WTO Dispute Settlement: Status of
U.S. Compliance in Pending Cases
Jeanne J. Grimmett
Legislative Attorney
January 29, 2010
Congressional Research Service
7-5700
www.crs.gov
RL32014
CRS Report for Congress
P
repared for Members and Committees 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, there are currently 10 cases in which rulings have not yet been
implemented or the United States has taken action and the dispute has not been fully resolved.
Under WTO dispute settlement rules, a WTO Member will generally be given a reasonable period
of time to comply with an adverse WTO decision. While the Member is expected to remove the
offending measure by the end of this period, compensation and temporary retaliation are available
if the Member has not acted or taken sufficient action by this time. Either disputing party may
request a compliance panel if there is disagreement over whether a Member has complied.
The United States has not yet settled long-standing disputes with the European Union (EU)
regarding a music copyright statute and a statutory trademark provision affecting property
confiscated by Cuba. H.R. 1530, H.R. 1531, H.R. 2272, and S. 1189 would repeal the trademark
statute, while H.R. 1103 and S. 1234 would amend the provision. Also unresolved is a dispute
with Japan, initiated in 1999, over a provision of U.S. antidumping law. The Continued Dumping
and Subsidy Offset Act of 2000 (CDSOA), which was held WTO-inconsistent in January 2003
and repealed, effective October 2005, by P.L. 109-171, remains the target of sanctions by
complainants EU and Japan due to continued payments to U.S firms under the CDSOA program.
In addition, the United States and Antigua have been consulting on the resolution of outstanding
issues in Antigua’s challenge of U.S. online gambling restrictions.
P.L. 109-171 also repealed a WTO-inconsistent cotton program at issue in Brazil’s 2002
complaint over U.S. cotton subsidies, but other programs were also successfully challenged and
the United States was later found not to have fully complied. The United States has since made
statutory and administrative changes affecting the export credit guarantee programs faulted in the
case. At the same time, Brazil has continued to pursue sanctions and on November 19, 2009, the
WTO authorized Brazil to suspend tariff concessions on U.S. goods in an amount of $294.7
million a year, a figure that may vary annually based on actual U.S. export subsidization. In
addition, if a variable threshold based on U.S. trade in goods with Brazil is exceeded, Brazil may
suspend WTO obligations involving U.S. intellectual property and services. Brazil has published
a list of U.S. goods potentially subject to increased tariffs, but will not announce until February
2010 the final list of products and the total value of sanctions that would be imposed. On
December 21, 2009, Brazil announced that, based on 2008 data provided by the United States,
it is entitled to annual retaliation of $829.3 million.
Four pending cases involve the U.S. practice of “zeroing,” under which the Department of
Commerce (DOC), in calculating dumping margins, disregards non-dumped sales. The practice
was successfully challenged by the EU in two cases (EU I and II), Japan, and Mexico. In response
to EU I, DOC discontinued the use of zeroing in the price comparison employed most often in
original antidumping investigations and recalculated dumping margins in the cases cited by the
EU. The United States has yet to fully comply in EU I and in the challenges by Japan and Mexico
to the extent that the WTO decisions affect the use of zeroing in other phases of U.S. antidumping
proceedings. Compliance proceedings in EU I and Japan’s challenge, completed in 2009, found
against the United States, permitting complainants to pursue sanctions requests. Also, Mexico
initiated compliance proceedings in August 2009, and a compliance deadline of December 19,
2009, was established in EU II. The United States stated that it will recalculate dumping margins
in four original antidumping investigations cited in EU II and that it is discussing outstanding
issues with interested parties. With other facets of EU II remaining unaddressed, however, the EU
has indicated that it may request a compliance panel in the proceeding.
Congressional Research Service
WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases
Contents
WTO Dispute Settlement Procedures .......................................................................................... 1
Uruguay Round Agreements Act (URAA): Statutory Requirements for Implementing
WTO Decisions ....................................................................................................................... 4
Section 102: Domestic Legal Effect of WTO Decisions ......................................................... 4
Federal Law.................................................................................................................... 4
State Law........................................................................................................................ 5
Preclusion of Private Remedies ....................................................................................... 6
Domestic Implementation of WTO Decisions Involving Administrative Action ..................... 7
Section 123: Regulatory Action Generally ....................................................................... 7
Section 129: Agency Determinations in Trade Remedy Proceedings ................................ 8
Judicial Responses .............................................................................................................. 12
Pending Cases Involving Legislative Action .............................................................................. 14
Section 110(5)(B) of the Copyright Act (Music Copyrights)(DS160) ................................... 15
Recent Developments.................................................................................................... 16
Section 211 of the Omnibus Appropriations Act of 1998 (Trademark Exclusion
Involving Property Confiscated by Cuba)(DS176)............................................................ 16
Recent Developments.................................................................................................... 17
Antidumping Measures on Hot-Rolled Steel Products from Japan (DS184) ......................... 18
Recent Developments.................................................................................................... 20
Continued Dumping and Subsidy Offset Act (DS217/DS234).............................................. 21
Recent Developments.................................................................................................... 25
Subsidies on Upland Cotton (DS267) .................................................................................. 25
Recent Developments.................................................................................................... 37
Measures Affecting Cross-Border Supply of Gambling and Betting Services (DS285)......... 39
Recent Developments.................................................................................................... 47
Pending Cases Involving Administrative Action ........................................................................ 48
Use of “Zeroing” in Antidumping Proceedings: Background ............................................... 50
Challenges to the U.S. Use of Zeroing in the WTO.............................................................. 54
Laws, Regulations, and Methodology for Calculating Dumping Margins (“Zeroing”)
(DS294) ........................................................................................................................... 56
Recent Developments.................................................................................................... 64
Measures Relating to Zeroing and Sunset Reviews (DS322)................................................ 65
Recent Developments.................................................................................................... 69
Final Anti-Dumping Measures on Stainless Steel from Mexico (DS344).............................. 70
Recent Developments.................................................................................................... 72
Continued Existence and Application of Zeroing Methodology (DS350) ............................. 72
Recent Developments.................................................................................................... 74
Contacts
Author Contact Information ...................................................................................................... 75
Congressional Research Service
WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases
his 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
T United States. Although the United States has complied with adverse rulings in many past
WTO disputes,1 there are 10 pending cases in which the United States has not fully implemented
adopted WTO panel and Appellate Body reports or the United States has taken action, including
the enactment of legislation, but the prevailing parties in the dispute continue to question whether
the United States has fully complied and, in one case, continue to impose WTO-authorized trade
sanctions. In all of these disputes, original or subsequently extended compliance deadlines have
expired. 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
discussion of major issues and the U.S. compliance history in each. Each entry contains a section
titled “Recent Developments,” which discusses the latest activity in the case.
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 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 (e.g., expedited timelines for subsidy disputes in the Agreement on Subsidies and
Countervailing Measures), the former will prevail. A list of these agreements and rules is
contained in Appendix 2 of the DSU. The Office of the United States Trade Representative
(USTR) represents the United States in the WTO and in WTO disputes.
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
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 cases in which the United States has
implemented adverse reports to the satisfaction of the complaining party and the dispute has been fully settled, nor does
it discuss the compliance history of other WTO Members that have been found to be in violation of their WTO
obligations. For further information on WTO disputes, see Office of the U.S. Trade Representative, “WTO Dispute
Settlement,” at http://www.ustr.gov/trade-topics/enforcement/dispute-settlement-proceedings/wto-dispute-settlement;
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/sites/default/files/uploads/reports/2009/asset_upload_file86_15410.pdf; 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 further information on WTO dispute settlement procedures, see “Dispute settlement,” at http://www.wto.org/
english/tratop_e/dispu_e/dispu_e.htm, and CRS Report RS20088, Dispute Settlement in the World Trade Organization
(WTO): An Overview, by Jeanne J. Grimmett.
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WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases
countermeasures are decisions that are subject to a “reverse consensus” rule under which the DSB
agrees to these actions unless all DSB Members object. In effect, these decisions are virtually
automatic. Article 23 of the DSU requires a complaining Member to act in accordance with the
DSU when it initiates a dispute, including making any internal determination that another
Member has violated a WTO obligation consistent with the WTO decision in the case and
following DSU procedures to set a deadline by which the defending Member must comply,
determining the level of sanctions for non-compliance, and obtaining authorization from the DSB
to impose any such sanctions.
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. If the Member
proposes a compliance period and it is not approved by the DSB, the disputing parties may
negotiate a deadline themselves. If this fails, the length of the period will be arbitrated. A WTO
Member found to have violated WTO obligations is expected to comply by withdrawing the
offending measure by the end of the established compliance period, 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
defending Member has not implemented the WTO rulings and recommendations by the end of the
established compliance period, it may request the other Member to negotiate a compensation
agreement or it may ask the DSB for authorization to suspend WTO concessions, usually to
impose higher tariffs on selected imports from the defending country. The Member may choose
the latter option without first requesting compensation. In some cases, the prevailing party may
agree to extend the original compliance deadline instead of immediately seeking a remedy.
If a prevailing Member does choose to suspend concessions, it is expected to do so in the same
sector in which the WTO violation was found, but if the Member finds that this is not “practicable
or effective,” it may seek to suspend concessions in other sectors in the same agreement. If,
however, the Member finds that this alternative would also be impracticable or ineffective and
that “the circumstances are serious enough,” it may seek to suspend obligations under another
WTO agreement, referred to as “cross-retaliation.” A prevailing Member may seek to cross-
retaliate if, for example, in a dispute involving trade in goods, the Member does not import a
sufficient amount of goods from the defending Member to remedy the trade injury involved or the
Member believes that placing tariff surcharges on goods imported from the defending Member
would be unreasonably costly for the prevailing Member’s economy.
Under the DSU, the DSB is to authorize the retaliation request under 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 cross-retaliation rules have been
followed. The arbitration, which may be carried out by the original panel if members are
available, or by an arbitrator appointed by the WTO Director General, is ordinarily to be
completed within 60 days after the compliance period expires. The DSB then meets to authorize
the retaliation request, subject to any modification by the arbitrator.
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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
is expected to issue its report within 90 days; the report may then be appealed. In practice,
compliance panels may require a considerably longer period of time to complete their work where
a complicated case is involved. For example, in the European Union’s challenge to the U.S. use of
“zeroing” in antidumping proceedings (DS294), the EU made its compliance panel request in
September 2007, panelists were appointed in November 2007, and the panel report was not
publicly circulated until December 2008.
Because 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. Disputing Members have often filled the gap
by entering into ad hoc bilateral procedural agreements setting out timelines for any requested
compliance-related proceedings and reserving Members’ rights in the unfolding of these
proceedings.3 Such agreements have been entered into in many of the cases discussed below.
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. As evident from some
of the cases discussed in this report, WTO Members may manage disputes in a variety of ways at
the compliance phase, short of imposing sanctions.
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 issue of removing such measures arose in connection with the continued levying of
increased tariffs on imports from the European Union (EC) by the United States and Canada in response to the EC’s
failure to comply with WTO decisions faulting European Union import restrictions on beef produced with growth
hormones. The EC initiated WTO dispute settlement proceedings against the United States and Canada in 2004. The
Appellate Body, reversing the panel on various points, recommended that the disputing parties request an Article 21.5
compliance panel proceeding in order to resolve their differences as to whether the EC is in compliance in the
underlying beef hormone cases (DS26/DS48) and whether the U.S. and Canadian countermeasures thus have a legal
basis. Appellate Body Report, United States—Continued Suspension of Obligations in the EC-Hormones Dispute,
WT/DS320/AB/R (Oct. 16, 2008); Appellate Body Report, Canada—Continued Suspension of Obligations in the EC-
Hormones Dispute, WT/DS321/AB/R (Oct. 16, 2008). The EC requested consultations under Article 21.5 in December
2008, but the proceeding involving the United States has since been suspended as part of a bilateral agreement intended
to resolve the beef hormone dispute. Press Release, Office of the USTR, USTR Announces Agreement with European
Union in Beef Hormones Dispute (updated June 22, 2009), at http://www.ustr.gov/about-us/press-office/press-releases/
2009/may/ustr-announces-agreement-european-union-beef-hormones-; European Commission, Memorandum on Beef
Hormones dispute signed with the United States (May 14, 2009), at http://ec.europa.eu/trade/issues/respectrules/
dispute/memo140509_en.htm.
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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 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: 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
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 John Garcia; 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).
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and the WTO agreements “can be enacted in subsequent legislation”8 Congress has traditionally
treated potential conflicts with prior GATT agreements 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 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
8 H.Rept. 103-826(I), at 25; see also S.Rept. 103-412, at 13.
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 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). In the challenge by Antigua and Barbuda to both
federal and state laws affecting the cross-border supply of gambling and betting services (DS285), 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 195-237 for further discussion of this case.
12 For further discussion, see Uruguay Round SAA, supra note 7, at 676.
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.
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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.”
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:
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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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
Domestic 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: Regulatory Action Generally
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 United States Trade Representative 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.19 Section 123(g) does not apply to any
regulation or practice of the U.S. International Trade Commission.
The statute requires the USTR to consult with “the appropriate congressional committees”
regarding the proposed contents of the final rule or other modification. These committees include
the House Ways and Means Committee, the Senate Finance Committee, and any other
congressional committees that have jurisdiction over matter at hand.20 In addition, 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
17 H.Rept. 103-826(I), at 26.
18 Uruguay Round SAA, supra note 7, at 676.
19 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).
20 URAA, § 121(3), 19 U.S.C. § 3531(3).
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interest. The House Ways and Means Committee and the Senate Finance Committee may vote to
indicate the disagreement of the committee with the proposed action during the 60-day period.
Any such vote is not binding on the agency or department involved.21
Section 129: Agency Determinations in Trade Remedy Proceedings
Section 129 of the URAA, 19 U.S.C. § 3538, sets forth authorities and procedures under which
the Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) may
issue new subsidy, dumping and injury determinations, referred to as Section 129 Determinations,
in implementation of adverse WTO decisions involving U.S. safeguards, antidumping, and
countervailing duty proceedings. Section 129 does not authorize the Commerce Department or
the ITC to issue new determinations on their own motion, but instead grants the 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, 19 U.S.C. §§ 1671-1677n, the Commerce Department
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 a domestic industry. Under U.S. safeguards law, set forth in Title II of the Trade
Act of 1974, 19 U.S.C. §§ 2251-2254, the ITC conducts investigations to determine if 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 (e.g., a tariff surcharge or import quota) to the President, who ultimately determines
whether or not to take action.
Implemented Section 129 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).22 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 Two 110th Congress bills would have placed restrictions on the use of section 123 authorities. S. 364 (Rockefeller)
would have amended section 123 to provide that any regulatory modification or final rule proposed under the section
could only enter into force if approved by joint resolution enacted into public law. The bill would also have rescinded
certain § 123 regulatory modifications that had already taken effect. S. 1919 (Baucus) would have established a WTO
Dispute Settlement Review Commission to evaluate WTO decisions under statutory criteria and prohibited a domestic
regulatory modification under section 123 from taking effect unless and until Congress received the Commission’s
report on the WTO decision involved. No action was taken on either of these bills. See also text at infra note 294.
22 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.
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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.23
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.24 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 the period of
time that may be needed to implementing the WTO decision.25
If a majority of the ITC 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.26 The
new determination must be issued within 120 days of the USTR’s request.27 The 120-day limit is
intended to allow the USTR to propose a reasonable period of time for implementation to the
WTO Dispute Settlement Body once the DSB adopts a WTO panel and any Appellate Body
report in a case.28
In the event the ITC issues a new negative injury or threat of injury determination, the imports
subject to antidumping or countervailing duty order at issue, or a least a portion of them, would
no longer be considered to have caused a harmful effect, even though they may in fact be dumped
or subsidized. The Tariff Act requires that the imposition of antidumping or countervailing duties
on dumped or subsidized imports be supported by an affirmative injury determination and thus,
absent such a determination, the antidumping or countervailing duty order would need to be
revoked in whole or in part. Section 129(a)(6) authorizes the USTR to direct the Commerce
Department to take this action.29 The USTR must consult with the House Ways and Means and
Senate Finance Committees before the ITC’s new determination is implemented.30
Where a safeguard proceeding is involved, section 129 authorizes the President, after receiving a
new ITC determination, to reduce, modify, or terminate the safeguard notwithstanding other
23 URAA, § 129(a)(1), 19 U.S.C. § 3538(a)(1).
24 URAA, § 129(a)(2), 19 U.S.C. § 3538(a)(2).
25 Uruguay Round SAA, supra note 7, at 1023.
26 URAA, § 129(a)(3),(4), 19 U.S.C. § 3538(a)(3),(4).
27 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.
28 Id.
29 URAA, § 129(a)(6), 19 U.S.C. § 3538(a)(6).
30 URAA, § 129(a)(5),(6), 19 U.S.C. § 3538(a)(5),(6).
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statutory requirements governing changes in existing safeguard measures.31 The President must
consult with the House Ways and Means Committee and Senate Finance Committee before acting
under this authority. The USTR is required to publish a notice of the implementation of any ITC
determination in the Federal Register.32
Department of Commerce
Section 129 also sets out a procedure for new Department of Commerce determinations in
antidumping and countervailing duty proceedings, though without the requirement for an initial
agency advisory report regarding the scope of the agency’s statutory discretion. Instead, promptly
after the issuance of a WTO panel or Appellate Body report finding that a DOC determination in
an antidumping or countervailing duty proceeds is inconsistent with U.S. obligations under the
WTO Antidumping Agreement or the Agreement on Subsidies and Countervailing Measures, the
USTR is to consult with the Commerce Department and the House Ways and Means and Senate
Finance Committees, and may request the Department, in writing, to issue a determination in
connection with the underlying antidumping or countervailing duty proceeding that would render
its action “not inconsistent with” the panel or appellate findings.33 The Commerce Department
must issue its Section 129 Determination within 180 days of the request.34 A new determination
may, for example, reduce the dumping margin or net subsidy and thus result in a reduction of
existing duties. After consulting with DOC and the above-named congressional committees,
USTR may direct DOC to implement its determination in whole or in part.35
Prospective Implementation of Section 129 Determinations
Section 129(c)(1) of the URAA provides that Section 129 Determinations, whether issued by the
ITC or the Commerce Department, apply prospectively, that is, the full or partial revocation of the
antidumping or countervailing duty order or the implementation of the DOC determination, as the
case may be, applies 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 or implement the determination.36 Unliquidated
entries are those for which the U.S. Customs and Border Protection has not ascertained a final
31 URAA, § 129(a)(7), 19 U.S.C. § 2254(b)(3).
32 URAA, § 129(c)(2)(B), 19 U.S.C. § 3538(c)(2)(B).
33 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.
34 URAA, § 129(b)(2), 19 U.S.C. § 3538(b)(2).
35 URAA, § 129(b)(3),(4), 19 U.S.C. § 3538(b)(3),(4).
36 URAA, § 129(c)(1), 19 U.S.C. § 3538(c)(1). This provision has been held to be unambiguous in its prospective
effect. E.g., Corus Staal BV, v. United States, 593 F.Supp.2d 1373, 1382-83 (Ct. Int’l Trade 2008).
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rate and amount of duty.37 Notices of the implementation of Section 129 Determinations must be
published in the Federal Register.
The Uruguay Round SAA explains the operation of § 129(c)(1) 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.38
Canada unsuccessfully challenged § 129(c)(1) in a WTO dispute settlement proceeding in 2001
on the ground that the provision violated the WTO Dispute Settlement Understanding and various
WTO antidumping and countervailing duty obligations. Under the retrospective U.S. antidumping
and countervailing duty system, DOC ordinarily makes a final assessment of the duties owed on
dumped or subsidized goods in an administrative review conducted after the goods are imported.
The review covers goods that enter the United States during a specified prior 12-month period.
Until this final duty assessment is made for particular goods, importers must deposit estimated
duties with U.S. Customs and Border Protection (CBP) on entry.39 Canada argued that, where a
DOC or ITC determination in an antidumping or countervailing duty proceeding is found to
violate a WTO obligation, § 129(c)(1) effectively prohibits the United States from fully
complying with the WTO decision by preventing it from refunding estimated duties deposited
with CBP before the date that the Section 129 Determination is implemented. In other words,
because the duty deposits supported by the challenged determination would no longer have a
WTO-consistent basis, Canada argued that they must be returned.40
In response to Canada’s claim, 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. The United States further argued
that the statute does not mandate any particular treatment of these prior unliquidated entries and
that the United States has other legal options for dealing with them, 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
37 U.S. Customs and Border Protection, Importing into the United States; A Guide for Commercial Importers 105-106
(2002 ed.), at http://www.cbp.gov/nafta/cgov/pdf/iius.pdf.
38 Uruguay Round SAA, supra note 7, at 1026. See also H.Rept. 103-826(I), at 39; S.Rept. 103-412, at 27.
39 Trade Act of 1974, § 751(a), 19 U.S.C. §1675(a), 19 C.F.R, § 351.212(a), 351.213. The rate determined in the
administrative review is also the rate at which estimated duties on imports entered during the succeeding year are
assessed and will apply until any subsequent administrative review produces a new rate.
40 Request for the Establishment of a Panel by Canada, United States—Section 129(c)(1) of the Uruguay Round
Agreements Act, WT/DS221/4 (July 13, 2001).
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proceeding, revising the duty rate in response to a domestic court decision involving the earlier
entries.41
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.42 Canada did not
appeal, and the panel report was adopted by the DSB in August 2002.
Judicial Responses
Although private rights of action based on Uruguay Round agreements are precluded under §
102(c) of the Uruguay Round Agreements Act, WTO panel findings have at times been brought to
the attention of federal courts, most often in challenges to agency determinations in antidumping
and countervailing duty proceedings initiated under judicial review provisions contained in §
516A of the Tariff Act of 1930, 19 U.S.C. § 1516a. Section 129 determinations issued by the ITC
and the Commerce Department to comply with WTO decisions are also reviewable under this
statute. These cases are heard in the U.S. Court of International Trade (USCIT), which has
exclusive jurisdiction over civil actions brought under § 516A.43 The USCIT’s decisions may be
appealed to the U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by
the U.S. Supreme Court.
Federal courts must hold a final agency determination in an antidumping or countervailing duty
proceeding or a Section 129 Determination unlawful if it is found to be “unsupported by
substantial evidence on the record, or otherwise not in accordance with law.”44 To determine
whether an agency legal interpretation applied in an agency determination is in accordance with
law, the court employs the two-step analysis set out by the U.S. Supreme Court in Chevron,
U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).45 First, the court, using
tools of statutory construction, determines whether Congress has clearly spoken to the issue at
hand. Second, if the underlying statute is silent or ambiguous, the court decides whether the
agency’s construction of the statute is permissible and will defer to an agency’s interpretation of a
statute provided it is reasonable. It has also been argued that, in considering whether an agency
construction is reasonable for purposes of the second prong of the Chevron test, the court should
apply the canon of construction articulated by the Supreme Court in 1804 in Murray v. Schooner
Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804). This canon holds that where a statute does not
require a specific interpretation, i.e., it permits more than one interpretation, it should be
interpreted consistently with U.S international obligations.46 In the current context, the
41 Second Written Submission of the United States, United States—Section 129(c)(1) of the Uruguay Round
Agreements Act (WT/DS221), paras. 17-20 (Mar. 8, 2002), at http://www.ustr.gov/webfm_send/688.
42 Panel Report, United States—Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R (July 15,
2002).
43 28 U.S.C. § 1581(c)(enacted in Customs Courts Act of 1980, P.L. 96-417, § 201).
44 Tariff Act of 1930, § 516A(b)(1)(B)(i), 19 U.S.C. § 1516a(b)(1)(B)(i).
45 See United States v. Eurodif S.A., 129 S.Ct. 878, 886-87 (2009); United States v. Mead Corp., 533 U.S. 218, 226-27
(2001). See also Wheatland Tube Co. v. United States, 495 F.3d 1355 (Fed. Cir. 2007); Pesquera Mares Australes Ltda.
v. United States, 266 F.3d 1372, 1379-82 (Fed. Cir. 2001); Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed.
Cir. 1994), Corus Staal BV v. United States, 593 F.Supp.2d 1373, 1381-82 (Ct. Int’l Trade 2008); Windmill Int’l PTE
v. United States, 193 F.Supp.2d 1303, 1305-306 (Ct. Int’l Trade 2002); Cultivos Miramonte S.A. v. United States, 980
F.Supp. 1268, 1271-72 (Ct. Int’l Trade 1997).
46 See, e.g, Corus Staal BV v. U.S. Dep’t of Commerce, 259 F.Supp.2d 1253, 1262 (Ct. Int’l Trade 2003) and generally
(continued...)
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international obligation would be that contained in a WTO agreement, either by itself or as
interpreted in one or more WTO decisions.47 Plaintiffs thus argue, on the basis of the Charming
Betsy canon, that an agency interpretation that violates a WTO obligation is unreasonable under
Chevron step two.
Because the underlying cause of action in domestic legal challenges to the agency actions
described above is based in the Tariff Act and not on a provision of a WTO agreement, courts
have not viewed § 102(c) of the URAA as preventing them from hearing a WTO-based argument
in these challenges.48 When faced with such arguments, courts may deem WTO decisions to be
“persuasive”49 or a source of useful reasoning, “if sound” to inform a court’s decision,50 but state
that WTO decisions are not binding on the United States, U.S. agencies, or the judiciary.51 Most
recently, courts have made clear that, given the statutory scheme established in the URAA for
implementing adverse WTO decisions, questions as to whether the United States should comply
with an adverse WTO decision, and what the extent of U.S. compliance should be, are matters
falling within the province of the executive branch.52 As a result, in ruling on whether an agency’s
interpretation of a statute is reasonable, courts have rejected Charming Betsy arguments and
(...continued)
Jane A. Restani & Ira Bloom, Interpreting International Trade Statutes: Is The Charming Betsy Sinking? 24 FORDHAM
INT’L L. J. 1533 (2001). The Charming Betsy canon stems from the following Supreme Court language: “It has also
been observed, that an act of congress ought never to be construed to violate the law of nations, if any other possible
construction remains, and consequently, can never be construed to violate neutral rights, or to affect neutral commerce,
further than is warranted by the law of nations as understood in this country.” Murray v. Schooner Charming Betsy, 6
U.S. (2 Cranch) 64, 118 (1804).
47 See, e.g, Corus Staal BV v. Dept. 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, 1343-44 (Fed. Cir. 2004); Corus Staal BV v. United States, 593
F.Supp.2d 1373, 1383-84 (Ct. Int’l Trade 2008).
48 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 August 30, 2001).
49 Koyo Seiko Co. v. United States, 442 F.Supp.2d 1360, 1363 (Ct. Intl Trade 2006), citing, inter alia, NSK Ltd. v.
United States, 358 F.Supp.2d 1276, 1288 (Ct. Int’l Trade 2005). Note also that in Cummings Inc. v. United States, the
Court of Appeals for the Federal Circuit held that a classification opinion of the World Customs Organization “is not
binding and is entitled, at most, to ‘respectful consideration’” by a U.S. court. 454 F.3d 1361, 1366 (Fed. Cir. 2006).
50Hyundai Electronics Co. v. United States, 53 F.Supp.2d 1334, 1343 (Ct. Int’l Trade 1999); see also, e.g., Allegheny
Ludlum Corp. v. United States, 367 F.3d 1339, 1348 (Fed. Cir. 2004).
51 Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1348-49 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006).
See also Corus Staal BV v. United States, 502 F.3d 1370, 1375 (Fed. Cir. 2007), and Koyo Seiko Co. v. United States,
442 F.Supp.2d 1360, 1363 (Ct. Int’l Trade 2006). For discussions of federal cases addressing the domestic effect of
WTO decisions, see, e.g., Robin Miller, Effect of World Trade Organization (WTO) Decisions Upon United States, 17
A.L.R.FED.2D 1 (2007) and Patrick C. Reed, Relationship of WTO Obligations to U.S. International Trade Law:
Internationalist Vision Meets Domestic Reality, 38 GEO. J. INT’L L. 209 (2006). See also John D. Greenwald, After
Corus Staal—Is There Any Role, and Should There Be—for WTO Jurisprudence in the Review of U.S. Trade Measures
by U.S. Courts? 39 GEO. J. INT’L L. 199 (2007).
52 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008)(“The determination whether, when, and how
to comply with the WTO’s decision on ‘zeroing’, involves delicate and subtle political judgments that are within the
authority of the Executive and not the Judicial Branch.”); Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1347
(Fed. Cir. 2005), cert denied, 126 S.Ct. 1023 (2006); SKF USA v. United States, 611 F.Supp.2d 1351, 1359-60 (Ct. Intl
trade 2009); Corus Staal BV v. United States, 593 F.Supp.2d 1373, 1383-85 (Ct. Int’l Trade 2008). See also Koyo
Seiko Co. v. United States, 442 F.Supp. 1360, 1363 (Ct. Int’l Trade 2006). In this case, the court refused to permit the
plaintiff to amend its complaint to challenge the Commerce Department’s “zeroing” methodology on the ground that
the WTO had since adopted an Appellate Body decision faulting the U.S. practice, stating that such an amendment
would be futile “given that it is not controlling precedent and is immaterial to the court’s examination of the
administrative decisions issued by the Department.”
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declined to base their decision making on a WTO decision adverse to the United States where the
executive branch has not taken the necessary domestic action to comply.53
Pending Cases Involving Legislative Action
Six WTO dispute proceedings that involve federal statutes remain pending—that is, panel and
Appellate Body reports adverse to the United States have been adopted by the WTO Dispute
Settlement Body (DSB) and compliance issues have not yet been fully resolved. Among these are
two long-standing disputes with the European Union (EU),54 one involving § 110(5)(B) of the
Copyright Act, a statute affecting music licensing, and the other, § 211 of the Omnibus
Appropriations Act of 1998, a statute addressing trademarks that involve property confiscated by
Cuba. Another is a long-standing dispute with Japan involving a provision of the U.S.
antidumping statute governing the calculation of dumping rates for producers and exporters who
are not individually investigated by the Commerce Department.
While Congress repealed the Continued Dumping and Subsidy Offset Act of 2000, a statute
which required the distribution of collected antidumping and countervailing duties to petitioners
and interested parties in the underlying trade remedy proceedings, the repeal legislation mandates
the distribution to U.S. firms of duties collected on goods entered through September 30, 2007,
two years after the statutory repeal date of October 1, 2005. The European Union and Japan, two
complainants who have objected to these continued distributions, are continuing to retaliate with
tariff surcharges on U.S. goods.
As the result of a completed compliance panel proceeding, the United States has been found not
to have fully complied in Brazil’s challenge to U.S. cotton subsidies and faces the possibility of
retaliation by Brazil against U.S. goods and possibly U.S. services or intellectual property
interests. While Congress repealed or made statutory changes to U.S. export credit guarantee
programs that were found by the WTO to be prohibited subsidies and the Executive Branch made
administrative changes to one of these programs under revised statutory authority, Congress also
reauthorized payments under two domestic support programs that Brazil successfully challenged
as actionable subsidies. Payments under these programs were found to cause serious prejudice to
Brazil in the form of significant price suppression in the world upland cotton market. Brazil is
currently authorized to impose sanctions to remedy both prohibited and actionable subsidy
measures at issue in the case.
Antigua’s challenge to federal laws governing the remote supply of gambling services, while only
partially successful, left certain issues unresolved and resulted in the United States withdrawing
its market access commitments for gambling services under the General Agreement on Trade in
Services (GATS). Antigua sought both retaliation in the WTO dispute and compensation under
53 E.g., Corus Staal BV v. Dept. of Commerce, 395 F.3d 1343, 1349 (Fed. Cir. 2005), cert denied, 126 S.Ct. 1023
(2006) and SNR Roulements v. United States, 341 F.Supp.2d 1334, 1343-44 (Ct. Int’l Trade 2004).
54 As of December 1, 2009, “European Union” replaced “European Communities” as the official name of this WTO
Member. The terms European Communities and EC still appear in older WTO materials, including panel and Appellate
Body reports, bilateral procedural agreements in particular disputes, and communications to the WTO Dispute
Settlement Body. Except for references to any such older WTO documents, this report uses the name “European
Union” or the acronym “EU” in the text of the report regardless of the time period being discussed. For further
information, see European Union or Communities?, at http://www.wto.org/english/thewto_e/countries_e/
european_union_or_communities_popup.htm.
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the GATS for the negative effects of the change in the U.S. GATS commitments. Outstanding
issues still remain subject to discussion by the two parties.
Section 110(5)(B) of the Copyright Act (Music Copyrights)(DS160)
This case, sometimes referred to as the “Irish music” 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.55 Challenged by the
European Union (EU) 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 EU agreed to extend the period to the end of 2001, and to consider U.S.
compensation for the EU 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 EU trade benefits are affected annually.
Notwithstanding the arbitration, the EU 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 EU 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 EU to cover a three-year period of nullification and impairment of benefits in the dispute (P.L.
108-11).56 The parties notified the WTO in late June 2003 that the payment, which will be made
into a fund for EU performers, constitutes a temporary settlement of the dispute.57 They also
agreed that the EU 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.
55 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.
56 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.
57 Notification of a Mutually Satisfactory Temporary Arrangement, United States—Section 110(5) of the US Copyright
Act, WT/DS160/23 (June 26, 2003).
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Recent Developments
In late November 2004, shortly before the three-year U.S.-EU agreement expired, the EU
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.58 The EU has
regularly raised the issue of U.S. noncompliance at DSB meetings, with the United States
continuing to report to the DSB that it will work with Congress on the matter.59 While the EU has
stated that it has reserved the right to reactivate the arbitration on its retaliation request at any
time,60 the disputing parties have also indicated interest in possible discussions on a mutually
satisfactory resolution of the matter.61 During a July 2009 meeting on bilateral trade relations held
in Washington, D.C., USTR Kirk and European Union Trade Commissioner Ashton “exchanged
ideas on potential steps to address” this dispute, and “directed … [their] staffs to explore new
options on this dispute in the coming weeks.”62
Section 211 of the Omnibus Appropriations Act of 1998 (Trademark
Exclusion Involving Property Confiscated by Cuba)(DS176)
This dispute, at time referred to as the “Havana Club” 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 European Union (EU) 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, 2002.63
The original compliance period, as agreed upon by the United States and the EU, expired
December 31, 2002; it was extended four times, also by agreement, most recently to June 30,
58 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 annual European Union (EU) reports on U.S. foreign
trade barriers and periodic EU updates of EU WTO disputes. See European Commission, United States Barriers to
Trade and Investment Report for 2008, at 20, 77 (July 2009)[hereinafter EC 2009 U.S. Trade Barriers Report], at
http://trade.ec.europa.eu/doclib/docs/2009/july/tradoc_144160.pdf, and European Commission, General Overview of
Active WTO Dispute Settlement Cases Involving the EC as Complainant or Defendant and of Active Cases under the
Trade Barriers Regulation, 22 January 2010, at 19-20 [hereinafter EC Dispute Settlement Overview (Jan. 2010)], at
http:// http://trade.ec.europa.eu/doclib/docs/2007/may/tradoc_134652.pdf.
59 E.g., Dispute Settlement Body, Minutes of Meeting, Mar. 20, 2009, at 5, 6, WT/DSB/M/266 (May 19, 2009)
[hereinafter DSB Minutes (Mar. 20, 2009)]; see also Status Report by the United States, Addendum, United States—
Section 110(5) of the US Copyright Act, WT/DS160/24/Add.56 (Aug. 21, 2009).
60 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)].
61 See, e.g., Dispute Settlement Body, Minutes of Meeting, June 20, 2007, at 6, WT/DSB/M/234 (July 23, 2007), as
corrected, WT/DSB/M/234/Corr.1 (Aug. 22, 2007).
62 Press Release, Office of the U.S. Trade Representative, U.S. and EU discuss ways forward on bilateral trade issues
(last updated July 14, 2009), at http://www.ustr.gov/about-us/press-office/press-releases/2009/july/eu-and-us-discuss-
ways-forward-bilateral-trade-issues.
63 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.
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2005.64 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 EU entered into an agreement
with the United States regarding rights and procedures involving any future EU retaliation
request.65 The EU agreed not to request authorization from the DSB to suspend concessions for
the time being, but pledged to notify and consult with the United States before making any such
request in the future. For its part, the United States agreed not to block any retaliation request by
the EU 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 retained the right to object to a proposed retaliation request
and to refer the matter to arbitration.
Recent Developments
As the EU, Cuba, and other WTO Members continue to raise the issue of U.S. noncompliance at
DSB meetings,66 the United States has been reporting to the DSB that legislative proposals that
would implement the WTO ruling have been introduced in the House and Senate and that it will
work with the Congress on legislative vehicles to resolve this matter.67
Various 111th Congress bills would either repeal or amend § 211. H.R. 1103 (Wexler) and S. 1234
(Lieberman) would amend § 211 to apply to all persons claiming rights in trademarks confiscated
by Cuba, whatever their nationality. H.R. 1530 (Rangel) and H.R. 2272 (Rush) would repeal §
211, remove the current trade embargo on Cuba, and make other statutory changes involving
U.S.-Cuba commercial relations. H.R. 1531 (Rangel) and S. 1089 (Baucus) would repeal § 211,
require related regulatory changes, and remove statutory restrictions on U.S.-Cuba trade in
agricultural and medical goods.
64 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).
65 Understanding between the European Communities and the United States, United States—Section 211 Omnibus
Appropriations Act of 1998, WT/DS176/16 (July 1, 2005).
66 E.g., DSB Minutes (Mar. 20, 2009), supra note 59, at 2-5. As with the “Irish music” case discussed earlier, the
continued existence of § 211 is routinely cited in annual European Union (EU) reports on U.S. foreign trade barriers
and periodic EU updates of EU WTO disputes. See EC 2009 U.S. Trade Barriers Report, supra note 58, at 21, 79-80,
and EC Dispute Settlement Overview (Jan. 2010), supra note 58, at 20.
67 See, e.g., Status Report by the United Status, Addendum, United States—Section 211 Omnibus Appropriations Act
of 1998, WT/DS176/11/Add.81 (Aug. 21, 2009).
Bills to repeal or amend the provision were also introduced in the 110th and earlier Congresses. 110th Congress bills
included: H.R. 217 (Serrano) and H.R. 624 (Rangel), which would have repealed § 211, as well as removed the current
trade embargo on Cuba; H.R. 2819 (Rangel) and S. 1673 (Baucus), which would have repealed the statute along with
removing certain other restrictions on trade with Cuba; S. 1806 (Leahy), which would have repealed the statute and
required the Secretary of the Treasury to issue regulations as were necessary to carry out the repeal within 30 days after
enactment; and H.R. 1306 (Wexler) and S. 749 (Nelson), which would have amended § 211 to apply to all persons
claiming rights in trademarks confiscated by Cuba, whatever their nationality. In addition, 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/hearings/hearing.cfm?id=1261 for witness lists, testimony
and Members statements.
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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.68
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.69
The arbitrated compliance period in the case expired November 23, 2002. While Japan had
threatened trade retaliation earlier in the month because it found it unlikely that the United States
would comply with each element of the ruling by this date, the deadline was extended until
December 31, 2003, or the end of the 108th Congress, 1st Session (whichever was earlier), to
permit the United States to comply fully with the panel and appellate reports in the case.70
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.”71 The panel, as upheld by the Appellate
68 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].
69 Hot-Rolled Steel AB Report, supra note 68, paras. 235-236.
70 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.
71 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).
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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.”72 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% 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....”73
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.’”74 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, 2002.75
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.76 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 it used 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
72 Hot-Rolled Steel Panel Report, supra note 68, paras. 7.91-7.120, Hot-Rolled Steel AB Report, supra note 68,
paras.131-173.
73 Modification of Antidumping Methodology, supra note 71, 67 Fed. Reg. at 69186. The 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.
74 Id.
75 Id.
76 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).
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producers or exporters, excluding any zero and de minimis margin and margins established on the
basis of facts available.77 Section 735(c)(5)(A) of the Tariff Act of 1930 states that, for purposes
of preliminary and final dumping determinations, the estimated dumping margin for producers
that are 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.”78 Section 776 of the Tariff Act governs the use of facts
available by the DOC and ITC in making dumping, subsidy, and injury determinations.79 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.80
Absent legislative compliance by the United States, the December 2003 deadline referred to
earlier was extended twice, most recently to July 31, 2005.81 The deadline lapsed without U.S.
action. In an understanding between the disputing parties reached earlier in July 2005, Japan
stated that it would not request authorization to retaliate at the time but might choose to do so in
the future.82
Recent Developments
No legislation has been introduced to amend § 735(c)(5) of the Tariff Act of 1930 since the 109th
Congress. H.R. 2473 (Shaw), 109th Cong., 1st Sess., would have amended § 735(c)(5) to remove
77 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.
78 Tariff Act of 1930, § 735(c)(5)(A), 19 U.S.C. § 1673d(c)(5)(A)(emphasis added).
79 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).
80 Emphasis added. See Hot-Rolled Steel Panel Report, supra note 68, paras. 7.83-7.90, 8.1(b); Hot-Rolled Steel AB
Report, supra note 68, paras. 111-130.
81 See Dispute Settlement Body, Minutes of Meeting, Aug. 31, 2004, at 6-7, WT/DSB/M/175 (Sept 24, 2004).
82 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.
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the word “entirely” each time it appears in the provision, thus enabling the Department of
Commerce to exclude dumping margins based in whole or in part on facts available in
determining the “all others” rate, as called for by the WTO decision. Although the text of H.R.
2473 was listed for possible inclusion in 109th Congress miscellaneous tariff legislation,83 the bill
was not made part of the tariff legislation nor was it acted upon as stand-alone legislation.
Japan continues to seek legislative action,84 as the United States continues to state its support for
legislative amendments that would achieve full compliance in the case.85 The United States has
also submitted a proposal to the Doha Round Negotiating Group on Rules that Article 9.4 of the
Antidumping Agreement be clarified to allow the invalidated practice.86 No revisions or
clarifications of Article 9.4, however, were included in the draft texts of proposed revisions to the
Antidumping Agreement circulated by the Chair of the Negotiating Group in November 2007 and
December 2008.87
Continued Dumping and Subsidy Offset Act (DS217/DS234)
The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000, also known as the Byrd
Amendment, required that duties collected under an existing antidumping or countervailing duty
order be distributed annually to petitioners and interested parties in the underlying antidumping or
countervailing duty proceeding.88 Payments were available for “qualifying expenditures” in
83 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.
84 E.g, DSB Minutes (Mar. 20, 2009), supra note 59, at 5-6, and Japan, Ministry of Economy, Trade and Industry,
METI Priorities Based on the 2009 Report on Compliance by Major Trading Partners with Trade Agreements 10-11
(May 29, 2009)[hereinafter 2009 METI Report on Japan Trade Priorities], at http://www.meti.go.jp/english/press/data/
pdf/20090525_02a.pdf.
85 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.81 (Aug. 21, 2009).
86 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 (Mar. 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.
87 See WTO, Negotiating Group on Rules, New Draft Consolidated Chair Texts of the AD and SCM Agreements, at
20, TN/RL/W/236 (Dec. 19, 2008[hereinafter 2008 Draft Rules Text] and WTO, Negotiating Group on Rules, Draft
Consolidated Chair Texts of the AD and SCM Agreements, at 21, TN/RL/W/213 (Nov. 30, 2007)[hereinafter 2007
Draft Rules Text].
88 P.L. 106-387, 114 Stat. 1549A-72, codified at 19 U.S.C. § 1675c (2000). Regulations are set out at 19 C.F.R. §§
159.61-64. For a 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
(continued...)
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specified categories (e.g., manufacturing facilities or equipment) incurred by the petitioners and
interested parties after the applicable antidumping or countervailing duty order was issued. To be
eligible, petitioners and interested parties, referred to in the statute as “affected domestic
producers,” must also have remained in operation. Although the statute was held WTO-
inconsistent in January 2003 and repealed, effective October 2005, by P.L. 109-171, it remains
the target of authorized sanctions by complainants European Union and Japan due to continued
payments to U.S firms under the CDSOA program.
Original WTO Complaints
Eleven WTO members challenged CDSOA shortly after its enactment in October 2000 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 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, as appropriate, the Antidumping or SCM Agreement.89 Two complaints
were filed: DS217, filed jointly by Australia, Brazil, Chile, the European Union (EU), India,
Indonesia, Japan, Korea and Thailand, and DS234, filed jointly by Canada and Mexico.
The WTO panel, which considered both complaints at the same time, 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.90 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.91 The reports were adopted January 27, 2003, and the
compliance period was subsequently determined by arbitration to expire December 27, 2003.92
(...continued)
Implementing the Continued Dumping and Subsidy Offset Act (Sept. 2005)(GAO-05-979).
89 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, paras. 103-138,
WT/DS136/AB/R, WT/DS162/AB/R (Aug. 28, 2000)(adopted Sept. 26, 2000).
90 Panel Report, United States—Continued Dumping and Subsidy Offset Act, WT/DS217/R, WT/DS234/R (Sept. 16,
2002).
91 Appellate Body Report, United States—Continued Dumping and Subsidy Offset Act, paras. 224-299,
WT/DS217/AB/R, WT/DS234/AB/R (Jan. 16, 2003).
92 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 was for the United States to decide on the
manner of implementation, which might be through repeal or modification of the law. Id. para. 50.
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Requests to Impose Sanctions
Because the United States did not comply by the December 2003 deadline, eight complaining
Members—Brazil, Chile, EU, India, Japan, Korea, Canada, and Mexico—asked the WTO in
January 2004 for authorization to impose retaliatory measures.93 The United States objected to the
requests, sending them to arbitration.94 The remaining three complainants—Australia, Indonesia,
and Thailand—agreed to give the United States until December 27, 2004, to comply.95
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.96
The Arbitrator stated that the disbursements “operate, in economic terms, as subsidies that may
generate import substitution production”97 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.98 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 2004.99 The EU and Canada began to impose countermeasures in the form of
higher tariffs and surcharges on selected U.S. products, respectively, as of May 1, 2005.100
Mexico began to impose $20.9 million in retaliatory tariffs effective August 18, 2005.101 In
addition, Japan imposed additional tariffs of 15% on 15 categories of U.S. goods as of September
1, 2005.102
93 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).
94 See Dispute Settlement Body, Minutes of Meeting, Jan. 26, 2004, WT/DSB/M/164 (Mar. 12, 2004).
95 See WTO documents WT/DS217/17 (Thailand); WT/DS217/18 (Australia); and WT/DS217/19 (Indonesia).
96 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),
paras. 5.1-5.2, WT/DS217/ARB/EEC (Aug. 31, 2004).
97 Id. para. 3.41.
98 Id. paras. 3.72, 3.80-3.151, 4.7.
99 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).
100 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).
101 Mexico Announces $20.9 Million in Byrd Retaliation Against U.S. Exports, INSIDE U.S. TRADE, Aug. 19, 2005, at 1.
102 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, Aug. 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) 1344 (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
(continued...)
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U.S. Judicial and Legislative Action
In April 2006, the U.S. Court of International Trade ruled that the CDSOA did not apply to
imports from Canada or Mexico,103 and on September 28, 2006, U.S. 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.104 Canada allowed its
retaliatory tariffs to terminate as of April 30, 2006.105 Mexico, after a month’s lapse, imposed
increased tariffs on U.S. dairy products from September 18 through October 31, 2006.106 These
tariffs surcharges have not been reimposed.
A provision repealing the CDSOA as of October 1, 2005, 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, 2006.107 While collection of
antidumping and countervailing duties for purposes of CDSOA disbursal has thus ceased, duties
will continue to be available for disbursement until all relevant customs entries before September
1, 2007, are liquidated, i.e., the final assessment of duties on these entries is made. On May 29,
2009, U.S. Customs and Border Protection issued its most recent annual notice of intent to
distribute these funds.108 In addition, Congress has routinely included provisions in annual
appropriations legislation directing the Commerce Department and the Office of the USTR to
conduct negotiations in the WTO “to recognize the right of members to distribute monies
collected from antidumping and countervailing duties.”109
(...continued)
Japanese goods in fiscal 2004. METI Press Release, supra.
103 Canadian Lumber Trade Alliance v. United States, 425 F.Supp.2d 1321 (Ct. Int’l Trade 2006), 441 F.Supp.2d 1259
(Ct. Int’l Trade 2006), aff’d in part, vacated in part, and remanded, 517 F.3d 1319 (Fed. Cir. 2008), cert. denied 129
S.Ct. 344 (2008). 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.
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.
104 Notice of Withholding of Certain Distributions on Continued Dumping and Subsidy Offset to Affected Producers,
71 Fed. Reg. 57000 (Sept. 28, 2006).
105 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.
106 U.S. Dairy Industry Expects Hit from Short-term Mexican Byrd Retaliation, INSIDE U.S. TRADE, Oct. 6, 2006; DSB
Minutes (Sept. 28, 2006), supra note 60, at 9.
107 Deficit Reduction Act of 2005, P.L. 109-171, § 7601. 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.”
108 Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 74 Fed. Reg. 25,814-
25,969 (May 29, 2009).
109 The mandate for FY2009 currently appears in the Omnibus Appropriations Act, 2009, P.L. 111-8, Division B, Title
I, Title IV. See also the pending appropriations bill for the Departments of Commerce and Justice, and Science, and
(continued...)
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Following the 2006 enactment, the United States informed the WTO Dispute Settlement Body
(DSB) that it had taken the actions necessary to implement the WTO rulings.110 Although
complaining Members expressed support for the repeal, Members also stated their concerns that
the requirement that duties be distributed through 2007 and possibly after this date would prevent
the United States from complying fully with its WTO obligations in the case.111
Recent Developments
Although WTO Members have regularly called on the United States to cease payments under the
CDSOA program,112 no Member has formally challenged the compatibility of the 2006 statute
with U.S. WTO obligations. The EU and Japan are continuing to impose retaliatory tariffs on U.S.
products, albeit at lower levels than in the past due to reduced payments to affected U.S.
producers under the CDSOA program. As noted earlier, authorized retaliation may not exceed 72
percent of the antidumping and countervailing duties collected on EU and Japanese products
disbursed in the most recent year for which data is available. On May 1, 2009, the EU reduced its
annual level of retaliation from $33.38 million to $16.31 million in trade and removed goods
classified in 14 tariff categories from its retaliation list.113 U.S. products currently subject to the
EU’s 15% tariff surcharge are diaries, various clothing items, sweet corn, metal frames and
mountings for glasses and goggles, and crane lorries. In September 2008, Japan reduced its level
of retaliation from $48.14 million to $16.49 million, imposing its 10.6% additional duty on two
U.S. products: ball bearings and tapered roller bearings.114 Japan notified the WTO on August 14,
2009, that as of September 1, 2009, it was reducing its duty on these products to 9.6% ad valorem
for the upcoming year, covering a total value of trade that does not exceed $16.54 million.115
Subsidies on Upland Cotton (DS267)
In September 2002, Brazil requested consultations with the United States regarding U.S. statutes
and programs that Brazil claimed provided prohibited and actionable subsidies to U.S. producers,
users, and exporters of upland cotton.116 Brazil alleged violations of the WTO Agreement on
(...continued)
Related Agencies for FY2010, H.R. 2847, 111th Cong., 1st Sess. (2009), Title I, Title IV, as passed the House and as
reported in the Senate (S.Rept. 111-34).
Although the USTR submitted a proposal of this type to the pertinent Doha Round negotiating group in 2004, a
provision addressing this issue has not been included in the draft negotiating texts. See Communication from the United
States, Three Issues Identified for Discussion by the Negotiating Group on Rules, at 2, TN/RL/W/153 (Apr. 26, 2004);
2007 Draft Rules Text and 2008 Draft Rules Text, supra note 87.
110 Dispute Settlement Body, Minutes of Meeting, Feb. 17, 2006, at 5-10, WT/DSB/M/205 (Mar. 31, 2006).
111 Id.
112 See, e.g., Dispute Settlement Body, Minutes of Meeting, May 20, 2009, at 13,WT/DSB/M/268 (July 13, 2009). See
also EC Dispute Settlement Overview (Jan. 2010), supra note 58, at 17; 2009 METI Report on Japan Trade Priorities,
supra note 84, at 8-9.
113 Communication from the European Communities, United States—Continued Dumping and Subsidy Offset Act of
2000, WT/DS217/55 (Apr. 28, 2009).
114 Communication from Japan, United States—Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/54
(Sept. 2, 2008).
115 Communication from Japan, United States—Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/56
(Aug. 18, 2009).
116 Request for Consultations by Brazil, United States—Subsidies on Upland Cotton, WT/DS267/1 (Oct. 3, 2002). For
(continued...)
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Agriculture, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and
national treatment obligations in the GATT. It requested a panel in February 2003, adding a claim
based on subsidy obligations in GATT Article XVI.117 The panel was established in March 2003;
panelists were appointed in May of that year.
WTO Members have made commitments in the WTO Agreement on Agriculture to reduce, and in
some cases eliminate, domestic support in favor of agricultural producers and export subsidies on
agricultural products.118 The commitments made by each Member to limit domestic support and
export subsidization are contained in the Member’s Schedule, which is attached to and considered
an integral part of the Agreement.119 “Scheduled products” are those products for which a WTO
Member has made domestic support and export subsidy reduction commitments. The United
States did not schedule any export subsidy reduction commitments regarding upland cotton.
The types of export subsidies for which reduction commitments are made are listed in Article 9.1
of the Agreement. Members may not provide any export subsidy listed in Article 9.1 to an
“unscheduled product” or to a “scheduled” product in excess of the Member’s scheduled
reduction commitments. If the Member does so it is in violation of Articles 3.3 and 8 of the
Agreement. In addition, Article 10.1 prohibits Members from applying any subsidy that is not
listed in Article 9.1 “in a manner which results in, or which threatens to lead to, circumvention of
export subsidy commitments.”
Alleged violations of the Agriculture Agreement may be challenged under WTO dispute
settlement procedures. Agricultural subsidies may also be challenged under the SCM Agreement,
which defines the term “subsidy,” prohibits export subsidies and subsidies contingent on the use
of domestic over imported products “except as provided in the Agreement on Agriculture,” and
makes any subsidy fitting the Agreement definition “actionable” if the subsidy is specific to an
industry and causes “adverse effects” to the interests of another WTO Member.120 Among these
adverse effects is what the Agreement refers to as “serious prejudice,” an effect that will be found
where there is, inter alia, “a significant price undercutting by the subsidized product as compared
with the price of a like product of another Member in the same market or significant price
suppression, price depression or lost sales in the same market.”121 The SCM Agreement contains
timelines for dispute settlement proceedings that are shorter than those in the WTO Dispute
Settlement Understanding and in general contemplates expedited compliance with adverse WTO
decisions in disputes arising under the Agreement.
Resort to WTO dispute settlement had been temporarily limited by Article 13 of the Agriculture
Agreement—the now-expired “Peace Clause”—which provided that certain domestic support
(...continued)
further information on this dispute, see CRS Report RL32571, Brazil’s WTO Case Against the U.S. Cotton Program,
by Randy Schnepf, available upon request [hereinafter CRS Report RL32571], and CRS Report RS22187, Brazil’s
WTO Case Against the U.S. Cotton Program: A Brief Overview, by Randy Schnepf, available upon request [hereinafter
CRS Report RS22187].
117 Request for the Establishment of a Panel by Brazil, United States—Subsidies on Upland Cotton, WT/DS267/7 (Feb.
7, 2003).
118 Agreement on Agriculture, at http://www.wto.org/english/docs_e/legal_e/14-ag.pdf.
119 Id. art. 3.1.
120 Agreement on Subsidies and Countervailing Measures (SCM Agreement) arts. 1, 3, 5, at http://www.wto.org/
english/docs_e/legal_e/legal_e.htm.
121 Id. art. 6.3(c).
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measures and export subsidies that conformed fully with enumerated requirements in the
Agriculture Agreement were “exempt from actions” under specified subsidy-related provisions in
the GATT 1994 and the SCM Agreement through the end of the “implementation period,” i.e., the
end of the nine-year period following the date the Agriculture Agreement entered into force
(January 1, 1995), or December 31, 2003. The United States unsuccessfully argued in the case
that certain of its agricultural programs were covered by this provision.
Panel and Appellate Body Reports
In a report issued September 8, 2004, the WTO panel found that the United States was
maintaining export subsidy programs and providing payments under domestic support programs
in violation of the Agriculture Agreement and the SCM Agreement. 122
First, the panel found that three U.S. export credit guarantee programs in effect at the time
constituted export subsidies for purposes of WTO obligations because the programs were
provided at premium rates that were “inadequate to cover the long-term operating costs and
losses” of the programs.123 The panel looked to the Illustrative List of Export Subsidies set out in
Annex I of the SCM Agreement, which includes export credit guarantee programs fitting this
description in item (j) of the List.124 The cited programs were: (1) the Commodity Credit
Corporation (CCC) Export Credit Guarantee Program (GSM-102), providing export credit
guarantees for up to three years; (2) the CCC Intermediate Export Credit Guarantee Program
(GSM-103), providing export credit guarantees for up to 10 years; and (3) the Supplier Credit
Guarantee Program (SCGP), allowing export guarantees for 180 days and in some cases up to 360
days.
The panel found that the premiums charged for the U.S. programs would not insure adequate
financial coverage for several reasons: (1) the existence of a statutory 1% fee cap in connection
with GSM-102 and SCGP transactions; (2) the fact that premiums were not risk-based either as to
country risk or the creditworthiness of the borrower in individual transactions; and (3) even
though the premiums charged offset the programs’ long-term costs and losses “to some degree,”
coverage was “effectively ensure[d]” by the U.S. Government’s subsidy estimates and re-
estimates “and ultimately the availability of United States government funds to cover any costs to
government.”125 The panel further found that, to the extent that these programs applied to exports
of upland cotton and other unscheduled agricultural commodities supported under the programs,
and to exports of rice (a scheduled commodity), the export subsidies were being applied in a
manner that circumvented U.S. export subsidy commitments in the Agriculture Agreement in
violation of Article 10 of the Agreement. As these programs did not conform fully to export
subsidy obligations in the Agreement, they were found not to be covered by the Peace Clause and
thus subject to challenge. The panel went on to find that these programs were prohibited export
subsidies under Article 3.1(a) of the SCM Agreement.
122 Panel Report, United States—Subsidies on Upland Cotton, WT/DS267/R (Sept. 8, 2004)[hereinafter U.S. Cotton
Panel Report]. For further information on the agricultural programs at issue and the bases for panel and Appellate Body
findings in the case, see CRS Report RL32571, supra note 116. 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.
123 U.S. Cotton Panel Report, supra note 122, at paras. 7.866-7.867.
124 Id. paras. 7.796-7.803.
125 Id. paras. 7.860-7.866.
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Second, the panel faulted the “Step 2” program, authorized in § 1207(a) of the Farm Security and
Rural Investment Act of 2002, P.L. 101-171 (“2002 farm bill”), 7 U.S.C. § 7937(a), as it applied
both to exporters and domestic users of upland cotton. To the extent that the program provided for
payments to exporters for their purchase of higher priced upland cotton, it was found to constitute
an export subsidy that was not scheduled by the United States in the Agreement on Agriculture
and was therefore inconsistent with U.S. obligations under the Agreement. As such, this part of
the Step 2 program was found not to be covered by the Peace Clause and thus also subject to
challenge. The panel then found that the program constituted a prohibited export subsidy under
the Article 3.1(a) of the SCM Agreement. In addition, the panel found that the Step 2 program,
insofar as it provided for payments to domestic users of upland cotton, qualified as a subsidy
contingent on the use of domestic over imported products and was thus prohibited under Article
3.1(b) of the SCM Agreement.
Third, the panel found that payments under various U.S. domestic support programs, including
counter-cyclical payments (CCP), market loss assistance payments (MLA), marketing loan
program payments, and Step 2 payments for U.S. cotton producers, were measures that granted
sufficient amounts of support to upland cotton to exempt them from the Peace Clause.126 The
panel then found that the payments under the four cited programs—which it characterized as
“mandatory price-contingent subsidies”—caused serious prejudice to Brazil’s interests in the
form of significant price suppression in the world upland cotton market for purposes of Articles
5(c) and Article 6.3(c) of the SCM Agreement.
At the time, CCP payments, market loan program payments, and Step 2 payments were
authorized in the 2002 farm bill, while the authority for the MLA payments had expired. Among
other findings, however, the panel determined 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 Agriculture
Agreement implementation period (i.e., between 1995 and the end of 2003) and continued to have
an adverse effect on the complaining Member. This finding allowed Brazil to challenge MLA
payments and flexibility contract payments (FCP), the legislative basis of which had lapsed in
2002. Brazil was unable, however, to show serious prejudice from the FCP program.
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.127 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, i.e., upon adoption of the panel report.128
The panel’s finding of serious prejudice for the actionable subsidies also implicated a deadline in
Article 7.9 of the SCM Agreement affecting requests for authorization to impose retaliatory
measures. Provided there is no agreement between the disputing parties on compensation, Article
126 Id. paras. 7.415-7.608. See Agreement on Agriculture art. 13(b)(ii).
127 U.S. Cotton Panel Report, supra note 122, para. 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.”
128 Id. para. 8.3(d).
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7.9 accords a prevailing Member the right to make such a request 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.129
The United States and Brazil appealed the panel report, and the Appellate Body, in a March 5,
2005, report largely upheld the panel.130 The reports were adopted on March 21, 2005.131 This
action effectively established a July 1, 2005, deadline for removal of the prohibited subsidies and
an Article 7.9 deadline of September 21, 2005, with respect to the actionable subsidies.
The United States told the WTO 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.132 Brazil complained that the U.S. statement was not
sufficiently detailed and made reference to the panel’s recommended time periods for
compliance.133 The European Union noted that because the subsidies at issue were found to
infringe both the SCM Agreement and the Agreement on Agriculture, the United States was
entitled to a “reasonable period of time” to comply with Agriculture Agreement, i.e., a
compliance period determined on an ad hoc basis, as ordinarily available under the WTO Dispute
Settlement Understanding.
Responses of the United States and Brazil
In response to the WTO finding that fees charged by the Commodity Credit Corporation (CCC)
guarantee programs must be risk-based, the United States Department of Agriculture (USDA)
announced on June 30, 2005, that, as of July 1, 2005, CCC would use a risk-based fee structure
for both the GSM-102 and SCGP program.134 USDA also announced that CCC would no longer
accept applications for payment guarantees under the GSM-103 program.
Because prohibited export subsidies had not been removed by July 1, 2005, Brazil requested that
the DSB meet on July 15, 2005, to consider its request for authorization to impose
countermeasures against the United States. Brazil sought 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. 135 Brazil proposed sanctions 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
129 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.
130 Appellate Body Report, United States—Subsidies on Upland Cotton, WT/DS267/AB/R (Mar. 3, 2005).
131 Dispute Settlement Body, Minutes of Meeting, Mar. 21, 2005, at 7-13, WT/DSB/M/186 (Apr. 14, 2005).
132 Dispute Settlement Body, Minutes of Meeting, Apr. 20, 2005, at 7, WT/DSB/M/188 (May 18, 2005)[hereinafter
DSB Minutes (Apr. 20, 2005)].
133 Id. at 8.
134 News Release, USDA, USDA Announces Changes to Export Credit Guarantee Programs to Comply with WTO
Findings (June 30, 2005).
135 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).
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programs, for all unscheduled commodities and for rice, for the most recent concluded fiscal year,
estimating the annual total for both to be $3 billion.136
On July 5, 2005, 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, remove the 1%
cap on origination fees under the GSM-102 program, and terminate the GSM-103 program.137
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. Eliminating the one-percent fee cap would make the Export Credit
Guarantee Program more risk-based. Terminating the GSM-103 program would reinforce the
recent U.S. decision to stop using longer-term export credit guarantees.138
On the same day, Brazil and the United States notified the DSB that they had entered into a
procedural agreement covering the implementation phase of the dispute.139 The agreement also
recognized both the changes to the CCC programs announced June 30, 2005, and the legislative
proposal sent to Congress to repeal the Step 2 program. As provided in the agreement, the United
States requested arbitration of Brazil’s retaliation proposal; the DSB referred the matter to
arbitration at its July 15, 2005, meeting;140 and the two countries, on August 17, 2005, requested
that the arbitration be suspended.141 The agreement also provided that Brazil could request an
Article 21.5 compliance panel at any time after the July 15, 2005, meeting.
In addition, because the United States had not complied with its WTO obligations regarding the
actionable subsidies by September 21, 2005, Brazil shortly thereafter proposed to suspend tariff
concessions as well as obligations under the TRIPS Agreement and the GATS in the annual
amount of $1.037 billion.142 The United States objected to the proposal, and the matter was
referred to arbitration.143 On November 21, 2005, the parties requested that the arbitration be
suspended, “noting that the United States reaffirmed” at the November 18, 2005, DSB meeting
“its commitment to implement the recommendations and rulings of the DSB in this dispute, and
136 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.
137 News Release, USDA, USDA Proposes Legislative Changes to Cotton and Export Credit Programs to Comply with
WTO Findings (July 5, 2005).
138 Id.
139 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).
140 Dispute Settlement Body, Minutes of Meeting, July 15, 2005, WT/DSB/M/193 (July 28, 2005).
141 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).
142 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).
143 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); 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).
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in light of the preference for WTO-consistent solutions mutually acceptable to the parties to a
dispute set out in DSU Article 3.7.”144
Congress subsequently repealed the Step 2 program, effective August 1, 2006.145
Compliance Panel Proceeding
On August 21, 2006, Brazil requested an Article 21.5 compliance panel, claiming WTO violations
stemming from the U.S. failure to repeal the Step 2 program as of end of the 6-month period set
out in Article 7.9 of the SCM Agreement (i.e., by September 21, 2005), the continued payments
under the marketing loan and counter-cyclical programs authorized in the 2002 farm bill, and
continued WTO-related defects in the export credit guarantee programs at issue in the case.
In December 2007, the compliance issued a report adverse to the United States with respect to
both the marketing loan and CCL payments and the GSM-102 program.146
First, the panel found that payments under the marketing loan and counter-cyclical programs
authorized in the 2002 farm bill resulted in significant price suppression, which constituted
present serious prejudice to the interests of Brazil in violation of Articles 5(c) and 6.3(c) of the
SCM Agreement. The panel thus found that the United States was in violation of its obligation
under Article 7.8 of the SCM Agreement to take “appropriate steps to remove the adverse effects
of … or withdraw the subsidy.”
Second, regarding GSM-102 export credit guarantees provided after July 1, 2005 (the deadline set
by the original panel), the panel found that Brazil had established that the revised GSM-102
program constituted an export subsidy on the ground that the program continued to be provided
against premiums that were inadequate to cover its long-term operating costs and losses and that
the program thus qualified as such under item (j) of the Illustrative List.147 The panel further
found that United States was in violation of its obligations in the Agreement on Agriculture in
applying export subsidies in a manner that circumvented its export subsidy commitments
regarding various unscheduled products (e.g., cotton, oilseeds, protein meals) as well as three
scheduled products (rice, poultry meat, and rice).148 By providing export subsidies both to
unscheduled products and to scheduled products in excess of its reduction commitments, the
United States was also found to be granting prohibited subsidies in violation of the SCM
Agreement.149
144 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).
145 See § 1103 of P.L. 109-171, the Deficit Reduction Act of 2005, signed by the President on February 8, 2006. For
further information on U.S. actions taken in response to the WTO decision, see CRS Report RS22187, supra note 116.
146 Panel Report, United States—Subsidies on Upland Cotton, Recourse to Article 21.5 of the DSU by
Brazil,WT/DS267/RW (Dec. 18, 2007)[U.S Cotton Article 21.5 Panel Report].
147 The compliance panel rejected Brazil’s argument that the United States had failed to comply with the panel’s
recommendations, as adopted by the WTO Dispute Settlement Body, to withdraw the export subsidy with respect to
payments issued before July 1, 2005. Id. paras. 14.19-14.39.
148 Id. paras. 14.139-14.150.
149 Id. paras. 14.151-14.157.
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The panel based its conclusion that the GSM-102 program constituted an export subsidy on the
following factors:
(a) The US Government continues to project that new GSM 102 export credit guarantees
issued under the new fee schedule will be provided at a net cost to the Government.
(b) GSM 102 fees are well below the OECD MPR’s [minimum premium rates], which we
consider to provide an informed appraisal of the level of fees necessary to cover the long-
term, operating costs and losses of an export credit guarantee programme;
(c) Elements of the structure, design and operation of the GSM 102 programme indicate that
the programme is not designed to cover the long term operating costs and losses of that
programme.150
The compliance panel’s conclusion in (c) resulted from the following considerations: “the CCC’s
access to funds from the US Treasury, which facilitates the functioning of the programme”; “the
fact that GSM 102 fees do not vary with foreign obligor risk”; and “the fact that the one percent
fee cap has not been repealed and in our view prevents the adoption of risk-based fees (notably
due to the insufficient ‘scaling’ of GSM 102 fees [as risk increases]).”151 The panel ultimately
found that the United States had failed to bring its measures into conformity with the Agreement
on Agriculture and to “withdraw the subsidy without delay” as recommended by the WTO
Dispute Settlement Body pursuant to Article 4.7 of the SCM Agreement.
Both the United States and Brazil appealed. In a report issued June 2, 2008, the Appellate Body
largely upheld the compliance panel, though taking issues with an aspect of the panel’s
methodology regarding the existence of export subsidization.152 The Appellate Body reversed the
panel’s intermediate conclusion that the GSM-102 program would be run at a net cost to the
government on the ground that the panel had not accorded sufficient weight to data provided by
the United States concerning re-estimates of initial subsidy estimates for the three challenged
programs for 1992-2006.153 The United States had argued that the re-estimates demonstrated that
the programs “were in fact not provided at a net loss to the US Government even before the
United States took any measures to comply with the DSB recommendations” in the case.154 At the
same time, the Appellate Body upheld the panel’s ultimate conclusion that the revised program
fell within the scope of item (j) and thus constituted an export subsidy, determining that the
panel’s findings on the structure, design, and operation of the revised GSM 102 program provided
“a sufficient evidentiary basis for the conclusion that it is more likely than not that … [it] operates
at a loss.”155
150 Id. para. 14.133.
151 Id. para. 14.131.
152 Appellate Body Report, United States—Subsidies on Upland Cotton, Recourse to Article 21.5 of the DSU by
Brazil,WT/DS267/AB/RW (June 2, 2008)[hereinafter U.S. Cotton Article 21.5 AB Report].
153 Id. paras. 279-295.
154 See U.S. Cotton Article 21.5 Panel Report, supra note 146, para. 14.78.
155 U.S. Cotton Article 21.5 AB Report, supra note 152, paras. 321-322. The Appellate Body upheld the panel’s
comparison of OECD MPRs with GSM-102 fees as an element of the panel’s analysis because, in the Appellate Body’s
view, the comparison was used only as evidence of the magnitude of the difference between the two and thus possibly
indicative of the inadequacy of the GSM-102 fees to the program’s long-term costs and losses, and was not relied upon
to make a definitive determination as to whether the criterion of item (j) of the Illustrative List was met. Id. paras. 302-
307.
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The WTO Dispute Settlement Body adopted the reports on June 25, 2008.
2008 Farm Bill Amendments
On June 18, 2008, a week before the compliance panel and appellate reports were adopted,
President George W. Bush signed the Food, Conservation, and Energy Act of 2008, P.L. 110-246
(“2008 farm bill”), a statute containing several provisions relevant to the pending dispute. Section
3101 of the act made statutory changes affecting U.S. export credit guarantee programs, changes
that the bill Managers believed “satisfy U.S. commitments to comply with the Brazil cotton case
with regard to the export credit programs.”156 The act repealed the GSM-103 intermediate export
credit guarantee program and the Supplier Credit Guarantee Program (SCGP)157 and eliminated
the 1% cap on origination fees under the GSM-102 program, a requirement contained in 7 U.S.C.
§ 5622(b).158 While leaving the GSM-102 program intact, Congress placed new requirements on
the Secretary of Agriculture in administering the program, including “work[ing] with industry to
ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees
cover, but do not exceed, the operating costs of and losses over the long term.”159 The phrase
“long term” is defined in the statute as “a period of 10 or more years.”160 In addition, Congress
directed the Commodity Credit Corporation to make available for GSM-102 programs each year
through FY2012 a maximum $5.5 billion, or “the amount of guarantees that can be supported by
$40 billion in budget authority (plus any budget authority for prior years) – whichever amount is
less.”161
In addition, Congress reauthorized counter-cyclical payments and marketing assistance loans for
cotton and other commodities for the 2008-2012 crop years.162 As discussed earlier, these two
programs, as authorized in the 2002 farm bill, were successfully challenged by Brazil as
actionable subsidies in the pending WTO case and are the basis of one of Brazil’s retaliation
requests.
Arbitration of Brazil’s Retaliation Request
In August 2008, following the DSB’s adoption of the compliance panel and Appellate Body
reports finding the U.S. not to be in full compliance in the case, Brazil requested that the
arbitrations on its retaliation proposals be resumed. Brazil lowered its retaliation requests in
March 2009 to approximately $2.5 billion consisting of three components: (1) a one-time
countermeasure of $350 million based on payments made under the repealed Step 2 program
156 Id.
157 Food, Conservation, and Energy Act of 2008 (FCE Act), P.L. 110-246, § 3101(a)(1)(B), (2), repealing Agricultural
Trade Act of 1978, § 202(a)(2),(3), (b), 7 U.S.C. § 5622(a)(2),(3), (b).
158 FCE Act, § 3101(b), amending Agricultural Trade Act of 1978, § 211(b), 7 U.S.C. § 5641(b).
159 FCE Act, § 3101(a)(4), adding Agricultural Trade Act of 1978, § 202(k)(2), 7 U.S.C. § 5622(k)(2).
160 FCE Act, § 3101(a)(4), adding Agricultural Trade Act of 1978, § 202(k)(1), 7 U.S.C. § 5622(k)(1).
161 H.Rept. 110-627 at 758. See FCE Act, § 3101(b), amending Agricultural Trade Act of 1978, § 211(b), 7 U.S.C. §
5641(b). As stated in the conference report, it was expected that USDA would be able to make available
“approximately $4 billion annually in export credit guarantees on $40 million in budget authority.” H.Rept. 110-627 at
728. Regarding the export credit guarantee authorization, see generally CRS Report RL33553, Agricultural Export and
Food Aid Programs, by Charles E. Hanrahan, at 8.
162 FCE Act, §§ 1104, 1201-1204. See generally CRS Report RL34594, Farm Commodity Programs
in the 2008 Farm Bill, by Jim Monke.
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during the 13-month period between the compliance deadline of July 1, 2005, set by the original
panel, and August 1, 2006, the date that the statutory repeal entered into force; (2) an annual
countermeasure of approximately $1.2 billion for prohibited subsidies resulting from the GSM-
102 export credit guarantee program; and (3) an annual countermeasure of approximately $1
billion based on actionable subsidies resulting from marketing loan and countercyclical
payments.163
In an arbitral proceeding involving prohibited subsidies, the Arbitrator determines whether the
proposed countermeasures are “appropriate,” that is, not “disproportionate in light of the fact that
the subsidies … are prohibited.”164 Where actionable subsidies are involved, the Arbitrator
determines whether the proposed countermeasures are “commensurate with the degree and nature
of the adverse effects determined to exist.”165
On August 31, 2009, the Arbitrator issued two reports – the first addressing retaliation for
prohibited subsidies, the second for actionable subsidies.166 The Arbitrator rejected Brazil’s
request for a one-time payment based on the Step 2 program; lowered the other amounts proposed
by Brazil to a total $ 297.4 million annually for both prohibited and actionable subsidies (based
on the FY2006 figures); and set out conditions under which Brazil could suspend WTO
obligations involving U.S. services and intellectual property, or “cross-retaliate.” Among other
findings, the Arbitrator rejected U.S. arguments that, with the expiration of the statutory authority
for the marketing loan and countercyclical payments at issue in the underlying WTO proceedings,
Brazil could not pursue countermeasures for serious prejudice resulting from payments under
these programs. The Arbitrator’s decisions are final and not subject to appeal.
Prohibited Subsidies
In examining Brazil’s request for countermeasures for the prohibited subsidies, the Arbitrator first
concluded that there was no legal basis for Brazil’s request for a one-time payment based on past
disbursements under the Step 2 program. The Arbitrator found that countermeasures are an
exceptional temporary remedy aimed at inducing compliance and that the United States had in
fact complied with respect to this program.167
Second, the Arbitrator determined that Brazil could suspend concessions amounting to $147.4
annually for the continued operation of the GSM-102 export credit guarantee program, based on
GSM-102 transactions in FY2006. As summarized by the Arbitrator, Brazil determined the trade-
distorting impact of the program and thus the level of “appropriate” countermeasures for the
prohibited subsidy by determining “the interest rate discounts secured by creditworthy and
163 See United States—Subsidies on Upland Cotton, Arbitration under Article 22.6 of the DSU and Article 7.10 of the
SCM Agreement, Oral Statement of the United States, Mar. 2, 2009, paras. 5, 60, at http://www.ustr.gov/webfm_send/
585; United States—Subsidies on Upland Cotton, Arbitration under Article 22.6 of the DSU and Article 7.10 of the
SCM Agreement, Oral Statement of the United States, Mar. 3, 2009, para. 6, at http://www.ustr.gov/webfm_send/587.
164 SCM Agreement art. 4.11 and n.10.
165 SCM Agreement art. 7.10.
166 Decision by the Arbitrator, United States—Subsidies on Upland Cotton, Recourse to Arbitration by the United
States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS267/ARB/1 (Aug. 31,
2009)[hereinafter U.S. Cotton Arbitrator’s Decision I]; Decision by the Arbitrator, United States—Subsidies on Upland
Cotton, Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM
Agreement, WT/DS267/ARB/2 (Aug. 31, 2009)[hereinafter U.S. Cotton Arbitrator’s Decision II].
167 U.S. Cotton Arbitrator’s Decision I, supra note 166, paras. 3.5-3.64.
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uncreditworthy foreign obligors backed by GSM-102 guarantees and estimating the additional
export sales obtained by US exporters as a result of these discounts.”168 Brazil referred to these
two factors as the “interest rate subsidy” and “additionality.” The Arbitrator modified Brazil’s
calculations, however, “in order to more accurately calculate the trade-distorting impact of the
GSM-102 programme on Brazil” and, taking into account other determinations it had made,
reduced Brazil’s original proposal to the figure stated above.169
The Arbitrator found that $147.4 figure was variable, however, and could change annually
depending on the total of amount of GSM-102 transactions in the most recently concluded fiscal
year. The Arbitrator set out a formula that Brazil would need to use to determine the amount of
permissible sanctions for a given year due to these payments, noting that “the United States does
not dispute that it would be permissible for the level of appropriate countermeasures to be
determined through a formula, provided that this formula was sufficiently well defined so as to
make it applicable in a transparent and predictable manner.”170
Third, the Arbitrator determined that Brazil could cross-retaliate in order to remedy the prohibited
subsidy resulting from the GSM-102 payments, but set conditions on Brazil’s use of this remedy.
The Arbitrator stated that “Brazil has at its disposal a sufficient range of imports of goods,
including consumer goods, from the United States so as to enable it to suspend concessions in the
area of trade in goods alone, without causing itself such economic harm so as to render such
suspension ‘not practicable or effective,’” the standard set out in the Dispute Settlement
Understanding, taking into account the cumulated $294.7 million in countermeasures the
Arbitrator had determined Brazil could impose for both prohibited and actionable subsidies in this
case.171 Based on Brazil’s imports of consumer goods for 2007, the Arbitrator identified at least
$409.7 million of such goods that could be the subject of countermeasures.172 For certain
consumer goods (food, medical products, and arms), the Arbitrator adopted a benchmark of 20%,
finding that a U.S. import share of the good of less than this amount “constitutes a reasonable
168 Id. para. 4.203.
169 Id. para. 4.278. See id. paras. 4.203-4.278 for a full discussion of this portion of the decision.
170 Id. para. 4.279.
171 Id. paras. 5.198, 5.200; see id. paras. 5.61-5.201 for full discussion of this issue. Along with determining whether or
not retaliating solely in trade in goods would be “practicable or effective,” the Arbitrator also needed to determine
whether Brazil met the second requirement for cross-retaliation, that is, whether it had adequately shown that the
“circumstances are serious enough” to warrant suspension of concessions under another agreement. Brazil maintained
that this was the case because of the continued maintenance and expansion of U.S. subsidy programs, their long term
distortion of world markets, and the disproportionately costly effects on the Brazilian economy and the welfare of the
Brazilian population if countermeasures were confined to trade in goods. Id. para. 5.216. The Arbitrator found that
Brazil’s determination was “reasonable in light of the circumstances of the case.” Id. paras. 5.217-5.218. While the
Arbitrator was not persuaded that the “very granting” of the subsidies by the United States was sufficient to create the
required “serious enough” circumstances, the Arbitrator agreed with Brazil that “the specific design and structure of the
subsidies at issue, as they have been maintained over a significant period of time, is such as to have created an artificial
and persisting competitive advantage for US producers over all other operators, and that this has a significant trade-
distorting impact, not just on the US domestic market, but on the world market in these products.” Id. para. 5.219.
Adding to this the amplified trade-distorting impact of the increased payments under GSM-102 program during the
current credit crisis, a situation also cited by Brazil, the Arbitrator found that these factors in combination supported the
required determination. Id. para. 5.220. In addition, the Arbitrator agreed that the disproportionate adverse impact of
suspending concessions or other obligations on a Member’s economy was also a relevant consideration. The Arbitrator
found that the fact that countermeasures involving trade in goods would no longer be “practicable or effective” for
Brazil if a specified monetary threshold is reached would in this case “also directly contribute to the circumstances
being ‘serious enough’ to justify recourse to suspension under another agreement.” Id. para. 5.221.
172 Id. para. 5.201.
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threshold by which to estimate the extent to which Brazil may be able to find alternative sources
of supply” for the product.173 This annual goods “threshold” is to be updated, however, under a
formula set out by the Arbitrator, to take into account any change in Brazil’s total imports of U.S.
consumer goods for the same year for which the annual countermeasures are determined.174
Under the decision, if the total level of countermeasures for prohibited and actionable subsidies
that Brazil is entitled to for a given year exceeds the updated goods threshold for that year, Brazil
may cross-retaliate, i.e., suspend WTO obligations involving U.S. services, intellectual property
rights, or both, in excess of the goods threshold to the full amount of permissible sanctions for the
year. If permissible sanctions do not exceed the goods threshold, however, Brazil may only
suspend concessions on trade in goods.
Actionable Subsidies
The United States preliminarily argued in the arbitration involving actionable subsidies that, with
the expiration of the 2002 farm bill, payments would no longer be made under the marketing loan
and countercyclical payments programs at issue in Brazil’s WTO challenge and that, because the
challenged measures were removed, there was no longer a legal basis for Brazil to impose
countermeasures with regard to these payments. Brazil argued that because these programs were
reauthorized in the 2008 farm bill in a manner that did not materially change them as they applied
to cotton, the problematic payments would continue under the same conditions and criteria as the
payments subject to the earlier WTO proceedings. Until the United States achieved what the
WTO Appellate Body deemed “substantial compliance,” Brazil claimed that it had the right to
pursue countermeasures for continuing present serious prejudice. The United States responded
that Brazil’s conclusions about payments that might be made under the 2008 farm bill and their
price effect were speculative.
In assessing whether the United States had complied, the Arbitrator quoted from the Appellate
Body report referred to by Brazil, in which the Appellate Body had stated that for purposes of
determining whether a WTO Member has complied in a case, “substantive compliance is
required, rather than formal removal of the inconsistent measure.”175 Informed by this principle,
the Arbitrator compared the 2002 and 2008 farm bills and concluded that the replacement of the
2002 provisions with new measures that are “essentially the same” as those found to be WTO-
inconsistent was not a basis for finding that the United States had complied, if the United States
had not shown that “the inconsistencies that were the object of the [prior WTO] proceedings have
been remedied.”176 Seemingly alluding to possible activity under the reauthorized CCP and
marketing loan provisions, the Arbitrator noted that “any uncertainty about what might happen in
the future” could not dissuade the Arbitrator from “assessing the adverse effects determined to
exist in relation to a measure which did exist and which, on the facts, continues to exist.”177 The
Arbitrator thus stated that “although the legal basis for the granting of ML and CCPs has been
modified, such payments continue to be offered and may continue to be made under a new legal
173 Id. para. 5.181.
174 Id. paras. 5.201, 5.230-5.236.
175 U.S. Cotton Arbitrator’s Decision II, supra note 166, para. 3.19, quoting Appellate Body Report, United States-
Continued Suspension of Obligations in the EC – Hormones Dispute, para. 308, WT/DS320/AB/R (Oct. 16, 2008).
176 Id. paras. 3.25-3.28.
177 Id. para. 3.28
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basis.”178 The Arbitrator concluded that, to the extent that it was entitled to review whether
compliance has been achieved in a case (a task it earlier admitted was not normally the task of
arbitrators), it would not have adequate grounds to conclude that the United States had
complied.179 Further noting that the findings in the underlying WTO proceedings related to the
payments under the 2002 farm bill and not to the farm bill as such, the Arbitrator concluded that
the United States had failed to establish that Brazil no longer had a legal basis to seek
countermeasures for payments under these two programs.180
The Arbitrator ultimately determined that Brazil could impose countermeasures for the actionable
subsidies in an amount not to exceed $147.3 million annually.181 The Arbitrator arrived at this
figure by first determining that the world cotton price would have been 9.38 % higher but for the
U.S programs, with adverse effects for the rest of the world of $2.905 billion in marketing year
(MY) 2005. The Arbitrator further found that this overall amount needed to be apportioned to
Brazil, basing this apportionment on Brazil’s 5.1% share of worldwide cotton production for the
same marketing year, or $147.3 million.
The Arbitrator also found that Brazil may cross-retaliate with regard to the actionable subsidies
only if the total amount of permissible countermeasures for a given year (i.e., $284.7 million, as
adjusted) exceeds the monetary import threshold (i.e., $409.7 million, as adjusted).182 Since
annual countermeasures for the actionable subsidies is fixed at $147.3 million, the use of cross-
retaliation will depend on annual increases in countermeasures due to increased U.S. payments
under the prohibited subsidy, i.e., the GSM-102 export credit guarantee program.
Recent Developments
After the August 2009 Arbitrator’s reports on Brazil’s retaliation requests were issued, Brazil
requested that the United States provide it with data on GSM-102 transactions for FY2008 and
FY2009 and the most recent data on U.S. export prices of products for which the United States
had made export subsidy reduction commitments (“scheduled” products), namely, pig meat,
poultry meat, and rice, for 2008 and 2009.183 Brazil’s request was based on language in the
Arbitrator’s report directing the United States to provide such data to Brazil to enable it to
calculate its annual countermeasures under the formula set out by the Arbitrator in Annex 4 of the
arbitral report.
On November 9, 2009, Brazil published a preliminary list of over 200 U.S. products, primarily
consumer and agricultural goods, that could potentially be subject to increased tariffs.184 On
November 19, 2009, Brazil received authorization from the WTO Dispute Settlement Body to
suspend WTO tariff concessions and other obligations owed the United States in an amount, and
with respect to types of trade, consistent with the August 2009 Arbitrator’s decisions.185 WTO
178 Id. para. 3.29.
179 Id. paras. 3.30.
180 Id. paras. 3.31-3.32.
181 U.S. Cotton Arbitrator’s Decision II, supra note 166, paras. 4.193-4.195.
182 Id. paras. 5.230-5.233.
183 Communication from Brazil, United States – Subsidies on Upland Cotton,WT/DS267/40 (Sept. 30, 2009).
184 Brazil to Seek WTO Okay for Cotton Sanctions, Issues List of Possible U.S. Imports Targeted, 26 Int’l Trade Rep.
(BNA) 1552 (Nov. 12, 2009).
185 WTO News Item, DSB authorizes Brazil countermeasures in “cotton” case, established “COOL” and poultry panels
(continued...)
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dispute settlement rules do not require that Brazil impose these measures once authorized or that
it do so by a given date. The United States stated at the DSB meeting that it intended to comply
and hoped that a resolution of the dispute could be reached, obviating the need for Brazil to
impose the authorized measures.186
As Brazil prepared for and pursued its retaliation request, the USDA made various administrative
changes to the GSM-program for FY2010 that tightened prior program requirements. On
September 21, 2009, the Commodity Credit Corporation and the Foreign Agricultural Service
solicited comments from stakeholders on revisions to the GSM-102 fee rate schedule that were
being proposed in order to implement requirements in the 2008 farm bill for the development of a
risk-based fee structure for the program.187 CCC’s goals in proposing the revisions were “to create
fees more commensurate with risk, generate additional program revenue in fiscal (FY) 2010 to
offset program costs, and consider allowing program participation by riskier countries.”188 The
fee rate schedule for GSM-102 program dated November 17, 2009, posts fees that exceed those
originally proposed in September.189 In addition, maximum credit terms for the FY2010 program
will be based on the risk category of the obligor country associated with the CCC payment
guarantees, with shorter repayment terms or “tenor” as country risk category increases.190 Under
the program, the maximum allowable tenor for the category of countries with the highest risk is
currently one year.191 The CCC has so far allocated $1.2 billion for the FY2010 program.192
As an additional option for resolving the cotton dispute, some have suggested that the United
States request a ruling by a compliance panel that the objectionable elements of the prohibited
subsidy, i.e., the GSM-102 program, have been eliminated.193 To date, there has been no official
indication that this option will be pursued194 and, even were a compliance panel established,
(...continued)
(Nov. 19, 2009), at http://www.wto.org/english/news_e/news09_e/dsb_19nov09_e.htmPhttp://www.wto.org/english/
news_e/news09_e/dsb_19nov09_e.htm.
186 Statements by the United States at the DSB Meeting, Item 7, Nov. 19, 2009, at http://geneva.usmission.gov/2009/
11/19/1119dsb.
187 Solicitation of Input from Stakeholders on Revised Fees for the Export Credit Guarantee (GSM-102) Program, 74
Fed. Reg. 48014 (Sept. 21, 2009).
188 Id. at 48015.
189 USDA, Foreign Agricultural Service, GSM-102 Guarantee Fee Rate Schedule, updated on Nov. 17, 2009, at
http://www.fas.usda.gov/excredits/gsm102fees.html.
190 News Release, USDA, Foreign Agricultural Service, Notice to GSM-102 Program Participants, at
http://www.fas.usda.gov/scriptsw/PressRelease/pressrel_dout.asp?PrNum=0280-09; USDA, Foreign Agricultural
Service, Country Risk Ratings (for the GSM-102 Program), updated on Dec. 7, 2009, at http://www.fas.usda.gov/
excredits/countryrisk.html.
191 Id.
192 USDA, Foreign Agricultural Service, FY 2010 GSM-102 Announcements, As of 12/08/09, at
http://www.fas.usda.gov/excredits/ecgp.asp.
193E.g., Letter from Export Credit Working Group (ECWG) to USTR Ronald Kirk, Sept. 22, 2009, and attached ECWG
Press Release, Sept. 2, 2009, at http://www.nopa.org/content/newsroom/2009/
ECWG%20to%20Amb%20Kirk_Mtg%20Request%20Letter_Press%20Release_9-22-09.pdf. See also Kirk: U.S. Will
Work Hard for Negotiated Solution to Brazil Cotton Dispute, INSIDE U.S. TRADE, Dec. 4, 2009, at 1 [hereinafter Kirk];
USTR Under Pressure to Bring Cotton Compliance Panel After Ruling, INSIDE U.S. TRADE, Sept. 4, 2009, at 1; U.S.
Prepared to Discuss with Brazil Settlement of Dispute Over Cotton Subsidies, Daily Rep. for Executives (BNA), Sept.
2, 2009, at A-22.
194 See Kirk: U.S. Will Work Hard for Negotiated Solution to Brazil Cotton Dispute, INSIDE U.S. TRADE, Dec. 4, 2009,
at 1.
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Brazil would not be precluded from imposing countermeasures during a compliance panel
proceeding.
While Brazil has not definitively stated that it will impose retaliatory measures as of a given date,
the Chamber of Foreign Trade of Brazil (CAMEX) stated on December 15, 2009, that a final
decision regarding the products subject to retaliation and the total amount of retaliation to be
imposed would be announced in February 2010.195 Originally expected in December 2009, the
announcement is reportedly being delayed because Brazil has yet to review full FY2009 data
regarding the GSM-102 program being provided by the United States.196 On December 21, 2009,
Brazil reported to the WTO Dispute Settlement Body that, based on U.S.-supplied fiscal and
calendar year data for 2008, it is entitled to annual retaliation of $829.3 million, with $561
million covering trade in goods and $268.3 million covering other sectors and agreements.197
If applied, Brazil’s countermeasures would be subject to Article 22.8 of the WTO Dispute
Settlement Understanding, which provides that the “suspension of concessions or other
obligations shall be temporary and shall only be applied until such time as the measure found to
be inconsistent with a covered agreement has been removed … or a mutually satisfactory
resolution is reached.”198 Given the variables affecting the actual level of countermeasures that
may be imposed by Brazil in a particular year, the United States would have the option, albeit a
time-consuming one, of challenging any such measures in a new WTO dispute settlement
proceeding if it believed that they exceeded the levels that the Arbitrator deemed to be proper in
this case.199 For the present, it appears unlikely that a settlement will be reached in the case.200
Measures Affecting Cross-Border Supply of Gambling and Betting
Services (DS285)
Antigua and Barbuda (Antigua) requested consultations with the United States in March 2003
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).201
195 Brazil Sets February Time Frame to Decide Key Elements of Cotton Retaliation, INSIDE U.S. TRADE, Dec. 18. 2009,
at 6; Brazil Delays Final List of U.S. Goods To Be Sanctioned in WTO Cotton Dispute, 26 Int’l Trade Rep. (BNA) 1777
(Dec. 24, 2009)[hereinafter Brazil Delays Final List].
196 Brazil Delays Final List, supra note 196.
197 WTO News Item, DSB establishes panel to examine China’s export restrictions of raw materials (Dec. 21, 2009), at
http://www.wto.org/english/news_e/news09_e/dsb_21dec09_e.htm [hereinafter WTO News Item (Dec. 21, 2009)];
Brazil Says Entitled to Impose $829 Million in Annual Sanctions on U.S. in Cotton Case, 26 Int’l Trade Rep. (BNA)
1776 (Dec. 24, 2009).
198 Regarding the difficulties that may be encountered in the removal of sanctions where disagreement over compliance
remains, see supra note 4.
199 Note U.S. Cotton Arbitrator’s Decision I, supra note 166, para. 5.235; U.S. Cotton Arbitrator’s Decision II, supra
note 166, para. 5.237.
200 See Brazil, U.S. Remain in Stalemate Over Cotton Case Settlement, INSIDE U.S. TRADE, Dec. 18, 2009, at 7; Settling
with Brazil on Cotton, WASH.TRADE DAILY, Dec. 15, 2009.
201 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).
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As part of their GATS obligations, WTO Members make specific commitments involving
particular service sectors, subject to any terms, limitations, or conditions Members may add.
Commitments are made with respect to four means or “modes” by which services may be
supplied, including supply from the territory of one Member into the territory of any other
Member, which is the mode of supply at issue in this case. Each Member’s sectoral commitments
are set out in a Schedule of Specific Commitments, which is attached to the GATS and considered
an integral part of the agreement. GATS market access and national treatment apply only with
respect to scheduled commitments. These obligations are set out in GATS Articles XVI and XVII,
respectively. All GATS obligations are subject to various general exceptions set out in Article
XIV.
Among other market access obligations, Article XVI(a) of the GATS prohibits a WTO Member,
in sectors where it has scheduled a specific commitment, 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.” In addition, 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.”
Panel and Appellate Body Reports
Although 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.202 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);203 the
state laws were those of Louisiana, Massachusetts, South Dakota, and Utah. The panel found that
by preventing one, several, or all means of delivering gambling and betting services, the statutes
constituted impermissible market access 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
202 Panel Report, United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services,
WT/DS285/R (Nov. 10, 2004) [hereinafter U.S. Gambling Panel Report].
203 The Wire Act, P.L. 87-216, § 2, 18 U.S.C. § 1084, prohibits the transmission of wagering information. The Travel
Act, P.L. 87-228, § 1(a), 18 U.S.C. § 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), 18 U.S.C. § 1955, prohibits illegal gambling businesses, as defined in
the statute.
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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, such 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.204
In an appeal by both parties to the dispute, 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.205 Though the AB upheld the panel’s
finding of a violation of GATS market access obligations,206 it reversed the panel on its finding
that the United States could not justify the federal measures under GATS exceptions. 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.
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.207 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.208
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.209 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.210 Second, it
204 See U.S. Gambling Panel Report, supra note 202, para. 6.578.
205 Appellate Body Report, United States—Measures Affecting the Cross-Border Supply of Gambling and Betting
Services, WT/DS285/AB/R (Apr. 7, 2005)[hereinafter U.S. Gambling AB Report].
206 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. paras. 238, 251.
207 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), the GATS exception for measures necessary to enforce
GATS-consistent laws and regulations. Id. paras. 337, 373(D)(iv)(b).
208 Id. paras. 338-372, 373(v),(vi).
209 Interstate Horseracing Act of 1978 (IHA), P.L. 95-515, 15 U.S.C §§ 3001-3006. See U.S. Gambling AB Report,
supra note 205, para. 361.
210 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
(continued...)
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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.211 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.212
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.”213 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.
Responses of the United States and Antigua
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.214 After the disputing parties had failed to agree on a reasonable
period of time for compliance, Antigua requested that the compliance period be arbitrated.215 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 “U.S. authorities intend to seek further clarification through legislation.”216
The United States sought a 15-month compliance period, stressing that such legislative action
would be “technically complex.”217 In an award made public August 19, 2005, the Arbitrator
(...continued)
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.”
211 IHA, § 3(3), 15 U.S.C § 3002(3).
212 Gambling AB Report, supra note 205, para. 361 (footnotes omitted)(emphasis in original).
213 Id. para. 364 (emphasis in original).
214 Dispute Settlement Body, Minutes of Meeting, May 19, 2005, at 9, WT/DSB/M/189 (June 17, 2005).
215 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).
216 Submission of the United States, United States—Measures Affecting the Cross-Border Supply of Gambling and
Betting Services (WT/DS285): Arbitration under Article 21.3(c) of the DSU, at 4 (July 12, 2005), at
http://www.ustr.gov/webfm_send/768.
217 The United States argued as follows regarding the complexity 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
(continued...)
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determined that the compliance period would last 11 months and two weeks from the date of
adoption of the panel and AB reports, thus expiring April 3, 2006.218
Legislative action was not taken before the deadline; instead, the United States stated in a status
report 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.219
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.220
(...continued)
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 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 (2005-2006), 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.
218 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).
219 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). Internet Gambling Prohibition Act of 2006:
Hearing Before the Subcomm. on Crime, Terrorism, and Homeland Security of the H. Comm. on the Judiciary, 109th
Cong. 14 (2006)(statement of Bruce G. Ohr, Chief, Organized Crime and Racketeering Section, Criminal Division,
U.S. Department of Justice), at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_house_hearings&
docid=f:26913.pdf.
220 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 Dispute Settlement Body, Minutes of Meeting, Apr. 21, 2006, at 8-10,
WT/DSB/M/210 (May 30, 2006).
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Compliance Proceedings
Antigua requested 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 same position had been
maintained by the United States during the course of the dispute and was subsequently rejected
by the panel and Appellate Body. Antigua 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.221 The compliance panel was established July 19, 2006.
On March 30, 2007, the compliance panel issued a report adverse to the United States, finding
that the United States had not taken any measures to comply in the case and thus left the statutory
ambiguity cited by the panel unresolved.222 The panel noted that legislation was not the only
means of compliance in the proceeding and that “other forms of administrative action, or judicial
action, [could be used] to bring the measures into conformity.”223 The United States did not
appeal the report, which was adopted by the DSB on May 22, 2007.
In early May 2007, the Office of the USTR announced that the United States intended to invoke
Article XXI of the GATS “in order to clarify its commitment involving ‘recreational services,’” in
order to bring the United States into compliance in the dispute and to resolve the dispute
permanently.224 The modification would explicitly exclude gambling and betting services from
221 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. 109-347, Title VIII. The statute prohibits gambling businesses 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 RS22749, Unlawful Internet
Gambling Enforcement Act (UIGEA) and Its Implementing Regulations, by Charles Doyle and Brian T. Yeh
[hereinafter CRS Report RS22749]; CRS Report RS21984, Internet Gambling: An Abridged Overview of Federal
Criminal Law, by Charles Doyle.
222 Panel Report, 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/RW (Mar. 30, 2007)[hereinafter U.S. Gambling
Article 21.5 Report]. Among other things, the panel concluded that enactment of the UIGEA, see supra note 221, did
not resolve any of the issues involved in the dispute, citing the statute’s express exclusion of activities allowed under
the Interstate Horseracing Act and its “sense of Congress” statement that UIGEA “is not intended to resolve any
existing disagreements over how to interpret the relationship between the IHA and other Federal statutes.” U.S.
Gambling Article 21.5 Report, supra, paras. 6.130-6.135.
223 Id. para. 6.90
224 Press Release, Office of the U.S. Trade Representative, Statement of Deputy United States Trade Representative
John K. Veroneau Regarding U.S. Actions under GATS Article XXI (May 4, 2007)[hereinafter USTR Press Release,
(continued...)
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this broader services category. With Antigua’s subsequent pursuit of retaliation in the underlying
WTO dispute, the United States became engaged in two WTO proceedings, one involving
negotiations with various WTO Members under Article XXI on compensation for changes in the
U.S. GATS schedule, and the other involving arbitration of Antigua’s request to impose
countermeasures against the United States for non-compliance with the WTO decision.
Negotiations on Compensation under GATS Article XXI
Article XXI allows a WTO Member to modify or withdraw any commitment in its GATS
Schedule, but any WTO Member whose GATS benefits may be affected by the proposed change
has a right to negotiate a compensation agreement with the Member making the change. In
negotiating an agreement, Members must try to maintain “a general level of mutually
advantageous commitments” that are as favorable to trade as was the case with the Schedule in its
original form. In its May 2007 announcement, USTR stated that in negotiating the GATS, the
United States “did not make it clear” that its international commitments to open its market to
recreational services did not extend to gambling and that since “no WTO Member either
bargained for or reasonably could have expected the United States to undertake a commitment on
gambling, there would be very little, if any basis for ... [compensation] claims.”225
Antigua, Australia, Canada, Costa Rica, European Union (EU), India, Japan, and Macao
requested consultations with the United States by June 22, 2007, the deadline for WTO Members
to notify the United States that their interests may be affected by the U.S. Schedule
modification,.226 The following month USTR filed a notice in the Federal Register asking for
public comment on the requested compensation negotiations.227 As provided in GATS procedural
rules, negotiations were expected to conclude within three months, i.e., toward the end of
September 2007, but the parties agreed on two extensions with a final deadline of January 14,
2007.228 On December 17, 2007, the United States and the EU announced that they had reached a
bilateral compensation agreement providing EU service suppliers with improved market access in
the U.S. postal and courier, research and development, warehouse and storage, and technical
testing services sectors.229 The United States also announced that it had reached agreement with
(...continued)
May 4, 2007], at http://www.ustr.gov/about-us/press-office/press-releases/archives/2007/may/statement-deputy-united-
states-trade-represen; Press Release, U.S. Diplomatic Mission to the United Nations in Geneva , Statements by the
United States at the WTO Dispute Settlement Body Meeting, Geneva, May 22, 2007, at http://www.us-mission.ch/
Press2007/0522DSB.html.
225 USTR Press Release, May 4, 2007, supra note 225.
226 See Request for Public Comment on the Negotiations for Compensatory Adjustments to U.S. Schedule of Services
Commitments Under WTO General Agreement on Trade in Services (GATS) in Response to Notice of the United
States of Intent to Modify Its Schedule Under Article XXI of the GATS, 72 Fed. Reg. 38846 (July 16,
2007)[hereinafter USTR Request for Public Comment]; WTO Council on Trade in Services, Procedures for the
Implementation of Article XXI of the General Agreement on Trade in Services (GATS)(Modification of Schedules),
para. 3, S/L/80 (Oct. 29, 1999)[hereinafter GATS Article XXI Procedures].
227 USTR Request for Public Comment, supra note 226.
228 U.S. Extends Gambling Negotiations on Compensation with Claimants, INSIDE U.S. TRADE, Oct. 26, 2007, at 9
[hereinafter U.S. Extends Negotiations]. See GATS Article XXI Procedures, supra note 226, para. 4.
229 Office of the U.S. Trade Representative, Statement by USTR Spokeswoman Gretchen Hamel on Gambling (Dec.
17, 2007)[hereinafter USTR Statement on Gambling Case (Dec. 17. 2007)]; Office of the U.S. Trade Representative,
Statement on Internet Gambling (Dec. 21, 2007); European Union, News Release No. 128/17, EU and US Agree on
Compensation in WTO for Loss of Trade Opportunities in US Gambling Sector (Dec. 17, 2007), at
http://www.eurunion.org/News/press/2007/20070128.htm.
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Canada and Japan as well.230 Australia had reportedly settled outstanding issues with the United
States several months earlier and had withdrawn from the negotiations.231
Since the United States had not agreed on compensation with Antigua, Costa Rica, India, or
Macao by the end of the negotiating period, these Members had a right to request that
compensation be arbitrated, provided that they made their request within 45 days after deadline,
i.e., by January 28, 2008. If none of these Members requested arbitration, the United States would
then be free to implement its Schedule modification, as originally proposed. Antigua and Costa
Rica each filed timely arbitration requests.232 India and Macao reportedly did not choose this
option and thus effectively abandoned their claims.233 In February 2008, Costa Rica reached
agreement with the United States on compensation and as a result withdrew its request to
arbitrate.234 Antigua was thus the only remaining Member pursuing arbitration under Article XXI.
Under GATS rules, any arbitral panel established under Article XXI would be expected to issue
its report within three months after the panel is appointed.235 Once a report is issued, the United
States would not be able to modify its GATS Schedule until it made compensatory adjustments in
conformity with the arbitration. If the United States modified its Schedule without complying
with the arbitral decision, Antigua could modify or withdraw substantially equivalent benefits in
conformity with the arbitral findings. GATS rules would allow the Antigua to apply any such
change only to the United States, notwithstanding the general most-favored-nation obligation in
GATS Article II.
Antigua’s Retaliation Request
In the WTO dispute itself, Antigua has requested authorization from the DSB to impose $ 3.4
billion in countermeasures against the United States for non-compliance, primarily by suspending
obligations owed the United States under the Agreement on Trade-Related Intellectual Property
Rights.236 The United States objected to the request, challenging both the level of suspension of
concessions and Antigua’s compliance with DSU principles and procedures governing a WTO
Member’s consideration of which concessions to suspend.237 Because of the U.S. objection,
230 USTR Statement on Gambling Case (Dec. 17, 2007), supra note 229.
231 U.S. Extends Negotiations, supra note 228; U.S. Japan Reach WTO Settlement on Compensation for Gambling
Claim, Daily Report for Executives (BNA), Sept. 28, 2007, at A-29; U.S. Compensation Package for WTO Members
Unlikely to Satisfy Antigua, INSIDE U.S. TRADE, at Aug. 24, 2007, at 1.
232 Antigua, Costa Rica Request Arbitration on Compensation in U.S. Gambling Dispute, 25 Int’l Trade Rep. (BNA)
166 (Jan. 31, 2008).
233 Id.; Costa Rica Drops Gambling Arbitration Claim in WTO Against U.S. After Compensation Deal, 25 Int’l Trade
Rep. (BNA) 355 (Mar. 6, 2008)[hereinafter Costa Rica Drops Claim].
234 Costa Rica Drops Claim, supra note 233.
235 See GATS Article XXI Procedures, supra note 226, paras. 7-19.
236 Recourse by Antigua and Barbuda to Article 22.2 of the DSU, United States—Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/22 (June 22, 2007). Along with obligations under the Agreement
on Trade Related Intellectual Property Rights, Antigua has also proposed possible suspension of GATS concessions
involving telecommunications services. Antigua argues in its request that imposing tariff surcharges on U.S. products
(the most commonly used form of retaliation) or placing added restrictions on U.S. services would have a
“disproportionate adverse impact” on Antigua because any such fees or restrictions would make the goods and services
“materially more expensive” to Antiguan citizens and would have little or no impact on the United States. Antigua also
argues that retaliating solely under the GATS would prevent it from recovering the full amount of trade damage caused
by the U.S. measures.
237 Request by the United States for Arbitration under Article 22.6 of the DSU, United States—Measures Affecting the
(continued...)
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Antigua’s proposal was sent to arbitration. In a ruling issued December 21, 2007, the Arbitrator
determined that Antigua may request authorization from the DSB to suspend concessions under
the TRIPS agreement at a level not to exceed $21 million annually.238 The amount was based on
the Arbitrator’s assumption that the United States would have complied with the ruling by
opening its market to Antiguan providers of remote gambling on horseracing.
Recent Developments
Although Antigua requested arbitration in January 2008 under GATS Article XXI on
compensation owed by the United States because of the U.S. withdrawal of gambling
commitments in its GATS Schedule, there have not been reports that panelists have been
appointed to hear this claim. Moreover, Antigua has not yet requested the WTO Dispute
Settlement Body to authorize its retaliation request as modified by the December 2007
Arbitrator’s report in the original WTO dispute settlement proceeding. In a July 2009 government
press release, the Minister of Finance of Antigua is quoted as stating that “‘[w]hile we may in the
future consider exercising the right to impose sanctions, as of this moment, I am instead looking
forward to meeting with the United States government in the near future and focusing on a
mutually beneficial resolution of the issues raised by the remote gambling case.’”239 The USTR’s
annual report for 2008 also indicates that the parties have been consulting with a view to
achieving “a mutually agreeable resolution” to the dispute.240
A June 10, 2009, European Commission staff report on an investigation under the European
Union (EU) Trade Barriers Regulation, initiated as a result of a complaint submitted by the
London-based Remote Gambling Association, indicates persistent EU concerns over U.S. Internet
gambling regulation and its consistency with U.S. GATS obligations.241 Regarding possible future
action, a fact sheet accompanying the report states as follows: “The report concludes that WTO
action would be justified. However, this is not an automatic consequence. The report does not
include any recommendation for action and also suggests that the issue should be addressed with
the US Administration, with a view to finding an amicable solution.”242 During their July 2009
(...continued)
Cross-Border Supply of Gambling and Betting Services, WT/DS285/23 (July 24, 2007). The United States challenged
both the economic data used by Antigua and its measurement of losses against the hypothetical legalization of all
remote gambling in the United States instead of the legalization of remote gambling on horseracing. The United States
argued that by its calculations Antigua’s trade injury should amount to $500,000 per year and, in any event, no more
than $3.3 million per year. Written Submission of the United States, United States-Measures Affecting the Cross-
Border Supply of Gambling and Betting Services—Arbitration Pursuant to Article 22.6 of the DSU, WT/DS285 (Sept.
19, 2007), at http://www.ustr.gov/webfm_send/769.
238 Decision by the Arbitrator, Recourse to Arbitration by the United States for Arbitration under Article 22.6 of the
DSU, United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/ARB
(Dec. 21, 2007).
239 Antiguan Government Statement on Unauthorized Representations by Zookz.com Regarding its Entertainment
Download Web Site, at http://www.antiguawto.com/pr_zookz_antiguan_gov_jul09.pdf.
240 Office of the U.S. Trade Representative, 2009 TRADE POLICY AGENDA AND 2008 ANNUAL REPORT 83 (Mar. 2009), at
http://www.ustr.gov/about-us/press-office/reports-and-publications/2009/2009-trade-policy-agenda-and-2008-annual-
report.
241 European Commission, Report to the Trade Barriers Regulation Committee (Commission Staff Working Paper),
Examination Procedure Concerning an Obstacle to Trade, Within the Meaning of Council Regulation (EC) No
3286/94, Consisting of Measures Adopted by the United States of America Affecting Trade in Remote gambling
Services at http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143405.pdf.
242 European Commission, Fact Sheet: Trade Barriers Regulation report on US Internet gambling laws (June 10, 2009),
(continued...)
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meeting in Washington, USTR Kirk and EU Trade Ambassador Ashton discussed the EU report
“and its implications for the WTO rights and obligations of the parties concerned.”243
In November 2008, the Treasury Department and the Board of Governors of the Federal Reserve
System issued a final rule implementing the provisions of the 2006 Unlawful Internet Gambling
Enforcement Act (UIGEA), P.L. 109-347, Title VIII.244 The statute prohibits gambling businesses
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 rule became effective on January 19, 2009; the original compliance date of December
1, 2009, was recently extended, however, to June 1, 2010. Various bills have also been introduced
in the 111th Congress to permit Internet gambling under a federal licensing program.245
Pending Cases Involving Administrative Action
Four pending WTO disputes in the compliance phase involve administrative action. These
address the practice of “zeroing,” a methodology used by the Department of Commerce (DOC) in
antidumping proceedings under which, in calculating dumping margins for an imported product,
it disregards non-dumped sales. Two of these cases were brought by the European Union (DS294
and DS350), one by Japan (DS322), and one by Mexico (DS344). These have a resulted in a
broad prohibition on the use of this practice in U.S. antidumping investigations and related
antidumping proceedings.
In response to the first EU challenge, the Commerce Department in early 2007 discontinued the
use of zeroing in the price comparison employed most frequently in original antidumping
investigations and recalculated dumping margins in the investigations cited by the EU under the
revised methodology. The United States has yet to fully comply with the WTO decisions in this
case and in the cases initiated by Japan and Mexico to the extent that the decisions affect the use
of zeroing in other aspects of U.S. antidumping proceedings. WTO compliance proceedings in the
first EU case and Japan’s challenge, concluded in 2009, resulted in findings adverse to the United
States and the complainants may now pursue requests to impose sanctions. In addition, Mexico
initiated compliance proceedings against the United States on August 19, 2009, and a compliance
deadline of December 19, 2009, was established in the second EU challenge. With the United
States having taken limited action to comply with the WTO decision in the second EU challenge,
the United States and the EU have entered into a “sequencing” agreement setting out a procedural
framework for a compliance panel request by the EU.
The United States acted in 2009 to resolve two other disputes in which administrative action was
needed to comply: United States – Measures Related to Shrimp from Thailand (DS343) and
United States – Customs Bond Directive for Merchandise Subject to Anti-
(...continued)
at http://trade.ec.europa.eu/doclib/docs/2009/june/tradoc_143429.pdf.
243 Press Release, Office of the U.S. Trade Representative, U.S. and EU discuss ways forward on bilateral trade issues
(last updated July 14, 2009).
244 73 Fed. Reg. 69382 (Nov. 18, 2008), codified at 31 C.F.R. Part 132; Prohibition on Funding of Unlawful Internet
Gambling, 74 Fed. Reg. 62687 (Dec. 1, 2009)(extension of compliance date).
245 For further information on the UIGEA and proposed legislation, see CRS Report RS22749, supra note 221.
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Dumping/Countervailing Duties (DS345).246 Each of these involved a successful challenge to the
U.S. enhanced customs bond requirement (EBR) for shrimp subject to antidumping duty orders,
with the dispute with Thailand also involving a successful challenge to the U.S. use of zeroing in
determining the original dumping margin for the subject shrimp imports. The United States was
subject to an April 1, 2009, deadline in both disputes for all issues raised.
In January 2009, the United States implemented a Section 129 determination in which the
Commerce Department recalculated the dumping margins for shrimp from Thailand without the
use of zeroing using its modified methodology for original investigations (discussed below). The
recalculation resulted in two de minimis margins, a lower margin for one exporter, and a lower
rate for exporters that were not individually investigated (“all others”rate), effective January 16,
2009. Consequently, antidumping duties were no longer collected for the two exporters with de
minimis rates. 247
In a Federal Register notice published April 1, 2009, U.S. Customs and Border Protection (CBP)
announced that, in response to the two WTO decisions, it was as of that date ending the
designation of shrimp subject to antidumping duty or countervailing duty orders as a “special
category” or “covered case” subject to the EBR and that importers subject to this requirement
could request the termination of any existing continuous bonds and submit a new bond
application.248 CBP did not apply the new policy retroactively to all entries of subject
merchandise calculated using the EBR, which some commenters had argued was necessary to
fully comply with the WTO decision.249 At the WTO Dispute Settlement Body meeting of April
20, 2009, the United States announced the revision of its policy and stated that, with this change,
it had complied with its WTO obligations in each dispute.250 While Thailand and India indicated
at the time that they did not consider the issues raised in the case to be fully resolved and that they
would thus monitor U.S. implementation,251 neither WTO Member appears to have raised the
issue of U.S compliance at subsequent DSB meetings. In August 2009, the U.S. Court of
International Trade ruled that the EBR, in applying only to importers of shrimp subject to
antidumping duties, was arbitrarily and capriciously applied, that it was unreasonable in amount,
and that, thus, individual bond determinations were not in accordance with law. 252 The court
ordered broad relief for shrimp importers, including the recalculation of bonds for earlier time
246 Panel Report, United States—Measures Related to Shrimp from Thailand, WT/DS343/R (Feb. 29, 2008); Panel
Report, United States—Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties,
WT/DS345/R (Feb. 29, 2008); Appellate Body Report, United States—Measures Related to Shrimp from Thailand,
United States—Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties,
WT/DS343/AB/R, WT/DS345/AB/R (July 16, 2008).
247 Implementation of the Findings of the WTO Panel in United States—Antidumping Measure on Shrimp From
Thailand: Notice of Determination Under Section 129 of the Uruguay Round Agreements Act and Partial Revocation
of the Antidumping Duty Order on Frozen Warmwater Shrimp from Thailand, 74 Fed. Reg. 5638 (Jan. 30, 2009).
248 Enhanced Bonding Requirement for Certain Shrimp Importers, 74 Fed. Reg. 14809 (Apr. 1, 2009)[hereinafter April
2009 EBR Notice]. U.S. Customs and Border Protection had proposed this change in January 2009. Enhanced Bonding
Requirement for Certain Shrimp Importers, 74 Fed. Reg. 1224 (Jan. 12, 2009).
249 April 2009 EBR Notice, supra note 248, 74 Fed. Reg. at 14811-12.
250 Dispute Settlement Body, Minutes of Meeting, Apr. 20, 2009, at 15, WT/DSB/M/267 (June 26, 2009)[hereinafter
DSB Minutes (Apr. 20, 2009)]. The United States also stated that, in response to another ruling and recommendation in
the dispute involving India, it had notified documents relating to the EBR to the WTO Committee on Antidumping
Practices and the Committee on Subsidies and Countervailing Measures. Id. at 16.
251 Id. at 15, 16.
252 National Fisheries Institute, Inc. v. U.S. Bureau of Customs and Border Protection, 637 F.Supp.2d 1270 (Ct. Int’l
Trade).
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periods on which plaintiffs may remain liable as principal until all goods entered during the
period are liquidated.
Use of “Zeroing” in Antidumping Proceedings: Background
Under U.S. law, antidumping duties will be applied to an imported product if the Department of
Commerce (DOC) determines that the product is being, or is likely to be sold, in the United States
at less than its fair value and the U.S. International Trade Commission (ITC) determines that a
U.S. industry is materially injured or threatened with material injury by reason of either imports
of dumped goods, or sales or likely sales of such goods for importation.253 Antidumping duties are
imposed in the amount of the dumping margin calculated by DOC. The dumping margin is the
amount by which the normal value of the product, i.e., the price at which the product is sold in the
exporting country, exceeds the export price or constructed export price.254 Antidumping duties
will not be imposed if the weighted average dumping margin is de minimis, i.e., less than two
percent ad valorem.255
Under the practice of zeroing, the Department assigns a zero value to non-dumped sales—that is,
sales at prices that are equal to or greater than normal value—and disregards these sales in
calculating a dumping margin for the product under investigation. The practice of zeroing is said
to inflate dumping margins by not allowing dumped sales to be weighed against non-dumped
sales, whereas others argue that the practice combats masked dumping—i.e., the situation where
an exporter masks sales of goods at less than normal value by sales at prices above normal
value—and that actual dumping may be remedied even though exporters may not sell all products
at dumped prices in a national market.256 The United States has applied zeroing or relied on
zeroing-based dumping margins in all phases of U.S. antidumping duty proceedings.
Original Antidumping Investigations
The United States uses a “retrospective” system of duty assessment under which the final liability
for antidumping duties is determined after the goods are imported.257 The Commerce Department,
ordinarily on the basis of an industry petition, first conducts an original investigation of the
allegedly dumped product. It investigates merchandise sold for a specified annual period, usually
the four most recently completed fiscal quarters as of the month preceding the month in which the
petition was filed.258 DOC ultimately makes a final determination as to whether dumping has
occurred during the period of investigation and, if so, calculates an estimated weighted-average
dumping margin for each known exporter of the subject merchandise.259 It also calculates an “all
others” rate for exporters that are not investigated individually.260 If the ITC makes a final
253 Tariff Act of 1930, § 731, 19 U.S.C. § 1673. The U.S. International Trade Commission may also find that the
establishment of a industry in the United States is materially retarded by reason of the dumped products, but this
situation has rarely been alleged in an antidumping investigation.
254 Tariff Act of 1930, § 771(35)(A), 19 U.S.C. § 1677(35)(A).
255 See Tariff Act of 1930, § 733(b)(3)m, 19 U.S.C. § 1673b(b)(3).
256 See, e.g, http://ia.ita.doc.gov/download/section123/final-123-modification-notice-20061220.pdf
257 19 C.F.R. § 351.212(a).
258 19 C.F.R. § 351.204(b)(1).
259 19 C.F.R. § 341.204(c)(1).
260 Tariff Act of 1930, § 735(c)(1)(B)(i)(II), 19 U.S.C. § 1673d(c)(1)(B)(i)(II). Liquidation of entries may also be
(continued...)
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determination that domestic industry is materially injured by reason of the dumped imports, DOC
will issue an antidumping order under which estimated duties are assessed and importers make
cash deposits in this amount on the subject goods. DOC also orders the suspension of liquidation,
i.e., the final assessment of duties, for the imported items.
Annual Administrative Reviews
One year after the antidumping order is published, an interested party may petition DOC for an
administrative review of the order. In an administrative review, DOC examines entries or sales of
the subject merchandise during the 12 months immediately preceding the anniversary month of
the order, and calculates dumping margins for these goods.261 The Department considers this the
final antidumping duty and the goods are liquidated in this amount. The rate calculated in the
administrative review also serves as the cash deposit rate for goods entering the United States
under the antidumping order during the upcoming year. If requested, administrative reviews are
conducted annually. If no review is requested for the first anniversary, DOC will apply the cash
deposit rate applicable at the time the merchandise was entered and liquidate the entries at this
amount.262 If there is an initial administrative review and a review is not requested for the
following year, duties will be assessed at the rate established in the completed review covering
the most recent prior period.
Other Reviews of Antidumping Orders
DOC also conducts other types of reviews of antidumping duty orders, including: (1) “new
shipper reviews,” in which exporters that did not export goods during the period of investigation
or that were not affiliated with an exporter that did export, may obtain their own individual
dumping margins on an expedited basis;263 (2) “changed circumstances reviews,” under which
interested parties may seek revocation of an AD order on the ground that changed circumstances
(e.g., the cessation of material injury to the U.S. industry) are sufficient to warrant revocation;264
and (3) mandatory five-year “sunset reviews” of existing AD orders, under which DOC and the
ITC determine whether revocation of the order would be likely to lead to continuation or
recurrence of dumping and material injury and DOC must revoke the order if negative
determinations are made.265
Calculating Dumping Margins with Use of Zeroing
In calculating dumping margins in original investigations, the Department of Commerce is
authorized under U.S. law to make three types of price comparisons, each of which is recognized
in Article 2.4.2 of the Antidumping Agreement. 266 These comparisons are: (1) weighted average
(...continued)
delayed because of litigation challenging a dumping or injury determination.
261 19 C.F.R. § 351.213.
262 19 C.F.R. § 351.212(a).
263 Tariff Act of 1930, § 751(a)(2)(B), 19 U.S.C. § 1675(a)(2)(B); regulations at 19 C.F.R. § 351.214.
264 Tariff Act of 1930, § 751(b), 19 U.S.C. § 1675(b); regulations at 19 C.F.R. § 351.216.
265 Tariff Act of 1930, § 751(b), 19 U.S.C. § 1675(c); regulations at 19 C.F.R. § 351.218.
266 Tariff Act of 1930, § 777A(d), 19 U.S.C. § 1677f-1(d).
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of normal values to weighted average of export prices for comparable merchandise (average-to-
average); (2) normal values of individual transactions to export prices of individual transactions
for comparable merchandise (transaction-to-transaction); and (3) where there is a pattern of prices
that differs significantly among purchasers, regions or time periods, or so-called “targeted
dumping,” weighted average of normal values to export prices of individual transactions for
comparable merchandise (average-to-transaction).267
The DOC ordinarily uses average-to-average comparisons in original investigations,268 as was the
case in the original investigations cited in the EU’s complaint in DS294, discussed below. In
applying the average-to-average method to a product under investigation, DOC ordinarily divides
export transactions into sub-groups of the product.269 Considering sales of the products in a sub-
group to be comparable, DOC compares an average of the export prices or constructed export
prices of the sales in the group to the weighted average of the normal values of such sales and
determines a dumping margin for the group.270 Once DOC determines the dumping margin for
each such group, DOC calculates a weighted average dumping margin for each individual
exporter or producer by aggregating the results of the comparisons. The term “weighted average
dumping margin” is defined in statute as “the percentage determined by dividing the aggregate
dumping margins determined for a specific exporter or producer by the aggregate export or
constructed export prices of such exporter or producer.” 271
267 Targeted dumping comparison methodology, authorized under Tariff Act of 1930, § 777A(d)(1)(B), 19 U.S.C. §
1677f-1(d )(1)(B), has been rarely used but may be employed where the other comparison methodologies “cannot
account for a pattern of prices that differ significantly among purchasers, regions, or time periods.” Uruguay Round
SAA, supra note 7, at 843. Targeting dumping would occur when an exporter sold a product at a dumped price in
certain areas or to certain customers, while masking these sales with non-dumped exports elsewhere.;
In October 2007, DOC requested comment on the use of targeted dumping in original antidumping investigations, the
one type of price comparison that has not been affected by the adverse zeroing decisions discussed in this report. DOC
specifically requested “comments and suggestions on what guidelines, threshold, and tests it should use in determining
whether targeting dumping is occurring.” Targeted Dumping in Antidumping Investigations; Request for Comment, 72
Fed. Reg. 60651 (Oct. 25, 2007). On May 9, 2008, DOC announced in the Federal Register that it proposed to adopt,
for future antidumping investigations, the new targeted dumping methodology that it had recently announced and
applied in a proceeding involving certain steel nails from the United Arab Emirates and the People’s Republic of
China, and requested comment on this action. The new methodology involves a two-stage test addressing the “pattern”
and “significant difference” requirements set out in the statute. Proposed Methodology for Identifying and Analyzing
Targeted Dumping in Antidumping Investigations; Request for Comment, 73 Fed. Reg. 26371 (May 9, 2008).
On December 10, 2008, DOC issued an interim final rule withdrawing 19 C.F.R. § 351.414 (f) and (g), the regulatory
provisions addressing targeted dumping, noting that these provisions had been promulgated before DOC had performed
a targeted dumping analysis and stating that their withdrawal “will provide the agency with the opportunity to analyze
extensively the concept of targeted dumping and develop a meaningful practice in this area as it gains experience in
evaluating such allegations.” It further stated that withdrawal of the rule was “not significant” and “will allow the
Department to exercise the discretion intended by the statute and, thereby, develop a practice that will allow interested
parties to pursue all statutory avenues of relief in this area.” DOC also stated that it was not replacing the provisions at
this time and is instead “returning to a case-by-case adjudication, until additional experience allows the Department to
gain a greater understanding of the issue. Withdrawal of the Regulatory Provisions Governing Targeted Dumping in
Antidumping Investigations; Request for Comment, 73 Fed. Reg. 74930 (Dec. 10, 2008).
268 19 C.F.R. § 351.414(c)(1).
269 19 C.F.R. § 351.414(d)(1). The products in a sub-group, or “averaging group,” are identical or virtually identical in
all physical characteristics and sold at the same level of trade. 19 C.F.R. § 351.414(d)(2).
270 19 C.F.R. § 351.414(d)(1).
271 Tariff Act of 1930, § 7771(35)(B), 19 U.S.C. § 1677(35)(B). See also Dept. of Commerce, Import Administration
Antidumping Manual, ch. 6, at 9 (1997 ed.)[hereinafter DOC AD Manual], at http://ia.ita.doc.gov/admanual/index.html.
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Before the Department discontinued the use of zeroing (sometimes referred to as “model
zeroing”) in average-to-average comparisons in original investigations, an action it announced in
late 2006 in response to the adverse decision in DS294, it would have assigned a dumping margin
of zero to any subgroup for which the export price was equal to or exceeded the normal value,
i.e., where there was no dumping. As a result, when the results of the averaging groups were
aggregated to determine the weighted-average dumping margin for the product as a whole,
negative dumping margins for particular models could not be used to offset positive margins for
other models. In other words, in aggregating the model-specific results to determining the
numerator in the “weighted average dumping margin” calculation, the Department used only
positive dumping margins.272
In annual administrative reviews, where DOC assesses the final antidumping duties to be imposed
on entries of the merchandise entered during the prior year, the Department calculates the duty
owed by an importer by using the average-to-transaction method, i.e., by comparing the price of
each individual export transaction with a monthly weighted-average normal value,273 and
employing what is sometimes referred to as “simple zeroing.” Thus, where the export price of the
transaction exceeds the normal value, DOC will consider the dumping margin for the export
transaction to be zero. The overall weighted average dumping margin for the product is then
calculated by combining the results of these multiple comparisons and, again, the numerator for
the overall weighted average margin is determined only on the basis of positive dumping margins.
DOC ordinarily uses average-to-transaction comparisons with simple zeroing in new shipper and
changed circumstances reviews.274 In sunset reviews, the Department relies on dumping margins
obtained through zeroing in determining whether dumping is likely to continue or recur if the
antidumping order at issue is revoked.
Domestic Legal Basis for Zeroing
Although the Tariff Act of 1930, at section 735(A), 19 U.S.C. § 1677(35), defines the terms
“dumping margin” and “weighted average dumping margin,” it does not expressly address the
practice of zeroing.275 Using the Chevron standard of judicial review, U.S. courts have held that
the statute does not unambiguously require zeroing, but the Commerce Department’s
interpretation of the statute as allowing the practice is a permissible one.276 Courts have also
272 See Antidumping Proceedings: Calculation of the Weighted-Average Dumping Margin During an Antidumping
Investigation; Final Modification, 71 Fed. Reg. 77722 (Dec. 27, 2006)[hereinafter Notice of Antidumping
Modification]. For another description of “model zeroing,” see Panel Report, United States—Laws, Regulations and
Methodology for Calculating Dumping Margins (“Zeroing”), para. 7.31, WT/DS294/R (Oct. 31, 2005).
273 19 C.F.R. § 351.414(c)(2).
274 See Panel Report, United States—Measures Relating to Zeroing and Sunset Reviews, paras. 7.3, 7.30, 7.35,
WT/DS322/R (Sept. 20, 2006); Panel Report, United States—Continued Existence and Application of Zeroing
Methodology, paras. 7.159-7.161, WT/DS350/R (Oct. 1, 2008). See generally DOC AD Manual, supra note 271, ch.
18, at 24.
275 The term “dumping margin” is defined as “the amount by which the normal value exceeds the export price or
constructed export price of the subject merchandise.” Tariff Act of 1930, § 777(35)(A), 19 U.S.C. § 1677(35)(A).
276 SKF USA Inc. v. United States, 491 F. Supp. 1354, 1364-66 (Ct. Int’l Trade 2007), aff’d, 537 F.3d 1373 (Fed. Cir.
2008); 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).
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refused to implement adverse WTO decisions on zeroing, leaving determinations as to “whether,
when, and how” to comply with such rulings to the executive branch.277
The U.S. Court of International Trade ruled in July 2009 that the Commerce Department’s
determination under section 123 of the Uruguay Round Agreements Act to eliminate zeroing in
average-to-average comparisons in original antidumping investigations and to offset sales made
at less than fair value with fair value sales, an action taken in response to the WTO decision in
DS294, was based on a reasonable interpretation of U.S. antidumping law for purposes of
Chevron and was thus in accordance with law.278 As discussed earlier, section 123 sets out
statutory requirements for U.S. regulatory modifications taken to implement WTO decisions. The
court also took into consideration the fact that the Department was undertaking this interpretation
in the context of authorities and requirements in section 123, stating that the “deference accorded
to Commerce’s interpretation [under Chevron] is at its highest when that agency acts under the
authority of a Congressional mandate to harmonize U.S. practices with international obligations,
particularly when it allows the Executive Branch to speak on behalf of the U.S. to the
international community on matters of trade and commerce.”279 The court further held that,
because the section 123 action was in accordance with law, the Department’s use of this new
approach in a Section 129 Determination taken to comply with the WTO decision was “not
unlawful.”280 Industry plaintiffs have since appealed the decision.
U.S. courts, under Step 2 of Chevron, have also refused to find it unreasonable for the Commerce
Department to construe section 735(A) of the Tariff Act as simultaneously permitting the use of
zeroing in administrative reviews and the abandonment of the practice in average-to-average
comparisons in original investigations.281
Challenges to the U.S. Use of Zeroing in the WTO
In addition to the four pending disputes and the resolved dispute with Thailand discussed earlier
in this report, three new challenges against the United States for its use of zeroing are currently
active. In the first of these, United States—Antidumping Measures on Polyethylene Retail Carrier
Bags from Thailand, WT/DS383, Thailand challenged the U.S. use of zeroing in an original
antidumping investigation, an issue dealt with in earlier WTO decisions adverse to the United
States. On January 22, 2010, the dispute panel issued a report finding that the United States was
in violation of its obligations under the WTO Antidumping Agreement.282 U.S. implementation of
the panel report, which has not yet been adopted by the WTO Dispute Settlement Body, is subject
to a procedural agreement between the United States and Thailand, notified to the WTO on
January 7, 2010. Among other things, the United States pledged not to contest Thailand’s claim
and the parties agreed that the United States will have six months to implement the panel report
once the report is adopted, provided the panel makes the adverse finding specified in the
277 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1290-91 (Fed. Cir. 2008).
278 U.S. Steel Corp. v. United States, 637 F.Supp.2d 1199, 1209-16 (Ct. Int’l Trade 2009), appeal docketed, No. 2009-
1572 (Fed. Cir. Sept. 16, 2009).
279 Id. at 1212.
280 Id. at 1216.
281 Union Steel v. United States, 645 F.Supp.2d 1298 (Ct. Int’l Trade 2009); see also Corus Staal BV v. United States,
502 F.3d 1370 (Fed. Cir. 2007).
282 Panel Report, United States—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand,
WT/DS383/R (Jan. 22, 2010)[hereinafter Thai Carrier Bags Panel Report].
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agreement.283 A panel was established in the second case, United States—Anti-Dumping
Administrative Reviews and Other Measures Related to Imports of Certain Orange Juice from
Brazil, WT/DS382, on September 25, 2009. Korea requested consultations with the United States
on November 24, 2009, in a third case, United States—Use of Zeroing in Anti-Dumping Measures
Involving Products from Korea, WT/DS402.284
The conduct of antidumping investigations and the imposition of antidumping duties is subject to
obligations in the WTO Agreement on Antidumping and Article VI of the General Agreement on
Tariffs and Trade. While neither of these agreements expressly address the use of zeroing in
antidumping investigations or in the various reviews and duty assessments carried out in
antidumping proceedings, WTO panels and the Appellate Body have found that the use of zeroing
in original investigations, except in one type of price comparison, is inconsistent with obligations
in Article 2.4.2 of the WTO Antidumping Agreement requiring WTO Members to determine
dumping margins by comparing normal and export values of “all comparable export
transactions.”285 In addition, with the exception of some early panels, WTO panels and the
Appellate Body have concluded that the use of zeroing in subsequent phases of antidumping
proceedings violates GATT and Antidumping Agreement prohibitions on imposing antidumping
duties that exceed the dumping margin for the goods under investigation. Further, reliance on
zeroing-based dumping margins in mandatory five-year sunset reviews of antidumping duty
orders has been found to violate Article 11.3 of the WTO Antidumping Agreement on the ground
that such reliance taints the fundamental determination made in sunset reviews, namely, whether
283 Agreement on Procedures between Thailand and the United States, United States—Antidumping Measures on
Polyethylene Retail Carrier Bags from Thailand, WT/DS383/4 (Jan. 12, 2010).
284 Along with the eight cases discussed or otherwise mentioned in the text, eight other WTO disputes have involved
challenges to the U.S. use of zeroing, though not all of these have resulted in panels. These include: United States—
Anti-dumping Measure on Shrimp from Ecuador, WT/DS335 (adverse panel report; dispute appears to have been
resolved with the August 2007 revocation of the AD order in question); United States—Anti-dumping Determinations
Regarding Stainless Steel from Mexico, WT/DS325 (consultations only; see WT/DS355, discussed in text, for further
action); United States—Provisional Anti-Dumping Measures on Shrimp from Thailand, WT/DS324 (consultations only;
see WT/DS343, supra, for further action); United States—Anti-dumping Measures on Cement from Mexico, WT/DS281
(panel established but work suspended; dispute settled with 2006 bilateral Trade in Cement Agreement); United
States—Final Dumping Determination on Softwood Lumber from Canada, WT/DS264 (adverse panel and AB reports
in original dispute; adverse AB report in compliance panel proceeding; dispute settled with 2006 bilateral Softwood
Lumber Agreement); United States—Provisional Anti-Dumping Measures on Import of Certain Softwood Lumber from
Canada, WT/DS247 (consultations only; dispute settled with 2006 bilateral Softwood Lumber Agreement, ); United
States—Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan,
WT/DS255 (Appellate Body reversed panel finding that United States did not violate WTO Antidumping Agreement in
relying on zeroing-based dumping margin in challenged sunset review, but found that it had insufficient factual basis to
complete analysis of Japan’s claim); United States—Anti-dumping Duties on Silicon Metal from Brazil, WT/DS239
(consultations only).
285 Article 2.4.2 states, in pertinent part, as follows: “Subject to the provisions governing fair comparison in paragraph
4, the existence of margins of dumping during the investigation phase shall normally be established on the basis of a
comparison of a weighted average normal value with a weighted average of prices of all comparable export
transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.”
The first WTO decision in which the U.S. practice of zeroing was ruled to be inconsistent with this provision of the
WTO Antidumping Agreement was United States – Final Dumping Determination on Softwood Lumber from Canada
(Softwood Lumber), WT/DS264. The case involved the application of zeroing in an average-to-average price
comparison in an original antidumping investigation. As summarized in the January 2010 panel report in Thai Carrier
Bags, the WTO Appellate Body found in Softwood Lumber “that the terms ‘margins of dumping’ and ‘all comparable
export transactions’ in Article 2.4.2 must be interpreted in an ‘integrated manner’, such that where ‘an investigating
authority has chosen to undertake multiple comparisons, the investigating authority necessarily has to take into account
the results of all those comparisons in order to establish margins of dumping for the product as a whole under Article
2.4.2’.” Thai Carrier Bags Panel Report, supra note 282, para. 7.20.
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revocation of the antidumping order is likely to lead to the recurrence or continuation of dumping
and injury.
As a result of these cases, the use of zeroing has been found to be broadly prohibited in the
calculation of duties in antidumping proceedings. Moreover, particularly important for the U.S.
“retrospective” antidumping duty system are findings in related compliance panel proceedings
that WTO decisions faulting the use of zeroing in original antidumping investigations continue to
apply with respect to subsequent administrative reviews. It has also been found in these
proceedings that, where goods have entered the United States before the end of the compliance
period established in a WTO dispute but final duties have not been collected, zeroing-based duties
may not be applied to such goods once this period has ended. In addition, the Appellate Body
recently found that an additional claim may be made in an initial WTO complaint against zeroing,
namely, the “continued use” of the practice in subsequent domestic proceedings relating to a
particular antidumping duty order.
The United States has expressed concerns with Appellate Body’s broad prohibition on the use of
zeroing at meetings of the WTO Dispute Settlement Body and in related documents circulated to
Members. In addition, the United States submitted proposals in June 2007 to the WTO
Negotiating Group of Rules, which has been negotiating revisions to antidumping and subsidy
rules in the Doha Round, asking that negotiators evaluate the reasoning of the WTO panels that
have examined the issue of zeroing and stating that “the proper resolution of this issue requires
clear text providing that margins of dumping may be determined without offsets for non-dumped
transactions, consistent with the long-held concept of dumping.”286 The United States also
proposed revised language for the Antidumping Agreement to this effect. 287 While the draft
negotiating text issued by the Chairman of the Doha Negotiating Group in November 2007
contained proposed language reflecting U.S. concerns,288 the draft text issued in December 2008
does not contain such language and instead notes that, with regard to zeroing, “[d]elegations
remain profoundly divided on this issue,” with positions ranging from “insistence on a total
prohibition of zeroing irrespective of the comparison methodology used and in respect of all
proceedings to a demand that zeroing be specifically authorized in all contexts.”289
Laws, Regulations, and Methodology for Calculating Dumping
Margins (“Zeroing”) (DS294)
In June 2003, the European Union (EU) requested consultations with the United States over the
use of zeroing by the Commerce Department in determining dumping margins, arguing that the
practice as it relates to original antidumping investigations and subsequent administrative, new
shipper, changed circumstances, and sunset reviews was inconsistent “as such” with provisions of
the WTO Agreement on Antidumping and Article VI of the GATT 1994. That is, complainants
argued that the existence of the practice violated these agreements regardless of any specific
286 Communication from the United States, Offsets for Non-Dumped Comparisons, TN/RL/W/208 (June 5, 2007).
287 Proposal from the United States, Proposal on Offsets for Non-Dumped Comparisons, TN/RL/GEN/147 (June 27,
2007).
288 2007 Draft Rules Text, supra note 87, at 6, 20.
289 2008 Draft Rules Text, supra note 87, at 6. See also 16 Members Propose Complete Ban of All ‘Zeroing’ in WTO
Rules Talks, 25 Int’l Trade Rep. (BNA) 149 (Jan. 31, 2008); China, Other WTO Members Add Support to Proposal on
Elimination of Zeroing, 25 Int’l Trade Rep. (BNA) 185 (Feb. 7, 2008).
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application.290 The EU also alleged that the United States had acted inconsistently with its WTO
obligations in applying zeroing in 31 specific cases, including 15 original investigations and 16
administrative reviews.291 The EU further claimed that insofar as dumping margins in original
investigations should be calculated without the use of zeroing and some exporters may thus have
de miminis dumping margins, these imports should be excluded from the volume of dumped
imports that the ITC takes into account in determining whether such imports are causing material
injury to domestic industry. The EU argued that WTO obligations require the United States to
make this determination based only on the volume of imports remaining after this exclusion. A
panel was established in March 2004.
Panel and Appellate Body Reports
In a report issued October 31, 2005, the WTO panel found that zeroing, as applied in the
weighted-average-to-weighted average price comparisons made in the 15 original investigations
cited in the EU’s complaint, was inconsistent with Article 2.4.2 of the Antidumping Agreement.
This article provides, in pertinent part, that “[s]ubject to the provisions governing fair comparison
in [Article 2] paragraph 4, the existence of margins of dumping during the investigation phase
shall normally be established on the basis of a comparison of weighted-average normal value of
prices of all comparable export transactions or by a comparison of normal value and export prices
on a transaction-to-transaction basis.”292 The panel based its conclusion on Appellate Body
rulings in earlier cases that “when a margin of dumping is calculated on the basis of multiple
averaging by model type, the margin of dumping for the products in question must reflect the
results of all such comparisons, including weighted average export prices that are above the
normal value for individual models.”293 The Appellate Body had earlier concluded that the term
“dumping” in WTO agreements is defined “in relation to a product as a whole” and that, as a
result, dumping can thus be found to exist “only for the product under investigation as a whole”
and not solely “for a type, model, or category of that product.”294 Thus, in considering the U.S.
multiple averaging technique in light of WTO obligations, the Appellate Body concluded that the
290 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). The EC’s use of zeroing in establishing the existence of dumping margins in antidumping
investigations, as applied in a case involving goods from India, had been successfully challenged by India in 2001. See
panel and Appellate Body reports in European Communities—Anti-Dumping Duties on Imports of Cotton-type Bed
Linen from India, WT/DS141.
291 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). :
The WTO Appellate Body has described “as such” claims as follows: “By definition, an ‘as such’ claim challenges
laws, regulations, or other instruments of a Member that have general and prospective application, asserting that a
Member’s conduct—not only in a particular instance that has occurred, but in future situation as well—will necessarily
be inconsistent with that Member’s WTO obligations. In essence, complaining parties brining ‘as such’ challenges seek
to prevent Members ex ante from engaging in certain conduct. The implications of such challenges are obviously more
far-reaching than ‘as applied’ claims.” Appellate Body Report, United States—Sunset Review of Anti-Dumping
Measures on Oil Country Tubular Goods from Argentina, para. 172, WT/DS268/AB/R (Nov. 29, 2004).
292 Panel Report, United States—Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”),
WT/DS294/R (Oct. 31, 2005)[hereinafter U.S. Zeroing Panel Report (EC I)].
293 Id. paras. 7.27-7.32 (emphasis added).
294 Appellate Body Report, United States—Final Dumping Determination on Softwood Lumber from
Canada,WT/DS264/AB/R, para. 93 (Aug. 11, 2004).
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only was that a dumping margin could be properly established for the product as a whole would
be to aggregate “all of the ‘results’ of the multiple comparisons for all product types.”295
The panel also found that zeroing, as it relates to original investigations, was a “well established
and well-defined norm” that could be challenged “as such” in a WTO dispute even though it was
not in written form, and that, with respect to its use in weighted-average-to-weighted-average
price comparisons in original investigations, the norm “as such” was inconsistent with Article
2.4.2.296
The panel rejected the EU’s claims regarding the application of zeroing in the 16 administrative
reviews cited by the EU, as well as on the use of zeroing “as such” in administrative reviews, new
shipper reviews, changed circumstances reviews, and sunset reviews. One dissenting panelist
would have struck down the use of the practice in proceedings other than original investigations,
however. The panel did not address EU claims involving the need for a new injury determination
based on excluded imports, viewing this as a dependent claim and finding that any conclusion
would not provide the United States with additional guidance as to how to remedy the primary
violation.
The panel report was appealed by the United States and the EU. While the United States appealed
the panel’s finding that zeroing was a challengeable norm, it did not appeal the panel’s conclusion
that the use of zeroing in weighted-average-to-weighted-average price comparisons in the cited
original investigations violated the Antidumping Agreement.297
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 is inconsistent with Article 2.4.2 of the Antidumping
Agreement.298
The AB also expanded the range of proceedings in which zeroing was prohibited, finding,
contrary to the panel, that the United States could not use zeroing in making weighted-average-to-
transaction comparisons to assess duties and set cash deposit rates in the 16 administrative
reviews challenged by the EU. The AB found that the application of zeroing in these reviews
violated Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994 since the
practice resulted in the imposition of antidumping duties that exceeded the exporters’ or
producers’ dumping margins.299 Article 9.3, which sets out obligations regarding the assessment
of antidumping duties, 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
295 Id. para. 98 (emphasis added).
296 U.S. Zeroing Panel Report (EC I), supra note 292, paras. 7.91-7.106. The panel rejected the EC’s claims that
various provisions of the Tariff Act of 1930, which define terms “dumping margin” and “weighted average dumping
margin,” establish the basic authority for imposing antidumping duties, and authorize the price comparison
methodologies discussed above, were inconsistent with WTO obligations, finding that these provisions did not address
the issue of zeroing. Id. paras. 7.50-7.69. The cited provisions were Tariff Act of 1930, §§ 771(35)(A),(B), 731,
777A(d), 19 U.S.C. §§ 1677(35)(A),(B), 1673, 1677f-1(d).
297 Notification of an Other Appeal by the United States, United States—Laws, Regulations and Methodology for
Calculating Dumping Margins (“Zeroing”), WT/DS294/13 (Feb. 1, 2006).
298 Appellate Body Report, United States—Laws, Regulations and Methodology for Calculating Dumping Margins
(“Zeroing”), WT/DS294/AB/R (Apr. 18, 2006).
299 Id. para. 133.
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Agreement. Article VI:2 of the GATT 1994 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.” The Appellate Body did not determine whether the use of zeroing in
these reviews was “as such” inconsistent with WTO obligations, however, due to insufficient
facts in the panel record to complete this analysis.
The AB report, which also addressed other issues, and the modified panel report were adopted on
May 9, 2006.300 While the United States vigorously disputed the Appellate Body decision,301 it
stated at a subsequent DSB meeting that it intended to comply.302 The disputing parties later
agreed on an implementation deadline of April 9, 2007.303
U.S. Actions in Response
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 weighted-average-to-
weighted-average comparisons in antidumping investigations and was seeking comments on
alternative approaches that might be appropriate in future investigations.304 The Department noted
that the United States had not appealed the panel’s finding that the zeroing could not be used in
making such comparisons in the specific antidumping investigations challenged by the EU.
Agreement.
On December 26, 2006, the Department, following the requirements in section 123 of the
Uruguay Round Agreements Act (URAA), published a Federal Register notice stating that it was
modifying its antidumping practice as announced earlier, noting that the modification would be
used in implementing the findings of the WTO panel pursuant to section 129 of the URAA with
regard to the specific antidumping investigations challenged by the EU 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, 2007.305 The Department
later extended the date to January 23, 2007, and then to 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.”306
300 Dispute Settlement Body, Minutes of Meeting, May 9, 2006, at 7-13, WT/DSB/M/211 (June 12, 2006).
301 Along with criticizing the Appellate Body report at DSB meetings, the United States took the uncommon step of
circulating detailed critiques of the decision to WTO Members. See 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).
302 Dispute Settlement Body, Minutes of Meeting, May 30, 2006, at [1], WT/DSB/M/213 (June 21, 2006).
303 Agreement under Article 21.3(b) of the DSU, United States—Laws, Regulations and Methodology for Calculating
Dumping Margins (“Zeroing”), WT/DS294/19 (Aug. 1, 2006).
304 Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin During an Antidumping Duty
Investigation, 71 Fed. Reg. 11189 (Mar. 6, 2006).
305 Notice of Antidumping Modification, supra note 272.
306 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, 72 Fed. Reg. 3783 (Jan. 26, 2007).
Representative Rangel, Chairman of the House Ways and Means Committee, and Senator Baucus, Chairman of the
Senate Finance Committee, had written to the Secretary of Commerce and the USTR on January 19, 2007, requesting
(continued...)
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The Department also announced on February 22, 2007, that it was initiating section 129
proceedings in which it would implement the WTO ruling with respect to 12 of the 15 original
antidumping investigations cited by the EU, three of the cited AD orders having been revoked.307
On April 9, 2007, the Department of Commerce issued new Section 129 Determinations in 11 of
the proceedings using average-to-average comparisons in which offsets were provided, two of
which resulted in findings of no dumping. 308 The DOC also postponed its determination in the
twelfth investigation, a proceeding involving stainless steel products from Italy, as it was
investigating a possible clerical error in the original investigation alleged by the respondent.
Recalculations were done without the use of zeroing as provided in the modification originally
announced in December 2006.309 Regarding the administrative reviews at issue in the dispute, the
United States stated that since they had been superseded by new administrative reviews, it did not
need to take any further action to bring these reviews into compliance with the WTO decision.310
The USTR instructed DOC to implement the new determinations on April 23, 2007.311
While the United States considered itself in compliance,312 the EU questioned the prospective
nature of the new determinations, that is, that they did not cover duties on goods entered before
the date the Section 129 Determinations were implemented; claimed that DOC had “massively
increased the ‘all others’ rate (applicable to exporters who do not have an individual duty rate,
notably new exporters)”; and stated that the United States was obligated to review the dumping
(...continued)
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, 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. The House Ways and Means Committee went on to solicit comments on the DOC action. See Advisory
from the Committee on Ways and Means, FC-7 (Jan. 31, 2007), at http://waysandmeans.house.gov.
In mid-December 2006, 11 Senators signed a letter to the same Administration recipients in which they took issue with
the Appellate Body decision in DS294, favorably referred to several earlier GATT and WTO panels that had ruled
differently, and expressed their disagreement with any modification of the U.S. practice. Text of December 2006 letter
and of USTR memo to Congress under section 123 regarding the modification available at Inside U.S. Trade, Dec. 15,
2006, at 19-21.
In addition, H.R. 496 (Rangel), introduced January 14, 2009, provides that the 2007 regulatory modification will expire
March 1, 2009, and the prior departmental practice will thenceforth apply, unless and until the department issues a
revised methodology pursuant to procedures laid out in the bill. Note also S. 364 (Rockefeller), 110th Cong., 1st Sess.
(2007), discussed at supra note 21.
307 See Department of Commerce Federal Register notice and fact sheet at http://ia.ita.doc.gov/ia-highlights-and-
news.html. The Department stated in its Federal Register notice that since a Section 129 Determination is implemented
prospectively, the date on which the USTR directs the Commerce Department to implement the determination “will
necessarily be after the effective date of the revocation” of the AD orders in the three referenced cases and that “[a]s a
result, the Department is not conducting section 129 proceedings with respect to the three investigations.”
308 Department of Commerce, Issues and Decision Memorandum for the Final Results of the Section 129
Determination (Apr. 9, 2007), at http://ia.ita.doc.gov/download/zeroing/zeroing-sec-129-final-decision-memo-
20070410.pdf.
309 Id.
310 Status Report by the United States, Addendum, United States—Laws, Regulations and Methodology for Calculating
Dumping Margins (“Zeroing”), at 2, WT/DS294/20/Add.2 (Apr. 13, 2007)[hereinafter April 2007 Zeroing Status
Report].
311 See Implementation of the Findings of the WTO Panel in US—Zeroing (EC): Notice of Determinations Under
Section 129 of the Uruguay Round Agreements Act and Revocations and Partial Revocations of Certain Antidumping
Duty Orders, 72 Fed. Reg. 25261 (May 4, 2007).
312 April 2007 Zeroing Status Report, supra note 310.
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margins in the 16 challenged administrative reviews, claiming that to its knowledge the United
States had not taken any action to bring these reviews into compliance with the WTO decision.313
On May 4, 2007, the United States and the EU entered into a procedural agreement regarding
possible Article 21.5 compliance panel proceedings and the sequencing of a possible retaliation
request in the event the United States was found not to have complied in the case.314 The EU
requested consultations with the United States under Article 21.5 in July 2007.315
In September 2007, DOC issued a new determination in the outstanding antidumping case
involving steel products from Italy, finding that the alleged clerical errors were not raised in the
WTO dispute and thus were outside the scope of the Section 129 proceeding.316
Compliance Proceedings
The EU requested a compliance panel in September 2007, claiming that the United States had
failed to take compliance actions in some cases and that measures that it had taken in others were
inconsistent with WTO obligations.317 In its panel request, the EU cited specific administrative
reviews and sunset reviews undertaken by the United States in the 15 original investigations and
16 administrative review that were successfully challenged in the original proceeding. The EU
also claimed that United States violated its WTO obligations in those cases where it had
recalculated dumping margins in original investigations without the use of zeroing, found that
some exporters were not dumping or had de miminis margins, and maintained the antidumping
order without determining whether the remaining amount of dumped were causing material injury
to domestic industry.
The compliance proceeding was complex not only because of the number of U.S. antidumping
determinations that the EU claimed were WTO-inconsistent, but also because of the interaction of
the retrospective U.S. duty system with what has generally been considered to be the prospective
nature of remedies in a WTO dispute. As described by the WTO Appellate Body, the WTO
dispute settlement system is one under which “compliance has to be accomplished at the latest
from the end of the reasonable period of time [i.e. the compliance period] with prospective
effect.”318 At the same time, due to the U.S. retrospective system, there were goods that had
313 European Commission, EU response to US action on WTO zeroing judgement (Apr. 12, 2007), at
http://ec.europa.eu/trade/issues/respectrules/anti_dumping/pr120407_en.htm.
314 Understanding between the United States and the European Communities Regarding Procedures under Articles 21
and 22 of the DSU, United States—Laws, Regulations and Methodology for Calculating Dumping Margins
(“Zeroing”), WT/DS294/21 (May 9, 2007).
315 Request for Consultations, Recourse to Article 21.5 of the DSU by the European Communities, United States—
Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/22 (July 12, 2007).
316 The final antidumping margins were 2.11 percent for the individually investigated producer and 2.11 for all other
exporters and producers, the same as the preliminary margins, each a reduction from an original margin of 11.23
percent. Implementation of the Findings of the WTO Panel in US-Zeroing (EC); Notice of Determination Under
Section 129 of the Uruguay Round Agreements Act: Antidumping Duty Order on Stainless Steel Sheet and Strip from
in Coils from Italy, 72 Fed. Reg. 54640 (Sept. 29, 2007); Department of Commerce, Issues and Decision Memorandum
for the Final Results of the Section 129 Determination (Aug. 20, 2007), at http://ia.ita.doc.gov/download/section129/
Italy-SSSS-in-Coils-129-Final-Decision-Memo-08-20-07.pdf.
317 Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by the European Communities,
United States—Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”), WT/DS294/25
(Sept. 14, 2007).
318 Report of the Appellate Body, United States—Laws, Regulations and Methodology for Calculating Dumping
(continued...)
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entered the United States before the date on which the compliance period ended but for which
final duty assessments would not be made until after this date, or for which final assessments
were made before this date, but the duties were not collected until after the period expired. While
the United States and the EU agreed that the WTO Dispute Settlement Understanding provides
only for prospective remedies, the parties disagreed on what this entailed for the United States
with regard to these earlier-entered goods.319
Questions also arose as to whether dumping determinations made in a phase of the proceeding
that occurred after the one at issue in the original WTO dispute were considered measures taken
to comply or whether they were properly before the panel for other reasons. Some of the
challenged determinations, which had been rendered in original investigations, were the subject
of later administrative or sunset reviews. In addition, the challenged administrative reviews had
been superseded by determinations made in subsequent administrative reviews. Further, the
United States had taken new action in some of the challenged proceedings before the panel and
Appellate Body reports were issued.
The United States argued that administrative reviews of challenged dumping determinations made
in original investigations were not measures taken to comply with the WTO decision and thus
outside the panel’s terms of reference.320 In its view, the compliance panel could only review
whether the original determination now complied with the WTO decision and could not examine
whether the United State had employed zeroing in the subsequent review. The United States made
the same argument with regard to administrative reviews that occurred after those that were
challenged in the dispute and protested the inclusion of sunset reviews of challenged
determinations as well.321 As noted above, the United States maintained that since the challenged
administrative reviews had been superseded by later reviews, the United States was not required
to take any action to ensure that the challenged determinations were in compliance. The EU
argued that under this approach, the EU would need to initiate a new dispute settlement
proceeding for each subsequent administrative review with which it disagreed, thus allowing the
United States to avoid permanent compliance with a WTO decision as it related to a specific
investigation or review that was successfully challenged.322 In addition, the United States had
undertaken sunset reviews of some of the challenged original determinations and administrative
reviews prior to the adoption of the panel and Appellate Body reports by the Dispute Settlement
Body, actions that the EU claimed could not be considered measures taken to comply with the
WTO rulings and recommendations in these reports.
(...continued)
Margins (“Zeroing”); Recourse to Article 21.5 of the DSU by the European Communities, para. 305,
WT/DS294/AB/RW (May 14, 2009)[hereinafter U.S. Zeroing Article 21.5 AB Report (EC I)].
319 Report of the Panel, United States—Laws, Regulations and Methodology for Calculating Dumping Margins
(“Zeroing”); Recourse to Article 21.5 of the DSU by the European Communities, paras. 8.165-8.169, WT/DS294/RW
(Dec. 17, 2008)[hereinafter U.S. Zeroing Article 21.5 Panel Report (EC I].
320 Id. para. 8.33.
321 Id. paras. 8.33-8.34, 8.36.
322 Id. paras. 8.40, 8.42.
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Compliance Proceedings: Panel and Appellate Body Reports
In December 2008, the panel issued a mixed report regarding U.S. compliance,323 which the EU
appealed. In a report issued May 20, 2009, the Appellate Body found that the United States
remained out of compliance with its WTO obligations in a variety of respects.324
Regarding whether actions taken by the United States before the panel and Appellate Body
reports were adopted were within the panel’s terms of reference, the Appellate Body, reversing
the panel, found that measures taken before this date were potentially reviewable as compliance
measures. The Appellate Body found that the relevant inquiry was not whether the measures were
intentionally taken to comply, but instead whether they each had a “sufficiently close nexus, in
terms of nature, effects, and timing,” with the WTO decision and with the declared measures that
were in fact taken to comply.325 The AB found that of the five sunset reviews that met this test
determinations in four of these, having relied on dumping margins calculated with the use of
zeroing, were inconsistent with WTO obligations; no findings were made on the fifth.326
Regarding whether subsequent administrative and sunset reviews of challenged measures were
amenable to review, it was determined in the compliance proceeding that administrative reviews
involving the calculation of a dumping margin based on zeroing and subsequent sunset reviews in
which DOC relies on dumping margins calculated with the use of zeroing, could potentially fall
within the scope of the compliance proceeding, This conclusion was based on two grounds: (1)
the “close nexus that exists in terms of their nature” between the subsequent reviews and
measures at issue in the original dispute and (2) the fact that “the subsequent reviews potentially
affect or undermine the steps otherwise taken—or the steps that should have been taken—by the
United States to comply with the recommendations and rulings of the DSB, notably in the form of
Section 129 determinations.”327 The panel had noted that the use of zeroing in an administrative
review of an original determination could potentially negate the results of a Section 129
determination in which the dumping margin was calculated without its use, thus undoing an
action taken to comply with the WTO decision.328
Further, regarding the scope of U.S. obligations involving imports entering the United States
before the end of the compliance period, the Appellate Body agreed with the panel that the
calculation of dumping margins in administrative reviews, or “definitive duty determinations,”
that occurred after the end of the compliance period, but that involved imports entered before this
date, could not be made with the use of zeroing.329 Contrary to the panel, however, the Appellate
Body determined that duties could not be collected after the end of compliance period
consistently with WTO obligations if they are based on dumping margins calculated with the use
of zeroing during administrative reviews that occur before the end of the compliance period. The
panel had found entries could be liquidated on the basis of a zeroing-based dumping
determination without violating WTO obligations even though actions taken by the United States
after the compliance deadline would ordinarily be expected to comply with the WTO decision.
323 U.S. Zeroing Article 21.5 Panel Report (EC I), supra note 319.
324 U.S. Zeroing Article 21.5 AB Report (EC I), supra note 318.
325 Id, para. 226 (emphasis in original).
326 Id. paras. 233-35, 392-97.
327 U.S. Zeroing Article 21.5 Panel Report (EC I), supra note 319, paras. 8.165-8.169.
328 Id. para. 8.108
329 U.S. Zeroing Article 21.5 AB Report (EC I), supra note 318, para. 311.
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The Appellate Body found that any measures that “derives mechanically” from the assessment of
duties, as is the case with the collection (or liquidation) of antidumping duties, would not be
WTO-compliant to the extent they are based on zeroing and are applied after the compliance
deadline expires.330
Before drawing these conclusions, the AB had generally noted that, with respect to the original
determinations and administrative reviews in which the use of zeroing was challenged “as
applied,” the assessment of a final duty for previously imported goods in an administrative review
also affects the cash deposit rate for certain future imports, a situation that has implications for
the administrative reviews not directly at issue in the case. Thus, in light of the prospective nature
of WTO remedies, “compliance is not confined by the limited duration of the original measures at
issue, especially when a subsequent measure replaces or supersedes the measure at issue in the
original proceeding.”331
The panel and AB made various findings regarding the inconsistency of particular determinations
challenged by the EU with the obligation to eliminate zeroing. Further, the panel, in an issue not
reviewed by the AB, determined that, with regard to four original determinations for which
Section 129 determinations were issued, the United States violated the Antidumping Agreement
by not revisiting its ITC material injury determinations due to revised import volumes. In some
cases, the recalculated dumping margins had led to findings of no dumping or de minimis
margins for particular exporters and thus the panel found that, in these four cases, the United
States was obligated to reconsider whether dumped imports were causing material injury to
domestic industry using import volumes that excluded these non-dumped and de minimis
imports.332
Recent Developments
The adverse Appellate Body report and the modified compliance panel report were adopted on
June 11, 2009. With the compliance panel proceeding completed, the EU has stated that the
United States is required to comply “without delay” by recalculating dumping margins without
the use of zeroing in the numerous dumping determinations faulted in the case and then collecting
duties at the recalculated rates. 333 At the same time, the United States has raised concerns about
what it views as the expanded scope of U.S. obligations in the case.334 According to the U.S.-EU
procedural agreement, the EU may now request authorization to suspend concessions owed the
United States and may also request negotiations on compensation. In its January 9, 2010, status
report to the WTO Dispute Settlement Body, the United States stated that it “will continue to
consult with interested parties in order to address the findings contained in these [panel and
Appellate Body] reports.”335
330 Id. (emphasis in original).
331 Id. para. 304.
332 U.S. Zeroing Article 21.5 Panel Report (EC I), supra note 319, para. 8.118.
333 WTO News Item, WTO adopts compliance rulings in the US “zeroing” case brought by the EC (June 11, 2009), at
http://www.wto.org/english/news_e/news09_e/dsb_11jun09_e.htm.
334 Id.
335 Status Report by the United States, United States—Laws, Regulations and Methodology for Calculating Dumping
Margins (“Zeroing”), WT/DS294/34/Add. 5 (Jan. 8, 2010).
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Measures Relating to Zeroing and Sunset Reviews (DS322)
In November 2004, Japan instituted a broad challenge of the use of zeroing by the United States,
claiming in its subsequent panel request that the use of this practice in original antidumping
investigations, administrative reviews (referred to in the case as “periodic reviews”), new shipper
reviews, sunset reviews, and changed circumstances reviews was in violation of obligations in the
WTO Antidumping Agreement. Japan also challenged zeroing as applied in 15 specific
antidumping proceedings, including one original investigation, 12 administrative reviews, and
two sunset reviews. The cited cases involved imports of steel plate and steel flat products, as well
as roller, ball, spherical plain, and antifriction bearings. In addition, Japan challenged subsequent
material injury determinations made by the U.S. International Trade Commission based on
dumping margins determined through zeroing and made further claims regarding sunset reviews
and changed circumstances reviews in which determinations were based on dumping margins
obtained in this way.
Panel and Appellate Body Reports
In a report circulated September 20, 2006, the WTO panel concluded that zeroing, when used by
DOC in weighted-average-to-weighted-average comparisons in original antidumping
investigations and consequently, the use of zeroing in the one original investigation cited by
Japan, were inconsistent with Article 2.4.2 of the Antidumping Agreement.336 As in DS294,
discussed above, zeroing was found to be a norm that could be challenged “as such” in a WTO
dispute settlement proceeding.
At the same time, the panel rejected Japan’s claims that the use of zeroing in transaction-to-
transaction comparisons and weighted-average-to-transaction comparisons in original
investigations, its use administrative reviews and new shipper reviews, its application in the 11
cited administrative reviews was violative of the Antidumping Agreement. The panel also found
that Japan had failed to make a prima facie case that the use of zeroing in changed circumstances
reviews and sunset reviews violated WTO obligations. The panel also rejected Japan’s claims that
the ITC had improperly relied on dumping margins calculated in previous proceedings in the two
sunset reviews cited by Japan. Both Japan and the United States appealed the decision.
In a ruling issued January 9, 2007, the Appellate Body upheld the panel’s findings that zeroing
could be challenged “as such,” but went further in finding that U.S. measures did in fact
constitute “as such” violations of the WTO antidumping obligations.337 The Appellate Body found
that, in maintaining zeroing procedures in transaction-to-transaction comparisons in original
investigations, the United States was in violation of Articles 2.4 of the Antidumping Agreement,
which requires that a “fair comparison ... be made between the export price and the normal
value,” and Article 2.4.2 of the Agreement, which as noted earlier, provides that “[s]ubject to the
provisions governing fair comparison in paragraph 4, the existence of margins of dumping during
the investigation phase shall normally be established on the basis of a comparison of weighted-
average normal value of prices of all comparable export transactions or by a comparison of
normal value and export prices on a transaction-to-transaction basis.”
336 Panel Report, United States—Measures Relating to Zeroing and Sunset Reviews, WT/DS322/R (Sept. 20, 2006).
337 Appellate Body Report, United States—Measures Relating to Zeroing and Sunset Reviews, WT/DS322/AB/R (Jan.
9, 2007)[hereinafter U.S. Zeroing AB Report (Japan)].
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The Appellate Body further found that by maintaining zeroing procedures in administrative
reviews, the United States acted inconsistently with Article 2.4 of the Antidumping Agreement,
Article 9.3 of the Agreement, which provides that amount of the antidumping duty actually
assessed “shall not exceed the margin of dumping” as determined under Article 2 of the
Agreement, and Article VI:2 of the GATT 1994, which 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.”
The Appellate Body also found that, by using zeroing in new shipper reviews, the United States
was out of compliance with Articles 2.4 and 9.5 of the Antidumping Agreement, the latter setting
out requirements for such reviews.
In addition, the Appellate Body upheld Japan’s “as applied” claims, finding that the United States
had acted inconsistently with Articles 2.4 and 9.3 of the Antidumping Agreement and Article VI:2
of the GATT 1994 by applying zeroing in the 11 administrative reviews cited by Japan.
The Appellate Body also determined that, in relying on zeroing-based dumping margins in two
cited sunset reviews, the United States had acted inconsistently with Article 11.3 of the
Antidumping Agreement. Article 11.3 requires that duties be terminated after five years unless
authorities determine in a review “that the expiry of the duty would be likely to lead to
continuation or recurrence of dumping and injury.” The Appellate Body had found in an earlier
dispute that WTO Members are not required to rely on dumping margins in making this
determination, but that, if Members choose to do so, they must calculate the margin in conformity
with the requirements of Article 2.4 of the Agreement.338 If not, the “likelihood” determination
would not serve as a proper foundation for maintaining the duty under Article 11.3 The Appellate
Body found in the instant case that the United States, in making its sunset determinations, had
relied on zeroing-based margins calculated in earlier administrative reviews. Since the Appellate
Body had also found that the use of zeroing in such reviews is inconsistent “as such” with
Articles 2.4 and 9.3 of the Antidumping Agreement, it concluded that reliance on these margins in
the sunset reviews thus violated Article 11.3.339
The Appellate Body report and the panel report, as modified, were adopted by the DSB at its
January 23, 2007, meeting.340 The United States, while once again disputing the Appellate Body’s
reasoning, told the DSB on February 20, 2007, that it intended to comply with its WTO
obligations in the case and that it needed a reasonable period of time to do so.341 It later circulated
a critical analysis of the Appellate Body decision to WTO Members.342 While Japan had
338 Id. para. 183, citing Appellate Body Report, United States—Sunset Review of Corrosion-Resistant Carbon Steel
Products from Japan, para. 127, WT/DS244/AB/R (Dec. 15, 2003).
339 U.S. Zeroing AB Report (Japan), supra note 337, paras. 184-185.
340 Dispute Settlement Body, Minutes of Meeting, Jan. 23, 2007, at 15-22 ,WT/DSB/M/225 (Mar. 8, 2007)[hereinafter
DSB Minutes (Jan. 23, 2007)].
341 Dispute Settlement Body, Minutes of Meeting, Feb. 20, 2007, at 7, WT/DSB/M/226 (Mar. 26, 2007); see also DSB
Minutes (Jan. 23, 2007), supra note 340 at 15-17, and Administration, Congress Explore Zeroing Compliance Options,
INSIDE U.S. TRADE, Feb. 9, 2007, at 1.
342 Communication from the United States, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/16 (Feb. 26, 2007). On June 1, 2007, the United States submitted a proposal to the WTO Negotiating
Committee on Rules asking that negotiators evaluate the reasoning of the WTO panels that have examined the issue of
zeroing and stating its view that “the proper resolution of this issue requires clear text providing that margins of
dumping may be determined without offsets for non-dumped transactions, consistent with the long-held concept of
dumping.” Communication from the United States, Offsets for Non-Dumped Comparisons, TN/RL/W/208 (June 5,
(continued...)
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originally requested the compliance period be arbitrated,343 the parties later agreed on a
compliance period ending December 24, 2007.344
Actions by the United States and Japan in Response
In its December 7, 2007 WTO status report on the case, the United States made reference to the
modification adopted by the Commerce Department in February 2007 under which zeroing would
no longer be used in weighted average-to-weighted average comparisons in original
investigations and stated only that is was “continually to consult internally on steps to be taken
with respect to the other DSB recommendations and rulings.”345 While the Department of
Commerce had initiated a proceeding under section 129 of Uruguay Round Agreements in
November 2007 regarding the challenged original investigation, a proceeding involving certain
steel plate products, and publicly released final results on December 27, 2007, 346 it took no final
action to comply by the December 24 deadline.347
In January 2008, Japan requested authorization to retaliate by imposing additional import duties
on selected products in an initial annual amount of $181.2 million.348 While the subsequent U.S.
objection sent Japan’s request to arbitration,349 the disputing parties entered into a procedural
agreement in March 2008 under which Japan was permitted to request a compliance panel
without first seeking consultations and, if it made such a request, its retaliation request would be
suspended.350 Under the procedural agreement, either party may request that the arbitration
resume in the event that the compliance proceeding results in a finding that U.S. compliance
measures are inadequate or non-existent or “there is no disagreement” between Japan and the
United States that “a measure taken to comply does not exist” with respect to certain U.S. actions
that were successfully challenged in the original dispute.
(...continued)
2007).
343 Request by Japan for Arbitration under Article 21.3(c) of the DSU, United States—Measures Relating to Zeroing
and Sunset Reviews, WT/DS322/17 (Mar. 30, 2007).
344 Agreement under Article 21.3(b) of the DSU, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/20 (May 8, 2007).
345 Status Report by the United States, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/Add.1 (Dec. 7, 2007).
346 Japan Certain Cut-to-Length Carbon-Quality Steel Plate Products, Final Results Under Section 129: Uruguay Round
Agreements Act, Dec. 27, 2007, at http://ia.ita.doc.gov/ia-news-2007.html; Issues and Decision Memorandum for the
Final Results (undated), at http://ia.ita.doc.gov/download/section129/Japan-CTL-Plate-129-Final-20071227.pdf. The
subsequent Federal Register notice announcing these results states that the Department issued them on December 21,
2007. See Notice of Implementation of Determination Under Section 129 of the Uruguay Round Agreements Act
Regarding the Antidumping Duty Order on Certain Cut-to-Length Carbon –Quality Steel Plate Products from Japan, 73
Fed. Reg. 29109 (May 20, 2008)[hereinafter Notice of Japan Steel Section 129 Determination].
347 See generally U.S. Fails to Comply with WTO Challenge on Zeroing by Deadline, INSIDE U.S. TRADE, Jan. 4, 2008,
at 1.
348 Recourse to Article 22.2 of the DSU by Japan, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/24 (Jan. 11, 2008); Recourse to Article 22.2 of the DSU by Japan, United States—Measures Relating to
Zeroing and Sunset Reviews, WT/DS322/23 (Jan. 11, 2008).
349 Request by the United States for Arbitration under Article 22.6 of the DSU, United States—Measures Relating to
Zeroing and Sunset Reviews, WT/DS322/25 (Jan. 21, 2008).
350 Understanding between the United States and Japan Regarding Procedures under Articles 21 and 22 of the DSU,
Recourse to Article 22.2 of the DSU by Japan, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/26 (Mar. 12, 2008).
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The United States maintained in a status report to the Dispute Settlement Body and in a DSB
meeting held on January 21, 2008, that it was in compliance in the case because it was no longer
making average-to-average price comparisons in original investigations without offsets, it had
issued a revised dumping determination using this methodology in the one challenged original
investigation, and it did not need to take action with respect to the challenged administrative
reviews because they had been superseded by subsequent reviews. 351
Compliance Panel Proceedings
As provided for in the U.S.-Japan procedural agreement, Japan requested a compliance panel on
April 7, 2008, stating that the United States was in violation of its WTO obligations by not having
fully complied with respect to the one original investigation at issue; by continuing to use zeroing
in transaction-to-transaction comparisons in original investigations, administrative reviews, and
new shipper reviews; by applying zeroing in five of the administrative reviews originally
challenged by Japan and as well as in three “closely connected” administrative reviews that the
United States argued had superseded earlier reviews; and by relying on zeroing in one of the
originally challenged sunset reviews and a subsequent sunset review of the same antidumping
duty order.352 The compliance panel was established on April 18, 2008. On June 6, 2008, the
United States and Japan asked the arbitration panel that was reviewing Japan’s January 2008
retaliation request to suspend its work.353
In the interim, DOC, on May 20, 2008, announced the results of the section 129 proceeding
involving the challenged original investigation, stating in the Federal Register that it had
recalculated the affected dumping margins, arriving at slightly reduced rates, which, at the
direction of the U.S. Trade Representative, went into effect on April 8, 2008.354
The compliance panel issued its report on April 20, 2009, finding that the United States had not
complied with its WTO antidumping obligations in the administrative reviews cited by Japan and
in maintaining zeroing in transaction-to-transaction comparisons in original investigations and in
any price comparison used in administrative and new shipper reviews.355 While the United States
had argued that it did not have compliance obligations with respect to five of the reviews because
the covered goods had entered the United States before the end of the compliance period, the
panel found that the United States was required to bring the importer-specific assessment rates
determined in these reviews into compliance with its WTO obligations by the end of the
compliance period.356 The panel also addressed a situation that had not been ruled upon in
DS294—that is, one in which duties are assessed before the end of the compliance period, but
liquidation instructions are delayed because of injunctions issued under domestic judicial
351 Status Report by the United States, Addendum, United States—Measures Relating to Zeroing and Sunset Reviews,
WT/DS322/22/Add.2 (Jan. 11, 2008); Dispute Settlement Body, Minutes of Meeting, Jan. 21, 2008, at 6,WT/SB/M/245
(Mar. 14, 2008).
352 Request for the Establishment of a Panel, Recourse to Article 21.5 of the DSU by Japan, United States—Measures
Relating to Zeroing and Sunset Reviews, WT/DS322/27 (Apr. 8, 2008).
353 Communication from the Arbitrator, Recourse by the United States to Article 22.6 of the DSU, United States—
Measures Relating to Zeroing and Sunset Reviews, WT/DS322/30 (June 10, 2008).
354 Notice of Japan Steel Section 129 Determination, supra note 346.
355 Panel Report, United States—Measures Relating to Zeroing and Sunset Reviews; Recourse to Article 21.5 of the
DSU by Japan, WT/DS322/RW (Apr. 24, 2009)[hereinafter U.S. Zeroing Article 21.5 Panel Report (Japan)].
356 Id. para. 7.149.
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proceedings challenging the assessment—and found that the fact that the delay was due to
litigation was of no consequence to compliance with the WTO obligations in the case.357
The panel further determined that the United States had violated GATT Article II prohibitions on
imposing tariff surcharges on goods subject to negotiated tariff rates (so-called “bound items”) by
issuing WTO-inconsistent liquidation instructions in four challenged administrative reviews
involving ball bearing products after the compliance period expired.358 These reviews were
among the five with delayed liquidations because of pending litigation. While the panel had
agreed with the United States that the Article II claims were derivative of Japan’s claims under
the Antidumping Agreement, it nonetheless found it appropriate to rule on them because “they
raise an important point of contention between the parties regarding the right of the United States
to continue liquidating entries after the expiry of the RPT [reasonable period of time] on the basis
of liquidation measures issued pursuant to administrative reviews that have already been found to
be WTO-inconsistent.”359
The panel additionally concluded that the United States was out of compliance with its WTO
obligations by not withdrawing or modifying the likelihood of dumping determination in the
challenged 1999 sunset review in which the United States had relied on zeroing-based dumping
margins.360
Recent Developments
The United States appealed the adverse compliance panel report in May 2009. In a report issued
August 18, 2009, the Appellate Body upheld the compliance panel on all issues appealed,
including against U.S. claims regarding the judicial delay of liquidation and violations of GATT
Article II.361 The Appellate Body emphasized that all antidumping duties collected after the end
of the compliance period needed to be calculated without the use of zeroing. Among other things,
it upheld the panel’s dismissal of the U.S. argument that judicial delay of liquidation permits the
collection of zeroing-based antidumping duties after the compliance period expires, stating, inter
alia, that it was “not persuaded that the initiation by private parties of domestic judicial
proceedings is relevant for determining the scope of the United States compliance obligations in
this case.”362
The Appellate Body and compliance panel reports issued in the Article 21.5 proceeding were
adopted by the WTO Dispute Settlement Body on August 31, 2009. At the meeting, the United
States referred Members to its earlier public statements regarding its intent to comply in all the
WTO zeroing disputes and stated that it was “working actively to implement these
recommendations and rulings, including those made in other disputes for which the reasonable
period of time … is still ongoing.” 363 The United States added, however, that in its view the
357 Id. para. 7.153.
358 Id. paras. 7.198-7.208. GATT Article II permits the imposition of antidumping duties on bound items but the duties
must be applied consistently with GATT VI. See GATT 1994 art. II:2(b).
359 U.S. Zeroing Article 21.5 Panel Report (Japan ), supra note 355, paras. 7.202, 7.203.
360 Id. paras. 7.223-7.229.
361 Appellate Body Report, United States—Measures Relating to Zeroing and Sunset Reviews; Recourse to Article 21.5
of the DSU by Japan, WT/DS322/AB/RW (Aug. 18, 2009).
362 Id. paras. 170-187, 188.
363 U.S. Diplomatic Mission to the United Nations in Geneva, Statements by the United States at the August 31, 2009
(continued...)
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appeal of the compliance panel report in this case “was not about zeroing but rather concerns
what a Member with a retrospective antidumping system must do to come into compliance with
the DSB’s recommendations and rulings with respect to individual administrative reviews” and
that the dispute in addition “raised important procedural issues as to the scope of dispute
settlement proceedings.” Noting the prospective nature of WTO remedies, the United States cited
the systemic implications of applying obligations under a WTO decision to governmental actions
involving goods that enter the defending Member’s customs territory before the end of the
compliance period, an approach that, in its view, could be taken toward all border measures
imposed on imports, including ordinary tariffs. It also took issue with Appellate Body’s finding
that the obligation not to use zeroing applied to duty liquidations that take place after the
expiration of the compliance period where the liquidation is delayed due to litigation, as well as
the Appellate Body’s affirmance that a particular administrative review could be reviewed by a
compliance panel even though the proceeding was not in existence at the time that Japan made its
panel request.
Under the U.S.-Japan procedural agreement, either the United States or Japan may ask that the
arbitration on Japan’s January 2008 retaliation request be resumed. The arbitration was suspended
in June 2008 following Japan’s request for a compliance panel. Japan has not yet taken further
action in the case.
Final Anti-Dumping Measures on Stainless Steel from Mexico
(DS344)
Mexico challenged (1) the use of model zeroing by the United States in original antidumping
investigations, both as such and as applied in an original investigation of Mexican stainless steel
sheet and strips in coils and (2) the use of simple zeroing in annual administrative reviews, both
as such and as applied in five administrative reviews in the antidumping proceeding involved.364
A panel report issued December 20, 2007, concluded that model zeroing, as used in original
investigations, was inconsistent with Article 2.4.2 of the Antidumping Agreement, both as such
and as applied in the cited antidumping investigation.365 The panel ruled in favor of the United
States, however, in finding that the use of simple zeroing, either as such or as applied in the cited
administrative reviews, was not inconsistent with the GATT Article VI or the Antidumping
Agreement.
In an appeal by Mexico, the Appellate Body issued a report on April 30, 2008, in which it
reversed the panel’s findings on the use of simple zeroing, finding, as it had in earlier disputes,
that the use of this practice in administrative reviews, both as such and as applied in cited
antidumping cases, was inconsistent with Article VI:2 of the GATT and Article 9.3 of the
Antidumping Agreement.366 The Appellate Body also criticized the panel for not adhering to
(...continued)
WTO—DSB, at para. 5, at http://geneva.usmission.gov/news/2009/08/31/ds/.
364 Request for the Establishment of a Panel by Mexico, United States—Final Anti-dumping Measures on Stainless
Steel from Mexico,WT/DS344/3 (Oct. 16, 2006).
365 Panel Report, United States—Final Anti-dumping Measures on Stainless Steel from Mexico,WT/DS344/R (Dec. 20,
2007).
366 Appellate Body Report, United States—Final Anti-dumping Measures on Stainless Steel from
Mexico,WT/DS344/AB/R (Apr. 30, 2008).
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earlier Appellate Body rulings on this issue, stating that, although it was “well settled that
Appellate Body reports are not binding, except with respect to resolving the particular dispute
between the parties,” this principle “does not mean that subsequent panels are free to disregard
the legal interpretations and the ratio decidendi contained in previous Appellate Body reports that
have been adopted by the DSB.”367 Examining the use made of panel and Appellate Body reports
in subsequent disputes and by WTO Members in enacting laws and issuing regulations, and the
role played by the Appellate Body in the WTO dispute settlement system vis à vis panels, the
Appellate Body concluded that the “Panel’s failure to follow previously adopted Appellate Body
reports addressing the same issues undermines the development of a coherent and predictable
body of jurisprudence clarifying Members’ rights and obligations under the covered agreements
as contemplated under the DSU.”368
The Appellate Body report and modified panel report were adopted at the May 20, 2008, meeting
of the Dispute Settlement Body. During the meeting, the United States stated its support for the
panel’s conclusions regarding simple zeroing and questioned the approach taken by the Appellate
Body in reversing the panel.369 It did not, however, discuss compliance in the case. The United
States later circulated a document in which it questioned in a more detailed fashion the reasoning
and approach of the Appellate Body regarding the use of zeroing in the transaction-specific
calculations employed in administrative reviews.370
Because the parties could not agree on the length of the compliance period, the issue was
arbitrated at Mexico’s request. In an October 31, 2008, decision, the Arbitrator set a deadline of
April 30, 2009.371
The Commerce Department issued a determination under section 129 of the Uruguay Round
Agreements Act on March 31, 2009, in which it recalculated the dumping margin in the original
investigation without the use of zeroing, and later published a notice in the Federal Register that
the USTR had instructed the Department to implement this determination effective April 23,
2009.372 The recalculation resulted in a reduction of the dumping margin from 30.85 percent to
30.69 percent for one individually investigated exporter and the same reduction in the “all others”
rate.
With respect to the administrative reviews that were challenged “as applied,” the United States
has reportedly informed the WTO Dispute Settlement Body at its May 20, 2009, meeting “that
‘any prospective effect of those reviews has been eliminated and all entries of merchandise under
the five reviews have been liquidated for customs purposes.’”373 With regard to other rulings and
367 Id. para. 158.
368 Id. paras. 160-61.
369 Dispute Settlement Body, Minutes of Meeting, May 20, 2008, at 9-11, WT/DSB/M/250 (July 1, 2008).
370 Communication from the United States, United States—Final Anti-dumping Measures on Stainless Steel from
Mexico,WT/DS344/11 (June 11, 2008).
371Award of the Arbitrator, United States—Final Anti-dumping Measures on Stainless Steel from Mexico, Arbitration
under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes,
WT/DS344/15 (Oct. 31, 2008).
372 Implementation of the Findings of the WTO Dispute Settlement Panel and Appellate Body in United States—Final
Anti-Dumping Measures on Stainless Steel from Mexico: Notice of Determination under Section 129 of the Uruguay
Round Agreements Act, 74 Fed. Reg. 19527 (Apr. 29, 2009).
373 Request for Consultations, United States—Final Anti-dumping Measures on Stainless Steel from Mexico, Recourse
to Article 21.5 of the DSU by Mexico, at 3, WT/DS344/18 (Aug. 24, 2009)[hereinafter Mexico Article 21.5
(continued...)
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recommendations in the dispute, however, the United States “informed the DSB that it ‘has also
been conferring with Mexico about the steps that the United States has taken to comply with the
recommendations and rulings of the DSB.’”374 On May 19, 2009, the United States and Mexico
entered into a sequencing agreement involving the possible request by Mexico of a compliance
panel and, if it is later determined that the United States has not taken a measure to comply or its
compliance measures are inconsistent with WTO obligations, a request for authorization to
suspend concessions owed the United States. 375
Recent Developments
On August 19, 2009, Mexico requested consultations with the United States under Article 21.5 of
the DSU regarding U.S. compliance in the case.376 Mexico maintains that the United States has
not complied with the WTO decision because it: (1) “has not taken any steps” to eliminate the use
of simple zeroing in periodic, i.e., administrative, reviews; (2) continues to maintain and use
simple zeroing in the five administrative reviews originally challenged in the case; and (3)
continues to “impose, assess and/or collect anti-dumping duties in excess of the proper margin of
dumping, and evidences its intention to continue to do so, through … five subsequent periodic
reviews [of the original antidumping duty order on stainless steel and sheet in coils from Mexico]
... , any amendments thereto, any measures closely related thereto, any future subsequent periodic
reviews, and the United States Government instructions and notices.” The U.S.-Mexico
procedural agreement gave the parties 15 days to consult on Mexico’s request, after which
Mexico could request a compliance panel. To date, Mexico has not made such a request.
Continued Existence and Application of Zeroing Methodology
(DS350)
Although the European Union (EU) had successfully challenged the U.S. use of zeroing in
DS294, it was concerned that the United States had not yet broadly discontinued use of the
practice. In October 2006, the EU challenged the continued use and application of zeroing in 18
specific antidumping cases, citing the continued application of antidumping duties at a level in
excess of the margins that would result from correct application of the Antidumping
Agreement.377 Ten of the 18 cases had been at issue in the EU’s earlier challenge, DS294. The EU
also challenged the use of zeroing in administrative and sunset reviews in 13 cases, a sunset
review in one case, and original investigations in four others, a total of 52 agency determinations.
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Consultation Request]. Recalculation of dumping margins in the challenged administrative reviews was not part of the
Section 129 proceeding for the original antidumping investigation at issue in the case. See Department of Commerce,
Issues and Decision Memorandum for the Final Results of Proceedings Under Section 129 of the Uruguay Round
Agreements Act: Antidumping Measures on Stainless Steel from Mexico, [Mar. 31, 2009], at http://ia.ita.doc.gov/
download/section129/mexico-ssss-coil-129-final-memo-04-03-09.pdf
374 Mexico Article 21.5 Consultation Request, supra note 373, at 3.
375Understanding between Mexico and the United States Regarding Procedures under Articles 21 and 22 of the DSU,
United States—Final Anti-dumping Measures on Stainless Steel from Mexico, WT/DS344/17 (May 20, 2009).
376 Mexico Article 21.5 Consultation Request, supra note 373.
377 Request for the Establishment of a Panel by the European Communities, United States—Continued Existence and
Application of Zeroing Methodology, WT/DS350/6 (May 11, 2007).
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Along with challenging the use of zeroing both “as such” and “as applied” in the cited
antidumping determinations, the EU also claimed that a duty based on zeroing, while not falling
within either of these two categories, was a “measure” subject to WTO dispute settlement.378 The
EU considered this new argument to be “key” to the proceeding since, in its view, its effect
“would be that of bringing the future use of United States zeroing in each case within the scope of
the panel findings.”379 The EU later abandoned its “as such” claim after Japan successfully
obtained a ruling on this point in DS322.380
In its October 1, 2008 report, the WTO panel found that the United States acted inconsistently
with its obligations in the Antidumping Agreement by (1) using model zeroing in the four cited
original investigations; (2) applying simple zeroing in 29 of the cited administrative reviews
cited; and (3) relying on dumping margins obtained through model zeroing in the eight sunset
reviews at issue. 381 The panel found, however, that claims involving the continued application of
antidumping duties in the18 antidumping cases were not within the panel’s terms of reference.
One panelist, while agreeing with these conclusions, disagreed with the legal reasoning used by
the panel in considering the EU’s claims on simple zeroing in periodic reviews and, in part, on
model zeroing in original investigations. The report was appealed by both the EU and the United
States.
In a report issued on February 4, 2009, the Appellate Body ruled that “the continued use of
zeroing in successive proceedings in which duties resulting from the 18 anti-dumping duty orders
are maintained, constitute ‘measures’ that can be challenged in WTO dispute settlement.”382 The
Appellate Body determined that it had a sufficient factual record to make findings on this basis in
four of the 18 cases cited by the EU and found that, with respect to these four cases, the
application and continued application of antidumping duties was (1) inconsistent with Article 9.3
of the Antidumping Agreement and Article VI:2 of the GATT 1994 to the extent that the duties
were calculated with zeroing in administrative reviews, and (2) inconsistent with Article 11.3, to
the extent that reliance was placed on a zeroing-based margin in sunset reviews.383
The Appellate Body also upheld the panel’s findings that zeroing was improperly applied in 29 of
the challenged administrative reviews and, contrary to the panel, was able to find that the United
States had acted inconsistently with its WTO obligations in five additional administrative reviews
originally cited by the EU.384 In addition, the Appellate Body upheld the panel’s finding that the
378 This issue implicates Article 6.2 of the WTO Dispute Settlement Understanding, which states that a Member’s
written request for the establishment of a panel must, inter alia, “identify the specific measures at issue” in the dispute
(emphasis added).
379 EC 2009 U.S. Trade Barriers Report, supra note 58, at 60.
380 Id.
381 Panel Report, United States—Continued Existence and Application of Zeroing Methodology, WT/DS350/R (Oct. 1,
2008).
382 Appellate Body Report, United States—Continued Existence and Application of Zeroing Methodology, para. 185,
WT/DS350/17 (June 4, 2009)[hereinafter U.S. Zeroing AB Report (EC II)]. The “continued use” argument has since
been made by Brazil its consultations and panel requests in United States—Anti-dumping Administrative Reviews and
Other Measures Related to Imports of Certain Orange Juice from Brazil. Request for Consultations by Brazil,
WT/DS382/1/Add.1 (May 27, 2009), at 2; Request for the Establishment of a Panel by Brazil, WT/DS382/4 (Aug. 21,
2009), at 3.
383 U.S. Zeroing AB Report (EC II), supra note 382, paras. 186-99.
384 Id. paras. 242-357. One Appellate Body member, in a concurrence to the AB’s findings that zeroing was not
permitted in administrative reviews, called for an end to litigation on the issue. Despite “arguments of substance made
on both sides,” the member stated that Appellate Body had “spoken definitively” on the issue of zeroing, the AB
(continued...)
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United States had acted inconsistently with Article 11.3 of the Antidumping Agreement in eight
sunset reviews.385
The Appellate Body Report and the modified panel report were adopted at the February 19, 2009,
meeting of the Dispute Settlement Body. As it had with respect to past appellate reports on
zeroing, the United States expressed concerns with the Appellate Body’s approach to a variety of
issues in the case.386 At the March 20, 2009, meeting of the Dispute Settlement Body, the United
States stated that it intended to comply in the dispute, “would be considering carefully how to do
so,” and would need a reasonable period of time for this undertaking.387 In June, the United States
and the EU agreed on a compliance period ending December 19, 2009.388
Recent Developments
With the compliance deadline of December 19, 2009, before it, the United States stated in its
December 10, 2009, WTO status report that the USTR had sent a written request to the Secretary
of Commerce to issue a Section 129 determination that would render four final antidumping
determinations at issue in the case not inconsistent with the recommendations and rulings of the
WTO Dispute Settlement Body.389 The United States also stated that it would “continue to consult
with interested parties in order to address the other findings” contained in the adopted panel and
Appellate Body reports.390 At the December 21, 2009, meeting of the WTO Dispute Settlement
Body, the United States added that it was “sure that Members appreciate the difficulties that are
raised for the United States by the Appellate Body findings on zeroing in this disputes and
others,” reiterating the action that it had taken and the ongoing discussions on unresolved
issues.391 At the same meeting, the EU reportedly “expressed its disappointment that the
reasonable period of time for implementation had expired and the US had yet to bring itself into
compliance.”392 With other issues in the case remaining unaddressed, the United States and the
EU entered into a procedural agreement in the case in January 2010 providing for a possible
compliance panel request by the EU.393
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decisions had been adopted, and that it was now “more important for the system of dispute resolution to have a
definitive outcome than to pick over the entrails of battles past.” Id. para. 312.
385 Id. paras. 369-83.
386 Dispute Settlement Body, Minutes of Meeting, Feb. 19, 2009, at 18-21, WT/DSB/M/265 (Apr. 29, 2009).
387 DSB Minutes (Mar. 20, 2009), supra note 59, at 14.
388 Agreement under Article 21.23(b) of the DSU, United States—Continued Existence and Application of Zeroing
Methodology, WT/DS350/17 (Feb. 4, 2009).
389 Status Report by the United States, United States—Continued Existence and Application of Zeroing Methodology,
WT/DS350/18 (Dec. 11, 2009).
390 Id.
391 U.S. Diplomatic Mission to the United Nations in Geneva, Satements [sic] by the United States at the December 21,
2009, DSB Meeting, at para. H, at http://geneva.usmission.gov/2009/12/21/1221dsb/.
392 WTO News Item (Dec. 21, 2009), supra note 197.
393 Understanding between the European Union and the United States Regarding Procedures under Articles 21 and 22
of the DSU, United States—Continued Existence and Application of Zeroing Methodology, WT/DS350/19 (Jan. 6,
2010).
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Author Contact Information
Jeanne J. Grimmett
Legislative Attorney
jgrimmett@crs.loc.gov, 7-5046
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