Dispute Settlement in the World Trade
Organization (WTO): An Overview

Jeanne J. Grimmett
Legislative Attorney
September 7, 2010
Congressional Research Service
7-5700
www.crs.gov
RS20088
CRS Report for Congress
P
repared for Members and Committees of Congress

Dispute Settlement in the World Trade Organization (WTO): An Overview

Summary
Dispute settlement in the World Trade Organization (WTO) is carried out under the WTO
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In effect
since January 1995, the DSU provides for consultations between disputing parties, panels and
appeals, and possible retaliation if a defending party fails to comply with a WTO decision by an
established deadline. Automatic establishment of panels, adoption of panel and appellate reports,
and authorization of requests to retaliate, along with deadlines and improved multilateral
oversight of compliance, are aimed at producing a more expeditious and effective system than
had existed under the General Agreement on Tariffs and Trade (GATT). To date, 411 complaints
have been filed, approximately one-half involving the United States as complainant or defendant.
Expressing dissatisfaction with WTO dispute settlement results in the trade remedy area,
Congress, in the Trade Act of 2002, directed the executive branch to address dispute settlement in
WTO negotiations. WTO Members have been negotiating DSU revisions in the currently stalled
Doha Development Round of trade negotiations but no final agreement on the DSU has been
reached. Use of the DSU has revealed procedural gaps, particularly affecting the compliance
phase of a dispute. These include a failure to coordinate procedures for requesting retaliation with
procedures for tasking a WTO panel with determining whether a defending Member has complied
in a case and the absence of a procedure for withdrawing trade sanctions imposed by a
complaining Member where the defending Member believes it has fulfilled its WTO obligations.
As a result, disputing Members have entered into bilateral agreements permitting retaliation and
compliance panel processes to progress on an agreed schedule and have initiated new dispute
proceedings aimed at removing retaliatory measures.
Where a U.S. law or regulation is at issue in a WTO case, the adoption by the WTO of a panel or
Appellate Body report finding that the measure violates a WTO agreement does not give the
report direct legal effect in this country; thus federal law is not affected until Congress or the
executive branch, as the case may be, takes action to remove the offending measure. Where a
restrictive foreign trade practice is at issue, Section 301 of the Trade Act of 1974 provides a
mechanism by which the United States Trade Representative (USTR) may challenge the measure
in a WTO dispute settlement proceeding and authorizes the USTR to take retaliatory action if the
defending Member has not complied with the resulting WTO decision. Although Section 301 was
challenged in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related
trade disputes in violation of DSU provisions requiring resort to multilateral WTO dispute
settlement, the United States was ultimately found not to be in violation of its DSU obligations.
H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer that would, inter
alia, investigate restrictive foreign trade practices in light of WTO obligations and call on the
USTR to pursue WTO cases where alleged violations are found; express congressional
dissatisfaction with WTO decisions; and restrict implementation of a revised methodology for
calculating dumping margins adopted by the Commerce Department in 2007 in response to
adverse WTO decisions. S. 363 (Snowe) would grant the U.S. Court of International Trade
exclusive jurisdiction to review de novo certain USTR determinations under Section 301 of the
Trade Act of 1974, which may in some cases involve the initiation and conduct of WTO disputes,
and would amend various Section 301 authorities themselves. S. 1466 (Stabenow) and S. 1982
(Brown) would establish mechanisms under the Trade Act of 1974 requiring the USTR to identify
particularly harmful foreign trade practices and, where appropriate, to initiate WTO cases to
remedy these practices.
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Dispute Settlement in the World Trade Organization (WTO): An Overview

Contents
Background ................................................................................................................................ 1
WTO Dispute Settlement Understanding ..................................................................................... 1
Steps in a WTO Dispute .............................................................................................................. 3
Consultations (Article 4) ....................................................................................................... 3
Establishing a Dispute Panel (Articles 6, 8) ........................................................................... 3
Panel Proceedings (Articles 12, 15, Appendix 3) ................................................................... 4
Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)........................................ 4
Implementation of Panel and Appellate Body Reports (Article 21) ........................................ 5
Compliance Panels (Article 21.5) .......................................................................................... 5
Compensation and Suspension of Concessions (Article 22) ................................................... 6
Use of Multilateral Dispute Settlement Procedures ...................................................................... 7
Compliance Issues ...................................................................................................................... 7
“Sequencing” ........................................................................................................................ 7
Removal of Retaliatory Measures.......................................................................................... 7
WTO Dispute Settlement and U.S. Law ...................................................................................... 9
Legal Effect of WTO Decisions............................................................................................. 9
Section 301 of the Trade Act ............................................................................................... 10
111th Congress Legislation ........................................................................................................ 12

Contacts
Author Contact Information ...................................................................................................... 12

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Dispute Settlement in the World Trade Organization (WTO): An Overview

Background
From its inception in 1947, the General Agreement on Tariffs and Trade (GATT), signed by the
United States and ultimately by a total of 128 countries, provided for consultations and dispute
resolution, allowing a GATT Party to invoke GATT dispute settlement articles if it believes that
another Party’s measure, whether violative of the GATT or not, caused it trade injury. Because the
GATT did not set out a dispute procedure with great specificity, GATT Parties developed a more
detailed process including ad hoc panels and other practices. The procedure was perceived to
have certain deficiencies, however, among them a lack of deadlines, a consensus decision-making
process that allowed a GATT Party against whom a dispute was filed to block the establishment
of a dispute panel and the adoption of a panel report by the GATT Parties as a whole, and laxity
in surveillance and implementation of panel reports even when reports were adopted and had the
status of an official GATT decision.
Congress made reform of the GATT dispute process a principal U.S. goal in the GATT Uruguay
Round of Multilateral Trade Negotiations, begun in 1986 and concluded in 1994 with the signing
of the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement). The
WTO Agreement requires any country that wishes to be a WTO Member to accept all of the
multilateral trade agreements negotiated during the Round, including the General Agreement on
Tariffs and Trade 1994, an updated version of the GATT adopted in 1947, as well as the
Understanding on Rules and Procedures Governing the Settlement of Disputes, applicable to
disputes arising under virtually all WTO agreements.
The Uruguay Round package of agreements not only carries forward original GATT obligations,
such as according goods of other parties nondiscriminatory treatment, not placing tariffs on goods
that exceed negotiated or “bound” rates, generally refraining from imposing quantitative
restrictions such as quotas and embargoes on imports and exports, and avoiding injurious
subsidies, but also expands on these obligations in new agreements such as the Agreement on
Agriculture, the Agreement on the Application of Sanitary and Phytosanitary Measures, the
Agreement on Antidumping, and the Agreement on Subsidies and Countervailing Measures.
Congress approved and implemented the WTO Agreement and the other agreements negotiated in
the Uruguay Round in the Uruguay Round Agreement Act, P.L. 103-465. The agreements entered
into force on January 1, 1995.
WTO Dispute Settlement Understanding
The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)
continues past GATT dispute practice, but also contains features aimed at strengthening the prior
system.1 The DSU provides for integrated dispute settlement under which the same rules apply to

1 The text of the DSU, panel and Appellate Body reports, and information on the WTO dispute process are available at
http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm. WTO disputes are listed and summarized by the WTO
Secretariat in its “Update of WTO Dispute Settlement Cases,” available at the WTO website, above. Information on
WTO disputes involving the United States, including the text of U.S. written submissions to WTO panels, may be
found at the USTR website, at http://www.ustr.gov/trade-topics/enforcement. For the status of current cases in which
the United States has been successfully challenged, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S.
Compliance in Pending Cases
, by Jeanne J. Grimmett.
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Dispute Settlement in the World Trade Organization (WTO): An Overview

disputes under virtually all WTO agreements, subject to any special or additional rules in an
individual agreement.
The WTO Dispute Settlement Body (DSB), created under the DSU and consisting of
representatives of all WTO Members, administers WTO dispute settlement proceedings. While
the DSB ordinarily operates by consensus (i.e., without objection), the DSU reverses past
consensus practice at fundamental stages of the process. Thus, unless it decides by consensus not
to do so, the DSB will establish panels; adopt panel and appellate reports; and, where WTO
rulings have not been implemented and if requested by a prevailing party, authorize the party to
impose a retaliatory measure. The DSU also sets forth deadlines for various stages of the
proceedings and improves multilateral monitoring of the implementation of adopted rulings.
Given that panel reports would otherwise be adopted automatically, WTO Members have a right
to appeal a panel report on legal issues. The DSU creates a standing Appellate Body to carry out
this added appellate function. The Appellate Body has seven members, three of whom serve on
any one case.
Dispute settlement under the WTO is primarily Member-driven; that is, it is up to the parties to a
dispute to decide whether or not to take particular actions available to them (e.g., to request a
panel if consultations fail, to request authorization to impose countermeasures against a non-
complying member, or to impose such measures even if the DSB has authorized them). As stated
in Article 3.7 of the DSU, the preferred outcome of a dispute is “a solution mutually acceptable to
the parties and consistent with the covered agreements.” Absent this, the primary objective of the
process is withdrawal of a violative measure, with compensation and retaliation being avenues of
last resort.
As of the date of this report, 411 complaints have been filed under the DSU, with slightly more
than one-half of these resulting in the establishment of a panel. In some of these proceedings,
however, the panel process was discontinued due to a settlement of the dispute or for other
reasons. To date, 134 original panel reports have been publicly circulated. Some panels have also
issued an additional report or reports under Article 21.5 of the DSU determining whether the
defending Member complied in a particular dispute; to date, 29 compliance panel reports have
been issued. Approximately two-thirds of original and Article 21.5 panel reports have been
appealed.
Approximately one-half of the 411 WTO complaints filed to date involve the United States as
complaining party or defendant. The United States Trade Representative (USTR) manages U.S.
participation and is the chief representative of the United States in the WTO, including in WTO
disputes.2
The DSU was scrutinized by WTO Members under a Uruguay Round Declaration, which called
for completion of a review within four years after the WTO Agreement entered into force (i.e., by
January 1999). Members did not agree on any revisions in the initial review and continued to
negotiate on dispute settlement issues during the current WTO Doha Development Round of
multilateral trade negotiations, doing so on a separate track permitting an agreement to be
adopted apart from any overall Doha Round accord. In 2008, the chairman of the dispute

2 Trade Act of 1974, P.L. 93-618, § 141(c)(1)(C),(D), 19 U.S.C. § 2171(c)(1)(C),(D). See also Uruguay Round
Agreements Act, P.L. 103-465, §§ 123, 127, 129, 19 U.S.C. § 3533, 3537, 3538.
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settlement negotiations prepared a consolidated draft legal text based mainly on Member
proposals, which Members agreed to use in their negotiations.3 The United States has proposed
such revisions as greater Member control over the process, guidelines for WTO adjudicative
bodies, and increased transparency—for example, open meetings and timely access to
submissions and final reports.4 Other Member proposals include, inter alia, a permanent roster of
panelists, enabling the Appellate Body to remand decisions to panels for further proceedings,
rules for sequencing and the termination of retaliatory measures (see below), tightened time
frames, enhanced third-party rights, and special treatment for developing country disputants.5
Steps in a WTO Dispute
Following are the stages in a DSU proceeding, with the applicable DSU articles for each:
Consultations (Article 4)
The DSU permits a WTO Member to consult with another Member regarding “measures affecting
the operation of any covered agreement taken within the territory” of the latter. If a WTO
Member requests consultations with another Member under a WTO agreement, the latter Member
must enter into consultations with the former within 30 days.6
If the dispute is not resolved within 60 days, the complaining party may request a panel. The
complainant may request a panel before this period ends if the other Member has failed to enter
into consultations or if the disputants agree that consultations have been unsuccessful.
Establishing a Dispute Panel (Articles 6, 8)
A panel request, which must be made in writing, must “identify the specific measures at issue and
provide a brief summary of the legal basis for the complaint sufficient to present the problem
clearly” (Art. 6.2). Under GATT and now WTO dispute settlement practice, a Member may
challenge a measure of another Member “as such,” “as applied,” or both.7 An “as such” claim

3 Special Session of the Dispute Settlement Body, Report by the Chairman to the Trade Negotiations Committee,
TN/DS/23 (Dec. 5, 2008); for further information on the status of the negotiations, see Special Session of the Dispute
Settlement Body, Report by the Chairman to the Trade Negotiations Committee for the purpose of the TNC stocktaking
exercise
, TN/DS/24 (Mar. 22, 2010).
4 See, e.g., WTO documents TN/DS/W/79 (July 13, 2005), TN/DS/W/82 (Oct. 24, 2005), TN/DS/W/82/Add.1 (Oct. 25,
2005), as corrected, and TN/DSW/86 (Apr. 21, 2006). See also documents posted on the USTR website, at
http://www.ustr.gov/trade-topics/enforcement/us-proposals-wto-dispute-settlement-understanding-negotiations.
5 For further information on proposals, see Institute of International Economic Law, DSU Review, at
http://www.law.georgetown.edu/iiel/research/projects/dsureview/synopsis.html.
6 Once the WTO is notified that a request for consultations has been made, the dispute will be assigned a number.
Disputes are numbered in chronological order. The prefix WT/DS, followed by the assigned number, is then used to
designate WTO documents issued in connection with the dispute. For example, the pending dispute between the United
States and China, China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and
Audio Entertainment Products
is DS363, with the U.S. request for consultations sent to China on August 10, 2007,
numbered WT/DS363/1, and the WTO Appellate Body report issued on December 21, 2009, numbered
WT/DS363/AB/R.
7 Appellate Body Report, United States—Anti-dumping Act of 1916, paras. 60-61, WT/DS136/AB/R, WT/DS162/AB/R
(Aug. 28, 2000).
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challenges the measure independent of its application in a specific situation and, as described by
the WTO Appellate Body, seeks to prevent the defending Member from engaging in identified
conduct before the fact.8
If a panel is requested, the DSB must establish it at the second DSB meeting at which the request
appears as an agenda item, unless it decides by consensus not to do so. Thus, while a defending
Member may block the establishment of a panel the first time the complaining Member makes its
request at a DSB meeting, the panel will be established, virtually automatically, the second time
such a request is placed on the DSB’s agenda. While DSB ordinarily meets once a month, the
complaining Member may request that the DSB convene for the sole purpose of considering the
panel request. Any such meeting must be held within 15 days after the complaining Member
requests that the meeting be held.
The panel is ordinarily composed of three persons. The WTO Secretariat proposes the names of
panelists to the disputing parties, who may not oppose them except for “compelling reasons” (Art.
8.6). If there is no agreement on panelists within 20 days from the date that the panel is
established, either disputing party may request the WTO Director-General to appoint the panel
members.
Panel Proceedings (Articles 12, 15, Appendix 3)
After considering written and oral arguments, the panel issues the descriptive part of its report
(facts and argument) to the disputing parties. After considering any comments, the panel submits
this portion along with its findings and conclusions to the disputants as an interim report.
Following a review period, a final report is issued to the disputing parties and later circulated to
all WTO Members. A panel must generally provide its final report to disputants within six
months after the panel is composed, but may take longer if needed; extensions are usual in
complex cases. The period from panel establishment to circulation of a panel report to WTO
Members should not exceed nine months. In practice, panels have been found to take more than
13 months on average to publicly circulate reports.9
Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)
Within 60 days after a panel report is circulated to WTO Members, the report is to be adopted at a
DSB meeting unless a disputing party appeals it or the DSB decides by consensus not to adopt it.
Within 60 days of being notified of an appeal (extendable to 90 days), the Appellate Body (AB)

8 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). The Appellate Body further 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 situations as well—will necessarily be
inconsistent with that Member’s WTO obligations. In essence, complaining parties bringing “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.
9 See, e.g., Henrik Horn & Petros C. Mavroidis, The WTO Dispute Settlement System 1995-2006: Some descriptive
statistics, at 28-29 (Mar. 14, 2008), at http://siteresources.worldbank.org/INTRES/Resources/469232-1107449512766/
DescriptiveStatistics_031408.pdf.
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must issue a report that upholds, reverses, or modifies the panel report. The AB report is to be
adopted by the DSB, and unconditionally accepted by the disputing parties, unless the DSB
decides by consensus not to adopt it within 30 days after circulation to Members. The period of
time from the date the panel is established to the date the DSB considers the panel report for
adoption is not to exceed nine months (12 months where the report is appealed) unless otherwise
agreed by the disputing parties.
Implementation of Panel and Appellate Body Reports (Article 21)
In the event that the WTO decision finds the defending Member has violated an obligation under
a WTO agreement, the Member must inform the DSB of its implementation plans within 30 days
after the panel report and any AB report are adopted. If it is “impracticable” for the Member to
comply immediately, the Member will have a “reasonable period of time” to do so. The Member
is expected to implement the WTO decision fully by the end of this period and to act consistently
with the decision after the period expires.10 Compliance may be achieved by withdrawing the
WTO-inconsistent measure or, alternatively, by issuing a revised measure that modifies or
replaces it.11
Under the DSU, the “reasonable period of time” is: (1) that proposed by the Member and
approved by the DSB; (2) absent approval, the period mutually agreed by the disputants within 45
days after the report or reports are adopted by the DSB; or (3) failing agreement, the period
determined by binding arbitration. Arbitration is to be completed within 90 days after adoption of
the reports. To aid the arbitrator in determining the length of the compliance period, the DSU
provides a non-binding guideline of 15 months from the date of adoption. Arbitrated compliance
periods have ranged from six months to 15 months and one week. The DSU envisions that a
maximum 18 months will elapse from the date a panel is established until the reasonable period
of time is determined.
Compliance Panels (Article 21.5)
Where there is disagreement as to whether a Member has complied—that is, whether a
compliance measure exists, or whether a measure that has been taken is consistent with the WTO
decision in the case—either disputing party may request that a compliance panel be convened
under Article 21.5. A compliance panel is expected to issue its report within 90 days after the
dispute is referred to it, but it may extend this time period if needed. Compliance panel reports
may be appealed to the WTO Appellate Body and both reports are subject to adoption by the
DSB.

10 E.g., Report of the Appellate Body, United States—Measures Relating to Zeroing and Sunset Reviews, Recourse to
Article 21.5 of the DSU by Japan
, paras. 153-158, WT/DS322/AB/RW (Aug. 18, 2009).
11 Id. para. 154.
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Compensation and Suspension of Concessions (Article 22)
If the defending Member fails to comply with the WTO decision within the established
compliance period, the prevailing Member may request that the defending Member negotiate a
compensation agreement. If such a request is made and agreement is not reached within 20 days
after the compliance deadline expires, or if negotiations have not been requested, the prevailing
Member may request authorization from the DSB to retaliate (i.e., suspend concessions or
obligations owed the non-complying Member under a WTO agreement).
Generally, a Member should first try to suspend concessions or obligations in the same trade
sector as the one at issue in the dispute (Art. 22.3(a)). If this is “not practicable or effective,” the
Member may then seek to suspend concessions in another sector under the same WTO agreement
(Art. 22.3(b)). If, however, suspending concessions in other sectors under the same agreement is
not “practicable or effective” and “the circumstances are serious enough,” the Member may seek
to suspend concessions or obligations under another WTO agreement, or “cross-retaliate” (Art.
22.3(c)).
Retaliation most often involves the suspension of GATT tariff concessions (i.e., the imposition of
tariff surcharges) on selected products from the non-complying Member. In some cases, however,
the non-compliant Member may not be a major exporter of goods to the prevailing Member or
some or all of the goods that are exported are considered to be critical to the prevailing Member’s
economy. In such case, if firms of the non-compliant Member are active service providers or
exercise significant intellectual property rights in the prevailing Member’s territory, the prevailing
Member may seek to suspend market access obligations under the General Agreement on Trade in
Services (GATS) or obligations under the Agreement on Trade-Related Aspects of Intellectual
Property Rights (Agreement on TRIPS).
The DSB is to grant a retaliation request within 30 days after the compliance deadline expires
unless it decides by consensus not to do so, or the defending Member requests that the retaliation
proposal be arbitrated. Depending on the contents of the proposal, the defending Member may
object to the level of the proposed retaliation (i.e., that it is not equivalent to the level of trade
injury in the dispute), claim that DSU principles and procedures for requesting cross-retaliation
have not been followed, or both.12 Once requested, arbitration is automatic and is to be completed
within 60 days after the compliance period ends. An arbitral decision is considered final.
After the arbitral decision is issued, the prevailing party may request that the DSB approve its
proposal, subject to any modification by the arbitrator. The prevailing Member is not required to
request authorization, however, nor is the Member required to do so by a given date if it chooses
to pursue such a request. If imposed, retaliation is permitted to remain in effect only until the
offending measure is removed or the disputing parties otherwise resolve the dispute.

12 See 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 4.21 of the
SCM Agreement, paras. 5.10-5.236, WT/DS267/ARB/1
(Aug. 31, 2009), for a recent arbitral analysis of a request to cross-retaliate. In response to U.S. non-compliance in
Brazil’s challenge of U.S. cotton subsidies, Brazil sought authorization to suspend concessions under the Agreement on
Trade-Related Aspects of Intellectual Property Right and the General Agreement on Trade in Services, arguing, as
required under the DSU, that suspending concessions on goods alone was not “practicable or effective” and that the
circumstances in the case were “serious enough” to permit it to do so. The arbitrator ultimately allowed Brazil to cross-
retaliate, but required that a variable annual threshold tied to the level of U.S. imports into Brazil be exceeded before
Brazil could exercise this option.
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Use of Multilateral Dispute Settlement Procedures
Article 23 of the DSU requires that WTO Members invoke DSU procedures in disputes involving
WTO agreements and that they act in accordance with the DSU (i.e., not unilaterally) when
determining if another Member has violated a WTO agreement, determining a date by which the
Member must comply with a WTO decision, and taking any retaliatory action against a non-
complying Member. Whether U.S. trade remedy law, specifically Section 301 of the Trade Act of
1974, requires the United States to act in violation of Section 23 of the DSU was at issue in an
early WTO case, United States—Sections 301-310 of the Trade Act of 1974, discussed below.
Compliance Issues
“Sequencing”
Although many WTO rulings have been satisfactorily implemented, difficult cases have tested
DSU implementation articles, highlighting deficiencies in the system and prompting suggestions
for reform. For example, gaps in the DSU have resulted in the problem of “sequencing,” which
first manifested itself in 1998-1999 during the compliance phase of the successful U.S. challenge
of the European Union’s banana import regime. Article 22 allows a prevailing party to request
authorization to retaliate within 30 days after a compliance period ends, while Article 21.5
provides that disagreements over the existence or adequacy of compliance measures are to be
decided using WTO dispute procedures, including resort to panels. A compliance panel’s report is
due within 90 days after the dispute is referred to it and may be appealed. The DSU does not
integrate an Article 21.5 procedure into the 30-day Article 22 deadline, nor does it expressly state
how compliance is to be determined so that a prevailing party may pursue action under Article 22.
Absent the adoption of multilateral rules on the matter, disputing parties have entered into ad hoc
procedural agreements in individual disputes.
Removal of Retaliatory Measures
The DSU is also silent on how authorized retaliation is to be terminated in the event a defending
Member believes that it has complied in a dispute. This issue has been the subject of United
States - Continued Suspension of Obligations in the EC—Hormones Dispute
(DS320), a dispute
initiated by the European Union (EU)13 against the United States in 2004 for continuing to
maintain increased (i.e., 100% ad valorem) tariffs on EU goods first imposed in 1999 in
retaliation for the EU’s failure to comply with the adverse WTO ruling on the EU’s ban on
hormone-treated beef. The EU also initiated a separate case against Canada on the same basis.14

13 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 or other governmental materials using this
name, this report uses “European Union” or the acronym “EU” in the report text or notes 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.
14 Canada—Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321.
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The Appellate Body and modified panel reports in the underlying beef hormone case, EC -
Hormones
,15 found that an EU ban on imports of meat and meat products from cattle produced
from six specific growth-promotion hormones violated the Agreement on the Application of
Sanitary and Phytosanitary Measures (SPS Agreement); the reports were adopted by the WTO in
February 1998.
Claiming that a 2003 European Union Directive rendered it WTO-compliant, the EU argued that
the defending Members, by maintaining their increased tariffs on EU products, were violating the
following WTO obligations: (1) the GATT most-favored-nation article; (2) the GATT prohibition
on tariff surcharges; and (3) various DSU provisions, including Article 23, which requires WTO
Members to invoke WTO dispute settlement for disputes arising under WTO agreements and
precludes certain unilateral actions in trade disputes, and Article 22.8, which permits sanctions to
be imposed only until the defending Member’s WTO-inconsistent measures have been removed
or the dispute is mutually resolved.
In separate panel reports issued March 31, 2008, the WTO panel found that the EU was
maintaining bans on certain hormones without a sufficient scientific basis in violation of the SPS
Agreement, and that United States and Canada had breached Article 23 requirements to resort to
WTO dispute settlement and to refrain from unilateral actions by (1) not initiating a WTO
proceeding to resolve the EU compliance issue and (2) determining unilaterally that the EU was
still in violation of the EC - Hormones decision. The panel also found, however, that to the extent
that the challenged EU measure had not been removed, the United States and Canada had not
violated Article 22.8, which requires that sanctions be removed once the offending measure is
withdrawn.16 The panel noted that it had functioned similarly to a compliance panel for the sole
purpose of determining whether Article 22.8 was violated and, because it did not have jurisdiction
to make a definitive determination in this regard, it suggested that the United States and Canada
initiate a compliance panel proceeding against the EU under Article 21.5 in order to comply with
their DSU obligations and to promptly resolve the dispute.
The Appellate Body, in separate reports issued October 16, 2008, reversed the panel’s findings
that the U.S. and Canada were in breach of the DSU as well as the panel’s findings that the EU
was still in violation of the SPS Agreement.17 Because the Appellate Body could not complete the
analysis needed to determine whether the contested EU measure had been withdrawn, however, it
recommended that the parties initiate an Article 21.5 compliance panel proceeding to resolve their
disagreement as to whether the EU is in compliance with the EC—Hormones decision and thus
whether the U.S. and Canadian countermeasures have a legal basis. The AB and modified panel
reports were adopted November 14, 2008.

15 European Communities—Measures Concerning Meat and Meat Products (Hormones), WT/DS26 (complaint by
United States); European Communities—Measures Affecting Livestock and Meat (Hormones), WT/DS48 (complaint by
Canada).
16 Panel Report, United States - Continued Suspension of Obligations in the EC—Hormones Dispute, WT/DS320/R
(Mar. 31, 2008); Panel Report, Canada - Continued Suspension of Obligations in the EC—Hormones Dispute,
WT/DS321/R (Mar. 31, 2008). At the request of the disputing parties, panel proceedings in the case were opened to the
public via closed-circuit TV broadcast at the WTO, this being the first time that public access was permitted in a WTO
dispute settlement proceeding. Disputing parties have also agreed to public access of this type in several subsequent
disputes.
17 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).
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The EU requested consultations under Article 21.5 in December 2008,18 but the proceeding
involving the United States has been suspended under a bilateral agreement. In a May 2009
memorandum of understanding (MOU) intended to resolve the underlying beef hormone dispute,
the United States and the EU agreed, inter alia, that the EU will expand market access for exports
of U.S. beef in three phases. In the first phase, the United States may maintain retaliatory tariffs
currently applied to EU products and will not impose the new duties that it announced in January
2009 under its “carousel” retaliation provision (see below). The two parties also agreed that they
will suspend WTO litigation (i.e., not request a compliance panel) for the first 18 months of the
agreement.19 The USTR delayed the imposition of the additional duties on new items until
September 19, 2009, and officially terminated these duties as of this date.20 As a result of these
actions, the duties were never imposed.
WTO Dispute Settlement and U.S. Law
Legal Effect of WTO Decisions
The adoption by the WTO Dispute Settlement Body of a panel or Appellate Body report finding
that a U.S. law, regulation, or practice violates a WTO agreement does not give the report direct
legal effect in this country. Thus, federal law is not affected until Congress or the executive
branch, as the case may be, changes the law or administrative measure at issue.21 Procedures for
executive branch compliance with adverse decisions are set out in §§ 123(g) and 129 of the
Uruguay Round Agreements Act, P.L. 103-465, 19 U.S.C. §§ 3533(g), 3538. Only the federal
government may bring suit against a state or locality to declare a state or local law invalid
because of inconsistency with a WTO agreement; private remedies based on WTO obligations are
also precluded.22 Federal courts have held that WTO panel and Appellate Body reports are not
binding on the judiciary23 and have treated determinations involving “whether, when, and how” to

18 Press Release, European Commission, EU requests WTO consultations concerning WTO-compliance of its
restrictions on hormone-treated beef and WTO inconsistency of continued US and Canadian trade sanctions (Dec. 22,
2008), at http://ec.europa.eu/trade/issues/respectrules/dispute/pr221208_en.htm.
19 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.
20 At the time of the May 2009 agreement, some products had been removed from the list of covered items pursuant to
the USTR’s January 2009 announcement. While the Office of the USTR ultimately delayed the effective date of the
additional duties on new products until September 19, 2009, the removal of items announced in January became
effective as of March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74
Fed. Reg. 40864 (Aug. 13, 2009). The United States officially terminated the additional duties on new items on
September 19, 2009, leaving in place the additional duties on the reduced list of products that had been in force since
March 23, 2009. Implementation of the U.S.-EC Beef Hormones Memorandum of Understanding, 74 Fed. Reg. 48808
(Sept. 24, 2009).
21 See Uruguay Round Agreements Act Statement of Administrative Action, H.Doc. 103-316, vol. 1, at 1032-33.
Uruguay Round implementing legislation states 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.” Uruguay Round Agreements Act (URAA), P.L. 103-465, § 102(a)(1); see also H.Rept. 103-826, Pt.
I, at 25.
22 URAA, P.L. 103-465, § 102(b), (c).
23 E.g., Corus Staal BV v. Department of Commerce, 395 F.3d 1343 (Fed. Cir. 2005), cert. denied, 126 S.Ct. 1023
(2006); see generally CRS Report RS22154, World Trade Organization (WTO) Decisions and Their Effect in U.S. Law,
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comply with a WTO decision as falling within the province of the executive rather than the
judicial branch.24
Section 301 of the Trade Act
Sections 301-310 of the Trade Act of 1974 (referred to collectively as Section 301), 19 U.S.C. §§
2411 et seq., provide a mechanism for private parties to petition the United States Trade
Representative (USTR) to take action regarding harmful foreign trade practices. If the USTR
decides to initiate an investigation, whether by petition or the USTR’s own motion, regarding a
foreign measure that allegedly violates a WTO agreement, the USTR must invoke the WTO
dispute process to seek resolution of the problem. Section 301 authorizes the USTR to impose
retaliatory measures to remedy an uncorrected foreign practice, some of which may involve
suspending a WTO obligation (e.g., imposing a tariff increase on a product in excess of the rate
negotiated in the WTO or the “bound” rate). The USTR may terminate a Section 301 case if the
dispute is settled, but, under § 306 of the act, the USTR must monitor foreign compliance and
may take further retaliatory action if compliance measures are unsatisfactory.
If the USTR has taken action against the goods of another country for its failure to comply with a
WTO decision, § 306(b)(2)(B)-(F), of the Trade Act, 19 U.S.C. § 2416(b)(2)(B)-(F), directs the
USTR periodically to revise the list of imported products subject to retaliation, unless the USTR
finds that implementation of WTO obligations is imminent or the USTR and the petitioner agree
that revision is unnecessary. This authority to rotate the products subject to retaliatory action is
often referred to as “carousel retaliation.” The European Union filed a WTO complaint
challenging the statutory provision shortly after its enactment in 2000, alleging that the statute
mandates unilateral action and the taking of retaliatory action other than that which had been
authorized by the WTO in violation of the DSU.25 Because the United States had not invoked the
provision, the EU refrained from seeking a panel in the case.
In December 2008, however, the United States exercised “carousel” authorities to propose
modifications to the list of EU products subject to the WTO-authorized tariff surcharges that it
had originally imposed in EC—Hormones, discussed earlier. A final modified list was published
in January 2009.26 Originally applicable to all covered goods entering the United States on or

(...continued)
by Jeanne J. Grimmett.
24 Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008).
25 Request for Consultations by the European Communities, United States—Section 306 of the Trade Act of 1974 and
Amendments Thereto
, WT/DS200/1 (June 13, 2000).
26 Modification of Action Taken in Connection with WTO Dispute Settlement Proceedings on the European
Communities’ Ban on Imports of U.S. Beef and Beef Products, 74 Fed. Reg. 4265 (Jan. 23, 2009).
The continued imposition of the beef hormone sanctions as applicable to toasted bread products from Spain has been
successfully challenged in the U.S. Court of International Trade, the specialized federal trade court located in New
York City, on the ground that the sanctions expired by operation of law in late July 2007. Gilda Industries, Inc. v.
United States, 625 F.Supp.2d 1377 (Ct. Int’l Trade 2009).
Section 307(c)(1) of the Trade Act of 1974, 19 U.S.C. § 2417(c)(1), provides that if “a particular action” has been taken
by the USTR under Section 301 during any four-year period, e.g., the imposition of increased tariffs on the products of
a foreign country, and neither the petitioner in the Section 301 case nor any representative of the domestic industry
which benefits from the action has submitted to the USTR during the last 60 days of the four-year period a written
request for the continuation of the action, the action is to terminate at the end of the four-year period. It was alleged in
the case that the operative four-year period for the beef hormone sanctions began at the end of July 2003 and that no
(continued...)
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after March 23, 2009, the revisions include removal of some products from the original list of
covered products, the addition of new products to the list, modified coverage with regard to
certain EU member states, and an increase to 300% ad valorem of duties on one product,
Roquefort cheese. The EU announced on January 15, 2009, that it had decided to “start
preparations” to pursue WTO dispute settlement regarding the carousel statute, stating that it
“breaches the WTO requirement of equivalence between the damage caused by the sanction or
ban and the retaliation proposed.”27 As noted above, under an MOU with the EU aimed at settling
the beef hormone dispute, the United States has agreed not to impose the announced tariff
increases on new items and officially terminated these additional duties as of September 19,
2009.28
The EU filed a broader challenge to Section 301 in 1998 based on various obligations in Article
23 of the DSU, which, as noted earlier, precludes certain unilateral actions in trade disputes
involving WTO agreements. Section 301 may generally be used consistently with the DSU,
though some U.S. trading partners have complained that the statute allows unilateral action and
forces negotiations through its threat of sanctions. The WTO panel found that the language of §
304, which requires the USTR to determine the legality of a foreign practice by a given date, is
prima facie inconsistent with Article 23 because in some cases it mandates a USTR
determination—and statutorily reserves a right for the USTR to determine that a practice is WTO-
inconsistent—before DSU procedures are completed.29 The panel also found, however, that the
serious threat of violative determinations and consequently the prima facie inconsistency was
removed because of U.S. undertakings, as set forth in the Uruguay Round Statement of
Administrative Action (H.Doc. 103-316), a document submitted to Congress along with the
Uruguay Round agreements, and U.S. undertakings made before the panel, that the USTR would
use its statutory discretion to implement Section 301 in conformity with WTO obligations.
Moreover, the panel could not find that the DSU was violated by § 306 of the Trade Act of 1974,
which directs USTR to make a determination as to imposing retaliatory measures by a given date,
given differing good faith interpretations of the “sequencing” ambiguities in the DSU. The panel
report, which was not appealed, was adopted in January 2000.

(...continued)
request was made to continue the sanctions during the final 60 days of this period. The court found that the retaliatory
measures terminated by operation of law on July 29, 2007, absent a timely petitioner or industry request, neither of
which had occurred. The court ordered the U.S. Department of Customs and Border Protection to refund to the plaintiff
all retaliatory duties collected on its imported products between July 29, 2007, and March 23, 2009, the date these
items were officially removed from the list of goods subject to the increased tariffs.
The United States has since appealed this decision to the U.S. Court of Appeals for the Federal Circuit. Gilda Industries
v. United States, appeal docketed, No. 2009-1492 (Fed. Cir. Aug. 10, 2009). See generally U.S. Faces Flood of
Lawsuits after CIT Orders Refund of Duties
, INSIDE U.S. TRADE, Aug. 21, 2009, at 1.
27 Press Release, European Commission, EU Prepares WTO action over US trade sanction law (Jan. 15, 2009), at
http://ec.europa.eu/trade/issues/respectrules/dispute/pr150109_en.htm. Article 22.4 of the DSU provides that “the level
of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the
nullification or impairment.” The “carousel” issue has also been raised by the EC in Doha Round dispute settlement
negotiations. Dispute Settlement Body, Special Session, Contribution of the European Communities and Its Member
States to the Improvement of the WTO Dispute Settlement Understanding,
at 6, TN/DS/W/1 (Mar. 13, 2002).
28 See supra note 19 and accompanying text.
29 Panel Report, United States—Sections 301-310 of the Trade Act of 1974, WT/DS152/R (Dec. 22, 1999).
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111th Congress Legislation
Legislation introduced in the 111th Congress generally reflects congressional concerns that the
executive branch has not challenged restrictive foreign trade practices in the WTO to a sufficient
degree and that, where WTO decisions have been adverse to the United States, the executive
branch has too readily used existing statutory authorities to comply with these decisions,
particularly where U.S. trade remedies are involved. A particular concern has been U.S.
compliance with WTO decisions faulting the use of “zeroing,” a practice employed by the
Department of Commerce in antidumping proceedings to determine the applicable dumping
margin, that is, the amount by which the price of an import when sold in the United States falls
below the fair value of the product, generally the price in the exporting country. The amount of
antidumping duties finally imposed on an imported product is based on this margin. “Zeroing” is
a practice under which sales above fair value are disregarded or given a “zero” value, thus
allowing the dumping margin to be determined solely on the basis of less than fair value sales
and, as alleged by some, improperly inflating the dumping margin. The Commerce Department
abandoned the use of “zeroing” in original antidumping investigations in early 2007, but has not
yet responded to WTO decisions rejecting U.S. use of the practice in later stages of U.S.
antidumping proceedings.
H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer (CTE), which,
inter alia, would investigate restrictive foreign trade practices in light of WTO obligations and
call on the United States Trade Representative (USTR) to initiate WTO dispute proceedings
where the CTE finds that practices violate such obligations; express congressional dissatisfaction
with WTO dispute settlement decisions finding that the U.S. practice of “zeroing” violates the
WTO Antidumping Agreement and with decisions of the WTO Appellate Body generally; and
place restrictions on the Department of Commerce in implementing the revised zeroing practice
that it adopted in 2007 in response to adverse WTO decisions.
S. 363 (Snowe) would give the U.S. Court of International Trade, the specialized federal trade
court based in New York City, exclusive jurisdiction to review de novo certain USTR
determinations under Section 301 of the Trade Act of 1974, including in some cases
determinations that may involve the initiation and conduct of WTO disputes, and would amend
various Section 301 authorities themselves.
S. 1466 (Stabenow) and S. 1982 (Brown) would establish mechanisms under the Trade Act of
1974 requiring the USTR to identify particularly harmful foreign trade practices and, where
appropriate, to initiate WTO cases to remedy these practices.

Author Contact Information

Jeanne J. Grimmett

Legislative Attorney
jgrimmett@crs.loc.gov, 7-5046


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