UNITED STATES - SECTION 129(c)(1) OF THE
URUGUAY ROUND AGREEMENTS ACT
 

Report of the Panel

(Continued)

4. Section 129(c)(1) Is Consistent with the DSU, Which Requires Prospective Remedies When a Measure is Found Inconsistent with WTO Obligations

3.85 Even if section 129(c)(1) did mandate how the Department of Commerce is to treat what Canada terms "prior unliquidated entries," section 129(c)(1) would not breach the WTO obligations of the United States, because the DSU provides for prospective implementation of adverse WTO reports, and Members are under no obligation to implement such reports with respect to pre-implementation entries.

(a) The Principle of Prospective Remedies in the Dispute Settlement Process

3.86 Canada fails to address the obligations imposed by the DSU, having abandoned all DSU claims raised in its panel request. Canada's decision to abandon these claims is not surprising, given that an examination of these provisions reinforces the prospective nature of WTO remedies. The fact that Canada has made no claim under the DSU should be sufficient for the Panel to find that they have failed to make a prima facie case.

(i) Textual Analysis of the DSU

3.87 Language used throughout the DSU demonstrates that when a Member's measure has been found to be inconsistent with a WTO Agreement, the Member's obligation extends only to providing prospective relief, and not to remedying past transgressions. For example, under Article 19.1 of the DSU, when it has found a measure to be inconsistent with a Member's WTO obligations a panel or the Appellate Body "shall recommend that the Member concerned bring the measure into conformity with that Agreement." The ordinary meaning of the term "bring" is to "[p]roduce as a consequence," or "cause to become."³⁴ These definitions give a clear indication of future action, supporting the conclusion that the obligation of a Member whose measure has been found inconsistent with a WTO agreement is to ensure that the measure is removed or altered in a prospective manner, not to provide retroactive relief.

3.88 Article 3.7 of the DSU also supports the conclusion that the obligation to implement DSB recommendations is prospective in nature. Article 3.7 states, "In the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements." The focus of WTO dispute settlement is on withdrawal of the measure, and not on providing compensation for the measure's past existence.

3.89 In a WTO case challenging an antidumping or countervailing duty measure, the measure in question is a border measure. Accordingly, revoking a WTO inconsistent antidumping or countervailing duty measure prospectively will constitute "withdrawal" of the measure within the meaning of Article 3.7 of the DSU.

3.90 Article 21.3 of the DSU provides further support for this conclusion. Under Article 21.3, when immediate compliance is impracticable, Members shall have a reasonable period of time in which to bring their measure into conformity with their WTO obligations. Nothing in Article 21.3 suggests that Members are obliged, during the course of the reasonable period of time, to suspend application of the offending measure, much less to provide relief for past effects. Rather, in the case of antidumping and countervailing duty measures, entries that take place during the reasonable period of time may continue to be liable for the payment of duties.

3.91 Articles 22.1 and 22.2 of the DSU confirm not only that a Member may maintain the WTO inconsistent measure until the end of the reasonable period of time for implementation, but also that neither compensation nor the suspension of concessions or other obligations are available to the complaining Member until the conclusion of that reasonable period of time. Thus, the DSU imposes no obligation on Members to cease application of the WTO inconsistent measure on entries occurring prior to the end of the reasonable period of time.

(ii) Panel and Appellate Body Clarification of the DSU

3.92 WTO panel reports addressing the implementation obligations of Members following an adverse WTO report confirm that such decisions be implemented in a prospective manner. In European Communities - Regime for the Importation, Sale and Distribution of Bananas - Recourse to Article 21.5 of the DSU by Ecuador³⁵, the panel discussed the prospective nature of the recommendations a panel or the Appellate Body can make under the DSU, stating, "we do not imply that the EC is under an obligation to remedy past discrimination." Rather, the principle of Article 3.7 of the DSU "requires compliance ex nunc as of the expiry of the reasonable period of time for compliance with the recommendations and rulings adopted by the DSB." In identifying three possible methods by which the European Communities could bring the measure into conformity, none of them involved providing a remedy for past transgressions.³⁶

3.93 When panels and the Appellate Body have been asked to make recommendations for retroactive relief, they have rejected those requests, recognizing that a Member's obligation under the DSU is to provide prospective relief in the form of withdrawing a measure inconsistent with a WTO agreement, or bringing that measure into conformity with the agreement by the end of the reasonable period of time. In the six years of dispute settlement under the WTO agreements, no panel or the Appellate Body has ever suggested that bringing a WTO inconsistent antidumping or countervailing duty measure into conformity with a Member's WTO obligations requires the refund of antidumping or countervailing duties collected on merchandise that entered prior to the date of implementation.

3.94 Canada's views on prospective application have been consistent with this view that the DSU only provides for prospective relief. Consistent with the concerns raised by many other Members, Canada has asserted that if Members' obligations under the DSU were to be retroactive, the language would have been explicit because "it was a significant departure from previous practice [�]."³⁷

3.95 This case is about the dispute settlement system. The fact that Canada has made no claim under the DSU is very telling; it highlights Canada's desire to avoid the well-accepted principle that the DSU does not require retroactive remedies. Section 129(c)(1) ensures that adverse WTO decisions will be implemented, in a prospective manner, in accordance with the requirements of the DSU.

(b) The Date of Entry is the Operative Date for Determining whether Relief is "Prospective" or "Retroactive"

(i) Using the Date of Entry as the Basis for Implementation is Consistent with the AD and SCM Agreements

3.96 This case revolves around what it means to implement an adverse WTO report in a prospective manner. In the context of an antidumping or countervailing duty measure, "prospective" implementation requires a Member to ensure that the new determination applies to all merchandise that enters for consumption on or after the date of implementation. This conclusion flows from the fact that it is the legal regime in effect on the date of entry which determines whether particular entries are liable for antidumping and countervailing duties. The fact that pre-implementation entries may remain unliquidated after the date of implementation -- due to domestic litigation or any other reason -- does not overcome the fact that a Member is under no obligation to implement with respect to such entries.

3.97 Using the date of entry as the basis for implementation is consistent with the basic manner in which the AD and SCM Agreements operate. Throughout those agreements, the critical factor for determining whether particular entries are subject to the assessment of antidumping or countervailing duties is the date of entry.

3.98 For example, Article 10.1 of the AD Agreement states that provisional measures and antidumping duties shall only be applied to "products which enter for consumption after the time" when the provisional or final decision enters into force, subject to certain exceptions.³⁸ Similarly, Article 8.6 of the AD Agreement states that if an exporter violates an undertaking, duties may be assessed on products "entered for consumption not more than 90 days before the application of ... provisional measures, except that any such retroactive assessment shall not apply to imports entered before the violation of the undertaking."³⁹ In addition, Article 10.6 of the AD Agreement states that when certain criteria are met, "[a] definitive anti-dumping duty may be levied on products which were entered for consumption not more than 90 days prior to the date of application of provisional measures [...]."⁴⁰ However, under Article 10.8, "[n]o duties shall be levied retroactively pursuant to paragraph 6 on products entered for consumption prior to the date of initiation of the investigation."⁴¹ Whenever the AD Agreement specifies an applicable date for an action, the scope of applicability is based on entries occurring on or after that date.

3.99 Canada has not identified anything in Articles 1, 9.3 and 18.1 of the AD Agreement, or Articles VI:2 and VI:6(a) of GATT 1994, that requires the implementation of adverse WTO reports with respect to entries that occurred prior to the end of the reasonable period of time and the date on which the measure was brought into conformity with the WTO.

3.100 Furthermore, section 129(c)(1) of the URAA implements adverse WTO reports in a way that ensures compliance with Articles 10 and 32.1 of the SCM Agreement, and Articles VI:3 and VI:6(a) of GATT 1994. First, where the implementation of an adverse WTO report results in a determination that the amount of the subsidy is less than originally determined, section 129(c)(1) of the URAA ensures that all entries that take place on or after the date of implementation will be subject to the revised cash deposit rate established in the new determination. Similarly, when the implementation of an adverse WTO report results in a negative injury determination or a finding that there was no subsidization during the original period of investigation, the countervailing duty order will be revoked with respect to all entries that take place on or after the date of implementation. Section 129(c)(1) of the URAA ensures that such adverse WTO reports will be implemented, in a prospective manner, in accordance with the requirements of the DSU. Canada has failed to make even a prima facie case that the WTO Agreements require Members to implement adverse WTO reports regarding antidumping or countervailing duty measures with respect to entries that have occurred prior to the conclusion of the reasonable period of time for implementation.

3.101 Canada's claim that section 129(c)(1) is inconsistent with Article 11.1 of the AD Agreement and Article 21.1 of the SCM Agreement is similarly without basis. As their titles and context make clear, the purpose of the two articles is to provide for the periodic review of antidumping and countervailing duty orders and price undertakings to determine whether they remain necessary to offset injurious dumping or subsidization. They do not cover administrative reviews conducted to determine the amount of final antidumping or countervailing duty liability on past entries. Footnote 21 of the AD Agreement makes this point clear by specifically differentiating between reviews to determine the amount of final antidumping liability, which are conducted pursuant to Article 9.3 of the AD Agreement, and reviews conducted pursuant to Article 11. Neither Article 11 of the AD Agreement nor Article 21.1 of the SCM Agreement has any bearing whatsoever on the extent of a Member's obligation to bring a WTO inconsistent measure into conformity with an adverse WTO report.

3.102 A recent Appellate Body report, United States - Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea,⁴² also provides support for the idea that the critical issue is date of entry. In the aptly numbered paragraph 129 of that report, the Appellate Body stated that "a duty [...] does not need actually to be enforced and collected to be 'applied' to a product. In our view, duties are 'applied against a product' when a Member imposes conditions under which that product can enter that Member's market [...]." Thus, when the Appellate Body analyzed when a duty is "applied," it focused not on what might occur at the time of enforcement or collection, but on the conditions that imports would face at the border.

(ii) Using the Date of Definitive Duty Determination as the Basis for Implementation Could Lead to Unexpected Results

3.103 The United States considers that the scope of a Member's implementation obligations is governed by the situation in effect at the time of entry. If Canada is correct in arguing that the Member's obligation depends upon the legal rights in effect on the date that the final duty liability is determined (and not on the date of entry), then a Member that has received DSB authorization to suspend concessions would be permitted to do so with respect to unliquidated, pre-authorization entries.

3.104 On this point, however, Canada's argument conflicts with the reasoning of the panel in the United States - Import Measures on Certain Products from the European Communities case.⁴³ That panel stated that suspending concessions on pre-authorization entries would constitute a retroactive remedy at odds with GATT and WTO practice. Further, the panel stated, "the applicable tariff (the applicable WTO obligation, the applicable law for that purpose), must be the one in force on the day of importation, the day the tariff is applied."⁴⁴ For the panel, the date of entry controlled whether the remedy was prospective or retroactive. Canada's attempt to distinguish the panel report on US - Certain EC Products on the basis of when the "rate of duty is fixed" misses the point,⁴⁵ since its argument implies that a Member that "fixes" the rate of duty at some point after the date of entry could, in fact, suspend concessions on unliquidated, pre-authorization entries.

3.105 Moreover, Canada's position makes it necessary to define when a Member "imposes" or "assesses" or "levies" duties. But interpreting the Agreements as creating distinct rights and obligations depending on when a Member "assesses" or "levies" duties could lead to unexpected results.

3.106 For example, Article 17.4 of the AD Agreement states that a matter may be referred to the DSB only when "final action has been taken by the administering authority of the importing Member to levy definitive anti-dumping duties or accept price undertakings [...]." Canada has argued at various points in this dispute that the term "levy" does not apply "to the imposition of potential liability in a Member using a retrospective system" and that the Department of Commerce does not make its final duty determinations until the end of administrative reviews. If the Panel were to adopt Canada's interpretation, then under the terms of Article 17.4, a panel would not have jurisdiction to review the final results of an antidumping investigation conducted by a Member with a retrospective system. If a Member believed that its exporters were subject to a WTO inconsistent antidumping investigation, the Member would need to wait to bring a challenge until the end of an administrative review, normally more than two years after the completion of the investigation.

3.107 The need to precisely define when a Member "imposes" or "assesses" or "levies" duties arises from Canada's attempt to make the time of the "final" determination relevant to determining the scope of a Member's implementation obligations. When it is properly recognized that date of entry controls under both prospective and retrospective systems, these terms, and the distinctions between them, become irrelevant to this dispute.

(c) There Should be No Distinction Between Members with Retrospective Duty Assessment Systems and Members with Prospective Duty Assessment Systems

(i) Canada's Position is Based on Artificial Distinctions Between Retrospective Duty Systems and Prospective Duty Systems

3.108 Canada and the United States agree that for Members with prospective systems, the date of entry controls for purposes of determining what constitutes "prospective" implementation of an adverse WTO report. Canada and the United States disagree, however, on whether that same date also controls for Members with retrospective systems. Although the United States believes the date of entry controls in all situations, Canada claims the date of entry is irrelevant in determining "prospective" implementation in retrospective systems. Canada's position is premised on a false factual distinction between retrospective and prospective systems, and Canada has failed to provide a textual basis for its position.

3.109 Canada attempts to build its legal arguments around the concept of "finality"; however, Canada employs inconsistent definitions of finality in order to create artificial distinctions between retrospective and prospective systems. When Canada's labels are set aside, the similarities between the two duty assessment systems are striking and in both cases, the liability for antidumping or countervailing duties arises at the border, at the time of entry.

3.110 For instance, under the Canadian prospective system, if an adverse WTO report results in a determination that there was no dumping or subsidization in a particular case, the determination implementing the adverse WTO report is deemed by law to be a termination of the investigation.⁴⁶ While Canadian law allows for the cessation of the collection of duties if this occurs, it does not appear to provide for the refund of duties incurred on entries that took place before the date of implementation.⁴⁷ Thus, the outcomes under the two systems are essentially the same.

3.111 Furthermore, even under Canada's prospective duty assessment system, the determination of duty liability is not final on the date of entry. Assessment does not occur until 30 days after the date of entry. Further, the duty on the entry is subject to redetermination based upon an importer's request within 90 days of the entry. In addition, for up to two years after the date of entry, Canada may redetermine the normal value, the export price, or the amount of subsidy associated with any imported product. Judicial review may further extend these periods. Consequently, even under Canada's prospective system, a number of determinations may be made after implementation regarding pre-implementation entries.

(ii) The WTO Obligations that Apply to Members with Retrospective and Prospective Systems are the Same

3.112 There is no evidence in the text of the AD Agreement or the SCM Agreement that the rules are intended to promote or create advantages or disadvantages for one type of system over the other. The DSU provides only for prospective remedies. Regardless of whether a Member utilizes a retrospective or prospective system of duty assessment, the date of entry is the controlling issue for determining whether the implementation obligations apply to a particular entry. A Member's obligation is to remove or modify the border measure (the antidumping or countervailing duty measure) with respect to all entries made on or after the date set for implementation.

3.113 Notwithstanding this, Canada is attempting to establish a different and higher level of obligation for Members with retrospective duty assessment systems than for Members with prospective duty assessment systems, based on nothing more than an arbitrary, form over substance, description of when duties are purportedly "final" under the two systems.

3.114 More specifically, Canada is seeking to draw a line between reviews conducted pursuant to Article 9.3.1 of the AD Agreement (in retrospective systems) and reviews conducted pursuant to Article 9.3.2 of the AD Agreement (in prospective systems). In essence, Canada is arguing that Members with retrospective duty assessment systems have an obligation to apply adverse DSB recommendations and rulings when conducting Article 9.3.1 reviews of pre-implementation entries, while Members with prospective systems do not have an obligation to apply adverse DSB recommendations and rulings when conducting Article 9.3.2 reviews of pre-implementation entries. In actuality, neither Member has such an obligation, because the date of entry determines what constitutes "prospective" implementation in both systems.

3.115 The inconsistency in Canada's claims is further evidenced in Canada's position with respect to judicial review. As the United States has noted, Members are obligated to maintain judicial, arbitral or administrative tribunals to review administrative actions. Canada would appear to be arguing that an administrative determination by a Member with a retrospective system of duty assessment is somehow less final, when subject to judicial review, than a comparable administrative determination by a Member with a prospective system of duty assessment, when subject to judicial review. Canada has not explained how the same terms regarding judicial review in Article 13 of the AD Agreement and Article 23 of the SCM Agreement must be read to create such disparate results between Members with retrospective duty assessment systems and Members with prospective duty assessment systems.

(iii) Canada is Seeking to Create an Obligation for Members with Retrospective Systems to Provide a Retroactive Remedy in Cases Involving Antidumping and Countervailing Duty Measures

3.116 Canada has argued repeatedly during this dispute that its arguments do not amount to a claim for retroactive relief in cases involving antidumping and countervailing duty measures because it is only asking the United States to make its decisions after the implementation date in accordance with adverse WTO reports, even if those decisions relate to pre-implementation entries. Canada has sought to distinguish the obligations applying to Members with prospective systems by claiming that those Members assess and collect duties at the time of entry, so that there are no decisions "after" the reasonable period of time that need to be made.⁴⁸ In Canada's view, a Member would only violate WTO rules if it were to make a WTO inconsistent decision after the reasonable period of time.

3.117 However, in the United States' view, by attempting to have adverse DSB recommendations and rulings apply to pre-implementation entries, Canada is seeking a retroactive remedy. If the Members had wanted to provide for the applicability of implementation actions to pre-implementation entries, they would have explicitly provided for that in the DSU or elsewhere in the WTO Agreements -- through language explicitly providing for either retroactive or injunctive relief. They did not do so. Instead, what the Members agreed to was a reasonable period of time in which to bring inconsistent measures into conformity with a Member's WTO obligations, and, as discussed above, no consequences for maintaining the inconsistent measures in the interim period. Adopting Canada's position and thereby modifying this agreement would be inconsistent with Article 3.2 of the DSU since it would add to the rights and obligations provided in the WTO Agreements.

3.118 What is more, Canada has argued that the United States would be required to return cash deposits collected in respect of what Canada terms "prior unliquidated entries."⁴⁹ Thus, Canada believes that Members with retrospective systems are not only under an obligation to ensure that all future (post-implementation) actions conform to WTO rules; they are also under an obligation to undo past (pre-implementation) actions.

3.119 By making an issue of the effect that implementation has on prior unliquidated entries, Canada is ignoring the international obligation -- which is to bring the border measure into conformity with the agreement -- and instead, is trying to create a new obligation for Members to provide redress or compensation to private parties within their own jurisdictions. There is no basis in the WTO agreements for such an obligation. To require refunds of cash deposits collected on entries prior to the end of the reasonable period of time would be to require retroactive relief, inconsistent with GATT/WTO practice.

3.120 In addition, under the logic that Canada has applied to prospective systems, if a Member with a retrospective system took no action with respect to cash deposits after the implementation date, there would be no possibility of a WTO violation. Canada has failed even to attempt to explain how an obligation not to take WTO inconsistent action after the implementation date can somehow be transformed into an affirmative obligation to take a certain action -- namely, refunding cash deposits collected before the implementation date -- when that "obligation" appears nowhere in the AD Agreement, the SCM Agreement, the GATT 1994, or the DSU.

3.121 Moreover, to read such an obligation into the agreements could have serious consequences for other Members. In the Guatemala Cement dispute, Guatemala argued that the panel should not order the refund of past duties, stating, "[I]f a panel were to suggest a retroactive remedy, this could interfere directly with the sovereignty of a Member by establishing a domestic right of action where there had been none previously."⁵⁰

(d) Conclusion

3.122 Nothing in the text of the WTO agreements requires anything other than prospective implementation of adverse WTO reports. Just as importantly, nothing in the agreements requires Members to apply adverse WTO reports not only to entries that take place after implementation, but also to entries that took place prior to implementation. Without a basis to assert that implementation decisions must apply in any way but prospectively -- i.e., to new entries only -- Canada's specific claims of violation under Articles 1, 9.3, 11.1 and 18.1 of the AD Agreement; Articles 10, 19.4, 21.1 and 32.1 of the SCM Agreement; and Articles VI:2, VI:3 and VI:6(a) of the GATT 1994 are inapposite. Section 129(c)(1) is fully consistent with the aforementioned WTO obligations of the United States. It ensures implementation of adverse WTO reports on a prospective basis, consistently with the United States' aforementioned WTO obligations.

3.123 Canada can only establish that the United States has breached the obligations of Article 18.4 of the AD Agreement, Article 32.5 of the SCM Agreement, and Article XVI:4 of the WTO Agreement to the extent that it establishes that section 129(c)(1) is inconsistent with the other WTO obligations that it invokes in support of its complaint. For the reasons described above, section 129(c)(1) is consistent with those other WTO obligations of the United States and, therefore, there is no breach of Article 18.4 of the AD Agreement, Article 32.5 of the SCM Agreement, or Article XVI:4 of the WTO Agreement.

5. Conclusion

3.124 For the foregoing reasons, the United States requests that the Panel find that Canada has failed to establish that section 129(c)(1) is inconsistent with Articles VI:2, VI:3, VI:6(a) of the GATT 1994, Articles 1, 9.3, 11.1, 18.1 and 18.4 of the AD Agreement, Articles 10, 19.4, 21.1, 32.1 and 32.5 of the SCM Agreement, and Article XVI:4 of the WTO Agreement.

IV. MAIN ARGUMENTS OF THE THIRD PARTIES

4.1 The main arguments of those third parties to these proceedings which have made submissions to the Panel, i.e., the European Communities and Japan, are as follows:

A. EUROPEAN COMMUNITIES

4.2 This section summarizes the main arguments of the European Communities.

1. The principle of prospective compliance

4.3 Canada's claim is based on the assumption that WTO Members have to apply compliance measures to all subsequent legal acts irrespective of the date of importation. In this context, the European Communities recalls that in the past numerous GATT and WTO panels were faced with requests by the complainant to recommend a reimbursement of anti dumping and countervailing duties. This was never granted. What is more, Article 19.1 of the DSU does not contain an obligation of WTO Members to apply compliance measures to entries before the implementation date.

4.4 The WTO dispute settlement system follows the principle of non-retroactivity of remedies. Thus, the DSU does not impose an obligation of Members to remedy past or consummated violations, but requires prospective compliance. This is clearly reflected in the wording of Article 19.1 of the DSU which imposes an obligation to "bring the measure into conformity with" the covered agreements. Several panels have confirmed this principle.⁵¹

4.5 Moreover, Articles 19 and 21 of the DSU reflect the principle of "minimum interference" in the choice of compliance measures by Members concerned.

4.6 The principle of prospective compliance is further corroborated by the concept of a reasonable period of time for implementation. Article 21.3 of the DSU implies that the obligation to comply does not embrace goods that entered before the expiry of the reasonable period of time. This is also clearly reflected in the wording of Article 22.2 of the DSU, which refers to the obligation of a Member "to bring the measure found to be inconsistent with a covered agreement into compliance therewith [�] within the reasonable period of time."

4.7 In addition, Article 3.2 of the DSU clarifies that the fundamental purpose of the WTO dispute settlement system is to provide "security and predictability to the multilateral trading system". Thus, WTO remedies shall ensure market opportunities for the future rather than providing reparation or compensation in the public international law sense. Members are not required to erase the consequences of an illegal measure occurring before the end of the reasonable period of time.

2. The temporal scope of the principle of prospective compliance

4.8 The European Communities notes that the date of entry serves as reference point for most of the substantive obligations of WTO Members. Thus, the obligation not to subject imported products to duties and other charges in excess of the bound rates under the relevant Schedule of tariff concessions relates to the time of importation, Articles II:1(b) and II:1(c) of the GATT 1994. This is further supported by the Kyoto International Convention on the Simplification and Harmonization of Customs Procedures and the tempus regit actum rule under public international law.

4.9 Similarly, the text of Article VI of the GATT 1994 suggests that the obligation not to impose an anti-dumping or countervailing duty contrary to the conditions set by WTO law, relates to the date of entry. Article VI:6(a) of the GATT 1994 clarifies the ratione temporis of this rule by stating in relevant part "no contracting party shall levy any anti-dumping or countervailing duty on the importation of any product [�]."

4.10 The preposition "on" textually implies not only a local but also a temporal element. Thus, Article VI:6(a) of the GATT 1994 does not simply refer to a "border measure". This can be derived from the Appellate Body report in United States - Anti-Dumping Act of 1916 where the Appellate Body decided that criminal and civil remedies constitute "specific action against dumping" and fall, therefore, within the scope of Article VI of the GATT 1994.

4.11 This understanding would not be contradicted by the term "levy" in Article VI:6(a) of the GATT 1994. Even if the term "levy" were to be interpreted according to footnote 12 of the AD Agreement and footnote 51 of the SCM Agreement this does not entail that the duty must be levied, i.e. assessed and collected, at the time of importation. Rather, it means that the dutiable event is the moment of importation. The relevant point in time is when the obligation to pay a duty arises and not when the duty is levied. In this regard Article 10.1 of the Anti-Dumping Agreement provides that an anti-dumping duty shall only be applied to products, which enter for consumption after the imposition of the measure.

4.12 In this context, the European Communities would also refer to the transparency provisions under WTO law, which provide that a measure must be published in advance before the importation date. This demonstrates that the WTO obligations relate to the point of importation. The transparency provisions would be undermined if the temporal aspect were disregarded.

4.13 On the basis of these fundamental principles of WTO law the date of entry should be the general reference point to determine the temporal scope of the obligation to comply with a DSB ruling under Article 19.1 of the DSU.

4.14 The European Communities notes Canada's argument that Article 9.3 of the AD Agreement would require the United States to apply its revised methodology during administrative reviews following implementation whatever the date of importation. The European Communities does not take a position on this argument.

B. JAPAN

4.15 This section summarizes the main arguments of Japan.

4.16 Japan generally agrees with Canada that section 129(c)(1) raises significant systemic concerns. AD and CVD measures (as well as safeguard measures) should be temporary measures, applied to provide domestic industries relief from imports under specifically defined circumstances. Although these measures are permitted under the WTO Agreements, these measures also stand the greatest chance of being abused by overzealous authorities. As such, the application of such measures must be carefully supervised by the Members, through such mechanism as the Dispute Settlement Body so as to ensure that sanctioned forms of trade protection, like AD and CVD measures, are applied only when authorized by the relevant WTO agreements.

4.17 For the dispute settlement system to work effectively, recommendations or rulings of the DSB must be given effect. Once the DSB ruling is adopted by the Dispute Settlement Body, it is final and must be observed per Article 21.3 of the DSU. Either immediately following the DSB ruling or following the expiry date of the reasonable period of time decided in accordance with Article 21.3 of the DSU, any imposition by the United States of AD and CVD duties -- including those on entries that are yet to be liquidated after the United States Trade Representative directs implementation of a new determination pursuant to section 129(a)(6) and section 129(b)(4) of the URAA -- must be consistent with the DSB ruling.

4.18 In this case, the unique features of the US AD and CVD laws create an unusual situation. By using a retrospective system that allows entries to take place based on estimated duties, and only later determining the actual duties owed, the United States effectively defers its decision on the application of duties. Section 129(c)(1) singled out DSB rulings for different treatment from the ordinary liquidation procedures. If a DSB ruling declares the duties to be improper, section 129(c)(1) requires that WTO inconsistent treatment be applied to prior unliquidated entries even after the United States Trade Representative directs the administering authority to apply revised anti-dumping or countervailing duty.

4.19 The United States may not hide behind the unique legal system it has adopted. Under the US system, the US authorities can change the estimated duties however they want -- after all, they are not yet final under the US legal system -- but they must ignore any decision by the WTO with regard to prior unliquidated entries. Section 129(c)(1) affirmatively bars the authorities from considering at all such decisions.

4.20 At great length the United States argues that the remedy under the WTO dispute settlement system should be of prospective nature and not retrospective, in its attempt to mis-characterise Canada's argument. Canada's argument, however, does not go that far as making any general statement about retrospective remedy, nor does Japan's. More specifically, Canada clarifies in footnote 25 of its submission that "the actions at issue in this dispute are those taken by the United States after the date it implements any measure to bring itself into conformity with the findings in a WTO Report." Hence it is clear that neither Canada nor Japan argues for retroactive application, or reversal of past actions.

4.21 In this connection, the United States misunderstands Japan's statement on the Australia - Automotive Leather II (Article 21.5 - US) case at the Dispute Settlement Body.⁵² The issue at the DSB meeting was the Panel report recommending repayment of a WTO inconsistent subsidy. Japan opposed to the report because the Panel recommended the reversal of past actions that had already been finalised, as against the actions yet to be finalised. The prior unliquidated entries that Canada identified in this dispute are those that are pending the finalisation of dumping duty, to be collected at the time of liquidation. Thus, it is inapposite to draw an analogy between the two cases.

4.22 The Unites States also dismisses as irrelevant a reference Canada makes to the system of applying revised anti-dumping margins under the US domestic judicial review and NAFTA. In Japan's view, however, the legal significance of Canada's reference lies not in the difference in time periods for which the revised dumping margins are to be applied under respective regimes, but in the very fact that the United States deliberately chose to frame the language of section 129(c)(1) so as to exclude the application of revised dumping margin to the entries of subject imports that remain unliquidated even after the issuance of a directive by the Untied States Trade Representative when those entries entered the United States before the issuance of the directive. Canada's claim is on the applicability of DSB rulings to liquidation decisions taking place after the United States Trade Representative has issued the directive, after the reasonable period of time during which the United States is entitled to maintaining WTO inconsistent measure, has expired. The question of retroactive application could arise only with regard to an action that has already taken place prior to the expiry of the reasonable period of time, which is not at issue here.

4.23 Japan believes Canada has raised serious questions about the consistency of section 129(c)(1) with US obligations under the WTO Agreements. Japan urges the Panel to give this important dispute the detailed attention it deserves. To the extent section 129(c)(1) violates US WTO obligations, the Panel should not hesitate to so find and to urge the United States to repeal the WTO inconsistent aspects of section 129(c)(1).

To continue with V. INTERIM REVIEW

Return to Table of Contents