and deemed waivers as well as the
panel’s conclusion that the SPB violated the Antidumping Agreement, including the
finding at that the SPB was a “measure” that could be challenged in a WTO dispute
settlement proceeding.225
Ruling in November 2004, the AB largely upheld the panel’s findings that §
751(c)(4)(B) and its related regulations were inconsistent with Articles 11.3, 6.1 and
6.2 of the Antidumping Agreement.226 While the AB also agreed that the SPB could
be challenged in a WTO dispute settlement proceeding, it reversed the panel on its
finding that a particular portion of the SPB was inconsistent with the Antidumping
Agreement on the ground that the panel had not made an “objective assessment” of
the issue, as required under the DSU.227 The reports were adopted on December 17,
2004.
The compliance deadline in the case, determined by arbitration, expired on
December 17, 2005.228 In a submission to the Arbitrator, the United States stated
that, in order to comply, it needed to amend its regulation regarding waivers and to
223 Id. ¶¶ 7.201-7.236, 7.239-7.245, 8.1(d).
224 Id. ¶ ¶ 7.178-7.193, 7.258-7.260, 7.268-7.312, 8.1(e).
225 Notification of an Appeal by the United States, United States — Sunset Review of Anti-
Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/5 (Aug. 31,
2004). The United States also appealed the panel’s finding that Argentina’s initial panel
request met the requirements of the Dispute Settlement Understanding.
226 Appellate Body Report, United States — Sunset Review of Anti-Dumping Measures on
Oil Country Tubular Goods from Argentina, WT/DS268/AB/R (Nov. 29, 2004). The AB
described the obligation in Article 11.3 as follows:
The plain meaning of the terms “review” and “determine” in Article 11.3
... compel an investigating authority in a sunset review to undertake an
examination, on the basis of positive evidence, of the likelihood of continuation
or recurrence of dumping and injury. In drawing conclusions from that
examination, the investigating authority must arrive at a reasoned determination
resting on a sufficient factual basis; it may not rely on assumptions or conjecture.
Id. ¶ 180.
227 Argentina had appealed panel findings regarding the U.S. injury standard used in sunset
reviews and the ITC actions in the review. See id. ¶¶ 61-93. The AB upheld the panel’s
conclusions on these issues.
228 Award of the Arbitrator, Arbitration under Article 21.3(c) of the Understanding on Rules
and Procedures Governing the Settlement of Disputes, United States — Sunset Review of
Anti-Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/12
(June 7, 2005).
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make a new determination of the likelihood of continuation or recurrence of dumping
in the sunset review at issue.229
In August 2005, DOC issued preliminary regulations amending 19 C.F.R. §
351.218(d)(2), regarding waivers by responding parties;230 final regulations were
issued on October 28, 2005.231 DOC also modified a portion of the regulations
involving participation in hearings in an expedited sunset review. After the final
regulations were issued, DOC issued a Section 129 determination in which it
continued to find that revocation of the order would be likely to led to continuation
or recurrence of dumping and thus maintained the duties at 1.36%.232
According to DOC, the three modifications made to § 351.218(d)(2) “eliminate
the possibility that the Department’s order-wide likelihood determinations would be
based on assumptions about likelihood of continuation or recurrence of dumping or
a countervailable subsidy due to interested parties’ waiver of participation in the
sunset reviews.”233 The Department stated that it “will make its order-wide
determinations on the basis of the facts and information available on the record of the
sunset review.”234
First, DOC amended paragraph (2)(i), under which a responding party may
choose not to participate in a sunset review by filing a Statement of Waiver within
30 days of initiation of the sunset review. DOC now requires that the filing include
a statement that the party “is likely to dump or benefit from a countervailable subsidy
(as the case may be) if the order is revoked or terminated.”235 Second, DOC removed
paragraph (d)(2)(ii), under which the responding party was “deemed” to have waived
participation in the sunset review when it failed to file a complete substantive
response to a notice of initiation.236 As a result, the Department “will no longer make
company-specific likelihood findings for companies that fail to file a statement of
waiver and fail to file a substantive response to the notice of initiation.”237 Third,
DOC amended subparagraphs dealing with waiver of participation by a foreign
government in a CVD sunset review, to remove a cross-reference to the eliminated
provision, and “to eliminate certain language that might suggest the possibility that
229 Id. at 2.
230 Procedures for Conducting Five-year (“Sunset”) Reviews of Antidumping and
Countervailing Duty Orders, 70 Fed. Reg. 47738 (Aug. 15, 2005)(proposed rule and request
for comments).
231 Procedures for Conducting Five-year (“Sunset”) Reviews of Antidumping and
Countervailing Duty Orders, 70 Fed. Reg. 62061 (Oct. 28, 2005)(final rule).
232 See U.S. Statements to the DSB, infra note 242; Section 129 Determination (A-357-810),
available at [http://www.insidetrade.com]; Antidumping and Countervailing Duty Orders
in Place as of December 30, 2005, by Country, at [http://info.usitc.gov/oinv/sunset.nsf].
233 70 Fed. Reg. at 62062.
234 Id.
235 19 C.F.R. § 351.218(d)(2)(ii), as amended, 70 Fed. Reg. at 62064.
236 70 Fed. Reg. at 62062.
237 Id.
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the Department’s sunset regulations would be based on assumptions about likelihood
of continuation or recurrence of a countervailable subsidy.”238
The Department rejected the suggestion of commenters on the preliminary
regulations that § 751(c)(4)(B) of the Tariff Act of 1930, having been found to be
WTO-inconsistent, needed to be amended or withdrawn in order to comply with the
WTO decision. The Department again stated that by modifying the waiver
regulations, it had “eliminated the possibility that its Department’s order-wide
likelihood determinations would be based on assumptions about likelihood of
continuation or recurrence of dumping or a countervailable subsidy due to interested
parties’ waiver of participation in the sunset reviews.”239 The Department continued:
Section 751(c)(4)(B) of the Act only mandates an affirmative company-specific
likelihood finding as a consequence of a party electing to waive its participation
in the sunset review. Thus, the modified regulatory waiver requirements result
in elimination of any assumption about likelihood because a party waiving
participation would have already indicated to the Department that it was likely
to dump or benefit from a countervailable subsidy if the order were revoked.240
Recent developments. The United States announced at the December 20,
2005, meeting of the DSB that it had implemented the WTO rulings and
recommendations in the case by issuing amended regulations and a redetermination
in the sunset review at issue. As noted above, DOC had issued a Section 129
determination in which it concluded that revocation of the antidumping duty order
was likely lead to continuation or recurrence of dumping and as a result the order
imposing antidumping duties of 1.36% was continued.241 Argentina stated at the
same DSB meeting that it did not view the United States as having complied242 and
in January 2006, the disputing parties entered into a procedural agreement addressing
Argentina’s possible request for a compliance panel and any subsequent appeal.243
It was agreed, inter alia, that Argentina would not request authorization to suspend
concessions or other obligations until any panel and appellate rulings adverse to the
United States were adopted by the DSB. Argentina filed a request for consultations
238 Id.
239 Id. at 62062-63 (emphasis added).
240 Id. at 63063 (emphasis in original).
241 Statements by the United States at the December 20th Meeting of the WTO Dispute
Settlement Body, Item 4, in U.S. Mission to the United Nations in Geneva, Press Release,
Dec. 21, 2005, at [http://www.us-mission.ch/Press2005/1221DSBmeeting.html].
242 See Argentina-United States Procedural Agreement, infra note 265, at 2.
243 Understanding between Argentina and the United States Regarding Procedures under
Articles 21 and 22 of the DSU, United States — Sunset Review of Anti-Dumping Measures
on Oil Country Tubular Goods from Argentina, WT/DS268/14 (Jan. 8, 2006).
CRS-53
with the United States in late January 2006244 and on March 17, 2006, the DSB
established a compliance panel at Argentina’s request.245
In its panel request, Argentina challenged the factual basis of the Section 129
determination, identified alleged procedural defects in the underlying proceeding,
claimed that the DOC’s failure to “implement” the Section 129 determination under
§ 129(b)(4) denied Argentinian respondents the opportunity to challenge the
determination in U.S. courts, claimed that the United States failure to repeal or
amend §§ 751(c)((4)(A)( and (B) of the Tariff Act of 1930 rendered the United States
out of compliance in the case, and faulted new 19 C.F.R. § 351.218(d)(2) for not
taking into account the “statutory consequences for parties who ‘elect not to
participate in a review’ ... but who also do not file a Statement of Waiver,” (i.e., that
in such case the United States would automatically find that removing the order
would likely lead to continued or recurring dumping).246
In a November 30, 2006, report, the compliance panel found that the United
States had not acted inconsistently with the Antidumping Agreement in developing
a new factual basis for its Section 129 Determination or in certain other procedural
aspects of the sunset review. It also determined, however, that U.S. statutory and
regulatory waiver provisions remained inconsistent with the Antidumping
Agreement, that DOC acted inconsistently with the Agreement in that its
determination that dumping was likely to continue or recur lacked a sufficient factual
basis with regard to its analysis of likely past dumping and volume, and that other
U.S. procedural actions did not meet the requirements of the Agreement.247 The
United States has appealed the panel ruling.248
Antidumping Measures on Oil Country Tubular Goods (OCTG) from
Mexico (DS282). In 2003, Mexico challenged DOC and ITC actions in a sunset
review of an antidumping duty order on oil country tubular goods (OCTG) from that
country, as well as U.S. laws, policies, and regulations involving such reviews.249
244 Request for Consultations, Recourse to Article 21.5 of the DSU by Argentina, United
States — Sunset Review of Anti-Dumping Measures on Oil Country Tubular Goods from
Argentina, WT/DS268/15 (Jan. 30, 2006).
245 WTO News, Dispute Settlement Body, Mar. 17, 2006, at [http://www.wto.org/english/
news_e/news06_e/dsb_17mar06_e.htm].
246 Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by
Argentina, United States — Sunset Review of Anti-Dumping Measures on Oil Country
Tubular Goods from Argentina, WT/DS268/16 (Mar. 7, 2006).
247 Report of the Panel, Recourse to Article 21.5 of the DSU by Argentina, United States —
Sunset Review of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina,
WT/DS268/RW (Nov. 30, 2006).
248 Notification of an Appeal by the United States, Recourse to Article 21.5 of the DSU by
Argentina, United States — Sunset Review of Anti-Dumping Measures on Oil Country
Tubular Goods from Argentina, WT/DS268/19 (Jan. 16, 2007).
249 Request for the Establishment of a Panel by Mexico, United States — Anti-Dumping
Measures on Oil Country Tubular Goods (OCTG) from Mexico, WT/DS282/2 (Aug. 8,
2003).
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The panel generally rejected Mexico’s claims, but it held that the DOC had made its
determination as to the likelihood of continued or recurred dumping entirely on the
basis of decline in import volumes and did not consider other possibly relevant
evidence.250 Both Mexico and the United States appealed, with the United States
focusing its appeal on the panel’s finding that the Department’s Sunset Policy
Bulletin, which lays out procedures for the conduct of sunset reviews, was
inconsistent with the WTO Antidumping Agreement.251 The Appellate Body, on
November 2, 2005, upheld the panel finding that the ITC had acted consistently with
the Antidumping Agreement but reversed the panel on its adverse finding regarding
the Sunset Policy Bulletin.252 The panel and AB reports were adopted on November
28, 2005.253
Because the panel’s adverse findings regarding the DOC’s action were adopted
by the WTO, administrative action is needed to comply with this portion of the WTO
decision. In February 2006, the United States and Mexico agreed on a compliance
deadline of May 28, 2006.254
DOC initiated the second sunset review of the AD order on June 1, 2006,255 and
on June 9, issued a issued a Section 129 determination in which it determined that
there was likelihood of continuation or recurrence of dumping had the AD order on
OCTG from Mexico been revoked in 2000, that is, at the end of the original sunset
review period and thus affirmed its basis for continuing the order.256 The parties
entered into a procedural agreement regarding the WTO dispute in July 2006257 and
the following month Mexico requested consultations regarding U.S. compliance
250 Panel Report, United States — Anti-Dumping Measures on Oil Country Tubular Goods
(OCTG) from Mexico, WT/DS282/R (June 20, 2005).
251 Notification of an Other Appeal by the United States, United States — Anti-Dumping
Measures on Oil Country Tubular Goods (OCTG) from Mexico, WT/DS282/7 (Aug. 19,
2005); regarding the Sunset Policy Bulletin, see supra note 230.
252 Appellate Body Report, United States — Anti-Dumping Measures on Oil Country
Tubular Goods (OCTG) from Mexico, WT/DS282/AB/R (Nov. 2, 2005).
253 Action by the Dispute Settlement Body, United States — Anti-Dumping Measures on Oil
Country Tubular Goods (OCTG) from Mexico, WT/DS282/10 (Dec. 2, 2005).
254 Agreement under Article 21.3(b) of the DSU, United States — Anti-Dumping Measures
on Oil Country Tubular goods (OCTG) from Mexico, WT/DS282/11 (Feb. 17, 2006).
255 Initiation of Five-Year (“Sunset”) Reviews, 71 Fed. Reg. 31153 (June 1, 2006).
256 Section 129 Determination: Final Results of Sunset Review , Oil Country Tubular Goods
f r o m M e x i c o , a t [ h t t p : / / i a . i t a . d o c . g o v / d o w n l o a d / s e c t i o n 1 2 9 /
mexico-octg-129-final-decision-memo.pdf].
257 Understanding between Mexico and the United States Regarding Procedures under
Articles 21 and 22 of the DSU, United States — Anti-Dumping Measures on Oil Country
Tubular Goods (OCTG) from Mexico, WT/DS282/12 (July 14, 2006).
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under Article 21.5 of the DSU.258 On December 26, 2006, DOC issued a affirmative
preliminary determination in the pending sunset review.259
Laws, Regulations and Methodology for Calculating Dumping
Margins (“Zeroing”)(DS294). In June 2003, the EC requested consultations with
the United States over its use of “zeroing” in antidumping investigations and
administrative reviews, arguing the practice violated the Agreement on Antidumping
and the GATT and citing 15 original investigations and 16 administrative reviews in
which it was used.260 A panel was established at the EC’s request in March 2004.261
Zeroing is a practice used by the Commerce Department in the calculation of
dumping margins under which, in comparing export prices to normal value, it assigns
a zero value to non-dumped sales. The Department is authorized under U.S. law to
make three types of price comparisons in determining a dumping margin, each of
which is recognized in Article 2.4.2 of the Antidumping Agreement: (1) weighted
average of normal values to weighted average of export prices (W-W); (2) normal
values of individual transactions to export prices of individual transactions (T-T); and
(3) under certain defined circumstances, weighted average of normal values to export
prices of individual transactions (W-T).262 The United States ordinarily uses W-W
comparisons as was the case in the antidumping proceedings cited in the EC’s
complaint. The practice of zeroing is said to inflate dumping margins by not
allowing dumped sales to be weighted against non-dumped sales, while others argue
that the practice combats masked dumping and that actual dumping may be remedied
notwithstanding that exporters may not sell all products at dumped prices in a
particular national market. Federal laws do not expressly address the use of the
practice and U.S. courts have ruled that DOC’s interpretation of current antidumping
statute to allow but not require the practice is a reasonable one.263
The WTO panel, in a report issued October 31, 2005, found that the
methodology, as applied in the specific original investigations cited in the EC’s
complaint, is inconsistent with Article 2.4.2 of the Antidumping Agreement, which
258 Request for Consultations, Recourse to Article 21.5 of the DSU by Mexico, United States
— Anti-Dumping Measures on Oil Country Tubular Goods (OCTG) from Mexico,
WT/DS282/13 (Aug. 24, 2006).
259 Oil Country Tubular Goods from Mexico; Preliminary Results of the Sunset Review of
Antidumping Duty Order, 71 Fed. Reg. 77372 (Dec. 26, 2006).
260 Request for Consultations by the European Communities, United States — Laws,
Regulations and Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/1
(June 19, 2003) and WT/DS294/1/Add.1 (Sept. 15, 2003).
261 Request for the Establishment of a Panel by the European Communities, United States
— Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”),
WT/DS294/7 (Feb. 6, 2004) and WT/DS294/7/Rev.1 (Feb. 19, 2004).
262 Tariff Act of 1930, § 777A(d), 19 U.S.C. § 1677f-1(d). The three modes of price
comparison are recognized in Article 2.4.2 of the Antidumping Agreement.
263 Corus Staal BV v. Department of Commerce, 395 F.3d 1343, 1347 (Fed. Cir. 2005), cert
denied, 126 S.Ct. 1023 (2006); Timken Co. v. United States, 354 F.3d 1334, 1341-42 (Fed.
Cir.), cert denied sub nom., Koyo Seiko Co. v. United States, 543 U.S. 976 (2004).
CRS-56
makes the comparison methodologies recognized in the Article subject to the “fair
comparison” requirements of Article 2.4.264 The panel also found that the
methodology, as it relates to individual investigations, is a norm that could be
challenged in a WTO dispute even though it is not in written form, and that the
practice as a whole was WTO-inconsistent
The panel rejected the EC’s claims regarding §§ 771(35)(A) and (B), 731, and
777(A)(d) of the Tariff Act of 1930, concluding that they did not address the issue
of zeroing. These sections, respectively, define the terms “dumping margin” and
“weighted average dumping margin,” establish the basic authority for imposing
antidumping duties, and authorize the three price comparison methodologies
discussed above.
The panel also upheld the United States on its use of zeroing in the
administrative reviews cited by the EC as well as in the use of zeroing as such in
administrative reviews, new shipper reviews, changed circumstances reviews, and
sunset reviews. One dissenting panelist, however, would have struck down the use
of the practice in proceedings other than original investigations. The report was
appealed by the United States and the EC.
On April 18, 2006, the Appellate Body found, although on different grounds
from the panel, that the zeroing methodology could be challenged “as such” as it
relates to original investigations and upheld the panel’s finding that the practice was
inconsistent with Article 2.4.2 of the Antidumping Agreement.265 The AB reversed
the panel, however, on its finding that the practice did not violate WTO obligations
when applied in the administrative reviews cited by the EC. The AB found instead
that the use of zeroing in these reviews violated Article 9.3 of the Antidumping
Agreement and Article VI:2 of the GATT, since the practice resulted in antidumping
duties that exceeded the exporters’ or producers’ dumping margins.
Article 9.3 provides that the “amount of the anti-dumping duty” imposed by a
WTO Member “shall not exceed the margin of dumping as established under Article
2” of the Agreement. Article VI:2 of the GATT provides that a WTO Member may
impose an antidumping duty on a dumped product “no greater in amount than the
margin of dumping in respect of such product.” Regarding use of the practice in the
cited instances, the Appellate Body stated that
... in the administrative reviews at issue, the USDOC assessed the anti-dumping
duties according to a methodology in which, for each individual importer,
comparisons were carried out between the export price of each individual
transaction made by the importer and a contemporaneous average normal value.
The results of these multiple comparisons were then aggregated to calculate the
anti-dumping duties owed by each individual importer. If, for a given individual
transaction, the export price exceeded the contemporaneous average normal
value, the USDOC, at the aggregation stage, disregarded the result of this
264 Panel Report, United States — Laws, Regulations and Methodology for Calculating
Dumping Margins (“Zeroing”), WT/DS294/R (Oct. 31, 2005).
265 Appellate Body Report, United States — Laws, Regulations and Methodology for
Calculating Dumping Margins (“Zeroing”), WT/DS294/AB/R (Apr. 18, 2006).
CRS-57
individual comparison. Because results of this type were systematically
disregarded, the methodology applied by the USDOC in the administrative
reviews at issue resulted in amounts of assessed anti-dumping duties that
exceeded the foreign producers’ or exporters’ margins of dumping with which
the anti-dumping duties had to be compared under Article 9.3 of the
Antidumping Agreement and Article VI:2 of the GATT 1994. Accordingly, the
zeroing methodology, as applied by the USDOC in the administrative reviews at
issue, is inconsistent with Article 9.3 of the Anti-Dumping Agreement and
Article VI:2 of the GATT 1994.266
The AB report, which also contained other findings, and the modified panel
report were adopted on May 9, 2006. While the United States vigorously disputed
the reports,267 it stated at a subsequent DSB meeting that it intended to comply.268
The disputing parties later agreed on an implementation deadline of April 9, 2007.269
Shortly before the AB report was issued, the DOC had announced in the Federal
Register that in response to the WTO panel report it would abandon the use of
zeroing in W-W comparisons in antidumping investigations and was seeking
comments on alternative approaches that might be appropriate in future
investigations.270 The Department noted that it had not appealed the panel’s finding
that, with respect to the specific antidumping investigations challenged by the EC,
the use of zeroing in W-W comparisons was inconsistent with Article 2.4.2 of the
Antidumping Agreement.
On December 26, 2006, the Department, pursuant to § 123 of the URAA,
published a Federal Register notice stating that it was modifying its methodology as
announced earlier, stating that the modification would be used in implementing the
findings of the WTO panel pursuant to § 129 of the URAA with regard to the specific
antidumping investigations challenged by the EC in the dispute and, moreover, that
it would apply the modification in all current and future antidumping investigation
as of the effective date, which at the time was planned for January 16, 2007.271 The
Department later extended the date to January 23, 2007, and more recently to
266 Id. ¶ 133.
267 Communication from the United States, United States — Laws, Regulations and
Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/16 (May 17,
2006); Communication from the United States, United States — Laws, Regulations and
Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/18 (June 19,
2006).
268 Dispute Settlement Body, Minutes of Meeting, May 30, 2006, at [1], WT/DSB/M/213
(June 21, 2006).
269 Agreement under Article 21.3(b) of the DSU, United States — Laws, Regulations and
Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/19 (August 1,
2006).
270 Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin
During an Antidumping Duty Investigation, 71 Fed. Reg. 11189 (Mar. 6, 2006).
271 Antidumping Proceedings: Calculation of the Weighted-Average Dumping Margin
During an Antidumping Duty Investigation; Final Modification, 71 Fed. Reg. 77722 (Dec.
27, 2006).
CRS-58
February 22, 2007, noting each time that it was acting “[a]fter further consultations
with Congress and in order to afford adequate time for review.”272
272 Antidumping Proceedings: Calculation of the Weighted-Average Dumping Margin
During an Antidumping Duty Investigation; Change in Effective Date of Final Modification,
72 Fed. Reg. 1704 (Jan. 16, 2007); Antidumping Proceedings: Calculation of the Weighted-
Average Dumping Margin During an Antidumping Duty Investigation; Change in Effective
Date of Final Modification (proposed Federal Register notice, Jan. 22, 2007), at
[http://ia.ita.doc.gov/download/zeroing/zeroing-prepub-2nd-ext-fr.pdf].
Representative Rangel, Chairman of the House Ways and Means Committee, and
Senator Baucus, Chairman of the Senate Finance Committee, wrote to the Secretary of
Commerce and the USTR on January 19, 2007, requesting that DOC postpone its decision
whether to modify the practice to March 31, 2007, to give Committee members additional
time to consider the issue. The letter stated that the 60-day consultation period, which in this
case ended in mid-January, was insufficient given the limited actual time for consultation
in the interim, the complexity of the matter, and the controversial nature of the ruling. Text
of letter available at [http://finance.senate.gov/ press/Bpress/2007press/prb012207.pdf]. In
mid-December 2006, eleven Senators had signed a letter to the same Administration
recipients in which they took issue with these and other WTO decisions on zeroing and
expressed their disagreement with any modification of the U.S. practice. Text of December
2006 letter and of U.S.T.R. memo to Congress under § 123 regarding the modification
available at Inside U.S. Trade, December 15, 2006, at 19-21.