6.1. In reviewing the United States' final measures imposing the anti-dumping duties at issue in this dispute, we keep in mind the applicable principles concerning the burden of proof and the standard of review in disputes under the AD Agreement.

6.2. In WTO dispute settlement proceedings, the burden of proof with respect to a particular claim or defense rests with the party that asserts such claim or defiance²⁶. In the context of the present dispute, this means that Korea is obliged to present a prima facie case of violation of the relevant Articles of the AD Agreement. In this regard, the Appellate Body has stated that ". . . a prima facie case is one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima facie case²⁷". Thus, where Korea presents a prima facie case in respect of a claim, it is for the United States to provide an "effective refutation" of Korea's evidence and arguments, by submitting its own evidence and arguments in support of the assertion that it has complied with its obligations under the AD Agreement. Assuming evidence and arguments are presented on both sides, it is then our task to weigh and assess that evidence and those arguments in order to determine whether Korea has established that the United States acted inconsistently with its obligations under the AD Agreement.

6.3. Article 17.6 of the AD Agreement sets out a special standard of review for disputes arising under that Agreement. With regard to factual issues, Article 17.6(i) provides:

"(i) in its assessment of the facts of the matter, the panel shall determine whether the authorities' establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned;"

Assuming that we conclude that the establishment of the facts with regard to a particular claim in this case was proper, we then may consider whether, based on the evidence before the DOC at the time of the determination, an unbiased and objective investigating authority evaluating that evidence could have reached the conclusions that the DOC reached on the matter in question²⁸.

6.4. With respect to questions of the interpretation of the AD Agreement, Article 17.6(ii) provides:

"(ii) the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations."

Thus, in considering those aspects of the United States' determinations which stand or fall depending on the interpretation of the AD Agreement itself rather than or in addition to the analysis of facts, we first interpret the provisions the AD Agreement. As the Appellate Body has repeatedly stated, panels are to consider the interpretation of the WTO Agreements, including the AD Agreement, in accordance with the principles set out in the Vienna Convention on the Law of Treaties (Vienna Convention). Thus, we look to the ordinary meaning of the provision in question, in its context, and in light of its object and purpose. Finally, we may consider the preparatory work (the negotiating history) of the provision, should this be necessary or appropriate in light of the conclusions we reach based on the text of the provision. We then evaluate whether the United States' interpretation is one that is "permissible" in light of the customary rules of interpretation of international law.

B. ALLEGED "DOUBLE CONVERSION" OF CERTAIN HOME MARKET SALES PRICES

1. Factual background

6.5. The claims addressed in this section of our report relate to the treatment by the DOC of certain sales by POSCO in the Korean market in both the Plate and Sheet investigations. These sales, which we will refer to as "local sales", are ordered and invoiced in US dollars, but are paid in Korean won. Some shipping invoices and all tax invoices relating to these sales also reflect a won price, using a calculation based upon the Korean Exchange Bank's exchange rate as of the date of invoice. The won price is recorded in POSCO's accounting records. As local sales are made pursuant to letters of credit, payment is made some months after invoice date; the parties disagree as to what the record in the two investigations shows with respect to the basis for the won amounts actually paid.

6.6. POSCO reported local sales in won in its initial questionnaire responses (the questionnaire response in the Sheet investigation also reported dollar amounts "for ease of verification"). In subsequent supplemental questionnaire responses, however, POSCO modified its home market sales listings to report local sales in dollars. In legal briefs submitted to the DOC in both investigations, POSCO argued that the DOC should calculate normal value on the basis of the US dollar price at which local sales were invoiced²⁹. The petitioners disagreed. In its final determinations in the Plate and Sheet investigations, the DOC used as the basis for its calculation of the normal value the won prices recorded in POSCO's accounting records. The DOC converted these won prices to US dollars at the exchange rate prevailing on the date of certain US sales.

2. Claims under Article 2.4.1 of the AD Agreement

(a) Arguments of the parties

6.7. Korea considers that the DOC performed a "double conversion" of local sales by converting the dollar amounts appearing in the invoices into won at one exchange rate and converting them back into dollars at a different exchange rate. In Korea's view, Article 2.4.1 of the AD Agreement permits currency conversions only when such conversions are "required", i.e., when there is no other reasonable alternative. Korea considers that the "double conversion" by the DOC was unnecessary, as it could simply have used the original dollar prices in the invoices. Accordingly, the DOC's "double conversion" of local sales departed from the requirement of Article 2.4.1 that currency conversions be performed only when required³⁰.

6.8. The United States argues that the phrase "[w]hen the comparison under paragraph 4 requires a conversion of currencies" in Article 2.4.1 establishes the condition under which the rules that follow will apply, but it cannot be read to require that currency conversions be avoided in any particular circumstances, particularly where the transaction occurs in a foreign currency. In any event, the United States considers that it made no "double conversion" of local sales in these investigations. Rather, the DOC made a proper factual determination that the local sales were won transactions as reported by POSCO in its questionnaire responses. The DOC simply converted those won amounts into dollars consistent with the methodology established in Article 2.4.1.

(b) Evaluation by the Panel

(i) Does Article 2.4.1 prohibit unnecessary currency conversions?

6.9. Korea alleges that the DOC performed an unnecessary "double conversion" of certain home market sales prices, in violation of Article 2.4.1, which in Korea's view permits the conversion of currencies only when such conversions are "required". As a threshold matter, therefore, we must consider whether Article 2.4.1 permits the conversion of currencies only when required or, expressed another way, whether Article 2.4.1 prohibits unnecessary currency conversions.

6.10. Our starting point in respect of this issue is of course the text of the relevant provisions of the AD Agreement. Article 2.4.1 provides that:

"When the comparison under paragraph 4 requires a conversion of currencies, such conversion should be made using the rate of exchange on the date of sale⁸, provided that when a sale of foreign currency on forward markets is directly linked to the export sale involved, the rate of exchange in the forward sale shall be used. Fluctuations in exchange rates shall be ignored and in an investigation the authorities shall allow exporters at least 60 days to have adjusted their export prices to reflect sustained movements in exchange rates during the period of investigation. (emphasis added).
 

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⁸[Footnote omitted]

6.11. Article 2.4.1 sets forth rules with respect to the conversion of currencies to be applied "[w]hen the comparison under paragraph 4 requires a conversion of currencies . . . ." While Article 2.4.1 does not spell out the precise circumstances under which currency conversions are to be avoided, we consider that it does establish a general � and in our view, self-evident - principle that currency conversions are permitted only where they are required in order to effect a comparison between the export price and the normal value. We note that a contrary interpretation would call into doubt the utility of the introductory clause of Article 2.4.1. If the drafters had not intended to establish a rule that currency conversions be performed only when required, they could easily have drafted Article 2.4.1 to provide that "Currency conversions should be made using the rate of exchange on the date of sale �." Further, such an interpretation could result in the unusual situation where currency conversions that were required in order to perform a comparison under Article 2.4 would be subject to the rules set forth in Article 2.4.1, but unnecessary currency conversions could be performed without regard to the rules of Article 2.4.1.

6.12. We need not here arrive at any general understanding as to when currency conversions are or are not required within the meaning of Article 2.4.1, nor do we express any view regarding Korea's "reasonable alternative" test. Rather, we consider it sufficient to conclude, for the purposes of this dispute, that currency conversion is not "required", and would thus not be permissible under Article 2.4.1, in instances where the prices being compared are already in the same currency.

6.13. We do not understand the United States to contest that it would be inconsistent with Article 2.4.1 to perform a currency conversion in a case where the prices to be compared were already in the same currency. While the United States initially disputed that Article 2.4.1 prohibits unnecessary currency conversions, it subsequently appears to have acknowledged that Article 2.4.1 would not permit currency conversions in a case where the sales to be compared were already in the same currency. Thus, the United States explained at the second meeting of the Panel that:

"A review of the submissions confirms that there is no real disagreement over the meaning of the relevant provisions of Article 2.4.1. Korea and the United States agree that if the sales used to establish normal value are in a different currency than the export price sales, conversion at the rate in effect on the date of sale was appropriate, and if the sales are in the same currency, no conversion is necessary or appropriate." (emphasis added)³¹

(ii) Did the United States properly determine that the local sales were made in won?

6.14. As discussed above, Korea claims that the DOC unnecessarily converted certain dollar-denominated sales in the Korean market into won at one exchange rate and converted them back into dollars in order to compare them to dollar-denominated export sales at a different exchange rate. It follows from our discussion in the previous section of this Report that such an unnecessary "double conversion" would be inconsistent with Article 2.4.1 of the AD Agreement. The question remains whether the DOC in fact made such an impermissible "double conversion".

6.15. The United States considers that the sales in question were properly found to have been made in won, such that a conversion to dollars was necessary in order to compare those prices to dollar-denominated export prices. In other words, the United States denies that it performed a "double conversion" in respect of local sales. This issue is a critical one to our inquiry, as the existence of a "double conversion" is a necessary predicate to Korea's claim. To the extent that Korea is correct, the United States acted in a manner inconsistent with Article 2.4.1; to the extent that the United States is correct, then the factual predicate underlying Korea's claim is without basis and Korea's claim must fail.

(i) standard of review

6.16. In examining this issue, we must first consider the issue of the proper standard of review to be applied in reviewing the DOC's determination. The United States considers that whether the sales in question were in dollars or won is a question of fact. Accordingly, the Panel should assess pursuant to Article 17.6(i) whether the DOC's establishment of the facts was proper and whether its evaluation of those facts was unbiased and objective. Korea by contrast argues that the determination in question was not a factual determination, because there were no facts in dispute.

6.17. As noted in Section VI.A, above, Article 17.6 sets forth the standard of review to be applied by a panel when examining a matter under the AD Agreement. It is evident from the text of Article 17.6 that the standard of review to be applied by panels depends upon the nature of the question before it. The relevant standard to be applied when considering questions of law, i.e., the interpretation of the AD Agreement, is set forth in Article 17.6(ii). The standard to be applied in reviewing determinations of an investigating authority in respect to questions of fact is set forth in Article 17.6(i). Thus, the question before us is whether that determination is one of fact and thus subject to the standard of review set forth in Article 17.6(i).

6.18. Korea's view appears to be that Article 17.6(i) applies only in respect of the establishment of certain objectively-ascertainable underlying facts, e.g., did the invoices express the sales values in terms of dollars or won, in what currency payment was made, etc. We consider that this interpretation does not however coincide with the language of Article 17.6(i). That Article speaks not only to the establishment of the facts, but also to their evaluation. Therefore, the Panel must check not merely whether the national authorities have properly established the relevant facts but also the value or weight attached to those facts and whether this was done in an unbiased and objective manner. This concerns the according of a certain weight to the facts in their relation to each other; it is not a legal evaluation.

6.19. In this case, it is generally true that the underlying facts on the basis of which the DOC considered whether the sales in question were made in dollars or won are not disputed (although we will see that there is substantial disagreement between the parties about one key underlying factual issue). We consider, however, that the DOC's determination that the sales in question were made in won was a factual determination in as much as it represents a determination made on the basis of the evaluation of certain facts and does not involve the interpretation of provisions of the AD Agreement.

6.20. In light of the above, we consider that the task before us is to examine whether an unbiased and objective investigating authority evaluating the evidence before the DOC in the Plate and Sheet investigations could properly have determined that the local sales in question were made in won rather than in dollars. Given the nature of the arguments before us, we recall that pursuant to Article 17.5(ii) of the AD Agreement we are to examine the matter based upon "the facts made available in conformity with appropriate domestic procedures to the authorities of the importing Member". Finally, we note that this dispute relates to two separate investigations, and that the facts before the DOC differ. Thus we will review the determinations of the DOC in these two investigations separately.

23. The DOC statement that "it is more appropriate to use the won price in which the customer actually pays" is not entirely clear. Similarly, the import of the statement that "the customer pays in won not US dollars, and the sales value of the merchandise is charged to the sales ledger in won, based on the aforementioned exchange rate [i.e., the exchange rate on the date of invoice]", depends upon whether the final clause regarding exchange rates relates only to the sales ledger or also to the amounts paid.

24. See para 6.22, infra.

25. Guatemala � Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, para. 8.22, adopted 17 November 2000.

26. United States � Measure Affecting Imports of Woven Wool Shirts and Blouses from India ("United States � Shirts and Blouses"), Appellate Body Report, WT/DS33/AB/R, adopted 23 May 1997, p. 14.

27. European Communities � Measures Concerning Meat and Meat Products ("EC � Hormones"), Appellate Body Report, WT/DS26/AB/R�WT/DS48/AB/R, adopted 13 February 1998, para. 104.

28. We note that this is the same standard as that applied by the Panel in Mexico � Anti-Dumping Investigation of High Fructose Corn Syrup, Report of the Panel, WT/DS132/R, adopted 24 February 2000, which, in considering whether the Mexican investigating authorities had acted consistently with Article 5.3 in determining that there was sufficient evidence to justify initiation, stated (para. 7.95): "Our approach in this dispute will � be to examine whether the evidence before SECOFI at the time it initiated the investigation was such that an unbiased and objective investigating authority evaluating that evidence could properly have determined that sufficient evidence of dumping, injury and causal link existed to justify initiation."

29. Korea Exhibit 7, pp. 3-6; Korea Exhibit 20, pp. 3-6

30. Korea also claimed, in footnote 142 to its first submission, that the United States breached Article 2.4.1, which provides in its relevant part that currency conversions "should be made using the rate of exchange on the date of sale", by using the exchange rate on the date of sale for export (US) sales, rather than the exchange rate on the date of sale of the local sales themselves, when converting the won prices of local sales to dollars. (First Submission of Korea, para. 4.68, footnote 142, Annex 1-1). In response to a question from the Panel regarding this argument, however, Korea indicated that it was not necessary for the Panel to address the meaning of the word "should" in Article 2.4.1, because Korea was not arguing that the DOC was required to use a particular exchange rate, but rather that the DOC performed currency conversions that were not required. (Responses of Korea to Questions posed by the Panel and the United States at the first meeting of the Panel, Annex 1-4, Question 12 on currency conversion). Given this statement, and Korea's failure to pursue this issue elsewhere in its submissions, we conclude that Korea abandoned this putative claim. In any event, we note that Korea's request for establishment of a panel focuses exclusively on the issue of an unnecessary double conversion. (See WT/DS179/2). Thus, we doubt that any such claim would be within our terms of reference.

31.Oral Statement of the United States at the Second Meeting of the Panel, para. 48, Annex 2-6.

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