UNITED STATES - CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF
2000

AB-2002-7

Report of the Appellate Body

1. Introduction

2. Factual Background

3. Arguments of the Participants and the Third Participants

1. United States - Appellant

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

6. Article 9.2 of the DSU

2. Australia - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

3. Brazil - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Canada - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

6. Article 9.2 of the DSU

5. European Communities, India, Indonesia and Thailand - Appellees

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

6. Article 9.2 of the DSU

6. Japan and Chile - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

6. Article 9.2 of the DSU

7. Korea - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

8. Mexico - Appellee

1. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

2. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

3. The Combination of Duties and CDSOA Offset Payments

4. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

5. The "Advisory Opinion"

9. Arguments of the Third Participants

1. Argentina

2. Hong Kong, China

3. Israel

4. Norway

4. Procedural Matters: Arguments of the Participants and the Third Participants

1. Allegation of Flaws in the Notice of Appeal

1. Canada

2. United States

3. Australia

4. Brazil

5. European Communities, India, Indonesia and Thailand

6. Japan

7. Korea

8. Norway

2. Allegations Regarding the Scope of Appellate Review

1. Canada

2. United States

3. Australia

4. European Communities, India, Indonesia and Thailand

5. Japan

6. Korea

7. Norway

5. Procedural Matters and Ruling

1. Allegations of Flaws in the Notice of Appeal

2. Allegations Regarding the Scope of Appellate Review Under Article 17.6 of the DSU

1. The United States' Comments About Letters Before the Panel

2. Allegations of New Evidence in Footnotes 148 and 149

6. Issues Raised in This Appeal

7. Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement

1. The Term "Specific" in the Phrase "Specific Action Against" Dumping or a Subsidy

2. The Term "Against" in the Phrase "Specific Action Against" Dumping or a Subsidy

3. Footnote 24 of the Anti-Dumping Agreement and Footnote 56 of the SCM Agreement

4. Whether the CDSOA is in Accordance with the WTO Agreement

1. The Anti-Dumping Agreement

2. The SCM Agreement

8. Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement

1. The Panel's Findings on the Interpretation of Articles 5.4 and 11.4

2. The Meaning of Articles 5.4 and 11.4

3. The Panel's Conclusion on Good Faith

9. Article XVI:4 of the WTO Agreement , Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement and Article 3.8 of the DSU

10. Article 9.2 of the DSU

11. Findings and Conclusions

ANNEX 1:

Notification of an Appeal by the United States under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes

 

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TABLE OF CASES CITED IN THIS REPORT
 

Short Title	Full Case Title and Citation
Argentina - Footwear (EC)	Appellate Body Report, Argentina - Safeguard Measures on Imports of Footwear , WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515.
Canada - Aircraft	Appellate Body Report, Canada - Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377.
Canada - Dairy	Appellate Body Report, Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057.
Chile - Alcoholic Beverages	Appellate Body Report, Chile - Taxes on Alcoholic Beverages, WT/DS87/AB/R, WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, 281.
EC - Bananas III	Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591.
EC - Bananas III (US)	Panel Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas - Complaint by the United States, WT/DS27/R/USA, adopted 25 September 1997, as modified by the Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 943.
EC - Hormones	Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135.
EC - Sardines	Appellate Body Report, European Communities - Trade Description of Sardines, WT/DS231/AB/R, adopted 23 October 2002.
India - Patents (US)	Appellate Body Report, India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9.
Japan - Alcoholic Beverages II	Appellate Body Report, Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97.
Korea - Dairy	Appellate Body Report, Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3.
Mexico - Corn Syrup (Article 21.5 - US)	Appellate Body Report, Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States - Recourse to Article 21.5 of the DSU by the United States, WT/DS132/AB/RW, adopted 21 November 2001.

US - 1916 Act	Appellate Body Report, United States - Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000.
US - 1916 Act (EC)	Panel Report, United States - Anti-Dumping Act of 1916 - Complaint by the European Communities, WT/DS136/R and Corr.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R.
US - 1916 Act (Japan)	Panel Report, United States - Anti-Dumping Act of 1916 - Complaint by Japan, WT/DS162/R and Add.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R.
US - Certain EC Products	Appellate Body Report, United States - Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, adopted 10 January 2001.
US - Countervailing Measures on Certain EC Products	Appellate Body Report, United States - Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003. Panel Report, United States - Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/R, adopted 8 January 2003, as modified by the Appellate Body Report, WT/DS212/AB/R.
US - FSC	Appellate Body Report, United States - Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619.
US - Gasoline	Appellate Body Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3.
US - Hot-Rolled Steel	Appellate Body Report, United States - Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001.
US - Norwegian Salmon AD	Panel Report, Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway, adopted 27 April 1994, BISD 41S/I/229.
US - Offset Act (Byrd Amendment)	Panel Report, United States - Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/R, WT/DS234/R, 16 September 2002.
US - Section 110(5) Copyright Act	Panel Report, United States - Section 110(5) of the US Copyright Act, WT/DS160/R, adopted 27 July 2000.
US - Section 129(c)(1) URAA	Panel Report, United States - Section 129(c)(1) of the Uruguay Round Agreements Act, WT/DS221/R, adopted 30 August 2002.
US - Section 211 Appropriations Act	Appellate Body Report, United States - Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002.
US - Shrimp	Appellate Body Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755.
US - Underwear	Appellate Body Report, United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear, WT/DS24/AB/R, adopted 25 February 1997, DSR 1997:I, 11.

WORLD TRADE ORGANIZATION
APPELLATE BODY

United States - Continued Dumping and Subsidy Offset Act of 2000 United States - Appellant Australia - Appellee Brazil - Appellee Canada - Appellee Chile - Appellee European Communities - Appellee India - Appellee Indonesia - Appellee Japan - Appellee Korea - Appellee Mexico - Appellee Thailand - Appellee Argentina - Third Participant Costa Rica - Third Participant Hong Kong, China - Third Participant Israel - Third Participant Norway - Third Participant

AB-2002-7 Present: Sacerdoti, Presiding Member Baptista, Member Lockhart, Member

I. Introduction

1. The United States appeals certain issues of law and legal interpretations developed in the Panel Report, United States - Continued Dumping and Subsidy Offset Act 2000 (the "Panel Report").¹

2. On 12 July 2001, Australia, Brazil, Chile, the European Communities, India, Indonesia, Japan, Korea and Thailand requested the establishment of a panel to examine the WTO-consistency of the United States Continued Dumping and Subsidy Offset Act of 2000 (the "CDSOA").² At its meeting of 23 August 2001, the Dispute Settlement Body (the "DSB") established the Panel.

3. On 10 August 2001, Canada and Mexico separately requested the establishment of a panel with respect to the same matter.³ At its meeting of 10 September 2001, the DSB agreed to those requests and, pursuant to Article 9.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), referred the matter to the Panel established on 23 August 2001.⁴

4. Australia, Brazil, Canada, Chile, the European Communities, India, Indonesia, Japan, Korea, Mexico and Thailand (the "Complaining Parties") argued before the Panel that the CDSOA is inconsistent with Articles 18.1 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement"), in conjunction with Article VI:2 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), and Article 1 of the Anti-Dumping Agreement; Article 32.1 of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement"), in conjunction with Article VI:3 of the GATT 1994 and Articles 4.10, 7.9 and 10 of the SCM Agreement; Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement; and Article XVI:4 of the Marrakesh Agreement Establishing the World Trade Organization (the "WTO Agreement "), Article 18.4 of the Anti-Dumping Agreement and Article 32.5 of the SCM Agreement. In addition, with the exception of Australia, the Complaining Parties contended that the CDSOA is in violation of Article X:3(a) of the GATT 1994, Article 8 of the Anti-Dumping Agreement and Article 18 of the SCM Agreement. Furthermore, in a separate claim, Mexico argued that the CDSOA is in violation of Article 5(b) of the SCM Agreement, and India and Indonesia asserted that the CDSOA undermines Article 15 of the Anti-Dumping Agreement.

5. In the Panel Report, circulated to the Members of the World Trade Organization (the "WTO") on 16 September 2002, the Panel found that the CDSOA is inconsistent with Articles 5.4, 18.1 and 18.4 of the Anti-Dumping Agreement; Articles 11.4, 32.1 and 32.5 of the SCM Agreement; Articles VI:2 and VI:3 of the GATT 1994; and Article XVI:4 of the WTO Agreement .⁵

6. The Panel concluded that the CDSOA nullifies or impairs benefits accruing to the Complaining Parties under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994 to the extent that the CDSOA is inconsistent with those agreements.⁶ Consequently, the Panel recommended that the DSB request the United States to bring the CDSOA into conformity with its obligations under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994.⁷

7. On 18 October 2002, the United States notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the DSU, and filed a Notice of Appeal pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures").⁸ On 28 October 2002, the United States filed its appellant's submission.⁹ On 12 November 2002, Australia, Brazil, Canada, Korea and Mexico each filed a separate appellee's submission.¹⁰ The European Communities, India, Indonesia and Thailand filed a joint appellees' submission. Japan and Chile also filed a joint appellees' submission. On the same day, Argentina, Hong Kong, China and Norway each filed a third participant's submission.¹¹ Israel and Costa Rica notified the Appellate Body of their intention to appear at the oral hearing as third participants.¹²

8. In a letter dated 22 November 2002, the Director of the Appellate Body Secretariat informed the participants and third participants that, in accordance with Rule 13 of the Working Procedures, the Appellate Body had selected Mr. Giorgio Sacerdoti to replace Mr. A.V. Ganesan as Presiding Member of the Division hearing this appeal. The latter was prevented from continuing to serve on the Division for serious personal reasons.

9. On 5 November 2002, Canada filed a request for a preliminary ruling in respect of certain questions of fact and law that it claimed were improperly included in the United States' appellant's submission, alleging that they were not included in the Notice of Appeal. The following day, we invited the United States and the other participants and third participants to comment on the issues raised by Canada in its request for a preliminary ruling, and set 8 November 2002 as the deadline for submission of comments. We received comments from the European Communities, India, Indonesia and Thailand (as joint appellees), Japan and the United States. By letter of 8 November 2002, the Director of the Appellate Body Secretariat informed the participants and third participants that we had decided not to issue a preliminary ruling, nor to make findings, at that stage, on the substance of Canada's submissions.

10. The oral hearing was held on 28 and 29 November 2002.¹³ The participants and third participants presented oral arguments and responded to questions put to them by the Members of the Appellate Body Division hearing the appeal.

II. Factual Background

11. The CDSOA was enacted on 28 October 2000 as part of the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act, 2001.¹⁴ The CDSOA amended Title VII of the Tariff Act of 1930 (the "Tariff Act"), entitled "Countervailing and Antidumping Duties", by adding a new Section 754 entitled "Continued Dumping and Subsidy Offset".¹⁵

12. The CDSOA provides that the United States Commissioner of Customs ("Customs") shall distribute, on an annual basis, duties assessed pursuant to a countervailing duty order, an anti-dumping duty order, or a finding under the United States Antidumping Act of 1921, to "affected domestic producers" for "qualifying expenditures".¹⁶ An "affected domestic producer" is defined as a domestic producer that: (a) was a petitioner or interested party in support of the petition with respect to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered; and (b) remains in operation.¹⁷ The term "qualifying expenditures" refers to expenditures on specific items identified in the CDSOA, which were incurred after the issuance of the anti-dumping duty finding, or order or countervailing duty order.¹⁸ Those expenditures must relate to the production of the same product that is subject to the anti-dumping or countervailing duty order, with the exception of expenses incurred by associations which must relate to the same case.¹⁹

13. The CDSOA, together with its implementing regulations issued by Customs, provides that Customs shall establish a special account and a clearing account with respect to each countervailing duty order, anti-dumping duty order, or a finding under the Antidumping Act of 1921.²⁰ All anti-dumping and countervailing duties assessed under such orders or findings are first deposited into a "clearing account".²¹ Transfers from "clearing accounts" to "special accounts" are made by Customs throughout the fiscal year.²² Such transfers are made only after the entries²³ in question that are subject to a countervailing duty order or an anti-dumping order or finding have been properly "liquidated".²⁴ Thus, when, and only when, the entries have been liquidated, will the proceeds be transferred to a special account. Only once there are funds in a special account (not a clearing account), can distributions to domestic producers under the CDSOA be made.²⁵ Therefore, if liquidation of entries has been enjoined, for instance, by a court-perhaps pending judicial review of the determination of dumping or countervailable subsidization-or if liquidation of entries has been suspended due to an administrative review of those entries, the relevant special account will be empty and no distribution can be made to domestic producers under the CDSOA.²⁶

14. Pursuant to the CDSOA, Customs shall distribute all funds (including all interest earned on the funds) from the assessed duties received in the preceding fiscal year (and contained in the special accounts) to each affected domestic producer based on a certification by the affected domestic producer that it is eligible to receive the distribution and desires to receive a distribution for qualifying expenditures incurred since the issuance of the order or finding.²⁷ Funds deposited in each special account during each fiscal year are to be distributed no later than 60 days after the beginning of the following fiscal year.²⁸ There is no statutory or regulatory requirement as to how a disbursement is to be spent.²⁹ The Panel found that CDSOA distributions to "affected domestic producers" made as of December 2001 totalled over $206 million.³⁰

To continue with III. Arguments of the Participants and the Third Participants

1 WT/DS217/R, WT/DS234/R, 16 September 2002.

2 WT/DS217/5. Referred to in the Panel Report also as the "Byrd Amendment" and the "Offset Act".

3 WT/DS234/12 and WT/DS234/13.

4 WT/DS234/14.

5 Panel Report, para. 8.1.

6 Ibid., para. 8.4.

7 Ibid., para. 8.5.

8 WT/DS217/8, WT/DS234/16, 22 October 2002.

9 Pursuant to Rule 21(1) of the Working Procedures.

10 Pursuant to Rule 22(1) of the Working Procedures.

11 Pursuant to Rule 24(1) of the Working Procedures.

12 Pursuant to Rule 24(2) of the Working Procedures.

13 Pursuant to Rule 27 of the Working Procedures.

14 Public Law 106-387, 114 Stat. 1549.

15 Section 754 of the Tariff Act corresponds to Section 1675c of Title 19 of the United States Code.

16 The CDSOA provides that: "[d]uties assessed pursuant to a countervailing duty order, an antidumping duty order, or a finding under the Antidumping Act of 1921 shall be distributed on an annual basis under this section to the affected domestic producers for qualifying expenditures. Such distribution shall be known as 'the continued dumping and subsidy offset'." (Section 754(a) of the Tariff Act)

17 Section 754(b)(1) of the Tariff Act defines "affected domestic producer" as:

� any manufacturer, producer, farmer, rancher, or worker representative (including associations of such persons) that -

(A) was a petitioner or interested party in support of the petition with respect to which an anti-dumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered, and

(B) remains in operation.