WT/DS184/R
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ANNEX A
First Submissions by the Parties
Contents Page
Annex A-1 First written submission of Japan 2
Annex A-2 First written submission of the United States 87
Annex A-3 Response of Japan to Prelimin ary Objections of the United States 245WT/DS184/R
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ANNEX A-1
First written subm ission of Japan
(3 July 2000)
TABLE OF CONTENTS
Page
INTRODUCT ION................................................................................................................... ...............8
I. PROCEDURAL BACKGROUND FOR DISPUTE SETTLEMENT IN THIS
CASE........................................................................................................................... .............10
II. SUMMARY AND CONTEXT OF THE CHALLENGED ANTI-DUMPING
MEASURE S ....................................................................................................................... .....10
A. TIMELINE FOR THE INVESTIGAT IONS ............................................................................10
B. POLITICAL CONTEXT FOR THE INVESTI GATIONS .......................................................12
C. ECONOMIC CONTEXT FOR THE INVESTI GATIONS ......................................................16
D. INTERNATIONAL RAMIFICATION S FOR THE INVE STIGATIO NS ..............................18
III. STANDARDS OF REVIEW..................................................................................................19
A. ANTI-DUMPING AGREEMENT STANDARDS OF REVIEW............................................19
B. GATT 1994 STANDARDS OF REVIEW FO R CLAIMS UNDER AR TICLE X:3...............20
IV. USDOC’S TREATMENT OF EVIDENCE AND APPLICATION OF “FACTS
AVAILABLE” WAS INCONSISTENT WITH ARTICLES 2, 6, AND 9 AND
ANNEX II OF THE ANTI-DUM PING AGR EEMENT .....................................................20
A. BACKGROUND ON US LA W AND PRAC TICE .................................................................21
B. USDOC’S ESTABLISHED PRACTICE OF APPLYING ADVERSE FACTS
AVAILABLE TO PUNISH RESPONDENTS IS INCONSISTENT WITH ARTICLE
6.8 AND ANNEX II OF THE ANTI- DUMPING AGREEMENT ..........................................22
C. IN APPLYING ADVERSE FACTS AVAILABLE TO KSC, DOC VIOLATED
ARTICLES 2, 6, 9 AND ANNEX II OF  THE ANTI-DUMPI NG AGREEMEN T .................24
1. Summary of the facts:  USDOC’s application of adverse facts available for KSC...........24
2. The application of adverse facts available for KSC was inconsistent with the
Anti-Dumping Agreement......................................................................................................26
(a) Article 6.8 and Annex II of the Anti-Dumping Agreement do not permit the use of
adverse inferences in appl ying facts av ailable..........................................................................26
(b) KSC’s actions did not justify the “less favourable” result contemplated by Annex II
of the Anti-Dumping Agreement ..............................................................................................26WT/DS184/R
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(c) USDOC’s failure to calculate constructed export price correctly for KSC is
inconsistent with Article 2.3 of the Anti-Dumping Agreement................................................28
(d) USDOC’s excessive margin of dumping for KSC is inconsistent with Article 9.3 of
the Anti-Dumping Agreement ..................................................................................................29
D. IN APPLYING ADVERSE FACTS AVAILABLE  TO NSC AND NKK, USDOC
VIOLATED ARTICLES 2, 6, 9 AND ANNEX II OF THE ANTI-DUMPING
AGREEMEN T...................................................................................................................... ....30
1. Summary of the facts:  USDOC’s application of adverse facts available for NSC
and NKK........................................................................................................................ ..........30
2. Application of facts available and use of adverse inferences against NSC and
NKK was inconsistent with the Anti-Dumping Agreement ................................................33
(a) USDOC’s application of adverse facts available was inconsistent with Article 6.8 and
Annex II of the Anti-Dumping Agreement...............................................................................33
(1) NKK and NSC submitted their corrections “within a reasonable period” ..............................34
(2) Annex II, paragraph 5 mandates the acceptance of thes e corrections .....................................34
(3) USDOC’s application of adverse facts available was inconsistent with Annex II,
paragraph 7 .................................................................................................................... ..........35
(b) USDOC’S treatment of the evidence submitted by NKK and NSC was inconsistent
with Article 6 of the An ti-Dumping Agreement.......................................................................35
(1) USDOC failed to provide NKK with proper notice or a proper opportunity to respond
and defend itself as requir ed by Article 6.1 ..............................................................................35
(2) USDOC failed properly to verify NKK’ s and NSC’s factual corrections as required
by Article 6.6................................................................................................................. ............36
(3) USDOC impermissibly failed to take into account the difficulties faced by NKK and
NSC as required by Article 6.13 ...............................................................................................3 7
(c) USDOC’s choice of adverse facts available is inconsistent with Article 2.4 of the
Anti-Dumping Agreement ........................................................................................................3 7
(d) USDOC’s application of facts available to NKK and NSC is also inconsistent with
Article 9.3 of the Anti-D umping Agreement............................................................................38
V. US LAW GOVERNING CALCULATION OF THE “ALL OTHERS” RATE,
ON ITS FACE AND AS APPLIED HERE, IS INCONSISTENT WITH
ARTICLE 9.4 OF THE ANTI-DUM PING AGR EEMENT ...............................................38
A. BACKGROUND ON US LA W AND PRAC TICE .................................................................38
B. SUMMARY OF THE FACTS:  APPLICATION OF THE STATUTE AND
ADMINISTRATIVE PRACTICE ............................................................................................39
C. USDOC'S INCLUSION OF PARTIAL FACTS AVAILABLE IN THE “ALL
OTHERS” RATE IS INCONSISTENT WITH ARTICLE 9.4 OF THE ANTI-
DUMPING AGREEM ENT ......................................................................................................40
1. On its face, the US statute is inconsistent with the requirement of Article 9.4 that
authorities “shall disregard” marg ins based on fa cts avail able .........................................40
2. USDOC’s specific calculation of the all others rate in the investigation of hot-
rolled steel from Japan was also inconsistent with  Article 9.4............................................41
VI. USDOC’S EXCLUSION OF CERTAIN HOME MARKET SALES FROM THE
CALCULATION OF NORMAL VALUE, AND THE REPLACEMENT OFWT/DS184/R
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SUCH SALES WITH DOWNSTREAM SALES, ARE BOTH INCONSISTENT
WITH ARTICLE 2 OF THE ANT I-DUMPING AG REEMENT ......................................41
A. BACKGROUND ON US LA W AND PRAC TICE .................................................................41
B. SUMMARY OF THE FACTS:  APPLICATION OF THE ARM’S LENGTH TEST
IN THE INVESTIGATION OF HOT -ROLLED STEEL FR OM JAPAN...............................43
C. USDOC VIOLATED ARTICLE 2 OF THE ANTI-DUMPING AGREEMENT ....................44
1. Article 2.4 of the Anti-Dumping Agreement, in combination with Article 2.1,
does not permit USDOC to treat  sales to affiliates that fail the 99.5 per cent
arm’s length test as outside th e ordinary course of trade ...................................................44
2. The replacement of home-market sales to an affiliate with the affiliate’s resales
is inconsistent with Article 2.2 of the Anti-Dumping Agreement .......................................45
3. The “fair comparison” requirement in Article 2.4 prohibits the use of USDOC’s
arm’s length test to disc ard sales to affiliates.......................................................................46
(a) Exclusion of sales via application of the 99.5 per cent test is inconsistent with
Article 2.4 .................................................................................................................... .............46
(b) Replacing a respondent’s home market sales with its affiliate’s downstream resales is
inconsistent with Article 2.4 .................................................................................................. ...46
VII. USDOC’S CRITICAL CIRCUMSTANCES DETERMINATIONS ARE
INCONSISTENT WITH ARTICLE 10 OF THE ANTI-DUMPING
AGREEM ENT ...................................................................................................................... ..47
A. BACKGROUND ON US LA W AND PRAC TICE .................................................................48
B. SUMMARY OF THE FACTS:  USDOC’S CRITICAL CIRCUMSTANCES
FINDI NGS....................................................................................................................... .........49
C. USDOC VIOLATED ARTICLE 10 OF  THE ANTI-DUMPING  AGREEMENT ..................51
1. Article 10.6 does not permit a finding of critical circumstances based solely on
threat of mate rial injury...................................................................................................... ...51
2. USDOC ignored the requirement of Article 10.7 to have sufficient evidence ...................53
(a) Article 10.7 expressly requires “sufficient evidence” that the elements of Article 10.6
have been met .................................................................................................................. .........53
(b) USDOC imposed provisional measures without having “sufficient evidence” within
the meaning of Article 10.7 .................................................................................................... ..54
3. On its face, the US statute does not meet the “sufficient evidence” requirement
of Article 10.7 in making determinations under Article 10.6..............................................56
4. Because USDOC’s preliminary critical circumstances findings and the relevant
US statutory provisions violate Articles 10.6 and 10.7, they also violate
Article 10.1................................................................................................................... ............56
VIII. USITC’S INJURY AND CAUSATION DETERMINATIONS WERE
INCONSISTENT WITH ARTICLES 3 AND 4 OF THE ANTI-DUMPING
AGREEM ENT ...................................................................................................................... ..57
A. THE CAPTIVE PRODUCTION PROVISION, BOTH ON ITS FACE AND AS
APPLIED IN THIS CASE, IS INCONSISTENT WITH ARTICLES 3 AND 4 OF
THE ANTI-DUMPING AGREEMENT...................................................................................57
1. Background on US law and practice.....................................................................................57WT/DS184/R
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2. The captive production provision on its face is inconsistent with Articles 3 and 4...........59
(a) The captive production provision ignores the Article 4.1 definition of the “domestic
industry” as the entire productive output of the industry, not part  of that output .....................59
(b) The captive production provision violates Article 3.2 because it exaggerates subject
import market share relative to  all domestic production...........................................................60
(c) The captive production provision violates Article 3.4 by requiring an evaluation of
certain key factors based on a narr ow segment of the industry ................................................61
(d) The captive production provision violates the requirement of Article 3.5 to establish a
causal connection between the effects of dumping and the industry as a whole ......................63
(e) The captive production provision violates the Article 3.6 requirement to analyze the
effect of imports on al l domestic pr oduction ............................................................................64
(f) The captive production provision violates the Article 3.1 requirement that injury
determinations be based on an “objective ex amination” ..........................................................64
3. USITC applied the captive production prov ision in this case inconsistently with
Articles 3 and 4 of the Anti-Dumping Agreement ...............................................................65
(a) Summary of the facts:  Application of the captive production provision in the hot-
rolled st eel case.............................................................................................................. ...........65
(b) The WTO-inconsistent captive production provision decisively influenced the USITC
determination in the ho t-rolled steel  case .................................................................................65
(1) A comparison of the 1993 and 1999 hot-rolled anti-dumping cases demonstrates the
significant impact of the ca ptive production provision.............................................................66
(2) Commissioner Askey’s dissent further de monstrates that the captive production
provision fundamentally distorted the analysis of the majority................................................67
(c) The specific determination downplaying or ignoring the domestic industry as a whole
violates Articles 3 and 4 of the Anti-Dumping Agreement ......................................................67
4. The captive production provision violates Article XVI:4 of the WTO Agreement ..........69
B. USITC’S FINDING OF INJURY AND CAUSATION IS INCONSISTENT WITH
ARTICLE 3 OF THE ANTI- DUMPING AGREEMENT........................................................69
1. The requirements of Articles 3.1, 3.4, and 3.5......................................................................69
2. USITC failed properly to consider relevant data.................................................................70
(a) USITC improperly diverged from its practice of analyzing industry trends over three
years, in violation of Ar ticles 3.1, 3.4, and 3.5 .........................................................................70
(b) USITC inadequately analyzed other alternative causes of injury, effectively
attributing their impact to subject im ports, in violation of Article 3.5 .....................................72
IX. THE UNITED STATES HAS VIOL ATED ARTICLE X:3 OF GATT 1994
BECAUSE THE USDOC AND USITC INVESTIGATIONS WERE NOT
CONDUCTED, AND THE DETERMINATIONS WERE NOT MADE, IN A
UNIFORM, IMPARTIAL OR REASONABLE MANNER ...............................................74
A. THE OBLIGATIONS IMPOSED BY AR TICLE X:3(A) OF GATT 1994.............................75
B. USDOC’ S AND USITC’ S ACTIONS WERE NON-UNIFORM , PARTIAL AND
UNREASONABLE ........................................................................................................................78
1. USDOC accelerated all aspects of the proceeding despite its extraordinarily
complicated  nature ............................................................................................................. ....78WT/DS184/R
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2. USDOC refused to follow its normal practice for correcting ministerial errors
following preliminary determinations, thus subjecting NKK product to critical
circumstances and requiring its importers to pay inflated and retroactive
provisional measures ........................................................................................................... ...80
3. USDOC revised its policy on critical circumstances and then took the
unprecedented action of ordering retroactive imposition of provisional measures
prior to the preliminary dumping determination ................................................................80
4. While USDOC resorted to “facts avail able” in each instance where Japanese
respondent companies made even the most  minor, inadvertent mistake, USDOC
and USITC took no adverse action when domestic companies refused to provide
highly material information...................................................................................................8 2
5. USITC deviated from its prior practice by ignoring the US industry’s financial
performance early in the period of investigation and instead contriving declining
financial performance by co mparing only two years ..........................................................84
CONCLUSION ..................................................................................................................... ...............84WT/DS184/R
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Business Confidential Information
In this Submission, including its Exhibits, Japan has placed Business Confidential
Information in brackets ("[]").  The bracketed information is highly confidential.  This information is
provided solely for the purpose of fully informing the Panel of the factual details of the Hot-Rolled
Steel investigations.  Japanese respondents would be seriously harmed if this information were used
for any other purpose or were made available to anyone outside the Panel, the Secretariat officials
assisting the Panel, and the official legal team of the United States and the third parties — especially
if this information were made available to any of Japanese respondents' competitors.  Japan therefore
respectfully requests that this information be protected and that it be omitted from the Panel's report.WT/DS184/R
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INTRODUCTION
1. This submission sets forth Japan’s challenge to the US imposition of anti-dumping measures
on Hot-Rolled Flat-Rolled Carbon-Quality Steel Products  (“hot-rolled steel”) from Japan.  Various
provisions of the US anti-dumping law are, on their face, inconsistent with US obligations under theGeneral Agreement on Tariffs and Trade 1994 (“GATT 1994”) and the Agreement on Implementation
of Article VI of the General Agreement on Tariffs and Trade 1994 (“Anti-Dumping Agreement”).
Furthermore, the application of US law in this investigation was inconsistent not only with numerous
substantive provisions of these agreements, but also with Article X:3(a) of GATT 1994 and the well-
established international legal obligation to apply one's laws in “good faith.”  The improper
imposition of these anti-dumping measures has essentially halted imports of the subject merchandise
from Japan into the United States.
2. The anti-dumping measures on hot-rolled steel were imposed following various
determinations made by the US International Trade Commission (“USITC”) and the US Department
of Commerce (“USDOC”).  These two agencies share responsibility for administering the US anti-
dumping law, with USDOC determining dumping  margins and USITC determining whether the
domestic industry has been injured by imports.
3. In conducting the dumping investigation, USDOC violated Articles 2, 6, 9 and 10, and
Annex II of the Anti-Dumping Agreement:
• USDOC’s established practice of using adverse “facts available” in order to punish respondents
for conduct USDOC deems uncooperative is inconsis tent with Article 6.8 and Annex II of the
Anti-Dumping Agreement.
• USDOC’s application of adverse “facts available” to Kawasaki Steel Corporation (“KSC”) was
inconsistent with Articles 2, 6, and 9 and Annex II because, although KSC provided all data under
its control and cooperated with the investigation, USDOC punished KSC for not providing datacontrolled by a petitioner.
• USDOC’s application of adverse “facts available” to NKK Corporation (“NKK”) and Nippon
Steel Corporation (“NSC”) was also inconsistent with Articles 2, 6 and 9 and Annex II becauseUSDOC improperly rejected and refused to verify data that was provided in a timely manner and
was verifiable.
• On its face and as applied by USDOC, the provision of US law requiring that the dumping margin
for non-investigated producers and exporters — known as the “all others” rate — be derived from
margins calculated using partial “facts available” is inconsistent with Article 9.4.
• Using its well-established arm’s length test, USDOC excluded certain home market sales to
affiliated parties from the normal value calculation, thereby failing to include sales in the ordinary
course of trade in the calculation as required by Article 2.1 and failing to provide a “fair
comparison ” as required by Article 2.4.  USDOC’s replacement of such sales with affiliated party
resales also violated Articles 2.1, 2.2 and 2.4.
• US law allowing retroactive imposition of provisional measures prior to a preliminary affirmative
determination of dumping violates Article 10.  On its face, US law (termed “criticalcircumstances”) does not require a finding of “sufficient evidence” in support of the conditions set
forth in Article 10.6 in making determinations under Article 10.7, in violation of Articles 10.6 and10.7.  As applied in this case, USDOC based its finding on petitioners’ allegations and pressWT/DS184/R
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reports, and ignored USITC’s preliminary finding of only a threat of injury, also violating the
requirements of Articles 10.1, 10.6, and 10.7.
4. The USITC injury investigation and determination violated Articles 3 and 4 of the Anti-
Dumping Agreement:
• The “captive production” provision of US law, on its face and as applied by USITC, is
inconsistent with the requirements of Articles 3 and 4.  When certain facts are present, this
provision requires USITC to focus on a narrow segment of the domestic industry rather than on
the industry as a whole, improperly inflating any negative impact of imports and precluding an
objective examination of all relevant factors and evidence.  In this case, USITC effectively based
its injury determination on only 30 per cent of the US industry’s US sales.
• USITC’s determination that the requisite causal relationship existed between imports and injury to
the domestic industry was inconsistent with Article 3.  Specifically USITC’s reliance on the USindustry’s peak performance year of 1997 as the measure of whether imports were causing injury
failed to satisfy the requirements of Article 3.1 and 3.4 that authorities make a determination
based on positive evidence, properly evaluate all related factors, and conduct an objective
examination.
• USITC also failed to evaluate properly the effe ct on the US industry of known factors other than
dumped imports, including the protracted General Motors strike, increased production by US
mini-mills, and faltering US demand for pipe and tube, in violation of Article 3.5.
5. In determining dumping, injury, and causation inconsistently with the provisions of the Anti-
Dumping Agreement, the US also acted inconsistently with GATT 1994 Article VI.
6. The US compounded these violations by conducting investigations exhibiting a pattern of bias
targeting Japanese respondents.  The US thus violated GATT 1994 Article X.3 because its
investigations were not complete and its determinat ions were not made in a uniform, impartial, and
reasonable manner as required by Article X:3(a) of GATT 1994:
• USDOC accelerated all aspects of the proceeding, despite its extraordinarily complicated nature.
• USDOC declined to correct a significant unfavourable clerical error in its preliminary
determination in violation of its own regulations.
• USDOC revised its critical circumstances policy during the proceeding and then took the
unprecedented action of determining it would retroactively impose provisional measures prior toits preliminary determination of dumping.
• USDOC systematically resorted to adverse “facts available” in each instance where Japanese
respondent companies made even the most minor, inadvertent mistake in submitting verifiable
data.  In stark contrast, USDOC and USITC refused to sanction US companies, includinginterested party petitioners, that purposefully withheld data.  USITC compounded this violation
by accepting (and relying on) the US steel companies’ data after the final briefs had been
submitted and oral argument had concluded.
• USITC improperly limited its analysis of the domestic industry to two years of the period
investigated, thereby abandoning its normal practice and ignoring the fact that the industry
performed better in the third year of investigation than the first.WT/DS184/R
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7. Finally, by maintaining an anti-dumping law, regulations and administrative procedures that
do not conform with US obligations under the WTO Agreements, the US violated Article XVI:4 of
the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement.
8. In light of these US violations, each of which Japan demonstrates in detail below, Japan
requests that the Panel to issue the findings and make the recommendations set forth in the conclusion
at the end of this submission.
I. PROCEDURAL BACKGROUND FOR DISPUTE SETTLEMENT IN THIS CASE
9. On 18 November 1999, the Government of Ja pan requested consultations with the US
Government pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU), Article XXII:1 of GATT 1994, and Article 17.2 of the Anti-Dumping
Agreement, regarding preliminary and final determinations in the USDOC and USITC anti-dumping
investigations of hot-rolled steel products from Japan.1
10. Consultations were held on 13 January 2000.  Unfortunately, the consultations failed to
resolve the dispute.
11. On 11 February 2000, the Government of Japan requested the establishment of a panel
pursuant to Article XXIII:1 of GATT 1994, Articles 4 and 6 of the DSU, and Article 17 of the Anti-
Dumping Agreement, and requested that the Panel have the standard terms of reference provided for
in Article 7.1 of the DSU.2
12. At its 20 March 2000 meeting, the Dispute Settlement Body (DSB) established a panel toexamine the complaints of the Government of Japan.  The Panel was constituted on 24 May 2000.
3
13. The Panel’s terms of reference, pursuant to DSU Article 7, are:
To examine, in light of the relevant provisions of the covered agreements cited by
Japan in document WT/DS184/2, the matter referred to the DSB by Japan in
document WT/DS184/2, and to make such findings as will assist the DSB in making
the recommendations or in giving the rulings provided for in those agreements.
II. SUMMARY AND CONTEXT OF THE CHALLENGED ANTI-DUMPING
MEASURES
A. TIMELINE FOR THE INVESTIGATIONS
14. On 30 September 1998, several US steel manufacturing companies, the United Steelworkers
of America, and the Independent Steelworkers Union filed a petition requesting that USITC and
USDOC undertake an anti-dumping duty investigati on of imports from Brazil, Japan, and Russia.4
The petitions alleged that these imports had entered the US market at “less than fair value” ( i.e.,
                                                     
1 United States—Anti-Dumping Measures on Certain Hot-Rolled Steel Products From Japan: Request
for Consultations by Japan , G/ADP/D20/1 (23 Nov. 1999).
2 United States—Anti-Dumping Measures on Certain Hot-Rolled Steel Products From Japan: Request
for the Establishment of a Panel by Japan, WT/DS184/2  (11 Feb. 2000).
3United States—Anti-Dumping Measures on Certain Hot-Rolled Steel Products From Japan:
Constitution of the Panel Established at the Request of Japan , WT/DS184/3 (24 May 2000).
4 Petition for the Imposition of Antidumping Duties: Certain Hot-Rolled Steel Flat Products From
Japan  , 30 Sept. 1998 (“ Petition ”) (excerpts in Exh. JP-1 ).  The petition also included a countervailing duty
claim against Brazil, which is immaterial to this proceeding.WT/DS184/R
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dumped prices) and materially injured the domestic industry.  The next day, on 1 October 1998,
USITC instituted its injury investigation.5
15. On 8 October 1998, USDOC issued a policy bulletin announcing its unprecedented plan to
issue preliminary critical circumstances determinations prior to preliminary dumping determinations.6
A week later, on 15 October 1998, USDOC initiated its anti-dumping duty investigation.7
16. On 17 November 1998, USITC issued an affirmative preliminary determination, finding a
reasonable indication that the US industry was threatened with material injury by reason of hot-rolled
steel imports from Brazil, Japan, and Russia.8   USITC found there was no “reasonable indication” of
current material injury.9
17. On 23 November 1998, USDOC issued an affirmative preliminary critical circumstancesdetermination, stating that all Japanese exporters would be liable for dumping duties retroactively to
90 days before any affirmative preliminary dumping determination.
10   This action occurred eleven
weeks prior to a preliminary determination by US DOC and was aimed at deterring shipments during
the investigation.11
18. On 12 February 1999, USDOC issued a preliminary determination finding that hot-rolledsteel from Japan was sold in the United States at dumped prices.
12   Having narrowed its investigation
to KSC, NSC, and NKK, as the “mandatory respon dents” who were required to participate in the
investigation, USDOC issued the following provisi onal measures to be paid on all entries of all
                                                     
5 Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia , 63 Fed. Reg. 53926, 53927
(7 Oct. 1998) (instituting USITC investigations and scheduling preliminary phase investigations) (“ USITC
Institution of Investigation ”) (Exh. JP-2 ).
6 Change in Policy Regarding Timi ng of Issuance of Critical Ci rcumstances Determinations , 63 Fed.
Reg. 55364, 55364-65 (15 Oct. 1998) (publishing USDOC Policy Bulletin 98/4, “Timing of Issuance of Critical
Circumstances Determinations”) ( “ USDOC Critical Circumstances Policy Bulletin ”) (Exh. JP-3 ); see also  19
U.S.C. § 1673b(e)(1) ( Exh. JP-4 ); 19 C.F.R. § 351.206(c)(2), as amended (Regulation Concerning Preliminary
Critical Circumstances Findings:  Final Rule , 64 Fed. Reg. 48706 (8 Sept. 1999)) ( Exh. JP-5 ).
7 Initiation of Antidumping Duty Investigations: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel
Products From Brazil, Japan and the Russian Federation,  63 Fed. Reg. 56607, 56613 (22 Oct. 1998) (“USDOC
Initiation of Investigation”) ( Exh. JP-6 ).
8 Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia , 63 Fed. Reg. 65221, 65221
(25 Nov. 1998) (“Notice of USITC Preliminary Injury Determination”)  (Exh. JP-7 ); see also Certain Hot-
Rolled Steel Products From Brazil, Japan, and Brazil,  Inv. Nos. 701-TA-384 and 731-TA-806-808
(Preliminary), USITC Pub. 3142 at 1 (Nov. 1998) (“USITC Preliminary Injury Determination” ) (Exh. JP-8 ).
9 In making this finding, USITC said that the “industry was relatively healthy during much of the
period examined.  Capacity, production, shipments, and net sales all increased during the period.  Employmentindicators generally held steady, and the industry’s productivity improved.  Nevertheless, there are signs ofimminent future difficulties for the industry from subject imports.”  USITC Preliminary Injury Determination ,
USITC Pub. 3142 at 17 (footnotes omitted) ( Exh. JP-8 ).
10 Preliminary Determinations of Critical Circumst ances:  Certain Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products From Japan and the Russian Federation , 63 Fed. Reg. 65750, 65751 (30 Nov. 1998)
(“USDOC Preliminary Determinations of Critical Circumstances” ) (Exh. JP-9 ).
11 In a January 1999 press release, USDOC Secretary Daley acknowledged that an early decision would
impact imports by stating that “making critical circum stances determinations prior to the preliminary dumping
determination . . . put{s} importers on notice that they could be liable for dumping duties up to 90 days earlierthan normal.”  USDOC Press Release, “Early Steel Numbers Tell Encouraging Story but More Remains to be
Done, Commerce Secretary William Daley Says” (28 Jan. 1999) ( Exh. JP-10 ).
12 Notice of Preliminary Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products From Japan , 64 Fed. Reg. 8291, 8299 (19 Feb. 1999) (“USDOC Preliminary
Dumping Determination” ) (Exh. JP-11 ).WT/DS184/R
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Japanese product made 90 days prior to the notice (pursuant to the earlier critical circumstances
finding) and all subsequent entries until the final determination:
Preliminary Dumping Margins
Calculated by USDOC
KSC 67.59%
NSC 25.14%
NKK 30.63%
All Others Rate 35.06%
19. Following its preliminary determination, USDOC issued several more requests for
information, conducted verification at the three mandatory respondents’ offices in Japan (and the US
in some cases), received interested party comments, and held a public hearing.  On 28 April 1999,
USDOC issued a final determination that respondents were dumping hot-rolled steel in the
United States at the following margins of dumping:
Final Dumping Margins
Calculated by USDOC
KSC 67.14%
NSC 19.65%NKK 17.86%
All Others Rate 29.30%
13
20. While USDOC conducted its final investig ation, USITC continued its own final injury
investigation.  Following interested party briefing and a public hearing held on 4 May 1999, USITCvoted unanimously on 11 June 1999, that the US industry was materially injured or threatened with
material injury by reason of hot-rolled steel imports from Japan.  On 18 June 1999, USITC
transmitted its final affirmative determination to USDOC.
14
21. On 23 June 1999, USDOC issued an anti-dum ping duty order imposing estimated dumping
duties on imports from Japan at the rates announced in its final determination.15
B. POLITICAL CONTEXT FOR THE INVESTIGATIONS
22. In analyzing the propriety of the US government’s determinations in this case, it is important
to recognize the intense political context in which those findings were made.  Although this case went
through the same basic stages as other cases, both the specific procedures and substantive decisions in
this case were unlike any other.  The US steel industry generated the maximum political pressure, andthe US government then allowed that pressure to  distort and compromise the investigative process.
                                                     
13 Notice of Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled Carbon-
Quality Steel Products From Japan ,  64 Fed. Reg. 24329, 24370 (6 May 1999) ( “USDOC Final Dumping
Determination”)  (Exh. JP-12 ).
14 On 1 March 1999, USITC scheduled the final phase of its injury investigation.  Scheduling of the
Final Phase of an Antidumping Investigation:  Certain Hot-Rolled Steel Products From Brazil and Japan , 64
Fed. Reg. 10723 (5 Mar. 1999); see also Certain Hot-Rolled Steel Products From Japan , 64 Fed. Reg. 33514,
33514 (23 Jun. 1999) (“Notice of USITC Final Injury Determination” ) (Exh. JP-13 ); Certain Hot-Rolled Steel
Products From Japan, Inv. No. 731-TA-807 (Final), USITC Pub. 3202 (Jun. 1999) (“USITC Final Injury
Determination” )  (Exh. JP-14 ).
15 Antidumping Duty Order; Certain Hot-Rolled Fl at-Rolled Carbon-Quality Steel Products From
Japan , 64 Fed. Reg. 34778, 34780 (29 June 1999) ( Exh. JP-15 ).  Since USITC had not found critical
circumstances from Japan, USDOC had to cancel the retroactive imposition of anti-dumping duties.WT/DS184/R
Page A-13
23. Just prior to submission of the petition in this case, the US steel industry commenced an
aggressive lobbying effort — the so-called “ Stand Up For Steel” campaign — to accompany the
administrative proceedings.  This campaign, which began on 10 September 1998, sought to exert
maximum political pressure for special treatment of the US steel industry under the anti-dumping
law.16   Having lost several of the flat-rolled steel cases they had brought in 1992, the steel industry
wanted to avoid that outcome at all costs.
24. On 30 September 1998, the day the petition was filed, chief executives of the major US steel
concerns met with top administrative officials, including senior USDOC officials, to ask for
emergency relief from USDOC.17    Regarding the importation of hot-rolled steel, the president of
United Steelworkers of America told reporters:  “We want it stopped.  We want the administration to
shut it down right now."18
25. Secretary of Commerce William Daley publicly expressed support for the case in earlyOctober 1998, even before USDOC officially initiated the investigation on 15 October 1998.
19  
USDOC then committed to the unprecedented act of expediting the investigations20,  and ultimately
imposed provisional measures earlier than any prior US anti-dumping investigation since the effective
date of the Uruguay Round Agreement.21   Under a normal schedule, USDOC would have issued its
preliminary determination on 4 March 1999, and could have extended that date for a further 50 days
until 24 April 1999, due to the complexity of the case (as is inevitable with flat-rolled steel cases).22
                                                     
16 The industry’s “Stand Up for Steel” coalition includes more than a dozen steel companies, including
Bethlehem, LTV Steel Co. and USX Corp., along with the United Steelworkers of America.  The US steel
industry and the steelworkers’ union issued a press release on 10 Sept. 1998, announcing a massive advertising
campaign in the print and broadcasting media throughout the country alerting the US public to the seriousness of
the import situation.  See Stand Up For Steel Press Release, “Stand Up For Steel - And American Jobs:
Coalition Of Steelworkers And Producers Launches Effort To Sound Alarm on Unfair Foreign Trade Practices”
(10 Sep. 1998), <http://www.fairtradewatch.org/press910.html> ( Exh. JP-16  ).
17 “US Steel/Anti-Dumping: Seek Unspecified Emergency Relief,” Dow Jones Commodities Service ,
(30 Sept. 1998) ( Exh. JP-17 ).
18 Robert A. Rankin, “Steel-makers demand government protection from cheaper imports,” Knight
Ridder/Tribune News Service,  (30 Sept. 1998) ( Exh. JP-18 ).
19 After stating in September 1998 that “{w}e at the Department of Commerce will use every weapon
at our disposal to ensure that our essential US industri es, like steel are not jeopardized by foreign unfair trade
practices,” Secretary Daley vowed in early October 1998 to “do whatever he can to expedite the {steel anti-dumping} cases.” See “Commerce Signals Support for Steel Industry Demands in New Cases,” Inside US Trade
(9 Oct. 1998) ( Exh. JP-19 ); Tsukasa Furukawa, “Steel’s Trade Complaints Stir Reactions,” American Metal
Market  (14 Sept. 1998) ( Exh. JP-20 ).
20 USDOC Initiation of Investigation , 63 Fed. Reg. at 56607 ( Exh. JP-6 ).  Daley told members of the
congressional steel caucuses in a 7 October 1999, meetin g that he had decided to add additional officials in
Import Administration so that the cases can be decided within 140 days rather than 160 days after the filing of
the petitions.  See Rossella Brevetti, “Regula Says Commerce Will Expedite Steel Cases,” 15 International
Trade Reporter , No. 40 (14 Oct. 1998) ( Exh. JP-21 ).  This promise alone was apparently not enough, as steel
executives demanded meetings with the highest level US government officials.  They met privately with seniorpresidential advisors, including Secretary Daley, on 21 October 1998, where they were promised a meeting withthe President of the United States in early November.  See Nancy E. Kelly, “Steel Execs to Meet With
President,” American Metal Market , at 2 (23 Oct. 1998).  ( Exh. JP-22 ).  Ultimately, US steel executives
obtained an hour-long private meeting with not only the President of the United States, but also the Vice
President and principal cabinet members, where they di scussed the investigation of hot-rolled steel products
from Japan, Brazil, and Russia, and demanded quantitative restrictions on steel imports while the investigationswere proceeding.  See Nancy E. Kelly, “Steel to Clinton: Erect trade wall,” American Metal Market , at 1
(9 Nov. 1998) ( Exh. JP-23 ).
21 See USDOC  AD and CVD Case History Tables 1980-1999: Investigations , (last modified
31 Dec. 1999), <http://www.ita.doc.gov/import_admin/records/stats/case.list.txt> ( Exh. JP-24 ).
22 19 U.S.C. § 1673b(b)(1), (c) ( Exh. JP-4 ).  Indeed, prior to the issuance of the preliminary
determinations in the hot-rolled investigations and following the passage of the Uruguay Round Agreement, theDepartment has granted extensions in 70 out of 76 anti-dumping investigations in which the USDOC reached aWT/DS184/R
Page A-14
Here, USDOC adopted a schedule to finish the preliminary determination on 12 February 1999, about
three weeks earlier than required by statute — a schedule that would place undue pressure on
respondents to comply with USDOC’s information requests and undue pressure on USDOC to rush its
investigation.
26. Meanwhile, USDOC’s 8 October 1998, announcement that it would issue preliminary critical
circumstances findings before its preliminary dumping determinations and “as soon as possible after
initiation"23  was clearly aimed at providing relief for the US steel industry.  Although USDOC
claimed no relationship between its new policy and the hot-rolled steel petition, published reports
show otherwise.24   Furthermore, upon applying the new policy to the hot-rolled case, USDOC made
its early affirmative critical circumstances determination despite the fact that (a) USITC had no
sufficient evidence of current injury, as clearly required by both US law and the Anti-DumpingAgreement, and (b) USDOC had not yet even preliminarily determined whether the sales were
dumped.  USDOC essentially provided the domestic industry with injunctive relief without requiringany evidence of wrongdoing:  the determination was based on nothing more than petitioners’
allegations of dumping and injury.
27. During the course of USDOC’s investigation, various US Government officials assured the
US steel industry that it would vigorously enforce the unfair trade laws, and joined the industry in
condemning the increase in imports.
25   Several members of the US Congress imposed extraordinary
pressure on the Clinton Administration to take forceful action.  The House of Representatives passed
resolutions and nearly passed legislation that would have (a) imposed quotas on steel imports contraryto US WTO obligations and (b) amended the anti-dumping laws to ensure that the results of any
unfair trade cases would be favourable to the US steel industry.
26
28. It was within this political context that USDOC issued its preliminary dumping
determinations.  The preliminary margins announced on 12 February 1999, which would serve as
                                                                                                                                                                    
preliminary determination; only one case involving multiple respondents did not receive an extension over the
minimum 140 days.  See Notice of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination:  Collated Roofing Nails From the People’s Republic of China,  62 Fed.
Reg. 25899 (12 May 1997) (the other countries were Korea and Taiwan, id. at 25895, 25904); see also USDOC
AD and CVD Case History Tables 1980-1999:  Investigations  (last modified 31 Dec. 1999)
<http://www.ita.doc.gov/import_admin/records/stats/case.list.txt> ( Exh. JP-24 ).
23 USDOC Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364 ( Exh. JP-3 ).
24 One report stated:  “The Commerce Department this week issued a new policy that signalled {sic} its
willingness to accommodate the US steel industry in it s quest to prevent a surge in low-priced imports from
entering the United States in the wake of a Sept. 30 filing of trade remedy cases against hot-rolled steel fromRussia, Brazil and Japan. . . . The bulletin was issued the day Commerce Secretary Bill Daley was one of threesenior Administration officials meeting with congressional supporters of the steel industry, who have been
demanding changes in trade law implementation as one way to stem the tide of imports.”  “Commerce Signals
Support for Steel Industry Demands In New Cases,” Inside  US Trade  (9 Oct. 1998).   A statement issued by a
Member of the US Congress, Representative Ralph Regula (who is Chairman of the House Steel Caucus),misinterpreted the Policy Bulletin as itself an early critical-circumstances determination in the hot-rolled
investigation.  See “ Officials said to be split on steel industry demands for import curbs,” Inside US Trade
(9 Oct. 1998).  These articles are collected in Exh. JP-25 .
25 In a White House meeting on 6 Nov. 1998, Secretary Daley stated that the administration would be
“very aggressive” against countries subjected to anti-dumping cases.  See Chad Bowman, “Steel Industry Chiefs
‘Hopeful’ After Telling President, Cabinet of Cheap Imports’ Impact,” 15 International Trade Reporter,  No. 44
(11 Nov. 1998) ( Exh. JP-26 ).
26 A resolution passed overwhelmingly by the House called for a ten-day review of imports from ten
countries and a one-year ban if it was determined thos e countries were not abiding by the spirit or letter of
international agreements.  In support of the bill, “{d}ozen s of congressmen took to the floor . . . to criticize the
administrations’ inaction on what they repeatedly termed the crises of survival resulting from an onslaught ofdumped steel from Asia, Russia and Brazil.”  Nancy E. Kelly, “House’s Steel Import Vote Sends Message,”American Metal Market , at 2 (19 Oct. 1998) ( Exh. JP-27 ).WT/DS184/R
Page A-15
provisional measures starting on the publication date of the determination (19 February 1999), were
all above 25 per cent, the level above which USDOC imputes importer knowledge of dumping.
Therefore, USDOC maintained the earlier affirmative finding of critical circumstances against every
Japanese exporter.27
29. Shortly after issuance of USDOC’s prelim inary dumping determination, however, NKK’s
counsel discovered a serious clerical error in the calculation of NKK’s margin.   The error inflated the
preliminary rate by twelve percentage points, meaning that the correct rate would have been well
under the 25 per cent threshold.  NKK immediat ely invoked the normal USDOC procedure for
correcting such clerical errors.  USDOC traditionally  corrects its preliminary determinations when the
error causes a significant percentage point change in the calculated margin, i.e. a change of at least
five percentage points.28   USDOC, however, declined to make the correction in this case, deviating
from its regulations and standard practice of correcting its error within thirty days after publication of
the preliminary determination.29   Notwithstanding that USDOC staff in charge of the case had
determined that all the criteria for issuing an amended preliminary determination had been satisfied,
senior USDOC officials refused to make the correcti on until the final determination, thus maintaining
provisional measures above 25 per cent and the critical circumstances finding.30
30. During the course of its investigation of KSC, USDOC demanded that the company report theresales of the affiliated US customer California Steel Industries (“CSI”).  That customer, however,
was a petitioner in the case and thus favoured the application of dumping duties.  Although at first
stating that it would cooperate with USDOC ’s investigation, CSI ultimately refused to provide mostof the requested information.  KSC made several requests to USDOC for guidance regarding CSI's
uncooperative behaviour, but USDOC never responded to those requests and instead punished KSC
with dumping margins triple those of other Japanese companies.
31   USDOC extended this abuse of
“facts available” by including the high adverse facts available KSC rate in the calculation of the
average “all others” rate used for non-participating exporters.  The all others rate was consequentlydriven well above the margins for NSC and NKK (whose margins were also inflated by the use of
adverse facts available, though to a lesser degree than for KSC).  Secretary Daley thereby kept his
promise to the steel industry to be “very aggressive” against the targets of the anti-dumping case.
31. Meanwhile, USITC commenced its final investigation as political activity on steel protection
loomed large.  Back in October 1998, the US House of Representatives had already passed by a wide
margin a resolution to impose a quota on imported steel.
32  The US Senate vote was still pending as
USITC began its investigation and decision making.
                                                     
27 USDOC Preliminary Determinations of Critical Circumstances,  63 Fed. Reg.  at 65750 (noting that
“{t}he Department normally considers margins of 25 per cent or more . . . sufficient to impute knowledge ofdumping”) ( Exh. JP-9 ); USDOC Preliminary Dumping Determination,  64 Fed. Reg. at 8299 (implementing the
early preliminary critical circumstances determination by ordering suspension of liquidation of all subject
entries on or after the date 90 days before publication of the USDOC Preliminary Dumping Determination )
(Exh. JP-11 ).
28 19 C.F.R. § 351.224(e), (g) ( Exh. JP-5 ).
29 19 C.F.R. § 351.224(e) ( Exh. JP-5 ).  In the final determination, USDOC not only agreed with
NKK’s corrections, but made the correction retroactive to th irty days after NKK’s allegation.  Yet, this was all
too late to remedy the harmful effects of the erroneous preliminary critical circumstances determination.  See
USDOC Final Dumping Determination, 64 Fed. Reg. at 24369 ( Exh. JP-12 ).
30 See Affidavit of Daniel L. Porter, Counsel to NKK  (Exh. JP-28 ).  Although discovered later,
USDOC had also made a clerical error in the calculatio n of NSC’s margin, which inflated NSC’s provisional
measures by six percentage points — also above the 25 per cent mark.  NSC raised the issue in its case brief.See NSC’s Case Brief, at 49-53 (13 Apr. 1999) ( Exh. JP-29 ).  USDOC waited to fix this error in the final
determination as well.  USDOC Final Dumping Determination , 64 Fed. Reg. at 24369 ( Exh. JP-12 ).
31 USDOC Final Dumping Determination,  64 Fed. Reg. at 24364-69 ( Exh. JP-12 ).
32 Nancy E. Kelly, "House's Steel Import Vote Sends Message," American Metal Market, at 2
(19 Oct. 1998) ( Exh. JP-27 ).WT/DS184/R
Page A-16
32. After voting in the affirmative on 11 June 1999, USITC issued a written determination that
revealed a number of improper analytical and procedural steps in its effort to create some rational
basis for its decision.  First, USITC narrowed its focus to a small segment of the overall domestic
industry, the “merchant market,” and largely ignored the lower import penetration and strongerfinancial performance for the industry as a whole.  Second, in an unprecedented decision, USITC
focused its analysis on only the last two years of the period of investigation, instead of comparing the
industry’s performance in 1998 with the two previous years as context.  Third, USITC failed to
consider adequately the effect of other factors on the domestic industry, and in doing so
inappropriately attributed the effect of such factors to the subject imports.
33
33. Finally, in marked contrast to its sister agency’s harsh treatment of foreign respondents,USITC patiently accommodated the domestic industry throughout its final investigation.  USITC
refrained from the use of adverse facts available and accepted every piece of information supplied by
the domestic mills, despite the domestic industry’s refusal to supply certain information, and their
failure to meet USITC’s deadlines
34  — the same reasons advanced by USDOC to justify the
application of adverse facts available for foreign respondents.  The contrast between the two agencies
in their approach to “facts available” was striking, and indefensible.
C. ECONOMIC CONTEXT FOR THE INVESTIGATIONS
34. Unlike most domestic industries, who rely on the merits of their cases, the domestic steel
industry felt it needed political pressure in this case.  Part of this need came from the economiccontext the industry was facing.  Beginning in 1991, the US steel industry experienced dramatic
growth in its production and shipments.  Betw een 1992 and 1998, US producers’ hot-rolled steel
shipments increased from less than 48 million tons to almost 64 million tons.
35   Beginning in late
1996 through mid-1998, the US steel mills operated at virtually full capacity, increasing their own
imports of hot-rolled steel to feed their downstream finishing mills, and realizing record profits.36  
Fostered by strong domestic demand generally, and for steel specifically, the industry’s performance
in 1997 was record breaking.37   This strong economic performance continued through the first half of
1998.38   Though by year’s end the industry showed somewhat weaker performance than 1997, it was
still better than 1996 even though imports had doubled.39
35. While the large integrated mills (mills using basic oxygen furnaces and pig iron produced by
blast furnaces as their primary feedstock) participated in this unprecedented period of sustainedexpansion and record performance, the main beneficiaries were the so-called “mini-mills” (mills using
scrap as feedstock and electric furnaces to produce steel).  Between the beginning of the 1990s and
the end of 1998, mini-mills entered into the market for flat-rolled carbon steel products, including hot-
rolled steel, by investing in approximately 18 million tons of new hot-rolled capacity —  the start-up
                                                     
33 USITC Final Injury Determination , USITC Pub. 3202 at 17-20 ( Exh. JP-14 ).
34 Respondents’ USITC Prehearing Brief, at 4-12 (29 Apr. 1999) (excerpts in Exh. JP-30 ).
35 Exh. JP-31  (providing relevant excerpts from various USITC reports showing this growth).
36 USITC Final Injury Determination , USITC Pub. 3202 at C-4 (Table C-1) ( Exh. JP-14 ) (showing
capacity utilization rates and levels of operating income).  The increases in hot-rolled steel purchases by all US
importers were high during the years of greatest prosperi ty for the US steel industry.  US mills also increased
their imports of semi-finished steel, which would be hot-rolled and then used in further finishing operations.See Exh. JP-32  (providing articles on US mills’ purchases of imported semi-finished steel).
37 USITC Final Injury Determination , USITC Pub. 3202 at C-4 (Table C-1) ( Exh. JP-14 ).
38 Demand was fuelled by the strength of the US economy.  S ee Graph of Hot-Rolled Industry
Composite — Profit From Operations ( Exh. JP-33 ); World Bank Annual Report 1999  at 19 (excerpts in Exh.
JP-33 ) (citing largest running economic expansion, low and stable inflation rates, projected budget surpluses,
the lowest unemployment in history, and a dynamic stock market).
39 USITC Final Injury Determination, USITC Pub. 3202 at C-4, C-5 (Table C-1) ( Exh. JP-14 ).WT/DS184/R
Page A-17
for 14.5 million tons of this hot-rolled capacity began in the 1997-1998 period.40   Nucor, a leading
mini-mill, has since leapfrogged all of the US integrated mills except US Steel to become the second
largest US steel producer in the United States.  Mini-mills have been successful in capturing market
share in the United States because of lower costs of production compared with the integrated mills.
Rapidly declining scrap prices after the beginning of the Asian crisis in 1997 provided the minimillswith further cost advantages as they were commencing substantial new capacity.
41
36. Intra-industry domestic competition reached a fevered pitch toward the end of 1998, led by
low cost mini-mills that (a) increased their capacity by 50 per cent from 1996 to 1998 (compared with
integrated mill capacity increases of only 3.2 per cent), (b) increased their shipments by 31.5 per cent
from 1996 to 1998 (compared with the 3.2 per cent decline of the integrated mills), and (c) were most
often cited as the price leaders in the marketplace for hot-rolled steel due to a widely-recognized lowcost advantage.  Indeed, in its report during the final injury investigation, USITC staff characterized
this comparison as a “striking difference."
42   With the mini-mill assault on the hot-rolled steel market
underway, the US integrated mills moved away from commodity grade hot-rolled steel products to
higher value-added products that the mini-mills were not yet capable of producing.43
37. In the midst of this fundamental structural change in the steel industry, demand for virtuallyall types of steel rose to unprecedented levels.  Because the integrated mills began shifting production
of hot-rolled steel downstream and the mini-mills were experiencing start-up difficulties with their
new plants, imports increased to meet the growin g gap between hot-rolled steel supply and demand
beginning in late 1996.  Despite rapidly increasing imports in 1997 and the first half of 1998, pricesremained stable and the industry continued its strong performance in terms of production, shipments,
capacity utilization, and profits.
44
38. Demand for steel continued its growth throughout the period investigated by USITC (1996
through 1998), remaining strong through the first two quarters of 1998, but falling off in certainsegments of the market in the last two quarters, ow ing in part to the labour strike at General Motors
(the largest single US customer of steel), whic h shut down the auto company’s production for nearly
two months.  The strike resulted in General Motors purchasing about 685,000 fewer tons of flat-rolled
steel than it had planned for 1998.
45   Many domestic mills sought to replace their General Motors
sales with sales to the spot market at low prices.  Importantly, by the time of the General Motors strike
in June 1998, previously ordered foreign steel was already on its way to the United States in
anticipation of continued demand growth.
                                                     
40 See Paine Webber, “Steel: A Gauntlet for All, Rewards for the Select,” Steel  Strategist  #24 at 117
(June 1998); Charles Yost, “Thin-Slab Casting/Flat-Rolling: New Technology To Benefit US Steel Industry,” in
United States International Trade Commission , Industry Trade and Technology Review , 1996 ITC LEXIS 428,
*52, *65, Table 1 (Oct. 1996).  Excerpts of these articles are provided in Exh. JP-34 .
41 Scrap prices fell from $130 per ton in 1997 to $97 per ton in 1998.  See Respondents’ USITC
Prehearing Brief, at 88 (29 Apr. 1999) (excerpts in Exh. JP-30 ).
42 See generally  Donald Barnett and Robert Crandall, “Steel:  Decline and Renewal,” in Industry
Studies (2d ed. Larry Duetsch, ed. 1998) ( Exh. JP-35 ); USITC Final Injury Determination , USITC Pub. 3202  at
II-1, III-4 to 5 ( Exh. JP-14 ).
43 Leading experts on the US steel industry have written on the important role minimills have played in
the industry in recent years.  See e.g., Donald Barnett & Robert Crandall, “Steel:  Decline and Renewal,” in
Industry Studies  (2d ed., Larry Duetsch, ed. 1998), at 127 (showing minimill share of various steel products,
including 22 per cent of hot-rolled steel market), 138 (“inevitable effect of mini-mill expansion in the US steelmarket has been a steady reduction in the capacity of large, integrated firms’ plants”), 142 (“The future of theAmerican steel industry lies almost entirely with the minimills.”) ( Exh. JP-35 ).  Messrs. Barnett and Crandall
are two of the most respected experts on the US steel industry.  This article was provided in its entirety in
Exhibit 17 of the Japanese producers’ prehearing brief to USITC.
44 USITC Final Injury Determination, USITC Pub. 3202 at C-3, C-4 (Table C-1) ( Exh. JP-14 ).
45 Id. at II-4 ( Exh. JP-14 ).WT/DS184/R
Page A-18
39. Prices of hot-rolled steel and virtually all other types of steel therefore fell substantially
during the summer of 1998.  Prices of all flat-rolled carbon steel products fell regardless of import
trends or import market share, with the steepest declines being in a market where imports had notincreased and constituted only a small share of the market — corrosion-resistant steel.
46  The timing
of these price declines suggested their strong causal relationship with a combination of factorsincluding the two-month strike at General Motors, reduced demand from the pipe and tube sector as
these companies adjusted inventories, and concerns about the impact of several million tons of long
anticipated additional capacity finally coming on stream from the mini-mills.
40. Rather than wait for the market to correct itse lf, the domestic steel industry  blamed imports,
mounted a public relations and lobbying campaign to win political support to restrain imports, and
filed the first of a string of anti-dumping and countervailing duty complaints — the complaint on hot-rolled steel.
D. INTERNATIONAL RAMIFICATIONS FOR THE INVESTIGATIONS
41. Since 1997, US steel producers and steelworkers unions have filed with US authorities a large
number of anti-dumping petitions on steel products from Japan.  As a result, at the start of the year2000, as much as 80 per cent of Japan’s steel exports to the United States were subject to anti-
dumping orders or to pending trade law investigations (including safeguard investigations on some
products).  Indeed, these actions against imported steel reach much more broadly than just Japan.
Steel imports from over twenty countries have been the subject of recent US anti-dumping
procedures, including Argentina, Belgium, Brazil, Canada, China, Czech Republic, France, Germany,India, Indonesia, Italy, Korea, Macedonia, Mexic o, Romania, Russia, Slovakia, South Africa, Spain,
Sweden, Taiwan, Thailand, Turkey, United Kingdom, and Venezuela.
47
42. Steel has been the primary target for anti-dumping measures in the United States for over
twenty years, with a disproportionate number of all dumping cases being brought by the US steel
industry and unions.48   As anti-dumping measures are used to close the US market to imports of
certain products, other countries are responding with their own, equally effective, anti-dumping
measures.
43. Although anti-dumping measures are authoriz ed under international trade rules, WTO
members have tried to constrain the use and abuse of anti-dumping measures to protect the trade
liberalizing principles that underlie other WTO obligations.  As a result, the WTO permits only anti-dumping measures that comply with a specific and detailed set of legal disciplines.  Still, respected
economists have raised concerns that proliferating and undisciplined anti-dumping measures pose a
serious problem for world trade.
49
                                                     
46 Transaction Pricing Service, Purchasing Magazine, (price series for hot-rolled steel, cold-rolled
steel, and hot-dipped galvanized steel, showing parallel declines in prices)  (Exh. JP-36 ).
47 See USDOC AD and CVD Case History Tables 1980-1999:  Investigations , (last modified
31 Dec. 1999) <http://www.ita.doc.gov/import_admin/records/stats/case.list.txt> ( Exh. JP-24 ).
48 Since 1979, the US Government has initiated 183 anti-dumping and 96 countervailing duty cases
involving steel.  US steel producers currently are protected by 56 anti-dumping and 20 countervailing duty
orders.
49 US Federal Reserve Chairman Alan Greenspan recently criticized the use of anti-dumping measures
to erect trade barriers:
. . . {T}here are reasons to be concerned that the be nefits of increasingly open trade may not be allowed
to be as readily forthcoming in the future as they have been in the past half century. . . . Administrativeprotection in the form of antidumping suits and countervailing duties is a case in point.  While these forms of
protection have often been imposed under the label of promoting “fair trade,” often times they are just simple
guises for inhibiting competition. Typically, antidumping duties are levied when foreign average prices arebelow average cost of production.  But that also descri bes a practice that often emerges as a wholly appropriate
response to a softening in demand.  It is the rare case that prices fall below marginal cost, which would be aWT/DS184/R
Page A-19
44. If not properly disciplined, the application of anti-dumping measures will lead to a dangerous
level of protectionism around the world.  Anti-dumping measures have become far more effective at
shielding domestic markets in the United States from foreign competition than were the gray area
measures employed in the 1980’ s and 1990’s or the tariff and non-tariff barriers that were eliminated
in multiple rounds of multilateral trade negotiations over a five-decade period.50   Under these
circumstances, the WTO should not tolerate improper application of anti-dumping measures.
45. The recent hot-rolled steel investigation is a compelling example of the direction of US anti-
dumping law and practice, and the abuses of the narrow principle in GATT 1994 allowing limited
application of anti-dumping measures.  In the United States, the threshold for application of anti-
dumping measures is becoming lower and lower, while the anti-dumping measures themselves are
erecting higher and higher barriers to trade.  The WTO should reject the result-oriented andeconomically dubious determinations of dumping, injury, and causation in the hot-rolled steel case.
III. STANDARDS OF REVIEW
46. The Panel must bear in mind the specific sta ndards of review set forth in the Anti-Dumping
Agreement and GATT 1994.
A. ANTI-DUMPING AGREEMENT STANDARDS OF REVIEW
47. The Anti-Dumping Agreement establishes two particular standards of review that panels are
to follow when examining claims under the Anti-Dumping Agreement.
48. Article 17.6(i) of the Anti-Dumping Agreement addresses the Panel’s assessment of an
authority’s establishment and evaluation of the facts.  It is a two part standard of review, instructing
that the Panel “shall determine whether the authorities’ establishment of the facts was proper and
whether their evaluation of those facts was unbiased and objective.”  (Emphasis added.)  Accordingly,
the Panel should first determine whether the US Government collected, evaluated, and processed factsduring the investigation in a manner consistent with the rules provided under the Anti-Dumping
Agreement, and thus established the facts in a “proper” manner.  This includes an assessment of
whether all relevant facts were considered, including those which might detract from an affirmative
determination, and whether adequate explanation was provided for how certain determinations were
reached.  Second, the Panel should determine whether the US Government evaluated those facts in an
unbiased and objective manner.
49. The Government of Japan does not ask the Panel to determine whether another conclusion is
possible from the facts that were made available to the US Government in the underlying
administrative proceeding.  The factual arguments in this case go directly to the US Government’s
improper establishment of the facts and the non-objective and biased evaluation of the facts so as to
favor the interests of the domestic industry in a manner inconsistent with the provisions of the Anti-Dumping Agreement.
                                                                                                                                                                    
more relevant standard.  Antidumping initiatives should be reserved, in the view of many economists, for those
cases where anticompetitive behaviour is involved.  Contrary to popular notions about antidumping suits, underUS and WTO law, it is not required to show evidence of predatory behaviour, or intention to monopolize, or ofany other intentional efforts to drive competitors out of business.
Alan Greenspan, “Trade and technology,” Remarks Before the Alliance for the Commonwealth,
Conference on International Business, Boston, Massachusetts (2 June 1999) ( Exh. JP-37 ).
50 For this history of protection, see I.M. Destler, American  Trade  Politics, passim  (3d ed. 1995);  Gary
Hufbauer et al, Trade  Protectionism  in the United  States :  31 Case  Studies,   154-84 (1986 ); Gary  Hufbauer  and
Kimberly  Elliott , Measuring the Costs of Protection in the United States, 19-22, 103-05 (1994) (excerpts in
Exh. JP-38) .WT/DS184/R
Page A-20
50. Article 17.6(ii) guides the Panel’s assessment of an administering authority’s interpretation of
the Anti-Dumping Agreement.  The first sentence of  this provision instructs that the Panel “shall
interpret the relevant provisions of the Agreement in accordance with customary rules of
interpretation of public international law.”  Articles 31 and 32 of the Vienna Convention on the Law
of Treaties (hereinafter the “Vienna Convention”) are the most frequently followed and citedcustomary rules of interpretation under international law.  WTO Panels and the Appellate Body rely
upon these rules to guide their legal interpretation.  Th ese rules of interpretation explain that first the
interpreter looks to the text, context, object, and purpose of the provision.  If ambiguity still exists, the
interpreter then looks to supplementary materials, such as negotiating history.  These rules assume
that at the end of the interpretation process, the interpreter will craft one nonambiguous
interpretation.
51
51. The Government of Japan contends that the US measures challenged in this case areimpermissible under the interpretative rules of the Vienna Convention.  The US Government has
completely ignored certain legal standards or provisions under the Anti-Dumping Agreement, or acted
inconsistently with the relevant provisions beyond any “permissible” legal interpretation.  These
aspects of US law and practice rest upon interpretations of the Anti-Dumping Agreement that do notreflect good faith, and are therefore not permissible interpretations.
B. GATT 1994 STANDARDS OF REVIEW FOR CLAIMS UNDER ARTICLE X:3
52. The Appellate Body has confirmed that Article 11 of the DSU provides the relevant standard
of review for all WTO claims other than those under the Anti-Dumping Agreement, which in this caseis relevant to Japan’s GATT 1994 Article X:3(a) claims.
52   Article 11 instructs that the Panel “should
make an objective assessment of the matter before it, including an objective assessment of the facts of
the case and the applicability of and conformity with the relevant covered agreements.” This standard
instructs the Panel to consider carefully all of the relevant facts in the case, as well as the overall
conformity with WTO provisions.
IV. USDOC’S TREATMENT OF EVIDENCE AND APPLICATION OF “FACTS
AVAILABLE” WAS INCONSISTENT WITH ARTICLES 2, 6, AND 9 AND ANNEX II
OF THE ANTI-DUMPING AGREEMENT
53. The Anti-Dumping Agreement establishes a neutral concept of “facts available,” intended to
fill gaps in information so that dumping authorities can carry out the necessary calculations.  USDOC,
however, consistently uses the US statute governing facts available to punish respondents in violation
of Article 6.8 and Annex II of the Anti-Dumping  Agreement.  Furthermore, in this case, USDOC
improperly rejected relevant data from each of the respondents, conducted a biased evaluation of the
facts, and wrongfully applied adverse facts available, contrary to Articles 2, 6, and 9 and Annex II of
the Anti-Dumping Agreement.
                                                     
51 In a recent article on the standard of review, focusing on Article 17 of the Anti-Dumping Agreement
in particular, two noted scholars conclude:
Thus, it is not clear what sort of ambiguity in an agreement’s provision is sufficient to lead a reviewing
panel to the second step of the analysis contemplated in Article 17.6(ii).  Once a panel has invoked Articles 31and 32 of the Vienna Convention, it presumably will have already settled on a nonambiguous, nonabsurdinterpretation.
Steven P. Croley and John H. Jackson, WTO Dispute Procedures, Standard of Review, and Deference
to National Governments, 90 Am. J. Int’l L. 193, 201 (1996).
52EC—Measures Concerning Meat and Meat Products (Hormones) , adopted 13 Feb. 1998,
WT/DS26/AB/R, WT/DS48/AB/R, at paras. 114-119.WT/DS184/R
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A. BACKGROUND ON US LAW AND PRACTICE
54. Section 776 of the Tariff Act of 1930, as amended, authorizes USDOC and USITC to use
“facts available” where:
(1) necessary information is not available on the record, or(2) an interested party or any other person—(A) withholds information that has been requested . . .
(B) fails to provide such information by the deadlines for submission of the information
or in the form and manner requested . . .
(C) significantly impedes a proceeding under this title, or(D) provides such information but th e information cannot be verified.
53
55. The statute also authorizes USDOC and USITC to use “adverse inferences,” defined as “an
inference that is adverse to the interests of that party in selecting from among the facts otherwise
available,” when resorting to facts available.  Such  inferences may apply to circumstances in which “
an interested party has failed to cooperate by not acting to the best of its ability to comply with a
request for information from {USDOC or USITC} (as the case may be)."54
56. In practice, USDOC bases its determinations on facts available (with respect to foreign
respondents) far more frequently than USITC (with respect to all questionnaire recipients, includingthe US industry).
55   Often USDOC chooses adverse  facts available in an effort to punish respondents.
Indeed, since passage of the Uruguay Round agreements, USDOC has consistently resorted to a
punitive form of adverse facts available when it determines that a respondent has not cooperated to
the best of its ability.  Specifically, as USDOC stated in a recent preliminary dumping determination:
The Department’s practice when selecting an adverse FA rate from among the
possible sources of information has been to ensure that the margin is sufficiently
adverse so “as to effectuate the purpose of the FA rule to induce respondents to
provide the Department with complete and accurate information in a timely
manner."56
                                                     
53 19 U.S.C. § 1677e(a) ( Exh. JP-4 ).
54 19 U.S.C. § 1677e(b) ( Exh. JP-4 ).  USDOC ’s regulations provide little additional guidance for
interpreting this provision.  The regulations simply reiterate the statutory standards.  See 19 C.F.R. § 351.308
(Exh. JP-5 ).  In response to comments received before implementation of the final anti-dumping regulations,
USDOC did clarify that use of adverse facts available is discretionary  and case-and fact-specific.  See Anti-
Dumping Duties; Counterva iling Duties; Final Rule , 62 Fed. Reg. 27296, 27340-41 (19 May 1997) (excerpts in
Exh. JP-39 ).
55 At the time of the hot-rolled steel investigation, USITC had explicitly drawn adverse inferences in
only two cases.  See Tart Cherry Juice and Tart Cherry Juice Concentrate from Germany and Yugoslavia , Inv.
Nos. 731-TA-512 and 513, (Prelim.), USITC Pub. 2378 at 21 & n.70 (May 1991); Certain Welded Carbon Steel
Pipes and Tubes from Taiwan and Venezuela , Inv. Nos. 731-TA-211 and 212 (Prelim.), USITC Pub. 1639 at 13-
15 (Feb. 1985).
56 Dynamic Random Access Memory Semiconductors of One Megabit or Above From the Republic of
Korea:  Preliminary Results of Antidumping Duty Administrative Review and Notice of Intent Not to RevokeOrder in Part,  65 Fed. Reg. 35886, 35887 (6 June 2000) (citation omitted); see also Frozen Concentrated
Orange Juice From Brazil; Final Results and Partial Rescission of Antidumping Duty Administrative Review,64 Fed. Reg. 43650, 43652 (11 Aug. 1999) (choosing as facts available the highest company-specific and
transaction-specific margins which were  “sufficiently high to effectuate the purpose of the facts available rule
— which is to encourage the participation of these co mpanies in future segments of this proceeding” ); Steel
Wire Rope From the Republic of Korea; Final Results of Antidumping Duty Administrative Review andRevocation in Part of Antidumping Duty Order,  63 Fed. Reg. 17986, 17987 (13 Apr. 1998) (noting that theWT/DS184/R
Page A-22
The purpose of the “sufficiently adverse” language is clearly aimed at punishing respondents which
USDOC deems noncooperative, a practice that violates US obligations under the Anti-Dumping
Agreement.
B. USDOC’S ESTABLISHED PRACTICE OF APPLYING ADVERSE FACTS AVAILABLE
TO PUNISH RESPONDENTS IS INCONSISTENT WITH ARTICLE 6.8 AND ANNEX II
OF THE ANTI-DUMPING AGREEMENT
57. Article 6.8 unambiguously describes the circumstances in which facts available may be
applied:
In cases in which any interested party refuses access to, or otherwise does not
provide, necessary information within a reasonable period or significantly impedesthe investigation, preliminary and final determinations . . . may be made on the basis
of the facts available.  The provisions of Annex II shall be observed in the application
of this paragraph.
In turn, Annex II of the Anti-Dumping Agreement provides in Paragraph 7 that:
If the authorities have to base their findings, including those with respect to normal
value, on information from a secondary source, including the information supplied in
the application for the initiation of the investigation, they should do so with special
circumspection  . . . .  It is clear, however, that if an interested party does not
cooperate and thus relevant information is being withheld from the authorities, this
situation could lead to a result which is less favourable to the party than if the party
did cooperate .  (Emphasis added.)
58. Neither Article 6.8 nor Annex II uses the word “adverse,” let alone “adverse inferences,” and
they certainly do not contemplate the punitive use of facts available. Paragraph 7 of Annex II
mentions only the possibility of “less favourable” results:  it merely states that the situation in which aparty does not cooperate “could lead to a result which is less favourable to the party.”  In other words,
the less favourable result is not meant to be purposeful, but rather coincidental.  Even then, however,the “facts” must be neutral and credible; the “result” may turn out to be less favourable, but the facts
themselves must be proper.  As stated by the Panel in US—Atlantic Salmon:
{T}he United States had not acted within its rights under Article 6:8 by imputing to
Nordsvalaks the highest costs of production figure found for any other farm in the
                                                                                                                                                                    
potential use of FA by the DOC provides the only incentive for foreign exporters and producers to respond to
questionnaires (SAA at 868) and that “one factor the Department considers in applying the facts available is theextent to which a party may benefit from its own lack of participation” (SAA at 870)); Notice of Final
Determination of Sales at Less Than Fair Value:  Stainless Steel Wire Rod From Spain, 63 Fed. Reg. 40391,
40398 (29 July 1998) (basing the margin for all unreported US sales on adverse facts available, selecting a
sufficiently adverse margin so as to induce respondents to provide the DOC with complete and accurate data in
a timely manner).  These cases are only a sampling among several cases that have used nearly identical languagewhen explaining the reasoning behind USDOC’s choice of adverse facts available.  Exhibit JP-40 contains a
copy of the relevant pages from the cited cases as well as a full list of cases in which USDOC has adopted thesame practice.  Despite otherwise critical opinions issued by the courts concerning USDOC’s use of punitiveadverse facts available, the current practice has been generally accepted by the courts.  See, e.g., Ad Hoc
Committee of AZ-NM-TX-FL Producers of Gray  Portland Cement v. United States  865 F. Supp. 857, 858 (Ct.
Int’l Trade 1994) (finding that the purpose of the best information available provisions (the precursor to factsavailable) was to encourage compliance with DOC’s request for information as the DOC lacks subpoenapower).WT/DS184/R
Page A-23
sample without considering how this would affect  the representativeness of the results
of the sample.57
The use of the word “representativeness” here is critical.  The purpose of any use of facts available isto fill gaps in information in a manner consistent with existing data.  The purpose is not to punish a
party.
59. Under the US anti-dumping law, when a party has failed to cooperate by not acting to the best
of its ability to provide certain information, USDOC does not look for representative facts available
that might lead coincidentally to a less favourable result, as intended by Annex II.  Instead, in
accordance with the statute, USDOC searches for data that are purposefully "adverse."  Worse still,
following its established practice, USDOC looks for data that are "sufficiently adverse" so as to
induce respondents to provide complete and accurate information.  Such punitive forms of factsavailable far exceed the neutral gap filling purposes of Article 6.8 and Annex II.
60. The Panel should therefore deem USDOC’s established practice of applying adverse facts
available to punish respondents as inconsistent with Articles 6.8 and Annex II.  Such established
practices are subject to facial challenge under Article XVI:4 of the WTO Agreement which requiresthat “Each Member shall ensure the conformity of its laws, regulations, and administrative procedures
with its obligations as provided in the annexed Agreements."
58   The Panel in US—Section 301 found
that the phrase “laws, regulations and administrative procedures” in Article XVI:4 should be read
broadly, stating:
even though the statutory language granting specific powers to a government agency
may be prima facie consistent with WTO rules,  the agency responsible, within the
discretion given to it, may adopt internal criteria or administrative procedures
inconsistent with WTO obligations which would, as a result, render the overall law in
violation  . . . "59
A Panel must therefore examine a Member ’s anti-dumping law as a whole, including the generally
applicable interpretations of those laws and regulations adopted by the domestic anti-dumping
authorities.60   This includes interpretations such as USDOC ’s policy with respect to adverse facts
available.
                                                     
57 United States—Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon
from Norway, 30 Nov. 1992, ADP/87, at para. 450 (unadopted) (“US—Atlantic Salmon”) (emphasis added).
58 Article 18.4 of the Anti-Dumping Agreement confirms in substantially identical terms the same
requirement for domestic anti-dumping laws.  According to Article XVI:3 of the WTO Agreement, any conflictbetween a provision of the Anti-Dumping Agreement and a provision of the WTO Agreement has to be resolvedin favor of the provision of the WTO Agreement.  This suggests that Article XVI:4 of the WTO Agreementranks higher than Article 18.4 of the Anti-Dumping Agreement in the hierarchy of WTO provisions.  Japan willtherefore focus its discussion below exclusively on Article XVI:4.  However, if the Panel were to regard
Article 18.4 of the Anti-Dumping Agreement as the applicable provision, Japan’s references to Article XVI:4
should be understood as references to Article 18.4 of the Anti-Dumping Agreement.
59 United States—Sections 301-310 of the Trade Act of 1974,  22 Dec . 1999, WT/DS152/R, at paras.
7.24-7.27 (emphasis added) ( "US—Section 301" ).
60 Article XVI:4 reflects the fact that domestic law at odds with WTO law generally creates uncertainty
for private operators, thereby adversely affecting the competitive opportunities for the goods or services of other
Members.  The WTO agreements seek to ensure that goods or services of domestic and foreign origin are
accorded equal competitive opportunities.  A party doe s not act in good faith if it accepts an obligation
stipulating one behaviour, but adopts domestic law calling for another.  The US—Section 301 Panel embraced
this view.  Id. paras. 7.81, 7.90.WT/DS184/R
Page A-24
C. IN APPLYING ADVERSE FACTS AVAILABLE TO KSC, DOC VIOLATED
ARTICLES 2, 6, 9 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT
1. Summary of the facts:  USDOC’s application of adverse facts available for KSC
61. During the period investigated by USDOC, respondent KSC made about [  ] of its US sales to
CSI, an affiliated importer that was also a petitioner in the case.  USDOC wanted detailed data fromCSI about its sales to its own customers.  When CSI refused to cooperate with KSC to provide
information about CSI’s resales and further manufactured product, USDOC applied adverse facts
available in calculating KSC’s dumping margin.
62. In 1986, KSC entered into a 50/50 joint venture with the Brazilian mining company,
Companhia Vale de Rio Doce (“CVRD ”), to own CS I, the largest steel rolling operation on the West
Coast of the United States.
61   CSI is a slab-rolling producer of hot-rolled sheet, cold-rolled sheet and
strip, galvanized sheet, and pipe and tube.  At times, due to hot-rolling capacity constraints, CSI
purchases hot-rolled steel to resell or further manufacture into downstream products.  In 1998, when
demand for hot-rolled steel grew in the United St ates, CSI began purchasing significant quantities of
imported hot-rolled steel.
63. Because of the size of its shipments to the United States, KSC was named a “mandatory”
respondent in the hot-rolled steel case, meaning it had to respond in full to USDOC’s questionnaires.
When a respondent is affiliated with a US customer , USDOC requires detailed information from the
affiliated customer regarding its resales and further manufacture of the product imported from the
respondent.
64. In this case, however, CSI was not merely KSC’s affiliated customer, but also an active
member of the US hot-rolled steel industry.  More importantly, CSI was itself a petitioner in the anti-
dumping investigation of hot-rolled steel imports from Japan.  In other words, despite their
relationship, CSI and KSC were direct competitors in the manufacture and sale of steel products in theUS market.  Their adverse relationship was confirmed by CSI’s decision to join the petition and
publicly testify against hot-rolled steel imports from Japan and Brazil, the home markets of its two
parent companies.
65. Furthermore, KSC was far removed from its affiliate’s day-to-day operations at the time of
USDOC’s investigation.  Mr. Lorenço Gonçalves was then President and CEO of CSI.
Mr. Gonçalves had been appointed to these positions after resigning from CSN (the Brazilian steelmaker and part owner of CVRD) and being nominated by CVRD.
66. This situation placed KSC in an untenable position.  Because under USDOC rules KSC and
CSI were affiliated, USDOC treated them as one entity for purposes of its dumping analysis.
62  
Therefore, USDOC required that KSC report in its questionnaire response CSI’s confidential furthermanufacturing and resale price data.  Yet, because CSI and KSC do not share the details of their cost,
pricing, or sales information, and because KSC could not control CSI without the cooperation of
CVRD, KSC could not obtain the data from CSI.
67. KSC invested substantial resources attempting to convince CSI and, by extension, CVRD to
help KSC respond to USDOC’s requests.  These efforts are summarized in a timeline attached as
Exhibit JP-42 .  Every time USDOC requested the information, KSC’s attorneys asked CSI for its
help.  Although at first offering to help, CEO and President Mr. Gonçalves ultimately refused to
cooperate.  The fact that the President and CEO of CSI was nominated by CVRD, and that he directly
                                                     
61 CSI produces about 1.625 million tons of hot-rolled steel per year.  See KSC Letter to USDOC of
10 Nov. 1998, at 6-7 (Exh. JP-42) .
62 USDOC  Final Dumping Determination , 64 Fed. Reg. at  24367 ( Exh. JP-12 ).WT/DS184/R
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refused KSC’s requests, shows that neither CS I nor KSC’s joint venture partner CVRD would
cooperate with KSC.  Faced with such stonewalling on the part of Mr. Gonçalves, KSC had no reason
to contact CVRD officials in Brazil directly in order to confirm their view on this issue.  Furthermore,
during the course of its investigation, USDOC never suggested or requested that KSC take this step,
even though KSC had specifically asked USDOC for guidance regarding CSI's uncooperativebehaviour.
68. The preliminary determination provided the fi rst notice of USDOC’s decision on this topic.
USDOC applied adverse facts available in calcul ating KSC’s margin for its sales involving CSI.
USDOC condemned KSC for a supposed “failure to act to the best of its ability” with regard to CSI.
USDOC treated KSC and CSI as a single entity, assu ming that KSC had sufficient control over CSI to
compel its cooperation.  Yet, in doing so, USDOC  disregarded the fact that KSC had no power to
control CSI without cooperation either from CSI its elf or from the other 50-per cent owner, CVRD.
USDOC made no proposals in its preliminary determ ination for how KSC should try to obtain CSI's
cooperation.
69. During verification conducted by USDOC officials between the preliminary and final
determinations, KSC again documented its good faith efforts and CSI’s refusal to cooperate.
63   KSC
also explained and documented that it had no way in which to force CSI to share its further
manufacturing and resale data due to the structure and management of the joint venture.
70. USDOC nevertheless again applied adverse facts available in its final determination.  It
acknowledged CSI’s refusal to cooperate, stating that neither KSC nor CSI “demonstrated to the
Department’s satisfaction that {submission of the information was} not possible;” and “KSC and CSI
have failed to cooperate by not acting to the best  of their ability to comply with the Department’s
requests for information with respect to the CSI sales."64   USDOC ignored petitioner CSI’s conflict of
interest, and merely listed all the methods it could think of that KSC had not utilized to obtain theinformation.  Among these was discussing the issue with its joint venture partner, CVRD.  Yet,
USDOC never addressed Mr. Gonçalves' relationship with CVRD or the fact that CVRD had no legal
duty to cooperate with KSC, or that, without CVRD’s cooperation, KSC had no means to compel CSI
to cooperate either.
65
71. As adverse facts available, USDOC chose to use the second-highest margin ([  ]) that it
calculated for any individual product type (“CONNUM"66 ) for which it had US sales data.67   USDOC
                                                     
63 KSC Sales Verification Report, at 21-22 (26 Mar. 1999) ( Exh. JP-42 ).
64 USDOC Final Dumping Determination , 64 Fed. Reg. at 24368 ( Exh. JP-12 ).
65 USDOC focused its rejection of KSC’s arguments  on the fact that the shareholder agreement
between KSC and CVRD concerning the CSI joint venture provided a mechanism through which KSC could
have obtained the CSI data.  The US will undoubtedly repeat this assertion here.  The shareholder agreement,however, is irrelevant to the question presented by USDOC’s action under the Anti-Dumping Agreement.Whether or not the shareholder agreement (which is attached here at Exhibit  JP-42)  gave KSC a method of
obtaining the CSI’s data (it does not), the question under the Agreement is whether KSC’s failure to utilize thosemethods permitted either the use of  “adverse” or even “less favourable” facts available.  Japan contends that it
does not.  As Japan demonstrates below, the existence of the shareholder agreement does not affect the fact that:
(a) the Anti-Dumping Agreement does not permit the use of punitive adverse facts available; and (b) that therequisite level of non-cooperation did not exist to justify even less favourable facts available given that KSCcould not obtain the requested information from CSI without CVRD’s cooperation.
66 “CONNUM” stands for “control number.”  USDO C requires the physical characteristics of each
product be assigned a number or letter pursuant to specific USDOC codes.  For example, merchandise that had
the characteristic of being “painted” is assigned number “1.”  Unpainted merchandise is assigned number “2.”
The codes all strung together comprise the CONNUM.  Each transaction is therefore assigned an individual
CONNUM based on physical characteristics.  Using th ese CONNUMs, USDOC can then sort the merchandise
in the computer programme.WT/DS184/R
Page A-26
admitted that its action was punitive, stating “we sought  a margin that is sufficiently adverse so as to
effectuate the statutory purpose of the adverse facts available rule to induce respondents to provide the
Department with complete and accurate information."68  To merge this margin with KSC’s non-facts
available margin, USDOC first calculated the percentage represented by KSC’s sales to CSI, based on
the general information provided in KSC’s initial response.  Given that [  ] of KSC’s US sales weremade to CSI, USDOC attributed KSC’s second-high est margin for any individual product type to
about [  ] of KSC’s total sales.
69   
72. The surrogate margin USDOC chose as adverse facts available significantly exceeded the
non-facts available KSC margin  as well as the margins found for the other respondents, NSC and
NKK   and consequently inflated KSC’s overall margin by [  ] percentage points.70
2. The application of adverse facts available for KSC was inconsistent with the Anti-
Dumping Agreement
(a) Article 6.8 and Annex II of the Anti-Dumping Agreement do not permit the use of
adverse inferences in applying facts available
73. As discussed in Section B above, USDOC’s c onsistent practice of applying adverse facts
available to punish respondents violates Article 6.8 and Annex II of the Anti-Dumping Agreement.
This same practice was applied in the hot-rolled steel investigation against KSC when USDOC chose
a margin “that is sufficiently adverse so as to effectuate the statutory purpose of the adverse facts
available rule to induce respondents to provide the Department with complete and accurate
information. ”  Therefore, this practice, as applied in this case, violated Article 6.8 and Annex II of theAnti-Dumping Agreement.
(b) KSC’s actions did not justify the “less favourable” result contemplated by Annex II
of the Anti-Dumping Agreement
74. Even if Article 6.8 permitted the use of facts available in this case, and even if the words “less
favourable” in Annex II could be read to justify an adverse result — an interpretation with which
Japan disagrees — USDOC’s actions with respect to KSC were nevertheless inconsistent with
paragraph 7 of Annex II in at least three distinct ways.
• USDOC  ignored KSC ’s cooperation and failed to inform KSC of the actions it should have
taken
75. In order to justify less favourable facts available under paragraph 7 of Annex II, an authority
must determine that a party did not cooperate.  When discerning the level of cooperation intended by
                                                                                                                                                                    
67 Specifically, USDOC examined all of the sales for which it calculated a margin in KSC’s database.
The absolute highest margin appeared for the sale of a special type of hot-rolled steel that carried an unusual
CONNUM.  USDOC therefore examined the second-highest margin calculated out of KSC’s entire database andadopted this margin as its adverse facts available.
68 USDOC Final Dumping Determination , 64 Fed. Reg. at 24369 (Exh. JP-12).
69 KSC’s second highest margin was [  ] per cent, which resulted from a comparison of dissimilar
products both in quality and quantity.  The product sold in the domestic market was to a particular customer thatrequired special quality (both high tensile strength and excellent formability).  The quantity was less than [..]tons.  On the other hand, the nearly [  ] tons of product sold to the United States was common high tensilestrength product for pipe.  It is noteworthy that in reviewing an earlier USDOC investigation of hot-rolled steelimports (as well as other steel products), a US court sp ecifically held that USDOC may not use the highest non-
aberrant margin as adverse facts available where the deficiencies in a respondent’s downstream sales data are
due to factors outside that respondent’s control.  See Usinor Sacilor v. United States , 872 F. Supp. 1000, 1007
(Ct. Int’l Trade 1994) (excerpts provided in  Exh. JP-43 ).
70 See Affidavit of Robert H. Huey, Counsel to KSC  (Exh. JP-44).WT/DS184/R
Page A-27
Annex II, an authority must consider the requirements of Article 6.13:  "The authorities shall take due
account of any difficulties experienced by interested parties. . . in supplying information requested,
and shall provide any assistance practicable."  The word "assistance" includes informing a respondent
of alternative methods for obtaining information when its own methods have failed.
76. KSC repeatedly tried to obtain CSI's information but its requests were refused.  KSC
informed USDOC of these events and asked USDOC for its guidance as to what action USDOC
thought KSC should take to obtain CSI's information, but to no avail.  Based on these facts, it is clear
that KSC cooperated as much as could be expected under paragraph 7 of Annex II.
77. If USDOC was unsatisfied with KSC's efforts to obtain CSI's information, it had ample
opportunity to abide by Article 6.13 and instruct KSC how to obtain the information.  USDOC neverdid this.  Instead, it waited to propose alternative methods until it was too late — in the final
determination — and claimed that KSC should have thought of these methods on its own in order to
meet USDOC's standard of cooperation.  USDOC th erefore required an impermissible standard of
cooperation.  As a result, USDOC violated paragra ph 7 of Annex II of the Anti-Dumping Agreement
by applying any form of less favourable facts available — let alone more severe adverse factsavailable — while requiring KSC to cooperate at a level far beyond the level required by paragraph 7
of Annex II, to the negligence of US DOC's own obligation to assist KSC.
• USDOC ignored the fact that KSC did not “withhold” information
78. USDOC acted inconsistently with paragraph 7 by ignoring the clear requirement that the
interested party be “with{holding}” information from the administering authority to justify facts
available leading to a “less favourable” result.  US DOC completely ig nored this criterion.  The plain
meaning of “is being withheld” requires that a party have something in its possession that it refuses to
turn over.
71  Or, at least, the party must have some kind of control over the desired item such that the
party is able to exert its control so as to keep the item from being turned over.
79. Here, USDOC applied an adverse inference to KS C’s sales, despite the fact that KSC did not
“withhold” any information from the authorities.  KSC never had the information in its possession,
nor did KSC have any control legally or in fact over the information without the voluntary
cooperation of its contractual partner CVRD.
USDOC did not exercise “special circumspection”80. USDOC also failed to exercise “special circumspection” when it chose which secondary
sources to use as facts available.  In the hot-rolled steel case, USDOC chose the second-highest
margin calculated for all KSC sales.  According to the New Shorter Oxford English Dictionary ,
“circumspection” is defined as “cautious observation of circumstances” and “taking everything  intoaccount.”  USDOC failed to approach its choice of facts available with “cautious observation of
circumstances” when it chose an abnormally high su rrogate margin.  It also failed to “take everything
into account,” such as the fact that the party w ithholding the information — CSI — actually benefited
from the application of adverse facts available.  USDOC affirmatively refused to consider these
circumstances, stating “{w}e cannot reasonably predict or weigh the multitude of effects this might ormight not have on the parties involved."
72
                                                     
71 The definition of “withhold” in the New Shorter Oxford English Dictionary  is:  “1. restrain or hold
back from action; keep under restraint; 2. keep back (what belongs to, is due to, or is desired by another); refrainfrom giving, granting, or allowing.”
72 USDOC Final Dumping Determination,  64 Fed. Reg. at 24368 ( Exh. JP-12 ).WT/DS184/R
Page A-28
(c) USDOC’s failure to calculate constructed export price correctly for KSC is
inconsistent with Article 2.3 of the Anti-Dumping Agreement
81. Rather than calculate an export price for KSC’s sales of hot-rolled steel to CSI, USDOC used
the second-highest margin from any of KSC’s sales for all of those CSI transactions.  This
unreasonable surrogate for export price constitutes a measure inconsistent with Article 2.3 of the Anti-
Dumping Agreement governing the calculation of export price.
82. Article 2.3 of the Anti-Dumping Agreement speaks directly to the calculation of export price
when an affiliated company is involved.  It provides:
In cases where there is no export price or where it appears to the authorities
concerned that the export price is unreliable because of association or a compensatoryarrangement between the exporter and the importer or a third party, the export price
may be constructed on the basis of the price at which the imported products are first
resold to an independent buyer, or if the products are not resold to an independent
buyer, or not resold in the condition as imported, on such reasonable basis as the
authorities may determine.
83. Article 2.3 mandates that administering authorities calculate export price on the basis of
resale price or another “reasonable basis” if that authority is concerned that the prices to an affiliated
importer are unreliable.  Here, USDOC did not express any specific concerns, but proceeded
immediately to the assumption  that because KSC and CSI were affiliated, CSI’s resale prices were
necessary.  When CSI refused to submit to USDOC its resale prices, USDOC simply skippeddetermining any type of export price for KSC’s sales to CSI and went directly to the application of an
abnormally high margin.
73  Article 2.3, however, permits the calculation of a price, not the imposition
of a margin.
84. USDOC’s failure to consider the many reasonable alternatives available to it, and subsequent
application of an unreasonably high adverse facts available margin to KSC’s sales to CSI, ignores the
mandate of Article 2.3 to calculate export price on  a “reasonable basis.”  A logical step would have
been for USDOC to request KSC’s own prices to CSI and then test the data to see whether they were
reliable or not.  If the prices were not reliable, then an adjustment could be applied based on sales to
unaffiliated companies.  But instead, USDOC simply disregarded the calculation of export price.
85. The Panel decision on US—Atlantic Salmon  confirms the unreasonableness of USDOC’s
choice in this situation.  The Panel held that any ri ght to apply facts available “had to be interpreted in
conjunction with the relevant substantive provisions of the Agreement."74   Therefore, the Panel
concluded:
{T}he United States had not acted within its rights under Article 6:8 by imputing to
Nordsvalaks the highest costs of production figure found for any other farm in the
sample without considering how  this would affect the representativeness of the results
                                                     
73 Because a margin is a factor or both export price and normal value, there is no guarantee that had the
USDOC applied a facts available export price instead of a facts available dumping margin itself, that the margin
calculated would have been similar.  In other words, us ing a facts available margin instead of a facts available
export price, USDOC applied facts available both to the missing export price data and to the verified  normal
value data for all CSI transactions.
74 US—Atlantic Salmon,  at para. 447.WT/DS184/R
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of the sample , and had thereby acted inconsistently with its obligations under
Article 2:4 of the Agreement.75
The use of adverse facts available “affecting the representativeness of the results” in that casetherefore not only violated Article 6.8, but also Article 2.4.
86. Similarly, in the hot-rolled steel case, USDOC failed to take into account that it was acting
under Article 2.3.  Selection of the second-highest margin found of any “dumped” products as the
substitute did not take into account the mandate to calculate export price on a reasonable basis.
Indeed, USDOC eschewed any calculation and moved straight to the application of the second-highest
margin.   In doing so, USDOC disregarded the existence of perfectly acceptable normal values(comparable product sold at the same level of trade) to which they could compare a surrogate export
price based on “facts available” if necessary.  USDOC failed to explain why its choice had anyrational relationship to the calculation of export price for KSC’s sales to CSI or for CSI’s resales.
76
87. The failure to calculate a constructed export price is also inconsistent with Article 2.3 in the
context of Articles 2.1 and 2.4 of the Anti-Dumping Agreement.  Article 2.1 requires that export
prices and normal value be compared to determine whether a product is being dumped.  BecauseUSDOC failed to calculate properly an export price on a “reasonable basis,” USDOC also failed to
compare properly an export price to normal value.  In this regard, the second sentence of Article 2.4
requires that the “fair comparison” between export price and normal value “be made at the same level
of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the
same time.”  As noted above, USDOC had a database full of acceptable, contemporaneous KSCnormal values at the same level of trade to which to compare a reasonably constructed facts available
export price.  USDOC’s affirmative choice not to do so highlights the biased nature in which it was
assessing the facts and applying “adverse” facts available.
(d) USDOC’s excessive margin of dumping for KSC is inconsistent with Article 9.3 of
the Anti-Dumping Agreement
88. Article 9.3 of the Anti-Dumping Agreement mandates that “{t}he amount of the anti-
dumping duty shall not exceed the margin of dumpi ng established under Article 2.”  By wrongfully
using “adverse” facts available under the US statute and imposing measures inconsistent with Article
2, USDOC ultimately applied an anti-dumping duty much higher than the margin of dumping that
would exist under a correctly applied Article 2.
89. Based on the data submitted by KSC, KSC’s margin would have been significantly lower if
USDOC had acted consistently with its decisions vis-à-vis  KSC’s other affiliated customers and
simply ignored those transactions.  However, because USDOC chose to apply the second highest
calculated margin as adverse facts available, the overall margin imposed by USDOC was inflated by
[  ] percentage points.
77   The resulting margin was significantly above any reasonable margin that
USDOC could have calculated properly under Article 2 and was, therefore, inconsistent with
Article 9.3 of the Anti-Dumping Agreement.78
                                                     
75Id. para. 450 (emphasis added).  The reference to Article 2:4 is to the Tokyo Round
Anti-Dumping Code.  This Article is now Article 2.2 of the current Anti-Dumping Agreement.
76 If USDOC could have devised a reason to think that KSC’s sales to CSI would in reality have such
high margins, then perhaps USDOC could have rationally justified its use of the second highest margin.  But,there were no facts to support such an assumption.  USDOC in fact made no such assumption and thereby actedinconsistently with Article 2.3 of the Anti-Dumping Agreement.
77 Affidavit of Robert H. Huey, Counsel to KSC ( Exh. JP-44 ).
78 The context of Article 9 underscores the wrongfulness of USDOC’s actions.  Article VI:2 of GATT
1994 governs the imposition of duties in the anti-dumping cont ext.  The provision is clear that duties are to be
imposed strictly to offset any actual  dumping, not to impose punitive measures.  See United States—
Antidumping Act of 1916 , 31 Mar. 2000, WT/DS136/R, at para. 6.189.  (The United States has appealed thisWT/DS184/R
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D. IN APPLYING ADVERSE FACTS AVAILABLE TO NSC AND NKK, USDOC
VIOLATED ARTICLES 2, 6, 9 AND ANNEX II OF THE ANTI-DUMPING AGREEMENT
90. USDOC rejected certain clarifying information submitted by respondents NSC and NKK
even though this data was submitted in time for USDOC to verify and analyze it for the finaldetermination.  Instead of accepting the informa tion, USDOC applied adverse facts available to that
portion of the companies’ sales affected by the clarification, thus inflating both companies’ dumping
margins.  USDOC’s decision to apply facts available, as well as its choice of adverse facts available,
was inconsistent with the Anti-Dumping Agreement.
1. Summary of the facts:  USDOC’s application of adverse facts available for NSC and
NKK
91. USDOC’s application of adverse facts available for NSC and NKK center upon one specific
item of information:  the conversion factor for ensuring that all sales in the respective home market
and US sales databases were in the same unit of measure.
79   Although during the applicable period of
investigation the overwhelming majority of NKK’s sales and NSC’s sales were sold based on the
actual weight of the steel (for which a conversion factor was irrelevant), both NKK and NSC alsoshipped a small number of sales based on theoretical weights.
80
92. In its initial questionnaire issued to respondents, USDOC requested the following quantity
information be submitted with respect to all home market and US sales:  quantity, quantity unit of
measure, quantity type, weight conversion factor, and converted quantity.  With respect to “quantitytype,” the USDOC questionnaire requested that respondents “ specify whether the quantity is
expressed in actual weight or on some other basis, e.g. theoretical weight.”  For “weight conversion
factor,” the USDOC questionnaire simply stated:
If you have reported both actual weights and weights expressed on some other basis,
you must provide the Department with the conversion factor you have used to arrive
at a uniform quantity measure.
81
93. In its initial questionnaire response, NKK responded to this specific request by advisingUSDOC that providing such conversion factor for NKK’s home market sales database was either
impracticable or impossible.
82
                                                                                                                                                                    
panel decision.  See United States—Antidumping Act of 1916, Notification of an Appeal by the United States
under paragraph 4 of Article 16 of the Understanding on Rules and Proce dures Governing the Settlement of
Disputes , WT/DS136/5, 29 May 2000.)
79 Steel mills sell their steel product based on either of two possible weights.  The first and most
common is the actual weight of the steel product, which is determined by actually weighing the steel.  Analternative means is “theoretical” weight, which is  calculated using a detailed formula based on various
characteristics of the steel.  Theoretical weight eliminat es the time and resources needed actually to weigh the
steel.  Modern technology has made the actual weighing process less burdensome, and it is now the norm.Some customers, however, still buy steel on a theoretical weight basis.
80 NSC’s theoretical weight sales were made to the United States, while NKK’s theoretical weight sales
were made only in the home market.   USDOC Final Dumping Determination,  64 Fed. Reg. at 24360, 24363
(Exh. JP-12 ).  In addition, NSC made a small quantity of sales of sheet in the home market at theoretical
weight, but these sales were not used in matching to US sales.
81 USDOC Section B Questionnaire, at B-19 (30 Oct. 1998) (excerpts in Exh. JP-45 ).
82 NKK Section B Questionnaire Response, at B-29 to B-30 (22 Dec. 1998) (excerpts in Exh. JP-45 ).
NKK explained that to arrive at a truly uniform quantity measure for NKK’s home market sales, NKK would
either have to convert 99.5 per cent of the database from an actual weight to theoretical weight basis ordetermine the actual weight of the 0.5 per cent of the database that was sold on a theoretical weight basis.  Thefirst option would have meant converting virtually the entire database to a less accurate weight.  The secondWT/DS184/R
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94. In its supplemental questionnaire to NKK, USDOC essentially repeated the same question,
requesting that NKK “clearly describe the conversion factor that you used."83   This follow-up
question included no meaningful clarification; indeed, it suggested that USDOC had not understood
NKK’s original response.  NKK’s attorneys called the relevant USDOC official for clarification andwere told that the supplemental question sought simply to confirm that NKK did not have a
conversion factor to report.
84   The official explained that NKK need only repeat the response it
provided in its initial questionnaire response.  NKK followed these specific USDOC instructions.85
95. NSC also responded in good faith to USDOC’s co nversion factor request.  At the time, NSC
did not use a conversion factor in its normal course of business and did not know how one could be
calculated.  NSC told USDOC, as NSC personnel believed at that time, that NSC did not weigh thesteel sold on a theoretical weight basis and theref ore, “lacking an actual weight, NSC has no way of
calculating the requested theoretical-to-actual weight conversion factor."
86
96. USDOC issued various subsequent supplemental questionnaires to NSC and NKK, but none
of the additional supplemental questionnaires addr essed the weight-conversion factor.  Then, to the
shock of both companies, the preliminary determin ation applied “adverse” facts available to those
NSC and NKK transactions that were made using theoretical weight.  By resorting to its “adverse
inference” provision, USDOC punished both NSC and NKK for their inability to provide a ratio that
they explained they had no means to calculate at that time.  For NKK, USDOC substituted the highest
normal value price it could find in NKK’s home market database for all of NKK’s theoretical weight-based sales.  For NSC, USDOC did not try to calcu late a surrogate US price, but instead applied a
surrogate margin (the highest of all margins for individual CONNUMs, which was [  ] per cent),
ignoring the fact that NSC’s US sales list contained acceptable facts available prices.
87
97. Upon reviewing the preliminary determination, NKK discovered that KSC had used a “bestestimate” as a surrogate for a weight conversion factor, and that this approach had been accepted by
USDOC.
88    Despite USDOC’s knowledge of this alternative methodology and despite the phone call
from NKK’s attorney requesting clarification of this  issue, USDOC had chosen not to alert NKK as to
this acceptable alternative methodology.  NKK immediately submitted to USDOC (within one week
of the preliminary determination) a correction to it s initial and supplemental responses containing a
weight conversion factor based on the same best estimate methodology utilized by KSC.  NKK made
this submission nine days before the commencement of verification and over ten weeks before theUSDOC’s final determination.
89
                                                                                                                                                                    
option was impossible because theoretical weight cannot be  converted to actual weight with precision if the
actual weight is not known.
83 NKK Supplemental Sections B, C, D Questionnaire, at 2 (4 Jan. 1999) ( Exh. JP-45 ).
84 See Affidavit of Daniel L. Porter, Counsel to NKK ( Exh. JP-28 ).
85 NKK Supplemental Section B Questionnaire Response, at BS-14 to BS-15 (26 Jan. 1999) ( Exh. JP-
45).
86 NSC Supplemental Section B Questionnaire Response, at Supp. B-24 (26 Jan. 1999) ( Exh. JP-29 ).
NSC’s response was based on the understanding of sales division personnel at NSC headquarters who wereresponsible for preparing NSC’s questionnaire responses.   The sales staff believed that coils sold on a
theoretical weight basis were never weighed, in part, because no actual weight figure appeared on any sales
documentation.  NSC’s sales database also contains no information about actual weights for theoretical weightsales.  Furthermore, sales division personnel understood that cut-to-length hot-rolled steel plate (whichaccounted for the bulk of the theoretical weight sales) was always sold based on theoretical weight and was
never weighed.
87 USDOC Preliminary Dumping Determination , 64 Fed. Reg. at 8298 ( Exh. JP-11 ).
88KSC Section B Response, at B-23 to B-24, Exhibit 6 ( Exh. JP-45 ); (21 Dec. 1998) KSC
Supplemental Response, at 18-20 ( Exh. JP-45 ).  KSC’ s conversion factor, which relied on other production
information to better estimate weight, satisfied USDOC.
89 NKK letter to USDOC of 23 Feb. 1999, at 4-8 ( Exh. JP-45 ).WT/DS184/R
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98. While preparing for verification, NSC headquarters and sales officials who had been
preparing NSC’s questionnaire responses discovered new information.90  For the first time, these
officials learned that the actual weights for sales made on a theoretical weight basis were contained in
a production database maintained at one of NSC’s factories, separated from the main sales databasesmaintained at headquarters.  The production databases do not overlap with the sales databases
maintained at NSC headquarters, and cannot be accessed from NSC headquarters.
91  N S C
immediately submitted to the USDOC, 14 days before verification, a correction to its initial and
supplemental responses, providing the conversion factor.92   NSC explained why the oversight had
occurred.  In particular, the merchandise was weighed by an isolated group in the production division,
and the actual weights were kept in a separate database not tied to the primary sales databases.  One
week later, seven days before verification, NSC s ubmitted to USDOC all of the backup data to its
weight conversion factor, in particular each of the actual weights for the sales made on a theoretical
weight basis.93
99. NKK and NSC submitted their corrections pursuant to a specific provision of USDOC’s
regulations governing USDOC’s acceptance or rejection of factual information, particularlycorrections that are discovered prior to verificati on.  Both companies met this regulatory deadline,
having filed their corrections to the conversion factor no later than seven days prior to verification.
94  
The conversion factors were submitted along with a large amount of additional data and other
corrections that added to or revised substantial parts of the companies’ reported sales.  Indeed, NSC
submitted — at USDOC’s request — other data that revised every US and home market sale.95   In
other words, USDOC accepted pre-verification data that affected every single sale, but rejected a
single number (the conversion factor) that affected only a small number of sales even though thatnumber was submitted at least seven days before verification.
100. USDOC officials visited the home offices in Japan of both NSC and NKK, and were prepared
to verify the corrections that had been submitted prior to verification.
96   USDOC officials verified
NKK’s best estimate factor for the small quantity of sales that had been sold on a theoretical weight
basis, but then decided not to place its verification of NKK’s conversion factor estimate on the
record.97   Following verification, USDOC ordered NKK to remove its submitted information from the
record and returned to NKK all of its submissions regarding the best estimate factor.98   By contrast,
                                                     
90 Verification preparation is often the first time that  headquarters officials, branch sales staff, and
technical staff come together to prep are all of the back-up documents to verify the sales and cost information
that was submitted as part of the thousands of pages in questionnaire responses.  In the questionnaire responseperiod, the primary focus is on the main computer systems and putting together an appropriate database thatcontains all of the necessary information in the format desired by USDOC.  Verification, on the other hand, is
document intensive, and it requires the specific expertise of personnel involved in each step of the production
and sales processes.
91 NSC Letter to USDOC of 15 Mar. 1999 ( Exh. JP-29 ).
92 NSC Letter to USDOC of 22 Feb. 1999, at 6.  The public version of this letter was submitted the next
day, on 23 Feb. 1999.  ( Exh. JP-29 ).
93 NSC Letter to USDOC of 1 Mar. 1999, public version on 2 March 1999 ( Exh. JP-29 ).
94 19 C.F.R. § 351.301(b)(1) provides that parties may submit factual information until seven days prior
to the start of verification.  See Exh. JP-5 .  NKK submitted this information on 22 February 1999, which was
nine days before its verification.  NSC submitted the conversion factor on 22 February 1999, 14 days beforeverification; NSC’s backup data was filed 1 March 1999, seven days before verification.
95 USDOC Letter to NSC of 12 Apr. 1999 ( Exh. JP-29 ).  Such changes often require each sale
observation be to changed, such as when an av erage selling expense adjustment is recalculated.
96 USDOC’s NKK Sales Verification Agenda, at 3 (16 Feb. 1999) (excerpts in Exh. JP-45 ); USDOC’s
NSC Sales Verification Agenda, at 3 (17 Feb. 1999)  (excerpts in Exh. JP-29 ).
97 See Affidavit of Daniel L. Porter, Counsel to NKK  (Exh. JP-28 )
98 USDOC Letter to NKK of 15 Apr. 1999 ( Exh. JP-45 ).WT/DS184/R
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USDOC accepted all of the other new factual data and information that had been included in the letter
in which NKK submitted its best estimate factor.
101. USDOC refused to verify any of NSC’s conversion factor data despite its previous request
that NSC be prepared to verify how NSC’s computer systems capture weights.99   This refusal came
despite repeated assurances from USDOC officials prior to and during the verification process that
they would verify the data.100   In the last hours of the verification, NSC’s staff and attorneys were told
that USDOC supervisors back in Washington had instructed the USDOC verifiers in Japan not to
verify the information.101   USDOC officials also refused to listen to, or to verify, NSC’s explanation
of the circumstances that led to its inadvertent erro r.  Further, following verification NSC was told by
USDOC officials that its conversion factor and supporting data were rejected and expunged from the
record.102
102. In its final determination, USDOC upheld its decision to apply facts available and adverseinferences with respect to NSC’ s and NKK’s theoretical weight sales.
103   USDOC continued to apply
to NSC’s theoretical weight sales the highest ca lculated margin for any US sale in that same
CONNUM ( i.e., any sale having the identical product characteristics).  With respect to NKK, USDOC
continued to apply the highest calculated adjusted domestic price for any CONNUM.  USDOC did
not acknowledge in its final determination that any failure to respond earlier was due to inadvertent
error or misunderstanding.104
2. Application of facts available and use of adverse inferences against NSC and NKK was
inconsistent with the Anti-Dumping Agreement
103. USDOC applied “facts available” to these tw o companies inconsistently with the Anti-
Dumping Agreement.105   In addition, USDOC invoked facts available after it ignored acceptable and
accurate data submitted by both NSC and NKK.  USDOC’ s failure to properly establish the facts is
therefore also inconsistent with numerous provisions of the Anti-Dumping Agreement.
(a) USDOC’s application of adverse facts available was inconsistent with Article 6.8 and
Annex II of the Anti-Dumping Agreement
104. As discussed above, USDOC’s established practice of applying adverse facts available to
punish respondents is facially violative of Article 6.8 and Annex II.  Application of that policy here
violated the Agreement in other ways as well.
                                                     
99 USDOC’s NSC Sales Verification Agenda, at 11 (17 Feb. 1999) (excerpts in Exh. JP-29 ).
100 NSC Case Brief, at 16 (13 Apr. 1999) (excerpts in Exh. JP-29 ).
101 Id. (excerpts in Exh. JP-29 ).
102 USDOC informed NSC of this decision on the day that NSC was required to submit its case brief
commenting on legal issues raised in the preliminary determination and at verification.  This date appears tohave been chosen by USDOC for calculated reasons:  once case briefs are submitted, further comments must be
limited to addressing issues raised by other parties.
103 USDOC Final Dumping Determination,  64 Fed. Reg. at 24363 ( Exh. JP-12 ).
104 The net impact on the overall NSC margin was two percentage points, while the impact on the
overall NKK margin was 0.09 percentage points.  See Affidavit of Daniel J. Plaine, Counsel to NSC ( Exh. JP-
46);  Affidavit of Daniel L. Porter, Counsel to NKK ( Exh. JP-28 ).
105 The discussions of inconsistent measures taken by the US Government with respect to NSC and
NKK are grouped together in this section only because of the relative similarity of the factual circumstances
surrounding their wrongful treatment.  Despite this grouping, the Government of Japan alleges that the USGovernment acted inconsistently with the Anti-Dumping Agreement in two individual instances — once withrespect to NSC and a second time with respect to NKK.WT/DS184/R
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(1) NKK and NSC submitted their corrections “within a reasonable period”
105. Article 6.8 limits the use of facts available to the following circumstances: (a) cases in which
“any interested party refuses access to, or otherwis e does not provide, necessary information within a
reasonable period,” or (b) cases in which any interested party “significantly impedes the
investigation.”  In this case, neither NSC nor NKK ever refused or failed to provide the information
regarding the minor weight conversion factor “within a reasonable period,” nor did they “significantly
impede the investigation.”
106. The notion of “a reasonable period” must be considered in context.  The weight conversion
factor played a minor role in the complex and voluminous computer programme that USDOC uses to
calculate an ultimate margin; it would affect only a few lines of computer code.  Moreover, the code
would be triggered for only a handful of sales given that so few had been made in theoretical weight.
107. Furthermore, NSC and NKK submitted the information regarding the weight conversion
factor “within a reasonable period” as defined in USDOC’s own regulatory deadlines for factual
information.  Specifically, USDOC regulation 19 C.F.R.  § 351.301(b)(1) establishes the final date for
the submission of factual information as seven days prior to verification.106   The use of verification as
the benchmark for this final deadline underscores the reality that respondents frequently uncover
errors or gaps during verification preparation, or as a result of the preliminary determination, and have
to submit corrected factual information to USDOC .  USDOC’s own regulations frame what would be
a good faith interpretation of “within a reasonable period.”
108. Finally, USDOC officials visited Japan prepared to verify this information.  The verification
agendas sent to NKK and NSC included an item indicating that USDOC would verify the way in
which actual weights were calculated ( i.e., converted from theoretical weight).107   Indeed, USDOC
fully verified NKK’s best estimate factor.108   Similarly, USDOC verifiers repeatedly told NSC staff
that the weight conversion factor would be verified.109   USDOC therefore ratified the notion that both
companies had submitted this information “within a reasonable period” as set forth in Article 6.8 of
the Anti-Dumping Agreement.
(2) Annex II, paragraph 5 mandates the acceptance of these corrections
109. USDOC’s decision to reject the factual corrections submitted by both NSC and NKK was
similarly inconsistent with paragraph 5 of Annex II.110   Paragraph 5 instructs:
Even though the information provided may not be ideal in all respects, this should not
justify the authorities from disregarding it, provided the interested party has acted to
the best of its ability.
110. Here, the information submitted was “ideal in all respects.”  The fact that it was submitted
after the questionnaire deadline does not change this fact.  Furthermore, both NSC and NKK acted tothe best of their ability by submitting the requisite information as soon as they became aware of their
ability to do so — which was still before the regu latory deadline for submitting factual information
                                                     
106 See Exh. JP-5.
107 NKK Sales Verification Agenda, at 11 (16 Feb. 1999) (excerpts in Exh. JP-45 ); NSC Sales
Verification Agenda, at 11 (17 Feb. 1999) (excerpts in Exh. JP-29 ).  Both agendas asked:  “Please provide
worksheets showing how your production and sales systems capture actual weights as reported in your section B
and C sales files.”
108 See Affidavit of Daniel L. Porter, Counsel to NKK  (Exh. JP-28 ).
109 NSC Case Brief, at 16 (13 Apr. 1999) (excerpts in Exh. JP-29  ).
110 Article 6.8 refers to the provisions in Annex II to guide the application of facts available.WT/DS184/R
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and early enough in the investigation for USDOC to verify the information and incorporate it into its
final determination.
(3) USDOC’s application of adverse facts available was inconsistent with Annex II,
paragraph 7
111. USDOC’s decision was also inconsistent with Annex II, paragraph 7 governing the
application of facts available.  The first sentence of paragraph 7 begins “ If the authorities have to base
their finding on information from a secondary source.”  (Emphasis added.)  USDOC did not “have to”
base its findings on any other source.  The data was made available to USDOC; there was no gap to
fill.
112. Even if the Panel accepts the use of facts available, however, the question becomes whether
this situation should have led “to a result which is less favourable to the party.”  Such a situation
exists only when an interested party “does not cooperate and thus relevant information is withheld
from the authorities.”  This did not happen in this case.
113. USDOC required an impermissibly high level of cooperation from NKK and NSC.111   Both
companies met the “cooperation” standard of paragraph 7 by submitting the weight conversion
information as soon as they were aware of their ability to do so.  NKK even called the US officials to
determine what was needed, and was then misled by those officials.  Both parties submitted the
information in time for verification.  These actions demonstrate good faith “cooperation.”
114. With respect to the “withheld” criterion, USDOC officials never made a finding on this issue
— nor could they because both parties initially replied in good faith that they did not possess the
requisite information, and then supplied it prior to verification when they realized they could.
Therefore, NSC and NKK cannot be deemed to have “withheld the information.”
115. Finally, USDOC acted inconsistently with pa ragraph 7 by failing to exercise “special
circumspection” in choosing which facts available to  apply.  Here, USDOC did not take into account
any of the mitigating circumstances surrounding NKK’s and NSC’s corrections.  This was an
unprecedented accelerated investigation.  Officials at both companies were under severe time
constraints to submit thousands of pages of information and millions of pieces of data.  Both
companies ultimately and accurately submitted this one minor piece of data in time for verification.
USDOC in fact verified NKK’s information, and was prepared to verify NSC’s information.  Despitethe fact that USDOC had accurate and relevant information in its hands, USDOC chose to use
unrepresentative information relating to other NKK and NSC transactions.  No “special
circumspection” was exercised at all.
(b) USDOC’S treatment of the evidence submitted by NKK and NSC was inconsistent
with Article 6 of the Anti-Dumping Agreement
116. Along with the wrongful application of facts available, USDOC failed to establish the facts
properly.
(1) USDOC failed to provide NKK with proper notice or a proper opportunity to respond
and defend itself as required by Article 6.1
117. Article 6.1 requires that:
                                                     
111 As discussed above with respect to KSC, paragraph 7 requires only that an interested party
“cooperate,” while the US statute goes beyond this requirement and demands that an interested party act “to thebest of its ability.”WT/DS184/R
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All interested parties in an anti-dumping investigation shall be given notice  of the
information which the authorities require and ample opportunity  to present in writing
all evidence which they consider relevant in respect of the investigation in question.
(Emphasis added.)
Paragraph 1 of Annex II states further that before applying facts available, “the investigating
authorities should specify in detail the information  required from any party.”  (Emphasis added.)
These provisions place the onus on the administering authority to explain in detail the type of
information that it is seeking.  It is not up to the responding party to guess what the administering
authority is looking for.  Notice is central to a party’s due process rights.
118. Here, USDOC failed to “specify in detail” the type of best estimate information that it wanted
from NKK and thereby also failed to provide “n otice of the information which the authorities
require.”  NKK attorneys called USDOC officials for clarification as to how to respond, and those
officials instructed that NKK need not submit any conversion factor and never requested it again.
Yet, in its final determination, USDOC declared that NKK “should have proposed to the Department
the sort of conversion factor it ultimately did calculate, explaining why a more accurate one might not
be practicable."112   Having been told by USDOC officials that the information was unnecessary, NKK
could not reasonably have made such a conclusion.
119. Article 6.1 also requires that the authority provide the interested party with “ample
opportunity to present in writing all evidence which they consider relevant in respect of the
investigation in question.”  USDOC violated this requirement by misleading NKK during itsattorneys’ phone call with USDOC officials and then rejecting NKK’s evidence regarding the weight
conversion factor once NKK understood what USDOC was seeking.  USDOC deprived NKK of any
opportunity, let alone “ample” opportunity, to present in writing its evidence regarding the weight
conversion factor.
(2) USDOC failed properly to verify NKK’s and NSC’s factual corrections as required
by Article 6.6
120. USDOC also acted inconsistently with Article 6.6, which states that “authorities shall during
the course of an investigation satisfy themselves as to the accuracy of the information supplied by
interested parties upon which their findings are based.”  USDOC fully verified the accuracy of NKK’s
weight conversion factor, but chose not to place its findings on the record.
113   As for NSC, despite
repeated assurances that it would verify the weight conversion factor, in the last hours of verificationUSDOC officials told NSC that USDOC headquarters had issued final orders not to verify the
information.
114   
121. Article 6.6 places the onus on authorities to satisfy themselves as to the accuracy of
information. The only exceptions to this mandate are the limited circumstances set forth in Article 6.8,which authorizes the use of facts available.  In this case, USDOC should not have applied facts
available and thus should have verified the NSC and NKK conversion factor data as planned.  Even if
USDOC believed that facts available might be applied, the facts in this case at least clearly showed
that USDOC’s application of facts available required strict examination in advance and that
verification of the data was therefore warranted.  USDOC officials had no right to ignore the mandateof Article 6.6 and refuse to “satisfy themselves as to the accuracy of the information.”
                                                     
112 USDOC Final Dumping Determination,  64 Fed. Reg. at 24362 ( Exh. JP-12 ).
113 See Affidavit of Daniel L. Porter, Counsel to NKK  (Exh. JP-28 ).
114 NSC Case Brief, at 16 (13 Apr. 1999) (excerpts in Exh. JP-29 ).WT/DS184/R
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(3) USDOC impermissibly failed to take into account the difficulties faced by NKK and
NSC as required by Article 6.13
122. Article 6.13 states:
The authorities shall take due account of any difficulties experienced by interested
parties,  in particular small companies, in supplying information requested, and shall
provide any assistance practicable.   (Emphasis added.)
123. USDOC officials acted inconsistently with Article 6.13 because they failed to take into
account the difficulties faced by NKK and NSC with regard to the submission of a weight conversion
factor.  USDOC not only did not provide any mean ingful assistance, instead USDOC itself created
NKK’s difficult situation by telling the company to merely reiterate its previous statement on the
issue.
124. Similarly, USDOC failed to consider the difficulties faced by NSC.  Conversion factors were
not necessary for NSC’s sales operations and therefore the staff preparing the responses to USDOC’s
questionnaires were unaware of the data until they discovered it in preparation for verification.
Despite mitigating facts, USDOC did not account for any of them in its final determination.  USDOCsimply and impermissibly accused NSC of failing to act to the best of its ability and ignored the
accurate and verifiable information.
(c) USDOC’s choice of adverse facts available is inconsistent with Article 2.4 of the
Anti-Dumping Agreement
125. USDOC’s arbitrary rejection of evidence and application of adverse facts available against
NSC and NKK was also inconsistent with Article 2.4 of the Anti-Dumping Agreement governing the
comparison of export price and normal value.  Article 2.4 requires in particular that the administering
authority make a “fair comparison . . . between the export price and the normal value.”
126. The Panel decision in US—Atlantic Salmon  discussed above again informs this analysis.
115
USDOC failed to consider the nature of its calculation when choosing which facts available to apply
to these sales.  For NSC, USDOC carried out no calculation whatsoever.  Instead, it went straight to
the application of the highest margin by CONNUM.116   This application ignored the fact that USDOC
had contemporaneous normal values that could have been used in a “fair comparison” as required by
Article 2.4.  As for NKK, because its theoretical sales were made in the home market, USDOC chose
to inflate NKK’s normal value on these specific sale s to as high a price as possible.  The products
from which USDOC derived the highest normal value possible, however, were isolated transactions
with no rational relationship to the overall average normal value for those specific product
categories.117   This unreasonable substitution precludes a “fair comparison.”
127. Finally, Article 2.4 contains a provision similar to Article 6.1 which states that “the
authorities shall indicate to the parties in question what information is necessary to ensure a fair
comparison.”  USDOC told NKK the information was not necessary, and therefore cannot fairly
punish NKK for not providing the information.
                                                     
115 As noted above, that GATT Panel established a requirement that a dumping authority determine
appropriate facts available “in conjunction with the relevant substantive provisions of the Agreement.”  US—
Atlantic Salmon,  at para. 447.
116 USDOC skipped the entire process of calculating an export price and went straight to assigning the
highest margin it could find for that product type (CONNUM).  USDOC never even went through the steps of
calculating a price and comparing that price to normal value as required by Article 2.  See Affidavit of Daniel J.
Plaine, Counsel to NSC ( Exh. JP-46 ).  Article 2.3 requires the calculation of an export price on a “reasonable
basis.”
117 See Affidavit of Daniel L. Porter, Counsel to NKK ( Exh. JP-28 ).WT/DS184/R
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(d) USDOC’s application of facts available to NKK and NSC is also inconsistent with
Article 9.3 of the Anti-Dumping Agreement
128. This failure to calculate the margins correctly under Article 2 in turn led to measures
inconsistent with Article 9.3 of the Anti-Dumping Agreement.  Article 9.3 holds that “{t}he amountof the anti-dumping duty shall not exceed the margin of dumping established under Article 2.”  Here,
USDOC applied faulty and inflated variables in the margin calculations for both NSC and NKK.  For
NSC, USDOC never even made the calculation as required by Article 2 for those sales made on a
theoretical weight basis.  For NKK, USDOC wrongfully carried out the mandated “fair comparison”
of Article 2.4 by using normal values from completely dissimilar products for those sales made on a
theoretical basis.  In this way, USDOC affirmatively inflated the applied anti-dumping margin well
beyond any margin that could have been calculated properly under Article 2.  USDOC’s decision,therefore, was inconsistent with Article 9.3 of the Anti-Dumping Agreement.
V. US LAW GOVERNING CALCULATION OF THE “ALL OTHERS” RATE, ON ITS
FACE AND AS APPLIED HERE, IS INCONSISTENT WITH ARTICLE 9.4 OF THE
ANTI-DUMPING AGREEMENT
129. Article 9.4 of the Anti-Dumping Agreement specifically prohibits authorities from calculating
“all others” rates based on margins using facts available.  Following US law, USDOC used each
respondent's dumping margins — each of which, as discussed above, were based on partial adverse
facts available — to calculate an inflated all others rate.  Thus, US law, on its face and as applied,
violates Article 9.4.
A. BACKGROUND ON US LAW AND PRACTICE
130. When describing the calculation of the “all others” rate, US law creates a distinction between
individual rates based “entirely” on facts available and individual rates based only partially on facts
available.  The statute provides that USDOC shall determine the estimated weighted average dumpingmargin for each exporter and producer individually investigated, and then determine the estimated all-
others rate for all exporters and producers not individually investigated.
118   Paragraph (5) of that
subsection prescribes the “{m}ethod for determining estimated all-others rate”:
(A) General rule
For purposes of this subsection and section 1673b(d) of this title, the estimated all-
others rate shall be an amount equal to the weighted average of the estimated
weighted average dumping margins established for exporters and producers
individually investigated, excluding any zero and de minimis margins, and any
margins determined entirely  under section 1677e of this title { i.e., any margins
determined entirely on the basis of facts available}.
(B) Exception
If the estimated weighted average dumping margins established for all exporters and
producers individually investigated are zero or de minimis margins, or are determinedentirely  under section 1677e of this title, the administering authority may use any
reasonable method to establish the estimated all-others rate for exporters and
producers not individually investigated, including averaging the estimated weighted
                                                     
118 19 U.S.C. § 1673d(c)(1)(B)(i) ( Exh. JP-4 ).WT/DS184/R
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average dumping margins determined for the exporters and producers individually
investigated.119
131. USDOC regulations do not specify how to calculate the “all others” rate, but USDOC's
general practice is to calculate it as the weighted average of the dumping margins established for therespondents, excluding any zero or de minimis  margins, as directed by the US statute.  USDOC’s
practice also excludes margins based entirely on facts available.
120
B. SUMMARY OF THE FACTS:  APPLICATION OF THE STATUTE AND
ADMINISTRATIVE PRACTICE
132. In its investigation of hot-rolled steel from Japan, USDOC did not individually investigate all
Japanese producers and exporters.  USDOC initially issued questionnaires to six companies (Kobe,KSC, Nisshin, NKK, NSC, and Sumitomo Metal Industries (“SMI”)), but ultimately selected only
three of these companies (KSC, NKK, and NSC) as mandatory respondents.
121   USDOC did not allow
the other companies to participate in the investigation.122   Thus, pursuant to US law, three companies
were assigned individual dumping margins; the remaining companies were assigned an “all others”
rate that was the weighted average of the margins calculated for the three mandatory respondents.123
133. As discussed in Part IV of this submission, the margins determined for the three selectedcompanies were significantly distorted by USDOC's unjustified application of adverse facts available.
Mathematically, these high margins are responsible for the inflated “all others” rate of 29.30 per cent.
134. USDOC’s basis for including the inflated rates is not explicit, but appears to be based on the
distinction made by the US statute.  Apparently , USDOC reasoned that since the individual margins
were not based “ entirely  upon the facts available,” the margins could be included in the “all others”
rate under the US statute specifying that margins determined “entirely” on the basis of facts available
should be excluded.
124   SMI strenuously argued in comments filed after the preliminary determination
that USDOC should not distort the “all others” rate in this manner, but USDOC ignored SMI.125
                                                     
11919 U.S.C. § 1673d(c)(5) (emphasis added) ( Exh. JP-4 ).  The statute governing preliminary
determinations of dumping margins requires USDOC to determine “an estimated all-others rate for all exportersand producers not individually investigated,” and incorporates by reference 19 U.S.C. § 1673d(c)(5).  See 19
U.S.C. § 1673b(d)(1) ( Exh. JP-4 ).
120 See, e.g., USDOC Preliminary Dumping Determination , 64 Fed. Reg. at 8299 ( Exh. JP-11 ).
121 Id. at 8291-94 ( Exh. JP-11 ).
122 The statute authorizes USDOC to limit the number of companies investigated, if investigation of
every known exporter or producer would be unduly burdensome and would thereby inhibit timely completion ofthe investigation.  See 19 U.S.C. § 1677f-1(c)(2) ( Exh. JP-4 ).  Considering the complexities likely to arise in
the investigation and USDOC’s limited resources, USDOC determined that it would not be practicable to
investigate every company that wanted to participate.   USDOC therefore selected the three companies that
accounted for the largest volume of subject imports.  See USDOC Preliminary Dumping Determination, 64 Fed.
Reg. at 8294 ( Exh. JP-11 ).
123 USDOC Preliminary Dumping Determination,  64 Fed. Reg. at 8299 ( Exh. JP-11 ); see also USDOC
Final Dumping Determination,  64 Fed. Reg. at 24370 ( Exh. JP-12 ).
124 USDOC Preliminary Dumping Determination, at 8299 (emphasis added) ( Exh. JP-11 ); 19 U.S.C. §
1673d(c)(5)(B) ( Exh. JP-4 ).
125 USDOC Final Dumping Determination, at 24364, 24368, 24370 ( Exh. JP-12 ); Sumitomo Metal
Indus., Ltd. Case Brief, at 4-5 (12 Apr. 1999) (excerpts in Exh. JP-48 ).WT/DS184/R
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C. USDOC'S INCLUSION OF PARTIAL FACTS AVAILABLE IN THE “ALL OTHERS”
RATE IS INCONSISTENT WITH ARTICLE 9.4 OF THE ANTI-DUMPING
AGREEMENT
1. On its face, the US statute is inconsistent with the requirement of Article 9.4 that
authorities “shall disregard” margins based on facts available
135. Article 9.4 unambiguously specifies that an authority “shall disregard” margins based on facts
available in determining the “all others rate.”  Unlike the US statute, the Agreement does not
distinguish between determinations based entirely on facts available and determinations based
partially on facts available.126   Article 9.4 provides:
When the authorities have limited their examination in accordance with the second
sentence of paragraph 10 of Article 6, any anti-dumping duty applied to imports fromexporters or producers not included in the examination shall not exceed:
(i) the weighted average margin of dumping established with respect to the selected
exporters or producers or,
(ii) where the liability for payment of anti-dumping duties is calculated on the basis of a
prospective normal value, the difference between the weighted average normal value
of the selected exporters or producers and the export prices of exporters or producers
not individually examined
provided that the authorities shall disregard for the purpose of this paragraph any
zero and de minimis  margins and margins established under the circumstances
referred to in paragraph 8 of Article 6 .  The authorities shall apply individual duties
or normal values to imports from any exporter or producer not included in the
examination who has provided the necessary  information during the course of the
investigation, as provided for in subparagraph 10 of Article 6.  (Emphasis added.)
136. The text of Article 9.4 thus sets a critical limitation on the calculation of an “all others” rate.
The investigating authority “shall disregard . . .  margins established under the circumstances referred
to in paragraph 8 of Article 6,” a reference to the provision governing “facts available.”  As
Article 9.4 uses the mandatory term “shall” and the unambiguous term “disregard,” the obligation is
not discretionary.
127
137. The broad language of Article 6.8 covers any resort to facts available.  It does not draw thedistinction in the US statute between determinations based “entirely” on facts available and
determinations based only partially on facts available.  To the contrary, Article 6.8 contemplates the
use of partial facts available whenever possible, to more accurately assess possible dumping.
Resorting entirely to facts available is limited to truly and entirely uncooperative parties.
138. The circumstances under which “facts available” may become the basis for a company’s
dumping margin under Article 6.8 are quite limited:  it is used only in instances where a company
                                                     
126 Indeed, the US proposed la nguage during the Uruguay Round that would incorporate the “entirely”
language, and it was rejected by the other members.
127 The context provided by other paragraphs of Article 9 also supports this interpretation of Article 9.4.
Article 9.3 provides that the dumping margin “shall not exceed the margin of dumping as established under
Article 2.”  Dumping margins should thus be based on real numbers determined under Article 2, not
hypothetical numbers.  If the authorities can base the “all others” rate on margins determined under Article 2based on real information, it makes no sense to “exceed” that margin of dumping by including exaggeratedmargins based on “facts available.”WT/DS184/R
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either (a) “refuses access to, or otherwise does not provide, necessary information within a reasonable
period”, or (b) “significantly impedes the investigation.”  The decision to resort to the facts available
responds to a particular action of a particular company.  The companies that fall within the “all
others” category, by definition, have not been indi vidually investigated.  They have not even been
given the opportunity to provide any information at all.  A company not individually investigatedcould not ever “significantly impede{ } the investigation.”  Indeed, USDOC excludes them precisely
to speed the investigation.  USDOC’s use of an adverse facts-available margin, however, effectively
punishes “all others” for the perceived uncooperative actions or inactions of other companies.
139. The US statute requires USDOC to estimate an all-others rate excluding only margins
“determined entirely ” on the basis of facts available.128   US law and practice impose a limitation that
defeats the objective of issuing an “all others” rate that reflects real and not inflated margins ofdumping.  By impermissibly defining the exclusion too narrowly, the US statute is therefore facially
inconsistent with Article 9.4 of the Anti-Dumping Agreement.
2. USDOC’s specific calculation of the all others rate in the investigation of hot-rolled steel
from Japan was also inconsistent with Article 9.4
140. By following the US statute, US DOC violated Article 9.4.  On the particular facts of this case,
all three mandatory respondents’ margins were ba sed on what US law would deem “partial” facts
available.  USDOC was therefore required by Article 9.4 to “disregard” the facts available portion of
these  margins for purposes of calculating the “all others” rate and should have used only that portion
of the margins not based on facts available.  USDOC could have done this, but instead used eachcompany’s margin to calculate the all others rate.
VI. USDOC’S EXCLUSION OF CERTAIN HOME MARKET SALES FROM THE
CALCULATION OF NORMAL VALUE, AND THE REPLACEMENT OF SUCH
SALES WITH DOWNSTREAM SALES, ARE BOTH INCONSISTENT WITHARTICLE 2 OF THE ANTI-DUMPING AGREEMENT
141. USDOC excluded certain home-market sales from the normal-value calculation by incorrectly
classifying them as  “outside the ordinary course of  trade” if they failed to meet the “arm’s length” or
“99.5 per cent” test.  Under this test, sales to affiliated customers are excluded if their weighted
average price was less than 99.5 per cent of the weig hted average price of product sold to unaffiliated
customers.  Upon excluding the sales, USDOC ofte n replaces them with th e affiliates’ inevitably
higher-priced downstream resales, with no cost adjustment to the price to reflect the different level oftrade.
142. These practices — which are applied consistently by USDOC — systematically inflated the
dumping margins in the hot-rolled steel case either because low-priced home market sales were
ignored and sometimes replaced by higher priced sales.  They are inconsistent with Article 2.4, incombination with Article 2.1 and 2.2, because (a) the sales that USDOC chose to disregard were made
in the ordinary course of trade, (b) the replacement of such sales with affiliated customers’ resales is
not contemplated anywhere in Article 2, and (c) the unjustified inflation of normal value by the
application of these practices contravenes the requirement in Article 2.4 that authorities make a “fair
comparison” between export price and normal value.
A. BACKGROUND ON US LAW AND PRACTICE
143. The US statute defining normal value is Section 773 of the Tariff Act of 1930.  The relevant
subsection defines normal value as
                                                     
128 19 U.S.C. § 1673d(c)(5) (emphasis added) ( Exh. JP-4 ).WT/DS184/R
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the price at which the foreign like product is first sold (or, in the absence of a sale,
offered for sale) for consumption in the exporting country, in the usual commercial
quantities and in the ordinary course of trade  and, to the extent practicable, at the
same level of trade as the export price or constructed export price.129
US law defines “ordinary course of trade” as “the conditions and practices which, for a reasonable
time prior to the exportation of the subject merchandise, have been normal in the trade under
consideration with respect to merchandise of the same class or kind."130
144. The statute also contains an exception to this rule which authorizes the replacement of sales to
an affiliated reseller with sales by an affiliated reseller.  Specifically, “{i}f the foreign like product is
sold or, in the absence of sales, offered for sale through an affiliated party, the prices at which the
foreign like product is sold (or offered for sale) by such affiliated party may be used in determining
normal value."131   Section 771(33) defines “affiliated” parties to include  companies in which a party
owns as little as five per cent of the outstanding voting stock.132
145. USDOC’s regulations reiterate and further define some of the terms used in the statute.  For
instance, the regulations provide that:
The Secretary may consider sales or transactions to be outside the ordinary course of
trade if the Secretary determines, based on an evaluation of all of the circumstances
particular to the sale in question , that such sales or transactions have characteristics
that are extraordinary for the market in question.133
146. The regulations go on to say that USDOC may consider a sale to an affiliated party at a non-
arm’s length price outside the “ordinary course of trade."134   Although the regulations do not define
“arm’s length price,” they clarify that if a respondent made sales to affiliated parties, then normal
value may be calculated based on those sales only if USDOC is “satisfied that the price is comparable
to the price at which the exporter or producer sold the foreign like product to a person who is notaffiliated with the seller.”  (Emphasis added.)
135
147. If a respondent sells in the home market “through” an affiliated customer that merely resells
the product, then USDOC’s regulations permit it to “calculate normal value based on the sale by such
affiliated party."136  Such sales are used in the event the prices to the affiliated reseller are deemed not
“comparable” ( i.e., not made at arm’s length).137
                                                     
129 19 U.S.C. § 1677b(a)(1)(B)(i) (emphasis added) ( Exh. JP-4 ).
130 19 U.S.C. § 1677(15) ( Exh. JP-4 ). The same statute specifically provides that USDOC shall treat
two types of transactions, “among others,” as outside the ordinary course of trade: sales below cost andtransactions between affiliated parties for the purchase of inputs used to calculate costs of production.  19 U.S.C.
§ 1677(15)(A)-(B) ( Exh. JP-4 ).
131 19 U.S.C. § 1677b(a)(5) (emphasis added) ( Exh. JP-4 ). This provision has been a part of the US
anti-dumping statute since 1988.  Pub. L. 100-414, § 1319 (amending Section 773 to include this subsection).
132 19 U.S.C. § 1677(33)(E) ( Exh. JP-4 ).  Under USDOC regulations and practice, companies may be
deemed affiliated even when one owns less than five per cent of the voting stock of the others.
133 19 C.F.R. § 351.102(b) (emphasis added) ( Exh. JP-5 ).
134 Id.  (Exh. JP-5 ).
135 Id. (Exh. JP-5 ).  USDOC regulations track the statutory definition of “affiliated”  parties.  See 19
C.F.R. § 351.102(b) ( Exh. JP-5 ).
136 19 C.F.R. § 351.403(d) (emphasis added) ( Exh. JP-5 ).
137 These sales are not always reported, however, either because they are of insignificant quantities or
because the respondent does not have the requisite control of the affiliate to report the resales.WT/DS184/R
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148. Upon rejecting sales to an affiliate for failin g the arm’s length test, USDOC has two options:
it can discard the sales in its calculation of normal value, or it can replace the sales with the affiliate’s
resales — assuming such sales have also been reported to USDOC by the respondent.
149. Since 1993, USDOC has followed a practice of considering sales of product to an affiliated
customer to be at “arm’s length” and thus included in the calculation of normal value only if the
weighted average price for all sales of the product to the affiliated customer are 99.5 per cent or more
of the weighted average price of sales of the product to non-affiliated customers.  This practice isknown as the “arm’s-length test” or “99.5 per cent test."
138
150. If sales to an affiliate fail the arm’s length, USDOC has adopted a practice of excluding such
sales from its calculation of normal value and, in  some instances, replacing such sales with the
affiliate’s resales, assuming such sales have also been reported by the respondent.
151. After passage of the US Uruguay Round Ag reements Act, USDOC invited comments on
whether to change and/or codify certain regulations and practices.  The US steel industry opposed
efforts to change USDOC’s arm’s-length test.139   In its published final rule USDOC complied, saying
“We will continue to apply the current 99.5 per cent test unless and until  we develop a new
method."140  It has done so, without exception, since then.  Japan therefore considers this an
established practice that may be the subject of a facial challenge under the Anti-Dumping
Agreement.141
B. SUMMARY OF THE FACTS:  APPLICATION OF THE ARM’S LENGTH TEST IN THE
INVESTIGATION OF HOT-ROLLED STEEL FROM JAPAN
152. The questionnaire issued to the Japanese respondents instructed them that their sales to
affiliated customers in the home market were subject to rejection and possible replacement with the
affiliates’ resales.
153. A significant percentage of each respondent’s home market sales were to customers that
USDOC considered to be “ affiliated.”  NKK and NSC each reported their sales to such customers
and, where possible, the resales of those affiliated customers willing and able to supply the data.
Knowing that USDOC would disregard its sales to one affiliated reseller, KSC made the decision to
report its affiliate's resales (some of which were also to affiliates).
154. USDOC applied the 99.5 per cent arm’s length test to the respondents’ sales to affiliated
customers (and to KSC’s affiliate’s resales to affiliates).142   The vast majority of the respondents’
reported sales to affiliated customers failed the 99.5 per cent test.  USDOC therefore excluded these
sales from its calculation of normal value, noting that they were “outside the ordinary course of
                                                     
138 This test was first developed by USDOC in 1993, when rendering preliminary determinations in a
wave of simultaneous investigations of flat-rolled steel imports from various countries.  See Notice of
Preliminary Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat ProductsFrom Argentina , 58 Fed. Reg. 7066, 7069 (4 Feb. 1993) (“Appendix II: Issues Common to All Anti-Dumping
Investigations of Flat-Rolled Steel Products”).  The test was confirmed over respondents’ objections.  See Notice
of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products
From Argentina , 58 Fed. Reg. 37062, 37077 (9 July 1993) (“Appendix II: Issues Common to All Anti-Dumping
Investigations of Flat-Rolled Steel Products ”).  Excerpts of these determinations are provided in  Exh. JP-49 .
139 See Exh. JP-50 containing comments submitted by counsel to the US steel industry.
140 Anti-Dumping Duties; Countervailing Duties; Final Rule , 62 Fed. Reg. 27296, 27355
(19 May 1997) (emphasis added) (excerpts in Exh. JP-39 ).
141 Such established practices are subject to facial challenges under the Anti-Dumping Agreement
pursuant to the interpretation of WTO Agreement Article XVI:4 in the US-Section 301 Panel.  See discussion
above with regard to adverse facts available.
142 USDOC Preliminary Dumping Determination,  64 Fed. Reg. at 8295 ( Exh. JP-11) .WT/DS184/R
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trade”143,  and sometimes replaced them with the affiliates’ downstream resales, sometimes with no
adjustment for any resulting differences in level of trade.  USDOC affirmed this decision in its final
determination.144
155. USDOC’s use of the 99.5 per cent test, as well as the substitution of sales to affiliates with theaffiliates’ resales, inflated each respondents’ dumping margins.  KSC’s margin increased by more
than [  ] percentage points.
145   Application of the 99.5 per cent test in this case is therefore subject to
an as-applied challenge under the Anti-Dumping Agreement.
C. USDOC VIOLATED ARTICLE 2 OF THE ANTI-DUMPING AGREEMENT
1. Article 2.4 of the Anti-Dumping Agreement, in combination with Article 2.1, does not
permit USDOC to treat  sales to affiliates that fail the 99.5 per cent arm’s length test asoutside the ordinary course of trade
156. Article 2.4 states that a “fair comparison shall be made between the export price and the
normal value.”  In performing that comparison, Articl e 2.1 explains that normal value shall be based
on sales “in the ordinary course of trade:”
For the purpose of this Agreement, a product is to be considered as being dumped,
i.e. introduced into the commerce of another country at less than its normal value, if
the export price of the product exported from one country to another is less than the
comparable price, in the ordinary course of trade, for the like product when destined
for consumption in the exporting country.
157. “Ordinary course of trade” is a term of art in international trade law.  It is a well-accepted
concept, as reflected in USDOC's own questionnaire:  “Generally, sales are in the ordinary course of
trade if made under conditions and practices that, for a reasonable period of time prior to the date of
sale of the subject merchandise, have been normal for sales of the foreign like product."
146
158. USDOC applied its arm’s length test in this case — as it has in all others since 1993 — to allhome market sales made by respondents to affiliated customers.  It then disregarded all sales to any
affiliated customer whose sales failed the test.  It did so based on the premise under US law, that sales
to affiliates that fail the arm’ s length test are not in the ordinary course of trade.
                                                     
143 Id. (Exh. JP-11).
144 NKK documented the flaws of the 99.5 per cent test and proposed alternatives to USDOC’s 99.5 per
cent test, including an alternative based on the widely applied statistical concept of “standard deviation.”  NKK
Supplemental Questionnaire Response, at Exhibit 3 (26 Jan. 1999) (excerpts in Exh. JP-52 ).  NKK renewed this
argument in its case brief.  NKK Case Brief, at 33-49 (13 Apr. 1999) (excerpts in  Exh. JP-52 ).  USDOC did not
seriously address these alternatives.  USDOC  Final Dumping Determination, 64 Fed. Reg . at 24342 ( Exh. JP-
12).
145 See Affidavit of Robert H. Huey, Counsel to KSC (Exh. JP-44) .  USDOC’ s practice inflated
NSC’s and NKK’s margins by about one percentage point each.  See Affidavit of Daniel L. Porter, Counsel to
NKK  (Exh. JP-28) ; Affidavit of Daniel J. Plaine, Counsel to NSC (Exh. JP-46) .  The reason for the larger
impact on KSC’s margin is that upon rejecting the sales to affiliates, the next most similar home market productmatches to US sales were very different in physical characteristics and, upon application of the difference inmerchandise adjustment, resulted in a distorted apples-to-oranges comparison.
146 USDOC Questionnaire, Appendix I: Glossary of Terms (19 Oct. 1998) ( Exh. JP-51 ).  Black’ s Law
Dictionary  defines “ordinary course of business” as:  “The transaction of business according to the common
usages and customs of the commercial world generally or of the particular community or (in some cases) of the
particular individual whose acts are under consideration. . . .  In general, any matter which transpires as a matter
of normal and incidental daily customs and practices in business.”  Black’s Law Dictionary  at 1098 (6th ed.
1990).WT/DS184/R
Page A-45
159. Nothing in the Agreement can be construed to suggest that sales made to affiliates — in
which the respondent may own as little as a five per cent share — at prices nearly identical to prices
sold to unaffiliated customers are outside the “ordinary course of trade.”
160. A 0.5 percentage point average price differential is too small a difference upon which to base
a finding that sales to affiliates are not ordinary.  Indeed, USDOC’s own regulations label price
differentials of 0.5 per cent “ de minimis  ”; at the investigation stage, both USDOC regulations and
Article 5.8 of the Anti-Dumping Agreement treat price differentials as large as 2.0 per cent as de
minimis.147
161. A simple example confirms the ludicrous nature of USDOC’s test.  If sales to an unaffiliated
company were at an average price of $300 per ton and sales of the same product to a company ofwhich the supplier owns five per cent were at an average of $298 per ton, USDOC would not consider
the affiliated sales ordinary.  Yet, USDOC would deem the affiliated sales ordinary if they averaged
$500 per ton.  This strains common sense.
2. The replacement of home-market sales to an  affiliate with the affiliate’s resales is
inconsistent with Article 2.2 of the Anti-Dumping Agreement
162. Articles 2.2 and 2.3 confirm that USDOC is not permitted to use affiliates’ downstream sales.
Article 2.2 governs what an authority must do if there are no home market sales “in the ordinary
course of trade”.  It may compare export price either with sales to a third country or with a
constructed value.
148   Replacing the respondent’s home-market sales with the downstream sales of
affiliated resellers is not an option.
163 In stark contrast, Article 2.3 — which covers export price transactions — specifically allows
an investigating authority to construct an export price “on the basis of the price at which the imported
products are first resold to an independent buyer” if the export price is deemed “unreliable” due toaffiliation between the exporter and the importer.  In other words, replacement of an exporter’s sales
to an affiliate with the affiliate’s resales are specifically permitted in the calculation of export price
under Article 2.3.
149
164. The Agreement’s silence on the use of downstream sales in the home market is significant.
By specifying that export price sales to affiliated customers may be replaced by the affiliates’ resales
implies that other sales to affiliated customers (e.g., sales in the home market) may not be so replaced.This interpretation of Article 2.3 is supported by a basic principle of treaty interpretation, expressio
unius est exclusio alterius  (to specify one thing is to exclude all other things).
150   Therefore, it is clear
that replacing the respondents' home market sales w ith their affiliates' downstream sales is a violation
of Article 2.2.
                                                     
147 See 19 C.F.R. 351.106 ( Exh. JP-5 );  see also 19 U.S.C. 1673d(a) ( Exh. JP-4) .
148 The last clause of Article 2.2 — “cost of production. . . plus a reasonable amount. . .” — is what is
commonly known as constructed value.
149 This interpretation of Article 2.3 is supported by a basic principle of treaty interpretation, expressio
unius est exclusio alterius  (to specify one thing is to exclude all other things).  See generally  Lord McNair, The
Law of Treaties 399-410 (1961) (excerpts in Exh.  JP-54).  By specifying that export price sales to affiliated
customers may be disregarded, the Agreement impl ies that other sales to affiliated customers ( e.g., sales in the
home market) may not be disregarded.
150 See generally  Lord McNair, The Law of Treaties  399-410 (1961) (excerpts in Exh. JP-54 ).WT/DS184/R
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3. The “fair comparison” requirement in Article 2.4 prohibits the use of USDOC’s arm’s
length test to discard sales to affiliates
165. Article 2.4’s requirement that authorities make a “fair comparison” between export price and
normal value does not permit USDOC to exclude home-market sales to affiliates simply because they
fail the 99.5 per cent arm’s length test, it also does not permit USDOC to replace a respondent’shome-market sales to affiliated resellers with the resellers’ downstream sales.
(a) Exclusion of sales via application of the 99.5 per cent test is inconsistent with
Article 2.4
166. Article 2.4 provides, “A fair comparison shall be made between the export price and the
normal value.  The comparison shall be made at th e same level of trade, normally at the ex-factory
level.”
167. When a group of sales fails the 99.5 per cent test, normal value is increased because lower
priced home market sales are excluded from the calculation and sometimes replaced by downstream
sales which are higher priced downstream sale by the costs and profits of the resellers.  When normal
value is increased, the dumping margin is also increased.  USDOC cannot justify this practice.  A“fair” comparison does not permit statistically arbitrary rules that reject low-priced sales from the
calculation of normal value and thereby artificially inflate the dumping margin.
168. Exhibit JP-53  provides several examples illustrating the inherent distortions created by the
99.5 per cent test.  The examples all reflect the two f undamental problems with the test.  First, the test
is one-sided:  it tests only lower prices, and considers higher
 prices to be normal no matter how high.
Second, the test fails to account for the degree of variability in prices; by collapsing the degree of
variability into a single average number, the test produces absurd outcomes.151
169. A “fair” arm’s-length test would incorporate some statistically valid technique to identifythose prices that are “ outliers,” whether they are lower or higher than prices charged to non-affiliated
customers.
152   For example, standard deviation analysis captures both the frequency and the
magnitude of the variation from mean.153  Unless USDOC applies a statistically valid test,
comparisons of normal value and export price under US will remain unfair, in violation of Article 2.4.
(b) Replacing a respondent’s home market sales with its affiliate’s downstream resales is
inconsistent with Article 2.4
170. As discussed above, Japan believes that the use of downstream home market sales to replace
sales to affiliated parties is not permitted by Article 2.2 and 2.3 in accordance with the principle of
expressio unius est exclusio alterius  (to specify one thing is to exclude all other things).  Japan also
believes that the use of such downstream sales violates the requirement of Article 2.4 that a “fair
comparison” be made with the respondent’s US sales.  Comparison of downstream sales in onemarket with ex-factory sales in the other market is an apples-to-oranges comparison.  Prices of
downstream sales can only be higher than the prices of a producer’s direct sales, in order to cover the
additional transaction costs and profit.  These downstream home-market sales are often at a different
                                                     
151 See  also Affidavit of Edward J. Heiden and John Pisarkiewicz, Statisticians  (Exh. JP-56 ) (resumes
of Mr. Heiden and Mr. Pisarkiewicz accompany their affidavit).
152 Panels have rejected statistically invalid methodologies.  See e.g . US—Atlantic Salmon,  at para. 426.
153 See Affidavit of Edward J. Heiden and John Pisarkiewicz, Statisticians  (Exh. JP-56 ).  In the
underlying investigation, NKK specifically proposed that USDOC adopt a standard-deviation methodology to
replace the 99.5 per cent rest.  USDOC rejected this alternative, not because it was flawed but because USDOCfelt the 99.5 per cent test was not unreasonable.  USDOC Final Dumping Determination,  64 Fed. Reg. at 24342
(Exh. JP-12 ).WT/DS184/R
Page A-47
level of trade, and therefore cannot be compared to export sales made directly to unaffiliated
customers under Article 2.4.  USDOC’s comparison of resales to direct sales is virtually certain to
result in artificially inflated dumping margins, and are therefore not “fair comparisons.”
VII. USDOC’S CRITICAL CIRCUMSTANCES DETERMINATIONS ARE
INCONSISTENT WITH ARTICLE 10 OF THE ANTI-DUMPING AGREEMENT
171. In this case, USDOC issued an unprecedented early finding of “critical circumstances” —
allowing retroactive imposition of anti-dumping measures — based solely on allegations in the
petition.  This action essentially stopped exports of hot-rolled steel from Japan.  After USDOC’s late
November announcement, Japanese imports fell precipitously from 399,927 tons in November 1998
to a mere 14,437 tons in January 1999.
172. USDOC’s critical circumstances finding in this case violated US obligations under the Anti-
Dumping Agreement in three respects.  First, Article 10.6 requires that a preliminary critical
circumstances finding be based on evidence of injury, not a mere threat of injury as had been found in
this case.  Second, USDOC’s critical-circumstances finding was not supported by “sufficient
evidence” as required by Article 10.7.  In both of these respects, the determination made in this case,and the new USDOC Policy Bulletin that precipitated the determination, violated the Anti-Dumping
Agreement.  Third, the evidentiary standards governing preliminary critical circumstances findings,
on their face, fail to meet the “sufficient evidence” standard of Article 10.7.
A. BACKGROUND ON US LAW AND PRACTICE
173. Section 733(e)(1) of the Tariff Act of 1930, as amended, allows the USDOC to impose anti-
dumping duties retroactive 90 days prior to a preliminary determination of dumping.  The statute
provides:
If a petitioner alleges critical circumstances in its original petition, or by amendment
at any time more than 20 days before the date of a final determination by {USDOC},
then {USDOC} shall promptly (at any time after the initiation of the investigation
under this part) determine, on the basis of the information available at that time,
whether there is a reasonable basis to believe or suspect that—
(A)(i) there is a history of dumping and material injury by reason of
dumped imports in the United States or elsewhere of the subject merchandise, or
(ii) the person by whom, or for whose account, the merchandise was
imported knew or should have known th at the exporter was selling the subject
merchandise at less than its fair value and that there was likely to be material injury
by reason of such sales, and
(B) there have been massive imports of the subject merchandise over a
relatively short period.
154
174. Regarding the statutory criterion of “massive imports . . . over a relatively short period,” therelevant regulation provides that USDOC:
normally will consider a “relatively short period” as the period beginning on the date
the proceeding begins and ending at least three months later.  However, if {USDOC}
                                                     
154 Codified at 19 U.S.C. § 1673b(e)(1) ( Exh. JP-4 ).  The corresponding provision for final
determinations of critical circumstances is section 735(a)(3), 19 U.S.C. § 1673d(a)(3).WT/DS184/R
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finds that importers, or exporters or producers, had reason to believe, at some time
prior to the beginning of the proceeding, that a proceeding was likely, then {USDOC}
may consider a period of not less than three months from that earlier time.155
175. USDOC fleshed out this regime with four spec ific policies.  First, the normal practice had
been not to announce a finding of critical circumstances until USDOC’s preliminary determination ofdumping.  This practice allowed USDOC to have the benefit of its own preliminary assessment of
possible anti-dumping margins, and not just petitioner’s allegations, when deciding whether importersshould have known about the dumping.  Until this case, USDOC apparently followed this practice
without exception, as evidenced by the formal announcement — coincident with the hot-rolled case
— indicating that USDOC decided to depart from that practice in this case.
156
176. Second, USDOC formerly interpreted the US stat ute to require a preliminary determination of
current injury by USITC during the period examin ed.  USDOC deemed a preliminary determination
of threat of injury to be insufficient.  In USDOC’s own words:
When {USITC} has preliminarily found no reasonable indication that a US industry
is experiencing present material injury by reason of the dumped subject merchandise,but only a threat of such injury, {USDOC} has determined that it is not reasonable to
conclude that an importer knew or should have known that its imports would cause
material injury.
157
In cases beginning in late 1997, USDOC without any explanation reversed this practice and issuedcritical-circumstances determinations even though USITC preliminarily found only the threat ofmaterial injury.
158   Interestingly, USDOC made this change in cases involving imports of steel from
non-WTO members - i.e., cases which could not be challenged in the WTO.
177. Third, in determining whether the importers “knew or should have known” that the subject
merchandise was dumped, USDOC normally considers margins of 15 per cent or more sufficient toimpute knowledge of dumping for constructed export price sales, and margins of 25 per cent or more
for export price sales.
159   In this case, however, USDOC used the inflated margins alleged in the
petition to meet this requirement.
178. Finally, in selecting a “relatively short period” for measuring whether imports have increased
massively, USDOC had traditionally examined the change in import levels from each investigated
company over the periods immediately preceding and immediately following the initiation of the
                                                     
155 19 C.F.R. § 351.206(i) ( Exh. JP-5 ).
156 USDOC Critical Circumstances Policy Bulletin  (Exh. JP-3 ); see also   19 C.F.R. § 351.206(c)(2), as
amended (Regulation Concerning Preliminary Critical  Circumstances Findings:  Final Rule,  64 Fed. Reg.
48706 (8 Sept. 1999)) ( Exh. JP-5 ).  USDOC’s policy of waiting until the dumping determination reflected the
fact that the US statute (like the Anti-Dumping Agreement) does not allow collection of retroactive duties unlessand until USDOC renders an affirmative preliminary dumping determination.  19 U.S.C. § 1673b(e)(2) ( Exh.
JP-4 ).
157 Notice of Final Determinations of Sales at Less Than Fair Value: Brake Drums and Brake Rotors
From the People’s Republic of China,  62 Fed. Reg. 9160, 9164 (28 Feb. 1997).
158 See Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel
Plate From the People’s Republic of China,  62 Fed. Reg. 61964, 61967 (20 Nov. 1997) (the other countries
were Russia and Ukraine, id. at 61793, 31961-62).
159 See, e.g., Notice of Preliminary Determination of Sales at Less Than Fair Value: Emulsion Styrene-
Butadiene Rubber From the Republic of Korea,  63 Fed. Reg. 59514, 59518 (4 Nov. 1998).WT/DS184/R
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investigation.160   At the earliest, USDOC would examine a period before and after the date the
petition was filed.161   In this case, however, USDOC examined the six months preceding initiation.
B. SUMMARY OF THE FACTS:  USDOC’S CRITICAL  CIRCUMSTANCES FINDINGS
179. USDOC’s practice changed in significant respects to accommodate political pressure
accompanying the petition against hot-rolled steel imports.  The petition filed on 30 September 1998,
asked that USDOC depart from its standard practice and make a critical circumstances determination
within thirty days of initiating the investigation.162   In response to intense political pressure from the
US steel industry163,  USDOC issued a Policy Bulletin — dated 8 October 1998, only eight days after
the petition was filed — announcing that USDOC would now issue critical circumstances
determinations “as soon as possible after initiation” of an investigation.164
180. To facilitate expedited critical circumstances determinations, the Policy Bulletin alsoannounced that USDOC would have to start examining “earlier base periods” to determine if
“importers, exporters or producers had reason to believe that a case was likely to be filed."
165
181. In response to the Policy Bulletin and the petitioners' request for an early criticalcircumstances determination, five Japanese mills filed a joint letter with USDOC on 26 October 1998,
opposing petitioners’ request.  This submission in cluded detailed argument showing the absence of
any credible evidence to support petitioners’ allegations.
166
182. USDOC nonetheless made its unprecedented preliminary determination of criticalcircumstances on 23 November 1998, eleven weeks before its preliminary determination of
dumping.
167   USDOC blindly accepted the allegations set forth in the petition:  “since we have not yet
made a preliminary finding of dumping, the mo st reasonable source of information concerning
                                                     
160 See, e.g., Preliminary Determination of Sales at Less Than Fair Value; Certain Cut-to-Length
Carbon Steel Plate From Ukraine,  62 Fed. Reg. 31958, 31962 (11 Jun. 1997).
161 See, e.g., Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement
of Final Determination: Certain Preserved Mushrooms From the People’s Republic of China,  63 Fed. Reg.
41794, 41800 (5 Aug. 1998).  In at least one anti-dumping investigation since the hot-rolled steel investigation,USDOC has returned to examining the “relatively short period” before and after the filing of the petition.  See
Preliminary Determinations of Cr itical Circumstances: Certain Small Diameter Carbon and Alloy Seamless
Standard, Line and Pressure Pipe From Japan and South Africa,  65 Fed. Reg. 12509, 12510 (9 Mar. 2000).
162 The petition also requested that the preliminary dumping determination be made separately and not
later than ninety days after  the critical-circumstances determination.  See Petition , Vol. III, at I-3 (excerpts in
Exh. JP-1 ).
163 See supra Part II.B.
164 USDOC Critical Circumstances Policy Bulletin,  63 Fed. Reg. at 55364 ( Exh. JP-3 ).
165 Id. (Exh. JP-3 ).
166 First, rumours in the press are inherently speculative and cannot form a basis for concluding that
importers should have known that an anti-dumping investigation of hot-rolled steel was likely.  Second, themills reviewed the main newspaper articles that allegedly provided “notice” that an anti-dumping case was
imminent; in fact, these articles were ambiguous and rarely discussed either hot-rolled steel specifically or Japan
specifically. Third, the mills reviewed publicly-available information from the same period reporting strongdemand for hot-rolled steel and rising prices; these articles indicated that an importer would not have reason toknow that an anti-dumping investigation was likely.  See Willkie Farr & Gallagher Letter to USDOC of
26 Oct. 1998 ( Exh. JP-57 ).  In addition, NKK filed a separate letter with USDOC on 18 Nov. 1998, arguing that
US law precluded USDOC from rendering an early prelim inary finding in the face of the USITC’s Preliminary
Injury Determination that there was only a threat of injury.  See Willkie Farr & Gallagher Letter to USDOC of
18 Nov. 1998 ( Exh. JP-58 ).
167 USDOC Preliminary Critical Circumstances Determinations, 63 Fed. Reg. at 65750-51 ( Exh.
JP-9 ).WT/DS184/R
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knowledge of dumping is the petition itself."168  Thus, USDOC, for the first time, relied entirely on
the greater-than-25-per cent margins alleged in the petition.
183. On the question of whether importers knew or  should have known that injury would result,
USDOC again relied on the petition.  USDOC cited “numerous press reports from early to mid-1998regarding rising imports, falling domestic prices resulting from rising imports, and domestic buyers
shifting to foreign suppliers” as evidence that importers knew they were injuring US producers.
Though noting that USITC “preliminarily found threat of material injury to the domestic industry due
to imports of hot-rolled steel from Japan,” US DOC concluded nevertheless that importers somehow
should have known that present  material injury — not threat — from the dumped merchandise was
likely.
184. USDOC then carefully selected a time period that exaggerated the growth in imports to
support its finding of “massive” imports.  USDOC agreed with petitioners that a couple of press
articles satisfied its new policy and justified an earlier measurement period for import volumes.
169
185. The following table summarizes the change s to USDOC's critical circumstances practice
made in this case:
Issue of Methodology Traditional USDOC Practice
Before  the Investigation of
Hot-rolled Steel from JapanUSDOC Practice
During  the Investigation of
Hot-rolled Steel from Japan
 Timing of theAnnouncementContemporaneous with the preliminary
dumping determination“As soon as possible after initiation”
Basis for Imputing
Knowledge of Injury to
ImportersInjury only, not threat (until 1997 cases
involving imports from China, Russia,
and Ukraine)Injury or threat
Basis for Imputing
Knowledge of Dumping
to ImportersCalculations of the dumping margin
based on questionnaire responses and
other record dataAllegations in the petition, including
(1) the magnitude of dumping
margins alleged, and(2) selected newspaper reports
Reference Point for the
“Relatively Short Period”
in Which to MeasureImport Volumes(1) Initiation of the investigation, or
(2) Date the petition is filedArbitrary date six months before
petition was even filed
The result of these new practices, as applied in the hot-rolled case, was to find the existence of critical
circumstances for all imports of hot-rolled steel from Japan and to require, upon issuance of an
affirmative preliminary dumping determination, that entries of all such imports during the 90-day
period prior to the preliminary dumping determination be subject to duty collection at the rates
determined in the preliminary dumping determination.170  Eleven weeks later, in its preliminary
dumping determination, USDOC affirmed its earlier preliminary critical circumstances decision anddirected the US Customs Service to require a cash deposit or posting of a bond, in order to ensure that
duties are collected retroactively as previously described.
171
186. USDOC applied the same analysis in its final dumping determination, but had to make a few
adjustments in light of the facts.  Specifically, USDOC could not find critical circumstances for NSC
and NKK, because the final dumping margins for these two companies were each less than 25 per
                                                     
168 Id. at 65750 ( Exh.JP-9 ).
169 Id. at 65751  (Exh. JP-9 ).
170 Id.
171 USDOC Preliminary Dumping Determination , 64 Fed. Reg. at 8299 ( Exh. JP-11 ).WT/DS184/R
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cent.172   USDOC indicated it would refund cash deposits and release any bonds on entries of these
companies’ product during the critical-circumstances period.  As to KSC and “all others,” however,
USDOC continued to find critical circumstances and maintained the suspended liquidation for imports
of the products from these companies.173
187. In the final phase of its investigation, USITC found that critical circumstances did not exist,so USDOC could not impose retroactive duties on hot-rolled steel imports from Japan.  However,
application of the new Policy Bulletin in USDOC’s preliminary critical circumstances determination
warned importers that they would be liable for retroactive duties of unknown magnitude.  The
uncertainty introduced by the preliminary finding quickly shut down trade.  Monthly import statistics
show that imports of hot-rolled steel from Japan plummeted from 399,927 tons per month in
November 1998 (the month of the actual preliminary critical circumstances finding) to 91,225 tons inDecember 1998, 14,437 tons in January 1999, and barely 4,300 tons in February 1999  all prior to the
preliminary dumping determination.
174
C. USDOC VIOLATED ARTICLE 10 OF THE ANTI-DUMPING AGREEMENT
1. Article 10.6 does not permit a finding of critical circumstances based solely on threat of
material injury
188. Article 10.6 limits the application of retroactive duties to situations where there is present
injury, not threat.  Yet, in this case, USDOC issued  its preliminary finding of critical circumstances
notwithstanding USITC’s determination that there was no reasonable indication of present injury, but
merely a reasonable indication of threat thereof.
189 Article 10.6 authorizes retroactive duties only when “the authorities determine” that both of
the following exist:
(i) there is a history of dumping which caused injury or that the importer was, or should
have been, aware that the exporter practices dumping and that such dumping would
cause injury, and
(ii) the injury is caused by massive dumped imports of a product in a relatively short time
which in light of the timing and the volume of the dumped imports and other
circumstances (such as a rapid build-up of inventories of the imported product) is
likely to seriously undermine the remedial effect of the definitive anti-dumping dutyto be applied, provided that the importers concerned have been given an opportunity
to comment.  (Emphasis added.)
                                                     
172 It is worth noting that the petition only contained estimated dumping margins for NSC and NKK,
which turned out to be inflated.  USDOC had therefore applied critical circumstances in its preliminary finding
based on incorrect petition data for the two companies for whom critical circumstances were not found in the
final determination.
173 USDOC Final Dumping Determination,  64 Fed. Reg. at 24369-70 ( Exh. JP-12 ).  USDOC’s
justification for these findings was the magnitude of th e final dumping margins exceeded 25 per cent.  As noted
elsewhere in this submission, however, these margins were wrongly inflated by USDOC’s improper resort toadverse facts available against KSC and USDOC’s improper use of the facts-available rates in calculating the“all others” rate.  See supra  Part V and VI.
174 We note that in the final phase of its investigation, USITC found that critical circumstances did not
exist.  USITC Final Injury Determination , USITC Pub. 3202 at 21-23 ( Exh. JP-14 ).  Under US law, USDOC
could therefore not impose retroactive duties.  At this la te stage in the process, however, the chilling effect on
imports had already occurred and the early announcement had served its purpose.WT/DS184/R
Page A-52
190. The plain language of Article 10.6 consistently specifies that a finding of “injury” must be
made, not mere “threat of injury.”  Under a general principle of treaty interpretation, by specifying
“injury,” the Agreement excludes alternative concepts such as “threat of injury."175
191. Context confirms this interpretation.  Throughout Article 10, “injury” is consistentlydistinguished from “threat of injury” in the context of whether anti-dumping duties may be imposed
retroactively.
176  Article 10.2 provides:
Where a final determination of injury (but not a threat thereof or a material
retardation of the establishment of an industry)  is made or, in the case of a final
determination of a threat of injury, where the effect of the dumped imports would, in
the absence of the provisional measures, have led to a determination of injury, anti-dumping duties may be levied retroactively for the period for which provisional
measures, if any, have been applied.  (Emphasis added.)
Article 10.2 thus expressly distinguishes “injury” from “threat thereof” and permits retroactive anti-
dumping duties only if there is a determination of current injury.  A threat determination alone is
insufficient:  retroactive duties may be levied after finding threat only if there would have been a finalinjury determination absent provisional measures
.
192. Similarly, Article 10.4 provides that remedies for threat of injury should be prospective only.
Article 10.4 provides:
Except as provided in paragraph 2, where a determination of threat of injury or
material retardation is made (but no injury has yet occurred)  a definitive anti-
dumping duty may be imposed only from the date of the determination of threat of
injury or material retardation, and any cash deposit made during the period of the
application of provisional measures shall be refunded and any bonds released in anexpeditious manner.  (Emphasis added.)
Logically, threat of some future (and not yet realized) injury does not require remedial measures to be
applied retroactively, except for the limited situation set forth in Article 10.2.
193. Thus “injury,” as used throughout Article 10, cannot be interpreted as a generic term covering
injury, threat of injury, and material retardation.  The text of Article 10.6, and the context provided by
paragraphs 2 and 4 of that Article, indicate that retroactive duties may be imposed only to addressactual “injury” in the past, not to address a “threat of injury” in the future.
194. These provisions reflect a strong desire to restrain retroactive provisional measures.  It makes
no sense to interpret Article 10.6 broadly as allowing precisely the type of retroactivity that
Articles 10.2 and 10.4 seek to prevent.  The need to avoid excessive retroactivity is even greater in thepreliminary stages of an investigation, where incomplete information can lead to measures that
unjustifiably disrupt trade.
195. In this case, USDOC exploited the ambiguity of the US statute, which does not adequately
distinguish between injury and threat, to make a findi ng of critical circumstances.  Despite a negative
                                                     
175 Expressio unius est exclusio alterius (to specify one thing implies the exclusion of another).  See
generally Lord McNair, The Law of Treaties  399-410 (1961) (excerpts in Exh. JP-54) .
176 In Article 3 of the Anti-Dumping Agreement, footnote 9 provides that the word "injury" includes
"threat of material injury" as well as other concepts "unless otherwise specified" .  (Emphasis added.)  Consistent
with this footnote, Article 10 specifies certain distinctions between injury and threat in the context of retroactiveduties.WT/DS184/R
Page A-53
current injury determination by USITC, USDOC relied  on petitioners’ claims to make an affirmative
critical circumstance finding.177
196. In addition, USDOC's finding of present injury was contrary to USITC's finding of no present
injury.178  USDOC acknowledged USITC’s preliminary de termination of threat, but explained that
“therefore {we} also considered other sources of information, including numerous press reports.179  In
other words, USDOC ignored the US agency entrusted to make injury determinations, and the
deliberations of that agency.  USDOC replaced USITC deliberation about the facts with petitioners’
self-serving selection of press reports.  This establishment of a critical fact was improper, and the
USDOC evaluation of the facts was neither unbiased nor objective.
2. USDOC ignored the requirement of Article 10.7 to have sufficient evidence
(a) Article 10.7 expressly requires “sufficient evidence” that the elements of Article 10.6
have been met
197. Article 10.7 requires that the steps necessary to collect retroactive duties may be taken only
on the basis of “sufficient evidence.”  In this investigation, USDOC’s preliminary critical
circumstances finding was based merely on allegations in the petition and on the newspaper articlesthe US steel industry attached to its petition.  It was not supported by “sufficient evidence.”
198. Article 10.7 establishes the evidentiary standard for Article 10.6:  the authorities may impose
retroactive duties as described in Article 10.6 — including “withholding of appraisement” — only
when they have “sufficient evidence” that the conditions for critical circumstances are met.  Thesufficiency standard of Article 10.7 is therefore essential to the question of whether the US finding of
critical circumstances is consistent with the substantive elements of Article 10.6.
199. Other Panels have evaluated the meaning of “sufficient evidence” in analogous contexts.  In
the US—Softwood Lumber  case, the Panel explained that “sufficient evidence” means:
more than mere allegation or conjecture, and could not be taken to mean just “any
evidence.”  In particular, there had to be a factual basis to the decision of the national
investigative authorities and this factual basis had to be susceptible to review under
the Agreement.
180
A recent WTO Panel confirmed that “sufficient evidence” is a meaningful, objective standardrequiring more than a mere allegation.  In Mexico—High Fructose Corn Syrup, the Panel examined
whether Mexico had “sufficient evidence” to initiate an anti-dumping investigation.  The Panel
framed its task as determining “whether 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” its decision.
181
                                                     
177 USITC Preliminary Injury Determination, USITC Pub. 3142 at 1 ( Exh. JP-8 ).  USITC ultimately
based its final affirmative determination on current  injury.  USITC Final Injury Determination , USITC Pub.
3202 at 1 ( Exh. JP-14 ).  However, this determination was made in July 1999, more than six months after
USITC had found a reasonable indication of threat  in its preliminary determination.
178 USDOC Final Dumping Determination,  64 Fed. Reg. at 24335-37 ( Exh. JP-12 ).
179 Id. at 24337-38 ( Exh. JP-12 ).
180 United States—Measures Affecting Imports of Softwood Lumber from Canada , adopted
27 Oct. 1993, BISD 40S/358, at para. 332 ( “US—Softwood Lumber”); Cf. United States—Measure Affecting
Imports of Woven Wool Shirts and Blouses From India,  adopted 25 Apr. 1997, WT/DS33/AB/R, at para. 16
(“US—Wool Shirts” ).
181 Mexico—Antidumping Investigation of High Fructose Corn Syrup (HFCS) from the United States,
adopted on 28 Jan. 2000, WT/DS132/R, at para. 7.57 (“Mexico—High Fructose Corn Syrup” ).WT/DS184/R
Page A-54
200. The standard of sufficiency is higher when applying accelerated provisional measures than it
is when initiating an investigation.  After all,  provisional measures benefit (ideally) from some
investigation, whereas initiations (by definition) do not.  Furthermore, provisional measures have a
more dramatic commercial consequence and should therefore reflect a more careful examination of
evidence than initiation.
(b) USDOC imposed provisional measures without having “sufficient evidence” within
the meaning of Article 10.7
201. In this case, USDOC did not have “sufficient evidence” to sustain its preliminary finding of
critical circumstances.  The evidentiary basis for this decision, was virtually non-existent and
therefore not “sufficient” or “legally satisfactory.”  An “unbiased and objective” analysis could not
have led to the conclusion that the evidence was “sufficient.”  To meet the requirements of
Articles 10.6 and 10.7, USDOC would have needed:
• “sufficient evidence” that “the importer was, or should have been, aware that the exporter
practices dumping and that such dumping would cause injury”; and
• “sufficient evidence” that “the injury is caused by massive dumped imports of a product in a
relatively short time”; and
• “sufficient evidence” that the massive dumped imports are “likely to seriously undermine the
remedial effect of the definitive anti-dumping duty to be applied.”
USDOC failed to meet any of these requirements.
202. USDOC lacked sufficient evidence of dumping.  As USDOC admitted, there was no history
of dumping hot-rolled steel from Japan.182  USDOC had no actual evidence; it found that importers
knew or should have known of dumping by relying solely on the dumping margins alleged in the
petition, all of which happened to exceed 25 per cent.  Therefore, USDOC had no evidence apart from
the allegations — much less sufficient  evidence as required by Article 10.7 — to support the
necessary findings required in Article 10.6(i).  USDOC essentially found that importers should have
known they were dumping because petitioners alleged they were dumping.
203. USDOC also had no sufficient evidence of injury.  To establish that importers should have
known the allegedly dumped imports caused injury, an element of Section 733(e)(1)(A)(ii) as well asArticle 10.6(i), USDOC relied on the press reports attached to the petition.
183  Such press reports, even
if true, are not consistent with a finding of current injury.  Indeed, after a preliminary investigation,
USITC found not even a “reasonable indication” of injury, but only a reasonable indication of the
threat of future injury.  Far from indicating injury, the data collected by USITC demonstrated that:
The industry was relatively healthy during much of the period examined.  Capacity,
production, shipments, and net sales all increased during the period.  Employmentindicators generally held steady, and the industry’s productivity improved.
184
USITC thus lacked sufficient evidence to support a necessary finding under Article 10.6(ii) that injuryexisted or that, under Article 10.6(i), importers sh ould have been aware of it.  Indeed, the USITC
findings proved exactly the opposite, and the USDOC essentially ignored these findings.
                                                     
182 Therefore, USDOC could not rely on Section 733( e)(1)(A)(I) as a basis for a critical circumstances
determination.  USDOC Preliminary Critical Circumstances Determination , 63 Fed. Reg. at 65750 ( Exh. JP-9 ).
183 Id. (Exh. JP-9 ).
184 USITC Preliminary Injury Determination,  USITC Pub. 3142 at 17 (emphasis added) ( Exh. JP-8 ).WT/DS184/R
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204. Finally, USDOC lacked sufficient evidence of “massive dumped imports” over a relatively
short period.  USDOC departed from its normal practice of assessing the period before and after the
filing of a petition ( i.e., 30 September 1998) or initiation of the investigation ( i.e., 15 October 1998)
for determining whether “massive imports” existed.  Instead, USDOC found that importers, exporters,
or producers had reason to believe that an anti-dumping investigation of hot-rolled steel from Japanwas “likely” as early as April 1998.
185   USDOC therefore picked the five months preceding and the
five months following this arbitrary date to determine whether imports were  “massive.”  Again, the
only basis for this finding was general press reports of the possibility of anti-dumping cases against
steel products generally from foreign countries generally.  Only one or two obscure articles mentioned
either Japan or hot-rolled steel specifically.  As a result of its essentially arbitrary selection of April
1998 as the point from which a reasonable importer should have believed an anti-dumping
investigation of hot-rolled steel from Japan to be imminent, USDOC never even acknowledged the
fact that imports of hot-rolled steel from the Ja panese companies subject to investigation actually
declined during the period after the petition was filed.186
205. It is important to recall the remedial purpose of retroactive duties in evaluating the
determination of “ massive dumped imports.”  USDOC ignored the entire second half ofArticle 10.6(ii), which explains why “massive” imports are even important:  because the injury caused
by the imports’ timing and volume “is likely to seriously undermine the remedial effect of the
definitive anti-dumping duty to be applied.”  USDOC conveniently made no mention of this element
in any of its determinations.  Indeed, it is impossible to reason how “massive imports” occurring
before a petition is filed could in any way undermine the remedial effects of an anti-dumping duty,when the earliest the duty could be applied is 90 days before the preliminary dumping determination.
This period — between the petition and the announcement of provisional measures —  should be the
benchmark for determining whether the imports were “massive” (as it was under US law until the
petition was filed in this case).
206. Previous Panels have already recognized that allegations are not sufficient evidence.
187   As
the Appellate Body has observed, it is “difficult, indeed, to see how any system of judicial settlement
could work if it incorporated the proposition that the mere assertion of a claim might amount to
proof."188   Yet in this case USDOC relied on nothing but allegations and press clips.  In the face of
USITC’s preliminary decision that there was only a threat of injury, “an unbiased and objective
investigating authority evaluating that evidence” c ould not “properly have determined that sufficient
evidence” existed to justify a preliminary critical circumstances finding.189   As USDOC has admitted
elsewhere, “it would be extremely unfair to importers and exporters to subject entries not already
suspended to suspension of liquidation and possible duty assessment with no prior notice and based
on nothing more than a domestic interested party’s allegation."190
207. Instead of waiting for its own analysis of dum ping margins, instead of respecting the USITC
judgment that there was only threat of injury, instead of waiting to see the import trends after the case
had been filed, USDOC abandoned an unbiased and objective assessment of the situation and instead
jumped to conclusions based on petitioners’ self-serving allegations.  Application of the policy set in
USDOC’s new Policy Bulletin caused these abuses.  The Policy Bulletin will continue to cause
similar abuses in the future.
                                                     
185 USDOC Preliminary Critical Circumstances Determination  , 63 Fed. Reg. at 65751.  ( Exh. JP-9 ).
186 USDOC Final Dumping Determination, 64 Fed. Reg. at 24337-38 ( Exh. JP-12 ).
187 US—Softwood Lumber, at para. 332.
188 US—Wool Shirts,  at 14 (emphasis added).
189 Mexico—High Fructose Corn Syrup,  at para. 7.57.
190 Anti-Dumping Duties; Countervailing Duties; Final Rule , 62 Fed. Reg. 27296, 27328
(19 May 1997) (commenting on proposed change to USDOC regulations governing suspension of liquidation)(excerpts in Exh. JP-39 ).WT/DS184/R
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3. On its face, the US statute does not me et the “sufficient evidence” requirement of
Article 10.7 in making determinations under Article 10.6
208. Section 733(e) of the Tariff Act of 1930 is inconsistent on its face with the requirements of
Article 10.6 and 10.7.  US law does not ensure that the US authorities respect the explicit
requirements of Article 10 in applying retroactive provisional measures.  This standard of “ sufficientevidence” represents the essential safeguard against arbitrary imposition of the extraordinary remedy
of retroactive provisional measures.  Whether at the preliminary stage of withholding assessment or
the final stage of levying actual duties (final estimated  duties under US law), retroactive measures
have an extraordinary chilling effect on trade, and must be invoked only when permitted by
Article 10.
209. US law violates Articles 10.6 and 10.7 in at least two ways.  First, US law does not require
the findings of fact required by Article 10.6.  More specifically, at the preliminary stage, US law
requires no finding that the massive dumped imports are “likely to seriously undermine the remedial
effect” of the duty, notwithstanding the clear requirement of Article 10.6(ii) to do so.  US law also
requires only that “there have been massive imports,” notwithstanding the Article 10.6(ii) requirement
of a determination that “the injury is caused by massive dumped imports."
191 The US statute thus
simplistically looks only to an increase in the volume of imports, and does not require any analysis
that the massive imports have been dumped or have caused injury.  The US law does not require
USITC or USDOC to look at this issue, and they do not do so.
210. Second, although Article 10.7 requires “sufficient evidence” of the elements of Article 10.6,
US law requires only “a reasonable basis to believe or suspect” that conditions of critical
circumstances exist.  This is a much lower threshold.  What is “reasonable” is not necessarily
“sufficient” and what one “believes or suspects” is not necessarily “evidence.”  The US statute directs
USDOC to find critical circumstances based on me re suspicion or belief, without any real evidence.
The mere existence of this provision chills tr ade because importers know that USDOC can find
critical circumstances based on a whim and a petitioner’s unfounded allegation.  When these low
standards combine with the new policy to make these determinations even earlier, and with even less
evidence, the failure to meet Article 10 requirements becomes more serious.
211. Even worse, US law allows USDOC to speculate about matters on which USITC has
expertise.  USITC makes decisions based on an investigation specifically geared toward determining
the existence of material injury by reason of imports.  USDOC does not undertake such investigationsand therefore does not collect the same amount of evidence on the question of injury.  To the extent
US law permits USDOC to ignore the expertise of USITC, it violates the sufficient evidence
requirements of Articles 10.7.
212. Section 733(e) of the Tariff Act of 1930, therefore, is facially inconsistent with Articles 10.6
and 10.7.  The US statute sets forth an evidentiary standard that does not meet the sufficiency standard
required to apply provisional measures retroactively and does not require findings of fact necessary to
apply retroactive provisional measures under Article 10 of the Anti-Dumping Agreement.
4. Because USDOC’s preliminary critical circumstances findings and the relevant US
statutory provisions violate Articles 10.6 and 10.7, they also violate Article 10.1.
213. Article 10.1 of the Anti-Dumping Agreement provides that:
Provisional measures and anti-dumping duties shall only be applied to products which
enter for consumption after the time when the decision taken under paragraph 1 ofArticle 7 (provisional measures) and paragraph 1 of Article 9 (imposition and
                                                     
191 Section 733(e)(1)(b), 19. U.S.C. § 1673b(e)(1)(b) ( Exh. JP-4 ).WT/DS184/R
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collection of anti-dumping duties), respectiv ely, enters into force, subject to the
exceptions set out in this Article.
Thus, determinations to levy anti-dumping duties retroactively are permissible only if justified by one
of the “exceptions set out in this Article.”  Since, as established in the previous sections, USDOC’s
preliminary critical circumstances finding and the US statutory provision governing such findings arenot justified by one of the exceptions and thus violate Articles 10.6 and 10.7, they also violate
Article 10.1.
VIII. USITC’S INJURY AND CAUSATION D ETERMINATIONS WERE INCONSISTENT
WITH ARTICLES 3 AND 4 OF THE ANTI-DUMPING AGREEMENT
214. US law and practice regarding injury and causation are inconsistent with WTO obligations.
First, the captive production provision of US law, both on its face and as applied in this case, isinconsistent with US obligations under the An ti-Dumping Agreement because it requires USITC
under certain circumstances to focus its causation and injury analysis on a narrow segment of an
industry rather than the industry as a whole.
215. Second, USITC’s causation analysis in the hot-rolled steel case, already tainted by the captive
production provision, suffered from a variety of other infirmities.  In analyzing the domestic
industry’s condition, USITC departed from long-sta nding practice and ignored the first year of its
three-year period of investigation, focusing instead on the domestic industry’s record-breaking
performance in the second year and the decline from that year in the final third year.  USITC also
summarily dismissed or completely ignored an array of alternative causes of injury to the hot-rolledsteel industry, failing both to consider all known alternative causes of injury and to conduct an
objective analysis.
A. THE CAPTIVE PRODUCTION PROVISION, BOTH ON ITS FACE AND AS APPLIED
IN THIS CASE, IS INCONSISTENT WITH ARTICLES 3 AND 4 OF THE ANTI-DUMPING AGREEMENT
1. Background on US law and practice
216. The US statute requires that USITC determine whether an industry in the United States is
injured “by reason of” imports from the country being investigated.
192   The statute provides guidance
to USITC for evaluating the volume, the price, a nd the impact of the imports being investigated.
217. Although in most cases USITC analyzes the domestic industry as a whole, USITC sometimes
narrows its inquiry under the captive production provision:
If domestic producers internally transfer significant production of the domestic like
product for the production of a downstream article and sell significant production of
the like product in the merchant market, and the Commission finds that —
(i) the domestic like product produced that is internally transferred for
processing in other downstream article does not enter the merchant market for the
domestic like product,
(ii) the domestic like product is the predominant material input in the production
of that downstream product, and
                                                     
192 19 U.S.C. § 1673b(a)(1) ( Exh. JP-4 );  19 U.S.C. § 1673d(b)(1) ( Exh. JP-4 );  19 U.S.C. §
1677(7)(B) ( Exh. JP-4 ).WT/DS184/R
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(iii) the production of the domestic like product sold in the merchant market is not
generally used in the production of that downstream article
then the Commission, in determining market share and the factors affecting financial
performance set forth in clause (iii), shall focus primarily on the merchant market for
the domestic like product.193
218. When the statutory language “shall focus primarily” applies, USITC does not meaningfully
examine the remainder of the domestic industry’s output — the so-called “captive production”
consumed to make downstream products.  The use of “shall” strips away any USITC discretion to
make case-by-case determinations.  The use of “focus” skews the analysis to the merchant market at
the expense of the rest of the domestic industry.  The statute then adds the modifier “primarily” to
narrow the focus even more.  Given that the domestic industry consists of both captive and merchant
market production, USITC is not considering domestic producers “as a whole” when its injury andcausation analysis is “primarily focused” on the merchant market segment.
219. This provision appeared in US law in 1994 at the urging of the US steel industry.  After losing
several injury determinations on hot-rolled steel (including from Japan) in 1993
194, the US steel
industry wanted to amend the trade laws to make affirmative injury determinations more likely in thefuture.  In the 1993 case concerning hot-rolled steel, USITC properly focused on the industry as a
whole and cited substantial captive production as an important condition of competition that shielded
domestic producers from import competition, a factor that contributed significantly to its negative
injury and threat determinations.
195   The industry was determined to reverse this analytic approach to
captive production, first with a failed legal challenge196,  followed by a vigorous lobbying campaign to
influence the Uruguay Round Agreements implementing legislation.197   The Committee to Support
US Trade Laws, consisting of domestic steelmakers and their outside counsel, issued a list of 34
“imperatives” for the implementing legislation, including a captive production provision prohibiting
USITC from considering captive production in its injury and causation analysis.  The steel industry
itself proposed that captive production should only be considered by USITC as part of the domesticindustry if it is shown to compete directly with  subject imports.  Eventually the Administration
acquiesced to this political pressure and the captive production provision became part of US law.
                                                     
193 Section 771(7)(c)(iv) of the Tariff Act of 1930, as amended (19 U.S.C. § 1677(7)(C)(iv)) (emphasis
added) ( Exh. JP-4 ).  The merchant market segment of an industry is that segment consisting of commercial
shipments on the open market, for example, to original equipment manufacturers or independent distributors.
The “captive” segment of the market consists of the same  like product produced for internal consumption for the
production of further-processed, downstream products, such as when hot-rolled steel is internally transferred bya company to its cold-rolling mill, where it is further processed into a thinner-gauge product known as cold-rolled steel.
194 Certain Flat-Rolled Carbon Steel Products From Argentina, Australia, Austria, Belgium, Brazil,
Canada, Finland, France, Germany, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Poland,
Romania, Spain, Sweden, and the United Kingdom,  Inv. Nos. 701-TA-319-332, 334, 336-342, 344, and 347-353
(Final), and Inv. Nos. 731-TA-573-579, 581-592, 594-597, 599-609, and 612-619 (Final), USITC Pub. 2664(Aug. 1993) ( “1993 Flat-Rolled Steel Case” ) (excerpts in Exh. JP-59 ).  This broad case involved four different
“like products”:  plate, hot-rolled steel, cold-rolled steel, and galvanized steel.
195 Id. at 15-18 ( Exh. JP-59 ).  The economic logic behind this “shielding effect” is discussed further
below.
196 USITC’s analysis was affirmed on appeal  to the US Court of International Trade.    See US Steel
Group v. United States , 873 F.Supp. 673, 684 (Ct. Int’l Trade 1994) (excerpts in Exh. JP-60 ).
197 Exh. JP-61  provides a chronology of this campaign, including various articles describing the
domestic industry pressure to change US law.WT/DS184/R
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2. The captive production provision on its face is inconsistent with Articles 3 and 4
220. Articles 3 and 4 require an authority to consider a domestic industry in its entirety throughout
its injury and causation analysis.  The very definition of the term “domestic industry” in Article 4.1 is
“domestic producers as a whole of the like products.”  The definition of “injury” in footnote 9 is
“material injury to a domestic industry, threat of injury to a domestic industry or material retardationof the establishment of such an industry.”  Whenever these two terms are invoked in Articles 3.1, 3.2,
3.4, 3.5, and 3.6, they direct an authority to undertake an “objective examination” of the “domestic
producers as a whole of the like products.”
221. The fundamental logic behind this legal obligation is clear:  authorities may not segment a
domestic industry and focus their analysis on the worst performing segments to find material injury,
and then impose anti-dumping duties benefiting all domestic producers.  Such an examinationcertainly would not be “objective” as required by Article 3.1.  Yet this is precisely what USITC must
do when the captive production provision applies — focus its injury analysis on the merchant market
and potentially find material injury, even if the industry as a whole is not experiencing material injury.
Given the mandatory nature of the captive production provision — and, therefore, the lack of
discretion the USITC has in whether to apply the provision — it is inconsistent with Articles 3 and 4on its face, regardless of its application in the hot-rolled steel case.
(a) The captive production provision ignores the Article 4.1 definition of the “domestic
industry” as the entire productive output of the industry, not part of that output
222. The definition of “domestic industry” in Article 4.1 requires authorities to consider an overall
domestic industry, and not a narrow segment of th at industry.  The provision explains that:
the term ‘domestic industry’ shall be interpreted as referring to the domestic
producers as a whole of the like products or  to those of them whose collective output
of the products constitutes a major proportion of the total domestic production ofthose products.
198
223. The US successfully argued this point in Mexico—High Fructose Corn Syrup, in which it
objected to the Mexican authority’s exclusive focus on one market segment in its causation analysis.
The authority had limited its analysis to the segment of the Mexican high fructose corn syrup industry
serving the industrial market, while completely ignoring the industry segment serving the consumer
market, even though the consumer segment represented 47 per cent of industry revenues.199   T h e
Panel sided with the US finding that the Article 4.1 definition of domestic industry and the footnote 9definition of injury have “unavoidable conseque nces,” namely that “the domestic industry with
respect to which injury is considered and determined must be . . . the domestic producers of the like
product as a whole."
200   While the Agreement does not completely preclude a sectoral analysis, the
Panel found such an analysis is only relevant in so far as it illuminates conditions in the industry as a
whole; the analysis of a particular segment is alone  insufficient  for establishing injury.201
                                                     
198 The New Shorter Oxford English Dictionary  defines “whole” as “the full, complete, or total amount
or extent of.”  A segment or portion of an industry cannot be “the full, complete, or total extent of” an industry.An authority focusing on a segment or  portion of a domestic industry’s output is therefore ignoring theArticle 4.1 definition of “domestic industry.”
199 Mexico—High Fructose Corn Syrup,  at para. 5.490.  SECOFI justified its analysis on grounds that
import competition was limited to the industrial market.  Id. para. 7.159.
200 Id. para. 7.147.
201 Id. para. 7.154.WT/DS184/R
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224. Another Panel adopted a similar definition of domestic industry in Argentina—Footwear.202
Because Argentina had found only one like product, the Panel found Argentina was required to
consider each serious injury factor for domestic producers as a whole of footwear and did not need to
make separate findings for each individual industry segment.203
225. Thus, Panels have consistently embraced the view that the core concept for defining thedomestic industry in Article 4.1 —  “domestic producers as a whole of the like product” — means
precisely what it says.  An authority's finding of injury must be based on an analysis of the industry as
a whole.
204
226. The captive production provision is inconsistent with Article 4.1 on its face.  The provision
compels USITC to focus its analysis primarily on merchant market data, necessarily precluding anybalanced assessment of the data about the industry as a whole, thereby making an affirmative
determination more likely.  Moreover, in addition to distorting USITC’s analysis of market share and
domestic industry financial performance, the captive production provision’s mandatory focus on the
merchant market forces the USITC to ignore the attenuated nature of import competition in the
captive market — a key condition of competition.  From the perspective of the industry as a whole,the higher the proportion of domestic production of a like product consumed in downstream captive
production (rather than in competition with subject imports in the merchant market), the lower the
likelihood that imports could possibly adversely affect the domestic industry’s overall performance.
(b) The captive production provision violates Article 3.2 because it exaggerates subject
import market share relative to all domestic production
227. Article 3.2 provides that the increase in dumped import volume “ shall ” be considered either
in absolute terms or “relative to production  or consumption .”  (Emphasis added.)  In light of footnote
9 and Article 4.1, an authority must consider domesti c producers as a whole of the like products, not a
portion thereof.
228. The Panel in Mexico—High Fructose Corn Syrup  found that Article 3.2 requires an authority
’s market share analysis to encompass the industry as a whole, and not merely an industry segment.
The Panel held that Mexico's market share analysis was inconsistent with Article 3.2, because “the
analysis and findings concerning market share and prices are based on information accounting for
only 53 per cent of the production of the domestic industry, and not information regarding the
domestic industry as a whole."
205   This Panel decision properly recognizes that evaluating market
share based on a narrow market segment invariably distorts the analysis, and precludes an appropriate
consideration of the industry as a whole.
229. The captive production provision likewise violates Article 3.2 by narrowing USITC’s market
share analysis to the merchant market, thereby decreasing apparent consumption, and increasingimport market share.  The market share analysis mandated by the captive production provision mirrors
exactly the market share analysis undertaken by Mexico in Mexico —High Fructose Corn Syrup,
which the United States deemed “particularly egregious.”  To paraphrase the US argument against
                                                     
202 Argentina—Safeguard Measures on Imports of Footwear, adopted on 25 Jun. 1999 WT/DS121/R
(“Argentina—Footwear ”).  Panel reports interpreting the Safeguards Agreement definition of domestic industry
are relevant to interpreting the Anti-Dumping Agreement definition of domestic industry, because the twodefinitions are virtually identical.  See Article 4.2(1)(C).  The Panel report in Mexico—High Fructose Corn
Syrup  specifically noted the relevance of Argentina—Footwear  for interpreting the Anti-Dumping Agreement
on this point. See Mexico—High Fructose Corn Syrup , at 218 n.625.
203 Argentina—Footwear, at paras. 8.135-137.
204 We treat the phrases “industry as a whole” and “producers as a whole” interchangeably throughout
this discussion.  See Mexico—High Fructose Corn Syrup,  at para 7.160.
205 Mexico—High Fructose Corn Syrup,  at para. 7.153.WT/DS184/R
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Mexico’s approach, the “constriction of the denominator of domestic consumption” required by the
captive production provision “greatly exaggerate{s} the level of import market share."206
230. The US argument was accurate and applies here as well.  When the captive production
provision is applied, subject import market share — the ratio of subject import volume to the totalmarket — will always increase.  This distortion occurs because the volume of subject imports (the
numerator) remains unchanged but the volume of domestic shipments (the denominator) shrinks
because USITC “focuses primarily” on the merchant market instead examining the industry as a
whole.
207   The smaller the merchant market, and the less it matters to the overall health of the
domestic industry as a whole, the higher the import penetration.  Imports are perceived to be the
biggest problem in precisely those situations where imports actually matter the least.  It is for
precisely this reason that Article 3.2 requires market share analysis to focus on total production, not anarrow subset.
(c) The captive production provision violates Article 3.4 by requiring an evaluation of
certain key factors based on a narrow segment of the industry
231. Article 3.4 provides that “the examination of the impact of dumped imports on the domestic
industry  concerned shall  include an evaluation of all  relevant economic factors and indices having a
bearing on the state of the industry .”  (Emphasis added.)  In the context of the Article 4.1 definition of
“domestic industry,” Article 3.4 requires an authority to consider “all relevant economic factors” with
respect to “the state of domestic producers as a whole of the domestic like products.”  Thus, an
authority cannot base an injury finding on an analysis of economic factors affecting only a limitedindustry segment.
232. In Mexico—High Fructose Corn Syrup  the Panel clarified:
It is important to differentiate the  consideration of factors  relevant to the injury
analysis on a sectoral basis, so as to gain a better understanding of the actual
functioning of the domestic industry and its specific markets and thus of the impact of
imports on the industry, from the determination of injury  or threat of injury on the
basis of information regarding only production sold in one specific market sector, to
the exclusion of the remainder of the domestic industry’s production.
208
In other words, while a sectoral analysis might prove useful in analyzing certain factors, it cannot bethe basis for a determination of injury.
209
233. The Panel in Korea—Dairy210  went further, embracing the requirement that each relevant
economic factor must be considered with respect to the domestic industry as a whole.211   Th e  E C
                                                     
206 Id. para. 5.491.
207 In this case, the distortion was quite large:  the market share in 1998 increased from 8.4 per cent to
17.7 per cent of consumption value.  On a quantity basis, the increase was from 9.3 per cent to 21.0 per cent.USITC Final Injury Determination,  at C-3, C-5 ( Exh. JP-14 ).
208 Mexico—High Fructose Corn Syrup , para. at 7.154 (emphasis added).
209 This is precisely the point made by the United States in its first submission in the Mexico—High
Fructose Corn Syrup  case .  To quote:
While the AD Agreement does not preclude an analysis of a particular market served by a domestic
industry in the context of an examination of “all releva nt economic factors and includes having a bearing on the
state of the industry” (Article 3.4), it does not permit a determination of material injury or threat thereof to a part
of the domestic industry’s production to be equated with injury or threat to the industry as a whole.
Mexico—Antidumping Investigation of High Fructose Corn Syrup (HFCS) From the United States:
First Submission of the United States of America  at 48 (12 Feb. 1999).  The US cannot reconcile this argument
with the captive production provision.WT/DS184/R
Page A-62
complained that although the Korean authority had found only one domestic industry, it had
considered the raw milk segment for certain injury  factors, and the milk powder segment for others,
instead of considering the industry as a whole.  The Panel found such an approach impermissible
under the provision of the Safeguard Agreement that mirrors Article 3.4 of the Anti-Dumping
Agreement.212
234. When the captive production provision applies, USITC must focus its injury analysis on the
financial performance of the merchant market segm ent, thereby exaggerating the impact of subject
imports.  Domestic production is captively consumed, rather than sold on the merchant market,
precisely when a company can increase profits by selling the downstream product instead of the
upstream product.  The captive production provision thus skews USITC’s focus to the portion of the
domestic industry’s production that is usually less profitable.213   The distortion caused by the captive
production provision is particularly serious as it requires USITC to focus primarily on the merchant
market in determining market share and financial performance instead of generally considering these
two factors.  The market share and financial performance determined through primarily focusing on
the merchant market will almost inevitably provide inflated numbers.
235. Although the factual issues of market share and financial performance form the analytic core
of any injury determination, the captive production provision leaves no discretion to consider fully
both the merchant market and the overall industry.  Nor does the provision require any explanation of
how the merchant market relates to the industry as a whole.  Instead, the smaller an industry’s
merchant market segment, the greater the distortions.  The exaggeration of import market share, andthe depression of domestic industry financial performance, worsen as the percentage of captive
production increases, and USITC’s injury determination rests on an ever smaller portion of the
domestic industry in the merchant market segment.  Article 3.4 does not allow authorities to evaluate
some factors with respect to a narrow segment, and other factors with respect to the industry as a
whole.  All factors must be assessed with respect to the industry as a whole.
                                                                                                                                                                    
210 Korea—Definitive Safeguard Measure on Imports of Certain Dairy Products , WT/DS98/R, adopted
on 21 Jun. 1999 (“ Korea—Dairy ”).  The Panel’s findings with respect to Article 4.2(a) were not appealed to the
appellate body.  See Korea—Definitive Safeguard Measure on Imports of Certain Dairy Products , adopted on
14 Dec. 1999, AB-1999-8 at 18.
211 Article 4.2(a) of the Safeguards Agreement is analogous to Article 3.4 of the Anti-Dumping
Agreement, providing that the serious injury investigation evaluate all relevant factors bearing on the state of the
domestic industry, defined as “domestic producers as a whole of the like products or directly competitiveproducts.”  See Safeguards Agreement, Article 4.2(a) (“In the investigation to determine whether increased
imports have caused or are threatening to cause serious injury to a domestic industry under the terms of thisagreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature
having a bearing on the situation in the industry. . . .”); Article 4.1(c) (“{a} ‘domestic industry’ shall be
understood to mean the producers as a whole of the like or directly competitive products. . . .”).  The Panelreport in Mexico—High Fructose Corn Syrup  specifically noted the relevance of the Panel report in Korea—
Dairy  for interpreting the Anti-Dumping Agreement.  See Mexico—High Fructose Corn Syrup,  at para. 7.155 n.
625.  This Panel then embraced precisely the same interpretation of Article 3.4 itself.  Both plain language ofArticle 3.4 and its context when read with Article 4.1 re quire authorities to assess all factors in relation to the
industry as a whole.
212 The Panel held:  “In considering each of the factors listed in Article 4.2, and any other factors found
to be relevant by the authority, the investigating au thority has two options: for each factor, the investigating
authority can consider it either for all segments, or if it decides to examine it for only one or some segment(s), it
must provide an explanation of how the segment(s) chosen is (are) objectively representative of the wholeindustry.”  Korea—Dairy,  at para. 7.58.  The Panel concluded, “{a} lack of consideration of all segments,
without any explanation, is a flaw we find present in Korea’s analysis.”  Id.
213 This case illustrates the potentially dramatic differences:  in 1998 the financial performance of the
overall industry was 2.6 per cent operating profit, but the performance of the merchant market was only 0.6 percent operating profit.  USITC Final Injury Determination,  at C-4, C-6 ( Exh. JP-14 ).WT/DS184/R
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(d) The captive production provision violates the requirement of Article 3.5 to establish a
causal connection between the effects of dumping and the industry as a whole
236. Article 3.5 provides that “it must be demonstrated that the dumped imports are, through the
effects of dumping . . . causing injury  within the meaning of this Agreement . . . based on an
examination of all relevant evidence before the authorities.”  (Emphasis added.)  In light of footnote 9
and Article 4.1, Article 3.5 requires an authority to demonstrate causation between imports and injury
to domestic producers as a whole of the like product, not merely an industry segment.214   Yet the
captive production provision forces USITC largely to ignore the attenuated nature of competition in
the captive market.
237. Prior to the captive production provision’s enactment, USITC generally recognized this logic.
In the 1993 flat-rolled steel products case, the petitioners argued that USITC should exclude captiveproduction from its injury analysis, because it does not compete directly with imports.
215   USITC not
only rejected this argument, but found with respect  to captively consumed hot-rolled steel that “two-
thirds of the production in this industry is shielded to a large extent from any potential adverse effects
of subsidized and {less than fair value} imports."216   USITC concluded, “{t}he cumulated imports
thus had little or no effect on the largest portion of the hot-rolled steel industry’s production.217
USITC applied this same logic to captive production in numerous other cases prior to the enactment
of the captive production provision.218
238. The subsequent captive production provision — created largely in response to the negative
injury determinations in the 1993 flat-rolled steel case — has essentially inverted the USITC’straditional analysis of captive production.  Under the provision, USITC now must ignore the shielding
effect of captive production, and focus instead on th e “injury” to that portion of the domestic industry
serving the merchant market.  Nowhere does the provision require or even allow the USITC to relate
the merchant market back to the industry as a whol e.  Indeed, the use of “primarily focus” prevents
the USITC from stepping back to put its findings in broader context.
239. The captive production provision thus makes it impossible for USITC to consider fully “all
relevant evidence before the authorities” as Article 3.5 requires.  When the provision applies, and
USITC must focus primarily on the merchant market, the ramifications of captive production on
injury and causation are marginalized.  In particular, USITC could not possibly focus primarily on the
merchant market, and simultaneously find that substantial captive production has largely shielded an
industry from import competition — these two findings cannot be logically reconciled.  Yet this isprecisely the sort of “ relevant evidence” that prov ed pivotal for the negative determinations in the
1993 flat-rolled case.
219   Hence, the captive production provision is facially inconsistent with
Article 3.5.
                                                     
214 Although this specific provision has not been addressed by prior Panels, the analogy to Article 3.4 is
quite close.  When read in context, Article 3.5 requires the same focus on the industry as a whole that Article 3.4requires.
215 1993 Flat-Rolled Steel Case , USITC Pub. 2664 at 22 ( Exh. JP-59 ).
216 Id. at 21 ( Exh. JP-59 )
217 Id. at 53 ( Exh. JP-59 ).
218 See Fresh Garlic From the People's Republic of China , Inv. No. 731-TA-683 (Final), USITC Pub.
2825 at I-4 n. 67 (Nov. 1994);  Stainless Steel Wire Rod From Brazil and France , Inv. Nos. 731-TA-636 and
637 (Final), USITC Pub. 2721 at I-10 to I-11 (Jan. 1994);  Stainless Steel Wire Rod from India, Inv. No. 731-
TA-338 (Final), USITC Pub. 2704 at I-10 to I-11 (Nov. 1993);  DRAMs of One Megabyte and Above From the
Republic of Korea, Inv. No. 731-TA-472 (Final), USITC Pub. 2629 at 29-30 n. 109 (Jun. 1991);  Silicon Metal
From the People's Republic of China , Inv. No. 731-TA-556 (Final), USITC Pub. 2385 at 10-11 (May 1993).
Excerpts of these determinations are provided in Exh. JP-62 .
219 1993 Flat-Rolled Steel Case , USITC Pub. 2664 at 53 ( Exh. JP-59 ).WT/DS184/R
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(e) The captive production provision violates the Article 3.6 requirement to analyze the
effect of imports on all domestic production
240. Article 3.6 provides that “the effect of the dumped imports shall be assessed in relation to the
domestic production of the like product  when available data permit the separate identification of that
production on the basis of such criteria as the production process, producers’ sales and profits.”(Emphasis added.)  The word “production” explicitly focuses attention on the output of the domestic
industry and not sales to various segments or subsegments.  This is consistent throughout Article 3.
Moreover, it is an accepted principle of treaty in terpretation that language is to be interpreted
consistently throughout a treaty.
220  Therefore, “domestic production of the like product” cannot mean
a portion of domestic production of the like product without being inconsistent with the virtually
identical definition of domestic industry in Article 4.1.
241. Accordingly, Article 3.6 can only be understood to require an authority to consider the effect
of dumped imports in relation to domestic production as a whole  of the like product.  The Panel in
Mexico—High Fructose Corn Syrup  confirmed this interpretation in its consideration of Article 3.6.
The Mexican authorities had justified their analysis of the industrial segment to the exclusion of the
consumer segment on grounds that Article 3.6 permits an authority to focus its analysis on theindustry segment that competes directly with imports , when separate data permits the identification of
such a segment.
221  The Panel rejected Mexico’s argument, holding that “Article 3.6 does not, on its
face, allow the determination of injury or threat of injury on the basis of the portion of the domestic
industry’s production sold in one sector of the domestic market, rather than on the basis of the
industry as a whole.”  Rather, the provision only permits an authority to consider production of abroader product group that includes the domestic like product, when information on production of the
like product is unavailable.
222
242. The captive production provision is facially inconsistent with Article 3.6, because it requires
USITC to focus its assessment of the two most important indices of the effect of dumped imports —market share and financial performance — on the merchant market segment of the domestic industry,
rather than domestic producers as a whole.  USITC cannot assess the effect of dumped imports in
relation to all domestic production of the like product, as Article 3.6 requires, and focus primarily on
the merchant market, as the captive production provision requires.
(f) The captive production provision violates the Article 3.1 requirement that injury
determinations be based on an “objective examination”
243. When USITC focuses primarily on the merchant market, its examination of factors is not
“objective” as required by Article 3.1.  An examination of these factors can only be objective if
performed for the industry as a whole.  Limitation of  the analysis to the merchant market by definition
skews the analysis unobjectively toward the merchant  market which inevitably makes an affirmative
determination more likely.
                                                     
220 Vienna Convention on the Law of Treaties, art. 31, done at Vienna, 23 May 1969, 1155 U.N.T.S.;
(1969) 8 International Legal Materials 679 (“Vienna Convention”); see, e.g., Turkey—Restrictions on Imports
of Textile and Clothing Products,  adopted on 31 May 1999, WT/DS34/R, at para. 9.125 (“The same terms being
used in paragraphs 5(a) and 5(b) should not lead to different interpretations.”).
221 See  Mexico—High Fructose Corn Syrup,  at para. 7.156.  Because the authority possessed separate
data on the industrial segment of the Mexican sugar industry, and had determined that imports only competed
with the industrial segment, it limited its analysis to the industrial segment.  Id.
222 Id. para. 7.157.  In fact, the mandate for a narrow exception just confirms the importance of the
basic principle:  focus on all domestic production of the like product whenever possible.WT/DS184/R
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3. USITC applied the captive production prov ision in this case inconsistently with
Articles 3 and 4 of the Anti-Dumping Agreement
(a) Summary of the facts:  Application of the captive production provision in the hot-
rolled steel case
244. In the hot-rolled steel investigation, three commissioners found that the necessary conditions
existed requiring application of the captive production provision.  These commissioners therefore
focused primarily on the merchant market when performing their analysis of the relevant factors for
determining injury, particularly in their assessment of market share and factors affecting financial
performance.223   Under US law, if three commissioners find current injury, this is sufficient for an
affirmative determination.224   Three other commissioners found that the provision did not apply, but
one of these commissioners nevertheless considered the same merchant market data in parallel with
data on the industry as a whole.225
(b) The WTO-inconsistent captive production provision decisively influenced the USITC
determination in the hot-rolled steel case
245. USITC's application of the captive production provision confirms the provision’s flawed
analytic approach and its influence on USITC de liberations.  Fundamentally, the commissioners could
not have considered, either primarily or secondarily, data for the merchant market in this case without
distorting their judgment.  The fact that data for domestic producers as a whole was contained in the
staff report, and even mentioned by the USITC in its decision, in no way mitigates these distortions.
Without the captive production provision, USITC would have considered:
• import penetration that never exceeded single digits;
• consistent operating profits throughout the period; and
• financial performance in 1998 that was better  than the performance in 1996 before the
increase in imports.
246. With the captive production provision, and the impermissible focus on the merchant market,
the economic picture changes completely:
• import penetration increases to 21 per cent of the market;
• operating profits in 1998 drop to break-even levels; and
• operating profits plunge precisely when the imports surge.
The two dramatically different and irreconcilable versions of economic reality demonstrate precisely
why the Anti-Dumping Agreement requires a focus on the domestic industry overall, and not sub-
segments.  Articles 3 and 4 create various specific requirements that govern how authorities should
frame the facts they consider.
                                                     
223 USITC Final Injury Determination , USITC Pub. 3202 at 35 (Vice Chairman Miller and
Commissioners Hillman and Koplan) ( Exh. JP-14 ).
224 19 U.S.C. § 1677(11) ( Exh. JP-4 ).  This provision on tie votes has been upheld by the courts.  See
United States Steel Group v. United States , 96 F.3d 1352, 1365-1367 (Fed. Cir. 1996); MBL Corp. v. United
States , 787 F. Supp. 202, 205-208 (Ct. Int’l Trade 1992)  Excerpts of these cases are provided in Exh. JP-63 .
225 USITC Final Injury Determination  at 29 (Chairman Bragg) ( Exh. JP-14 ).  Commissioner Crawford
considered only the industry as a whole.  Id. at 29, n. 21 ( Exh. JP-14 ).  Commissioner Askey also noted that she
did not consider any merchant market data.  Id. at 29, n. 23 ( Exh. JP-14 ).WT/DS184/R
Page A-66
247. The impact of the captive production provision on USITC’s determination of facts, and its
analysis of those facts, can be further illuminated in two ways.  First, a comparison of the 1993 and
1999 hot-rolled steel anti-dumping cases demonstrates that the captive production provision enabled
USITC to find present material injury despite the fact the domestic industry as a whole was healthierin 1999 than in 1993 when USITC rendered a negative determination.  Second, Commissioner
Askey’s dissent confirms that a finding of present material injury would have been factually and
logically impossible had the USITC focused on the industry as a whole and recognized the shielding
effect of captive production.
(1) A comparison of the 1993 and 1999 hot-rolled anti-dumping cases demonstrates the
significant impact of the captive production provision
248. Prior to adoption of the captive production provision, USITC properly viewed captive
production as shielding domestic producers from import competition, making injury from subject
imports less likely.  Largely on this basis, USITC rendered a negative determination in the 1993 hot-
rolled steel case, notwithstanding the fact that the industry’s operating performance over the period of
investigation was much worse than the industry’s operating performance in the most recent hot-rolledsteel case.  For example, overall industry capacity declined two per cent over the 1990-1992 period,
but increased nine per cent over the 1996-1998 period.  Overall industry shipments declined 1.4
million short tons over the 1990-1992 period, but increased 500,000 short tons over the 1996-1998
period.  Capacity utilization of 87.5 per cent in 1998 was significantly higher than 80.4 per cent in
1992.  Overall industry operating margins declined from a meagre 0.3 per cent operating profit to aneven more serious 10 per cent loss over the 1990-1992 period, but increased from 2.0 per cent to
2.6 per cent operating profit in the 1996-1998 period.
226
249. Petitioners in the 1993 case argued that USITC should concentrate its analysis on the
merchant market, but these arguments were reject ed.  USITC provided a break-out of the sales
quantity and value of captive production, but did not calculate market share or financial data for the
merchant market alone in its actual decision.  To have done so would have been fundamentally
inconsistent with its finding that “two-thirds of the production in this industry is shielded to a large
extent from any potential adverse effects of subsidized and LTFV imports.227
250. In this case, however, four of the six Commissioners abandoned the traditional approach
epitomized by the 1993 case, ignoring captive consumption as an important condition of competition,and instead emphasizing merchant market data to varying degrees.  The three Commissioners
applying the captive production provision primarily focused their analysis on the merchant market
228,
and a fourth Commissioner who found the provision inapplicable nevertheless considered the same
merchant market data in parallel with data on the industry as a whole.229   The captive production
provision fundamentally distorted the analytic approach even for this Commissioner who professed to
                                                     
226 Compare 1993 Flat-Rolled Steel Case,  USITC Pub. 2664 at 22-23, I-51 ( Exh. JP-59 ) with USITC
Final Injury Determination, USITC Pub. 3202 at 17, III-6, and VI-6 ( Exh. JP-14 ).
227 1993 Flat-Rolled Steel Case, USITC Pub. 2664 at 21 ( Exh. JP-59 ).
228 USITC Final Injury Determination,  USITC Pub. 3202 at 35 (Views of Vice Chairman Miller,
Commissioner Hillman, and Commissioner Koplan concerning captive production: “Because we have found thecaptive production provision to apply in this case, we have focused primarily on the merchant market inassessing market share and the factors affecting financial performance.”) ( Exh. JP-14 ).
229 Id. at 29 (Views of Chairman Bragg, Commissioner Crawford, and Commissioner Askey regarding
the captive production provision: “{Though the captive production provision does not apply,} we have
examined data both for the domestic industry as a whole and for merchant market operations for purposes of ourdetermination.”) ( Exh. JP-14 ).  Commissioner Crawford and Commissioner Askey dissented from this portion
of the opinion.   Id. at 29, n. 21 and n. 23 ( Exh. JP-14 ).WT/DS184/R
Page A-67
be looking at the industry as a whole, but who refused even to acknowledge the shielding effect of
captive consumption.230
(2) Commissioner Askey’s dissent further de monstrates that the captive production
provision fundamentally distorted the analysis of the majority
251. Commissioner Askey declined to focus on merchant market data because the captive
production provision did not apply.231   She noted in her dissenting views that captive production
shielded the domestic industry from import competition.232   Commissioner Askey's recognition of this
economic reality led inexorably to her negative determination on present material injury.233
252. First, she found that the increase in import volume was not significant relative to the size of
the US market.234   Second, she found that average unit values did not decline significantly235,  and that
sales and production for the industry overall increased over the full period.236   Third, she found that
industry financial performance was positive, though fluctuating, over the period; significantly, 1998
performance exceeded 1996 performance.237   Finally, captive production shielded nearly two-thirds of
the industry from import competition.  Therefore, if the four other Commissioners had considered
domestic producers as a whole, it would have had a significant impact on their analysis and should
have led to a different conclusion.238
(c) The specific determination downplaying or ignoring the domestic industry as a whole
violates Articles 3 and 4 of the Anti-Dumping Agreement
253. USITC’s application of the captive production provision violated Articles 3 and 4 in two
ways.  First, USITC inappropriately focused its analysis on a market segment, rather than the
                                                     
230 Id. at 9-11 (factor not mentioned in conditions of competition), 29 (factor not mentioned in main
text of views of Chairman Bragg, Commissioner Crawford and Commissioner Askey regarding the captiveproduction provision) ( Exh. JP-14 ).
231 Id. at 29 n.23 (“Commissioner Askey believes it is inappropriate to focus on the merchant market if
the captive production provision does not apply.”) ( Exh. JP-14 ).
232 Id. at 51 (“I note that significant captive consumption effectively protects the domestic industry by
providing integrated producers with a guaranteed market in which they do not compete with imports or withnon-affiliated domestic producers.” ( Exh. JP-14 )).
233 Commissioner Askey did find the existence of a threat to the domestic industry as a whole.  Id. at
51-52 ( Exh. JP-14 ).  Commissioner Crawford applies a unique analysis framework that differs from that of the
other Commissioners.  See id.  at 39 ( Exh. JP-14 ).  She finds injury whenever the domestic industry would have
been better off without unfairly trade imports.
234 Import penetration was only from 9.3 per cent, including domestic producers as a whole but was
significantly inflated, to 21.0 per cent in the merchant market.  Id. at 49-50, C-5 ( Exh. JP-14 ).
235 Id. at 50 ( Exh. JP-14 ).
236 Id. at 51 ( Exh. JP-14 ).
237 USITC’s focus on the merchant market yielded an even steeper decline in industry financial
performance: 1998 operating profit margins were 2.6 per cent for the industry as a whole, but only 0.6 per centfor the merchant market.  Id. at 18, 51 ( Exh. JP-14 ).  An operating profit margin of 2.6 per cent is respectable
for a mature industry like steel.  The USITC has rendered negative determinations in several investigations
concerning steel products in which the domestic industry’s operating margin was less than 2.6 per cent in the
final full year of the period of investigation, including Certain Cold-Rolled Steel Products From Argentina,
Brazil, Japan, Russia, South Africa, and Thailand , Ins. Nos. 701-TA-393 and 731-TA-829-830, 833-834, 836,
and 838 (Final), USITC Pub. 3283 (Mar. 2000) at VI-6 (1.5 per cent); Stainless Steel Round Wire From
Canada, India, Japan, Korea, Spain, and Taiwan, Inv. Nos. 731-TA-781-786 (Final), USITC Pub. 3194 at VI-2
(May 1999) (2.4 per cent); and Certain Carbon Steel Butt-Weld Pipe F ittings From France, India, Israel,
Malaysia, Korea, Thailand, the United Kingdom, and Venezuela,  Inv. Nos. 701-TA-360-361 (Final) 731-TA
688-695 (Final), USITC Pub. 2870 (Apr. 1995) at II-30 (-0.3 per cent).
238 While Commissioner Askey did make an affirmative threat determination, the five Commissioners
finding material injury did not consider threat.WT/DS184/R
Page A-68
domestic industry as a whole.  The definition of domestic industry in Article 4.1 requires analysis to
be focused on “domestic producers as a whole of the like products.”  Consequently, the USITC did
not make an objective examination as required by  Article 3.1.  USITC’s focus on the merchant market
import penetration figure violates Article 3.2, which requires import penetration to be measured
relative to all production and all consumption.  USITC’s focus on the merchant market segment’shigher import penetration, and weaker financial performance, violates Article 3.4, which requires an
examination of these very factors bearing on the state of domestic producers as a whole.  Because its
affirmative material injury determination was predicated on the industry’s financial performance in
the merchant market, USITC violated Article 3.5, wh ich requires a finding of injury to be based on
domestic producers as a whole.  Finally, USITC’s focus on the effects of dumped imports on the
merchant market segment violates Article 3.6, which requires that these effects be assessed with
respect to domestic producers as a whole.
254. Second, USITC failed to consider key relevant factors relating to captive production in its
analysis of causation and injury.  The skewed analytic framework applied by USITC also violates
Article 3 in that key aspects of a proper assessment of causation were ignored or marginalized.
Foremost, USITC overlooked the fact that captiv e production is insulated from import competition,
even though this condition of competition was pivotal in the 1993 case, and was reaffirmed in the
recent cold-rolled steel case.
239   USITC also ignored the fact that domestic producers had increased
their captive consumption of hot-rolled steel to realize the higher profit margins on downstream
products relative to merchant market sales.  By committing more of their production to captive
production, the domestic mills created room in the market for imports of hot-rolled product.240  
Finally, USITC failed to conduct an objective examination of the impact of imports on the domestic
industry’s overall operations, according undue importance to the merchant market segment.
255. USITC’s non-consideration of these various factors relating to captive production violates
Articles 3.4, 3.5, and 3.6.  USITC failed to evaluate “all relevant economic factors bearing on thedomestic industry,” as required by Article 3.4.  The benefits accorded to the hot-rolled steel industry
by captive production is a relevant economic factor USITC failed to evaluate.  USITC did not
demonstrate a “causal relationship between dumped imports and injury” with “an examination of all
relevant evidence before the authorities,” as required by Article 3.5.  Again, the benefits of captive
production constitute relevant evidence ignored by USITC.  Finally, USITC did not assess “the effect
of the dumped imports . . . in relation to the domestic production of the like product,” as required by
Article 3.6.  It failed to consider that the effect of imports is different on captive production, whichaccounts for nearly two-thirds of the hot-rolled steel industry.
                                                     
239 It is worth noting here USITC’s inconsistent treatment of captive domestic production and captive
imports in the hot-rolled steel case.  Although four of the six commissioners chose to focus their analysis of thedomestic industry to the merchant market, none of the commissioners sought to similarly limit imports that werecaptively consumed by affiliated importers.  USITC Final Injury Determination,  USITC Pub. 3202 at IV-11-12
(Exh. JP-14 ).  Such imports are no different from captive produ ction:  they are shielded from competition in the
merchant market.  Yet, USITC never sought to reconcile their differential treatment.  As a result, in the analysis
of import penetration, while the denominator was deflated by application of the captive production provision,
the numerator was inconsistently inflated by inclusion of captive imports.  The irony in this is particularly stark
with respect to CSI’s imports of KSC product:  the non-arm’s length nature of these sales due to their exchangebetween affiliated parties was the very reason why USDO C applied adverse facts available in calculating KSC’s
dumping margin.
240 USITC Final Injury Determination, USITC Pub. 3202, at 25-30 (views of Chairman Bragg and
Commissioners Crawford and Askey), 31-35 (views of Vice Chairman Miller and Commissioners Hillman and
Koplan) ( Exh. JP-14 ).  The USITC ignored data presented in the staff report, which shows an increase from
1996 to 1998 of US producers’ internal transfers of hot-rolled steel.  See id at III-6 to -7 ( Exh. JP-14 ).WT/DS184/R
Page A-69
4. The captive production provision violates Article XVI:4 of the WTO Agreement
256. In 1994, when it should have been bringing its law into compliance with the new Uruguay
Round, the United States yielded to intense political  pressure and created an inconsistency with its
obligations under the Anti-Dumping Agreement and the WTO Agreement.  In place of the old statute
that properly confined itself to the industry as  a whole, the new US statute mandated an analytic
approach to focus primarily on a narrow industry segment in a way that ignored the plain meaning of
Articles 3 and Article 4 of the Anti-Dumping Agreement.  This new statute thus created an additional
violation of Article XVI:4 of the WTO Agreement.
B. USITC’S FINDING OF INJURY AND CAUSATION IS INCONSISTENT WITH
ARTICLE 3 OF THE ANTI-DUMPING AGREEMENT
257. In addition to its application of the WTO-illegal captive production provision, USITC also
ignored a host of important factors in its effort to find injury and causation in the hot-rolled steel case.
These omissions also violate Article 3 of the Anti-Dumping Agreement, which contains strict
disciplines governing the analysis of causation.
1. The requirements of Articles 3.1, 3.4, and 3.5.
258. Article 3.1 sets forth the overall structure of an authority’s injury analysis:
A determination of injury for purposes of Article VI of GATT 1994 shall be based on
positive evidence and involve an objective examination of both (a) the volume of the
dumped imports and the effect of the dumped imports on prices in the domesticmarket for like products, and (b) the consequent impact of these imports on domestic
producers of such products.
259.. Article 3.4 establishes specific requirements regarding the examination of factor (b) in
Article 3.1.  It requires an authority to examine “all relevant economic factors and indices,” including
(but not limited to):
actual and potential decline in sales, profits, output, market share, productivity, return
on investments, or utilization of capacity; factors affecting domestic prices; the
magnitude of the margin of dumping; actual and potential negative effects on cash
flow, inventories, employment, wages, growt h, ability to raise capital or investments.
The Panel in Mexico—High Fructose Corn Syrup  recently confirmed that Article 3.4 requires an
authority both to consider and make apparent in the written determination its consideration of the
factors listed in Article 3.4.241
260. Article 3.5 requires authorities to demonstrate causation “based on all the relevant evidence
before the authorities.”  It goes on to say:
The authorities shall also examine any k nown factors other than the dumped imports
which at the same time are injuring the domestic industry, and injuries caused by
these other factors must not be attributed to the dumped imports.242
                                                     
241 Mexico—High Fructose Corn Syrup , at 7.128.
242 This represents a significant strengthening of the Tokyo Round Anti-Dumping Code’s causation
standard.  Article 3.4 of the Code merely observed that “{t}here may be other factors which at the same time areinjuring the industry, and the injuries caused by other factors must not be attributed to the dumped imports.”BISD 26S/171 at 174 (Mar. 1980) (footnote omitted).  USTR has recognized that the Anti-Dumping AgreementWT/DS184/R
Page A-70
It also provides a non-exhaustive list of relevant factors:
the volume and prices of imports not sold at dumping prices, contraction in demand
or changes in the patterns of consumption, trade restrictive practices of and
competition between foreign and domestic producers, developments in technologyand the export performance and productivity of the domestic industry.
2. USITC failed properly to consider relevant data
261. USITC’s final injury determination fails to comply with the Anti-Dumping Agreement’s
strengthened causation disciplines, and departs from USITC’s own traditional approach to
establishing causation.  Specifically, USITC focused on data for only two years of its three-year
period of investigation and ignored or marginalized alternative causes of injury, including non-subject
imports, contractions in demand, and technological developments.  As demonstrated below, theseactions violate Articles 3.1, 3.4, and 3.5 of the Anti-Dumping Agreement.
(a) USITC improperly diverged from its practice of analyzing industry trends over three
years, in violation of Articles 3.1, 3.4, and 3.5
262. USITC’s normal practice is to examine imports , prices, and US industry performance over a
three-year period.  This practice is consistent with the recently adopted Recommendation of the WTO
Committee on Anti-Dumping Practices, which declared:
the period of data collection for injury investigations normally should be at least three
years, unless a party from whom data is being gathered has existed for a lesser period,and should include the entirety of the period of data collection for the dumping
investigation . . . .
243
This recommendation makes sense.  Trends are only apparent when three or more annual data sets areavailable.  With only two annual data sets, one cannot know whether a high level for the first year is
anomalous or not.
263. If applied in the hot-rolled steel case, a three-year analysis revealed that virtually all the major
domestic industry performance indices improved.  Between 1996 and 1998, total industry shipments
increased from 63.6 million tons to 64.0 million tons; operating income increased from $430.8 million
to $560.5 million, and operating margins increased from 2.0 per cent to 2.6 per cent.
244   Such facts
would typically demonstrate an absence of material injury by reason imports.
264. USITC, however, eschewed its traditional th ree year analysis, and instead compared 1998
with 1997.  In this case, however, the 1997 base line for the USITC’s two-year trend analysis
happened to be the best year the industry had expe rienced in a decade, with shipments peaking at 64.5
million tons, operating income at $1.25 million, and operating margins at 5.5 per cent.245   A
                                                                                                                                                                    
“strengthens the requirement for the importing country to establish a clear causal relationship between dumped
imports and injury to the domestic industry.”  See Office of the US Trade Representative web site,
<www.ustr.gov>(visited 19 Feb. 1996) ( Exh. JP-64 ).
243 Committee on Anti-Dumping Practices, Recommendation Concerning the Periods of Data
Collection for Anti-Dumping Investigations,  adopted by the Committee on 5 May 2000, G/ADP/6, at para. 1(c)
(16 May  2000).  The United States does not, and cannot, claim that the Japanese respondents had been inoperation for less than three years, the only authorized  exception to cons ideration of three years of data.
244 USITC Final Injury Determination , USITC Pub. 3202 at III-6, VI-6 ( Exh. JP-14 ).
245 Id. ( Exh. JP-14).WT/DS184/R
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comparison of this record-breaking year to the fo llowing year virtually guaranteed an affirmative
determination.246
265. The investigation of hot-rolled steel from Japan was unique.  Of the 133 final injury
determinations issued from January 1990 to June 1999,  this was the only case in which the first year
of the period was ignored.247   In fact, USITC had previously refused to examine a two-year period
alone.  In Elastic Rubber Tape From India , the USITC found that a comparison of 1998 with 1997
would be less appropriate than a comparison of 1998 with 1996, because industry performance in
1997 was unusually strong, bolstered by an unanticipated high volume of orders.248   In Stainless Steel
Round Wire From Canada, India, Japan, Korea, Spain, and Taiwan , USITC found that although
industry performance declined between 1997 and 1998, certain industry indices improved between
1996 and 1998, concluding that industry performance had been “steady” while subject importsincreased.
249   In Certain Carbon Steel Plate From China, Russia, South Africa, and Ukraine , USITC
rendered a negative present material injury determination after finding that the industry’s performance
had improved from 1994 to 1996, although its performance had declined between its peak in 1995 and
1996.250   Each of these cases illustrates the traditional analytic approach used by USITC, an approach
ignored in the hot-rolled steel case.
266. The lone commissioner — Commissioner Askey —  who applied USITC ’s traditional three-
year analysis reached a dramatically different conclusion from her colleagues.  Commissioner Askey
found that when domestic producers as a whole are considered over a three year period, together with
alternative sources of declining industry performance, there could be no finding of material injury byreason of imports.  She found that most industry indicators, including production, shipments, and
profitability, improved between 1996 and 1998, if not between 1997 and 1998.  She acknowledged
that most indicators peaked in 1997, but properly followed USITC practice and predicated her
determination on the entire period of investigation rather than focusing on 1997 and 1998 like the
other commissioners.
251
267. In manipulating its traditional three year period of investigation, USITC violated Article 3.1by failing to predicate its material injury dete rmination upon “positive evidence” and an “objective
examination.”  USITC’s analysis departed from its long-standing practice of examining trends over a
three year period.  In other cases, USITC has relied explicitly on the disconnect between trends in
import levels and trends in operating performance to find the absence of causation.  Commissioner
Askey’s dissent makes clear that when the traditional three-year period is considered, the domesticindustry’s performance improved while subject imports increased, making an affirmative material
injury determination inappropriate.  USITC’s decision to ignore logic and prior practice cannot
represent an “objective” examination of injury and causation, as required by Article 3.1.
                                                     
246 USITC tried to justify its analysis by explaining that consumption had increased to record levels
from 1996 and 1997 and from 1997 to 1998, such that industry performance should have improved between
1997 and 1998.  Id. at 18 ( Exh. JP-14 ).  This explanation only underscores USITC’s failure to adequately
analyze the other market factors depressing industry performance in 1998, as discussed below.
247 There was one other case among these 133 in which the final two years constituted the primary basis
for the affirmative determination.  Fresh Garlic From the People’s Republic of China , Inv. No. 731-TA-683
(Final), USITC Pub. 2825 at I-27 (Nov. 1994).   But, in that case, the USITC noted that the domestic industry
had been experiencing declines in profitability throughout the period examined.  Id.  A summary of the final
determinations from January 1990 - June 1999 is attached as Exh.  JP-65 .
248 Elastic Rubber Tape  From  India, Inv. No. 731-TA-805 (Final), USITC Pub. 3200 (June 1999) at 14.
249 Stainless Steel Round Wire From Canada, India, Japan, Korea, Spain, and Taiwan,  Inv. Nos. 731-
TA-781-786 (Final), USITC Pub. 3194 (May 1999) at 16-17.
250 Certain Carbon Steel Plate From China, Russia, South Africa, and Ukraine , Inv. Nos. 731-TA-753-
756 (Final), USITC Pub. 3076 (Dec. 1997) at 22 (rendering an affirmative determination on threat).
251 USITC Final Injury Determination, USITC Pub. 3202. at 51-52 (“Certainly the industry’s financial
indicators were worse in 1998 than they had been in 1997, but in 1998 the industry remained profitable, and itsprofitability generally exceeded 1996 levels.”) ( Exh. JP-14 ).WT/DS184/R
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268. In addition, USITC’s conduct violated Article 3.4.  In Mexico—High Fructose Corn Syrup,
the Panel found that “consideration of the Article 3.4 factors is required in every case, even though
such consideration may lead the investigating authority to conclude that a particular factor is not
probative . . . Moreover, the consideration of each of the Article 3.4 factors must be apparent in thefinal determination of the investigating authority."
252   Here, USITC failed both to consider and to
make “apparent” its consideration of the Article 3.4 factors for the first year of the period.  USITC’s
incomplete consideration of these factors violated Article 3.4.
269. USITC’s determination was also inconsistent with Article 3.5.  In Argentina—Footwear  , the
EC had argued that Argentina improperly limited its analysis to a comparison of the first and last year
of its five year period of investigation, and ignored intervening trends, to support its finding of seriousinjury.
253    The Panel agreed, holding that “the relationship  between the movements in imports
(volume and market share) and the movements in injury factors . . . must be central to a causation
analysis and determination."254   Argentina’s comparison of two years, without consideration of other
years over the period of investigation, was inappropriate, because it did not permit an adequate
comparison of import and injury trends.  This failure to conduct a proper causation analysis violatesArticle 3.5.
270. By mistreating the record evidence, USITC failed to (i) conduct an “objective examination”
of the “positive evidence,” as required by Article 3.1; (ii) properly consider and make apparent its
consideration of the factors required by Article 3.4; and (iii) demonstrate causation as required byArticle 3.5.
(b) USITC inadequately analyzed other alternative causes of injury, effectively
attributing their impact to subject imports, in violation of Article 3.5
271. USITC’s disregard of the domestic industry’s improved performance between 1996 and 1998
was but one of an array of omissions.  Among the alternative sources of injury ignored or slighted
were non-subject imports, the prolonged strike at General Motors, (the largest steel consumer in the
United States), greatly increased capacity and production by low-cost mini-mills, and faltering
demand for pipe and tube due to collapsing oil prices.  When it addressed these factors at all, USITC
made no effort to distinguish carefully between their impact and the impact of subject imports.
272. Article 3.5 requires consideration of “the volume and prices  of imports not sold at dumping
prices” (emphasis added).  USITC made no effort to consider the price effects of non-subject imports.
Instead, it only collected information on the volume of non-subject imports, and used this volume in
addition to the subject import volume and domestic industry volumes to calculate market shares.
Furthermore, USITC refused to disaggregate non- subject import sources, a necessary step in
considering their volume and price effects.
255
273. Article 3.5 of the Anti-Dumping Agreement also requires that authorities analyzing causationdo more than merely mention relevant issues.  The authority must reconcile the facts and arguments
                                                     
252 Mexico—High Fructose Corn Syrup,  at para. 7.128.
253 Argentina Footwear , at para. 8.230.  The causation requirement under the Safeguards Agreement
Article 4.2 is analogous to the causation requirement under the Anti-Dumping Agreement Article 3.5, thoughsomewhat stricter.  Article 4.2 of the Safeguards Agreement provides, in relevant part: “the competentauthorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on thesituation of that industry . . . {a serious injury or threat finding} shall not be made unless the investigationdemonstrates, on the basis of objective evidence, the existence of the causal link between increased imports . . .
and serious injury or threat thereof.  When factors other than increased imports are causing injury to the
domestic industry at the same time, such injury shall not be attributed to increased imports.”
254 Id. para. 8.237 (emphasis in original).
255 USITC Final Injury Determination , USITC Pub. 3202 at 10, 12-16, IV-11-14 ( Exh. JP-14 ).WT/DS184/R
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presented by the parties to the decision being made.  USITC failed to do this with respect to several
other sources of injury.
274. With regard to mini-mills, USITC merely asserted that most mini-mill capacity had been
commissioned by 1997, while industry performance improved between 1996 and 1997.256   T h i s
explanation ignores commercial reality.  As demonstrated by respondents, the new mini-mill capacity
commissioned in 1996 would not have impacted the market until 1998, as mini-mills typically require
two years to “ramp-up,” break-in their new equipment, and ship at full rated capacity.257
275. USITC also ignored the price depressing and suppressing effect of the dramatic increase in
mini-mill capacity, resulting from both the tremendous expansion of US hot-rolled steel supply, and
the lower cost structure of mini-mills (which permits lower prices).258   This omission is especially
glaring given the magnitude of the mini-mill capacity expansion:  17 million tons of new mini-mill
capacity was commissioned during the period of investigation, according to public sources259,  equal
to 78 per cent all domestic industry merchant market shipments in 1998.260
276. USITC conducted a similarly perfunctory analysis of the General Motors strike.  The recordshowed that the strike left 685,000 tons of flat-rolled product normally produced for the car maker
available for other sources.  This dislocation of a significant quantity of product clearly impacted the
price of hot-rolled steel.  Of the 57 purchasers that completed questionnaires, 34 replied that they
experienced price effects from the strike, with eleven of them saying that those effects were strong.
261  
The data bore this out, as prices fell immediately following the strike.262
277. USITC concluded that the effects of the General Motors strike were “not large enough toexplain the kind of price declines that occurred in 1998."
263  Yet, it made no effort to distinguish the
effects of the General Motors strike from the effects of subject imports.  Furthermore, it did not
consider the impact of the General Motors strike in the proper context — the second half of 1998.  Anappropriate analysis would have compared the first half and second half of 1998 given that the strike,
which started in June and ended in late July, primarily affected the second half of 1998.  However,
USITC minimized the impact of the strike by limiting its analysis to full years, comparing 1998 to
1997.  This approach sharply contrasts with USITC’s recognition that the price declines were most
precipitous in the third and fourth quarters of 1998.
264
278. Finally, USITC made no effort whatsoever to analyze the recession in the pipe and tubeindustry — the largest consumer of hot-rolled steel — caused by the collapse in oil prices.  Not only
did this argument figure prominently in the respondents’ briefs
265,  but USITC itself collected
                                                     
256 Id. at 19 ( Exh. JP-14 ).
257 Respondents’ USITC Prehearing Brief, at 96-98 (29 Apr. 1999)  (excerpts in Exh. JP-30 ).  Indeed,
as respondents argued, start up problems meant that minimill capacity utilization in 1998 had hit only about 55per cent.  Id. (excerpts in Exh. JP-30 ).
258 Indeed Commissioner Askey noted this point.  Sh e found that the decline in hot-rolled steel prices
over the period was not clearly attributable to subject imports, given the rapid emergence of low-cost domestic
mini-mill competition.  USITC Final Injury Determination, USITC Pub. 3202  at 52 ( Exh. JP-14 ).
259 Respondents’ USITC Prehearing Brief, at 85 (excerpts in Exh. JP-30 ).
260 USITC Final Injury Determination, USITC Pub. 3202  at IV-12 (1998 merchant market shipments
were 21.8 million short tons) ( Exh. JP-14 ).
261 Id. at II-4 ( Exh. JP-14 ).
262 Id. at 16 ( Exh. JP-14 ).
263 Id. (Exh. JP-14).
264 Id. ( Exh. JP-14).
265 Respondents’ USITC Prehearing Brief, at 126-28 (excerpts in Exh. JP-30 ).WT/DS184/R
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disaggregated data on sales to pipe and tube manufacturers in anticipation of this issue.266   Though
clearly relevant267,  the pipe and tube industry’s declining demand for hot-rolled steel was not
mentioned once in USITC’s determination.268
279. USITC’s perfunctory — or outright lack of — consideration of alternative causes of injury tothe domestic industry violates the explicit requirement in Article 3.5 that an authority examine “all
relevant evidence” and “any known factors other than the dumped imports which at the same time are
injuring the domestic industry.”
280. The violations here are analogous to the violations found by the Panel in Argentina—
Footwear  .  There, the EC alleged that Argentina had failed to consider adequately three alternative
causes of injury to the footwear industry, and therefore wrongfully attributed their effects toimports.
269   The Panel agreed, finding that the Safeguards Agreement requires that “a sufficient
consideration of ‘other factors’ operating in the market at the same time must be conducted, so that
any such injury caused by such other factors can be identified and properly attributed."270   The Panel
considered the extent to which each alternative cause had been considered by the Argentine
authorities, and found that two of the three altern ative causes had not been sufficiently considered.271
The Appellate Body upheld the Panel’s findings on this point.272
281. USITC likewise violated Article 3.5 of the Anti-Dumping Agreement, by failing to examine
all relevant evidence, including known factors other than dumped imports that were injuring domestic
producers at the same time.  USITC conducted a perfunctory analysis of the impact of mini-mills andthe General Motors strike on the industry, which was insufficient to properly attribute the injury
resulting from them, as required by the Panel’s approach in Argentina—Footwear .  USITC
completely ignored the impact of non-subject imports and the pipe and tube recession, though both
alternative causes of injury were “known factors.”  USITC therefore failed to establish causation
between subject imports and injury in the manner required by Article 3.5.
IX. THE UNITED STATES HAS VIOLATED ARTICLE X:3 OF GATT 1994 BECAUSE
THE USDOC AND USITC INVESTIGATIONS WERE NOT CONDUCTED, AND
THE DETERMINATIONS WERE NOT MADE, IN A UNIFORM, IMPARTIAL OR
REASONABLE MANNER
282. The WTO regulates not only the substance of Members’ anti-dumping regimes, but also their
administration, demanding adherence to the fundamental international law principle of good faith.Article X:3(a) of GATT 1994 reflects this obligation, requiring a Member to “administer {its
measures} in a uniform, impartial and reasonable manner.”
283. The United States violated its Article X:3(a) obligation in the hot-rolled case as follows:
• USDOC took the unusual step of accelerating all aspects of the proceeding, despite the
extraordinarily complicated nature of this case;
                                                     
266 See USITC US Producers’ Questionnaire,  Certain Hot-Rolled Steel Products From Brazil, Japan,
and Russia , Inv. Nos. 701-TA-384 and 731-TA-806-808 (Final), at question II-21 (excerpts in  Exh. JP-66 ).
(This information was also relevant to USITC’s consideration of the captive production provision.).
267 See Preston Pipe & Tube Report  (Nov. 1998) (excerpts in Exh. JP-67 ); Preston Pipe & Tube
Report  (Sept. 1998) (excerpts in Exh. JP-67 ).
268 See, e.g ., USITC Final Injury Determination, USITC Pub.3202  at 10-11 (conditions of competition)
( Exh. JP-14 ).
269 Argentina—Footwear,   at para. 8.265.
270 Id. para. 8.267.
271 Id. paras. 8.268-74.
272 Argentina Safeguard Measures on Imports of Footwear , 14 Dec. 1999, WT/DS121/AB/R, at paras.
140-47.WT/DS184/R
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• During the proceeding, USDOC revised its policy regarding issuance of critical circumstance
determinations and used the revised policy to take the unprecedented action of retroactively
imposing provisional measures prior to making its preliminary determination of dumping;
• USDOC deviated from its regulations and prior practice, when it failed to correct immediately
its own calculation error in NKK’s preliminary dumping margin;
• While USDOC repeatedly resorted to adverse “facts available” in all instances where
Japanese respondent companies made even the most minor, inadvertent mistake or submitted data
that were verifiable but deemed untimely, US DOC and USITC took no adverse action against a
petitioner and other US steel companies that refused to provide highly material information;
• USITC deviated from its prior practices by ignoring the US industry’s financial performance
early in the period of investigation and instead comparing the most recent year’s performancewith the previous year (the industry’s most profitable year in recent history).
284. The pattern of the US anti-import bias is pervasive.  Were there but a few isolated incidents,
one might be willing to be tolerant.  But the pattern of bias had a tremendous impact on this case.  The
US has therefore violated its obligations under Article X:3(a) to administer its law in a uniform,
impartial, and reasonable manner.
A. THE OBLIGATIONS IMPOSED BY ARTICLE X:3(A) OF GATT 1994
285. Unlike most provisions of GATT 1994, which are concerned with the content of a
government’s laws, regulations, decisions and rulings, Article X of GATT 1994 focuses on the
administration of those laws, regulations, decisions and rulings.
273   Article X articulates the basic
principles of what is widely known as due process or fundamental fairness.274  According to
Article X:3(a):
Each contracting party shall administer in a uniform ,  impartial and reasonable
manner  all its laws, regulations, decisions and rulings of the kind described in
paragraph 1 of this Article.  (Emphasis added.)275
286. The words “uniform,” “impartial” and “reasonable” form the essence of the Article X:3(a)obligations.
276   They are to be interpreted “in good faith in accordance with the ordinary meaning to
                                                     
273 The Appellate Body referenced this distinction in European Communities—Regime for the
Importation, Sale and Distribution of Bananas,  9 Sept. 1997, WT/DS27/AB/R, at para. 200 (“Article X applies
to the administration  of laws, regulations, decisions and rulings.” (emphasis in original)).
274 The term “due process” has been used extensively in WTO dispute settlement proceedings.  See,
e.g., India—Patent Protection for Pharmaceutical and Agricultural Chemical Products , 19 Dec. 1997,
WT/DS50/AB/R, at para. 94; United States—Tax Treatment For “Foreign Sales Corporations ,” 8 Oct. 1999,
WT/DS108/R, at para. 6.3.
275 The GATT Analytical Index  notes that Article X was based, in part, on the 1923 International
Convention Relating to the Simplification of Customs Formalities and, in part, on US proposals.  See 1 GATT,
Analytical Index:  Guide to GATT Law and Practice 309 (6th ed., 1995).  The 1923 Convention is printed in 30
League of Nations Treaty Series 373 Exh. JP-68 ).  The due process obligation was set out at Article 1 of the
Simplification Convention:  "{t}he Contracting States … undertake that their commercial relations shall not behindered by excessive, unnecessary or arbitr ary Customs or other similar formalities."
276 The New Shorter Oxford Dictionary  defines these important terms as:
“impartial” — Not partial; not favouring one party or side more than another; unprejudiced, unbiased;
fair.
“reasonable” — 1. Endowed with the faculty of reason, rational.  2.  In accordance with reason; not
irrational or absurd.  3.  Proportionate.  4. Having sound judgment; ready to listen to reason, sensible.  Also, notWT/DS184/R
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be given to the terms of the treaty in the context of its object and purpose."277   With respect to the
administration of laws which Article X:3(a) governs, “impartial” ensures that authorities do not favor
particular parties over others, “reasonable” is directed at the nature of the administration itself and
ensures that authorities do not administer a law in an inappropriate manner, such as applying a penalty
in a disproportionate manner, while “uniform” ensures that authorities do not administer laws indifferent ways under similar circumstances.  Collectively, these obligations ensure due process.
287. The Appellate Body gave meaning to the due process standards set forth in Article X:3 in
US—Shrimp , where it emphasized the standards of good faith as regards the obligations placed upon
Members in other GATT 1994 articles:
Inasmuch as there are due process requirements generally for measures that are
otherwise imposed in compliance with WTO obligations, it is only reasonable that
rigorous compliance with the fundamental requirements of due process should be
required in the application and administration of a measure which purports to be an
exception to the treaty obligations of the Member imposing the measure and which
effectively results in a suspension pro hac vice  of treaty rights of other Members.
278
288. Thus, the Appellate Body considers the standards contained in Article X:3 to represent in one
sense the notion of good faith and in another sense the “fundamental requirements of due process.”
289. The Article X:3(a) due process rights may be viewed as a specific incorporation of the
fundamental international legal principle of abus de droit.  Abus de droit  or abuse of law prohibits a
state from engaging in an abusive exercise of its rights.279
290. This principle was recognized by the Appellate Body in the US—Shrimp  case.  “It noted that
good faith” is a “general principle of law and a general principle of international law {that} controls
the exercise of rights by states"280  and that abus de droit  is one application of this general principle.281
                                                                                                                                                                    
asking for too much.  5. Within the limits of reason; not greatly less or more than might be thought likely or
appropriate; moderate.
“uniform” — “1. Of one unchanging form, character, or kind; that is or stays the same in different
places or circumstances, or at different times, . . . 4. Of  the same form, character, or kind as another or others;
conforming to one standard, rule, or pattern; alike, similar.”
277 Vienna Convention, art. 31.1.  Article 26 also establishes the concept of pacta sunt servanda  stating
“Every treaty in force is binding upon the parties to it and must be performed by them in good faith,” and it
appears in Part III of the Vienna Convention titled, “Observance, Application and Interpretation of Treaties.”Id.  The Vienna Convention governs the interpretation of the provisions of the WTO Agreements, including
GATT 1994.  See DSU Article 3.2; see also Anti-Dumping Agreement, Art 17.6 (i) (requiring Members’
authorities to evaluate facts in “an unbiased and objective manner”); Art. 17.6(ii) (directing Panels interpreting
the Agreement to use “customary rules of interpretation of public international law,” i.e., the Vienna
Convention).  Most recently, the Panel in Korea—Measures Affecting Government Procurement  recognized the
implicit development of Vienna Convention Article 26 pacta sunt servanda  in respect of the GATT 1947 and
the WTO Agreements.  Circulated on 1 May 2000, WT/DS163/R, at para. 7.93.
278 United States—Import Prohibition of Certain Shrimp and Shrimp Products,  12 Oct. 1998,
WT/DS8/AB/R, at para. 182 (emphasis in original) (“US—Shrimp”).
279 See, e.g.,  Sir Robert Jennings, 1  Oppenheim's International Law 407 (9th ed. 1992) (an abuse of
right occurs when a state avails itself of a right in an arbitrary manner) ( Exh. JP-74 ).
280 US—Shrimp , at para. 158; see also United States—Tax Treatment for “Foreign Sales
Corporations,”  24 Feb. 2000, WT/DS108/AB/R, at para. 166; United States—Standard for Reformulated and
Conventional Gasoline,  29 Apr. 1996, WT/DS2/AB/R, at 18.  This principle is set out at Article 26 (“pacta sunt
servanda”) of the Vienna Convention, which requires states bound by treaties to perform them in good faith.
Also, the principle is recognized by the International Court of Justice ( see, e.g., Lighthouse Case  (1934),
France/Greece, S.O. by Sefriaders, A/B 62, at 47 ( Exh. JP-75 ) and by US law ( see, e.g ., U.C.C. § 1-203
(“Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement”)(Exh. JP-76 ).WT/DS184/R
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291. The US—Shrimp  case is particularly applicable to the hot-rolled case.  Similar to the
circumstances in US—Shrimp , the US agencies administering the dumping statutes afforded
favourable treatment to the domestic petitioners over the foreign respondents.  As in US—Shrimp ,
when several parties are subject to the same set of supposedly neutral rules, it is of the utmostimportance that there be a “rigorous compliance with the fundamental requirements of due
process."
282
292. In this way, the Appellate Body adopted the concept of good faith as a tool for interpreting
WTO provisions so as to guarantee the due process rights of WTO Members.  Specifically, good faith
precludes unreasonable, abusive, or discriminatory interpretation of WTO rights and obligations.
293. These principles prove even more crucial when a particular law endows a national authority
with discretion.283   An exercise of discretion in good faith must include a consideration of the parties’
interests.   In this way, the concept of good faith imposes a duty upon Members to implement the
provisions in a reasonable and equitable manner.
294. The US Government ignored this principle, and did not act in a reasonable and equitable
manner in the hot-rolled case.  The US Government essentially decided the case in the favor of the
domestic industry before it even began its investigation.  This bias surfaced repeatedly when the US
Government manipulated the facts and adopted impermissible legal interpretations.
295. Having established the extent of the Article X:3(a) obligations, we turn now to the various
ways in which the United States breached its obligations under that Article.  As demonstrated below,
in each case and as a totality, the Article X:3(a) violations committed by the United States were so
egregious that they fundamentally compromised th e ability of the Japanese companies to defend
themselves in the US proceeding.  Thus, apart from indicating a pattern of bias against the Japanesecompanies, the “procedural” violations took a substantive toll.  This being the case, Japan asks the
Panel not to view these claims as subsidiary complaints, but as independent claims.
                                                                                                                                                                    
281 As the Appellate Body concluded, “{a}n abusive exercise by a Member of its own treaty right thus
results in a breach of the treaty rights of the other Members and, as well, a violation of the Treaty obligation ofthe Member so acting.”  US—Shrimp , at para. 158.
282 US—Shrimp , at para. 182.  The United States itself has confirmed that Article X applies when a
Member administers a statute so as to favor one pa rty over another.  The United States recognized this
applicability of Article X in its arguments in the 1984 Japan Leather  case under the GATT 1947.  Panel on
Japanese Measures on Imports of Leather,  L/5623, adopted 15/16 May 1984.  There, the United States
challenged Japan’s administration of its import quota system as “unreasonable” under Article X:3(a).Specifically, the United States argued:
If a contracting party were to administer an import quota — even a GATT-legal one — by
systematically and knowingly granting import licenses only to domestic producers of competing products who
had every incentive not to import, this would clearly fall outside the scope of “reasonable” conduct under
Article X:3.
Id. para. 28.
283 The same leading treatise used by the Appellate Body in US—Shrimp  explains, “wherever the law
leaves a matter to the judgment of the person exercising the right, this discretion must be exercised in good faith,and the law will intervene in all cases where this discretio n is abused. . . .  Whenever, therefore, the owner of a
right enjoys a certain discretionary power, this must be exercised in good faith, which means that it must be
exercised reasonably, honestly, in conformity with the spirit of the law and with due regard to the interests ofothers.” Cheng at 133.  B. Cheng, General Principles of Law as applied by International Courts and Tribunals
(Stevens and Sons, Ltd., 1953), Chapter 4, p. 133.WT/DS184/R
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B. USDOC’ S AND USITC’ S ACTIONS WERE NON-UNIFORM , PARTIAL AND UNREASONABLE
1. USDOC accelerated all aspects of the proceeding despite its extraordinarily complicated
nature
296. At every stage of the proceeding, USDOC acted with unprecedented haste.  USDOC initiated
its investigation 15 October 1998, five days earlier than normal.284   The speed of these ministerial acts
was a precursor of what was to follow.  Indeed, on 7 October 1998, a week before even initiating its
investigation, USDOC Secretary Daley promised members of the Congressional Steel Caucus that hewould order that the investigation be expedited.
285   He was true to his word.  USDOC staff sent initial
questionnaires to the respondent companies on 19 October 1998, only four days after initiation rather
than thirty days thereafter as they normally do.286
297. This was just the beginning.  As promised by Secretary Daley, USDOC rushed to issue itspreliminary determination on 12 February 1999 – 120 days after initiating its investigation (135 days
after receipt of the petition).
287   This is 25 days less than normal for even the simplest proceeding and
75 days less than normal for highly complex proceedings like the hot-rolled steel case – a 36 per cent
reduction in the time available.288   
298. This acceleration was unprecedented.  Since the enactment of the Uruguay Round Agreement,
the USDOC has never reached a preliminary determin ation in an anti-dumping investigation less than
120 days after initiation.289   The unprecedented speed is further highlighted by the fact that prior to
the issuance of the preliminary determinations in the hot-rolled investigations and since the effective
date of the Uruguay Round Agreement, USDOC has extended the preliminary determination in 70 out
                                                     
284 USDOC Initiation of Investigation , 63 Fed. Reg. at 56613 ( Exh. JP-6 ).  In addition, the USITC
initiated its investigation the day after the petition was filed.  See USITC Institution of Investigation , 63 Fed.
Reg. at 53926 ( Exh. JP-2 ).
285 After stating in September 1998 that “{w}e at the Department of Commerce will use every weapon
at our disposal to ensure that our essential US industri es, like steel are not jeopardized by foreign unfair trade
practices,” Secretary Daley vowed in early Oct. 1998 to “do whatever he can to expedite the {steel anti-
dumping} cases.” See “Commerce Signals Support for Steel Industry Demands in New Cases,” Inside US Trade
(9 Oct. 1998) ( Exh. JP-19 ); Tsukasa Furukawa, “Steel’s Trade Complaints Stir Reactions,” American Metal
Market  (14 Sept. 1998) ( Exh. JP-20 ).
286 See Exh. JP-69 , which summarizes the timing of questionnaires and responses in other US anti-
dumping proceedings in 1998.  The Section A Questionnaire is extensive, requesting information on the total
quantity and value of subject sales, corporate structure and affiliations, product distribution, sales processes
(including sales to affiliated companies), and accounting/financial practices, among other issues.  See USDOC
Standard Questionnaire for Antidumping Investigations (19 May 2000), <http://ia.ita.doc.gov/library.htm>.  TheSection B questionnaire requests a narrative description and computerized listing of all sales transactions for use
in determining normal value, including data on product and customer identifiers, sale dates, quantities, prices,
and price adjustments.  See id.  The Section C questionnaire requests the same information for US sales
transactions for use in determining export price.  See id.   The Section D questionnaire requests cost of
production and constructed value information for the subject merchandise.  See id.  The Section E questionnaire
requests information about further manufacturing or assembly in the United States prior to delivery tounaffiliated US customers.  See id.
287 USDOC Preliminary Dumping Determination , 63 Fed. Reg. at 8299 ( Exh. JP-11 ).
288 Preliminary dumping determinations are normally due 140 days after USDOC initiates its
investigation. See 19 U.S.C. § 1673b(b)(1) ( Exh. JP-4 ).  USDOC may extend its preliminary determination
until no later than 190 days after initiation for extraordinarily complicated cases.  See 19 U.S.C. § 1673b(c)
(Exh. JP-4 ).
289 See USDOC  AD and CVD Case History Tables 1980-1999: Investigations , (last modified
31 Dec. 1999), <http://www.ita.doc.gov/import_admin/records/stats/case.list.txt> ( Exh. JP-24 ).  There are four
situations where expedition is authorized and they are:  (1) short life cycle merchandise (19 U.S.C.
§§ 1673h(b)(4), 1673b(b)(1)(B)); (2) waiver of verification (19 U.S.C. § 1673b(b)(2)); (3) cases initiated aftermonitoring (19 U.S.C. § 1673a(a)(2); and (4) merchandise previously subject to an order (19 U.S.C.§ 1673a(c)(1)(C)) ( Exh. JP-4 ).  None of these exceptions apply in this proceeding.WT/DS184/R
Page A-79
of 76 anti-dumping investigations in which the USDOC reached a preliminary determination.290   Only
one case involving multiple respondents did not receive an extension over the minimum 140 days.291  
This proceeding fit within the US statutory definition of “extraordinarily complicated” (by virtue of
the number and complexity of the transactions and adjustments) and thus should have been extended
under authority of 19 U.S.C. § 1673b(c)(1), rather than accelerated.292
299. These unprecedented accelerations are not “uniform.”  The rareness of previous accelerations,and concomitant prevalence of extensions in comparable proceedings, demonstrates the lack of
uniformity.  As evidenced by hundreds of prior cases, USDOC uniformly allows the maximum time
under the statute to issue its preliminary dumping determination — not less than the full time allowed
in this case.  The accelerated schedule was not “impartial.”  Secretary Daley’s pre-initiation
commitment to the Congressional Steel Caucus in th e context of the US industry’s concerted lobbying
efforts most clearly demonstrates this partiality.  The accelerated schedule was not “reasonable.”  This
proceeding was extraordinarily complicated, involving hundreds of thousands of pages of data from
each of the responding companies.  To demand all this, and to require that it all be perfect under
penalty of hair-trigger application of “facts available,” within significantly accelerated deadlines, is
the epitome of unreasonable government action.
300. In fact, USDOC’s expedited schedule resulted in the imposition of early, error-ridden
provisional measures.  NKK and NSC found cleric al errors in USDOC’s calculation of their
preliminary dumping margins, inflating the margins by twelve and six percentage points,
respectively.
293   Petitioners found three other errors that disfavoured NKK to a lesser degree.294  
USDOC’s haste to issue its preliminary determination thereby resulted in collection of anti-dumping
duty deposits at excessively and unjustifiably high rates.295
301. Thus, USDOC’s actions to accelerate deadlines violate all three of the obligations of
Article X:3.  Moreover, they are stark violations of the fundamental international law principles thatArticle X:3 enshrines.  They constitute a pattern of abusive exercise of rights and violation of the
obligation of good faith administration of the anti-dumping remedy.  Even if USDOC had the
administrative discretion to accelerate certain deadlines, regardless of its invariable practice of not
doing so, the significant acceleration of all deadlines in this highly politicized attack on steel imports
tramples Japan’s (and the exporting Japanese steel companies’) international legal rights to a fair
proceeding and thus Japan's international legal rights under Article X:3(a).
                                                     
290 See USDOC  AD and CVD Case History Tables 1980-1999: Investigations , (last modified
31 Dec. 1999), <http://www.ita.doc.gov/import_admin/records/stats/case.list.txt> ( Exh. JP-24 ).
291 See id . (Exh. JP-24 );  See Notice of Preliminary Determination of Sales at Less Than Fair Value
and Postponement of Final Determination:  Collated Roofing Nails From the People’s Republic of China , 62
Fed. Reg. 25899 (12 May 1997); Notice of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination:  Collated Roofing Nails From Korea,  62 Fed. Reg. 25895
(12 May 1997); Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of
Final Determination:  Collated Roofing Nails From Taiwan ,  62 Fed. Reg. 25904 (12 May 1997).
292 The US statute defines “extraordinarily complicat ed” in terms of “(I) the number and complexity of
the transactions to be investigated or adjustments to be  considered, (II) the novelty of the issues presented, or
(III) the number of firms whose activities must be investigated.”  19 U.S.C. § 1 673b(c)(1)(B) ( Exh. JP-4 ).
293 NKK Letter to USDOC of 18 Feb. 1999 (setting forth clerical errors) ( Exh. JP-70 ); NSC’s Case
Brief, at 49-54 (13 Apr. 1999) (d escribing the clerical error) ( Exh. JP-29 ).
294 USDOC Final Dumping Determination , 64 Fed. Reg. at 24369 ( Exh. JP-12 ).
295 Compare id. at 24370 ( Exh. JP-12 ) with USDOC Preliminary Dumping Determination , 64 Fed.
Reg. at 8299 ( Exh. JP-11 ).WT/DS184/R
Page A-80
2. USDOC refused to follow its normal practice for correcting ministerial errors following
preliminary determinations, thus subjecting NKK product to critical circumstances and
requiring its importers to pay inflated and retroactive provisional measures
302. Shortly following the issuance of USDOC’s preliminary dumping determination, NKK’s
counsel discovered a serious clerical error in the calculation of its dumping margin.  This errorinflated NKK’s dumping margin by twelve percentage points.  Given that NKK’s published
preliminary margin was 30.63 per cent, the error would not only reduce the margin by 40 per cent, but
also eliminate the basis for USDOC’s affirmative cr itical circumstances determination with regard to
this respondent.
303. USDOC’s regulations set forth procedures for correcting such clerical errors.  Specifically, if
an interested party informs USDOC of an error in a timely fashion (usually five days after release of
disclosure documents), USDOC is instructed to issue a correction within 30 days of publication of its
preliminary determination if the error is deemed “significant."
296   The regulations further define
“significant” to include errors that result in a change of at least five percentage points.297
304. Upon finding the error in USDOC’s prel iminary determination, NKK followed USDOC’s
regulations and filed timely comments bringing the error to USDOC’s attention.298   Although the
error NKK identified clearly met the standa rd under which USDOC would normally correct
ministerial errors, USDOC declined to make the correction within the 30-day time period set forth in
its own regulations.  Instead, USDOC decided to make the change in the final determination.299
305. Such an unexplained departure from USDOC’s established practice lacks the uniformity,
impartiality, and reasonableness mandated by Article X:3(a).  It was not uniform because it
represented a departure from normal practice — a practice defined in USDOC’s regulations.  It was
not impartial because it maintained a high margin that triggered critical circumstances, and therefore
favoured the interests of petitioners at the expense of NKK and its customers.  Finally, its was notreasonable: there was no sound reason for USDOC to  ignore its own regulations.  USDOC therefore
failed to abide by its obligation under Article X:3(a) to apply its laws and regulations in a uniform,
impartial and reasonable manner.
3. USDOC revised its policy on critical ci rcumstances and then took the unprecedented
action of ordering retroactive imposition  of provisional measures prior to the
preliminary dumping determination
306. On 8 October 1998, one week after it initiate d the hot-rolled investigation, USDOC issued a
“Policy Bulletin” announcing that it was “revising its critical circumstances practice.”  The new
policy permitted USDOC to issue preliminary determinations of critical circumstances prior to
preliminary determinations of dumping.
300
307. Using this new policy, USDOC issued its preliminary determination of critical circumstanceson 23 November 1998
301,  eleven weeks before issuing its preliminary determination of dumping on
12 February 1999.302   As discussed in the previous section presenting Japan’s specific claim on the
                                                     
296 19 C.F.R. 351,224 (e) (  Exh. JP-5 ).
297 19 C.F.R. 351.224 (g) ( Exh. JP-5 ).
298 NKK Letter to USDOC of 18 Feb. 1999 ( Exh. JP-70 ).
299 Indeed, in the final determination, USDOC not only made the change, but applied it retroactively to
thirty days following NKK’s allegation.  See USDOC Final Dumping Determination, 64 Fed. Reg. at 24368
(Exh. JP-12) .  While this provided NKK with some vindication, it was largely meaningless given that the
harmful effects of an erroneous preliminary critical ci rcumstances determination had already served its purpose.
300 USDOC Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364 ( Exh. JP-3 ).
301 USDOC Preliminary Determinations of Critical Circumstances , 63 Fed. Reg. at 65751 ( Exh. JP-9 ).
302 USDOC Preliminary Dumping  Determination , 63 Fed. Reg. at 8299 ( Exh. JP-11 ).WT/DS184/R
Page A-81
critical circumstance determination, USDOC relied on the margin allegations in the petition (which,
as was the case here, are always highly inflated).  Its justification for doing so was “since we have not
yet made a preliminary finding of dumping, the mo st reasonable source of information concerning
knowledge of dumping is the petition itself."303   This was a ludicrous attempt to fulfill the mandate in
the newly issued Policy Bulletin that early issuance was permissible only where there was “adequateevidence of critical circumstances."
304   Petition allegations are not “adequate evidence.”
308. USDOC’s basis for imputing to importers know ledge that there was likely to be material
injury by reason of the investigated imports is equally unsound.  As detailed previously, USDOC
ignored the findings of USITC that there was no pr esent injury.  Rejecting the findings of the agency
statutorily mandated to determine whether the domestic industry was materially injured, USDOC
imputed knowledge of injury on the basis of press reports that were speculative, did not refer toJapanese hot-rolled steel, and were not specific as to timing of a possible petition.
309. The timing of the release of the Policy Bulletin and the preliminary critical circumstances
determination, and the substance of that determination, were inconsistent with the US obligation to
administer its trade laws in a “uniform, impartial, and reasonable” manner under Article X:3(a).  Thetiming was not  “impartial.”  USDOC abruptly changed its practice in response to the loud and public
demands of petitioners and their Congressional supporters for instant relief in this particular
investigation.
310. The timing also was not “reasonable.”  The early determination of critical circumstances was
made in a vacuum, before any facts were gathered about actual dumping.  There was no legitimate
purpose in issuing the finding early since, under its anti-dumping law, the US Government cannot
collect retroactive duties until 90 days prior to the preliminary determination of dumping.
305  
Rendering an early decision on critical circumstances served only the purpose of chilling further
imports with no evidentiary support  – a purpose that USDOC achieved in this instance, as reflectedby the dramatic drop in US imports of Japanese hot-rolled steel after this determination was made.
306
311. The substance of the decision was not “uniform.”  Unlike all previous cases, the period for
measuring imports was not before and after the date of the petition or initiation.  Instead, USDOC
selected an arbitrary date months earlier by which, they claimed, importers “should have known” an
investigation was likely.  The standard is not transparent, but varies from case to case in an outcome-
determinative manner.
312. On the question of injury, the early finding also was not “uniform” in that it did not conform
to one standard, rule or pattern.  USITC had already preliminarily found no present injury during the
period USDOC chose to examine, but USDOC found injury during that period anyway.  Two
agencies of the US government thus rendered injury  determinations that were inconsistent with one
another and thus not “uniform.”
313. Insofar as it was based solely on allegations in the petition, including petitioners’ selected
news articles, the decision was not “impartial” because it favoured one party or side.  USDOC had not
yet solicited or obtained information on actual dumping margins or shipments from the importers orJapanese producers.  To assume the veracity of one party’s allegations without giving other parties the
opportunity to build a record cannot be deemed impartial.
                                                     
303 USDOC Preliminary Determinations of Critical Circumstances , 63 Fed. Reg. at 65750 ( Exh. JP-9 ).
304 USDOC Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364 ( Exh. JP-3 ).
305 19 U.S.C. § 1673b(e)(2) ( Exh. JP-4 ).  See also  Anti-Dumping Agreement Art. 10.6.
306 USDOC, Import Statistics ( Exh. JP-71 ).WT/DS184/R
Page A-82
314. For these reasons, the early issuance of the preliminary critical circumstance determination
violates all three of the obligations of Article X:3 and also constitutes an abusive exercise of any
administrative discretion that might have been provided by the Policy Bulletin.
4. While USDOC resorted to “facts available ” in each instance where Japanese respondent
companies made even the most minor, inad vertent mistake, USDOC and USITC took no
adverse action when domestic companies refus ed to provide highly material information
315. As described in detail above, USDOC punished KSC for the failure of another interested
party — petitioner CSI — to turn over resale and further manufacturing information regarding KSC’s
sales.  Yet, when petitioner and interested part y CSI refused to turn over its downstream product and
price data, USDOC applied facts available less favourable to KSC rather than CSI.  In this way,
USDOC allowed CSI, as a petitioner in the investigat ion, to manipulate the system so as to inflate its
adversary’s margin.  Application of its facts available provision in this manner is inconsistent with the
requirement to administer all laws in an “impartial” manner under Article X:3(a).
316. Similarly, USDOC’s choice of adverse facts available was a disproportionate penalty to apply
to KSC under the circumstances, thereby contravening the Article X:3(a) requirement thatadministration of laws be “reasonable.”  KSC tried repeatedly to convince CSI to turn over its data,
but CSI repeatedly refused.  Despite KSC’s efforts, USDOC chose the harshest penalty that it could
find to apply to KSC — the second highest margin of any transaction for which there existed a
dumping margin out of KSC’s entire sales database.  USDOC chose this harsh penalty despite the
existence of several more proportionate and reasonable alternatives.  Application of such a severepenalty bears no rational relationship to the factua l circumstances surrounding the failure to provide
the information.
317. USDOC’s administration of its facts available and adverse inference provisions with respect
to NSC and NKK also was  “unreasonable."
307   This punishment is highly disproportionate to the
good faith actions taken by NSC and NKK.  First, this harsh penalty punished the respondents for
failure to provide a minor piece of data that applied to only a handful of sales, despite the fact that
both respondents substantially cooperated throughout the investigation and turned over complete data
on all other (more important) issues.  Second, both companies submitted acceptable data concerning
the weight conversion factor prior to the time that USDOC came to Japan for verification; USDOC
had the actual or estimated data in front of them, placed on the record by both companies and made
open for verification.  In short, for both NSC and NKK, USDOC could have verified and used the
actual data.  Therefore, USDOC’s harsh penalties in the form of adverse facts available were
“unreasonable” within the meaning of Article X:3(a).
318. When the punitive treatment of the three Japanese respondents is compared to the highly
lenient treatment accorded the domestic petitioners, the US actions exhibit a fundamentalinconsistency with Article X:3(a).  The US Government applied its facts available provisions in very
different ways during the proceeding depending upon whether the affected party was a domestic
petitioner or a foreign respondent.  As described above, USDOC punished all three respondents by
applying facts available and adverse inferences in the harshest manner possible.  In stark contrast,
USDOC and USITC decided not to apply facts available at all to petitioners, let alone adverseinferences, under circumstances far more deserving of punishment.
                                                     
307 USDOC attributed to NKK’s home market sales made on a theoretical weight basis, the highest
normal value found for any other transaction of the same CONNUM ( i.e., product type).  With respect to NSC,
USDOC simply decided not to calculate an export price an d instead attributed to those theoretical weight sales
the highest margin found by CONNUM.WT/DS184/R
Page A-83
319. In the USITC’s initial questionnaire, the domestic petitioners were instructed to report
financial information for internally transferred products using a particular valuation methodology.308  
This information was readily available information which headquarters and sales staff at any of the
domestic companies could have easily gathered.  However, several petitioners refused to comply with
USITC’s request.  Petitioners recognized that this data would be particularly important to determiningthe applicability of the captive production provision, a decisive element of the injury side of the hot-
rolled case.
320. USITC staff admonished US producers in its Prehearing Staff Report for failing to respond
properly to USITC’s questions concerning internal transfers.
309   At the injury hearing, USITC
Commissioners issued a harsh rebuke concerning the withholding of the requisite data by the
petitioners.310   After the hearing and nearly a month and a half after the producer questionnaire
response deadlines, petitioners finally agreed to submit the requisite information.  USITC accepted
and utilized this untimely data, even though, since it was submitted after USITC’s hearing, the
responding Japanese companies had inadequate opportunity to review and challenge the data.  USITC
imposed no penalty on the domestic petitioners whatsoever.
321. When these facts are compared to USDOC’s actions, as summarized below, the overall
behaviour of the US Government, quite simply, can only be seen as favoring the domestic parties
under a supposedly neutral statute.
Non-Uniform Treatment of Respondents and Petitioners
Issue USDOC vis-à-vis Respondents USITC vis-à-vis Petitioners
Cooperation Respondents cooperate throughout
entirety of investigation.  NSC and
NKK report missing conversion
factor in time for verification and as
soon as they learn of theirmistake/misunderstanding.  KSC
acts in good faith to convince
adverse petitioner CSI to provide
data.Petitioners affirmatively refuse to
disclose readily available
information in their questionnaire
responses until USITC’s public
rebuke.  Revised questionnairesfiled just before the USITC vote.
Withholding Information No respondent withheld
information.  NSC and NKK make
an honest mistake, but correctbefore verification.  KSC never had
physical possession of the
information that petitioner CSI was
actually withholding.Petitioners affirmatively refuse to
report data as requested until
USITC ’s public rebuke.  Revisedquestionnaires filed just before the
USITC vote.
                                                     
308 USITC US Producers’ Questionnaire, Certain Hot-Rolled Steel Products from Brazil, Japan, and
Russia , Inv. Nos. 701-TA-384 and 731-TA-806-808 (Final), at 8 (excerpts in Exh. JP-66 ).
309 Certain Hot-Rolled Steel Products from Brazil, Japan, and Russia: Prehearing Report to the USITC
of Investigations Nos. 701-TA-384 and 731-TA-806-808 (Final) at VI-7 (22 Apr. 1999) (excerpts in Exh. JP-
72).
310 See USITC Hearing Transcript, at 8-9, 65-68, 82-83, 176-177, 180, 274-275 (4 May 1999)
(comments by Chairman Bragg, Vice Chairman Miller, and Commissioners Koplan, Askey and Crawford)(excerpts in  Exh. JP-73 ).WT/DS184/R
Page A-84
Non-Uniform Treatment of Respondents and Petitioners
Issue USDOC vis-à-vis Respondents USITC vis-à-vis Petitioners
Timeliness KSC was never late; instead, it
simply had no access to the
requested data and could not report
it without petitioner CSI’scooperation.  NSC and NKK report
missing figure after the due date for
initial questionnaire response, but
before the record is closed and prio r
to verification.  Petitioners haveplenty of time to comment.Petitioners’ data filed late, after the
public hearing and just in time for
the USITC vote, giving other
parties inadequate time tocomment.
322. The contradictory applications of the US facts available provision was inconsistent with the
fundamental right to due process guaranteed by Article X:3(a).  When compared with the lenient
treatment accorded the domestic petitioners by USITC, it is clear that USDOC’s actions were not“uniform” or “impartial” as mandated by Article X:3.  The application of facts available was not
“uniform” because despite the similar circumstances noted above, only USDOC ultimately applied
adverse facts available.  The application of facts available also was not “impartial” because the US
Government applied it in such as way as to accord favourable treatment to the domestic parties in the
case.  USDOC punished the foreign respondents for alleged “infractions” that were arguably notinfractions at all, while USITC refused to apply adverse facts available under the US statute to the
domestic industry.  This was not “reasonable.”  Moreover, the inconsistent application of facts
available was patently an abusive exercise of any rights that USDOC or USITC might have had – a
blatant failure to conduct the proceeding in good faith as required under international law.
5. USITC deviated from its prior practice by ignoring the US industry’s financial
performance early in the period of investigation and instead contriving declining
financial performance by comparing only two years
323. As detailed earlier, USITC’s normal analytic approach would have demonstrated the absence
of material injury by reason of subject imports, given that virtually all the major domestic industry
performance indices improved over the three year period of investigation.  Here, USITC eschewed its
traditional three year analysis, and instead compared 1998 only with 1997.
324. USITC’s injury analysis was inconsistent with the principles of Article X:(3)(a), being neither
“uniform,” “impartial,” or “reasonable.”  The truncated analysis of the domestic industry’s financial
performance is not “uniform” given the absence of a single other case in the past ten years where
USITC focused on only the last two years of the period of investigation.  Uniformity requires at leastone other analogous case, if not significantly more.  The analysis also was not “impartial” as it was
outcome determinative.  As recognized by Commissioner Askey, there was substantial other evidence
that the domestic industry’s condition improved over a three-year period.
311   Finally, the analysis was
not “reasonable” because it relied on a skewed comparison of only two years.  The point of USITC’s
analysis of the impact of subject imports is to establish a trend over time.  A two-year period is not
reasonable because it is not moderate, proportionate or suitable under the circumstances.
CONCLUSION
325. For the reasons discussed above, Japan respectfully requests the Panel:
                                                     
311 USITC Final Injury Determination , USITC Pub. 3202 at  51-52 (dissenting views of Commissioner
Askey) ( Exh. JP-14 ).WT/DS184/R
Page A-85
(a) to find that the specific anti-dumping measures imposed by the United States on hot-
rolled steel from Japan are inconsistent with various provisions of the Anti-Dumping
Agreement, as follows:
• USDOC’s application of adverse facts available to KSC’s dumping margin was inconsistent
with Articles 2.3, 6.8, 9.3, and Annex II;
• USDOC’s application of adverse facts available and treatment of the facts with respect to
NKK’s dumping margin were inconsistent with Articles 2.4, 6.1, 6.6, 6.8, 6.13, 9.3, and Annex II;
• USDOC’s application of adverse facts available and treatment of the facts with respect to
NSC’s dumping margin were inconsistent with Articles 2.4, 6.6, 6.8, 6.13, 9.3, and Annex II;
• USDOC’s inclusion of margins based on partial facts available in the calculation of the "all
others rate" was inconsistent with Article 9.4;
• USDOC’s exclusion and replacement of certain home market sales in the calculation of
normal value through use of the unreasonable 99.5 per cent arm’s length test was inconsistentwith Articles 2.1, 2.2, and 2.4;
• USDOC’s application of a new policy with respect to preliminary critical circumstances
determinations was inconsistent with Articles 10.1, 10.6, and 10.7;
• USITC’s application of the captive production provision was inconsistent with Articles 3.1,
3.2, 3.4, 3.5, 3.6 and 4.1;
• USITC’s finding of a causal connection between imports and the domestic industry’s injury
was inconsistent with Articles 3.1, 3.4, and 3.5;
and to recommend that the DSB request the United States to bring these measures into conformity
with the Anti-Dumping Agreement.
(b) to find that the following actions undertaken by the United States were inconsistent
with GATT 1994 Article X:3, including:
• USDOC’s accelerated proceeding;
• USDOC’s application of a revised critical circumstances policy;
• USDOC’s failure to correct the clerical error committed in calculating NKK's preliminary
margin;
• USDOC’s resort to adverse facts available with respect to respondents, coupled with
USDOC’s and USITC’s decisions against applying facts available with respect to petitioners;
• USITC’s limited analysis to two years of the three-year period of investigation, in
abandonment of its normal policy to analyze all three years;
and to recommend that the DSB request the United St ates to bring these actions into conformity with
the GATT 1994;
(c) to find that the United States’ anti-dumping laws, regulations, and administrative
procedures governing:WT/DS184/R
Page A-86
• the use of adverse “facts available” are inconsistent with Article 6.8 and Annex II of the Anti-
Dumping Agreement;
• the calculation of an “all others” rate based on partial facts available are inconsistent with
Article 9.4 of the Anti-Dumping Agreement;
• the exclusion and replacement of certain home market sales in the calculation of normal value
by the unreasonable arm's length test are inconsistent with Articles 2.1, 2.2, and 2.4 of the Anti-Dumping Agreement;
• "critical circumstances," including the generally  applicable interpretations reflected in the
Policy Bulletin issued on 8 October 1998, are inconsistent with Articles 10.1, 10.6 and 10.7 of the
Anti-Dumping Agreement;
• the focus on the merchant market sales to the exclusion of the remainder of the domestic
industry when determining injury by reason of imports are inconsistent with Articles 3.1, 3.2, 3.4,
3.5, 3.6, and 4.1 of the Anti-Dumping Agreement;
and to recommend that the DSB request the United St ates to ensure, as stipulated in Article XVI:4 of
the WTO Agreement and Article 18.4 of the Anti-Dumping Agreement, the conformity of the above-
listed elements of its anti-dumping laws, regulations, and administrative procedures with itsobligations under the Anti-Dumping Agreement; and
(d) to recommend that, if the Panel's findings  result in a determination that the imported
product was either not dumped or that it did not injure the domestic industry, the DSB
further request that the United States revoke its anti-dumping duty order andreimburse any anti-dumping duties collected;
(e) to recommend that, if the Panel's findings result in a determination that the imported
product was dumped to a lesser extent than the duties actually imposed, the DSB
further request that the United States reimburse the duties collected to the extent ofthe difference.WT/DS184/R
Page A-87
ANNEX A-2
First written submission of the United States
(24 July 2000)
This first submission of the United States, filed in response to the submission of the
Government of Japan (“Japan”), dated 3 July 2000, is divided into four separate parts, each of which
is separately paginated and has its own series of paragraph and exhibit numbers.1  Part A responds to
Japan’s description of the purported “Summary and Context” of the anti dumping measures at issue,
and clarifies the applicable standard of review.  Part A also raises preliminary objections and urges the
Panel to disregard (1) evidence that was not made av ailable to US authorities during the course of the
anti-dumping investigation at issue, and (2) Japan’s claim concerning the United States’s general
practice with respect to “facts available”, which was not raised in Japan’s request for theestablishment of a panel and is therefore not included in this Panel’s terms of reference.
In accordance with paragraph 12 of the Panel’s working procedures  we request that the Panel
set a deadline of 3 August 2000, for any responses to these preliminary objections, and we request that
the Panel rule on these preliminary objections at or before the first substantive meeting of the Panel on22 August.
Part B of this submission demonstrates that Japan’s claims relating to the calculation of
anti-dumping duty margins (the use of “facts available”, the calculation of the “all others” rate of
anti-dumping duties, and the exclusion of home mark et sales that are out of the ordinary course of
trade) and critical circumstances, are baseless, and shows that both the US law and the decisions of
US Department of Commerce are entirely consistent with the requirements of the Anti-DumpingAgreement.
Part B also notes that certain specific info rmation on which the US Department of Commerce
based its “facts available” decision was submitted in confidence to the Department by Kawasaki Steel
Corporation (“KSC”) during the anti-dumping investigation, and is not now before the Panel.  Thisinformation, identified in Part B, includes the minutes of three CSI Board of Directors meetings,
confidential portions of the KSC sales verification report, the Department’s analysis memorandum
regarding CSI, and KSC’s response to the Department’s supplemental section A questionnaire.
Under Article 6.5 of the Anti-Dumping Agreement and the Department’s rules, the Department
cannot disclose this information without the permission of the party submitting it, and so hasidentified this information through the use of empty double brackets(“[[   ]]”).  While the
United States has been discussing this matter with KSC and expects that it will be resolved promptly,
we nevertheless reserve the right to ask the Panel to request that authorization to disclose be granted,
at or before the first Panel meeting, currently scheduled for 22 August 2000.
Part C of this submission shows that Japan is incorrect in claiming that the US International
Trade Commission’s (“USITC’s”) injury determination -- and the “captive production” provision
                                                     
1 Therefore, references to pages or paragraph numbers in this submission should reference the part (A,
B, C or D), as well as the page or paragraph number.WT/DS184/R
Page A-88
itself -- is inconsistent with the Anti-Dumping Agreement.  It shows that, in trying to support its
claim, Japan has misrepresented the law, the USITC’s practice, and the USITC determination in this
particular investigation.
Finally, Part D shows that Japan’s claims unde r Article X:3 of the GATT 1994 – which are
based on the same actions alleged incorrectly to violate the Anti-Dumping Agreement – are
groundless, and represent an attempt by Japan to ignore the rights and obligations of the Anti-
Dumping Agreement.  Part D also requests that the Panel deny Japan’s request for a specific remedy,
as contrary to the DSU and long-standing WTO practice.
Requested Deadlines
As provided for by paragraph 12 of the Panel’s working procedures, the United States
requests that the Panel set a deadline of 3 August 2000, for any responses to these preliminary
objections identified above, and requests that the Panel rule on these preliminary objections at or
before the first substantive meeting of the Panel on 22 August.
Business Confidential Information
Part B of this submission contains information in brackets (“[]”) that Japan has identified as
Business Confidential.  This information will be omitted from any versions of this submission that is
released to the public.  Part B omits Business Confidential information in double brackets (“[[]]”) forwhich the United States has requested permission, from Japan and the pertinent Japanese producer, to
release to the Panel under its working procedures.  Exhibits to this submission which contain BCI are
noted accordingly.WT/DS184/R
Page A-89
TABLE OF CONTENTS
Page
PART A:  INTRODUCTION; PRELIMINARY OBJECTIONS; STANDARD OF
REVI EW......................................................................................................................... .........95
I. INTRO DUCTION ................................................................................................................. .95
A. BIRTH OF THE SUPPOSED CONSPIRACY ......................................................................................96
B. ACCELERATION OF THE INVESTIGATION ...................................................................................96
C. CRITICAL CIRCUMSTANCES .......................................................................................................98
1. Accelerated Date of Critical Circumstances De termination...............................................98
2. Knowledge of Dumping and Injury.....................................................................................1003. Periods Compared to Determine Whether Imports were Massive ..................................100
D. F
AILURE TO CORRECT THE CLERICAL ERROR IN THE PRELIMINARY DETERMINATION .........101
E. A PPLICATION OF THE FACTS AVAILABLE ...............................................................................102
F. THE INJURY DETERMINATION ..................................................................................................102
G. THE "ECONOMIC CONTEXT " OF THE INVESTIGATION ..............................................................104
H. THE SUPPOSED CONSPIRACY , REVIEWED ................................................................................106
I. THE "INTERNATIONAL RAMIFICATIONS " OF THE PROCEEDING ...............................................106
J. CONCLUSION ...........................................................................................................................107
II. PRELIMINARY OB JECTIONS.........................................................................................107
A. THE PANEL MAY NOT CONSIDER EXTRA -RECORD POST -INVESTIGATION EVIDENCE ...............107
1. Article 17.5(ii) of the Anti-Dumping Agreement Limits the Panel's Review...................108
2. The Panel Must Disregard Japan's Four Affidavits..........................................................109
3. The Panel Must Disregard Japan's Newspaper Articles...................................................110
B. THE PANEL MUST FIND THAT JAPAN 'S IMPROPER FACTS AVAILABLE CLAIM IS OUTSIDE
THE PANEL 'S TERMS OF REFERENCE ........................................................................................111
III. STANDARD OF REVIEW ..................................................................................................113
A. STANDARD OF REVIEW ............................................................................................................113
1. Review of an authority's establishment and assessment of the facts:  Panel's may
not engage in de novo  review................................................................................................113
2. Review of an authority's interpretation  of the Agreement:  Panels must respect
multiple, permissibl e interpre tation....................................................................................115
3. Japan's Argument Concerning the Standard of Review under Article X:3 is
Irrelevant ..................................................................................................................... ..........117
PART B:  ANTI-DUMPING MARGINS AND CRITICAL CIRCUMSTANCES
(PART B CONTAINS BC I IN BRACK ETS).....................................................................118
I. THE COURSE OF TH E PROCEE DING ..........................................................................118
II. APPLICATION OF FACTS AVAILA BLE WITH REG ARD TO KSC.........................120WT/DS184/R
Page A-90
III. APPLICATION OF FACTS AVAI LABLE TO NSC AND NKK FOR
CONVERSION  FACTORS ................................................................................................122
IV. EXCLUSION OF FACTS AVAILABLE MARGINS FROM THE ALL OTHER
RATE ........................................................................................................................... ..........127
V. APPLICATION OF THE "ARM'S LENGTH" TEST TO AFFILIATED
CUSTOMERS TO DETERMI NE NORMAL  VALUE .....................................................128
VI. CRITICAL CIRCUMSTANCES AND RETROACTIVE APPLICATION OF
ANTI-DUMPING DUTIES..................................................................................................129
ARGUMEN T....................................................................................................................... ...............132
I. THE AGREEMENT PERMITS ADMINISTERING AUTHORITIES TO USE
ADVERSE INFERENCES IN SELECTING THE FACTS AVAILABLE
WHERE A PARTY HAS NOT COOPERA TED IN AN INVESTIGATION.................132
A. INTRODUC TION ................................................................................................................. .132
B. ARTICLE 6.8 OF THE AGREEMENT AUTHORIZES ADVERSE INFERENCES ABOUT
UNCOOPERATIVE RESPONDENTS .............................................................................................133
C. ANNEX II OF THE AGREEMENT AUTHORIZES ADVERSE INFERENCES ABOUT
UNCOOPERATIVE RESPONDENTS .............................................................................................133
D. THE APPLICATION OF ADVERSE INFERENCES TO UNCOOPERATIVE PARTIES IS
ESSENTIAL TO APPLYING THE AGREEMENT AS A PRACTICAL MATTER ....................................135
E. THE WTO MEMBER STATES OVERWHELMINGLY INTERPRET ARTICLE 6.8 OF THE
AGREEMENT AS PERMITTING ADVERSE INFERENCES ABOUT UNCOOPERATIVE PARTIES
IN ANTI -DUMPING PROCEEDINGS .............................................................................................136
F. JAPAN 'S INTERPRETATION OF AYRTICLE 6.8 AND ANNEX II MUST BE REJECTED
BECAUSE IT WOULD NULLIFY THOSE PROVISIONS ...................................................................138
II. THE DEPARTMENT'S PARTIAL ADVERSE FACTS AVAILABLE
DETERMINATION WITH REGARD TO KAWASAKI STEEL
CORPORATION ("KSC") WAS CO NSISTENT WITH ARTICLE 6.8 AND
ANNEX II OF THE AGREEMENT, AS WELL AS WITH ARTICLE 2.3 OF
THE AGREEM ENT.............................................................................................................140
A. THE FULL RECORD EVIDENCE SHOWS THAT  COMMERCE PROPERLY DETERMINED THAT
KSC FAILED TO ACT TO THE BEST OF ITS ABILITY TO REPORT THE REQUESTED DATA
FOR THE US SALES THROUGH ITS AFFILIATE , CSI....................................................................140
1. Japan's first submission withholds, omits, and ignores critical factual
information.................................................................................................................... ........140
2. The full record evidence shows that KSC fail ed to act to the best of its ability ..............141
B. COMMERCE 'S DETERMINATION THAT PARTIAL ADVERSE FACTS AVAILABLE WERE
WARRANTED FOR KSC 'S SALES THROUGH CSI IS CONSISTENT WITH ARTICLE 6.8 AND
ANNEX II OF THE AGREEMENT .................................................................................................144
C. JAPAN 'S ARGUMENTS LACK ANY SUPPORT IN THE APPLICABLE PROVISIONS OF THE
ANTI -DUMPING AGREEMENT OR IN THE FACTS AND SHOULD BE REJECTED BY THE
PANEL ............................................................................................................................... .......144
1. Commerce did not violate any duty to  provide assistance to KSC...................................144
2. Commerce appropriately applied an adverse inference because KSC "withheld"
the requested information ....................................................................................................14 5WT/DS184/R
Page A-91
3. Commerce exercised circumspection, taking all circumstances into account, in
its choice of fa cts available .................................................................................................. .145
4. Commerce's Application of facts available to KSC was completely consistent
with Article 2.3 of the Agreement........................................................................................148
III. THE DEPARTMENT'S PART IAL ADVERSE FACTS AVAILABLE
DETERMINATIONS WITH REGARD TO NSC AND NKK WERE
CONSISTENT WITH THE STANDARDS OF THE WTO AGREEMENT..................150
A. THE DEPARTMENT PERMISSIBLY INTERPRETED THE AGREEMENT TO ALLOW FOR THE
USE OF FACTS AVAILABLE WHEN INFORMATION REQUESTED IN A QUESTIONNAIRE
WAS NOT PROVIDED BY THE ESTABLISHED DEADLINE ............................................................152
B. THE DEPARTMENT PROVIDED "AMPLE OPPORTUNITY " FOR NSC AND NKK TO
FURNISH THE WEIGHT -CONVERSION FACTORS REQUESTED IN THE QUESTIONNAIRES ............153
C. THE DEPARTMENT 'S UPPLEMENTATION QUESTIONNAIRES AFFORDED NSC AND NKK
ADDITIONAL OPPORTUNITY TO FURTHER EXPLAIN , AND EVEN SUPPLEMENT , THEIR
PRIOR RESPONSES CONSISTENT WITH PARAGRAPH 6 OF ANNEX II ..........................................154
D. COMMERCE PERMISSIBLY REJECTED THE BELATED CONVERSION FACTORS AND USED
ADVERSE FACTS AVAILABLE BECAUSE NSC AND NKK FAILED TO ACT TO THE BEST OFTHEIR ABILITY AS CONTEMPLATED BY PARAGRAPHS 
5 AND 7 OF ANNEX II , AND BY
ARTICLES 2.4 AND 9.3 OF THE AGREEMENT ............................................................................155
E. JAPAN HAS FAILED TO SHOW THAT COMMERCE 'S USE OF PARTIAL FACTS AVAILABLE
WAS INCONSISTENT WITH ANY PROVISION OF THE AGREEMENT .............................................156
1. The Department fully complied with Article 6.8 and with paragraphs 5 and 7 of
Annex II ....................................................................................................................... ..........156
(a) NKK and NSC did not submit their conversion factors "within a reasonable period"
as required by  Article  6.8..................................................................................................... ...157
(b) Annex II, paragraph 5 does not mandate acceptance of the untimely provided
conversion factors............................................................................................................. ......158
(c) The Department's application of adverse fa cts available was consistent with Annex II,
paragraph 7 .................................................................................................................... .........158
2. Commerce's treatment of the untimely submitted conversion factors fully
complied with Article 6 of the Agreement ..........................................................................159
(a) Commerce gave NKK notice and ample opportunity to present the conversion factor
information, as requir ed by Article 6.1...................................................................................159
(b) Article 6.6 did not require the Department to verify NSC's and NKK's untimely
submitted conversi on factors ..................................................................................................1 61
(c) The Department's handling of the conversi on factor issue was consistent with Article
6.13 ........................................................................................................................... ..............161
3. The Department's choice of facts available with respect to the weight conversion
issue was consistent with Ar ticle 2.4 of the Agreement .....................................................161
4. The Department's application of facts available to NSC and NKK is also
consistent with Article 9.3 of the Agreement......................................................................162
IV. SECTION 735(C)(5)(A) OF THE TARIFF ACT OF 1930 IS A PERMISSIBLE
INTERPRETATION OF ARTICLE 9.4 OF THE AGREEMENT;
THEREFORE, THE DEPARTMENT'S APPLICATION OF THAT ALLWT/DS184/R
Page A-92
OTHERS RATE PROVISION OF THE STATUTE WAS LIKEWISE
CONSISTENT WITH ARTICLE 9.4 OF THE AGRE EMENT ......................................162
A. ARTICLES 6.10 AND 9.4 OF THE AGREEMENT PROVIDE FOR AN ALL OTHERS RATE
BASED ON OVERALL COMPANY -SPECIFIC MARGINS ................................................................163
B. SECTION 735( C)(5)(A) IS A PERMISSIBLE INTERPREATION OF ARTICLE 9.4 OF THE
ANTI -DUMPING AGREEMENT ...................................................................................................164
C. THE ARGUMENTS RAISED BY JAPAN LACK MERIT ...................................................................166
V. THE DEPARTMENT'S APPLICATION OF THE "ARM'S LENGTH" TEST,
WHICH DETERMINED THAT SOME EXPORTER'S HOME MARKET
SALES TO AFFILIATES WERE NOT MADE IN THE ORDINARY COURSE
OF TRADE, AND SUBSEQUENT USE OF HOME MARKET
DOWNSTREAM SALES TO CALCULATE THE NORMAL VALUE FORSUCH SALES, WAS CONSISTENT WITH ARTICLE 2 OF THE
AGREEM ENT ...................................................................................................................... 169
A.
FACTUAL BACKGROUND ..........................................................................................................170
B. THE DEPARTMENT 'S "ARM'S LENGTH " TEST FOCUSES ON THE RELATIONSHIP BETWEEN
AFFILIATED PARTIES ................................................................................................................171
C. THE AGREEMENT IS SUBJECT TO MORE THAN ONE INTERPRETATION AS TO HOW
AUTHORITIES SHIOULD DETERMINE IF AN EXPORTER 'S HOME MARKET SALES TO
AFFILIATED CUSTOMERS WERE MADE IN THE ORDINARY COURSE OF TRADE , AND THE
ARM'S LENGTH TEST IS A PERMISSIBLE INTERPRETATION .......................................................173
1. Japan misinterprets the application of Article 2 of the Agreement .................................174
2. Japan fails to prove that the Department's current arm's length test is not
permissible interpretati on of Article 2.1.............................................................................176
3. Japan's claim that use of downstre am sales is unfair  lacks merit ....................................178
4. Conclusion ................................................................................................................... ..........180
VI. THE DEPARTMENT'S CRITICAL CICUMSTANCES DETERMINATION
WAS CONSISTENT WITH ARTICLE 10 OF THE ANTI-DUMPING
AGREEM ENT ...................................................................................................................... 180
A. ARTICLES 10.6 AND 10.7 OF THE ANTI -DUMPING AGREEMENT PERMIT AUTHORITIES
TO TAKE MEASURES NECESSARY FOR THE RETROACTIVE APPLICATION OF ANTI -
DUMPING DUTIES AT ANY TIME AFTER THE INITIATION OF AN INVESTIGATION ......................181
B. THE US CRICITICAL CIRCUMSTANCES STATUTORY PROVISIONS ARE CONSISTENT WITH
ARTICLES 10.6 AND 10.7 OF THE AGREEMENT ........................................................................182
C. THE DEPARTMENT 'S PRELIMINARY DETERMINATION OF CRITICAL CIRCUMSTANCES IN
THIS CASE WAS FULLY IN ACCORDANCE WITH ARTICLES 10.6 AND 10.7 OF THE ANTI -
DUMPING AGREEMENT ............................................................................................................184
1. Article 10.6 of the Agreement does not prohibit a finding of critical
circumstances where there is a threat of  injury to a domestic industry ..........................185
2. The Department's preliminary determination of critical circumstances was
supported by sufficient evidence under Article 10.7..........................................................188
(a) The "Sufficient Ev idence" St andard .......................................................................................188
(b) Evidence of importe r knowledge dumping.............................................................................189WT/DS184/R
Page A-93
(c) Evidence of import knowledge injury.....................................................................................191
(d) Evidence that the injury was caused by massive imports over a relatively short period
of time........................................................................................................................ .............192
(e) Evidence that the imports were likely to seriously undermine the remedial effect of
imposing anti-dumpi ng duties.................................................................................................19 3
D. THE STANDARD FOR CRITICAL CIRCUMSTANC ES DETERMINATIONS PROVIDED FOR IN
THE US STATUTE IS CONSISTENT WITH ARTICLES 10.6 AND 10.7 OF THE ANTI -
DUMPING AGREEMENT ............................................................................................................194
1. As part of its policy and practice under the US Statute, the Department makes
all of the findings required under Article 10.6 of the Agreement.....................................194
2. The evidentiary standard for preliminary critical circumstances determinations
is not lower in the US Statute than in Article 10.7 of the Agreement...............................196
PART C:  INJURY ................................................................................................................ ............197
I. INTRODUCT ION ................................................................................................................1 97
II. THE CAPTIVE PRODUCTION PROVISION IS CONSISTENT WITH THE
ANTI-DUMPING AG REEMENT.......................................................................................197
A. US LAW REQUIRES THE US AUTHORITY TO EXAMINE THE EFFECTS OF IMPORTS ON THE
DOMESTIC INDUSTRY AS A WHOLE , CONSISTENT WITH ARTICLES 3 AND 4 OF THE
ANTI -DUMPING AGREEMENT ...................................................................................................199
1. The captive production provision, itself, shows that the USITC must consider the
industry as a whole ............................................................................................................ ...199
2. The statutory provisions governing injury, taken together, demonstrate that the
USITC must consider the industry as a whole, even when the captive production
provision applies .............................................................................................................. .....200
B. THE CAPTIVE PRODUCTION PROVISION MEETS THE REQUIREMENT TO CONSIDER
RELEVANT ECONOMIC FACTORS IN KEEPING WITH ARTICLE 3 OF THE ANTI -DUMPING
AGREEMENT ............................................................................................................................202
1. The refined analysis provided for in the captive production provision helps
assure an  objective examination of all relevant factors, as required by Articles
3.1 and 3.4.................................................................................................................... ..........202
2. The captive production provision pinpoints evidence relevant to each factor as
required by Articles 3.4, 3.5 and 3.6 of the Anti-Dumping Agreement ...........................203
C. WTO PRECEDENT RECOGNIZES A SEGMENTED MARKET ANALYSIS AS CONSISTENT
WITH ARTICLE  3 AND ARTICLE 4.............................................................................................205
D. THE INJURY ANALYSES OF OTHER AUTHORITIES FACED WITH SIMILAR FACTS
DEMONSTRATE THE REASONABLENESS OF THE UNITED STATES ' APPROACH ..........................206
1. Canada ....................................................................................................................... ............206
2. The European Communities ................................................................................................207
E. THE CAPTIVE PRODUCTION PROVISION IS CONSISTENT WITH ARTICLE XVI :4 OF THE
WTO AGREEMENT ....................................................................................................................208
III. THE USITC'S MATERIAL INJURY DETERMINATION IS CONSISTENT
WITH THE ANTI-DUMPI NG AGREEM ENT.................................................................208WT/DS184/R
Page A-94
A. J APAN 'S SUBMISSION IS BASED UPON A MISCHARACTERIZATION OF THE USITC 'S
DETERMINATION .....................................................................................................................208
1. The nature of the USITC's proceedings..............................................................................208
2. The USITC's determination.................................................................................................210
(a) The Commissioners considered the effects that a significant amount of captive
production had  on the i ndustry as a whole.............................................................................210
(b) The USITC considered all relevant economic factors over the entire period of
investig ation.................................................................................................................. ..........211
(c) The USITC looked at other potential cau ses of injury to th e domestic industrry...................214
B. THE USITC REASONABLY ASSESSED CAPTIVE PRODUCTION IN A MANNER CONSISTENT
WITH  THE ANTI -DUMPING AGREMEENT ..................................................................................216
1. All six commissioners made affirmative determinations regardless of their views
on the  proper method for examining of captive production ............................................216
(a) Japan's argument mischaracterizes the role of captive production in the determination ........216
(b) The views of the Commissioners who did not apply the captive production provision
do not undermine the validity of the views of  those Commissioners who did apply it ..........219
2. Contrary to Japan's argument, the treatment of captive production did not
result in different outcomes in the 1993 ho t rolled determination and the current
hot rolled  case................................................................................................................ ........220
(a) The approach to captive production in the 1993 hot rolled case was not pivotal in its
outcome or point to a practice contrary  to the analysis in this case........................................220
(b) The facts of the current case and the 1993 hot rolled case are significantly different
and do not support Japan's attemp ted analogy betw een the cases ..........................................221
C. THE USITC PROPERLY USED A THREE -YEAR PERIOD OF INVESTIGATION AND
CONDUCTED AN OBJECTIVE EXAMINATION OF THE DATA COLLECTED OVER THAT
PERIOD ............................................................................................................................... ......223
1. The USITC used a three-year period of investigation.......................................................223
2. The USITC, consistent with Article 3 of the Anti-Dumping Agreement,
established the causal relationship betw een dumped imports and material injury
based upon an objective evaluation of ch anges in relevant economic factors over
the three-yea r period .......................................................................................................... ..224
(a) The USITC evaluated data over the entire period  investig ated ..............................................224
(b) Reliance on recent trends is appropriate in determining current material injury
because it appropriate recognizes ch anges in economic circumstances .................................224
(c) Reliance on recent trends is in  keeping with USITC practice ................................................226
D. THE USITC DETERMINATION , CONSISTENT WITH ARTICLED 3, EXAMINED THE
RELEVANT FACTORS AND DID NOT ATTRIBUTE THE ADVERSE EFFECTS OF OTHER
KNOWN FACTORS TO THE JAPANESE DUMPED IMPORTS ..........................................................227
1. The requirements of Article 3 of the Anti-Dumping Agreement......................................227
2. The asserted other factors................................................................................................... .229
(a) The General Motors strike ................................................................................................... ...229
(b) Minimill co mpetit ion ........................................................................................................ ......230WT/DS184/R
Page A-95
(c) Nonsubject  impor ts.......................................................................................................... .......232
(d) Pipe and tube demand ........................................................................................................ .....233
PART D:  OTHER ISSU ES AND CONCL USION.........................................................................235
I. JAPAN'S CLAIMS UNDER ARTICLE X:3 OF THE GATT 1994 ARE
UNFOUNDE D...................................................................................................................... .235
A. THE ACTIONS AT ISSUE ARE CONSISTENT WITH THE ANTI -DUMPING AGREEMENT AND
DO NOT VIOLATE ARTICLE X :3 ................................................................................................235
B. THE UNITED STATES ' ACTIONS WERE CONSISTENT WITH GATT ARTICLE X :3..........................237
II. THE SPECIFIC REMEDY SOUGHT BY JAPAN IS INCONSISTENT WITH
ESTABLISHED PANEL P RACTICE AND TH E DSU....................................................241
CONCLUSION ..................................................................................................................... .............243
PART A:  INTRODUCTION; PRELIMINARY OBJECTIONS; STANDARD OF REVIEW
I. INTRODUCTION
1. In its first written submission, the United States responds to the arguments presented by the
Government of Japan (“Japan”) in its first written submission.  Japan argues that the Determination of
the US Department of Commerce (“Commerce” or “the Department”) that exports of certain
hot-rolled flat-rolled carbon-quality steel (“hot-rolled steel”) from Japan were being dumped in the
United States1 and the Determination by the US International Trade Commission (“USITC”) that
those imports were injuring the US domestic producers of such steel2 were, in various respects,
inconsistent with the Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994 (the “Agreement”).  Before turning to the merits of Japan’s individual claims,
however, we respond to the extensive and extraordinary introduction in Japan’ s submission, which
attempts to prejudice this Panel by persuading it that the Department and the USITC deliberatelyconducted  investigations that were biased and unfair.
2. According to Japan, Secretary of Commerce William Daley fixed the investigation even
before it was initiated, by promising the US steel industry that the Department would accelerate the
proceeding and would be “very aggressive” in handling it.
3  Allegedly, Secretary Daley “kept his
promise” by “accommodating the domestic industry"4 in the following ways:  accelerating the
schedule for the investigation; making a determination of critical circumstances at an earlier pointthan normal on the basis of mere allegations and despite the fact that the USITC had found only threat
of injury; failing to correct clerical errors in the preliminary determination; and, most importantly,
extensively applying adverse facts available to the respondents.  Finally, Japan alleges that the USITC
                                                     
1 See Notice of Final Determination of Sales at Less Than Fair Value of Certain Hot-Rolled
Flat-Rolled Carbon-Quality Steel Products from Japan (“LTFV Fi nal Determination”) , 64 Fed. Reg. 24,329
(6 May 1999) (Exh. JP-12) .
2 Certain Hot-Rolled Steel Products from Japan, Notice of USITC Final Injury Determination (“USITC
Final Determination”) , 64 Fed. Reg. 33514 (23 June 1999) (Exh. JP-12) .
3 First Written Submission of the Government of Japan to the World Trade Organization, Doc.
No. WT/DS184 (3 July 2000) at para. 27, n. 25 and para. 30 (hereinafter “First Submission of Japan”).
4 Id. at  paras. 30 and 31.WT/DS184/R
Page A-96
joined in, improperly limiting its analysis of the domestic industry to two years of the period
investigated.5
3. All this makes interesting reading - - everyone loves a conspiracy.  And, like many interesting
conspiracy theories, Japan’s begins (although selectively) with facts that are well-known.  Also like
many conspiracy theories, however, it then amplifies those facts through conjecture and, finally,jumps to conclusions that are utterly unsupported.  We address each of the elements of the supposed
conspiracy below.
A. 
BIRTH OF THE SUPPOSED CONSPIRACY
4. As noted, the conspiracy theory begins with established facts.  It is well known that, in
response to the unprecedented surge in steel imports from Russia, Japan, and (to a lesser extent)
Brazil that began in the spring of 1998, the US domestic steel industry conducted a “stand up forsteel” campaign in the United States in the fall of that year.  This effort (and the articles Japan cites
which relate to it) concerned steel as a whole, rather than hot-rolled steel.  As Japan comes close to
acknowledging, the campaign was directed overwhelmingly at the US Congress, with the goal of
securing the application of quotas on steel impor ts and amendments to the US anti-dumping law.
6  As
is also well known, both efforts failed.
5. At Commerce, the US industry simply pressed the Department to accelerate its investigation
and the point at which it determined whether critical circumstances existed, so that, if an order were
entered, anti-dumping duties would become effective in  time to prevent at least a portion of the export
surge from escaping the duties.  As we explain below, this acceleration was perfectly consistent withthe Agreement and with US law.  Although Japan attempts to expand the acknowledged acceleration
of the proceeding into a pervasive pattern of bias, there is no such pattern and, indeed, no general
connection between the various elements in the determinations about which Japan complains.  In fact,
the only ways in which the Department departed from its standard practice in the investigation were
by accelerating the investigation in certain respects and in not correcting the clerical error in itspreliminary determination before the final determination.
6. The “smoking gun” in Japan’s conspiracy theory seems to be Secretary Daley’s reported
promise to enforce the anti-dumping laws aggressively in this proceeding.  This is frivolous.  Every
Secretary of Commerce routinely promises to enforce all of the laws within the Department’sjurisdiction.  No Secretary could ever say, in any context, that he or she would not vigorously enforce
those laws.  The Secretary’s recital is not evidence of a conspiracy or of bias against Japan or
Japanese steel exports.   It was a standard affirmation that he would do his duty as a public servant.
B. 
ACCELERATION OF THE INVESTIGATION
7. According to Japan, the Department accelerated its investigation for the specific purpose of
prejudicing the respondents , by denying them adequate time to comply with the Department’s
requests for information.7  This is both inaccurate and highly misleading.  The total time by which the
investigation was shortened was 20 days.8  These 20 days were taken from the time that the
                                                     
5 Id. at para. 32.
6 Id. at para. 27.
7 Id. at para. 6.
8 The normal length of an investigation is 215 days.  19 U.S.C. 1673d(a)(1) (Exh. JP-4) .  This
investigation was initiated on 15 October 1998, Notice of Preliminary Determination of Sales at Less Than Fair
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Japan (hereinafter “ LTFV Preliminary
Determination ”), 64 Fed. Reg. 8291, 8292 (19 February 1999) (Exh. JP-11) , and completed on 28 April 1999,
for a total of 195 days.  The final determination was published on May 6, 1999.  LTFV Final Determination , 64WT/DS184/R
Page A-97
Department allowed itself to reach a preliminary determination after   receiving the respondent’s
submissions.9  None of the respondents’ standard time-periods for submitting information was
shortened.10
8. Most importantly, the respondents were given the normal time in which to answer the most
detailed sections of the Department’s questionnaire11 -- 37 days.12  In addition, all of the respondents
asked for, and received, the standard fifteen-day extension of this period13, so that they had a total of
52 days to respond – the standard time for respondents in the Department’s investigations and
substantially more than the Agreement requires.14   Second, as explained below, although the
acceleration of the case may have inconvenienced the Japanese respondents, there is  no evidence
whatsoever  that it prevented them from submitting necessary information.
9. By claiming that the Department accelerated its investigation to prejudice the exporters, Japan
seeks to draw attention away from the real, and perfectly legitimate, reason for the acceleration --
because the massive surge in steel imports from Japan and Russia threatened to seriously undermine
the relief that the anti-dumping law could provide.  As the Department explained in its critical
circumstances determination, this import surge began in the spring of 1998.15  Over the period from
May to September 1998, the volume of imports of hot-rolled steel from Japan exceeded the volumefor the previous six months by 100 per cent.
16  By way of comparison, this increase is more than six
times  the increase in the volume of imports (15 per cent) required to find critical circumstances under
the US anti-dumping  regulations17, a standard that Japan has not challenged here. With Japanese steel
                                                                                                                                                                    
Fed. Reg. at 24329 (Exh. JP-12) ; see also Hot-Rolled Flat-Rolled Carbon-Quality Steel Products AD
Investigation Timetable  (Oct. 27, 1998); Annex III – Deadlines for Parties in Anti-Dumping Investigations , 19
C.F.R. part 351.
9 Section 733(b)(1)(A) requires that a preliminary determination be made “within 140 days after the
date on which the administering authority initiates an investigation.”  19 U.S.C. 1673b (b)(1)(A) (Exh. JP-4) .
This investigation was initiated on 15 October 1998, and the preliminary determination was made on12 February 1999, for a total of 120 days.  The preliminary determination was published on 19 February 1999.LTFV Preliminary Determination , 64 Fed. Reg. 8291 (Exh. JP-11) .
10 In fact, the Department provided the Japanese respondents with a significant amount of extra time to
respond to the Section A supplemental questionnaire.  Specifically, the Department “issued supplemental
questionnaires for section A to NSC, NKK, and KSC on 4 December 1998.  On 11 December 1998, the
Department issued a letter to respondents informing them that the Department would consider thesesupplemental questions for section A to have been issued on January 4, 1999, in order to adhere to the scheduleprovided to all interested parties at the time of initiation.”  LTFV Preliminary Determination , 64 Fed. Reg. at
8292  (Exh. JP-11) .  Therefore, the Japanese respondents had an extra month to prepare responses to the
Section A supplemental questionnaire.  The section B-E supplemental questionnaire was distributed to the
Japanese respondents on 4 January 1999, and responses were received by the Department, after a seven-day
extension, on 25 January 1999.  In contrast, the petitioners had only one week to file comments on NSC’s,NKK’s, and KSC’s section B-D questionnaires.  See id.
11 Sections B through E request data on US and home market prices and on the cost of production.
12 This refers to the most burdensome part of the questionnaires – Sections B, C, and D.  Section A
requests more general information about the respondent and is less burdensome.  Respondents normally receive
21 days to respond to Section A, with the possibility of a seven-day extension.  Such was the case here, as the
Department issued Section A on 20 October 1998, and received responses from NSC, NKK, and KSC on
16 November 1998.  LTFV Preliminary Determination , 64 Fed. Reg. at 8292 (Exh. JP-11) .
13 See id.  (“[O]n 30 October 1998, the Department issued sections B-E of an anti-dumping
questionnaire to NSC, NKK, and KSC.” and “On 21 December 1998, we received responses to sections B, C,
and D of the questionnaire from NSC, NKK, and KSC.”)
14 See Article 6.1.1 of the Agreement.
15 See Critical Circumstances Preliminary Determination , 63 Fed. Reg. 65750 (30 Nov. 1998) (Exh.
JP-9)  and accompanying memorandum to the file (23 Nov. 1998) ( “Preliminary Critical Circumstances
Memo”)  (Exh. US/B-42) .
16 Id.
17 19 C.F.R. § 351.206(h)(1)(iii) (Exh. JP-5) .WT/DS184/R
Page A-98
exports pouring into the United States in such quantities, the US domestic industry had a perfectly
legitimate reason to request that whatever relief could be obtained under the statute be provided as
promptly as possible.
10. Finally, Japan fails to acknowledge that, although the Department accelerated its investigation
in the context of the massive import surge from Japan involved here, the new procedures are by nomeans confined either to this proceeding or to Japan.  They have been applied in other
investigations
18and will be applied uniformly whenever comparable export surges occur.19
C. CRITICAL CIRCUMSTANCES
11. The next piece of the supposed conspiracy was the critical circumstances determination.  Here
again, Japan begins with an acknowledged fact -- like the general acceleration of the case, the
acceleration of the critical circumstances determination was the direct result of the export surge.According to Japan, however, there are several aspects of the early determination that cannot be so
easily explained:  basing the preliminary determination on information from the petition and a
preliminary determination of threat of injury by the USITC; and moving the period that was examined
in order to determine whether there was an import surge.  We address the substance of these
arguments in the body of our submission, but offer some general considerations here relating towhether these actions should be seen as part of a general effort to prejudice the Japanese exporters.
12. To begin with, it is essential to recall the purpose of the critical circumstances provision,
which is to preserve the effectiveness of anti-dumping measures in the face of import surges.  In the
normal course of events, provisional measures may be applied no sooner than 60 days after theinitiation of the investigation.
20  The critical circumstances provision provides an exception to this
rule where (among other conditions) there have been massive imports.21  The reason for the exception
is clear -- to prevent exporters from flooding a targeted market with a large volume of dumped goods
before anti-dumping duties can be applied.  The remedy is imperfect, because the domestic industry in
the importing country cannot file a case until it has enough evidence to sustain an injurydetermination.  While the industry is waiting to be injured, the importers may be able to stockpile
enough dumped imports to last them for a year or more.  Consequently, a critical circumstances
determination often will not cover all of the imports in such a surge.  By advancing the onset of duties
by two or three months, however, it can provide some relief.
1. Accelerated Date of Critical Circumstances Determination
13. The Department made its preliminary determination that critical circumstances existed on
23 November 1998, -- 46 days after initiating the investigation.  At that time, Commerce did not
impose any provisional measures (such as withholding appraisement) whatsoever.  Provisional
measures were not imposed until 81 days later, when the Department made its preliminary
determination of dumping.
22  These provisional measures were then made retroactive by 90 days,
exactly  as if the preliminary determination of critical circumstances had accompanied the
                                                     
18 See Preliminary Determination of Critical Circum stances: Solid Fertilizer Grade Ammonium Nitrate
from the Russian Federation , 64 Fed. Reg. 60422 (5Nov. 1999) (Exh. US/B-47) ; Preliminary Determination of
Critical Circumstances: Certain Cut-to-Lengt h Carbon-Quality Steel Plate from Japan , 64 Fed. Reg. 20251
(26 Apr. 1999); Preliminary Determination of Critical Circ umstances: Certain Non-Frozen Apple Juice
Concentrate from the People ’s Republic of China , 64 Fed. Reg. 61835 (15 Nov. 1999).
19 See Change in Policy Regarding Ti ming of Issuance of Critical Circumstances Determinations , 63
Fed. Reg. 55364 (15 October 1998) (Exh. JP-3) .
20 Article 7.3 of the Agreement.
21 Article 10.6 of the Agreement.  Article 10.8 provides that in no case may anti-dumping duties be
imposed upon imports prior to the date the investigation was initiated.
22 Critical Circumstances Preliminary Determination , 63 Fed. Reg. 65750 (Exh. JP-9).WT/DS184/R
Page A-99
Department’s preliminary determination of dumpin g.  Commerce’s delay in withholding appraisement
was more favourable to Japanese exporters than Article 10.7 of the Agreement required.  Article 10.7
would have allowed the Department to begin withholding appraisement as soon as it made the
preliminary determination of critical circumstances.
14. Japan’s argument that the Department could not modify its practice to accommodate the
special circumstances of this investigation implies that, once the Department had decided to accelerate
the investigation and stated that it would enforce the anti-dumping law vigorously, it was no longer
free to introduce changes to its procedures or methodology in the investigation, even if those
procedures and changes in methodology were directly attributable to the unique circumstances before
it.  There is no basis for such a claim.
15. Japan claims that the early preliminary determination  of critical circumstances shut down
exports of hot-rolled steel to the United States23, but this claim is utterly unsupported.  The
Department initiated its investigation on 15 October 1998, and promptly announced that it would
issue its preliminary determination 120 days later.  The petitioners had alleged  critical circumstances
in their application for initiation24, so that the exporters would have been well aware from the outset
that anti-dumping duties potentially could be applied beginning 90 days before the date of thepreliminary determination.  Once the exporters knew that the preliminary determination was
scheduled for 12 February 1999 (and would be published about one week later), they had only to
subtract 90 days from the publication date to know that their exports could become subject to
anti-dumping duties beginning around 21 November 1998 (about five weeks after the investigation
was initiated).
25  This would have been equally true had the Department not made its preliminary
determination of critical circumstances early.  Thus, the acceleration of the preliminary determination
simply confirmed what the exporters already knew - - that the application of anti-dumping duties as of
about 21 November 1988, was a possibility.26
16. Of course, the possibility that retroactive duties would be applied was always fairly remote(and remained so after Commerce’s early preliminary determination of critical circumstances)
because of the well-known fact that the USITC rarely makes affirmative determinations on critical
circumstances.
27  This being the case, the Department’s early preliminary determination of critical
circumstances simply put importers on notice that, if the Department confirmed its finding in its final
determination, and if the importers’ steel were found to have been dumped, and if the USITCdetermined that there was injury and that imports during the period covered by the critical
circumstances determination were likely to undermine seriously the remedial effect of the order, their
exports would become subject to anti-dumping du ties as of approximately 21 November 1988.  As it
turned out, of course, the USITC did not make an affirmative finding on the issue and no duties ever
were or will be collected for the period before the preliminary determination.
17. In sum, the Department’s early preliminary determination had no effect whatsoever, other
than making a fairly remote possibility -- that in fact never occurred -- a bit less remote.  The
investigation itself and the allegation  of critical circumstances led the Japanese exporters to reduce
their exports (presumably, because they knew they could not sell in the United States without
dumping), not the early determination of critical circumstances.
                                                     
23 First Submission of Japan at para. 171.
24 Petition for the Imposition of Ant-Dumping Duties: Certain Hot-Rolled Carbon Steel Flat Products
from Japan  (Sept. 30, 1998) (Exh. US/B-40(a)(b)&(c)) .
25 19 U.S.C. 1673b(e)(1).
26 This possibility was real, because the final margin for KSC was well over the 25 per cent threshold
for critical circumstances.
27 The USITC has made affirmative determinations of critical circumstances in only three
investigations since 1988.WT/DS184/R
Page A-100
2. Knowledge of Dumping and Injury
18. Japan next criticizes the Department’s determination that the importers were, or should have
been, aware that the exporters practiced dumping th at would cause injury before its own preliminary
determination of dumping and on the basis of the USITC’s preliminary determination that found only
a threat of injury.28  Japan has three complaints.
19. First, Japan argues that the Department “blindly accepted” mere allegations of dumping in the
petition.29  This is highly misleading. As we show below, the allegations in the petition were backed
up with very substantial evidence.
20. Second, Japan complains that the Department’s reliance on press articles as evidence that
there was widespread knowledge that an anti-dumping petition would be filed was unreasonable.  Infact, the press articles reflect what plainly was common knowledge in the industry.  In any event,
Japan’s implication that its exporters were caught off-guard
30 is misplaced given that, earlier in its
submission, Japan observes that there has been an epidemic of anti-dumping petitions in the steel
industry since 1997, so that anti-dumping orders now cover 80 per cent of Japan’s steel exports to the
United States.31  If anti-dumping petitions against Japan are so endemic and so routinely successful,
then it would seem that any Japanese steel exporter could be expected to figure out that becoming the
subject of an anti-dumping investigation and order in the United States was a realistic possibility.
21. At the very least, the well-known situation in the steel industry makes it inconceivable that
the Japanese exporters were not closely monitoring the situation in the United States.  These exportersare hardly mom-and-pop operations.  They are large and sophisticated corporations with ample
resources to monitor market conditions, including the probability that anti-dumping proceedings will
be initiated in the United States and succeed.
22. Third, Japan complains that the USITC’s preliminary determination that there was threat of
injury was not evidence that the importers knew or  should have known that the dumping would cause
injury.  This argument rests on an interpretation of the Agreement that is simply wrong.    A
determination that there is threat of injury is an affirmative determination of injury, pursuant to which
anti-dumping duties may be assessed under the Agreement.  We address this argument in detail
below.
3. Periods Compared to Determine Whether Imports were Massive
23. Japan’s next charge is that it was somehow improper or unfair for the Department to change
the periods it examined to determine whether there was an export surge.  In Japan’s view, the fact that
the anti-dumping petition was filed after the export surge began, rather than just before it began,
required the Department to proceed as if that massive import surge had never happened and was not
continuing.
24. This argument is utterly specious.  The Agreement simply provides that the massive dumped
imports must have occurred “in a relatively short period of time".
32  It does not stipulate any precise
                                                     
28 First Submission of Japan at para. 26.
29 First Submission of Japan at para. 182.
30 Id. at para. 202.
31 Id. at para. 41.  Of course, Japan omits the obvious explanation that this has been a perfectly
legitimate response to an epidemic of dumping.  Repeated recourse to anti-dumping measures in response torepeated dumping is not an abuse of such measures.
32 Article 10.6(ii) of the Agreement.WT/DS184/R
Page A-101
periods.  Presumably, there is no question that a 100 per cent increase in imports from one six-month
period to the next is a massive increase over a relatively short period, regardless of whether that
increase is sustained.
25. Japan argues, however, that, having established a different time period as the “normal” (but
by no means the absolute) rule in its regulations33, the Department was somehow prevented from
changing that period.  There is no basis for this cl aim.  The Department’s regulations provide that it
will “normally” compare the three months follow ing initiation to the three months preceding
initiation.34  This covers the situation where the exporters learn of the investigation when it is
initiated, and then try to beat the preliminary dete rmination with an export surge.  In the steel
industry, however, dumping cases are common (as Japan has been at pains to point out) and the large
and sophisticated exporters are well aware of the possibility of anti-dumping investigations well
before petitions are filed.  In this case, the Japanese exporters simply launched the export surge in thespring of 1998 (apparently because their domestic demand declined) and continued exporting in high
volumes until after the investigation was initiated.
26. Had the Department confined itself to the “normal” period in these circumstances, it would
have missed the surge altogether, because it had been underway for more than three months when theinvestigation was initiated.  Most likely, the reason why the petition was not filed as soon as the surge
began was that the domestic industry needed data for another quarter of a year to establish its case for
injury.  Whatever the reason, there is no basis in either the Agreement or the Department’s regulations
for punishing the domestic industry for the delay in applying for the initiation of an investigation by
depriving it of the critical circumstances provision.
27. Japan’s argument implies that it was somehow “cheating” for Commerce to take account of
the fact that the massive export surge occurred slightly before its “normal” period of enquiry.  In
effect. Japan argues that it is entitled to create a loophole in the critical circumstances rule by turning
a discretionary guideline in the Department’s regulations into an absolute rule, notwithstanding thatthere is nothing in the Agreement to require such a rule.  To top it off, Japan implies that refusing to
create such a loophole must have been an element of a broad conspiracy, rather than simple common
sense.
D. F
AILURE TO CORRECT THE CLERICAL ERROR IN THE PRELIMINARY DETERMINATION
28. First of all, it is worth noting that the United States is the only country in the world that has a
procedure (other than final determinations) for correcting clerical errors in preliminary
determinations.  The United States provides this procedure so that respondents will not be
unnecessarily disadvantaged in the few months between the preliminary and final determinations.
The reason that no other country offers this extraordinary protection for foreign respondents is that the
Agreement does not come close to requiring that such protection be granted.
29. Japan claims that NKK was prejudiced by th e Department’s omission because the Department
would not have found critical circumstances for NKK if it had corrected the error earlier.  But this
claim of harm is based on the presumption that NK K would not have stopped exporting, had the error
been corrected.  As we have seen, however, NKK had to make its decision about whether to stop
exporting (or stop dumping) before 21 November 1998.  Once the preliminary determination wasmade, 90 days later, it was too late for NKK to change its decision and make up for the lost exports,
regardless of whether the margin had been less than 25 per cent to begin with, or lowered below
                                                     
33 19 C.F.R. § 351.206(i) (Exh. JP-5) .  The US statute, 19 U.S.C. § 1677(e) also does not provide an
exact time, simply paraphrasing the requirement of the Agreement that the imports should have been made“over a relatively short period".
34 Id.WT/DS184/R
Page A-102
25 per cent as the result of the correction of a clerical error.  So Japan’s claim is not based on any  real
harm - - it simply provides “atmosphere” for the conspiracy theory.
E. APPLICATION OF THE FACTS AVAILABLE
30. Although Japan highlights the fact that the investigation was accelerated, and claims that the
acceleration prejudiced the respondent companies35, it has failed even to allege  that a single instance
in which the Department resorted to the facts available was attributable to the acceleration of the case.
Japan complains of only two instances in which the Department resorted to facts available in the
investigation36, and time demonstrably was not a factor in either instance.  In the case of the sales
from KSC’s joint venture CSI, Japan has emphasized that CSI absolutely refused to supply the
missing data.  This means that CSI would not have supplied the data, even if it had been given six
months to do so.  In the case of the actual/theoretical weight problem (which affected a small number
of sales for NKK and NSC and had a tiny effect upon the margin), Japan acknowledges that those
companies’ failure to submit conversion factors was based on their mistaken belief that this was
impossible37, not because there was not time in which to calculate the factors.  Neither company had
any trouble calculating conversion factors quickly, once it had decided to do so.38
31. When Japan’s ultimate argument on application of the facts available is considered, thereason why it wants the Panel to view these determinations as tainted by bias, and particularly by the
acceleration of the investigation, becomes clear.  Japan candidly asks the panel to interpret Article 6.8
of the Agreement so that it cannot be used “to induce respondents to provide complete and accurate
information".
39  The consequences of agreeing to this request are obvious -- with no incentive to
cooperate, respondents will not cooperate.  Anti-dumping investigations therefore will becomeimpracticable.  Given that it effectively is asking this Panel to render the entire Agreement inoperable,
it is easy to see why Japan wants the Panel to believ e that it is dealing with investigating authorities
who are biased and unfair.
F. 
THE INJURY DETERMINATION
32. Last, Japan suggests that the conspiracy to deprive the Japanese respondents of their rights
under the Agreement in this investigation extende d to the USCIT and its injury determination.40
Japan presents absolutely no basis for concluding that the USITC decision was biased.  The
newspaper articles upon which Japan relies to suggest that the Department was biased do not even
mention the USITC.  As will be discussed below,  the USITC is an independent agency of the US
Government, not part of the Depart ment of Commerce.  Accordingly, to the extent that Japan seeks to
misread Secretary Daley’s statements as reflecting some improper motivation, Japan cannot impute
such a motivation to the USITC Commissioners.
33. As we will demonstrate below, Japan’s cont entions that the USITC’s determination employed
methodologies inconsistent with its decisions in other cases are entirely misplaced.  In fact, as the
record of USITC’s most recent decision on cold-rolled steel demonstrates, those methodologies areanalytically neutral and were not used to favour the US steel industry.  The USITC’s decision in
Certain Cold-Rolled Steel Products from Ar gentina, Brazil, Japan, Russia, South Africa and
                                                     
35 First Submission of Japan at para. 25.
36 First Submission of Japan at paras. 61 - 72 and paras. 91 - 102.
37 First Submission of Japan at para.  93 and para. 95.
38 First Submission of Japan at paras. 97 - 98.
39 First Submission of Japan at para. 59.
40 Id. at para. 32.WT/DS184/R
Page A-103
Thailand41, puts the lie to Japan’s insinuations that the USITC adopted the methodologies used in the
hot-rolled steel investigation in order to assist the US steel industry.  In Cold-Rolled Steel , decided
less than a year after its decision on Hot-Rolled Steel Products  at issue here, the USITC reached a
negative conclusion, denying the US industry relief, using many of the same analytical techniques that
Japan alleges demonstrates the USITC’s bias in the current case.
34. For example, although the USITC found the captive production provision not to be
applicable, nevertheless the USITC in Cold-Rolled Steel , like Commissioner Bragg in this case, made
parallel findings concerning both captive production and merchant-market sales.42  There, however,
the USITC simply found that the evidence did not support an affirmative determination.
35. Likewise, the USITC’s determination in Cold-Rolled Steel , as here, relied on the most recent
trends for many factors, not only on trends over the entire investigatory period.  In that case, althoughmany trends over the entire period showed some decline, the more recent trends for many factors
showed industry recovery at the end of the period.
43  Thus, the same approach which Japan alleges
favours US steel producers in the current case disadvantaged them in that case.  Contrary to Japan’s
allegations, the analytical approaches that the USITC adopted in the Hot-Rolled  investigation are not
in the least unusual, nor do they in any way favour an affirmative result.  Rather, the USITCdeterminations demonstrate that the USITC, in making both affirmative and negative determinations
concerning steel production, simply adjudicated the facts as they appeared
36. The Cold-Rolled Steel  decision also demonstrates how misplaced is Japan's contention that
the USITC's findings on other asserted causes reflects bias.  As will be discussed in more detailbelow, in that case, the USITC, as it did here, examined the effects on price declines  of a strike at
General Motors Corporation (GM).  In both cases , the USITC found that the GM strike did have
effects on the relevant industry, but in both it carefully analyzed the role that those effects had to
assure that it did not ascribe to the dumped imports the effects of the strike.  In the current case, the
USITC concluded that the GM strike could only be regarded as a partial explanation of  the fall inprices for hot-rolled products, which occurr ed as low-priced dumped imports surged.
44  I n
Cold-Rolled Steel , in contrast, the USITC found that the timing of the work stoppage corresponded
more closely with the drop in domestic prices that did the largest increase in subject imports.45
37. That decision, furthermore, belies the Japanese assertion that the USITC did not conduct an
unbiased analysis of the effects of competition within the domestic industry.  As is discussed below,
                                                     
41 Inv. Nos. 701-TA-393 and 731-TA-829-830, 833-834, 836, and 838 (Final), USITC Pub. No. 3283
(March 2000) (“  Cold-Rolled Steel Report ”) (Exh. US/A-3) .  The USITC reached a similar affirmative
determination relying on the same investigative record in Certain Cold-Rolled Steel Products from Turkey and
Venezuela , Inv. Nos. 731-TA-839-840, USITC Pub. No. 3297 (Final) ( May 2000) (Exh. US/A-4) .  All but one
of the Commissioners who made the more recent decision were the same as those who rendered the earlierdecision at issue in the present proceeding.  While the affirmative determination in the Hot-Rolled  case was
unanimous, only one Commissioner dissented from the negative determination in the Cold-Rolled case.  US
steel producers have sued in the United States Court of International Trade to challenge these negative
determinations.
42 See Cold-Rolled Steel Report  at 20-21 (reflecting import shares of total consumption and merchant
market), 24 (reflecting parallelism in merchant market and total market domestic industry operating income)(US/A-3) .
43 See Cold-Rolled Steel Report  at 20-21 (though dumped import total volume and shares of total
consumption and merchant market rose over period, they fell at end of period); 25 (though US industry sufferedoverall market share loss, US shipments grew at end of period; though capital expenditures declined, theyshowed strong growth in interim 1999) (US/A-3).
44 See Inv. No. 731-TA-807 (Final), USITC Pub. No. 3202 (June 1999) at 16 (hereinafter “USITC
Views ”)  (US/C-1) .
45 See Cold-Rolled Steel Report  at 24 (US/A-3) .WT/DS184/R
Page A-104
the USITC rejected the argument that increased competition within the domestic industry caused by
non-integrated producers (“minimills” or “ EAF” producers) led to the industry’s reduced
performance.  Rather, it found that minimills, more sensitive to import competition than integrated
producers, suffered worse during the industry downturn of 1998 and that the increases in their
capacity did not correspond with the asserted effects in 1998.46  In Cold-Rolled Steel , the USITC also
addressed the influence of competition within the domestic industry.  There, the USITC found thatfalling hot-rolled prices had been beneficial to re-r ollers, who purchase rather than produce, hot-rolled
steel for cold-rolling, and found that, in part through them, the decline in hot-rolled steel prices put a
downward pressure on cold-rolled steel prices.
47  In short, the USITC Commissioners did not bring
closed minds to such issues; in each case, they made the decision to which they believed an objective
analysis of the evidence should lead them.
38. Moreover, the face of the decision before this Panel demonstrates that none of the analytical
approaches of which Japan complains was adopted for the purpose of reaching a particular outcome.
Japan complains, for example, that four of the six USITC Commissioners relied either primarily or
secondarily on analysis specific to merchant market sales.  As will be shown below, Japan is simply
wrong in arguing that this analysis caused the US ITC Commissioners to ignore effects on the industry
as a whole.  In any event, the USITC determination shows that such findings concerning the merchantmarket segment cannot reasonably be used to suggest bias, since those Commissioners who made no
such findings also made affirmative determinations.  One, Commissioner Crawford, found material
injury, and one, Commissioner Askey, found threat of material injury.  Japan challenges neither of
their findings.  Japan cannot contend that findings specific to the merchant market were necessary to
reaching an affirmative determination supporting the imposition of anti-dumping measures.
39. Similarly, contrary to Japan’s complaint, as will be shown below, the USITC acted
completely consistently with prior decisions in relying on the most recent trends.  Quite apart from the
inaccuracies of Japan’s portrayal of the USIT C decision, however, the report shows that the
Commissioners did not choose to rely on such trends as a pretext in order, as Japan alleges, to “createsome rational basis for its decision".
48  As Japan points out, Commissioner Crawford’s analysis did
not rely on such trends.  Yet she reached an affirmative injury determination.
40. Commissioner Askey, who found that three-y ear trends did not support a present injury
determination, found the accelerating trends of imports at the end of the period established a threat ofmaterial injury.  In short, no manipulation of the facts was needed in this case in order to reach an
affirmative determination.  The Commissioners found that result to be required by the facts regardless
of the method they used for examining the evidence.
G. 
THE "ECONOMIC CONTEXT " OF THE INVESTIGATION
41. Japan’s demonstrably false accusations that the USITC ignored such factors as minimill
competition and the GM strike, as well as the growth in US demand, amount to an attempt to distractthe Panel from the clear demonstration of the adverse effects of the dramatic increase in dumped
imports on the US industry.  Although the USITC’ s findings will be discussed more thoroughly
below, a brief summary here is a necessary correct ive to the thoroughly unobjective view that Japan
offers.  Although Japan makes much of the US steel industry’s efforts to publicize its sense of crisis
due to the increasing levels of dumped imports, the USITC’s findings show that, by quite objectivemeasures, that sense of crisis was not misplaced.
                                                     
46 See USITC Views at 11, 15, 18, 19 (US/C-1) .
47 See Cold-Rolled Steel Report  at 23 (US/A-3) .
48 First Submission of Japan at para. 32.WT/DS184/R
Page A-105
42. US imports of hot-rolled flat products from Japan surged.  They increased by 419.8 per cent
from 1996 to 1998 and 132 per cent from 1997 to 1998 alone.49   This rise was not simply in keeping
with the rise in consumption in the United States.  The dumped imports’ share of US sales and
consumption also surged.  Their share of the merchant market held by dumped imports quadrupled,
rising from 5.0 per cent in 1996 to 21.0 per cent in 1998; their share of total consumption almost
quintupled, rising from 2.0 per cent to 9.3 per cent.50  While dumped imports rose, they increasingly
undersold the US product and shifted to the sale of more commodity grade products.51  Both US and
imported prices decreased most precipitously in 1998 when the volume of dumped imports reached
their greatest level.52
43. The USITC found that this dramatic rise in dumped imports prevented the US industry from
participating in the growth in demand.53  Over the entire investigative period, domestic producers’
shipments remained essentially flat.  In the most recent period, from 1997 to 1998, when total USconsumption rose 6.0 per cent, the US industry’s shipments fell by 1.0 per cent.
54  The domestic
producers’  share of total consumption fell from 92.3 per cent in 1996 to 84.8 per cent in 1998, and
their share of merchant market sales fell from 80.4 per cent in 1996 to 65.6 per cent in 1998.55
44. The effects of the surge in dumped imports on the US industry were immediate and dramatic.
The US industry had increased its capacity at a rate largely commensurate with the rise in demand.
Nevertheless, the USITC found that “due to the rapid increase in the volume and market share ofsubject imports, the domestic industry’s increased capacity almost immediately became excess
capacity".
56  Capacity utilization plummeted.  The industry’s performance experienced serious
declines.  Operating income fell by more than ha lf and the ratio of operating income to net sales
declined dramatically as import volumes, market share and underselling reached their peak.57
Industry employment fell, capital expenditures declined, and two firms filed for bankruptcy.58
45. The USITC considered and rejected the argument that Japan makes here -- namely, that  the
increase in dumped imports was simply a response to a US domestic shortage in 1998.  The USITC
found that argument simply not consistent with the conditions in the market place.  The declining
capacity utilization of the domestic industry and the plummeting prices of imported steel made it clearthat the influx was supply-driven.
59
46. Likewise, the USITC rejected the arguments th at Japan makes here in alleging that the US
industry had a strong performance in 1998, simply declining from a “banner year”.60  As the USITC
found, in a year in which US consumption reached record levels and the US industry increased itsproductivity and lowered its costs, 1998 should have been a highly successful year for the industry.
Instead, however, as the USITC’s analysis de monstrates, the US industry’s 1998 performance
deteriorated sharply, as measured by almost all performance indicators.
61  It is noteworthy that the
USITC found that, as operating income for the whole industry declined significantly both for
                                                     
49 USITC Views at 12, citing  record information at Table C-1 (Exh. US/C-1) .
50 Id. (citing  record information at Tables C-1 and C-2).
51 Id. at 14-15.
52 Id. at 14.
53 Id. at 12.
54 Id. at 13.
55 Id. at 12.
56 Id. at 17.
57 Id. at 18.
58 Id. at 18, n.101.
59 Id. at 13.
60 First Submission of Japan at para. 34.
61 USITC Views at 17-20 (Exh. US/C-1) .WT/DS184/R
Page A-106
merchant market sales and overall production,  those producers most exposed to import competition
found their ratio of operating income to net sales declining to negative levels.62
47. In brief, an objective analysis of the relevant economic factors demonstrated to the USITC
that dumped imports caused material injury to the US industry.  Japan may want the United States
investigative authorities to have ignored the very real effects that dumped Japanese imports were
having in the United States market.  The fact that they did not do so is no evidence, however, of bias.
Rather, it reflects administration of anti-dumping laws entirely in accordance with the Agreement.Japan’s allegations of bias are simply an attempt to distract the Panel from the merits of the
authorities’ decisions.
H. 
THE SUPPOSED CONSPIRACY , REVIEWED
48. The only established facts of any significance are that, in response to a massive surge in
imports from Japan, Commerce agreed with the US industry that it was necessary to accelerate its
investigation by 20 days and to make its preliminary determination on the issue of criticalcircumstances about two months before its preliminary determination of dumping.  Japan’s problem is
that the real targets of its case are the Department’s use of facts available and the USITC’s
determination of injury, and there is no evidence whatsoever that this acceleration of the investigation
had any effect on the outcome of either issue.
49. Japan’s answer to this problem was to attempt to construct a conspiracy in which the
pervasive influence of the US industry led the Department and the USITC to use unfair means to
reach biased determinations.  As evidence of the conspiracy, Japan offers the simple fact of the
acceleration of the case itself, which was plainly in answer to its own export surge, and Secretary
Daley’s pledge to vigorously enforce a law that he  is charged with administering.  On this flimsy
basis, this Panel is supposed to view the objective merits of this case with a jaundiced eye, and punish
the Department and the USITC for their supposed transgressions.
I. 
THE "INTERNATIONAL RAMIFICATIONS " OF THE PROCEEDING
50. In a final flourish, Japan broadly hints to th e Panel that, given the widespread use of anti-
dumping measures among WTO Member States, it should “discipline” their application to make them
less effective.63  Japan asks the Panel members to keep in mind that US Federal Reserve Chairman
Greenspan evidently would prefer an anti-dumping regime that addresses only sales made below
marginal cost (rather than average cost).64  The “international ramifications” of this little reminder are
plain. Since “right thinking” people do not agree with the Agreement negotiated by the WTO MemberStates, this Panel should interpret the Agreement so  that the results permitted are those of which such
“right thinking” people would approve - - minimal, if any, anti-dumping measures.
51. This is a blatant call for the Panel to do whatever it can to eviscerate the Agreement, rather
than to follow its clear mandate to enforce only those restrictions on the application of anti-dumping
measures to which the WTO Member States have  agreed.  It is well-known that Japan opposes any
application of anti-dumping measures.  As Japan knows (or should know), however, this Panel’s
proper role is to apply the Agreement as agreed  between the Member States, not to interpret the
Agreement as the Japanese Government would have preferred to see it.
52. To provide nominal legal cover for this effort, Japan raises once again the long-discredited
notion that the Agreement is an "exception" to th e liberal trade principles of the WTO Agreements,
                                                     
62 Id. at 19.
63 Id. at para. 44.
64 Id. at para. 43, n. 49.WT/DS184/R
Page A-107
and so should be subject to special scrutiny.  The Panel should reject this notion. The Appellate Body
has made clear that the status of a provision as a so-called exception:  (1) does not shift the burden of
proof ( Wool Shirts65 and Hormones66); and (2) does not warrant a different approach to interpreting
the provisions ( Hormones ).  As the Appellate Body said in Hormones :  
The general rule in a dispute settlement proceeding requiring a complaining party to
establish a prima facie  case of inconsistency with a provision of the SPS Agreement
before the burden of showing consistency with that provision is taken on by the
defending party, is not avoided by simply describing that same provision as an
"exception."  In much the same way, merely characterizing a treaty provision as an
"exception" does not by itself justify a "stricter" or "narrower" interpretation of that
provision than would be warranted by examination of the ordinary meaning of the
actual treaty words, viewed in context and in the light of the treaty's object andpurpose, or, in other words, by applying the normal rules of treaty interpretation.
67
53. Anti-dumping measures do not constitute exceptions from the rest of the WTO framework.They are subject to the same rules of interpretation as any other provision of the other WTO
Agreements, except in that they enjoy a more deferential standard of review.  Therefore, the Panel
should reject Japan’s suggestion that this discredited notion should serve as cover for eviscerating theAgreement.  
J. 
CONCLUSION
54. The Panel should reject in the most unequivocal terms possible Japan’s unseemly efforts to
taint this Panel’s deliberations by unfounded allegations of bias, and should decide each of the issuesstrictly upon its merits under the Agreement.
II. PRELIMINARY OBJECTIONS
55. The United States has two preliminary objections.  First, Japan improperly asks the Panel to
examine extra-record testimony and evidence which has only now been submitted to the Panel and
which was not made available to the investigating authorities during the course of the anti-dumping
investigation.  Second, Japan’s first submission asks the Panel to examine claims which are outside
the Panel’s terms of reference -- i.e., that were not set forth in Japan’s request for the establishment of
a panel.
68  The United States objects to both of these actions by Japan and requests that the Panel rule
on these preliminary objections at or before its fi rst meeting with the parties, and that the Panel
disregard the extra-record testimony and evidence and decline to examine the claim in question.
A. THE PANEL MAY NOT CONSIDER EXTRA -RECORD POST -INVESTIGATION EVIDENCE
56. Japan seeks to have the Panel review post-investigation testimony and evidence which was
not originally made available to the Department or the USITC.  Under the Anti-dumping Agreement,
a panel examines the decisions of the investigating authorities in light of the facts available to it – and
                                                     
65 United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India,
WT/DS33/AB/R, at 16.
66 EC - Measures Concerning Meat and Meat Products (Hormones) , WT/DS26/AB/R, Report of the
Appellate Body adopted 13 February 1998, para. 104.
67 Id. at para. 104.
68 United States–Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, Request
for the Establishment of a Panel (Feb. 11, 2000) (hereinafter “ Panel Request ”) (Exh. US/A-1) .WT/DS184/R
Page A-108
not new facts revealed for the first time to the panel.  The Panel should therefore disregard this
extra-record evidence.
1. Article 17.5(ii) of the Anti-Dumping Agreement Limits the Panel's Review
57. Article 17.5 of the Agreement provides that the Panel shall examine the matter based upon:
(ii) the facts made available in conformity with appropriate domestic procedures
to the authorities of the importing Member.
58. This provision directs the Panel to limit its review to the “facts made available” that were
before the Department when it made its determination ( i.e., the evidence contained in the
administrative record).69  The panel in Mexico - Anti-Dumping Investigation of High Fructose Corn
Syrup from the United States , WT/DS132/R, Report of the Panel issued 14 January 2000 (hereinafter
“HFCS ”) stressed this point, stating:
{W}e are required to consider this dispute on the basis of the facts before the
investigating authority, pursuant to Article 17.5(ii) of the AD Agreement.70
And,
Mindful of the standard of review and Article 17.5(ii), we note that we may consider
in our examination of this issue only what was actually available to the investigating
authority at the time . . . .71 (Emphasis added).
59. The  HFCS  panel also stated:
Our approach in this dispute will similarly be to examine whether the evidence before
SECOFI at the time . . . 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 . . . .  We . . . also take into
account information that was before SECOFI at the time of its determination . . .
.72(Emphasis added).
60. Likewise, in describing the panel’s role, the panel in the Wool Shirts  case stated in part:
{P}anels do not reinvestigate the market situation but rather limit themselves to the
evidence used by the importing Member in making its determination to impose themeasure. In addition, such {} panels . . . do not consider developments subsequent to
the initial determination. In respect of the US determination at issue in the present
case, we consider, therefore, that this Panel is requested to make an objective
                                                     
69 The administrative record is the information presented during th e investigation, in accordance with
Article 17.5(ii) of the Anti-Dumping Agreement.  The “appropriate domestic procedures” of the United States
investigating authorities -- the Department and the USITC -- are detailed in 19 U.S.C. §1516a(b)(2)(A), which
states that the record consists of all information “pre sented to or obtained by ... the administering authority ...
during the course of the administrative proceeding, ...; an d a copy of the determination, all transcripts or records
of conferences or hearings, and all notices published in the Federal Register.”
70 HFCS  at para. 7.43.
71 HFCS  at para. 7.105.
72 HFCS at para. 7.95.WT/DS184/R
Page A-109
assessment as to whether the United States respected the requirements of {Article
17.5(ii)} at the time of the determination.73  (Emphasis added).
61. Similarly, the Panel in the Korean Dairy Products  case stated:
{W}e consider that the Panel should examine the analysis performed by the national
authorities at the time of the investigation on the basis of the various national
authorities' determinations and the evidence it had collected.74  (Emphasis added).
2. The Panel Must Disregard Japan's Four Affidavits
62. Japan has included affidavits by the American attorneys for NSC75, NKK76, and KSC77, as
well as one by statisticians hired by the counsel for NKK78, with their first submission.  These
represent sworn testimony by attorneys and experts which was not presented to the  Department
during the investigation and therefore not made part  of its administrative record.  Consistent with
Article 17.5(ii), the Panel may not base its review on any of this evidence.
63. These affidavits contain egregious and belated attempts to supplement the Department’s
administrative record, and should be dismissed in toto .  For example, Mr. Plaine testifies that the
Department’s use of facts available was improper based in part on unspecified conversations with
unnamed Department officials.79  Mr. Porter also relies on undocumented personal conversations with
Department officials to substantiate his testimony.80  It is not clear that such conversations ever took
place.  Even if they did, the substance of these conversations is not part of the administrative record
and therefore should not be before the Panel.  Furthermore, Mr. Porter explicitly acknowledges that
the information he is urging the Panel to consider is not part of the record.81  Mr. Huey arranged for a
post-determination margin analysis based on different assumptions, and based on his firm’s computerprogramme runs, for comparison with the Department’s final margin results.
82  Since this
inappropriate analysis is obviously not part of the record before the Panel, it must be considered new
evidence and excluded.  Finally, the  statisticians could just as well have engaged in their discussion
regarding appropriate statistical methodologies during Commerce’s investigation.  At that time, their
testimony would have gone on the administrative record for Commerce to analyze and petitioners torebut.  They did not do so.  Again, the Panel must disregard their belated appraisal.
64. Further, the Panel’s mission under Article 17.6(i) is to determine whether the establishment of
the facts was proper and its evaluation of those facts unbiased and objective.  If no violation is alleged
concerning the way in which interested parties were able to present evidence and argument, then theonly question is whether the authorities’ evaluation of the evidence and argument before them was
                                                     
73 United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from India  (United
States -- Shirts and Blouses) , WT/DS33/R, Report of the Panel, as modified by the Appellate Body, adopted
23 May 1997, para. 7.21.  (This case involved the Agreement on Textiles and Clothing; however, the language
of Article 17.5(ii) is substantially the same as the corresponding ATC language.)
74 Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products , Report of the Panel
adopted 21 June 1999,  WT/DS98/R, para. 7.30.
75 Affidavit of Daniel J. Plaine, Counsel to NSC (Exh. JP-46) .
76 Affidavit of Daniel L. Porter (Exh. JP-28) .
77 Affidavit of Robert H. Huey, Counsel to KSC (Exh. JP-44) .
78 Affidavit and Resumes of Edward J. Heiden and John Pisarkiewicz, Statisticians (Exh. JP-56) .
79 Affidavit and Resumes of Edward J. Heiden and John Pisarkiewicz, Statisticians (Exh. JP-56) .
80 Affidavit of Daniel L. Porter at paras. 10, 14, 28 (Exh. JP-28) .
81 See id.  at para. 23 (discussing matters which did not form part of the NKK Sales Verification
Report).
82 Affidavit of Robert H. Huey, Counsel to KSC at paras. 5-7 (Exh. JP-44) .WT/DS184/R
Page A-110
unbiased and objective.  Presenting new testimony that was not before the authority seeks to have the
Panel go beyond its assigned task.
65. The policy that an authority’s final determination will be evaluated only in terms of the
arguments and facts that were presented to it during its investigation is also embodied in
Article 12.2.2’s description of what the authority’s public  report will contain.  The report is to contain
“the reasons for the acceptance or rejection of relevant arguments or claims made by the exporters and
importers.”  If the exporters or importers did not make some argument or claim, that cannot be taken
as a basis for finding that the authority did not evaluate the evidence and argument before them on an
unbiased and objective basis.  Thus, the Panel should not allow exporters or importers to try to
impugn the authority’s decision by new argument.
66. Finally, for the Panel to consider this new testimony is to undermine the guarantees of the
Anti-Dumping Agreement.  The Agreement guarantees to  interested parties rights of participation and
response.  Article 6.1 guarantees that all interested parties will have ample opportunity to present in
writing all evidence which they consider relevant.  The Panel, whose proceedings are confidential and
in which only Members are parties, cannot provide that assurance.  Under Article 6.2,
Throughout the anti-dumping investigation all interested parties shall have a full
opportunity for the defence of their interests.  To this end, the authorities shall, on
request, provide opportunities for all interested parties to meet those parties with
adverse interests, so that opposing views may be presented and rebuttal arguments
offered.
Since DSB proceedings do not offer non-Member interested parties these rights, to allow some
interested parties to present argument to the Pane l undermines the due process rights afforded by the
Anti-Dumping Agreement.  By admitting such pres entation, the Panel will be undermining the stated
purposes of the DSB of “providing security and predictability to the multilateral system” and to
“preserve the rights and obligations of Members under the covered agreements".83
67. In sum, Japan, with these affidavits, is trying not only to bolster its  arguments with assistancefrom attorneys in the United States, but also to allow its steel companies, through their American
lawyers, to fabricate extra-record post-investigation evidence and present it to the Panel as if they
were legitimate parties to the dispute.  The Pane l may not allow it and must confine its scope to the
evidence relied upon by the Department in order to determine whether the determinations were
permissible under the Anti-Dumping Agreement.
3. The Panel Must Disregard Japan's Newspaper Articles
68. The Government of Japan’s written submission relies upon numerous pieces of alleged
evidence concerning the state of the US industry which were not part of the original record before
Commerce or the USITC, and, accordingly, these pieces of extra-record evidence should not be
allowed to be used in support of Japan’s arguments before this panel.  Article 6.1 of the Anti-
Dumping Agreement provides that interested parties should be given “ample opportunity to present inwriting all evidence which they consider relevant in respect of the investigation in question”.   Japan
does not, and indeed cannot, allege that the United States violated this obligation.  Japanese
respondents were given ample opportunity to put information on the record during the course of the
investigation, and they availed themselves of this opportunity.  The extra-record evidence that Japan
now proffers goes to issues that were before th e investigating authorities in the proceedings below.
For example, the evidence pertains to the political  climate in the United States resulting from the
                                                     
83 See DSU Article 3.2.WT/DS184/R
Page A-111
surge of Japanese imports84, the consumption of hot rolled steel in the United States85, the
performance of minimills86, and pricing of hot rolled steel in the US market.87  If the Japanese
respondents understood these pieces of evidence to be more probative of these issues than the
evidence which they had already put before the agencies and the evidence that their staffs had
collected, then they should have offered them as exhibits in the course of the proceedings as well.
Likewise, had they wished to engage either investigating authority in an academic discussion of themerits of the anti-dumping law, they could also have  submitted such articles or treatises in the course
of the proceedings.
88  They did not, and this Panel now should refuse to consider all of these pieces of
information.
B. THE PANEL MUST FIND THAT JAPAN 'S IMPROPER FACTS AVAILABLE CLAIM IS OUTSIDE THE
PANEL 'S TERMS OF REFERENCE
69. The Panel must dismiss Japan’s challenge to the Commerce Department’s facts available
practice89 as outside the Panel’s terms of reference.  Japan was very clear in its panel request that it
was asking the Panel to examine the Department’s determination “in its application of ‘facts
available’” specifically to KSC, NSC, and NKK corporations.  The panel’s terms of reference are “to
examine ... the matter referred to by the DSB in [  ]".90  Since Japan never referred the Department’s
general practice of facts available, which is based on the United States statute, to the DSB, but onlyreferred the specific application to these companies, this general practice is outside the Panel’s terms
of reference.
70. The United States notes that, where Japan wanted the Panel to examine the law or a general
practice on its face, Japan’s panel request made that request specific.  Japan was careful to specify thatit was challenging the United States’ statute in the claims pertaining to Commerce’s all others rate and
critical circumstances statutory provisions, as well  as the Commission’s captive production statutory
provision.
91  Plainly, Japan’s panel request did not include a similar reference to the Department’s
“general practice” concerning facts available.                                                     
84 First Submission of Japan at n.32 ( citing  Nancy E. Kelly, “ House Steel Import Vote Sends Message ,”
American Metal Market, at 2 (Oct. 19 1998) (Exh. JP-27) ).
85 First Submission of Japan at n.38 ( citing  a Graph of Hot-Rolled Industry Composite - Profit From
Operations (Exh. JP-33) ; and World Bank Annual Report 1999  (Exh. JP-33) ); see also  First Submission of
Japan at n.267 mentioning the  Preston Pipe & Tube Report  (Nov. 1998) and Preston Pipe and Tube Report
(Sept. 1998) (Exh. JP-67) , and articles regarding US mills’ purchases of semi-finished steel (Exh. JP-32) ).
86 First Submission of Japan at n.40 citing PaineWebber, “ Steel: A Gauntlet for All, Rewards for the
Select ,” Steel Strategist #24 at 117 (June 1998) and Charles Yost, “Thin Slab Casting/Flat-Rolling: New
Technology to Benefit US Steel Industry,” in United States International Trade Commission, Industry Trade
and Technology Review , 1996 ITC Lexis 428, *52, *65, Table 1 (Oct. 1996) (Exh. JP-34);  see also  First
Submission of Japan at n.42 ( citing  Donald Barnett and Robert Crandall, “Steel: Decline and Renewal,” in
Industry Studies  (2nd ed. Larry Duetsch, ed. 1998) (Exh. JP-35) ).
87 First Submission of Japan at n.46 ( citing  Transaction Pricing Service,  Purchasing
Magazine  (Exh. JP-36) ).
88 First Submission of Japan at n.49 ( citing  Greenspan remarks (Exh. JP-37); and n. 50 citing  trade
protection treatises (Exh. JP-38) ).  Similarly, the series of press articles which Japan has included at exhibits
16-23 and 25-26 and cited in the introduction of its First Submission, represents a further potpourri ofextra-record material, selectively chosen to advance Japa n’s arguments.  This Panel must reject Japan’s attempts
to draw it and the parties in this case into a battle of extra-record newspaper clippings.
89 See First Submission of Japan at  19-21.
90 The Panel’s scope of authority is governed by Article 7 of the Dispute Settlement Understanding
(“DSU”), regarding the terms of reference of panels.  That provision authorizes panels to examine the “matter”referred to them by the DSB.
91 Panel Request  at 4 and 5, paras. A-3, A-5, and B-2.  In each of these three instances, Japan stated:
“In addition, section .... of the Tariff Act of 1930, as amended ... is inconsistent with” the pertinent provision of
the Agreement concerning the three issues for which Japan challenged US statutory provisions – all others rate,WT/DS184/R
Page A-112
71. Yet, in its first submission, Japan has two sections specifically, and appropriately, entitled “In
Applying Adverse Facts Available to [KSC, NSC, or NKK], USDOC Violated ..., ” but has a third,
separate section, entitled “USDOC’s Established Practice of Applying Adverse Facts Available To
Punish Respondents Is Inconsistent With Article 6.8 and Annex II of the Anti-Dumping Agreement”.
This latter section, and the previous “background” section, contain numerous citations toinvestigations that were not the subject of any c onsultations and which were not referred to the DSB
in Japan’s panel request.  This is not a matter that this Panel should examine under its terms of
reference.
72. The only possible way in which Japan might try to justify including the US law and general
practice as to facts available in its first submission is that, in the panel request, Japan included a very
broad and ambiguous count of conformity.
92  This stated that the United States contravened Article
XVI:4 of the Marrakesh Agreement and Article 18.4 of the Anti-Dumping Agreement.  In the section
of its brief challenging Commerce’s general facts available practice, Japan cites these provisions as
justifications.93  These provisions, however, do not specify claims.  Article XVI:4 of the Marrakesh
Agreement states:
Each  Member shall ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed Agreements.
Nothing in that article indicates that it may be used as a means to challenge a specific practice which
was not mentioned in the panel request.  Similarly, Article 18.4 merely states,
Each Member shall take all necessary steps, of a general or particular character, to
ensure, not later than the date of entry into force of the WTO Agreement for it, the
conformity of its laws, regulations and administrative procedures with the provisions
of this Agreement as they may apply for the Member in question.
Again, nothing in that article suggests that it ma y authorize a challenge to a specific practice not
mentioned in the panel request.  If Japan wanted to challenge the Department’s general facts available
practice under this provision, it should have cited the practice specifically in the panel request.  In
fact, its failure to do so has prejudiced the United States, which could have sought the participation of
other Members as third parties, which also use adverse inferences in their facts available practices,had the United States known, when it received Japan’s panel request, that the challenge involved so
much more than mere company-specific claims.
73. The Appellate Body examined this issue in Korea - Definitive Safeguard Measure on Imports
of Certain Dairy Products , WT/DS98/AB/R, Report of the Appellate Body issued 14 December 1999
(hereinafter “ Korean Dairy Products AB Report ”), stating:
Indeed, any claim that is not asserted in the request for the establishment of a panel
may not be submitted at any time after submission and acceptance of that request.
94
                                                                                                                                                                    
critical circumstances, and captive production.  This additional “In addition” paragraph  is notably absent from
Japan’s facts available claim, set forth at paragraph A-2 of its panel request.  It is likewise absent from Japan’sother claims – affiliated companies (A-1) and injury (B-1) for which Japan has not included challenges toUnited States’ statutory provisions or general practice.
92 Panel Request   at 5, para. E (Exh. US/A-1) .
93 First Submission of Japan at para. 60 and n.58.
94 Korean Dairy Products AB Report  at para. 139.WT/DS184/R
Page A-113
74. Finally, the Appellate Body faced this general issue in Guatemala - Anti-Dumping
Investigation Regarding Portland Cement from Mexico , WT/DS60/AB/R, Report of the Appellate
Body decided 2 November 1998 (hereinafter “ Mexican Cement ”).  There, the Appellate Body found:
“The matter referred to the DSB” for the purposes of Article 7 of the DSU and
Article 17.4 of the Anti-Dumping Agreement must be the “matter” identified in therequest for the establishment of a panel under Article 6.2 of the DSU.  That provision
requires the complaining Member, in a panel request, to “identify the specific
measures at issue  and provide a brief summary of the legal basis of the complaint
sufficient to present the problem clearly.95
75. The Appellate Body emphasized this point, stating:
Where a complaining Member wishes to make any claims concerning an action taken,
or not taken, in the course of an anti-dumping investigation under the provisions of
the Anti-Dumping Agreement, Article 6.2 of the DSU requires “the specific measures
at issue” to be identified in the panel request.96
76. In sum, Japan’s apparent attempt to hide its unexpected general attack on Commerce’s facts
available practice behind Article 18.4 of the Anti-Dumping Agreement and Article XVI:4 of theMarrakesh Agreement must fail.  The Panel must therefore reject as outside its terms of reference
Japan’s challenge to the United States’ facts available practice generally.
III. STANDARD OF REVIEW
A. 
STANDARD OF REVIEW
77. The Anti-dumping Agreement is unique among the WTO agreements in providing its own
standard for a WTO panel’s review of an anti-dumping determination by an investigating authority.97
That standard is set forth in Article 17.6 in two parts: the first concerns review of questions of fact andthe second concerns review of issues of law.  In its brief, Japan acknowledges this concept.
98
However, in discussing the pertinent provisions of  the Agreement dealing with these standards, Japan
omits critical phrases, thereby distorting the standard of review which this Panel is to apply.  The
proper standard is that described below.
1. Review of an authority's establishment and assessment of the facts:  Panel's may not
engage in de novo  review
78. Article 17.6(i) of the AD Agreement provides that:
(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
                                                     
95 Mexican Cement  at para. 72 (emphasis in original), reversed on other grounds before the Appellate
Body.
96 Id. at para. 77 (emphasis added).
97 The Ministerial Declaration on AD/CVD Dispute Settlement also applies the standard of review set
forth in Article 17.6 of the AD Agreement to matters pertaining to subsidies and countervailing measures, inview of “the need for consistent resolution of disputes arising from anti-dumping and countervailing dutymeasures".
98 First Submission of Japan at para. 47.WT/DS184/R
Page A-114
though the panel might have reached a different conclusion, the evaluation
shall not be overturned .  (Emphasis added.)
79. In other words, the panel may not conduct its own de novo  evaluation of the facts if the
authority’s establishment of the facts is proper and if its evaluation of the facts is unbiased and
objective.  This applies even if the panel -- had it stood in the shoes of that authority originally --
might have decided the matter differently.  Japan ignores this last concept, by omitting the criticalphrase -- “even though the panel might have reached a different conclusion” -- from its quotation of
Article 17.6(i).
99   Omission of this phrase distorts a core principle of this provision -- that panels
should not re-evaluate the relative weight which the domestic fact-finder, in its discretion, decides to
accord to particular pieces of evidence.100  After all, the investigating authority is the entity which
gathers, hears, and weighs the evidence in the first place; its evaluation deserves deference.
80. Moreover, it is well-established that panel review is not a substitute for proceedings
conducted by national investigating authorities.  Numerous panels have recognized that the role of
panels is not to conduct a de novo  review of the factual findings of a national investigating authority.
For example, in HFCS101, adopted earlier this year, the WTO panel stated that when reviewing an
anti-dumping determination, a panel's proper role is to examine whether the evidence before the
investigating authority was such that an unbiased and objective investigating authority evaluating that
evidence could properly have made the same determination.  In its reasoning, the panel quoted the
following language from an earlier decision:
[T]he Panel was not to conduct a de novo  review of the evidence relied upon by the
United States authorities or otherwise to substitute its judgment as to the sufficiencyof the particular evidence considered by the United States authorities.
102
81. Therefore, in interpreting subparagraph (i) as to factual determinations, Article 17.6 makesclear that the matter before the Panel is not whether there was injury or dumping, but rather whether
the investigating authority properly established the facts and evaluated them in an unbiased and
objective way.  Article 17.6 further makes clear that a Panel does not conduct the required assessmentof that question if it evaluates what findings it would make if presented with the same evidence.
                                                     
99 Id. para. 48.
100 Japan apparently believes that this phrase is irrelevant because it intends to prove that all of the
Commission’s and Commerce’s factual determinations were improper, biased, and non-objective.  Id. at
para. 49.  It errs, as the remainder of this brief demonstrates.
101 Mexico  – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the
United States, WT/DS132/R (28 Jan. 2000) at paras. 7.94 - 7.95.  In its discussion, the HFCS panel quoted from
the panel report in Guatemala – Anti-Dumping Investigation Regarding Portland Cement From Mexico,WT/DS60/R (19 June 1998) at paras. 7.54 - 7.57.  Moreover, the HFCS panel noted that, while the Appellate
Body reversed the Guatemala - Cement panel report on other grounds, the HFCS panel noted that the Guatemala
- Cement panel report set out a standard of review that was “instructive.”  See HFCS, at para. 7.94.
102 The quoted language is actually taken from United States – Measures affecting Import of Softwood
Lumber from Canada , SCM/162, BISD40S/358, adopted 27-28 October 1993, at para. 335, as quoted in
Guatemala – Cement  at para. 7.56.  In fact, the Guatemala – Cement  panel, in a section of its report quoted in
HFCS , stated that "We believe that the approach taken by the Panel in the Softwood Lumber  dispute is a sensible
one and is consistent with the standard of review under Article 17.6(i). "  See HFCS  at para. 7.94 (quoting
Guatemala – Cement  at para. 7.57).  See also  United States – Anti-dumping Du ty on Dynamic Random Access
Memory Semiconductors (DRAMs) of One Megabit or Above from Korea , WT/DS99/R, para. 4.443
(29 January 1999) (refusing to perform a de novo  review of evidence before the US Commerce Department with
regard to an econometric study which Commerce determined was based on unrealistic assumptions and
contradictory evidence).WT/DS184/R
Page A-115
82. In addition to establishing the standard of review for factual issues, the AD Agreement also
establishes the “scope” of that review.  Specifically, Article 17.5(ii) of the AD Agreement directs the
Panel to limit its review to the facts that were be fore the investigating authority when it made its
determination ( i.e., the evidence contained in the administrative record).103  This concept is consistent
with the fact that the Panel may not act as a trier-of-fact in the first instance.  In its first submission,
Japan has ignored this principle by attaching extra-record evidence, including affidavits from USattorneys for certain Japanese steel mills.  We have objected to these affidavits and other extra-record
evidence in our Preliminary Objections, above.
2. Review of an authority's interpretation of th e Agreement:  Panels must respect multiple,
permissible interpretation
83. In reviewing legal questions that turn on the proper meaning to be ascribed to the Anti-
Dumping Agreement, subparagraph (ii) of Article 17.6 provides that, where a relevant provision ofthe Agreement is subject to more than one permissible interpretation, a WTO panel shall find the
Anti-dumping measure in question to be in conformity with the Agreement if it is based on any of
those permissible interpretations.  Japan ignores this concept, by omitting the second sentence of
Article 17.6(ii).
104  That provision, quoted in full, states as follows:
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 Agreem ent 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.   (Emphasis
added.)
84. The negotiators of the Anti-Dumping Agreement, uniquely among negotiators of the WTO
Agreements, saw fit to make specific provision for the possibility that customary rules of
interpretation would not resolve disputes concerning the meaning of the Anti-dumping Agreement.
This very fact provides context for the interpretation of that Agreement.  It reflects the negotiators’understanding that they had left a sufficient number of issues ambiguous such that they needed to
make special provision for cases in which customary rules would not provide an unequivocal result.
The drafters of the Agreement wisely recognized that  they could not possibly foresee, and write rules
for, the precise methodology to be applied to ever y issue that would arise in the conduct of highly
technical and complex anti-dumping proceedings.  Equally wisely, they understood that, with regardto many of these complex issues, national authorities already did things differently, and that the
Agreement should allow sufficient flexibility for authorities to continue such variations on the
anti-dumping theme.
85. In fact, Article 17.6(ii) reflects a deliberate choice by the negotiators to allow for multiple
interpretations.  In this sense, Article 17.6(ii) constitutes an admonition to panels to take special care,
as reflected in Articles 3.2 and 19.2 of the DSU, not to add to the obligations of Members.  Thereference to "customary rules of interpretation of public international law" is not specific.  While we
may presume that it refers to the Vienna Conven tion, the panel may not apply the Convention in a
manner which renders any of the express language of the Agreement a nullity.  Thus, Japan’s
contention that Articles 31 and 32 of the Convention require or even permit a panel to choose one
interpretation of ambiguous language in the Agreement as the only interpretation
105, renders a nullity
                                                     
103 See HFCS , para. 7.43 (“[W]e are required to consider this dispute on the basis of the facts before the
investigating authority, pursuant to Article 17.5(ii) of the AD Agreement.”).
104 First Submission of Japan at para. 50.
105 First Submission of Japan at para. 50 and n.51.  Japan cites “two noted scholars” for its contention
that there can be only one permissible interpretation of an Anti-dumping Agreement provision.  Id. (citingWT/DS184/R
Page A-116
the second sentence of Article 17.6(ii) of the Agreement.  That sentence expressly acknowledges that
the drafters of the Agreement were aware that they had fashioned language that allowed of more than
one permissible interpretation, and they expressly directed that panels were not to resolve such
ambiguities in favour of only one interpretation.
86. Moreover, in interpreting subparagraph (ii) as to legal questions, the Panel should take note of
Article 31(3) of the Vienna Convention on the Law of Treaties, which specifically provides that, in
interpreting international agreements:
There shall be taken into account, together with the context:  . . .(b) any subsequent practice in the application of the treaty which establishes the
agreement of the parties regarding its interpretation;
Thus, where the Anti-Dumping Agreement is ambiguous or silent with respect to a particular
methodology, but that methodology has been subsequently adopted as standard practice by a number
of signatories to the Agreement, the practice of those parties must be taken into account, with regard
to determining whether that methodology constitute s a “permissible interpretation” of the Agreement.
For example, the practice of countries with regard to the arm’s-length test under Article 2 of theAgreement, discussed below, varies: some countries exclude all sales to affiliated parties, and some
countries, like the United States, use them if they pass a certain test.  This practice may be taken into
account by the Panel in determining whether the practice of the United States -- at issue in this
particular case -- is consistent with the Agreement.  The varying practices of other countries may
likewise suggest that there are, in fact, multiple permissible interpretations of this provision of theAgreement.
106
87. In sum, Article 17.6(ii) makes clear that a Panel fails to make the required assessment of the
applicability or conformity of an authority’s action with the Anti-dumping Agreement when, if the
terms of the Agreement admit of multiple permissible interpretations, a Panel decides that anauthority’s action fails to conform with the Anti-dumping Agreement when it conforms to one of
those interpretations.  Thus, the relevant question in every case is not whether the challenged
determination rests upon the best or the “correct” interpretation of the Anti-dumping Agreement, but
whether it rests upon a “permissible interpretation” (of which there may be many).  Moreover, in
determining whether an interpretation is permissi ble, the Panel should take into account the
                                                                                                                                                                    
Steven P. Croley and John H. Jackson, WTO Dispute Procedures: Standard of Review, and Deference to
National Governments , 90 Am. J. Int’l L. 192, 201 (1996)).  However, even Jackson and Croley recognize that
the second prong of Article 17.6(ii) uses terms nearly identical to those of US administrative law, which allowsfor multiple, permissible interpretations of a statutory provision which is silent or ambiguous on a specific point.See Croley and Jackson, 90 Am. J. Int’l L. at 203-204.
106 See also  New Zealand - Electrical Transformers from Finland , GATT Doc. L/5814 - 32S/55
(18 July 1985), para. 4.3, where a Panel noted with regard to the anti-dumping methodology used by
New Zealand in calculating cost-of-production:WT/DS184/R
Page A-117
subsequent practice of signatories to the Anti-dumping Agreement.  If the challenged determination
does in fact rest upon a permissible interpretation, then this Panel must uphold the determination.
3. Japan's Argument Concerning the Standard of Review under Article X:3 is Irrelevant
88. Finally, Japan contends that its GATT Article X:3 claims are not covered by the deferential
standard of review in the Anti-dumping Agreement.107  This argument is simply not relevant.  As
demonstrated below, Japan is complaining about actions that are authorized as reasonable and
unbiased under the Anti-Dumping Agreement, and are reviewed under the deferential standard of
review of Article 17.6. These same actions cannot be found to be inconsistent with Article X:3.
                                                     
107 First Submission of Japan at para. 52.  Since GATT Article X:3 is outside the Anti-dumping
Agreement, Japan’s argument is that the general standard of review provision of Article 11 of the DisputeSettlement Understanding governs the Article X:3 claims.WT/DS184/R
Page A-118
PART B:  ANTI-DUMPING MARGINS AND CRITICAL CIRCUMSTANCES (PART B
CONTAINS BCI IN BRACKETS)
FACTUAL BACKGROUND
I. THE COURSE OF THE PROCEEDING
1. On 30 September 1998, the Department of Commerce received an anti-dumping petition from
a group of domestic steel producers alleging that hot-rolled steel from Japan and other countries was
being dumped in the United States, and was thereby injuring a US industry.1  In addition to alleging
injurious dumping the petition provided information demonstrating reasonable grounds to believe or
suspect that sales in Japan were made at prices below the fully allocated cost of production (“COP”).2
The petition also alleged that critical circumstances existed as to imports from Japan, and supportedthe elements required for a finding of critical circumstances with information readily available.
3
2. On 7 October 1998, the USITC initiated its investigation of hot-rolled steel from Brazil, Japanand Russia.
4  Based on an examination of the information presented in the petition, the Department
published, on 22 October 1998, its notice of initiation of the anti-dumping investigation at issue.5  At
the same time, Commerce initiated country-wide cost  and critical circumstances investigations with
respect to Japanese hot-rolled steel.6  In accordance with its newly adopted policy.7  Commerce stated
that it would make a critical circumstances determination “as soon as practicable".8
3. On 19 October 1998,  Commerce issued Section A of its antidumping questionnaire to the six
Japanese steel producers identified in the petition.9
4. Based on production-volume information received from these six producers, and because itwas not practicable for the Department to examine all the Japanese producers fully, Commerce
selected Nippon Steel Corporation (“NSC”), NKK Corporation (“NKK”) and Kawasaki Steel
Corporation (“KSC”) NSC, NKK and KSC as respondents on 30 October 1998, and advised theremaining companies that they were excused from responding to Section A.
10  O n  t h e  s a m e  d a y ,
Commerce issued sections B-E of its ant- dumping questionnaire to NSC, NKK and KSC.11
                                                     
1 Initiation of Antidumping Duty Investigation: Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel
Products From Brazil, Japan, and the Russian Federation (hereinafter “Commerce Initiation Notice ”), 63 Fed.
Reg. 56607, 56607 (22 October 1998) (Exh. JP-6) .
2 Id. at 56610, 56612.
3 Id. at 56612-13.
4 Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia , 63 Fed. Reg. 53926
(7 October 1998) (Exh. JP-2) .
5 Commerce Initiation Notice at 63 Fed. Reg. at 56607, 56613 (Exh. JP-6) .
6 Id. at 56612-13.
7 See Change in Policy Regarding Timing of Issuance of Critical Circumstances Determinations, 63
Fed. Reg. 55364, 55364 (15 October 1998)  (Exh. JP-3) .
8 Commerce Initiation Notice, 63 Fed. Reg. at 56613 (Exh. JP-6) .
9 Cf.  Id., 63 Fed. Reg. at 56610 with Notice of Preliminary Determination of Sales at Less Than Fair
Value: Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From Japan (hereinafter “LTFV Preliminary
Determination”), 64 Fed. Reg. 8291, 8292 (19 February 1999) (Exh. JP-11) .
10 Id.
11 Id.WT/DS184/R
Page A-119
5. On 16 November  the USITC notified the Department of its affirmative preliminary finding of
threat of material injury in this case.12  On 30 November 1998, Commerce published its affirmative
preliminary critical circumstances determination.13
6. The Department issued its Preliminary Determination of Sales at Less Than Fair Value
(“LTFV Preliminary Determination”) on 12 February 1999.14  The dumping margins reflected in the
LTFV Preliminary Determination were:  NSC, 25.14 per cent; NKK, 30.63 per cent; KSC, 67.59 per
cent; “All Others,” 35.06 per cent.15  The  “all others” margin was the weighted average of the
margins calculated for NSC, NKK and KSC.16  Three days later, on 22 February 1999, NSC and NKK
untimely submitted weight-conversion factors.17
7. Once the LTFV Preliminary Determination was published, the Department, pursuant to its
earlier preliminary critical circumstances finding, ordered suspension of liquidation for entries made90 days prior to the 19 February 1999 publication of the preliminary determination of sales at less
than fair value.
18
8.  During February and March of 1999, Commerce conducted sales and cost verifications of
NSC’s, NKK’s and KSC’s responses to the antidumping questionnaires.19  On 26 March 1999,
Commerce issued verification reports for all three responding companies.20  On 12 April 1999,
Commerce returned the untimely submissions containing the conversion factors and their supporting
data.21
9.  Petitioners and respondents submitted case and rebuttal briefs on 12 April and 19 Aprilrespectively, and a public hearing was held on 21 April 1999.
22
10. On 6 May 1999, Commerce published its Final Determination of Sales at Less Than Fair
Value (“LTFV Final Determination”).23  The dumping margins in the LTFV Final Determination
                                                     
12 Id.; Certain Hot-Rolled Steel Products From Brazil, Japan and Russia , 63 Fed. Reg. 65221
(25 November 1998) (Exh. JP-7) .
13 Preliminary Determination of Critical Circ umstances: Certain  Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products From Japan and the Russi an Federation (“Critical Circumstances Preliminary
Determination” ), 63 Fed. Reg. 65750, 65751 (30 November 1968)  (Exh. JP-9) .
14 LTFV Preliminary Determination , 64 Fed. Reg. 8291 (Exh. JP-11) .
15 Id. at 8299.
16 Id.
17 See NSC Letter resubmitting redacted versions of submissions containing untimely new information
on the weight-conversion factor (14 April 1999), at 6 of the redacted 22 February 1999 submission (excerpts at
Exh. US/B-1) ,; see also NKK Letter resubmitting redacted versions of submissions containing untimely new
information on the weight-conversion factor (19 April 1999), at 4-8 of the redacted 22 February 1999submission (excerpts at Exh. US/B-2) .  NSC and NKK submitted additional untimely conversion-factor data on
1 March and 4 March 1999, respectively.  See NSC Letter (14 April 1999), at 3 and Exh. 8 of the redacted
1 March 1999, submission (excerpts at Exh. US/B-1) and NKK Letter (April 19, 1999), at the redacted
4 March 1999 submission (excerpts at Exh. US/B-2) .
18 LTFV Preliminary Determination, 64 Fed Reg. at 8299  (JP-11) .
19 Notice of Final Determination of Sales at Less Than Fair Value: Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products from Japan (“LTFV Final Determination” ), 64 Fed. Reg. 24329, 24330 (May 6,
1999) (Exh. JP-12) .
20 Id.
21 Letter from Programme Manager to NSC rejecting NSC factor information, at 3 (12 April 1999)
(Exh. US/B-3(a)) ; Letter from Programme Manager to NKK rejecting NKK factor information at 3
(12 April 1999) (Exh. US/B-3(c)) ; see also , LTFV Final Determination, 64 Fed. Reg. at 24361 (NSC) and
24363 (NKK)  (Exh. JP-12) .
22 LTFV Final Determination,  64 Fed. Reg. at 24361  (Exh. JP-12) .
23 Id. at  24329.WT/DS184/R
Page A-120
were:  NSC, 19.65 per cent; NKK, 17.86 per cent; KSC, 67.14 per cent; “All Others, ” 29.30 per
cent.24
11. The LTFV Final Determination included a final negative determination of critical
circumstances for NSC and NKK.25  Therefore, the Final Determination stated that cash deposits or
bonds posted by NSC and NKK for the critical circumstances period were to be refunded or released,respectively.
26  However, the Department continued to find that critical circumstances existed as to
KSC and the “all others” group, taking into consideration their final margins and the evidence of
record as to importer knowledge of injury and as to massive imports.27
12. On 23 June 1999, the USITC published its final determination, finding that an industry in the
United States was materially injured by reason of imports of the subject merchandise.28  The USITC
also found that critical circumstances did not exist for these products.29
13. On 29 June 1999, Commerce published its antidumping duty order in this case.  Therein,Commerce stated that it would order the release of all entries made prior to the preliminary
determination of sales at less than fair value ( i.e., the “critical circumstances” entries).
30
14. On 18 November 1999, the Government of Japan formally invoked the dispute settlement
provisions of GATT 1994, by requesting consultations with the US Government  with respect to this
case.  Japan has set forth, at paragraphs 9-13 of its brief, the procedural background of the dispute
resolution process with respect to this case.
15. For the convenience of the Panel, further facts relating to the underlying administrative case
have been organized in terms of the issues raised for review and set forth below.   In addition, each
section of argument pertaining to each issue covers the facts as necessary to the argument of that
issue.
II. APPLICATION OF FACTS AVAILABLE WITH REGARD TO KSC
16. On 19 October 1998,  Commerce issued Section A of its antidumping questionnaire to KSC31,
concerning its general corporate structure.  This was followed by sections B-E of its questionnaire on
30 October 1998, which covered, among other matters, the prices of KSC’s sales to the United States,
including its affiliated further manufacturers.  During November and December of 1998 and Januaryof 1999 – prior to Commerce’s preliminary determination -- the Department received responses to
these initial and supplemental questionnaires.
32
17. During this time, an issue arose with respect to the Department’s request that KSC provide it
with data on sales to affiliates located in the United States.  In letters to the Department dated
10 November, 3 December and 18 December 1998, KSC requested that it be excused altogether from
                                                     
24 Id. at 34780.
25 Id. at 24337; Memorandum from Roland L. MacDonald to Joseph A. Spetrini: Final Determination
of Critical Circumstances (hereinafter “ Final Critical Circumstances Memo”), at 2 (April 28, 1999)(Exh. US/B-4) .
26 LTFV Final Determination , 64 Fed. Reg. at 24370 (Exh. JP-12) .
27 Id. at 24337-38; Final Critical Circumstances Memo (Exh. US/B-4) .
28 Certain Hot-Rolled Steel Products From Japan  (“USITC Final Determination” ), 64 Fed. Reg.
33514 (23 June 1999) (Exh. JP-13) .
29 Id.
30 Anti-Dumping Duty Order: Certain Hot-Rolled, Flat-Rolled Carbon-Quality Steel Products From
Japan (hereinafter, “Hot-Rolled Steel Order” ), 64 Fed. Reg. 34778 (29 June 1999) (Exh. JP-15) .
31 LTFV Preliminary Determination , 64 Fed. Reg. 8291, 8292 (19 February 1999), (Exh. JP-11) .
32 Id.WT/DS184/R
Page A-121
reporting sales to affiliates located in the United  States that further manufactured subject hot-rolled
steel into non-subject merchandise.33  These two US affiliates were California Steel Industries (“CSI”)
and VEST, Inc. (“VEST”).34  With regard to CSI, KSC explained that it was a 50/50 joint venture
between KSC and a Brazilian company, Companhia Vale de Rio Doce (“CVRD”).   Moreover, KSC
explained that CSI was a petitioner in the investig ation and that a CSI executive was a witness for the
petitioners in the preliminary injury conference at the International Trade Commission, claiming that
CSI was injured by hot-rolled steel from Japan.35
18. Domestic interested parties contested KSC’s request for exemption from reporting these sales
in their comments dated 25 November 199836, and KSC rebutted these comments on
27 November 1998.  In further questionnaires issued 4 December 1998 and 4 January 1999, the
Department continued to request that KSC report the necessary data concerning its sales through the
affiliated manufacturers.37  On 25 January 1999, instead of responding to Commerce’s Section E
questionnaire (which requests information on further manufacturing by affiliated companies), KSC
reiterated that it was unable to do so because CSI refused to cooperate and because VEST did not
have computerized records and lacked a systemat ic method of tracing further manufactured sales.38
KSC did not allege that CSI was unable to provide the requested information.39
19. The Department issued its Preliminary Determination of sales at less than fair value on
12 February 1999.40  The Department preliminarily determined to disregard KSC’s sales made
through VEST, because they accounted for less than 5 per cent of KSC’s US sales.41  With regard to
KSC’s sales through CSI, the Department prelim inarily determined that it was inappropriate to
disregard these sales because they accounted for a substantial portion of KSC’s US sales.42  T h e
Department further preliminarily determined that KSC and CSI had failed to cooperate by not acting
to the best of their ability to comply with the De partment’s request for information as to these sales.
Therefore, the Department based its preliminary margin for the KSC/CSI sales upon adverse facts
available.43  As facts available, Commerce applied the highest product-specific weighted-average
margin for KSC to the quantity of subject merchandise KSC sold through CSI during the period ofinvestigation (“ POI”).
44  The margins for the KSC/CSI sales were weight-averaged with the
calculated margins for the KSC sales for which the required data had been reported.  KSC’s overall
preliminary margin was the result of that calculation.
20. Commerce conducted its cost verification and sales verifications of KSC in late February and
early March of 1999.45  At the KSC sales verification, Commerce devoted significant time to
gathering evidence of KSC’s efforts to obtain the necessary data concerning the sales made through
CSI.46  Commerce examined documents relating to KSC’s sales through CSI and KSC’s interactions
                                                     
33 Letter from KSC to Secretary of Commerce (10 November 1998) (Exh. JP-42(i)) ;  Letter from KSC
to Secretary of Commerce, 3 Dec. 1998, (Exh. US/B-5) ;  Letter from KSC to Secretary of Commerce
18 (December 1998) (JP-42(n)) ;  see also  KSC Preliminary Analysis Memo  (12 February 1999)  (Exh. US/B-6) .
34 Id.
35 Id.
36 Letter from Bethlehem Steel, et. al. , to Secretary of Commerce, (25 November 1998) (Exh. US/B-7) .
37 KSC Supplemental Questionnaire (4 December 1998) (Exh. JP-42(k)) , and  KSC Supplemental
Questionnaire, Section E (4 January 1999)  (Exh. US/B-8) .
38 KSC Supplemental Questionnaire (January 25, 1999)  (Exh. JP-42(v)) .
39 Id.
40 LTFV Preliminary Determination , 64 Fed. Reg. 8291,  (Exh. JP-11) .
41 Id.
42 Id.
43 Id.
44 Id.
45 LTFV Final Determination, 64 Fed. Reg. at 24330  (Exh. JP-12) .
46 KSC Sales Verification Report at 20-22 (Exh. JP-42(y)) .WT/DS184/R
Page A-122
with CSI with respect to the Department’s request for the data necessary to calculate antidumping
margins for those sales.  These inquiries revealed, among other things, that, although KSC had made a
series of requests to CSI, KSC did not act to the best of its ability to obtain the requested information.
Specifically, KSC never raised the issue before the CSI Board, never discussed the matter with its
co-owner and joint venture partner, and never attempted to enforce its rights with respect to this
matter under its Shareholder’s Agreement.47  On 26 March 1999, Commerce issued its verification
report for KSC.48
21. On 6 May 1999, Commerce published its Final Determination.49  As in the Preliminary
Determination, the Department found that the absence of the necessary information concerning the
KSC/CSI sales required the use of facts available.  The Department further determined that the use of
an adverse inference was warranted because KSC and CSI, collectively, failed to cooperate with the
Department by not acting to the best of their ability to comply with requests for information.50
Commerce stated that:
KSC and CSI  have neither provided the data on CSI’s sales, as requested by the
Department, nor demonstrated to the Department’s satisfaction that this is not
possible.  Therefore, the Department finds that KSC and CSI have failed to cooperateby not acting to the best of their ability to comply with the Department’s request for
information with respect to the CSI sales.  Therefore we have used an adverse
inference in selecting the facts available with respect to the CSI sales.
51
In addition, the Department found that KSC had “limited its efforts to merely requesting the requireddata and otherwise took a ‘hands-off’  approach wi th respect to CSI’s alleged decision not to provide
this data".
52
22. Commerce selected as facts available for the KSC/CSI sales the second-highest, rather than
the highest, product-specific margin for KSC’s other US sales, after further examination of theappropriateness of the highest product-specific margin.
53  When the margins for the KSC/CSI sales
were weight-averaged with the calculated margins for the US sales for which KSC had provided the
requested information, the overall final margin for KSC was 67.14 per cent, slightly lower than the
Preliminary Determination margin.54
III. APPLICATION OF FACTS AVAILABLE TO NSC AND NKK FOR CONVERSION 
FACTORS
23. On 30 October 1998, Commerce issued Sections B (home market sales) and C (US sales) of
its questionnaire to NSC, NKK and KSC.  The questionnaire included a request for weight conversion
factors so that export sales and home market sales could be compared on a common weight basis.
Specifically, the Department’s questionnaire clearly stated that if respondents report both actual
weights of hot-rolled steel on some sales and weights expressed on a different basis on other sales,
                                                     
47 Id.
48 LTFV Final Determination , 64 Fed. Reg. at 24330 (Exh. JP-12) .  See also  KSC Sales Verification
Report at 1  (Exh. JP-42(y)) .
49 LTFV Final Determination , 64 Fed. Reg. 24329 (Exh. JP-12) .
50 Id.
51 Id. at 24368
52 Id.
53 Id. at 24369.
54 Id. at 24370.WT/DS184/R
Page A-123
they “must” provide the Department with the conversion factor used to arrive at a uniform quantity of
measure, as well as the converted quantity for such sales.55
24. Steel can be sold on a dollar per actual ton basis or on a dollar per ton theoretical weight
basis.  The former is based on the actual weight of the product sold.  The latter is uses a calculated
weight, based on the dimensions of the product and its theoretical mass.  These are, in effect, differentunit measures: a $300 per actual ton price may be less than or greater than a $300 per theoretical
weight price, and there can be significant differences between the two.  It is impossible to
meaningfully compare a $300 per actual ton price in the US market to a $300 per theoretical ton price
in the home market without some conversion factor to put the prices on the same basis.
25. Commerce gave respondents 52 days to respond to the questionnaire, after granting their
requests for a two-week extension beyond the original deadline.
56  Respondents replied to the
questionnaire on 21 December 1998.57  KSC stated that it did not measure actual weight when the
order was placed on a theoretical weight basis, but nevertheless provided factors for use in converting
theoretical weight to actual weight for various categories of subject merchandise.58  NSC declined to
provide the factor Commerce had requested, stating (incorrectly, as the Department later learned) that
“NSC quantity types are consistent within product type”  (in other words, claiming that the conversionfactor was not necessary).
59  After stating that “[i]t is not possible to convert a theoretical weight into
an actual weight,” NKK claimed (incorrectly, as th e Department later learned) that none of its home
market theoretical weight transactions corresponded to products matched to US sales;  accordingly,
NKK did not submit a conversion factor for the theoretical weight sales.60
26. On 4 January 1999, Commerce renewed its request that NSC and NKK provide a factor forconverting actual and theoretical weight sales to a common basis.
61  Commerce gave both companies
an additional 21 days to provide the requested conversion factors, after granting their requests for a
one-week extension beyond the supplemental questionnaire’s original deadline.
27. In their 25 January 1999, responses to the Department’s second request for conversion
factors, both companies again declined to provide the requested data.  NSC claimed (again
incorrectly) that it did not weigh merchandise sold on a theoretical weight basis, and thus had “no way
                                                     
55 Department’s Initial Section B-E questionnaire, at B-19 and C-17  (October 30, 1998)
(Exh. JP-45(a)) .
56 See Letter from Programme Manager to law firm of Gibson, Dunn & Crutcher (19 November 1998)
(granting extension to NSC) (Exh. US/B-9)  and Letter from Programme Manager to law firm of Willkie Farr &
Gallagher (1 December 1998) (granting extension to NKK) (Exh. US/B-10) .
57 See KSC Initial Section B Responses at B-23-24 and Exh. B-6 (21 December 1998) (Exh. JP-45(e)) ,
and KSC Initial Section C Questionnaire Responses  at C-26-27 and Exh. C-6 (21 December 1998) (excerpts at
Exh. US/B-11) ;  NSC Initial Section B-D Questionnaire Response at B-22 (21 December 1998)  (excerpts at
Exh. JP-29(a)) ; NKK Initial Section B-D Questionnaire Response at B-30 (21 December 1998) (excerpts at
Exh. JP-45(b)) .
58 KSC Initial Section B Questionnaire Response at B-23-24 and Exh. B-6 (21 December 1998)
(JP-45(e) ;  KSC Initial Section C Questionnaire Respons e at C-26-27 and Exh. C-6 (21 December 1998)
(Exh. US/B-11) .
59 NSC Initial Questionnaire Response at B-22 (21 December 1999) (excerpts at Exh. JP-29(a)) .  NSC
later acknowledged that a small number of its US sales of hot-rolled coil were made on a theoretical weight
basis, whereas all home market sales of hot-rolled coil were made on an actual weight basis.  NSC Section B-DSupplementary Questionnaire Response at B-24-25 (25 January 1999)  (excerpts at Exh. US/B-12) .
60 NKK Initial Section B-D Questionnaire Response at B-30 (21 December 1998) (excerpts at
Exh. JP-45(b))
61 NSC Section B-C Supplementary Questionnaire at 5 (4 January 1999) (Excerpts at Exh. US/B-13) ;
NKK Section B-D Supplementary Questionnaire at 2 (4 January 1999) (Excerpts at Exh. US/B-14) .WT/DS184/R
Page A-124
of calculating” the requested conversion factor.62  In its response of the same date, NKK reiterated
that it would be impossible to convert theoretical weight to actual weight and impractical to do the
inverse and that none of the theoretical weight transactions was associated with a product matched to
US sales.63
28. NSC had a small quantity of US sales reported on a theoretical weight basis that had to becompared, for dumping purposes,  to reported home market sales made on an actual weight basis.
Similarly, although NKK reported all of its US sales on an actual weight basis, a small number of its
home market sales that had to be compared to US sales were reported on a theoretical weight basis.
Thus, a price per actual ton in one market would have to be compared to a price per theoretical ton in
the other market.  A meaningful comparison required that that Department convert these prices, as
closely as possible, to a common basis.  But NSC and NKK failed to provide the conversion factors
needed to do this.  Consequently, in its preliminary dumping determination issued on12 February 1999
64,  Commerce assigned a facts available margin to NSC’s and NKK’s sales affected
by the absence of a weight conversion factor.  As facts available for NSC’s affected US sales, the
Department preliminarily assigned NSC ’s highest calculated product-specific margin.65  For NKK’s
sales affected by the missing conversion factors, the Department preliminarily used, as normal value
for each home market transaction involving a theore tical weight, the highest calculated normal value
for any product.66
29. On 22 February 1999, ten days after Commerce issued its preliminary determination, NSC
submitted a weight-conversion factor, claiming that, “[a]t the time of the previous filing, NSC was
unable to determine an appropriate ratio".67  NKK also submitted a weight-conversion factor on
22 February 1999.68  NKK explained that what another respondent, KSC, had done was merely to
provide a factor to derive a more accurate estimate  of actual weight than that expressed by theoretical
weight; thus, NKK provided such a factor.69  NSC and NKK submitted additional data relevant to the
conversion factor calculations on 1 March 1999 (dat a supporting a new, corrected conversion factor)
                                                     
62 NSC Section B-D Supplementary Questionnaire Response at B-24-25 (25 January 1999) (Excerpts
at Exh. US/B-12) .
63 NKK Section B-D Supplementary Questionnaire Response at BS-14-15 (25 January 1999)
(Excerpts at Exh. US/B-15) .
64 LTFV Preliminary Determination , 64 Fed. Reg. 8291 (Exh. JP-11).
65 Id. at 8298.
66 Memorandum from Team to File: Analysis of Data Submitted by NKK Corporation (“NKK”) for
Final Determination of Investigation  (hereinafter, “NKK Final Analysis Memo” ), at 3, 5 (28 April 1999)
(explaining  that, contrary to what inadvertently wa s indicated in its preliminary determination analysis
memorandum, the Department had applied, in both the preliminary and final determination programming, thehighest calculated normal value for any product to all of NKK’s theoretical weight sales) (Exh. US/B-16)  .  The
LTFV Preliminary Determination  had also inadvertently stated that the Department, in the preliminary
determination, had applied the highest calculated normal value on a product-specific basis.  64 Fed. Reg., at
8298 (Exh. JP-11) .
67 See NSC Letter resubmitting redacted versions of submissions containing untimely new information
on the weight-conversion factor (April 14, 1999), at 6 of the redacted 22 February 1999 submission (excerpts at
Exh. US/B-1) .  The original NSC submissions containing weight conversion factors and supporting data, at
Exhibits JP-29(d) and (e) , are no longer part of the official record in this case; thus, the Panel should not rely
upon them.
68 See NKK Letter resubmitting redacted versions of submissions containing untimely new information
on the weight-conversion factor (April 19, 1999), at 4-8 of the redacted 22 February 1999 submission (excerpts
at Exh. US/B-2) . The original NKK submissions containing we ight conversion factors and supporting data,
including Exhibit JP-45(g) , are no longer part of the official record in this case; thus, the Panel should not rely
upon them.
69 Id. at 5-6 of the redacted 22 February 1999 submission.WT/DS184/R
Page A-125
and 4 March 1999, respectively.70  However, Commerce determined that the conversion factor data
had been untimely filed, long after the deadlines for the original and supplemental questionnaire
responses had passed.  Therefore, consistent with its regulations and practice, Commerce returned the
submissions containing the conversion factors and their supporting data on 12 April 1999.71
30.  Because NSC and NKK contested the Department’s rejection of the untimely conversionfactor data and treatment of sales reported on theoretical weight in their respective case briefs,
Commerce explained its position on this issue in the Final Determination. With respect to NSC’s US
sales reported on a theoretical weight basis, the Department continued to reject NSC’s untimely
provided conversion factor for the final determination, and assigned a margin to the affected sales
based on the facts available.
In the instant case, NSC failed to submit the requested [conversion factor]
information by 21 December 1998 (the deadline for the original Section B and C
questionnaire responses), nor did it provide this information by 25 January 1999 (the
deadline for submission of information requested in Section B and C supplemental
questionnaire).  Despite repeated requests for this information, NSC did not provide
the requested data until 1 March 1999 (nearly 3 months after the initial questionnairedeadline).
 * * *
NSC’s only response was that the data did not exist.  While NSC characterizes that
statement as a correctable minor error, we disagree.  The evidence indicates that therequested information was routinely maintained by NSC in the normal course of
business, but that obtaining it was simply not a priority.  Regardless of who
specifically knew about this information, the sales department or the production
department, the data existed and could have easily been obtained.  The fact that NSC
was able to provide this information shortly after the preliminary determination alsosupports the conclusion that it could have done so within the time requested.
Moreover, it is impossible for the Department to determine whether NSC’s claims of
inadvertent error are valid or merely self-serving.  Thus, they are insufficient to rebut
the evidence establishing that the requested information was readily available.
Furthermore, timely, accurate conversion information is necessary to the margin
calculation and can have a significant impact.  In recognition of steel industry
practices, the Department routinely requests respondents in proceedings involving
steel to provide either the actual and theo retical weights of the transactions in both
markets, or in the alternative, to provide c onversion factors to ensure apples to apples
comparisons on the same weight basis.  The need for timely filed, verifiable actual
weights or conversion factors is particularly acute with flat rolled steel products in
coils, including those at issue.  Assuming that the coils meet the specifications of theordered product, the actual width and the actual thickness of the coils will vary within
                                                     
70 NSC Letter resubmitting redacted versions of submissions containing untimely new information on
the weight-conversion factor (April 14, 1999) at 3 and Exh. 8 of the redacted 1 March 1999 submission
(excerpts at Exh. US/B-1) ; NKK Letter resubmitting redacted versions of submissions containing untimely new
information on the weight-conversion factor (April 19, 1999), at the redacted 4 March 1999 submission(removing affected data without narrative)  (excerpts at Exh. US/B-2) .  As noted above, the original versions of
these submissions are no longer part of the official record and should not be relied upon by the Panel.
71 Letter from Programme Manager to NSC rejecting NSC factor information at 3 (12 April 1999)
(Exh. US/B-3(c)) ; Letter from Programme Manager to NKK at 3 (12 April 1999) (Exh. US/B-3(a)) ;  see also ,
LTFV Final Determination , 64 Fed. Reg.  at 24361 (NSC) and  24363 (NKK) (Exh. JP-12) .WT/DS184/R
Page A-126
the allowed tolerances, but the lengths of the coils are not specified in the available
sales-related documentation.  Therefore, the total actual weight of the coils sold in
transactions denominated in theoretical weight can vary by a significant, but
unknown amount, as the actual dimensions of the coils cannot be determined.
Accordingly, the resulting unit values that would be used in the Department’s
price-to-price comparisons could also vary by a significant, but unknown amount.72
Moreover, Commerce found that “by not submitting a theoretical weight conversion factor it couldhave provided when originally requested until well after the time for response had passed, [NSC]
failed to cooperate by not acting to the best of its ability".
73  Consequently, the Department applied an
adverse inference in selecting the facts available “so as to effectuate the statutory purposes of the
adverse facts available rule, which is to induce respondents to provide the Department with complete
and accurate information in a timely manner".74  Commerce used, as the margin for each US sale
reported based on theoretical weight (  i.e., different weight units from the home market sales to which
they had to be compared) the average of the highes t calculated sale-specific margins for each of the
products involved in the theoretical weight sales.75
31. With respect to NKK’s home market sales reported on a theoretical weight basis, theDepartment also continued to reject NKK’s untimely provided conversion factor, and assigned a
normal value to the affected sales based on the facts available.  As with NSC, the Department noted
the long delay in submitting the conversion factors.
76  Moreover, after finding that NKK had failed to
act to the best of its ability because it could have provided the conversion factor when originally
requested, Commerce used an adverse inference in selecting the normal value for those sales.77  The
Department explained:
NKK’s claims that it could calculate a conversion factor in February of 1999, but was
unable to derive such a factor when the questionnaire responses were due, does not
withstand scrutiny.  Although NKK argues that it did not understand what theDepartment wanted when it originally requested a “conversion factor”, although this
was not stated at the time, and that it lacked the data necessary to calculate one, . . . it
should have proposed to the Department the sort of conversion factor it ultimately did
calculate, explaining why a more accurate one might not be practicable.  Instead,
NKK merely dismissed the Department’s repeated requests.  The fact that NKKultimately did provide such a factor is the proof that they could have done so much
earlier.
78
As in the preliminary determination, Commerce used, as normal value for each home markettransaction involving a theoretical weight, the highest NKK normal value for any product.
79
                                                     
72 LTFV Final Determination , 64 Fed. Reg. at 24361 (citations omitted) (Exh. JP-12) .
73 Id.
74 Id. at 24362.
75 Id.  Commerce calculated a margin for the affected US sales as follows.  First, it isolated the products
sold on a theoretical weight basis, and then identified  US sales of those same products that were made on an
actual weight basis.  The Department calculated a margin for each of the actual weight sales, identified thehighest margin for each product, averaged these margins, and applied the resulting margin to the US theoretical
weight sales.  Memorandum from Team to File: Analysis of Data Submitted by Nippon Steel Corporation
(“NSC”) for Final Determination of Investigation   (hereinafter, “ NSC Final Analysis Memo ”) at 6
(28 April 1999) (Exh. US/B-17) .
76 LTFV Final Determination , 64 Fed. Reg. at 24363  (Exh. JP-12) .
77 Id. at 24363-64.
78 Id.
79 Id. at 24364; NKK Final Analysis Memo  at 3 (Exh. US/B-16) .WT/DS184/R
Page A-127
IV. EXCLUSION OF FACTS AVAILABLE MARGINS FROM THE ALL OTHER RATE
32. The petition submitted to the Department in September of 1998 identified six steel producers
as possible exporters of hot-rolled steel from Japan.80  These companies were NSC, NKK, KSC,
Sumitomo Metal Industries (“Sumitomo”), Kobe Steel, Ltd. (“Kobe”), and Nisshin Steel Co. Ltd.
(“Nisshin”).81  On 19 October 1998,  Commerce issued Section A of its antidumping questionnaire to
these six Japanese steel producers.82
33. Based on production-volume information received from these producers, and because it was
not practicable for the Department to examine all the Japanese producers fully, Commerce selected
NSC, NKK and KSC as respondents on 30 October 1998 and advised the remaining companies that
they were excused from responding to Section A.83  Commerce therefore issued sections B-E of its
antidumping questionnaire only to NSC, NKK and KSC.84  Commerce’s selection of the respondents
whose company-specific data would be used to ca lculate anti-dumping margins was made pursuant to
section 777A(c)(2)(B) of the Act, which implements  Article 6.10 of the Anti-dumping Agreement.
That article permits authorities to limit their examin ation to “the largest percentage of the volume of
the exports from the country in question which can reasonably be investigated” when the number of
exporters involved is so large as to make it imprac ticable to determine an individual margin for each
exporter.
34. The Department issued its Preliminary Determination of sales at less than fair value on
12 February 1999.85  The dumping margins in the LTFV Preliminary Determination for the three
examined respondents were:  NSC, 25.14 per cent; NKK, 30.63 per cent; KSC, 67.59 per cent.86
35. In accordance with section 735(c)(5) of the Act, which implements Article 9.4 of theAgreement, and using the Department’s normal methodology for this purpose, the Preliminary
Determination also provided a margin for the non-se lected companies,  called the “all others” margin,
based on the data submitted by the selected companies.
87  The “all others” margin in the Preliminary
Determination, 35.06 per cent, was the weighted average of the margins calculated for NSC, NKK
and KSC.88  This is the methodology provided for in section 735(c)(5)(A) of the Act, which states that
the “all others” rate shall be an amount equal to the weighted average dumping margins established
for exporters and producers individually investigated, excluding any zero and de minimis  margins, and
any margins based entirely on the facts available.89
36. During the comment period, no party challenged the methodology the Department had usedfor calculating the all others rate.
90  Furthermore, no party challenged the manner in which this
methodology was applied.    This is particularly not eworthy, given the fact that Sumitomo, one of the
companies subject to the all others rate, submitted a case brief making arguments with respect to two
                                                     
80 Initiation Notice , 63 Fed. Reg. at 56610 (Exh. JP-6) .
81 Id.
82 Cf.  id. with LTFV Preliminary Determination , 64 Fed. Reg. 8291, 8292 (Exh. JP-11) .
83 LTFV Preliminary Determination , 64 Fed. Reg. at 8292 (Exh. JP-11) .  The three companies selected
were those with the largest volume of exports to  the United States, accordin g to the production-volume
information they submitted in response to the Department’s questionnaires.  Id.
84 Id.
85 Id. at 8291.
86 Id. at 8299.
87 Id.
88 Id.
89 Id.
90 LTFV Final Determination , 64 Fed. Reg. 24329 et seq. , passim  (Exh. JP-12) .WT/DS184/R
Page A-128
other issues, and could easily have commented on the all others rate at the same time if it had
concerns with respect to that issue.91
37. On 6 May 1999, Commerce published its Final Determination.92  The dumping margins in the
Final Determination for the selected respondents were:  NSC, 19.65 per cent; NKK, 17.86 per cent;
KSC, 67.14 per cent.
38.  In the Final Determination, the Department continued to apply its standard all others rate
methodology, calculating that rate as the weighted  average of the margins calculated for NSC, NKK
and KSC.93  The final all others rate was 29.30 per cent.  Because no party had challenged this
methodology in the case briefs, the Department did not include any further explanation in the Final
Determination of its uncontested methodology for determining the all others rate.
V. APPLICATION OF THE "ARM'S LENGTH" TEST TO AFFILIATED CUSTOMERS
TO DETERMINE NORMAL VALUE
39. In calculating its preliminary dumping margin s, the Department excluded from its analysis
sales to affiliated customers in the home market which were not made at arm’s length prices, because
the Department considered them to be outside the ordinary course of trade.94  The Department
described its “arm’s length test” as follows:
To test whether these sales were made at arm’s length prices, we compared on a
model-specific basis the prices of sales to affiliated and unaffiliated customers net of
all discounts, rebates, billing adjustments, movement charges, direct selling expenses,and packing.  Where, for the tested models of subject merchandise, prices to the
affiliated party were on average 99.5 per cent or more of the price to unaffiliated
parties, we determined that sales made to the affiliated party and used those sales in
determining NV [normal value].  See 19 CFR 351.403(c).  In instances where no
price ratio could be constructed for an affiliated customer because identicalmerchandise was not sold to unaffiliated customers, we were unable to determine that
these sales were made at arm’s length prices and , therefore, excluded them from our
LTFV analysis.  See Notice of Final Determination of Sales at Less Than Fair Value:
Certain Cold-Rolled Carbon Steel Flat Products from Argentina , 58 FR 37062,
37077 (9 July 1993).  Where the exclusion of such sales eliminated all sales of themost appropriate comparison product, we made a comparison to the next most similar
product.
95
40. Following the Preliminary Determination, NKK contested, among other issues, the
Department’s methodology for determining when sales to affiliated customers in the home market
will be deemed to be at “arm’s length” (“the arm’s length test”).96  With respect to NKK’s challenge
                                                     
91 Id. at 24337 (Comment 2) and 24364 (Comment 31).  Japan’s suggestion at para. 134 of its brief that
Sumitomo Metal Industries “strenuously argued” against the Department’s all others methodology is belied by
the very document they rely upon, Sumitomo’s case brief (Exh. US/B-19) .  Sumitomo sought to lower its
margin by arguing against adverse treatment of Kawasaki’s CSI sales, which affected the Kawasaki’s marginand thus the weighted average all others rate.
92 LTFV Final Determination , 64 Fed. Reg. at 24329  (Exh. JP-12) .
93 Cf.  LTFV Preliminary Determination , 64 Fed. Reg. at 8299 (Exh. JP-11)  with Final Determination ,
64 Fed. Reg. at 24331 (“Changes From the Department’s Preliminary Determination,” showing no change inthis respect) (Exh. JP-12) .
94 LTFV Preliminary Determination  at 8295, citing 19 C.F.R. § 351.102 (definition of “ordinary course
of trade”)  (Exh. JP-11) .
95 Id. at 8295.
96 LTFV Final Determination , 64 Fed. Reg. at 24341-42 (Exh. JP-12) .WT/DS184/R
Page A-129
to the Department’s arm’s length test, the Department continued to use, in its Final Determination, its
established methodology, which the Court of International Trade has repeatedly sustained.97  T h e
Department noted that, although NKK had proposed an alternative methodology based on a statistical
approach, it had not demonstrated that the current methodology was unreasonable.98  The Department
also explained that it applies the arm’s length test on a customer-by-customer, rather than a
product-by-product, basis because “the question underlying the test is whether affiliation between theseller and the customer has (in general) affected pricing".
99
VI. CRITICAL CIRCUMSTANCES AND RETROACTIVE APPLICATION OF ANTI-
DUMPING DUTIES
41. On 30 September 1998, US domestic steel producers filed a petition with the Department of
Commerce and the USITC seeking relief from unfairly dumped imports.100  This petition (including
amendments)101 contained allegations of dumping and injury, along with approximately 800 pages of
factual data and support.102
42. In response to the allegations and accompanying factual information, the Department of
Commerce analyzed the sufficiency of the petition in order to determine whether it was proper to
initiate an investigation.103  Specifically, the Department analyzed the less than fair value and injury
allegations, and determined that the petition contained, among other things, sufficient factual support
relating to (1) volume and value of imports; (2) US market share ( i.e., the ratio of imports to
consumption); (3) actual pricing ( i.e., evidence of decreased pricing); (4) relative pricing ( i.e.,
evidence of imports under-selling US products); (5) prices or costs and claimed adjustments; (6) home
market pricing (market research reports including affidavits); (7) current pricing data (no more thanone year old); (8) price and cost data from contemporaneous time periods; (9) correct currency rates
used for all conversions to US dollars; and (10) conversion factors for comparisons of differing units
of measure.
104  In addition to analyzing the “sufficiency of the allegations,” the Department further
assessed the reliability of the factual support, by corroborating the evidence with publicly available
data.105
43. After reviewing the allegations and factual support contained in the petition, the Departmentdetermined that there existed reasonable grounds to believe or suspect sales were being made below
                                                     
97 Id. at 24342-43.
98 Id. at 24342.
99 Id., citing Micron Technology, Inc. v. United States , 893 F. Supp. 21 (CIT 1995) and Torrington Co.
v. United States , 960 F. Supp. 339 (CIT 1997).
100 See Petition for the Imposition of Antidumping Duties  (Exhs. US/B-40a, 40b and 40c).
101 After receiving the initial petition, the Department sent petitioners a questionnaire requesting
additional information and supporting documentation.  See Letter from the Department to Skadden, Arps, Slate,
Meagher & Flom LLP (6 October 1998)  (Exh. US/B-41) .  In the questionnaire, the Department requested,
among other things, additional supporting documentation pert aining to claimed import volumes, material injury,
and knowledge by Japanese producers of the potential investigation.  Id.  In response to the questionnaire, the
petitioners filed amendments to the petition on 9 October 1998 and 14 October 1998 containing additionalexplanation and supporting documentation as requested.
102 See Petition for the Imposition of Anti-Dumping Duties  (Exhs. US/B-40a, 40b and 40c).
103 Import Administration AD Investigation Initiation Checklist, Certain Hot-Rolled Flat-Rolled
Carbon Quality Steel Products from Japan, Brazil and the Russian Federation  at 6-8 (19 Oct. 1998) (hereinafter
Initiation Checklist) (Exh. US/B-18) .
104 See id.
105 See id. Attachment at 15-16.WT/DS184/R
Page A-130
cost.106  As a result, the Department published a notice of initiation of an anti-dumping investigation
on 22 October 1998.107
44. On 16 November 1998, the USITC notified the Department of its affirmative preliminary
finding of threat of material injury in this case.108
45. On 30 November 1998, Commerce published its preliminary critical circumstancesdetermination.
109  In reaching its preliminary determination as to whether critical circumstances
existed, the Department found, based on the evidence before it, a massive surge in import volumes in
which “imports of hot-rolled steel from Japan increased by more than 100 per cent".110  This was more
than six times greater than the 15 per cent increase needed to establish massive imports under the
Department’s established practice.111  The Department also found that importers knew or should have
known both that the respondents were selling the subject merchandise at less than fair value and thatthere was likely to be material injury.
112  It based this determination on the fact that the dumping
margins documented in the petition were in excess of 25 per cent, on the ITC’s preliminary
determination of threat of injury, and on other publicly available information, including “numerous
press reports . . . regarding rising imports, falling domestic prices resulting from rising imports, and
domestic buyers shifting to foreign suppliers".113  The Department also considered comments
submitted by the respondents on this issue.114  Based upon these findings and the arguments
presented, the Department determined that it was proper to issue a preliminary affirmative
determination of critical circumstances.115
46. During November and December of 1998 and January of 1999,  Commerce receivedresponses to initial and supplemental questionnaires.
116
47. On 12 February 1999, the Department issued its Preliminary Determination of Sales at Less
Than Fair Value.117  The dumping margins reflected in the LTFV Preliminary Determination were:
NSC, 25.14 per cent; NKK, 30.63 per cent; KSC, 67.59 per cent; “All Others,” 35.06 per cent.118
                                                     
106 See id. at 6-8.
107 See Initiation of Antidumping Duty  Investigation: Certain Hot-Rolled Flat-Rolled Carbon Quality
Steel Products From Brazil, Japan and the Russian Federation , 63 Fed. Reg. 56607, 56607 (22 October 1998)
(Exh. JP-6).
108 Certain Hot-Rolled Steel Products From Brazil, Japan and Russia , 63 Fed. Reg. 65221 (November
25, 1998) (Exh. JP-7) .
109 Preliminary Determination of Critical Circ umstances: Certain Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products From Japan and the Russi an Federation (“Critical Circumstances Preliminary
Determination” ), 63 Fed. Reg. 65750, 65751 (30 November 1998) (Exh. JP-9) ; see also The Department’s
Preliminary Critical Circumstances Memorandum (“Preliminary Critical Circumstances Memo” ) at 2-4
(23 November 1998) (Exh. US/B-42) .
110 Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65751 (Exh. JP-9)  ;
Preliminary Critical Circumstances Memo, passim (Exh. US/B-42)
111 Critical Circumstances  Preliminary Determination  at 65750 (Exh. JP-9) ; see also 19 C.F.R. § 
351.206(h)(2)
112 Critical Circumstances Preliminary Determination , 63 Fed. Reg. 65750 (Exh. JP-9)  ; see also
Preliminary Critical Circumstances Memo  at 2-4 (Exh. US/B-42) .
113 Id.
114 See Preliminary Critical Circumstances Memo  at 3 (Exh. US/B-42)
115 Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65751 (Exh. JP-9)
116 LTFV Preliminary Determination, 64 Fed. Reg. at 8292 (Exh. JP-11) .
117 Id. at 8291.
118 Id.WT/DS184/R
Page A-131
48. Pursuant to its earlier preliminary critical circumstances finding, the Department at this point
ordered suspension of liquidation for entries made 90 days prior to the publication of the  Preliminary
Determination of Sales at Less Than Fair Value.
49. Following the issuance of the LTFV Preliminary Determination, various Japanese
respondents filed case briefs contesting, among other issues, the Department’s critical circumstancesdetermination.
119  Respondents challenged each aspect of the critical circumstances determination.120
Specifically, with respect to the Department’s determination that importers had knowledge of
dumping, respondents argued that the Department erred when it relied on what they called the mere
allegations in the petition as a basis for determining the margins of dumping.121  With respect to the
Department’s determination that importers had knowledge that the dumping was likely to cause injury
to the US domestic industry, respondents argued that, because the USITC preliminary determination
of injury did not find current material injury, th e Department could not impute knowledge of injury.122
Finally, with respect to the Department’s determination that massive imports existed, respondents
argued that the Department incorrectly deviated from its normal practice by selecting a different
comparison period for determining the volume of imports.123  Thus, based upon these contentions,
respondents argued that there was insufficient evidence in the record to support the findings leading to
the affirmative critical circumstances determination.124
50. On 6 May 1999, Commerce published its LTFV Final Determination.125  The dumping
margins reflected in the LTFV Final Determination were:  NSC, 19.65 per cent; NKK, 17.86 per cent;
KSC, 67.14 per cent; “All Others,” 29.30 per cent.126
51. The Final Determination also included a final negative determination of critical circumstancesas to NSC and NKK, both of which had final dumping margins below the 25 per cent threshold the
Department uses to impute importer knowledge of dumping.
127   Therefore, the Final Determination
stated that cash deposits or bonds posted by NSC and NKK for the critical circumstances period were
to be refunded or released, respectively.128  However, the Department continued to find that critical
circumstances existed as to KSC and the “all others” group, taking into consideration their final
margins and the evidence of record as to importe r knowledge of injury and as to massive imports.129
52. On 23 June 1999, the ITC published its final determination, finding that an industry in the
United States was materially injured by reason of imports of the subject merchandise.130  Th e  I TC
found, however, that critical circumstances did not exist for these products.131
                                                     
119 LTFV Final Determination , 64 Fed. Reg. at 24335-24339 (Ex. JP-12) .
120 Id.
121 Id.
122 Id.
123 Id.
124 Id.
125 Id.
126 Id. at 34780.
127 Id. at 24337; Memorandum from Roland L. MacDonald to Joseph A. Spetrini: Final Determination
of Critical Circumstances  (hereinafter “Final Critical Circumstances Memo” ) at 2 (28 April 1999) (Exh.
US/B-4) .
128 LTFV Final Determination,  64 Fed. Reg. at 24370 (Ex. JP-12) .
129 Id. at 24337-38; Final Critical Circumstances Memo ,  passim (Exh. US/B-4) .
130 Certain Hot-Rolled Steel Products From Japan  (“ITC Final Determination” ), 64 Fed. Reg. 33514
(23 June 1999)  (Exh. JP-13) .
131 Id.WT/DS184/R
Page A-132
53. On 29 June 1999, Commerce published its antidumping duty order in this case.  Therein,
Commerce stated that it would order the release of all entries made prior to the preliminary
determination of sales at less than fair value.132
ARGUMENT
I. THE AGREEMENT PERMITS ADMINISTERING AUTHORITIES TO USE
ADVERSE INFERENCES IN SELECTING THE FACTS AVAILABLE WHERE A
PARTY HAS NOT COOPERATED IN AN INVESTIGATION
A. INTRODUCTION
54. As we explain in detail below, the Department applied adverse facts available to KSC after
KSC failed to compel CSI (the joint venture in  which KSC and a Brazilian company each held a
50 per cent interest) to respond to the constructed-export-price portion of the anti-dumping
questionnaire.  In addition, the Department applied adverse facts available to NSC and NKK when
they did not submit information that would have permitted the Department to convert sales based on
theoretical weights into actual weights.   The de cisions affected the margins for NSC and NKK by a
very small amount.
55. Japan has raised questions about each of these applications in its First Submission, which are
addressed individually below.  Before getting into the specifics, however, Japan attempts to knock the
facts available provision out of the Agreement, by asking the Panel to rule that Commerce may not
select the facts available for uncooperative exporters so as to give them any incentive to respond toantidumping questionnaires.
56. Japan argues that “the purpose of any use of facts available is to fill gaps in information in a
manner consistent with existing data".
133  In other words, if an exporter refuses to report 90 per cent
of its sales, the Department must use, as facts available, the “existing data” - - the margin for the
remaining 10 per cent of the sales that the exporter selected to report.  Of course, this would allow
exporters to manipulate the outcome of antidumping investigations at will, by reporting only that
information most favourable to them and withholding the rest.
57. Japan does not shrink from this implication.  It candidly explains that the problem with
Commerce’s practice is that the Department, in selecting facts available, “looks for data that are
‘sufficiently adverse’ so as to induce respondents to provide complete and accurate information ”
(emphasis added), as if that were a deplorable result.134  Working from the premise that respondents
should not be required to provide complete and accurate information, Japan asks the Panel to remove
this inducement.  If the Panel agrees, the result is inevitable - - respondents will refuse to provide such
information, and investigating authorities around the world will have no remedy.  Therefore, the most
important issue in this proceeding is whether the Agreement actually constrains investigatingauthorities in this manner.
                                                     
132 Antidumping Duty Order: Certain Hot-Rolled, Flat-Rolled Carbon-Quality Steel Products From
Japan (hereinafter, “Hot-Rolled Steel Order” ), 64 Fed. Reg. 34778 (29 June 1999) (Ex. JP-14) .
133 First written submission of Japan, at para. 58.
134 Id. at para. 59.WT/DS184/R
Page A-133
B. ARTICLE 6.8 OF THE AGREEMENT AUTHORIZES ADVERSE INFERENCES ABOUT
UNCOOPERATIVE RESPONDENTS
58. Article 6.8 of the Agreement provides in pa rt that, where a party “refuses access to, or
otherwise does not provide, necessary information within a reasonable period or significantly impedes
the investigation . . . determinations . . . may be made on the basis of the facts available.”  Thus,
Article 6.8 deals in part with uncooperative parties - - that refuse access to information, submitinformation late, withhold information, and otherwise impede investigations.  In order to deal with
such uncooperative parties, Article 6.8 authorizes the application of the “facts available”.
59. Article 6.8 does not explicitly provide that the selection of facts available may entail an
adverse inference.  The inescapable fact, however, is  that the use of facts available is the solution to
the problem posed by non-cooperative respondents.  This strongly implies that administering
authorities may employ facts available so as to solve the problem which renders their application
necessary.  Application of the facts available can solve the problem posed by uncooperative
respondents only if it succeeds in inducing them to cooperate, and the only inducement that will
persuade them to cooperate is the prospect of a worse result than if they do not.  Investigating
authorities have neither the resources nor any legal process (other than the facts available rule) by
which they can induce exporters outside their jurisdic tion to cooperate in their investigations.  Thus,
in order to solve the problem that it so clearly iden tifies, Article 6.8 must authorize the application of
adverse inferences to uncooperative respondents.
C. 
ANNEX II OF THE AGREEMENT AUTHORIZES ADVERSE INFERENCES ABOUT UNCOOPERATIVE
RESPONDENTS
60. Annex II of the Agreement contains guidelines and requirements that investigating authorities
must observe when applying facts available under Article 6.8.  Paragraph 1 of Annex II provides in
part that:
. . . The authorities should also ensure that the party is aware that if information is not
supplied within a reasonable time, the authorities will be free to make determinations
on the basis of the facts available, including those contained in the application for the
initiation of the investigation by the domestic industry.
This underscores in two different ways the strong implication of Article 6.8 that administering
authorities may make adverse inferences regarding uncooperative respondents.
61. First, Paragraph 1 explicitly requires investigating authorities to warn  respondents that, if they
do not cooperate, the authorities may apply the facts available.  This plainly implies that the
consequences of failing to cooperate may be adve rse.  Otherwise, no warning would be required.
Japan would have this panel believe that the Member States crafted Paragraph 1 of Annex II to make
the following statement: “Warning!  If you do not cooperate in an investigation, the investigating
authority is authorized to apply neutral information that will yield precisely the same result as if you
had cooperated fully!”  This is absurd, and would reduce Paragraph 1 (and Article 6.8 itself) to a
nullity, in contravention of the well-recognized principle of treaty construction rejecting such
interpretations.135
62. Second, Paragraph 1 explicitly states that the consequences of failing to cooperate in theinvestigation include making a determination on the basis of the facts in the application for initiation
                                                     
135 United States - Standards for Reformulated and Conventional Gasoline , WT/DS2/AB/R,
29 April 1996, at p. 23.WT/DS184/R
Page A-134
filed by the domestic industry.  While the information in an application must be substantiated136, it is
generally understood that applicants will document the highest degree of dumping that the available
evidence will support.  Accordingly, while the information in the application is not necessarily
adverse to the respondents, it generally is presumed to be adverse.  Therefore, the authority given to
investigating authorities to apply the information in the petition to uncooperative respondents is
generally understood to authorize them to make adverse inferences regarding uncooperativerespondents.
63. Paragraph 5 of Annex II provides that “ev en though the information provided may not be
ideal in all respects”, investigating authorities ne vertheless should not reject that information where
the respondent “has acted to the best of its ability”.  This also makes sense only if investigating
authorities can make adverse inferences in selectin g the facts available to be applied to uncooperative
respondents.  In such cases, this tells investigatin g authorities that adverse inferences can be applied
only to uncooperative respondents, and that the inability  to cooperate is not a failure to cooperate.  In
other words, parties who try their best to cooperate should not be sanctioned.  This makes sense.
64. In contrast, if Japan’s interpretation of Article 6.8 and Annex II is accepted, Paragraph 5
prohibits investigating authorities from disregarding faulty information provided by respondents whoacted to the best of their ability, because that would allow those authorities to substitute purely neutral
information.  Such a prohibition would be absurd, because it would protect respondents from neutral
information, from which no protection is needed.
65. Paragraph 6 of Annex II provides that, where an investigating authority does not accept
submitted information, it should inform the party “forthwith of the reasons therefore,” and give it the
opportunity to provide an explanation.  If the investigating authority rejects the explanation, it must
explain the reasons for doing so in its published de termination.  This is another of the comprehensive
set of safeguards governing the use of facts available.  Again, this safeguard make sense only if
adverse inferences are permitted.  There would be no reason to require investigating authorities togive exporters a “last chance” to explain before their information was rejected, if that information
could be replaced only with a neutral gap-filler.
66. Paragraph 7 of Annex II squarely states that, where an interested party has not cooperated, the
result may be adverse to that party.  The last sentence of paragraph 7 states that:
It is clear, however, that if an interested party does not co-operate and thus relevant
information is being withheld from the authorities, this situation could lead to a result
which is less favourable to the party [that did not cooperate] than if the party did
cooperate.
67. Although the exact term "adverse" is not used, a result that is “less favourable” to the exporter
is equivalent to a result that is adverse to the exporter, according to the ordinary meaning of thoseterms.
137  In the context of the Agreement, a "less favourable" result for a responding party is a higher
                                                     
136 See Article 5.2 of the Anti-dumping Agreement.  Applications must include “such evidence as is
reasonably available to the applicant” of dumping.  Th ere is no requirement that the evidence be complete, and
no requirement that applicants strive to obtain exonerati ng information.  Similarly, Article 5.3 requires only that
investigating authorities “examine the accuracy and adequacy of the evidence provided . . . to determine whether
there is sufficient evidence to justify the initiation of an  investigation.”  Investigating authorities are not required
to determine whether the evidence submitted by the applicants is balanced before determining whether to initiatean investigation.
137 The term “adverse ” has been defined as “[a]cting in opposition; actively hostile” and “[h]urtful;
injurious.”  New Shorter Oxford English Dictionary (1993).    The term “favourable,” on the other hand,  means
“propitious,” “advantageous,” and “facilitating one’s purpose or wishes.”  Id.  The  “adverse inference rule” has
been defined as “ [t]he principle that if a party fails to produce a witness who is within its power to produce andWT/DS184/R
Page A-135
margin.  This means that a party that does not cooperate may receive a higher margin than if it had
cooperated - - a margin likely to be higher than its actual margin and higher than the neutral margin
that would be given to a cooperative respondent.  The logical way for an investigating authority to
achieve this result is to apply an adverse inferen ce in selecting the facts available to be applied to
uncooperative parties.
68. In sum, a careful reading of Article 6.8 and Annex II demonstrates that the Member States
intended to provide investigating authorities a means of inducing respondents in antidumping
investigations to cooperate by furnishing necessary information in a timely manner.  The means of
inducing the necessary cooperation was to authorize ad verse inferences to be drawn about the missing
information if it was not supplied.  The adverse in ference must be that the information that was
withheld was unfavourable to the party that withheld it.
D. THE APPLICATION OF ADVERSE INFERENCES TO UNCOOPERATIVE PARTIES IS ESSENTIAL TO
APPLYING THE AGREEMENT AS A PRACTICAL MATTER
69. The reason why the Member States authorized investigating authorities to draw adverse
inferences to induce exporters to cooperate is obvious.  Overwhelmingly, the data necessary to
calculate dumping margins is within the sole possession of the exporters.  These parties arecompletely beyond the reach or even the threat of any process by which national authorities could
compel them to supply the necessary information.  Therefore, without the facts available rule, they
could refuse with complete impunity to cooperate in antidumping investigations, and would do
exactly that.  The ability to draw adverse infe rences regarding uncooperative foreign parties is
therefore an essential tool for investigating authorities - -  not just to give effect to Article 6.8, but togive effect to the entire Agreement.  Any interpretation of the Agreement as not permitting the
application of adverse inferences to uncooperative parties would therefore render the entire
Agreement a nullity.
138
70. The WTO Appellate Body has recognized that adverse inferences are a necessary tool forgathering information.  In Canada - Measures Affecting the Export of Civilian Aircraft , the WTO
Appellate Body concluded that WTO panels are perm itted to draw adverse inferences from a party’s
failure to submit relevant evidence to a panel, noting that this view is “supported by the general
practice and usage of international tribunals".
139  The Appellate Body explained the importance of
adverse inferences as follows:
[A] party’s refusal to collaborate has the potential to undermine the functioning of the
dispute settlement system.  The continued viability of that system depends, in
substantial measure, on the willingness of panels to take all steps open to them to
induce the parties to the dispute to comply  with their duty to provide information
deemed necessary for dispute settlement.  In particular, a panel should be willing
expressly to remind parties – during the course of dispute settlement proceedings –
                                                                                                                                                                    
who should have been produced, the judge may instruct  the jury to infer that the witness’s evidence is
unfavourable to the party’s case.”  Black’s Law Dictionary, 7th ed. (1999)(defining the equivalent term
“adverse-interest rule”).
138 “An interpreter is not free to adopt a reading that would result in reducing whole clauses or
paragraphs of a treaty to redundancy or inutility.” United States - Standards for Reformulated and Conventional
Gasoline , WT/DS2/AB/R, 29 April 1996, at p. 23.
139 WT/DS70/AB/R, 2 August 1999 at para. 202 (hereinafter Civilian Aircraft ).  (In that case, the
Panel’s review included de novo  review of evidence, unlike a Panel’s review under the Agreement.   See
Preliminary Objections, above at Part A.)WT/DS184/R
Page A-136
that a refusal to provide information requested by the panel may lead to inferences
being drawn about the inculpatory character of the information withheld.140
71. Similarly, when using an inference against Argentina in Argentina - Measures  Affecting
Imports of Footwear, Textiles, Apparel and Other Items141, the WTO Panel recognized the parties’
duty of collaboration in the presentation of facts and evidence before a panel, obligating the parties to
provide relevant documents which are in their sole possession.   The Panel noted that a typical“discovery” process “in its common-law system sense, is not available in international procedures".
142
Commerce, like the WTO panels referenced in the cases discussed above, is without typical discoverytools, and must rely on the cooperation of the parties.
143
E. THE WTO MEMBER STATES OVERWHELMINGLY INTERPRET ARTICLE 6.8 OF THE AGREEMENT
AS PERMITTING ADVERSE INFERENCES ABOUT UNCOOPERATIVE PARTIES IN ANTI -DUMPING
PROCEEDINGS
72. Given that interpreting Article 6.8 as permitting the application of adverse inferences to
uncooperative respondents is the only interpretation that can be reconciled with the plain language of
Article 6.8 and Annex II, and the only interpretation that does not reduce those provisions (and,
indeed, the entire Agreement) to a nullity, it is hardly surprising that this is the overwhelming
interpretation of Article 6.8 by WTO members that have expressed a view.  Adverse inferences havebeen made, for example, in cases determined by the European Community
144, Canada145145
                                                     
140 Id. at para. 204.
141 WT/DS56/R, 25 November 1997 at para. 6.40, as modified on other grounds WT/DS56/AB/R, 27
March 1998.  (In that case, the Panel’s review included de novo  review of evidence, unlike a Panel’s review
under the Agreement.  See Preliminary Objections, above at Part A.)
142 Id.
143 This has been recognized by the US appeals court reviewing Commerce determinations.   Olympic
Adhesives, Inc. v. United States , 899 F.2d 1565,1571 (Fed. Cir. 1990).  In  affirming the ability of Commerce to
use an adverse inference, appellate courts in the United States have cited the need to induce respondent partiesto provide timely, complete, and accurate responses so that the agency can calculate accurate dumping margins.Rhone Poulenc, Inc. v. United States , 899 F.2d 1185, 1191 (Fed. Cir. 1990); Allied-Signal Aerospace Co. v.
United States , 996 F.2d 1185, 1191-92 (Fed. Cir. 1993).
144 Under its "well-established practice of penalizing exporters who do not cooperate with the enquiry,"
"the {European} Community will typically select the highest dumping or injury margin which is determined forexports from that country."  Edmond McGovern, European Community Anti-Dumping Law and Practice ,
section 444 at 44:9 (1998).  See, e.g., Glycine from China , Commission Reg. (EC) No. 1043/2000 (5/18/00)
(assigning imports from non-cooperating companies a dumping margin based on the highest dumping margin
established for the cooperating exporter with representative export volumes); Certain Unbleached Fabrics from
China, Egypt, Indonesia, Pakistan, and Turkey , O.J. L. 111, 1998, p. 19, rec. 86 (assigning non-cooperating
companies a dumping margin based on "the margin of the company with the highest dumping margin in thesample").
In fact, the European Community has assigned f acts available margins that exceeded the highest
margin calculated for a cooperating party.  See Polyester Staple Fibers from Australia, Indonesia, and Thailand ,
Commission Reg. (EC) No. 124/2000, O.J. L. 16, 2000, p.30, p. 34 rec. 35 (since "there is reason to believe thatthe high level of non-cooperation results from the non-cooperating exporting producers in the country concernedgenerally having dumped at a higher level than any cooperating exporting producer," the EC set "residualdumping margin for the non-cooperating companies at a level higher than the highest dumping margin
established for a cooperating company").  The European Community also has utilized adverse facts contained in
the petition.   See Certain Footwear from China , Council Reg. (EC) No. 467/98, O.J. L. 60, 1998, n. 1, rec. 40
(imposing on uncooperative exporters "the highest margin of dumping alleged in the complaint").
145 Where a party fails to provide requested info rmation, values are determined according to a
Ministerial specification.  Special Import Measures Act §29(1).  “{A}ny divergence between the valuesestablished using the Ministerial specification and the values which would have been calculated had the
information been provided should not benefit the exporter. . . . Normal values of the goods will be based on theWT/DS184/R
Page A-137
Australia146, and Japan147,  Moreover, Brazil148, Ecuador149, the European Community150, Mexico151,
Panama152, and Uruguay153 specifically sanction the use of information contained in the request for
initiation and other information submitted by the domestic industry as facts available.  It is recognized
                                                                                                                                                                    
export price determined under section 24 or 25 of SIMA plus an amount equal to the highest margin of dumping
(expressed as a percentage of the export price) found for the final determination from exporters who were
required to provide information and who fully complied with the Department’s request for information.”  SIMAHandbook Inserts at 5.12.2; see Final Determination — Cold-Rolled Steel Sheet — Statement of Reasons ,
AD/1198 (28 July 1999) (exporters with incomplete responses received the "highest margin of dumping foundamong all cooperating exporters to the investigation); Final Determination — Hot-Rolled Steel Sheet —
Statement of Reasons , AD/1210, para. 5 (1 June 1999) (exporters  with incomplete responses received the
"highest margin of dumping, for a cooperating exporter").
146 Where a party fails to provide requested info rmation, values are determined according to a
Ministerial specification.  Special Import Measures Act §29(1).  “{A}ny divergence between the valuesestablished using the Ministerial specification and the values which would have been calculated had theinformation been provided should not benefit the exporter. . . . Normal values of the goods will be based on the
export price determined under section 24 or 25 of SIMA plus an amount equal to the highest margin of dumping
(expressed as a percentage of the export price) found for the final determination from exporters who wererequired to provide information and who fully complied with the Department’s request for information.”  SIMAHandbook Inserts at 5.12.2; see Final Determination — Cold-Rolled Steel Sheet — Statement of Reasons ,
AD/1198 (July 28, 1999) (exporters with incomplete responses received the "highest margin of dumping foundamong all cooperating exporters to the investigation); Final Determination — Hot-Rolled Steel Sheet —
Statement of Reasons , AD/1210, para. 5 (1 June 1999) (exporters  with incomplete responses received the
"highest margin of dumping, for a cooperating exporter").
147 Cotton Yarn from Pakistan , Official Gazette (Kampo) No. 1702 (8/4/96) Extra Edition (Gogai) No.
147 (The dumping margin for non-cooperating parties was calculated by deducting the lowest export priceamong the cooperating suppliers found to be dumping from the weighted average normal value among the
cooperating suppliers.  This methodology yielded a margin ( i.e., 9.9 percent) that exceeded the highest margin
calculated for a cooperating party ( i.e., 7.9 percent)) (English language translation) (Exh. US/B-19A); see also
World Competition: Law and Economics Review , v. 21, no. 1 at 35 (1997) (describing the  Cotton Yarn from
Pakistan  determination) (Exh. US/B-19B).
148 WTO Doc. G/ADP/N/1/BRA/2, Decree No. 1602 (8/23/95) at Art 66.1 ("The party shall be advised
that if the information is not submitted within the specified period of time, it will imply that determinations will
be made based on the facts available, including those contained in the request for initiating the investigation.").
149 WTO Doc. G/ADP/N/1/ECU/1/Suppl.1, Rules and Procedures Art. 37 ("When the investigating
authority requires the participation of the applicant or an interested party in order to verify information providedfor the investigation in good time and in proper form, it shall inform him thereof in advance. If he does not agreeto verification, the information provided by the othe r party shall be deemed to be correct, unless there is
evidence to the contrary.").
150 WTO Doc. G/ADP/N/1/EEC/2/Suppl.1, Council Reg. (EC) No. 2331/96 (2/12/96) Art. 18(5) (“If
determinations, including those regarding normal value, are based on the provisions of paragraph 1,  including
the information supplied in the complaint , they shall, where practicable and with due regard to the time-limits of
the investigation, be checked by reference to information from other independent sources which may beavailable, such as published price lists, official import statistics and customs returns, or information obtainedfrom other interested parties during the investigation.”) (emphasis added).
151 WTO Doc. G/ADP/N/1/MEX/1, Foreign Trade Act Art. 83 ("Information and evidence submitted
by the interested parties may be verified in the country of origin if the interested parties so agree.  Without their
consent, the Ministry shall assume that the requesting party's claims are true, unless there exist elements whichindicate otherwise.").
152 WTO Doc. G/ADP/N/1/PAN/1, Law 29 of 1996 Art. 157 ("When the authorities of the exporting
country or the interested parties deny access to the nece ssary information, refuse to provide such information
within a reasonable time-period or seriously impede the investigation, preliminary or definitive conclusions maybe reached on the basis of the facts available, including those appearing in the application for the initiation ofthe proceedings submitted by the domestic industry or production.").
153 WTO Doc. G/ADP/N/1/URY/2, Law No. 16671 (12/13/94) Art. 120 ("{I}f the information is not
supplied within the specified time, the implementing authority may make its determination on the basis of the
facts available, including those contained in the application for the initiation of the investigation.").WT/DS184/R
Page A-138
that information submitted in a request for initiation is likely to be adverse to the interests of the
responding party.
F. JAPAN 'S INTERPRETATION OF ARTICLE 6.8 AND ANNEX II MUST BE REJECTED BECAUSE IT
WOULD NULLIFY THOSE PROVISIONS
73. In a strained effort to deny investigating au thorities the ability to make adverse inferences
about uncooperative respondents, and yet preserve some  force for Article 6.8 and Annex II, Japan
concedes that the result of not cooperating may be less favourable to a respondent than cooperating
where that is an accident .  According to Japan, the authority to make inferences that may be adverse
is limited to situations where the investigating authority is attempting to select neutral gap filler154,
but, owing to the imperfections in the data, selects data that coincidentally turned out to be adverse.
But Japan insists that investigating authorities could never intentionally select data presumed to be
adverse as a means of inducing a respondent to cooperate.155
74. There are two fundamental flaws in this argume nt.  First, there is no such limitation in the
language of Paragraph 7 of Annex II.  The last sentence of that paragraph says that “ [i]t is clear,
however,” that a failure to cooperate “could lead to a result that is less favourable to the party than if
the party did cooperate” (emphasis added).  That sentence does  not say that “although failure to
cooperate will normally lead to the application of neutral gap-filler, respondent parties should
nevertheless be advised that some of this neutral gap-filler may, coincidentally, contain some
information that turns out to be adverse to such pa rties.”  If that had been what the Member States
intended, there would have been no need to emphasize (by stating that it “is clear”) that the result of
failing to cooperate could be adverse.  Indeed, there would have been no need for the warning at all.
75. Second, Japan’s nominal concession would virtually eliminate any incentive for respondent
parties to cooperate.  The remnant of the actually-intended incentive that Japan would allow would be
that, if respondents did not cooperate, the neutral gap-filler applied to them might, by accident,
contain some data that was adverse.  However, the likely consequence of refusing to cooperate wouldnot be adverse at all.  Even if some of the data accidentally turned out to be adverse, the effect on the
margin would likely be small.
76. In consequence, a respondent would stand to profit substantially by generally withholding
unfavourable information.  The probable result would be that only a small percentage of theinformation withheld would be replaced by other unfa vourable information.  Most of the information
withheld would be replaced by “neutral” gap-filler (in reality, information favourable to the
respondent).
156  Thus, the incentive to cooperate would be minimal, at best.  This result is hardly
surprising--Japan has explicitly acknowledged that its purpose is to eliminate any incentive that
exporting respondents have to cooperate.157
77. Japan’s reliance on the Atlantic Salmon  GATT panel decision158 for the proposition that the
Agreement does not permit a purposeful selection of adverse facts available is also misplaced.  In that
case, Commerce selected a sample group of seven salmon farms to calculate a single cost of
                                                     
154 Id.
155 First Submission of Japan at paras. 57-60.
156 A neutral number would be an average number.  With much of the data withheld any  “average”
number would, in practice, be an average of the remaining, favourable, numbers.
157 First Submission of Japan at para. 59.
158 United States-Imposition of Anti-Du mping Duties on Imports of Fr esh and Chilled Atlantic Salmon
from Norway , ADP/87, 30 Nov. 1992 (hereinafter Atlantic Salmon )(involving Article 6.8 of the (Tokyo Round)
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, GATT, 26th Supp.
BISD 171-88 (1980)).WT/DS184/R
Page A-139
production that would then be used industry-wide fo r most of the exporters under investigation.  One
of the seven farms failed to produce complete cost information. Commerce rejected that farm's
reported costs, and as facts available for that farm's  costs, used the highest reported cost information
from among the other six farms.159
78. On review, the GATT panel rejected  Commerce's selection of facts available,  not because it
was adverse as to the farm in question, but because it would be used to determine a single average
cost of production in Norway.  As the Panel stated:
The actual verified costs of production per kg. for the six remaining farms in the
sample differed significantly and the imputation of the highest of these figures to the
[seventh farm] had a significant impact on the average cost of production figure.
Given that the sample was used by the Department of Commerce to compute a singleaverage "cost of production in the country of origin" figure to be included in the
calculation of the constructed normal values of most of the exporters under
investigation, the Department should have considered how its choice of "the fact
available" for determining the costs of production of [the seventh farm] would affect
the representativeness of the results of the sample.
160
As can be seen, the decision in Atlantic Salmon  was based solely on the fact that the facts available
information selected was used to calculate a single, average cost of production, applicable to many
other exporters.  Japan is therefore  incorrect when it suggests that this case stands for the proposition
that facts available can only be used to “fill gaps in information in a manner consistent with existingdata".
161  I n  Atlantic Salmon , the Panel did not reject the principle that adverse inferences may be
drawn where appropriate.162
79. Finally, Japan’s argument that the use of an adverse inference is punitive is without merit.
The WTO Appellate Body has stated that an adverse inference drawn from a party’s failure toproduce information is not punitive, but “merely an inference which in certain circumstances could be
logically or reasonably derived by a panel from the facts before it".
163  As we have noted, that
inference is simply that the information was withheld precisely because  it was unfavourable to the
party that withheld it - - a perfectly reasonable conclusion.  Moreover, as noted, the same WTO
Appellate Body has recognized that the adverse inference tool is necessary to create an incentive forparties appearing before a tribunal (or, as in this ca se, the  investigating authority) to participate in the
information  gathering process.
164  The Commerce decisions cited by Japan discuss the need for that
incentive and are the result of no more than the application of this fundamental principle.
                                                     
159 Id. at paragraph 449.
160 Id.
161 First Submission of Japan, at para. 58.
162 Moreover, the Panel in Atlantic Salmon  addressed a claim made under Article 6.8 of the Tokyo
Round Antidumping Agreement, which did not include Annex II.  Thus, any interpretation of Article 6.8 underthat Agreement is of only limited value.  Under the current Agreement, the provisions of Annex II must beobserved in the application of Article 6.8.  As detailed above, Article 6.8 and Annex II together clearlycontemplate the use of adverse facts available by administering authorities.
163 Civilian Aircraft, WT/DS70/AB/R at para. 200.
164 Id. at para. 204.WT/DS184/R
Page A-140
II. THE DEPARTMENT'S PARTIAL ADVERSE FACTS AVAILABLE
DETERMINATION WITH REGARD TO KAWASAKI STEEL CORPORATION
("KSC") WAS CONSISTENT WITH ARTICLE 6.8 AND ANNEX II OF THE
AGREEMENT, AS WELL AS WITH  ARTICLE 2.3 OF THE AGREEMENT
80. The Department’s determination to apply partial adverse facts available to Kawasaki Steel
Corporation (“KSC”) for failing to act to the best  of its ability to provide necessary information
regarding the sales through its US affiliate, California Steel Industries (“CSI”), was consistent with
Article 6.8 and Annex II of the Anti-dumping Agreem ent. Commerce’s application of facts available
to KSC was partial because KSC was cooperative as to the majority of its sales to the United States,
which were simple export price sales to unaffiliated  buyers in the United States and did not have to be
constructed.  Nevertheless, for those sales through CSI which did require construction and for which
KSC was non-cooperative, Commerce used data drawn from KSC’s own reported, verified sales
information for its export price sales.  Commerce applied the second-highest product-specific margincalculated for these reported, verified sales as the margin for KSC's sales through CSI.  As a result,
KSC’s overall anti-dumping margin likely was less favourable to it than if it had cooperated with
Commerce in the investigation.
81. Japan’s arguments that Commerce’s facts available determination as to KSC was inconsistent
with the Agreement are based on incomplete factual information and a misreading of the relevant
provisions of the Agreement.  Based on all of the record evidence that was before Commerce in the
investigation, its determination that partial adverse facts available should be applied to KSC is fully
consistent with the applicable provisions of the Agreement.
A. 
THE FULL RECORD EVIDENCE SHOWS THAT COMMERCE PROPERLY DETERMINED THAT KSC
FAILED TO ACT TO THE BEST OF ITS ABILITY TO REPORT THE REQUESTED DATA FOR THE US
SALES THROUGH ITS AFFILIATE , CSI
1. Japan's first submission with holds, omits, and ignores critical factual information
82. In its first submission to the Panel, Japan has withheld, omitted, and ignored critical factual
information regarding KSC’s relationship with its US affiliate, CSI, and its joint venture partner,
CVRD.  This information is essential to a full understanding of the steps that KSC could have taken to
obtain and report the sales and further manufacturing cost information Commerce requested in order
to construct export price (“CEP”) for KSC's US sales through CSI.165  In fact, the full record evidence
shows that KSC failed to exercise rights and powers that were readily available to it to report therequested information and, therefore, that KSC failed to cooperate to the best of its ability.
83. Japan lays the blame for KSC’s failure to report the information requested by Commerce at
the feet of its CSI joint venture partner, CVRD – and, in particular, Lourenço Gonçalves, a former
employee of CVRD's partial owner, CSN.
166  During the investigation, Mr. Gonçalves was CSI’s
President and CEO and the person responsible for purportedly “stonewalling"167 KSC’s efforts to
                                                     
165 In calculating constructed export price, or “CEP,” Commerce begins with the price at which
imported products are first resold to an independent buy er in the United States, in accordance with Article 2.3 of
the Anti-dumping Agreement and pertinent US legislation.   This price is then ad justed to account for certain
expenses that are incurred, including the costs associated  with further manufacturing performed prior to the sale
to the unaffiliated customer.  It is this information, the prices for CSI's sales to unaffiliated customers and CSI's
further manufacturing cost information, which was not provided in this case.  See also  the Statement of Facts
above, regarding Commerce’s appli cation of facts available to KSC.
166 First Submission of Japan at para. 65.  CSN is a Brazilian steel producer and respondent in the
companion investigation of hot-rolled steel from Brazil.  KSC Letter to Commerce at 2, (November 10, 1998)(Exh. JP-42(i)) .
167 Id. para. 67.WT/DS184/R
Page A-141
obtain the requested information from CSI.  So powerful was he – according to Japan – that KSC
never bothered to go beyond making requests to him for the CSI information.
84. The factual information presented by Japan in support of its claims, however, is entirely
one-sided.  It omits the considerable power which KSC, as half-owner of CSI, held over that company
through the structure of the corporation and its Board of Directors.  This power is demonstratedthrough the CSI Shareholders’ Agreement, which delineates the legal relationship between the
shareholders and their relationship to CSI, as well as through information which Commerce officials
gathered in discussions with KSC officials at verification in Japan.  While some of this information is
business confidential information that Japan has chosen to release under WTO protection for this
proceeding, the United States has not yet obtained consent from KSC, through Japan, to release other
parts of this information.
168  In particular, KSC has thus far not agreed to release, under WTO
protection, the minutes of three critical CSI Board of  Directors meetings and the confidential portions
of the KSC sales verification report and Commerce’s analysis memorandum regarding CSI.169  It is
essential that in reaching its decision here, the Panel consider all of the evidence that was before
Commerce in its investigation.  Accordingly, all such evidence must be released by Japan for
consideration by the Panel.170
2. The full record evidence show s that KSC failed to act to the best of its ability
85. The full record evidence that was before Commerce in its investigation here demonstrably
shows that KSC failed to act to the best of its ability to provide Commerce with the necessary
information to calculate CEP for KSC's sales through CSI.  Commerce repeatedly made requests to
KSC, and KSC repeatedly refused, to supply this information.  Commerce's verification of KSC thenconfirmed KSC's failure to cooperate.
86. Commerce requested the relevant sales and further manufacturing cost information from KSC
no less than three times.  And on three separate occasions, KSC requested that it be excused from
reporting such information.
171  Finally, on January 25, 1999, instead of responding to Commerce's
third request for the CSI information, KSC stated that it was unable to do so because CSI, which was
also a petitioner in the anti-dumping proceeding, refused to cooperate.  However, based on its analysis
of the evidence on the record, Commerce found in its preliminary determination that KSC had failed
to cooperate to the best of its ability to provide the requested information and that this failure justified
the application of partial adverse facts available.
                                                     
168 Pursuant to Article 6.5 of the Anti-dumping Agreement, permission to disclose business confidential
information must be sought from the specific party submitting the information.  In this instance, that is KSC,who referred the Department to Japan about this matter.   Japan has referred the Department back to KSC.  See
Letter from Department to Japanese Embassy re: BCI (July 18, 2000) (Exh. US/B-20) .
169 California Steel Industries (“CSI”) Minutes of 1998 Board of Directors Meetings (hereinafter “CSI
Board Minutes”) (business confidential information redacted) (Exh. US/B-23) ; KSC Verification Report (March
30, 1999) (showing business confidential information redacted) (Exh. US/B-21)  (redacted version at Exh.
JP-42(y)) ; and Analysis Memorandum: Kawasaki Steel Co rporation -California Steel Industries  (hereinafter
“KSC Final Analysis Memo ”) (April 28, 1999) (Exh. US/B-22) .  Japan has included the CSI Shareholders’
Agreement (Exh. JP-42(aa)) , with a request for BCI treatment as to its contents.  All of the foregoing
documents were in Commerce’s administrative record for the investigation and all of the business confidential
information in them has been released to counsel for petitioners and respondents pursuant to Commerce’sadministrative protective orders as well as the US Court of International Trade’s judicial protective orders inparallel litigation pending with respect to this matter.
170 The confidential information for which we have not yet obtained consent for release is
double-bracketed and omitted in this submission.
171 See Statement of Facts, above, regarding KSC.WT/DS184/R
Page A-142
87. Commerce conducted a thorough examination of KSC’s efforts to obtain the CEP sales data
at verification in Japan in late February and early March of 1999.172  This included meeting with the
involved KSC officials and reviewing the relevant corporate documents, including the minutes of CSI
Board of Directors meetings, in order to take into account any and all efforts KSC made to obtain the
data.  These inquiries showed that although KSC had made written and oral requests to CSI for the
data, KSC had failed to employ the numerous means at its disposal to obtain those data.  Specifically,KSC never raised the issue before the CSI Board, neve r attempted to enforce its rights with respect to
this matter under the CSI Shareholders’ Agreement, and never discussed the matter directly with
officials at its joint venture partner, CVRD.
173
88. As an initial matter, Japan claims that the CS I Shareholders' Agreement "is irrelevant to the
question presented by USDOC's action under the Anti-Dumping Agreement".174  However, the
Shareholders' Agreement is the only objective evidence on the record that shows how CSI operatedand was governed internally.  It therefore represents crucial evidence of the steps that KSC could have
taken to obtain and report the information requested by Commerce regarding KSC's sales through
CSI.  Japan's astonishing assertion that the Shareholders' Agreement is "irrelevant" here and the
failure on the part of Japan even to address the provisions of the Shareholders' Agreement are a true
reflection of the lack of merit and credibility in its claims.
89. The record evidence shows that KSC and CV RD, through their respective holding companies,
each own 50 per cent of CSI and have an equal number of votes in decisions made at shareholder
meetings.
175  Moreover, at all relevant times, the Board of Directors of CSI consisted of [  ].  In other
words, KSC [  ].176
90. Through its [  ].  Indeed, Article [  ].177  Article [  ].178  In addition, under Articles [  ].179  Thus,
Japan’s claim that CSI's President and CEO, Lourenço Gonçalves, was CVRD’s “man”  and that KSC
lacked any ability to control his actions at CSI is belied by express provisions of the Shareholders’
Agreement itself.
91. Despite [  ].  KSC failed to have [  ].180  KSC's [  ].  Indeed, at CSI's regular Board meeting on
[[
                                            ]].181
92. KSC's Board representatives at CSI also [  ].  Again, at CSI's regular Board meeting on [[
                                                          ]].182
                                                     
172 KSC Verification Report (Exh. JP-42 (y))  (Exh. US/B-21) .
173 LTFV Final Determination , 64 Fed. Reg. at 24368 (Exh. JP-12) ; KSC Final Analysis Memorandum
at 3-4 (Exh. US/B-22) .
174 First Submission of Japan at para. 68.
175 CSI Shareholders’ Agreement (Exh. JP-42(aa)) .
176 Id.
177 Id.
178 Id.
179 Id.
180 Under [  ].  Id.
181 CSI Board Minutes  (Exh. US/B-23) .
182 Id.WT/DS184/R
Page A-143
93. In addition to the foregoing, Article [  ].183  Nevertheless, KSC never attempted to enforce [  ].
Indeed, there is no evidence on the record that KSC ev en invoked [  ].  But even if it could be argued
that KSC invoked [  ] by simply requesting inform ation from CSI, it acquiesced in CSI's failure to
provide the requested information and did not make any attempt to enforce [  ].
94. Furthermore, despite the [  ] history of cooperation and partnership between KSC and
CVRD184, KSC itself acknowledged to Commerce during the investigation here that it never even
discussed the anti-dumping investigation or the lack of cooperation it was receiving from CSI officials
with CVRD.185
95. KSC's sole claim with respect to the issue of wh ether it acted to the best of its ability is that
CSI's President and CEO Gonçalves and, "by extension," CVRD failed to cooperate in KSC's attempts
to obtain the information requested by Commerce.  However, KSC's assertions do not and cannotshow that requesting cooperation from Mr. Gonçalves was equivalent to requesting cooperation from
CVRD.  In fact, the provisions of the Shareholders' Agreement and the record evidence here show
otherwise.  Moreover, this claim is directly re futed by KSC's own admission to Commerce during the
investigation that it had failed to discuss this matter with CVRD.  Thus, despite KSC's attempts to
show otherwise, it inexplicably failed to ask for assistance even from CVRD in solving a problemwith a company they jointly own and control.
96. There is nothing on the record indicating that KSC would have encountered any opposition
from CVRD if KSC had directly requested CVRD's assistance in obtaining the information requested
by Commerce regarding KSC's sales through CSI.  Nevertheless, even if KSC had explicitly requestedsuch cooperation and been refused, KSC had at its disposal [  ].  In the event of a deadlock between
KSC and CVRD, [  ] to resolve the dispute.
186  [  ].187
97. In sum, KSC made no attempt either to exercise any of the contractual rights and powers
available to it under the Shareholders' Agreement or to work with its joint venture partner, CVRD, toobtain the information requested by the Commer ce Department.  As the Department summarized:
While the Department has considered that the record supports KSC’s claim that it did
make some effort to obtain the data and that CSI’s management rebuffed these
efforts, the record also shows that KSC essentially acquiesced in CSI’s decision notto provide this data.  Given KSC’s relationship with this 50/50 joint venture, as
detailed in the Home Market Sales Verification Report , dated March 26, 1999, this
did not constitute making its best efforts to obtain the data.
188
98. Based upon a proper establishment of all of the facts and an unbiased and objectiveassessment of those facts, Commerce reasonably determined that KSC failed to cooperate to the best
of its ability to produce the necessary information for Commerce to calculate CEP for KSC's sales
through CSI.  Accordingly, as set forth below, the Department's use of an adverse inference inselecting facts available for those sales is fully consistent with the Anti-Dumping Agreement.
                                                     
183 CSI Shareholders' Agreement (Exh. JP-42(aa)) .
184 See id.
185 KSC Verification Report at 22 (Exh. JP-42(y))  (Exh. US/B-21) .
186 CSI Shareholders’ Agreement  (Exh. JP-42(aa)) .
187 See id.
188 LTFV Final Determination , 64 Fed. Reg. at 24368 (Exh. JP-12) .  See also  KSC Verification Report
at 20-23 (Exh. JP-42(y)) (Exh. US/B-21) .WT/DS184/R
Page A-144
B. COMMERCE 'S DETERMINATION THAT PARTIAL ADVERSE FACTS AVAILABLE WERE
WARRANTED FOR KSC 'S SALES THROUGH CSI IS CONSISTENT WITH ARTICLE 6.8 AND ANNEX II
OF THE AGREEMENT
99. Given the facts when fully set forth, Commerce acted consistently with the Anti-dumping
Agreement both in applying facts available to KSC’s sales through CSI and in employing an adverse
inference in selecting facts available for those sales.
100. As detailed in the section above defending Commerce’s facts available practice generally,
Article 6.8 of the Agreement permits the application of facts available for a party's failure or refusal to
provide necessary information in an anti-dumping in vestigation. Annex II of the Agreement then sets
out the criteria which investigating authorities mu st meet before drawing an adverse inference and
applying less favourable information to parties which do not provide necessary information.  As we
have explained, taken together, Article 6.8 and Annex II of the Agreement allow investigatingauthorities to draw an adverse inference and apply less favourable information to a party that fails to
act to the best of its ability to provide requeste d information.  These provisions of the Agreement
provide investigating authorities with a logical method for calculating anti-dumping margins when
information is missing because parties either refuse access to it or otherwise do not timely provide it.
In such situations, authorities cannot calculate margins out of thin air; instead, they are authorized byArticle 6.8 to use facts available and, if necessary, to draw an adverse inference.
101. When all of the facts of record are examined here, as set forth above, it is clear that KSC
failed to act to the best of its ability by taking the steps readily available to it to obtain and report the
requested information regarding its CEP sales through CSI.  Thus, Commerce’s determination toapply facts available was consistent with Article 6 .8 of the Agreement, and its drawing of an adverse
inference through the use of “less favourable” in formation was consistent with Annex II of the
Agreement.
C. 
JAPAN 'S ARGUMENTS LACK ANY SUPPORT IN THE APPLICABLE PROVISIONS OF THE ANTI -
DUMPING AGREEMENT OR IN THE FACTS AND SHOULD BE REJECTED BY THE PANEL
102. Japan’s arguments attacking Commerce's application of facts available to KSC are based on a
misreading or mischaracterization of the applicable provisions of the Agreement and, once again,
ignore critical information.  Accordingly, these arguments must fail.
1. Commerce did not violate any duty to provide assistance to KSC
103. Japan makes the incredible claim that Commerce should have held KSC’s hand by advising it
of methods to obtain information from its own affiliate.  In support of this argument, Japan has cited
Article 6.13 of the Agreement, but it has conveniently omitted that provision's specific reference to
“small companies".189  Article 6.13, in its entirety, provides: “The authorities shall take due account of
any difficulties experienced by interested parties, in particular small companies , in supplying
information requested and shall provide any assistance practicable.”  (emphasis added)  Of course, incleverly deleting the reference to small companies in Article 6.13, Japan is suggesting that the
provision is not necessarily limited, in its application, to such companies.  While facially correct,
Japan’s reading of the text totally disregards the provision’s primary aim: that it be given particular
force and effect with regard to sm all companies.  This is logical, since small companies are normally
the parties needing assistance from investigating au thorities in highly complex and technical anti-
dumping proceedings.
                                                     
189 First Submission of Japan at para. 75, quotes Article 6.13 as follows: “The authorities shall take due
account of any difficulties experienced by interested parties . . . in supplying information requested and shall
provide any assistance practicable".WT/DS184/R
Page A-145
104. KSC certainly is not a small company.  Its sales revenue for fiscal year 1998 was more than
$9 billion. Thus, Japan’s suggestion that one of its largest corporations and one of the biggest steel
producers in the world -- represented and advised by highly sophisticated and experienced US trade
counsel -- needed the help of the US Commerce Depa rtment in divining how to manage its internal
commercial relations with its half-owned affiliate and its Brazilian joint venture partner is astonishing.
105. Furthermore, Commerce had no responsibility or obligation to advise KSC to take the
obvious steps that were available to it to obtain th e information requested for its CSI sales, including
contacting CVRD, its joint venture partner of more than [  ] years.  There was no uncertainty as to the
information requested; Commerce had met its obligation to make that clear.  Yet Japan seems to
expect that Commerce officials should have acted, in  effect, as KSC’s own lawyers, by advising them
of all legal means, however obvious, of attemptin g to obtain the requested information.  Any such
interpretation of Article 6.13 of the Agreement is absurd and, therefore, should be eschewed by the
Panel.
106. In any event, KSC never asked for Commerce's assistance in the investigation in any respect.
Specifically, KSC never asked Commerce what steps it should take to obtain the informationregarding its sales through CSI and never asked Commerce whether it could report the requested
information in another form or suggested such othe r form.  Indeed, rather than asking for Commerce's
assistance, KSC asked to be excused altogether from reporting the requested information.
190
107. In sum, Japan’s argument that Commerce acted inconsistently with Article 6.13 of theAgreement is belied by the facts and unsupported by any but the most strained and illogical reading of
that provision.  It should, therefore, be rejected by the Panel.
2. Commerce appropriately applied an adverse inference because KSC "withheld" the
requested information
108. Japan’s contention that KSC did not “withhold” any information from Commerce and that an
adverse inference should not, therefore, have been applied against it under Annex II of the Agreement
is likewise belied by the facts.  As Commerce found, KSC withheld the information requested
regarding its sales through CSI because it did not take steps readily available to it to obtain and
provide that information.  In this regard, Japan’s contention that “KSC did not have any controllegally or in fact over the information without the voluntary cooperation of its contractual partner
CVRD” is unsupported by the evidence, when fully disclosed, as discussed above.  Specifically, there
is no record evidence that there was any lack of cooperation on the part of CVRD with respect to
obtaining the requested CSI data.  In fact, KS C never even discussed the matter with CVRD.
Moreover, KSC did not use the rights and powers granted to it by the Shareholders’ Agreement to
obtain and report the information that had been requested.  In sum, the facts on the record here show
that KSC withheld information from Commerce that was within its power to produce, and Commercetherefore properly applied an adverse inference under Annex II of the Agreement.  Japan's argument
to the contrary should be rejected.
3. Commerce exercised circumspection, taking all circumstances into account, in its choice
of facts available
109. Japan further argues that "USDOC failed to ex ercise ‘special circumspection’ when it chose
which secondary sources   to use as facts available".
191  As demonstrated below, however, the
                                                     
190 See, e.g.,  Letter from Howrey & Simon to the Honourable William M. Daley (November 10, 1998)
(Exh. JP-42(i)) .
191 First Submission of Japan at 26 para. 80 (emphasis added).WT/DS184/R
Page A-146
requirement in the Agreement to apply "special circumspection" in making determinations based on
information from "secondary sources" did not even apply here because Commerce relied on KSC's
own reported data in selecting the facts availabl e to apply for KSC's sales through CSI.  And even
assuming that this requirement did apply, Commerce certainly exercised appropriate circumspection
in its selection of facts available to apply to KSC.
110. Annex II, paragraph 7, of the Agreement requires investigating authorities to use "special
circumspection" in selecting facts available only wh en they base their determinations on information
from "a secondary source, including the information supplied in the request for the initiation of the
investigation."  In selecting facts available to apply to KSC for its sales through CSI, Commerce did
not base its determination on information from "a secondary source."  Rather, as facts available,
Commerce applied the margin it calculated for other US sales within the mainstream of KSC's
transactions using the company's own verified data.192  Because Commerce did not use information
from "a secondary source" in making its determination here, the requirement of "special
circumspection" was not even applicable.
111. Nevertheless, even assuming that the requirement of "special circumspection" did apply,
Commerce plainly satisfied this requirement.
112. Specifically, as facts available for the sales through CSI, Commerce chose the second-highest
product-specific margin for KSC's reported, verified sales, drawn from KSC's reported sales to
unaffiliated buyers in the United States, which represented [[  ]] per cent of all of KSC’s sales.  In its
preliminary determination, Commerce had chosen the highest product-specific margin for KSC.However, in the final determination, Commerce rejected this as not within KSC’s mainstream sales
and opted instead for what Commerce considered to be a more reasonable choice of the highest
margin for a product for which there were sales in substantial commercial quantities.
193  In deciding
what rate to substitute for the missing CSI information, Commerce fully explained its rationale:
For the final determination, the Department has used as adverse facts
available the second highest calculated margin for an individual CONNUM {control
number for a specific product}. ... In selecting the facts available margin for the final
determination, we sought a margin that is sufficiently adverse so as to effectuate the
statutory purposes of the adverse facts available rule to induce respondents to providethe Department with complete and accurate information in a timely manner.  We also
sought a margin that is indicative of KSC’s customary selling practices and is
rationally related to the transactions to which the adverse facts available are being
applied.  To that end, we selected a marg in for a CONNUM that involved substantial
                                                     
192 See LTFV Final Determination , 64 Fed. Reg. at 24369 (Exh. JP-12).
193 In the Preliminary Determination, Commerce chose the highest margin from among KSC's reported
US sales.  However, in the Final Determination , Commerce determined that the product for which this marginwas calculated was not fully representative of KSC’s US sales.  Commerce explained this change as follows:
Although no party commented on the rate chosen as facts available in the preliminary determination,
we have reexamined our choice for this final determination.  In the preliminary determination, we used as thefacts available margin the highest margin by CONNUM {control number for a specific product}.  However,upon re-examining that decision, we find that the margin chosen was not sufficiently within the mainstream of
KSC’s sales in that the rate was derived from sales of a product that accounted for a very small portion of KSC’s
total sales as well as the highest rate by CONNUM.
LTFV Final Determination , 64 Fed. Reg. at 24369 (Exh. JP-12) .  Japan contends that Commerce’s
choice of the facts available margin was aberrant.  First Submission of Japan at para. 69.  To the contrary, asstated in the Final Determination, it was based upon a product within the mainstream of KSC’s sales.  Thus,
Japan’s citation to Usinor Sacilor v. United States , 872 F. Supp. 1000 (Ct. Int’l Trade 1994) is inapposite.  Id.WT/DS184/R
Page A-147
commercial quantities and thus fell within the mainstream of KSC’s transactions
based on quantity.  Finally, we found nothing on the record to indicate that the sales
that we selected were not transacted in a normal manner.194
113. Commerce’s selection of KSC’s second-highest product-specific margin as adverse factsavailable is consistent with Annex II of the Agreement.  The margin selection is based upon KSC’s
own verified data and upon sales well within the mainstream of KSC’s transactions during the periodof investigation.  Moreover, the adverse inference dr awn is directly proportionate to the magnitude of
the failure to provide a complete response, i.e., the smaller the quantity of unreported sales, the
smaller the impact and vice versa.  In short, the outcome appropriately reflects the level ofcooperation; it is not punitive but merely provides reasonable assurances that KSC did not benefit by
failing to provide the information requested.  Thus, any further step to reflect KSC’s limited
cooperation, i.e. , the selection of a lower margin, is unnecessary and could result in KSC receiving a
benefit from its failure to cooperate.  Such a result would be inconsistent with the admonition to
non-cooperating parties in paragraph 7 of Annex II that their failure to cooperate may result in a
margin which is less favourable than if they did cooperate.
114. Japan’s argument that Commerce failed to take into account the fact that the party
withholding the information – CSI – actually bene fitted from the application of facts available195 is
likewise incorrect.  As an affiliated importer and reseller of a substantial amount of KSC hot-rolled
steel, it was in CSI's best interests for KSC's marg in to be as low as possible so that CSI could
continue to purchase such merchandise from KSC without incurring the costs imposed by high
anti-dumping duties.  Additionally, any benefit from high anti-dumping duties being imposed on
hot-rolled steel from Japan that may have been experienced by CSI as a US producer of non-subjectmerchandise would also work to KSC's benefit as a 50 per cent shareholder in CSI.  Commerce fully
considered these interests and properly concluded that sorting them out was not a fruitful exercise:
We cannot reasonably predict or weigh the magnitude of effects this might or might
not have on the parties involved.  In this case, we can only ensure that KSC and CSIdo not obtain a more favourable dumping margin on subject merchandise.  As an
affiliated importer and/or seller of KSC’s subject merchandise, CSI will be affected
by any margin assigned to KSC’s exports of this merchandise.  Neither KSC nor CSI
will be rewarded with more favourable dumping margins.  Any benefit accruing to
CSI from its non-cooperation will flow not from its role as an affiliate-respondent,but from its role as a US producer of non-subject merchandise.  Furthermore, KSC, as
a 50 per cent shareholder in CSI, will share in any such benefit.  In addition, we note
that it is not the use of the adverse inference which allows KSC’s US affiliate to
restrict the scope of data on the record – it is CSI’s decision to withhold that data and
KSC’s decision to acquiesce in this posture.  Neither KSC nor CSI should be relieved
of the obligation to report data on sales through CSI in this or future proceedings.
Thus, while KSC’s business relationships may involve certain internal conflicts ofinterest, the use of an adverse inference in determining the dumping margins on CSI
sales does not contradict the Department’s policies.
196
115. CSI's status as a petitioner in the investigation, while unusual, did not require Commerce to
reach a different result here.  KSC's representatives on the CSI Board of Directors [  ].197  KSC [  ].
The only conclusion that may be drawn from these facts is that KSC, in effect, acquiesced in CSI's
participation as a petitioner.   Moreover, CSI's status as a petitioner did not relieve KSC from its
                                                     
194 LTFV Final Determination , 64 Fed. Reg. at 24369 (Exh JP-12) .
195 First Submission of Japan at para. 80.
196 LTFV Final Determination , 64 Fed. Reg. at 24368 (Exh. JP-12) .
197 See CSI Shareholders' Agreement (Exh. JP-42(aa)) .WT/DS184/R
Page A-148
responsibility to take all of the steps available to it to act to the best of its ability to provide the data
necessary to calculate a dumping margin.  Indeed, as Commerce explained in its final determination:
Allowing a producer and its US affiliate to decline to provide US cost and
sales data on a large portion of their US sales would create considerable opportunities
for such parties to mask future sales at le ss than fair value through the US affiliate.
The fact that the affiliate is a petitioner does not allay such concerns.  Thus, this fact
does not constitute an exception to the principle that the Department may make an
adverse inference with respect to sales for which data is not provided unless the
foreign exporter and its US affiliate have acted to the best of their ability to provide
such data.198
116. Lastly, Japan overlooks the fact that, in this case, Commerce’s application of facts availablewas partial.  This is not a case in which the Department applied  facts available to all of KSC’s sales --
i.e., it did not apply “total” facts available.  Instead, it recognized KSC’s cooperation on [[               ]]
of its sales and applied actual, calculated margins to those sales based on the verified data reported by
KSC.  It is only with regard to the CSI sales that the adverse inference has been applied.
117. In sum, Commerce permissibly interpreted Annex II of the Agreement and acted with "special
circumspection" when it chose the second-highest of the margins calculated for KSC’s reported,
verified sales to apply to its sales through CSI.  As a result, KSC’s overall anti-dumping margin was
likely less favourable to it than if it had cooperated with Commerce in the investigation.  Such a result
is not only permissible, but intended, under the facts available provisions of the Agreement;otherwise, firms could refuse to report sales with their highest margins with impunity, as long as they
were “cooperative” as to their lower-margin sales.
4. Commerce's Application of facts available to KSC was completely consistent with
Article 2.3 of the Agreement
118. Japan concludes its attack on Commerce’s determination with respect to KSC by arguing that
the use of partial adverse facts available for KSC's sales through CSI was an "unreasonable surrogate
for export price {that} constitutes a measure inconsistent with Article 2.3 of the Agreement governing
the calculation of export price".
199  This argument is based on an incorrect and impermissible
interpretation of Article 2.3 of the Agreement and should be rejected by the Panel.
119. Japan contends that, instead of applying the second highest margin for KSC’s reported sales
as facts available for KSC’s sales through CSI, Commerce should instead have used some other
methodology to determine a margin for the CSI sales.200  Specifically, Japan claims that Commerce
acted in a manner inconsistent with Article 2.3 of the Anti-Dumping Agreement because it failed to
calculate export price for the sales through CSI on a "reasonable basis".201  Article 2.3 governs the
construction of export prices for sales through US affiliates like CSI and provides as follows:
In cases where there is no export price or where it appears to the authorities
concerned that the export price is unreliable because of association or a compensatory
arrangement between the exporter and the importer or a third party, the export price
may be constructed on the basis of the price at which the imported products are firstresold to an independent buyer, or if the products are not resold to an independent
                                                     
198 LTFV Final Determination , 64 Fed. Reg. at 24368 (Exh. JP-12) .
199 First Submission of Japan at 26-27.
200 Id.
201 Id.WT/DS184/R
Page A-149
buyer, or not resold in the condition as imported, on such reasonable basis as the
authorities may determine.
120. It is clear from the face of Article 2.3 that, if the investigating authority considers the export
price to be unreliable because of association, or affiliation, between the exporter and the importer – as
with KSC and its half-owned affiliate, CSI – then the authority may construct the export price on the
basis of the resale price to the first unrelated customer, or, if the product is not resold in the condition
as imported – as is the case here because of CSI’s further manufacturing of the imported product –
then on such reasonable basis as the authority may determine.
121. Commerce adhered to the requirements of Article 2.3 for KSC's sales through CSI.  In order
for Commerce to have constructed the export price and have calculated an accurate dumping margin
for KSC's sales through CSI pursuant to Article 2.3, it was essential for Commerce to have obtainedCSI's price to the first unaffiliated customer for such sales as well as the further manufacturing cost
information on those sales as requested in Section E of its Anti-Dumping Duty Questionnaire.
Nevertheless, KSC failed to provide any of the necessary sales data or further manufacturing cost data
for the sales in question.  By applying a product-specific dumping margin calculated for other US
sales to the sales through CSI, Commerce used facts available that allowed it to make the necessarycalculations under the applicable provisions of the Anti-Dumping Agreement.
202
122. Commerce even considered, at the urging of KS C, whether to exclude CSI’s sales pursuant to
its “special rule” for further manufacturing.  This rule allows the Department to base the margin for
products further manufactured by an affiliate before sale in the United States on other sales of subjectmerchandise by the same exporter when “the value added by the affiliated person is likely to exceed
substantially the value of the subject merchandise {when sold to the unaffiliated party}".
203
Commerce found that the value added by CSI's further manufacturing processes did not meet thethreshold for the application of the "special rule".
204  Japan does not contest that finding.
123. Japan urges that “a logical step would have been for USDOC to request KSC’s own prices to
CSI and then test the data to see whether they were reliable or not".205  In so doing, Japan once again
ignores the facts on the record.  Commerce did request, and KSC refused to report, the transfer prices
between KSC and CSI.206  Instead, KSC provided an average transfer price between KSC and CSI.207
This would be insufficient as a basis for comparison to KSC’s sales to its non-affiliated customers
because it was calculated on an aggregate basis, rather than on a sale-by-sale basis, and would not
provide an accurate comparison.  Thus, any argument that the transfer prices between KSC and CSI
could be the basis for US price on the CSI sales -- an approach which Commerce rejects -- is moot
because KSC failed to report the transfer prices.
                                                     
202 Japan cites Atlantic Salmon  in support of the proposition that the right to apply facts available must
be interpreted in conjunction with the relevant substantive provisions of the Anti-dumping Agreement.  FirstSubmission of Japan at para. 85.  Commerce's application of  facts available satisfies that standard here.  As set
forth above, Commerce's application of facts available for KSC's sales through CSI allowed it to make the
necessary calculations under the applicable substantive provisions of the Agreement for those CEP sales.  Thus,this application of facts available was fully justified and was consistent with the Agreement, and the decision inAtlantic Salmon  does not require a different result.
203 19 U.S.C. § 1677a(e)(1).
204 LTFV Final Determination  at 24367 (Exh. JP-12) .
205 First Submission of Japan at para. 84.
206 See KSC Supplemental Section A Questionnaire at 2 (4 December 1998) (Exh. JP-42(k)) ; KSC
Supplemental Section A Response at 6-7 (19 January 1999) (Exh. US/B-24) .  Cf.  Huey Affidavit at para. 27
(Exh. JP-44) , claiming that the Department did not perform any type of price comparison on the CSI sales, but
omitting the fact that KSC did not provide the sales information to do such a comparison.
207 See KSC Supplemental Section A Response at 6-7 (19 January 1999) (Exh. US/B-24) .WT/DS184/R
Page A-150
124. Japan further argues that by applying the second-highest product-specific margin calculated
for reported sales as the margin for the CSI sale s, Commerce "disregarded the existence of perfectly
acceptable normal values . . . to which they could compare a surrogate export price . . ." calculated for
the CSI sales.208  This argument completely ignores the fact that Commerce could not have compared
even surrogate export prices for the CSI sales to  normal values calculated for home market sales
because Commerce was never provided with the product characteristics, or any other data for thatmatter, for the merchandise imported by, and sold through, CSI.  Without the product characteristics
and the other details for the merchandise sold through CSI, there is no basis to compare those sales
with home market sales for purposes of the margin calculation.
125. Japan essentially treats the "reasonable basis" language of Article 2.3 of the Anti-Dumping
Agreement like an independent facts available provision.  However, if that were so, the drafters of the
Agreement would not have bothered to specify rules for application of facts available in Article 6.8and Annex II, including the “less favourable” language  allowing an investigating authority to apply an
adverse inference when a party has not cooperated to the best of its ability, in order to induce its
cooperation.  Thus, for all of the foregoing reasons, Japan's interpretation of Article 2.3 is completely
erroneous.
126. In fact, if Japan's interpretation of Article 2.3 were to be adopted, this would invite
manipulation.  The exporter could shield all of its CEP sales from the reach of the anti-dumping law
and price those sales at whatever level it desired.  Such could not have been the intent of the drafters
of the Anti-Dumping Agreement.
127. In sum, Commerce’s determination to apply partial adverse facts available to KSC for failing
to act to the best of its ability to provide nece ssary information regarding its sales through its US
affiliate, CSI, was consistent with Article 2.3, Article 6.8, and Annex II of the Anti-dumping
Agreement.  Japan’s further argument that Commerce’s determination was inconsistent with
Article 9.3 of the Agreement because the margin for KSC was excessive
209 is likewise in error,
because Commerce correctly calculated KSC's margin in accordance with the applicable substantive
provisions of the Agreement.  For all of these reasons, the Panel should uphold Commerce’s
application of partial adverse facts available to KSC.
III. THE DEPARTMENT'S PARTIAL ADVERSE FACTS AVAILABLE
DETERMINATIONS WITH REGARD TO NSC AND NKK WERE CONSISTENT
WITH THE STANDARDS OF THE WTO AGREEMENT
128. The Department’s application of the facts available to NSC’s and NKK’s theoretical weight210
sales for which they did not provide a theoretical-to-actual weight conversion factor within a
                                                     
208 First Submission of Japan at para. 86.
209 First Submission of Japan at paras. 88-89.  Japan also contends that the Department violated
Article 9 of the Agreement and Article VI:2 of GATT 1994 by applying facts available to create an
unreasonable and punitive margin for KSC’s downstream sales, relying upon United States-Antidumping Act of
1916 , 31 Mar. 2000, WT/DS136/R, at para. 6.189.  First Su bmission of Japan at para. 78. In fact, that panel
decision interprets Article VI:2 to  mean that, when faced with dumping from another country, Members must
apply some form of antidumping duty rather than some other punitive measure.  The Department’s decision to
apply facts available to determine a dumping margin for KSC’s downstream sales was fully consistent with this
interpretation.  The Department did not take punitive measures against KSC; it simply applied the facts availableto calculate a dumping margin in the face of an uncooperative respondent, as it was permitted to do byArticle 6.8 and Annex II of the Anti-Dumping Agreement.
210 The “theoretical weight” of a steel coil is an estimated weight, based upon the dimensions of the
product.   In determining the price per metric ton of steel coil sold on a theoretical weight basis, the price of the
coil is divided by the estimated weight for a coil of certain dimensions, which may vary from the actual weightWT/DS184/R
Page A-151
reasonable period of time was based upon a permissible interpretation of the Agreement.  Export sales
and home market sales must be compared on a common basis.  Because both NSC and NKK made
export sales that would be compared to home market sales made on a different weight basis, the
Department reasonably required them to provide a weight-conversion factor so that it could make its
margin comparison on a common basis.
129. Article 6.8 and Annex II expressly provide that an authority may resort to the facts available
if information is not supplied within a reasonable time.  In questionnaires and supplemental
questionnaires, the Department, with extensions , eventually gave both NSC and NKK a total of 87
days in which to provide a timely response to its request for conversion factors.  This clearly was a
“reasonable time.”   Yet NSC and NKK did not submit their conversion factors until
22 February 1999, almost four months after the Department’s first request for this data on
30 October 1998 and nearly a month after the 25 January 1999 final due date for a timelysupplementary questionnaire response.
130. Thus the Department’s decision to reject these untimely submissions, and to use adverse facts
available in determining margins for the affected sales given that NSC and NKK could have provided
the factors when originally asked, had they acted to the best of their ability, was consistent with eachand every provision Japan has relied upon with respect to this question.
211  NSC and NKK, which
each twice declined to provide such factors, alle ging that this was unnecessary and/or impossible,
were given ample opportunity both to present this evidence, and to provide its explanations.  When
Commerce rejected their untimely-submitted factors, they were told the reason this information was
not accepted, and allowed to make further legal arguments on this issue before the Departmentreached its Final Determination.  These provisions reflect the understanding of the drafters of the
Agreement that, given the complex international natu re of these investigations, authorities need to
give parties an opportunity to make their presentations, but also need to be able to proceed to their
determinations despite inadequate responses by interested parties.
131. As explained above, the facts available provisions of the Agreement, including the provision
that an adverse inference may be taken when a party does not cooperate in providing the information
at issue, creates an important incentive for an exporter to respond to the Department’s questionnaires
in a complete and timely manner.  The Panel in the DRAMs  case, for example, recognized that the
Agreement should not be interpreted in a manner which would render antidumping cases
unmanageable.
212
132. The principle at issue here is a simple one: the right, under the Agreement, for authorities to
establish reasonable deadlines for submission of information and to use the facts available when a
party does not provide a response to a questionnaire within those reasonable deadlines.  Where, as
here, a respondent first offers the requested data item long after the reasonable deadlines have passed
for its submission, the Agreement does not compel the Department to accept and use the late-provideddata.  Similarly, the Agreement permits authorities to use an adverse inference in selecting from the
facts available when a party has failed to act to the best of its ability to timely supply the requested
information. The Agreement thus leaves it to investigating authorities to set and enforce deadlines for
receiving information in keeping with their judgment as  to when they need it, so long as they provide
interested parties with a reasonable period in which to make their submissions.  The interpretationproposed by Japan with respect to the use and selection of the facts available would render
                                                                                                                                                                    
of that coil.   Thus, the price per ton (the basis of the antidumping margin comparison) may vary, depending on
whether a coil was sold based on actual or theoretical weight.
211 Japan has relied upon Articles 2.4,  6.1, 6.6, 6.8, 6.13, 9.3 and paras. 5 and 7 of Annex II of the
Agreement.
212 US-DRAMS  at para. 6.78.WT/DS184/R
Page A-152
meaningless any Member’s right to establish deadlines.  This is an unacceptable result, and one not
intended by the Agreement.
A. THE DEPARTMENT PERMISSIBLY INTERPRETED THE AGREEMENT TO ALLOW FOR THE USE OF
FACTS AVAILABLE WHEN INFORMATION REQUESTED IN A QUESTIONNAIRE WAS NOT
PROVIDED BY THE ESTABLISHED DEADLINE
133. When Commerce calculates a dumping margin, it compares US and home market sales made
on the same quantitative basis.  For example, it does not compare a per-pound price to a per-kilo price
without first converting them to the same basis.   Thus, the Department’s initial questionnaires
instructed NSC and NKK that if they had made some sales of hot-rolled steel based on theoretical
weight and others based on actual weight, they “must”  provide a conversion factor “used to arrive at a
uniform quantity measure” for purposes of price comparison and report the converted quantity for
affected sales.213
134. Under Article 6.8, authorities may base a determination on “facts available” if an interestedparty “refuses access to, or otherwise does not provide, necessary information within a reasonable
period . . . .”  As detailed in our Statement of Facts, above, both NSC and NKK failed to provide the
requested conversion factors in their initial questionnaire responses.  Commerce again requested thedata in its supplemental questionnaires, and again both respondents failed to provide the conversion
factors in their supplemental responses.  NSC’s and NKK’s belated attempts to submit the data, long
after the due date for questionnaire responses had passed and even after the preliminary
determination, does not constitute providing this information “within a reasonable period.”  Thus,
Commerce was authorized, consistent with Article 6.8, to use the facts available in determining themargin for the affected sales.
214
135. Article 6.8 also states that “[t]he provisions of Annex II shall be observed in the application of
this paragraph.”  Neither Article 6.8 nor Annex II de fine “reasonable period.”  Therefore, “reasonable
period” must be interpreted “in accordance with the ordinary meaning to be given to the terms . . . intheir context” and in light of  the object and purpose of the Agreement.
215
136. Paragraph 1 of Annex II reiterates the basis for the use of facts available found in Article 6.8:
“The authorities should also ensure that the party is aware that if information is not supplied within a
reasonable time , the authorities will be free to make determinations on the basis of the facts available
. . . .” (Emphasis added.)   The purpose of this sentence is to require investigating authorities to notify
respondents of the consequences of a failure to submit requested information within the established
deadlines.  It clearly contemplates the use of facts available by authorities if that information is not
provided within a “reasonable time.”216
137. Paragraph 3 of Annex II discusses when an investigating authority should accept the
information submitted by a respondent: “All information which is verifiable, which is appropriately
                                                     
213 Section B-E Questionnaire at B-19, C-17  (October 30, 1998)  (Exh. JP-45(a)) .
214 Commerce’s use of facts available was made pursuant to its authority under Section 776(a)(2) of the
Act (19 U.S.C. § 1677e(a)(2) (Exh. JP-4(k) ).  Although Japan has challenged the Department ’s general
practice with respect to use of adverse inferences and the consistency of its use of facts available in this casewith the Agreement, it has not specifically challenged the statutory provision pursuant to which Commerce
applied facts available.
215 Article 31(1) of the Vienna Convention on the Law of Treaties.
216 It is undisputed that, consistent with the requirements of Paragraph 1 of Annex II, NSC and NKK
were warned that failure to provide the information re quested could result in the use of facts available.  See
NSC Supplementary Questionnaire at second page (unnumbered) of cover letter (4 January 1999) (Exh.
US/B-13) ; NKK Supplementary Questionnaire at second page  (unnumbered) of cover letter (4 January 1999)
(Exh. US/B-14) .WT/DS184/R
Page A-153
submitted so that it can be used in the investigation without undue difficulties and which is supplied
in a timely fashion , . . . should be taken into account when determinations are made.” (Emphasis
added.)  The meaning of this sentence is clear on its face.  If the information supplied meets all of the
listed criteria, then an investigating authority should accept it.  However, there is no obligation to
accept the data unless it was,  inter alia , timely.  Because the drafters listed separate and distinct
criteria, all of which were required to be satisfied before authorities should accept the proffered data,it is clear that the fact that submitted information could be used “without undue difficulty” was not
sufficient to compel the acceptance later in the proceeding of information that was not also “timely.”
138. Thus, the term “reasonable period” in Article 6.8, interpreted in accordance with Annex II,
contemplates a timely submission.  A respondent that does not meet the reasonable deadlines imposed
by the authorities may face rejection of any data that are submitted late.  If that information is rejected
on a permissible ground ( e.g., untimeliness), then the authority may resort to facts available.
139. Because Article 6.8 requires that a party submit data within a “reasonable period,” authorities
should impose “reasonable” deadlines.   As demonstrated below, the Department’s deadlines were
more than reasonable.
B. 
THE DEPARTMENT PROVIDED "AMPLE OPPORTUNITY " FOR NSC AND NKK TO FURNISH THE
WEIGHT -CONVERSION FACTORS REQUESTED IN THE QUESTIONNAIRES
140. The Department’s use of facts available for the sales affected by the weight-conversion
factors also complies with the requirement of Article 6.1 that parties must be given “ample
opportunity to present in writing all evidence they consider relevant in respect of the investigation inquestion".
217  NSC and NKK had ample opportunity to provide the conversion factors, which the
Department requested both in the initial questionnaires and in supplemental questionnaires.  NSC and
NKK did not provide the conversion factors by the due  dates contained in either of the questionnaires,
and thus did not provide the factors within a “reasonable period.”
141. The general requirement that parties have an ample opportunity to present evidence in
Article 6.1 is clarified in Article 6.1.1, which provides that exporters or foreign producers must be
given at least thirty days for reply to a questionnaire.  Because Article 6.1.1 sets forth a specific
requirement, it limits the more general language of paragraph 6.1.  Thus, a respondent that has been
given at least 30 days to respond to a questionnaire, has normally been given “ample opportunity” topresent evidence with respect to the issues raised in that questionnaire.
142. NSC and NKK were given more than ample opportunity to respond to the Department’s
request for conversion factors.  Both companies were given 52 days to respond to the original
questionnaire.  The questionnaire was issued on 30 October 1998, and NSC’s and NKK’s responses
were ultimately provided on 21 December 1998, after the Department granted NSC and NKK’s
requests for a two-week extension beyond the original deadline.218  After the Department had
analyzed the initial questionnaire response, NSC and NKK were again asked for the same data in a
supplemental questionnaire.  Both companies were given 21 additional days to respond to the
supplemental questionnaire.  That questionnaire was issued 4 January 1999; NSC and NKK ultimately
provided their responses on 25 January 1999, after the Department granted NSC and NKK a
                                                     
217 See First Submission of Japan at paras. 116-119.
218 See Letter from Programme Manager to law firm of Gibson, Dunn & Crutcher (19 November 1998)
(granting extension to NSC)  (Exh. US/B-9) , and Letter from Programme Manager to law firm of Willkie Farr &
Gallagher December 1, 1998) (granting extension to NKK) (Exh. US/B-10) .WT/DS184/R
Page A-154
one-week extension beyond the original deadline.219  Between the Department’s first request for the
conversion factors in October of 1998 and the due date for the supplemental questionnaire, 87 days
had elapsed.  Thus, Commerce more than met the 30-day minimum amount of time stipulated for
questionnaire responses in Article 6.1.1.
C. THE DEPARTMENT 'S SUPPLEMENTATION QUESTIONNAIRES AFFORDED NSC AND NKK
ADDITIONAL OPPORTUNITY TO FURTHER EXPLAIN , AND EVEN SUPPLEMENT , THEIR PRIOR
RESPONSES CONSISTENT WITH PARAGRAPH 6 OF ANNEX II
143. Annex II, at paragraphs 1 and 3, makes it clear that authorities need only consider information
“supplied in a timely fashion”.  If information “is not supplied within a reasonable time, the
authorities will be free to make determinations on the basis of the facts available.”  Paragraph 6 of
Annex II echoes this concern for timely responses in the provision that “due account” must be taken
of the time limits of the investigation.
144. Despite the fact that NSC and NKK did not provide the necessary conversion factors by the
deadline for the original questionnaire, Commerce, in its supplemental questionnaire, afforded them a
second chance to submit these conversion factors.  By this second request for data, the Department
more than complied with its obligations under paragraph 6 of Annex II.
145. Paragraph 6 of Annex II, requires that “[i]f evidence or information is not accepted, the
supplying party should be informed forthwith of the reasons thereof and have an opportunity to
provide further explanations within a reasonable period, due account being taken of the time-limits of
the investigation.”  Paragraph 6 further requires th at “[i]f the explanations are considered by the
authorities as not being satisfactory, the reasons fo r the rejection of such evidence or information
should be given in any published determinations.”
146. Paragraph 6 of Annex II requires that an investigating authority inform a respondent of the
reasons evidence or information is not accepted and give a respondent an opportunity to providefurther explanation within a reasonable period.  The same provision also calls for the agency to
provide, in its published determination, the reasons for the rejection of evidence or information it has
not accepted.  Commerce met all of these requiremen ts.  In particular, the Department’s supplemental
questionnaires put NSC and NKK on notice that their initial responses were inadequate because they
neither provided the requested factor nor supported their claim that the factor was unnecessary, andgave both firms an opportunity to provide the necessary factor within a reasonable period.
220
Paragraph 6 requires “an” opportunity to provide further explanation, not endless opportunities to doso.
147. With respect to NSC, which initially attempted to avoid the conversion factor issue by stating
(incorrectly) that no such factor was necessary because “NSC quantity types are consistent within the
product type"
221,  the supplemental questionnaire afforded an opportunity to examine the data on these
sales more closely, and to correct its error by providing new evidence (the requested factor).  Instead,
NSC responded with another erroneous claim, that it had no way of calculating the requested factor.222
Paragraph 6 of Annex II does not require the Department to recognize sequential errors and provideunlimited opportunities for new submissions.
                                                     
219 See Letter from Programme Manager to law firm of Willkie Farr & Gallagher (7 January 1999)
(granting extension to NKK) (Exh. US/B-25) , and Letter from Programme Manager to law firm of Gibson Dunn
& Crutcher  (15 January 1999) (granting extension to NSC)  (Exh. US/B-26) .
220 See NSC Supplementary Questionnaire at 2, (4 January 1999) (excerpts at Exh. US/B-13) ; NKK
Supplementary Questionnaire at 5 (January 4, 1999)  (excerpts at Exh. US/B-14) .
221 NSC Initial Questionnaire Response at B-22  (21 December 1999) (excerpts at Exh. JP-29(a)) .
222 NSC Supplementary Questionnaire Response at B-24-25 (25 January 1999) ( Exh. US/B-12 ).WT/DS184/R
Page A-155
148. NKK likewise responded to the initial questionnaire by stating (incorrectly) that no
conversion factor was necessary because none of its home market theoretical weight sales would be
matched to actual weight US sales, but also added the claim that “it is not possible to convert a
theoretical weight into an actual weight".223  Commerce’s supplemental questionnaire not only gave
NKK the chance to further explain the claims it had made in the initial questionnaire response, butalso to correct its erroneous answer and to provide new evidence (the requested factor).  Commerce
thus complied with the terms of paragraph 6 of Annex II.   NKK chose to ignore this opportunity, and
instead reiterated its position that a conversion factor was both unnecessary and impossible to
calculate.
149. Paragraph 6  of Annex II does not require authorities to provide further opportunities to
submit completely new information after respondents have twice failed to meet response deadlinesand have asserted that the information requested cannot be provided.  This is clear from the distinction
in that paragraph that “explanations” (rather than further “evidence”) may be provided when
“evidence” or “information” is not accepted.  Thus, although an authority should inform a respondent
when evidence initially timely provided does not meet the necessary requirements, and should allow
the respondent an opportunity to explain  why that information should be accepted, paragraph 6 of
Annex II does not require authorities to provide endless opportunities to submit evidence requested in
a questionnaire at whatever point after the reasonable questionnaire response deadline the respondent
may select.  Thus, Commerce more than complied with its obligations under the Agreement when it
issued supplemental questionnaires to NKK and to NSC, allowing them another chance to provide
conversion factors.
D. 
COMMERCE PERMISSIBLY REJECTED THE BELATED CONVERSION FACTORS AND USED
ADVERSE FACTS AVAILABLE BECAUSE NSC AND NKK FAILED TO ACT TO THE BEST OF THEIR
ABILITY AS CONTEMPLATED BY PARAGRAPHS 5 AND 7 OF ANNEX II , AND BY ARTICLES 2.4
AND 9.3 OF THE AGREEMENT
150. The Department’s use of facts available, including its use of an adverse inference, for the
sales affected by the weight conversion factor was fully consistent with paragraphs 5 and 7 of
Annex II, as well as with Articles 2.4 and 9.3 of the Agreement.  Because NSC and NKK could have
provided the information in a timely manner but did not do so, they failed to act the best of their
ability and did not cooperate with the Department with respect to this information request.  As aconsequence, the Department was justified in rejecting the untimely data, and applying an adverse
inference in its choice of facts available.
151. Paragraph 5 of Annex II states that “even though information provided may not be ideal in all
respects, this should not justify the authorities from  disregarding it, provided the interested party has
acted to the best of its ability.”   That NSC and NKK did not act to the best of their ability in not
providing the conversion factors in response to  the original and supplemental questionnaires is
demonstrated by the fact that both companies were able to proffer such factors immediately after the
issuance of the preliminary determination.  Paragraph 5 does not require the acceptance of all
submissions, at any time.  Instead it calls for agencies not to require “ideal” information when
respondents are unable to provide “ideal” information, despite their best attempts to do so. Commerce
did not violate this provision by declining to accept the conversion factor NSC discovered it couldindeed provide, after the preliminary determination and just before verification. Because NSC’s and
NKK’s conversion factors were not rejected because of flaws in their quality (but rather because they
were untimely provided) and because this information could have been timely presented had these
                                                     
223 NKK Initial Questionnaire Response at B-30 (December 21, 1999) (Exh. JP-45(b)) .WT/DS184/R
Page A-156
firms acted to the best of their ability with respec t to this issue, Commerce was not required to accept
the information pursuant to paragraph 5.224
152. Paragraph 7 of Annex II states, “[i]t is clear, however, that if an interested party does not
co-operate and thus relevant information is being w ithheld from the authorities, this situation could
lead to a result which is less favourable to the party than if the party did cooperate.”  NSC and NKKrefused to provide conversion factors, despite repeated requests for the data.  The evidence
demonstrates that both companies had the ability to submit the data in a timely manner, but failed to
do so.  A party that fails to act to the best of its ability with respect to a given issue must be deemed to
be noncooperative with respect to that issue.
225  No other interpretation of paragraph 7 would provide
an investigating authority with an adequate tool  to encourage complete and timely submissions of
data.  An investigating authority must have the abil ity to draw an adverse inference when a party fails
to provide requested information in a timely manner.  Without such a tool, respondent parties wouldhave little incentive either to provide relevant data that might be unfavourable or to submit data within
stated time limits.  The Department’s use of an adverse inference in this case was a permissible use of
this tool.
E. 
JAPAN HAS FAILED TO SHOW THAT COMMERCE 'S USE OF PARTIAL FACTS AVAILABLE WAS
INCONSISTENT WITH ANY PROVISION OF THE AGREEMENT
153. Japan has not demonstrated that the Department’s use of adverse facts available in
determining the margins for NSC’s and NKK’s sales af fected by their refusal to timely provide weight
conversion factors violated any provisions of the Agreement.  With respect to each cited provision of
the Agreement, Japan’s arguments fail to establish that the interpretation upon which theDepartment’s decisions on this issue were based was impermissible.  Indeed, as we demonstrate
below, the interpretations which Japan urges upon the Panel are seriously flawed.
1. The Department fully complied with Article 6.8 and with paragraphs 5 and 7 of
Annex II
154. Just as Japan has failed to establish its newly-raised claim that the Department’s general
practice of making an adverse inference when it finds that a party has not acted to the best of its
ability violates either Article 6.8 or the provisions of Annex II, it has also failed to establish that the
Department violated those provision on the specific facts of this case.
                                                     
224 Commerce also explained its reason for rejecting the factors that were belatedly provided by NSC
and NKK in its Final Determination, stating that these submissions were rejected because they were untimely
provided.  See Letter from Programme Manager to NSC at 3 (12 April 1999) (Exh. US/B-3(c)) ; Letter from
Programme Manager to NKK (April 12, 1999) (Exh. US/B-3(a))  and Letter from Programme Manager to NKK
(15 April 1999)  (Exh. US/B-3(b)) ; see also  LTFV Final Determination , 64 Fed. Reg. at 24360-62 (NSC),
24363-64 (NKK) (Exh. JP-12) .  Thereby, Commerce complied with paragraph 6 of Annex with respect to this
rejected information.
225 The problem of selective data reporting to control the parameters of what data will be considered in
calculating a margin is further illustrated by another area in which NSC also chose not to provide requested
information.  Contrary to the suggestion at para. 91 of the First Submission of Japan, the theoretical weight
factor was not the only data with respect to which the Department was required to resort to the use of factsavailable during the investigation.  NSC also declined to  report, or expressly opted to report at an inadequate
level of detail, product-specific costs for certain products,  based on the stated (and incorrect) belief -- like that
originally expressed with respect to its theoretical weight  sales -- that the affected products would not be used in
the margin-calculation process.  See LTFV Final Determination , 64 Fed. Reg. at 24348 (Comment 14)  (Exh.
JP-12) .WT/DS184/R
Page A-157
(a) NKK and NSC did not submit their conversion factors "within a reasonable period" as
required by Article 6.8
155. Japan does not deny that NSC and NKK’s conversion factors were not submitted within the
deadlines established for responding to the questionnaires in which these factors were requested.
They do not deny that these deadlines were “reasonable” ones, or that they were even given extension
of time in which to respond to these questionnaires.  Thus, they have not demonstrated that theconversion factors, which were submitted for the first time long after the 87 days provided by
Commerce’s questionnaires
226, were submitted within the “reasonable time” referenced in Article 6.8
of the Agreement.
156. Instead, Japan suggests that, in the context of some unspecified provision of the Agreement,
authorities have an obligation to accept information first proffered long after a reasonable
questionnaire deadline as long as it “plays a minor role,” affects a small number of lines of computercode, and is presented in time to allow for verification.
227   Such an interpretation would make a
mockery of questionnaire response deadlines, allow respondents to selectively withhold certain data
until after the preliminary determination, and limit the ability of petitioners to comment on submitted
data prior to the preparation of verification outlines.  It is, therefore, at odds with the paragraphs 1, 3
and 6 of Annex II, all of which emphasize the importance of information being timely presented.Because this interpretation would render the timeliness requirement contained in Annex II
meaningless, it is contrary to the customary rules of treaty interpretation.
228
157. Japan’s second argument, that the Department’s regulations define a “reasonable period” for
the submission of such information as seven days prior to verification229, is simply incorrect.  The
regulation upon which Japan relies, 19 C.F.R. § 351.301(b)(1), does not apply to data requested in
questionnaires.  Section 351.301(b)(“Time limits in general”) begins with a preamble explaining that
“Except as provided in paragraphs (c) and (d) of this section and § 351.302" factual information is due
by the deadlines provided in section 351.301(b).  Thus, section 351.301(b) is only a fallback provision
for data for which other deadlines (such as those for questionnaire responses) do not take precedence.The Department explained in the Final Determination:
Section 351.301(b)(1) of the Department’s regulations provides generally that, in an
investigation, factual information can be submitted up to seven days prior to
verification.  However, section 351.301(c)(2) states that “[n]otwithstandingparagraph (b)”, when requesting information pursuant  to a questionnaire, the
Department will specify the deadlines by which the information is to be provided by
the parties.  ...   Any information submitted after the deadline specified in the
questionnaire is untimely, regardless of  whether the general deadline in
section 351.301(b) has passed.
230
158. Finally, neither the inclusion in the Department’s verification agenda outlines of an itemrelating to this issue nor the fact that verifiers examined aspects of NKK’s conversion factor data at
                                                     
226 As an initial matter, Japan is incorrect in ch aracterizing NSC and NKK’ s belated submissions of
conversion factors as simply “corrections” to previously submitted data.  See First Submission of Japan at
29-39, passim.   The conversion factors NSC and NKK submitted after the preliminary determination constituted
completely new factual information, not a correction to a database they had previously provided.
227 First Submission of Japan at paras. 99, 108.
228 United States - Standards for Reformulated and Conventional Gasoline , WT/DS2/AB/R,
29 April 1996, p. 23 (“One of the corollaries of the ‘general rule of interpretation’ in the Vienna Convention  is
that interpretation must give meaning and effect to all the terms of the treaty.  An interpreter is not free to adopta reading that would result in reducing whole clauses or  paragraphs of a treaty to redundancy or inutility.”)
229 See id .
230 LTFV Final Determination , 64 Fed. Reg. at 24361  (Exh. JP-12) .WT/DS184/R
Page A-158
verification “ratifies the notion” that the conversion factors were timely submitted within the meaning
of Article 6.8.231  The NKK and NSC verification agendas were  issued before either company
submitted a conversion factor, and reflect the De partment’s interest in  verifying NSC and NKK’s
assertions that it was impossible for them to provide such factors.232  The conditional  verification of
NKK’s factor data merely shows that there was an outstanding issue with respect to NKK’s
submissions at the time of verification, given that the verifiers were not authorized to makedeterminations with respect to rejection of submissions.  Once that decision was made by appropriate
authorities in Washington, they properly omitted references to the untimely submitted data from their
report.
(b) Annex II, paragraph 5 does not mandate acceptance of the untimely provided conversion
factors
159. Japan’s argument that paragraph 5 of Annex II compels the acceptance of NSC and NKK’ s
untimely provided conversion factors fails because NSC and NKK did not “act to the best of their
abilities” to provide the necessary conversion factors.   That NSC and NKK supplied these factors as
soon as the Preliminary Determination convinced them that it was in their immediate interest to do so
shows that they could have done so earlier.  The very claim that these firms submitted the factors “as
soon as they became aware of their ability to do so” is an admission that, from the time of the first,evasive
233, questionnaire response, they were “able” to provide the conversion factors.
160. NKK’s original claims that, with respect to this unique issue, it was “impossible” to provide
any conversion factor because it lacked the data to provide one derived from actual weights for the
theoretical weight merchandise would be more believable had it not routinely demonstrated its abilityto provide other requested information based on less-than-ideal underlying databases.
234  The premise
that NSC was “unable” to discover prior to the pre liminary determination that it did, in fact, weigh the
steel coils sold on a theoretical weight basis is even more difficult to sustain.  If huge, heavy steel
coils are weighed anywhere, this would necessarily be done not at a Tokyo headquarters office, but at
the production site.  Because NSC did not ask the production facility whether it weighed the coilsuntil the preliminary determination convinced it that this simple measure might yield a better result,
NSC failed to act to the best of its ability to procure the information which enabled it to submit a
conversion factor immediately after the Preliminary Determination.
(c) The Department's application of adverse fact s available was consistent with Annex II,
paragraph 7
161. Paragraph 7 of Annex II provides that, when information from a “secondary source” is used
as facts available, “special circumspection” be exercised in the choice of such data.  The second half
of paragraph 7, however, tempers this concern by recognizing the “clear” corollary that when the need
for the use of the facts available arises from the failure of an interested party to cooperate, the result
                                                     
231 First Submission of Japan at paras. 99, 109.
232 See NKK Sales Verification Agenda (February 16, 1999) (Exh. JP-45(h))  and NSC Sales
Verification Agenda (17 February 1999) (Exh. JP-29(g)) .  NSC and NKK first submitted their conversion
factors on 22 February 1999.  See Letter from Programme Manager to NSC (12 April 1999) (Exh. US/B-3(c)) ,
at 3; Letter from Programme Manager to NKK, 12 Apr. 1999 and Letter from Programme Manager to NKK(15 April 1999)   (Exh. US/B-3(a)) .
233 As described above, both companies had originally professed the belief  that their theoretical weight
sales would not affect the margin at all.  In short, they were deemed “not worth the effort” to report on.
234 See, e.g., NKK’s response at point 8 of its supplemental questionnaire response of
23 February 1999, at 3:  “NKK does not track actual delivery charges for individual transactions.  In order toprovide movement expenses for each reported sales tr ansaction, NKK allocated pe r metric ton average unit
expenses to specific transactions based on the way in wh ich the particular transaction was most likely to have
been transported.” (Exh. JP-45(g)) .WT/DS184/R
Page A-159
may be “less favourable” to that party.  The Department’s decision to base its findings with respect to
the theoretical weight sales on the facts available, a nd its use of an adverse inference in selecting from
primary source data for NSC and NKK, are entirely consistent with both of these provisions.235
162. Japan’s claim that the Department “required an  impermissibly high level of cooperation from
NKK and NSC” by requiring them to submit, within reasonable deadlines, conversion  factors theywere unquestionably able to submit by those deadlines is unconvincing.
236  Submitting information
weeks and even months after it is requested, and after protestations that the requested information isunnecessary and impossible to provide, does not demonstrate “cooperation” as to that information
simply because the information is finally produ ced prior to verification. Cooperation calls for the
timely submission of data, as indicated by the fact that paragraph 3 of Annex II requires that only
timely submitted data be taken into account, and for acting to the best of one’s ability to provide
requested data, as indicated in paragraph 5 of Annex II.  Otherwise, respondents would have anincentive to delay the submission of selective pieces of information, waiting to determine whether the
facts available an investigating authority might appl y will yield better or worse results than the actual
data.  Because Japan has not demonstrated that NSC and NKK were cooperative with respect to the
factors, paragraph 7 contemplates the selection of facts available that are less favourable to those
firms.
237
163. Finally, the Department’s selection of facts available was not inconsistent with the “specialcircumspection” provision of paragraph 7 of An nex II.    Here, the Department did act with
circumspection, using as facts available not a secondary source but a primary source, namely data
NSC and NKK had themselves timely provided on other sales.  Furthermore, for that very reason,
paragraph 7 of Annex II does not even apply to the facts available selected with respect to the
theoretical weight issue, because that provision pertains expressly to situations in which authorities
base their facts available findings on “information from a secondary source.”
2. Commerce's treatment of the untimely submit ted conversion factors fully complied with
Article 6 of the Agreement
164.  In addition to meeting all provisions of Article 6.8 and Annex II with respect to the
application of the fact available, the Department also fully complied with the provisions of Article 6
respecting the establishment of the facts in the underlying investigation.
(a) Commerce gave NKK notice and ample opportunity to present the conversion factor
information, as required by Article 6.1
165. Commerce also provided NKK with notice and ample opportunity to respond with respect to
the weight conversion factor, as required by Article 6.1.238
                                                     
235 The Department’s resort to facts available wa s also necessary because, as discussed above, it
properly rejected NSC’s and NKK’s untimely provided conversion data.   Therefore, contrary to Japan’s
argument at para. 111, there was, in fact, a “gap to fill.”  Paragraph 7 of Annex II creates no new and distinctrequirement of necessity.
236 First Submission of Japan at para. 112-113.
237 Paragraph 7 does not require a separate  “finding” that NSC and NKK “withheld” the factor
information.  Under the terms of paragraph 7, it is understood that if the authorities lack necessary informationas a result of the failure of a party to cooperate in providing that information, it follows that “ thus relevant
information is being withheld from the authorities.”  When exporters or producers have the ability to providerequested  data but do not provide it, the data is necessarily “withheld from the authorities.”
238 See  First Submission of Japan at paras. 117-119.  (Japan’s Article 6.1 argument is made solely with
respect to NKK.) Id.WT/DS184/R
Page A-160
166. Japan’s Article 6.1 notice argument claims that the Department failed to “specify in detail the
information required,” within the terms of paragraph 1 of Annex II.  In addition, Japan claims that
Commerce “officials” misled NKK’s attorneys, orally instructing NKK that it “need not submit any
conversion factor,” and thus violated both the notice and opportunity to respond provisions of
Article 6.1.239  Neither claim is supported by the record; the second is, furthermore, flatly incredible.
167.  There was nothing vague about the Departme nt’s request for a conversion factor.  As
discussed above, Commerce stated that such a factor “must” be provided.  It also did not prescribe any
single methodology that had to be used to the exclus ion of all others in arriving at such a factor,
reasonably leaving such details to the respondent parties, who were more familiar than the
Department with what data they had to work with and how their systems worked.
168. NKK did not provide the data requested in the initial questionnaire, apparently choosing to
read Commerce’s request very narrowly.  Commer ce’s supplemental request to NKK apprized the
company of the deficiency of its initial response: a failure to provide conversion factors that
Commerce still required.  NKK was not required to “guess what [Commerce] was looking for".240
Commerce was clearly “looking for” a conversion factor, which it needed in order to comparetheoretical and actual weight sales on a common basis.   NKK’s insistence on the narrow reading thatsupported its “impossibility” thesis conveniently dovetailed with its stated belief  that the information
was unnecessary.
169. With respect to the second Article 6.1 claim, the Panel should disregard the self-serving
thirteenth-hour allegation that “NKK  attorneys called USDOC officials
 for clarification”  and “those
officials instructed that NKK need not submit any conversion factor ".241  The sole support for this
claim is an extra-record affidavit from the attorney who claims to have made the telephone call in the
course of which this alleged statement was made.242  Even were the Panel to assume, arguendo , that
counsel for NKK did telephone the Department “on or about” January 7, 1999 in order to seek
clarification with respect to the Department’s reiterated written request for a conversion factor, theanalyst who responded may well have said, for example, that if NKK continued to take the position
that providing a conversion factor was both unnecessary and impossible, it could so state.  However,
had the Department, as Japan suggests, gone further and modified the questionnaire  requirement by
orally withdrawing the requirement to provide su ch a factor, the Department would normally have
memorialized such a change on the written record.  NKK’s experienced trade counsel, moreover,would have mentioned the change in NKK’s questi onnaire response to assure that this change in
requirements was reflected on the record.  The fact that neither of these things happened, and that no
mention was made of this alleged change in the questionnaire requirement during the remainder of the
investigation, suggests that the memory of precisely what may have  been said during a phone call
made on an uncertain date a year and a half ago is, at best, unreliable and thus cannot be relied upon
by this Panel.
243
                                                     
239 See First Submission of Japan at paras. 118-119.
240 See First Submission of Japan at para. 117.
241 First Submission of Japan at para. 118.   Although Japan also relies upon variations of this claim at
several other points in its brief, we address it only once.  Because the central claim is not credible (and thedocument supporting it is not on the record), it woul d be pointless to discuss it in multiple contexts.
242 The source is the Affidavit of Daniel L. Porter, at 3 (Exh. JP-28) .  For the reasons given in our
Preliminary Objections, above, this document should be disregarded by the panel.  In the alternative, however,
above is a rebuttal to the charges made in that document with respect to this issue.
243 It is also worth noting that the claim at para. 118 with respect to this phone call overstates even the
claims made in the much more recent affidavit, which refers to a call by a single attorney, who spoke with asingle analyst, who is alleged to have stated only that “the supplemental question was intended simply toconfirm that NKK did not have a conversion factor to report.”  The affidavit further states that the analyst “didnot indicate” what the Department expected or required.  The transformation of this memory into an affirmation
that multiple attorneys were told by multiple officials that, contrary to the standing written request, a conversionWT/DS184/R
Page A-161
(b) Article 6.6 did not require the Department to verify NSC's and NKK's untimely submitted
conversion factors
170. Article 6.6 provides, in full, that “[e]xcept in circumstances provided for in paragraph 8, the
authorities shall during the course of an investigation satisfy themselves as to the accuracy of the
information supplied by interested parties upon which their findings are based ”  (Emphasis added.)
Because the Department rejected NSC’s and NKK’s untimely submitted conversion factors, removed
these data from the record, and did not base its findings upon those factors, there was no requirement
under Article 6.6 that the Department verify these factors.   Article 6.6 clearly does not require theDepartment to verify the accuracy of data it does not intend to use or even retain on the record, or, in
the case of NKK, to memorialize the results of any examination at verification of such data.
(c) The Department's handling of the conversion fa ctor issue was consistent with Article 6.13
171. Japan’s claim that NSC and NKK faced difficulties with regard to the submission of the
weight conversion factors which required some action by the Department under Article 6.13 is
without merit.  Article 6.13 states that “authorities shall take due account of any difficulties
experienced by interested parties, in particular small companies, in supplying information requested
and provide any assistance practicable.”  The drafters of the Agreement recognized that the need tosubmit large amounts of detailed data in advanced computer formats can be especially burdensome
for small companies.  The primary purpose of Article 6.13 was to alleviate that burden and ensure that
companies experiencing such difficulties would nonetheless be able to participate in the investigation.
Although the Article is not per se  limited to small companies, it was not intended to excuse repeated
errors, self-serving interpretations, or grossly untimely submissions by large, capable, sophisticatedcompanies such as NSC and NKK.
172. Japan has failed to demonstrate that NSC and NKK were either unable to supply the requested
information without special assistance from the Department or in fact experienced “ difficulties”
which led to the need for such assistance.  Although NSC and NKK may have been burdened by theneed to respond to the questionnaires in general, th e record does not indicate that they required any
special assistance with respect to this matter.  I ndeed, the fact that they were ultimately able to
provide conversion factors within days of learning that their absence had resulted in the use of facts
available in the preliminary determination belies the need for any special assistance such as the
Department might render to small companies experiencing difficulties in dealing with thecomplexities of an antidumping questionnaire.  Japan’s reliance on Article 6.13 to excuse NSC’s and
NKK’s belated submissions is, therefore, misplaced.
3. The Department's choice of facts available wi th respect to the weight conversion issue
was consistent with Article 2.4 of the Agreement
173. The Department’s utilization of NSC’s a nd NKK’s own verified information as facts
available for the sales affected by the missing weight conversion factors was fully consistent with itsobligation, under Article 2.4, to make a fair comparison between export price and normal value.
174. With respect to NKK, the failure to timely provide a conversion factor meant that the
Department was  unable to convert a small number of home market sales to an actual weight basis,
and was therefore unable to determine the actual per metric ton normal value for these sales.  TheDepartment therefore substituted the highest per-product weighted average price for these few  sales,
and averaged them together with the actual weight sales of the same products.  It then compared
                                                                                                                                                                    
factor was affirmatively not required further demonstrates  the unreliability of any claims as to this alleged
conversation.WT/DS184/R
Page A-162
product-specific weighted average export prices to those weighted average normal values which were
the most similar matches.  Thus, the Department was able to make a fair comparison between export
price and normal value with respect to NKK.  Interp reting Article 2.4 to require that authorities use
the “overall average normal value”  for item-specific normal values which are missing due to the
failure of a respondent to cooperate would nullif y the provision of Annex II, paragraph 7 allowing
authorities to select facts available “less favourable” to parties that have not been cooperative inproviding what was requested of them.
244
175. Because NSC’s affected theoretical weight sales were export price sales, the Department
assigned a margin to these sales based on margins calculated for NSC’s actual weight sales of the
same products.  Although Japan complains because the Department did not, instead, calculate a
surrogate export price for the affected products and then compare this to a normal value, Article 2.4
does not prevent authorities from utilizing a surrogate margin, rather than a surrogate export price.  Tothe contrary, that provision must be read in ta ndem with Article 6.8, which clearly contemplates the
use of facts available margins as well as of more limited facts available plugs.  The margins used by
the Department for this purpose, furthermore, fulfill the requirements of Article 2.4 because they were
calculated by comparing (actual weight) export prices to (actual weight) normal values in accordance
with Article 2.4.  In addition, there was no inform ation available that would allow the Department to
determine export prices based on an adverse inferen ce.   Therefore, selecting margins for these sales
was an appropriate way to apply an adverse inference.
4. The Department's application of facts availa ble to NSC and NKK is also consistent with
Article 9.3 of the Agreement
176. Finally, the Department complied with the requirement of Article 9.3 that the amount of
anti-dumping duty “not exceed the margin of dum ping established under Article 2" because the
Department complied not only with the terms of Article 2.4, as demonstrated above, but also with all
the other provisions of Article 2.  Therefore, the Panel should uphold the Department’s determinations
with respect to the theoretical weight factor issue.
IV. SECTION 735(C)(5)(A) OF THE TARIFF ACT OF 1930 IS A PERMISSIBLE
INTERPRETATION OF ARTICLE 9.4 OF TH E AGREEMENT;  THEREFORE, THE
DEPARTMENT'S APPLICATION OF THAT ALL OTHERS RATE PROVISION OF
THE STATUTE WAS LIKEWISE CONS ISTENT WITH ARTICLE 9.4 OF THE
AGREEMENT
177. The “all others” rate is the margin of dumping assigned to respondents whose own data are
not examined when an authority limits its examination to a sample and they are not selected as part of
the sample.  The margin for such respondents is, therefore, based on a weighted average of data
submitted by the “selected” respondents.  Article 9.4 of the Agreement and US law, however, call for
the authorities to disregard certain “outlier” types of margins when making this calculation: zero
margins, de minimis  margins, and margins established based on facts available.  As we demonstrate
below, the language and context of the Agreement support the position of the United States that such
outlier margins should be disregarded in their entirety in making this calculation.
178. Similarly, the Department permissibly interprets the requirement of Article 9.4 to exclude
“margins” which are zero,  de minimis or established based on the facts available to refer only to an
exporter or producer’s overall margin, not to portions of that margin which may involve individual
transactions dumped at rates that are zero, de minimis or based on partial or total facts available.
Thus, an exporter or producer ’s margin which was not based entirely on facts available would still be
fully weight-averaged in the calculation of the all others rate.
                                                     
244 See First Submission of Japan at para. 136.WT/DS184/R
Page A-163
179. The interpretation urged by Japan, in contrast, improperly requires the Panel to read the term
“margins” in Article 9.4 to mean “portions of the margins.”  That interpretation could lead to totally
arbitrary results, including higher all others rates.  It would, moreover, expose the calculation of the
all others rate to manipulation by the selected respondents, who are competitors of the all others
companies.245
A. ARTICLES 6.10 AND 9.4 OF THE AGREEMENT PROVIDE FOR AN ALL OTHERS RATE BASED ON
OVERALL COMPANY -SPECIFIC MARGINS
180. The need for an all others rate described in Article 9.4, and thus the nature of that rate,
proceeds from the recognition, in Article 6.10,  that an administering agency will not always have the
resources to examine each and every producer or exporter of subject merchandise.  The first sentence
of Article 6.10 refers to a “margin of dumping for each known exporter or producer”.  This plainlyuses “margin” as meaning the company’s overall (weight-averaged) margin.  Therefore, Article 6.10
provides for the dumping margins of some producers or exporters to serve as proxies for those of
other exporters or producers.  In this case, the Department selected as its mandatory respondents NSC,
NKK and KSC, the three companies with the larg est volume of exports to the United States.
246  The
appropriateness of that selection remains undisputed in this case.
181. Just as Article 6.10 provides for the consistent and objective selection of a sample which can
serve as a proxy for the rest of the industry,  Article 9.4 of the Agreement provides a method for using
the margins from the proxy companies to determine the anti-dumping duty to be assessed on entries of
merchandise exported by producers or exporters not included in that sample.  This  companionprovision states, in pertinent part, as follows (emphasis added):
When the authorities have limited their examination in accordance with the second
sentence of paragraph 10 of Article 6, any anti-dumping duty applied to imports from
exporters or producers not included in the examination shall not exceed:
(i) the weighted average margin of dumping established with respect to the
selected exporters or producers or,
(ii) where the liability for payment of antidumping duty is calculated on the basis
of a prospective normal value, the difference between the weighted averagenormal value of the selected exporters or  producers  and the export prices
of exporters or producers not individually examined,
provided that the authorities shall disregard  for the purpose of this paragraph any
zero and de minimis  margins and margins established under the circumstances
referred to in paragraph 8 of Article 6.
182. Article 6.8 provides that determinations may be made “on the basis of the facts available”.
Thus, Article 9.4 provides that, in calculating the all other rate, margins established on the basis of thefacts available shall be disregarded.  Article 9.4 also states that zero and de minimis  “margins” shall
                                                     
245 Because the all others companies are competitors of the selected companies in both the foreign and
domestic markets, the selected companies, under the interpretation proposed by Japan, might find themselves“unable” to provide tiny bits of information affecting on ly products sold at prices that would yield low-end
margins.  Elimination of such sales from the all others margin calculation would result in higher all othersmargins for their competitors, as could elimination of all zero and de minimis  portions of the overall margins for
mandatory respondents.
246 LTFV Preliminary Determination , 64 Fed. Reg. at 8292 (Exh. JP-11) .WT/DS184/R
Page A-164
be disregarded in the calculation of the all others rate.  Such margins are, likewise, the entire
weighted-average margins for each exporter/producer, not portions thereof, and no party here has
suggested the contrary.
183. Given the context of Article 9.4, a respondent company’s margin is only “established under
the circumstances referred to in paragraph 8 of Article 6" when it is based entirely on the factsavailable.  Thus, when the Department assigns an exporter a calculated margin
247, that exporter’s
margin is not a “margin established under the circumstances referred to in paragraph 8 of Article 6”.
Therefore, Article 9.4 addresses the situation where the overall company-wide margin is based
entirely on the facts available.
184. In both the preliminary and final determinations in this case, Commerce used, as the all others
rate, the weighted average of the rate it calculated  for NSC, the rate it calculated for NKK and the rate
it calculated for KSC.248  As we demonstrate below, this methodology conforms to both Section
735(c)(5)(A) of the Act (19 U.S.C. § 1673d(5)(A) and to Article 9.4 of the Agreement.
B. SECTION 735( C)(5)(A) IS A PERMISSIBLE INTERPRETATION OF ARTICLE 9.4 OF THE ANTI -
DUMPING AGREEMENT
185. The Department’s methodology for determining the all others rate in this investigation was
consistent with Article 9.4 of the Agreement because this rate was calculated in accordance with
Section 735(c)(5)(A) of the Act, which is a permissible interpretation of that Article.
186. Congress amended the Act in the 1994 Uruguay Round Agreements Act (“URAA”) to
implement Article 9.4.249  The Statement of Administrative Action (“SAA”) accompanying the
URAA stated:
Recognizing the impracticality of examining all producers and exporters in all cases,
Article 9.4 of the Anti-Dumping Agreement permits the use of an all others rate to beapplied to non-investigated firms.  To implement the Agreement, section 219(b) of
the bill adds section 735(c)(5)(A) to the Act which provides that the all others rate
will be equal to the weighted-average of individual dumping margins calculated for
those exporters and producers that are individually investigated, exclusive of any zero
and de minimis  margins, and any margins determined entirely on the basis of the facts
available.  Currently, in determining the all others rate, Commerce includes margins
determined on the basis of the facts available.
250
187. Reflecting this intent to conscientiously amend US law to implement Article 9.4, Section735(c)(5), therefore, provided the following general rule for the calculation of the all others margin:
[T]he estimated all others rate shall be an amount equal to the weighted average of
the estimated weighted average dumping margins established for exporters and
                                                     
247 When the Department is able to use the exporter’s company-specific data in determining the margin
for that exporter, the Department considers that respondent to have received a “calculated” margin.  A
calculated margin is not necessarily based solely on the exporter’s submitted data.   When an exporter’s margin
is based in part, but not entirely, on the use of facts available, that respondent’s margin is considered acalculated margin based on “partial facts available,” not simply a margin based on facts available.
248 LTFV Preliminary Determination , 64 Fed. Reg. at 8299 (Exh. JP-11) ; LTFV Final Determination ,
64 Fed. Reg. at  24331, 24370 (Exh. JP-12) .
249 Pub. L. No. 103-465, 108 Stat. 4809 (1994).
250 SAA at 873 (Exh. US/B-27) .WT/DS184/R
Page A-165
producers individually investigated, excluding any zero and de minimis margins, and
any margins determined entirely under section 776.251
188. Under US law,  the “weighted average margin  of dumping” for the all others companies is
calculated by weight-averaging the overall (weighted-average) margins for the mandatory respondents
because the “margins” referred to in the portion of Article 9.4 which calls for disregarding certain
“margins” are, in the context of Article 6.10 and the remainder of 9.4, the overall margin of each
individual exporter or producer, rather than the component portions of those company-specific
margins.  Thus, the United States permissibly inte rprets the reference in Article 9.4 to “margins”
established based on the facts available to mean company-specific margins established based entirely
on the facts available.
189. A similar reference to the “margin” is contained at Article 5.8 of the Anti-Dumping
Agreement, which provides, in relevant part, for i mmediate termination of an investigation where the
authorities determine that “the margin of dumping is de minimis ... ”.  The United States permissibly
interprets this to mean that an investigation should be terminated when the overall margin is
de minimis , rather than any margins associated with component transactions.  Thus, the Agreement
uses the term  “margins” to mean entire respondent-specific margins, not merely  portions of those
margins.  Japan’s interpretation that “margins,” as used in Article 9.4, refers to any portions of thosemargins would require a parallel reading of the term “margin” in Article 5.8 as applied to termination
based on zero and de minimis margins.  Because such a reading would require an authority to dismiss
a case unless every single product was being dumped at non- de minimis rates, this clearly is not the
reading the drafters intended.
190. Article 31 (1) of the Vienna Convention provides that a treaty “shall be interpreted in
accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the
light of its object and purpose ” (emphasis added).  Because the “context” of the reference to
“margins” in the sentence in Article 9.4 includes earlier references to margins at the exporter-specific
level both in Articles 6.10 and 5.8, and in the earlier portion of Article 9.4, the Departmentpermissibly gave the same reading to the term “margins” in all of these segments of the Anti-
Dumping Agreement.  Under principles of statut ory construction, “where the meaning of a word is
unclear in one part of a statute but clear in another part, the clear meaning can be imparted to the
unclear usage on the assumption that it means the same thing throughout the statute".
252  T h i s
principle has been applied in the context of international dispute resolution.253
191. Specifically, Article 9.4 requires that the all others rate not exceed “the weighted averagemargin of dumping established with respect to the selected  exporters or producers".
254  Thus,
Article 9.4 clearly contemplates that the all others rate is to be based on the weighted average of theoverall margins of dumping established for individual  exporters or producers, not on portions of those
margins associated with individual transactions or other components of the overall margin.255
                                                     
251 Section 776 of the Act is the section dealing with determinations made based on the facts available.
The complete text of Section 735(c)(5), as reported at 19 U.S.C. § 1673(d)(5), is shown at Exh. JP-4(c) .
252 Norman Singer, Statutes and Statutory Construction, § 47.16, at 272 (6th ed. 2000).
253 See Boundary Dispute Concerning the Taba Area (Egypt v. Israel) , 27 International Legal Materials
1427, 1470 para. 177 (Egypt-Israel Arb. Trib. 1988)(finding the “it is only logical that the word ‘address’ shouldbe given the same interpretation in two paragraphs of the same Annex” ).
254 The United States does not calculate liability for payment of anti-dumping duties on the basis of a
prospective normal value; thus, United States law is based on section (i) of Article 9.4, rather than on section (ii)of that Article.
255 This reading is further buttressed by a parallel requir ement, in section (ii) of Article 9.4, that, when a
rate is set in a country which determines liability for antidumping duties on the basis of a prospective normalvalue, the only data from the originally-examined companies used for such purpose shall be the single
weighted-average normal value of “the selected exporters or producers.”  It is reasonable to conclude that whenWT/DS184/R
Page A-166
C. THE ARGUMENTS RAISED BY JAPAN LACK MERIT
192. Japan argues that the Department was required by Article 9.4 to disregard “the facts available
portion  ”of the margins for the mandatory respondents.256  Article 9.4, however, says nothing about
discarding only a “ portion” of the margins established “on the basis of the facts available.”  Instead, it
calls for such “margins” to be disregarded in making this calculation.  As demonstrated above, theUnited States permissibly interpreted this provision to mean that a company’s margin should be either
disregarded or not, as a whole.   Japan has not demonstrated that the Agreement requires members to
read the term “margins” to mean “portions of the margins.”   Thus, Japan has not carried its burden of
proving that its preferred interpretation of the Agreement is the only permissible one, and the Panel
must uphold the decision of the Department with resp ect to the calculation of the all others rate.
193. Japan’s assertion that “the Agreement does not distinguish between determinations based
entirely on facts available and determinations based partially on facts available” does not support the
interpretation it urges upon the Panel.
257  This statement is based on the unstated assumption  that the
absence of an express reference in Article 9.4 to a distinction between margins based entirely on facts
available and those based partially on facts available precludes an interpretation which makes such a
distinction.
194. If this assumption is correct and the language of Article 9.4 is clear and complete on its face,
then authorities must disregard all “margins” (not merely “portions” of margins) which are based
wholly or in part on the facts available.   The result would be a great many cases in which it would be
impossible to calculate an all others rate under the Agreement because no margins would remain forthis purpose.  In this case, for example, the margins for NSC, NKK and KSC ( i.e., for all of the
mandatory respondents), all of which are partial facts available margins, would all have to be
disregarded.  It is not logical that the Agreement would compel such a result.
195. If this assumption is not correct, the silence in the language of Article 9.4 as to whether the
reference to margins established based on the facts available includes margins based in part on the
facts available is due to an ambiguity in the language, in which case member countries are permitted
to adopt a reasonable interpretation of the provision.258  As we demonstrate below, the Department’s
interpretation is a permissible and workable one.
196. Japan’s theory that Article 9.4 requires the Department to disregard the portions  of the
mandatory respondent margins that involve the use of the facts available appears to be based on the
assertion that Article 6.8 (the article which provides for the use of  the facts available) “contemplates
the use of partial facts available whenever possible".259  Like Japan’s claim with respect to Article 9.4,
this claim with respect to Article 6.8 is not substantiated.  Article 6.8 itself makes no reference
whatsoever to the use of partial facts available.  While this absence of a counter indication clearly
                                                                                                                                                                    
no sale-specific portions of the exporters’ overall margins are disregarded in determining the all others rate
under national laws following the model in section (ii), the same principle is intended to apply to countries
which must determine the all others rate using section (i).
256 First Submission of Japan at para. 140 (emphasis added).
257 See First Submission of Japan at para. 135.
258 Japan asserts, without support, that US-proposed language which would have incorporated a
reference to margins based “entirely” on facts availabl e was rejected during the course of the Uruguay Round.
First Submission of Japan at 42 n. 126.    Even if the Panel were to assume, arguendo , the truth of that assertion,
it would not follow that the language ultimately adopted foreclosed the interpretation adopted by the UnitedStates.  Because Article 9.4 also does not expressly refer to disregarding the “portion” of a margin that is basedon facts available, it is more likely that the negotiators agreed upon deliberately ambiguous language in order toaccommodate their differing interpretations.
259 First Submission of Japan at para. 137.WT/DS184/R
Page A-167
permits the use of partial facts available under appropriate circumstances, it in no way compels the
agency to “use” partial facts available “margins,” once calculated, in any particular way.
Furthermore, Annex II, which is referenced in Article 6.8, also contains no provision describing how
facts available margins should be “used” once they have been calculated or dictating that,  having
calculated partial facts available margins, the United States should then ignore the facts available
portions of those margins “whenever possible”.
197. Japan’s argument that the impact of the facts available portion of the margins for mandatory
respondents must be avoided as to the companies receiving the “all others” rate because these
companies have not refused access to information or otherwise impeded the investigation also lacks
merit.260  The Department did not base the all others margin on the facts available, but rather on the
results of the formula set forth in Article 9.4 and in the Act: using a weighted average of the margins
for the mandatory respondents (none of which were zero, de minimis  or established based on the facts
available).  Thus, the fact that the all others companies did not refuse access to information or impede
the investigation is not relevant to the use of th e overall margins for the three mandatory respondents
to calculate the all others rate.
198. The use of the partial facts available margins for the mandatory respondents, furthermore,
cannot be said to “punish” the all others companies simply because the result is less favourable to
them than the result would be under Japan’s preferred interpretation.261  While the terms of the
formula set forth in Article 9.4 may result in either detrimental or beneficial rates for individual
companies in particular cases, these terms are themselv es intended to be neutral, as befits a margin for
companies about whose pricing practices nothing is known.262  Just as the provision in Article 9.4 for
exclusion from the all others rate of margins that are zero or de minimis  is not a punishment,  the
exclusion from this calculation of margins established based on facts available is not a reward.  Thus,
not excluding facts-available “portions” of a margin which is not, overall, “established based on  facts
available” certainly cannot be said to “punish” the all others companies.  Article 9.4 does not providefor either punishment or reward; it simply provid es for the elimination of “margins” that fall into
outlier categories on both sides of the scale, such that the margin for the all-other companies is based
on the overall response of the remaining mandatory respondents.
199. Japan’s interpretation that an agency must disregard the facts available “portions” of the
margins of the mandatory respondent also fails to realistically take into consideration the multiple
levels at which the use of facts available must often be applied in practice, and would therefore result
in an unworkable general rule.
200. Given the complexity of an anti-dumping inve stigation, a myriad of individual data items,
relating not only to price but also to cost and product characterization (such as the weight conversion
factor), must be provided.  Not all respondents are able to bring to this process the high levels of
manpower, technical expertise and computerization characteristic of Japan’s largest steel companies.This frequently results in the use of at least some facts available.   For example, if a respondent is
unable to supply, or to adequately support, the value of an input, the Department may be required to
use facts available as a proxy for that value in calculating a constructed value
263 for use in a margin
                                                     
260 See First Submission of Japan at para. 138.
261 See Id.
262 The calculation of margins for some firms based on the experience of other firms necessarily leads
to some degree of inaccuracy.  This may favour the all others firms or be adverse to them.  For example, it mightwell be argued that basing the all others rate on the average margins for the largest exporters results in anunrepresentatively low margin because larger companies may have greater efficiencies of scale than smaller
companies.
263 Article 2.2.1 permits home market sales to be treated as not in the ordinary course of trade and thus
disregarded from the margin calculation when they are ma de at prices below their per-unit cost of production.WT/DS184/R
Page A-168
comparison.  If the input is part of the cost structure of a wide range of products, it is not possible to
disregard the facts available portion of the calculation without disregarding all of the affected
transactions.  This is the case even if the input is a very minor one, even if the facts-available “plug”
is a non-adverse one, and even if the effect of this use of facts available has an infinitesimal effect on
individual margins.264  Given that the use of such “plugs” is not uncommon in many investigations
and reviews, it is also not uncommon for many - - or  even all -- of a participating respondent’s sales to
be affected to some degree by the use of partial facts available.
201. If the Panel were to accept Japan’s interpretation, all “portions” of a respondent’s margin
affected in part by facts available would have to be disregarded in calculating the all others rate.  The
calculation of the all others rate would then depend not upon a broader universe of data, but upon the
random assortment of remaining “portions” for which no odd bit of information was missing.  Such an
approach would be much less transparent than the methodology the United States currently uses, andwould not necessarily result in either more reasonable or lower all others rates.
202. Such an approach would also encourage manipu lation with respect to data submission.  Under
the methodology prescribed in the Act, the level of the all others margin is tied to the level of the
overall margins of the mandatory respondents, not merely to selective “portions” of a databasecontrolled by those respondents.  Under the approa ch Japan seeks to compel, this would no longer be
the case.  This is one of the problems the interpretation of the United States, a regular nuts-and-bolts
user of the antidumping law, seeks to address.
203. In summary, Japan seeks to have the Panel demand an interpretation of Article 9.4 which
would compel the Department to eliminate from its all others rate calculations “portions” of the partial
facts available margins calculated for the mandatory respondents.   To obtain that end, however, Japan
must demonstrate to the Panel that the Department’s  statutory provision, which must provide rules not
only for this case but for a host of other cases with more complex situations with respect to the use of
facts available, is an impermissible interpretation of Article 9.4.  Japan has not done so.  Indeed,because the United States gives to Article 9.4 is wholly consistent with the context in which it occurs
and with the purpose of the provision of which it forms a part, Japan cannot do so.  Thus, the
permissible, reasonable and workable statutory interpretation of Article 9.4 in US law must stand, as
must the calculation of the “all others” rate in this investigation, which fully complied with that
statutory provision.
                                                                                                                                                                    
When there are insufficient home market sales available for comparison purposes for this, or other reasons,
Article 2.2 provides that the export sales may be compared with “the cost of production in the country of originplus a reasonable amount for administrative, selling and general costs and for profits.”  This constructed cost ofthe exported sales is known used as normal value, cost is termed  “constructed value.”  See Section 773(e) of the
Act (19 U.S.C. § 1677b(e)) (Exh. JP-4(j))
264 For example, Kawasaki’s margin in the Japanese Steel Plate case was a partial facts available
margin.  See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-To-Length CarbonQuality Plate Products from Japan,  64 Fed. Reg. 73215, 73226-27 (December 29, 1999) (Exh. US/B-48) .
Because the Department was unable to verify the reported dates of payment to make a necessary calculation of
home market credit expenses, the Department determined that it was necessary to resort to the use of facts
available with respect to the number of days for which credit was extended.  Id.  Because the Department agreed
that Kawasaki’s affiliated trading company Kawasho was unable to systematically determine the actual date ofpayment, and that actual payment dates were both earlier and later than the reported dates, it applied anon-adverse adjustment to the reported payment dates for all of Kawasho’s home market sales.  Id.  Despite thenecessarily broad application of this facts available element, the number of credit days is only one component of
a single adjustment among many.WT/DS184/R
Page A-169
V. THE DEPARTMENT'S APPLICATION OF THE "ARM'S LENGTH" TEST, WHICH
DETERMINED THAT SOME EXPORTER'S HOME MARKET SALES TO
AFFILIATES WERE NOT MADE IN THE ORDINARY COURSE OF TRADE, AND
SUBSEQUENT USE OF HOME MARKET DOWNSTREAM SALES TO
CALCULATE THE NORMAL VALUE FOR SUCH SALES, WAS CONSISTENT
WITH ARTICLE 2 OF THE AGREEMENT
204. The Department’s application of the “arm’s length” test, which determined that some
exporter’s home market sales to affiliates were not made in the ordinary course of trade, and its
subsequent use of home market downstream sales to calculate the normal value for such sales, was
consistent with Article 2 of the Agreement.  In order for an exporter’s home market sales to affiliated
customers to be included in the normal value calculation, Article 2.1 of the Agreement specifically
states that such sales must be made in the ordinary course of trade.  That provision is subject to more
than one permissible interpretation as to how authorities should determine whether such sales aremade in the ordinary course of trade.
205. It is generally recognized that sales to affiliated customers are inherently suspect and may
form an unreliable basis for the dumping calculations.  Indeed, the Agreement makes explicit
provision for the exclusion of sales to affiliated importers.  Article 2.3 permits the calculation of a"constructed" export price "[w]here it appears to the authorities concerned that the export price is
unreliable because of association or a compensatory arrangement between the exporter and the
importer."
206. Home market sales may be similarly "unreliable because of association" between the producer
and a customer in the country of export.  Such sales may, therefore, reasonably be excluded under the
"outside the ordinary course of trade" provis ion of Article 2.1.  Indeed, Mexico defines all
affiliated-party transactions as being "outside the ordinary course"
265, while the European
Community266, Brazil267, Argentina268, and Korea269, like the United States, treat as outside the
                                                     
265 Mexico's Foreign Trade Act at Article 32 (defining the term "in the ordinary course of trade" to
include only "transactions . . . between independent buyers and sellers") (WTO Doc. No. G/ADP/N/1/MEX/1)(Exh. US/B-28(a)) .
266 The relevant EC provision states:
Prices between parties which appear to be associat ed or to have a compensatory arrangement with each
other may not be considered to be in the ordinary course  of trade and may not be used to establish normal value
unless it is determined that they are unaffected by the relationship.
WTO Doc. No. G/ADP/N/1/EEC/2, Council Regulation No. 384/96, Article 2 (Exh. US/B-28(b)) .
Pursuant to this legislation, the EC, like the United States, compares prices to affiliated and unaffiliated
customers, and rejects transfer prices where "the analys is of prices of sales . . . to both related and unrelated
customers did not show that the prices to the former were at arm's length."  Council Regulation (EC) No. 393/98
of 16 February 1998 imposing a definitive anti-dumping duty on imports of stainless steel fasteners and partsthereof originating in the People's Republic of China, India, the Republic of Korea, Malaysia, Taiwan, andThailand , O.J.L. 50, p.1, rec. 21 (Feb. 20, 1998)  (Exh. US/B-29) .
267 The relevant Brazilian statute provides:
Transactions among parties who are considered a ssociated or who have agreed to a compensatory
arrangement among themselves may be considered as not being in the ordinary course of trade and not be takeninto account in determining normal value, unless it is prov en that the related prices and costs are comparable to
those of operations among parties that are not so related.
WTO Doc. No. G/ADP/N/1/BRA/2, Legislative Decree No. 1602 of 23 August 1995 at Article 6.4
(Exh. US/B-28(c)) .WT/DS184/R
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ordinary course those affiliated-party sales not made at arm's length.  In addition, Australia and
New Zealand exclude some, and Canada excludes all, affiliated customer sales from the calculation of
normal value without explicit reliance upon the "outside the ordinary course" provision.270
207. The Department instructs respondents that "if you sold to an affiliate who resold the
merchandise, report the affiliate's resales to unaffiliated customers [i.e., home market downstream
sales] rather than your sales to the affiliate".271  However, the Department accepts the reporting of
affiliated-party home market sales in lieu of home market downstream sales where the former pass the
arm's-length test".272  As a result, if a respondent’s sales relationship with an affiliated customer
passes the arm’s length test, sales to that affiliated customer can be used despite the affiliation – anoption that is unavailable in countries such as Canada and Mexico which automatically disregard all
affiliated customer sales and instead base normal value on the downstream sales corresponding to
such transactions.  Furthermore, if downstream sa les are used in the normal value calculation, the
Department will determine whether they are made at a different level of trade and, if so, determine
whether a level of trade adjustment should be made.
273  Therefore, the Department’s practice is
consistent with Article 2.4, as is evident when this provision is read in combination with Articles 2.1
and 2.2.
A. FACTUAL BACKGROUND
208. In the Preliminary Determination , the Department tested whether home market sales by the
respondent exporters to affiliated customers were arm’s length transactions by applying its “99.5 per
cent” methodology, which compares prices between affiliated and unaffiliated purchasers, as
explained below.274  The majority of KSC’s total home market sales were made through Kawasho, an
affiliated trading company.275  KSC reported the downstream sales by Kawasho, which made sales to
both affiliated and unaffiliated customers.276  The Department’s arm’s length test indicated that sales
                                                                                                                                                                    
268 The Argentine statute provides that a "sale shall be considered as having been made in the ordinary
course of trade," when "(a) the price is not affected by any of the associations or relationships" and "(b) the sale
price is not lower than the cost of production."  WTO Doc. No. G/ADP/N/1/ARG/2, Decree No. 2121/94 atArticle 13  (Exh. US/B-28(d)) .
269 The relevant Korean regulations state that "in calcula ting the prices in the ordinary course of trade, .
. . sale prices shall not be used as a basis [for normal value] where the sales price between such related parties asprescribed in Article 3-6(1) of the Decree was affected  by such a relation."  WTO Doc. No. G/ADP/N/1/KOR/4,
Customs Regulations at Article 4-4(1).  See also Article 4-6(1) (normal value)  (Exh. US/B-28(e)) .
270 See Australia's Customs Act of 1901 at 269TAA(1)(b) & 269TAC(1) (excluding from normal value
all non-arm's length transactions, defined as occurring wher e "the price is influenced by a commercial or other
relationship between the buyer, or an associate of the buyer, and the seller, or an associate of the seller") (WTO
Doc. No. G/ADP/N/1/AUS/1)  (Exh. US/B-28(f)) ; New Zealand's Dumping Act at §§3(2) and 5 (excluding from
normal value all non-arm's length transactions, define d as occurring where "the price is influenced by a
relationship between the buyer, or a related person, and the seller, or a related person") (WTO Doc. No.G/ADP/N/1/NZL/2) (Exh. US/B-28(g)) ; Canada's Special Import Measures Act § 15(a)(i) ("where goods are
sold to an importer in Canada, the normal value of the goods is the price of like goods when they are sold by the
exporter of the first mentioned goods to purchasers  with whom the exporter is not associated  at the time of the
sale of the like goods") (WTO Doc. No. G/ADP/N/1/CAN/1) (emphasis added) (Exh. US/B-28(h)) .
271 Department’s Initial Section B Ques tionnaire at B-1( 30 October 1998) (Exh. US/B-30) .
272 19 C.F.R. §  351.403(d)  (Exh. JP-5(g)) .  See also Certain Corrosion-Resistant Carbon Steel Flat
Products From Japan , 64 Fed. Reg. 44483, 44486 (16 August 1999) (prelim. results) ("the Department normally
will not require the respondent to report the affiliate's do wnstream sales unless the sales to the affiliate fail the
arm's length test")  (Exh. US/B-31) .
273 19 U.S.C. 1677b(a)(7)(A)  (Exh. JP-4(j)) .
274 Preliminary Determination,  64 Fed. Reg. at 8295  (Exh. JP-11) .
275 KSC Preliminary Analysis Memo  at 2 (Exh. US/B-6) ; see also LTFV Preliminary Determination , 64
Fed. Reg. at 8295 (Exh. JP-11) .
276 Id.WT/DS184/R
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by Kawasho involving one affiliate were made at arm’s length.277  KSC did not provide data on
certain other downstream sales because the affiliates were not able to trace the original purchase of
subject merchandise from KSC to their resale to an unaffiliated customer.278  The Department excused
KSC from reporting downstream sales which accounted for less than 3 per cent of each firm’s total
home market sales of subject merchandise.279
209. A significant percentage of NSC’s total home market sales were to affiliated parties.280  NSC
requested that it not be required to report downstream sales made by four affiliated companies, but
provided data on other downstream sales which accounted for the majority of home market sales to
affiliated trading companies.281  The unreported downstream sales made by NSC’s four affiliated
trading companies represented a small percentage of NSC’s total home market sales.282  Furthermore,
the results of the arm’s length test indicated that NSC’s sales to two of the four trading companies
were made at arm’s length.283  The Department determined that the portion of home market
downstream sales by two affiliated customers that failed the arm’s length test was insignificant, and
that NSC had put ample information on the record indicating that these sales were not essential to the
Department’s analysis.284  Therefore, NSC was not required to report these downstream sales.
210. NKK submitted its home market sales as well as the downstream sales of its affiliated
resellers.285  The Department determined that NKK’s home market sales to one of its affiliates failed
the arm’s length test, while NKK’s home market sales to its other affiliates passed the arm’s length
test.286  NKK argued that the Department should use a different arm’s length test than it normally
uses.287  The Department disagreed and, in the Final Determination , continued to apply its established
methodology.288  The Department noted that, although NKK had proposed an alternative methodology
based on a statistical approach, it had not demonstrated that the Department’s current methodology
was unreasonable.289  Furthermore, the Department explained that it applies the arm’s length test on a
customer-by-customer, rather than a product-by-pr oduct, basis, because “the question underlying the
test is whether affiliation between the seller and the customer has (in general) affected pricing".290
B. THE DEPARTMENT 'S "ARM'S LENGTH " TEST FOCUSES ON THE RELATIONSHIP BETWEEN
AFFILIATED PARTIES
211. The Department runs a basic test to determine whether home market sales by exporters to
affiliated customers were made at prices comparable to those to unaffiliated customers.  If they are
comparable, then the sales to that affiliated customer are deemed to be at “arm’s length,” i.e., the
affiliation does not distort pricing.  This is a permissible interpretation of the relevant provisions of
                                                     
277 Id.
278 Id. at 2-3.
279 KSC Preliminary Analysis Memo  at 3  (Exh. US/B-6 ) .  Pursuant to Section 351.403 of the
Department’s regulations (19 C.F.R. §351.403), the Department does not normally require the reporting of homemarket downstream sales if total sales of the foreign like  product by a firm to all affiliated customers account for
five percent or less of the firm’s total sales of the foreign like product.
280 NSC Preliminary Analysis Memo  at 2 (February 12, 1999) (Exh. US/B-32) ; see also Preliminary
Determination , 64 Fed. Reg. at 8296 (Exh. JP-11) .
281 Id.
282 Id.
283 Id.
284 Id.
285 NKK  Preliminary Analysis Memo at 2 (February 12, 1999)  (Exh. US/B-33) .
286 Id.
287 LTFV Final Determination , 64 Fed. Reg. at 24341  (Exh. JP-12) .
288 Id. at 24342.
289 Id.
290 Id.WT/DS184/R
Page A-172
the Agreement.  If such sales were not made at arm’s length prices and thus not in the ordinary course
of trade, the Department may use the affiliated customer’s downstream sales in calculating normal
value, depending on the nature of the merchandise sold to and by the affiliate, the volume of sales to
the affiliate, and the level of trade involved.291  Canada also provides for the use of downstream sales
in lieu of home market sales.292  The Department’s use of downstream sales in this case is discussed
above.
212. The Department’s policy is to treat home market sales by an exporter to an affiliated customer
as having been made at arm’s length if prices to that affiliated customer are, on average, at least
99.5 per cent of the prices charged to unaffiliated customers.293  The purpose of the arm’s length test
(also referred to as the 99.5 per cent test) is to de termine whether the affiliation between the seller and
the customer has, in general, affected the pricing of the goods sold to the affiliated customer.  When
the affiliation between a given seller and a given customer does affect pricing, the affected sales arereasonably deemed “not in the ordinary course of trade.”  Thus, the prices associated with those sales
are not used in the calculation of normal value.
213. The Department’s 99.5 per cent arm’s length test is conducted in the following manner:
Step one:  The Department separates each exporter/producer’s customer into two groups:
affiliated customers and unaffiliated customers.  For each affiliated customer, the Department
calculates a weighted average
294 net price for sales of each product (CONNUM295).  All of that
exporter/producer’s sales to unaffiliated customers are combined in one pool, and the Department
calculates a weighted average net price for sales of each product (CONNUM) to the unaffiliatedcustomer group.
Step two:  Working on a customer-specific basis, the Department compares the
weighted-average price of a product sold to an affili ated customer to the weighted-average price of the
same model to the unaffiliated customer group.  Models which are sold only to the affiliated customerprovide no basis for price comparison, and are eliminated from the test.
Step three:  The Department calculates, for eac h affiliated customer and product-specific price
comparison, the ratio of the weighted-average price to the affiliated customer to the weighted-average
price to the unaffiliated group, using the formula of affiliated net price/unaffiliated net price,multiplied by 100.
                                                     
291 Preliminary Determination , 64 Fed. Reg. at 8297 (Exh. JP-11).
292 The relevant Canadian provision states:
if there was not, in the opinion of the Deputy Minister, such a number of sales of like goods made by
the exporter to purchasers described in subparagraph 15(a)(i) {i.e., “purchasers with whom the exporter is notassociated”} who are at the same or substantially the same  trade level as the importer in Canada as to permit a
proper comparison with the sale of goods to the importer, but there was such a number of sales of like goods
made to purchasers described in subparagraph 15(a)(i) who are at the trade level nearest and subsequent to thatof the importer, there shall be substituted for the purcha sers described in paragraph 15(a) purchasers described
in subparagraph 15(a)(i) who are at the trade level nearest and subsequent to that of the importer.
Canada’s Special Import Measures Act, Sect ion 15(b) (WTO Doc. No. G/ADP/N/1/CAN/1) (Exh.
US/B-28(h)) .
293 Anti-Dumping Duties; Countervailing Duties – Final Rule, 62 Fed. Reg. at 27296, 27355 (Exh.
JP-39) .
294 Weighted average is generally defined as "an average computed by counting each occurrence of
each value, not merely as single occurrence of each value."  Stickney, Weil, & Davidson, Financial Accounting
(6th ed. 1991) at 825  (Exh. US/B-34) .
295 A CONNUM is a product model as defined by the Department's matching characteristics.WT/DS184/R
Page A-173
Step four:  On a customer-specific basis, the Department calculates a weighted average of the
ratios calculated in step three for all of the products sold to that affiliated customer (other than
products that were not sold to unaffiliated parties, as noted in step two).   This yields a composite ratio
representing the overall relationship between prices to that affiliated customer and prices to
unaffiliated customers.
Step five:  Sales made to affiliated customers whose overall prices are at least 99.5 per cent of
the overall prices to unaffiliated parties are deemed to be at arm’s length, and all sales to such
customers are retained for use in determining norma l value regardless of whether the price ratio for
individual products is greater or less than 99.5 per cent.  Sales made to customers whose overall prices
do not pass this test are deemed not to be made at arm’s length and thus not made in the ordinary
course of trade.  The Department does not use sales to these customers in determining normal value.Instead, respondents are asked again to report downstream sales made by these affiliates to their
unaffiliated customers, unless one of the exceptions noted above applies.
C. 
THE AGREEMENT IS SUBJECT TO MORE THAN ONE INTERPRETATION AS TO HOW AUTHORITIES
SHOULD DETERMINE IF AN EXPORTER 'S HOME MARKET SALES TO AFFILIATED CUSTOMERS
WERE MADE IN THE ORDINARY COURSE OF TRADE , AND THE ARM 'S LENGTH TEST IS A
PERMISSIBLE INTERPRETATION
214. The Agreement is subject to more than one  interpretation as to how authorities should
determine if an exporter’s home market sales to affiliated customers were made in the ordinary course
of trade, and the arm’s length test is a permissible interpretation.  Article 2 sets forth the generalprovisions of the Agreement which address the determination of dumping.  Article 2.1, in establishing
the basic tenets of the determination of dumping, provides definitions of the term dumping
(“introduced into the commerce of another country at  less than its normal value”) and of the term
normal value (“the comparable price, in the ordi nary course of trade, for the like product when
destined for consumption in the exporting country”).  However, Article 2.1 does not specify how todetermine if home market sales were made in the ordinary course of trade.  The Department,
therefore, must interpret Article 2.1 for purposes of determining whether home market sales to
affiliated customers were made in the ordinary course of trade.  The Department’s arm’s length test,
as described above, constitutes a permissible interpretation.
215. Also, Article 2.1 permits the use of home market downstream sales in order to calculate
normal value.
296  As stated above, this provision defines normal value as “the comparable price, in the
ordinary course of trade, for the like product wh en destined for consumption in the exporting
country.”  Home market downstream sales meet the definition of normal value because the sales price
being used by the Department in the normal value calculation is that of the same product sold by the
exporter through its affiliate for consumption in the home market.  The product has not left the home
market, and the downstream sale is not unreliable based on affiliation.  Japan fails to address this issuein its submission.
216. Although Article 2.2 suggests one example (i.e., certain sales below cost) of transactions
made outside the ordinary course, this is not, nor was it ever intended to be, an exhaustive or even
illustrative list.297  To the contrary, Article 2.2 merely sets forth a single instance where sales may be
                                                     
296 Home market downstream sales to an unaffiliated party may be used by the Department to calculate
normal value when, based on the factors discussed above,  home market downstream sales reflect normal value
more reliably than the transfer price sales.
297 The negotiating history of the Agreement shows that attempts were made to include an illustrative
list of sales considered "outside the ordinary course of trade."  See Amendments to the Anti-Dumping Code:
Submission by the Nordic Countries , GATT Doc. No. MTN.GNG/NG8/W/64 (22 Dec. 1989) at 2-3  (includingWT/DS184/R
Page A-174
considered outside the ordinary course of trade.298  The Agreement, however, imposes no other
limitations or restrictions on the application of the outside the ordinary course provision.  Therefore,
the provisions of Article 2.2 concern what an authority may do in order to disregard home market
sales because they are below cost, and leave open to permissible interpretation what an authority may
do if affiliation has rendered home market sales unreliable.
1. Japan misinterprets the application of Article 2 of the Agreement
217. Japan alleges that the Department’s determination of dumping is inconsistent with Article 2 of
the Agreement, in that the Department employ ed a methodology which improperly excludes certain
home market sales from the calculation of normal value, and replaces such sales with downstream
sales.299  In particular, Japan argues that under Article 2.1, read in conjunction with Article 2.4, “a 0.5
percentage point average price differential is too small a difference upon which to base a finding that
sales to affiliates are not ordinary".300  However, as stated above, Article 2.1 does not specify how to
determine if home market sales were made in the ordinary course of trade, and thus does not compel
that conclusion.  The Department, therefore, must interpret Article 2.1 for purposes of determining
whether home market sales to affiliated customers were made in the ordinary course of trade.  The
Department’s arm’s length test, as described above, constitutes a permissible interpretation.
218. Japan also challenges the arm’s length test under Article 2.4301 of the Agreement.302  The first
sentence of Article 2.4, in particular, provides that “[a] fair comparison shall be made between the
export price and the normal value.”  Japan argues that the methodology applied by the Department in
determining whether home market sales to affiliated customers were made in the ordinary course of
trade does not allow for a fair comparison between export price and normal value.303  In effect Japan
is claiming that the arm’s length test is unfair.
219. In arguing that the 99.5 per cent test is unfair, Japan improperly urges the Panel to impose
upon the United States its own definition of what it considers fair.304  Instead, Article 2.4 itself speaks
                                                                                                                                                                    
the examples of "sales at strongly reduced prices to  liquidate the end of stock," "sales at particularly
advantageous prices having the character of gifts to important interest groupings for the company of business
sector," and "low price sales offers, which are valid for very limited periods of time, to introduce new products")
(Exh. US/B-35) .  Nevertheless, the prevailing view was that "strictly defining 'ordinary course' was almost
impossible and even inappropriate."  Meetings of 31 January-2 February and 19-20 February 1990 , GATT
Doc. No. MTN.GNG/NG8/15 (19 Mar. 1990) at 13 (Exh. US/B-36) .  Negotiators were "not certain that a
detailed examination would lead to a list, be it an exhaustive or illustrative one," and believed "that the proposalto give a positive definition of cases which were not in 'the ordinary course' was certain to lead to controversy in
the Group."  Id.
298 Article 2.2.1 provides, in relevant part, that sales below cost "may be treated as not being in the
ordinary course of trade by reason of price and may be disregarded in determining normal value only if theauthorities determine that such sales are made within an extended period of time in substantial quantities and areat prices which do not provide for the recovery of all costs within a reasonable period of time".
299 Japan Panel Request at 3 (Exh. US/A-1) ; First Submission of Japan at para. 141.
300 First Submission of Japan at para. 160.
301 Article 2.4 of the Agreement provides, in relevant part, that “a fair comparison shall be made
between the export price and the normal value.  This comparison shall be made at the same level of trade,normally at the ex-factory level, and in respect of sales made at as nearly as possible the same time.  Dueallowance shall be made in each case, on its merits, for differences which affect price comparability, including
differences in conditions and terms of sale, taxation, leve ls of trade, quantities, physical characteristics, and any
other differences which are also demonstrated to affect price comparability”.
302 First Submission of Japan at para. 165.
303 Id. , para. 167.
304 See 19 U.S.C. 1677b(a): “In determining under this title whether subject merchandise is being, or is
likely to be, sold at less than fair value, a fair compar ison shall be made between the export price or constructed
export price and normal value.”  (Exh. JP-4(j)) .WT/DS184/R
Page A-175
to this issue, providing that comparisons are fair if made in accordance with the requirements of that
provision.  For example, Article 2.4 requires that the comparison shall take into consideration level of
trade, the contemporaneity of sales, differences in circumstances of sale, and other differences
demonstrated to affect price comparability.  The Department’s margin calculation takes all of these
things into consideration.305  Since all comparisons of export price or constructed export price to
normal value based on downstream sales complied with the requirements of Article 2.4, suchcomparisons were fair.
220. Moreover, although not required by the Agreem ent, the Department's arm's length test also
takes into consideration factors enumerated at Ar ticle 2.4.  Indeed, the test's methodology, which
involves ex-factory price comparisons of a producer's sales weight-averaged by product, is virtually
identical to the margin calculation itself.  This is because the margin calculation and the arm's length
test have parallel objectives: the former discerns whether there has been significant pricediscrimination between home market and US sales in the same way that the latter discerns whether
there has been significant "price discrimination" between affiliated and unaffiliated customer sales.
221. In the context of an investigation, the only other meaningful difference between the margin
calculation and the arm's length test is in what the Department considers "significant."  Whereas theformer treats margins under 2 per cent as de minimis , the latter utilizes a 0.5 per cent threshold (i.e.,
sales to affiliated customers are excluded only if, on average, they are more than 0.5 per cent below
the average arm's length price).  However, the 0.5 per cent de minimis  standard is not, as Japan now
contends, "too small".306  Indeed, it is the very same de minimis  standard as that applied to the margin
calculation in the context of administrative reviews -- a standard that has been specifically upheld asreasonable by a WTO panel.
307  Because the nature of affiliation does not vary between investigations
and administrative reviews, it would be absurd to in clude sales to a particular affiliated customer in an
investigation (using a 2 per cent de minimis  threshold) that would otherwise be excluded in a review
(using a 0.5 per cent de minimis  threshold).  There is thus no reason to depart, for purposes of
investigations, from the application of the arm's length test's 0.5 per cent de minimis threshold used inadministrative reviews.
308
                                                     
305 See, e.g., LTFV Preliminary Determination , 64 Fed. Reg. at 8294  (Exh. JP-11) .
306 First Submission of Japan at para. 160.
307 See Dynamic Random Access Memory Semiconductors of one Megabit or Above from Korea ,
WT/DS99/R (Jan. 29, 1999) at p. 150, para. 6.90.  The panel held that, because the function of Article 5.8's 2
percent de minimis  standard was to determine "whether or not an exporter is subject to an anti-dumping order,"
it did not preclude Members from adjusting the threshol d for other purposes.  Specifically, the Panel found
"logical explanations for applying different de minimis  standards in investigations and Article 9.3 duty
assessment procedures," and upheld the application of a 0.5 percent de minimis  test in administrative reviews.
Id.  Similarly, Article 5.8 contains no de minimis  standard for the comparisons involved in determining whether
sales have been made outside th e "ordinary course of trade".
308 It has been noted that the heightened 2 percent de minimis  standard for the final margin calculation:
recognized that for purposes of investigations, a higher (more forgiving) standard of
"actionable dumping" (which is what a de minimis   standard is) was appropriate.  This
recognition is consistent with the fact that the calculation of a dumping margin necessarilyinvolves scores (and in some cases, hundreds) of discrete factual determinations, some ofwhich may involve situations where the outcome is close and the exercise of human judgment
is unavoidable.  For example, in the case of an adjustment to normal value, it may be a "close
call" as to whether a particular expense is direct or indirect or whether the amount of theadjustment has been properly documented.  This inevitable aspect of the anti-dumping processarguably makes it unfair to subject parties involved (perhaps for the first time) in an initialinvestigation of dumping to an overly rigorous standard of actionable dumping.
Dynamic Random Access Memory Semiconductors of one Megabit or Above from Korea , WT/DS99/R
(29 Jan. 1999) at 127, Para. 4.661 (restating the position of the United States).  There is no similar justificationWT/DS184/R
Page A-176
2. Japan fails to prove that the Department's current arm's length test is not permissible
interpretation of Article 2.1
222. As explained above, the purpose of the arm’s length test is to determine whether the
affiliation between a given seller and a given buyer affects pricing in general between those firms.309
However, Japan argues that the 99.5 per cent test creates “inherent distortions".310  Japan also claims
that since the test considers higher prices to be normal no matter how high, and tests only lower
prices, it produces absurd results.311  Japan proposes that a new test be applied to determine whether
home market sales by exporters to affiliates were made at arm’s length prices, which it incorrectly
claims the Department did not seriously consider.312
223. In fact, the Department did seriously c onsider Japan’s proposed test, and found it
fundamentally flawed.  First, under Japan’s proposed product-specific approach, affiliation could befound to have affected sales prices for some models, but not for others, even though the customer in
both cases is the same.
313 Because affiliation involves relationships between firms, the focus of the
Department’s arm’s length test is on the overall relationship with a particular customer, not the price
of each particular product.  In all cases, the focus of the Department’s arm’s length test, and thus the
determination of whether home market sales to affiliated customers were made in the ordinary courseof trade, is on the relationship between the seller and the customer, not on a particular product.
314
Therefore, under its methodology, the Department makes one up-or-down call on pricing to anaffiliated customer: either there is arm’s length pricing between the producer and that customer or
there is not.
315  Rather than looking to pricing at the product-specific level, the Department reasonably
prefers to focus on the overall relationship.  This approach does not preclude findings that particularsales to a customer are outside the ordinary course of trade for other reasons.  It only means that the
arm’s length test has a specific purpose.  Such an interpretation of the “ordinary course of trade”
provision of Article 2.1, while perhaps not the only reasonable interpretation, is certainly a
permissible one.
224. Second, Japan argues that its standard deviation analysis more properly accounts for what it
calls "variability in prices".
316  This line of argument reinforces the point that there is more than one
interpretation of the meaning of “ordinary course of trade,” and that the Department’s arm’s length
test is a permissible interpretation.  Nevertheless, Japan submits at Exhibit JP-53 descriptions of
several hypothetical situations where such price variability causes affiliated-party sales to fail theDepartment's 99.5 per cent test.  However, Japa n's proposed methodology errs significantly on the
                                                                                                                                                                    
for having a heightened de minimis  standard for the arm's length test in investigations.  Article 5.8 already
provides a sufficient "cushion" to protect producers from anti-dumping orders in "close calls".
309 LTFV Final Determination , 64 Fed. Reg. at 24342 (Exh. JP-12).
310 First Submission of Japan at para. 168.  See also  Affidavit of Robert H. Huey, Counsel to KSC
(Exh. JP-44) ; Affidavit of Daniel L. Porter, Counsel to NKK (Exh. JP-28) ; and Affidavit of Daniel J. Plaine,
Counsel to NSC (Exh. JP-46) .
311 First Submission of Japan at para. 168.  This  argument underscores Japan’s misinterpretation of
Article 2.  Specifically, Article 2.1 says that “a product is to be considered as being dumped, i.e, introduced into
the commerce of another country at less than its normal value...”  Therefore, the determination of dumping is
not concerned with sales prices higher than normal value.
312 See First Submission of Japan at 47 n.144, 50 n.153.
313 See Final Determination , 64 Fed. Reg. at 24342 (Exh. JP-12) .
314 See Id.
315 Id.
316 First Submission of Japan at para. 169.  The standard deviation analysis is completely reliant on the
model-specific approach rejected above, because standa rd deviation analysis requires a symmetrical, bell-shaped
frequency distribution of data, which is unlikely under the customer-specific approach.  See LTFV Final
Determination , 64 Fed. Reg. at 24342 (Exh. JP-12)  .WT/DS184/R
Page A-177
side of inclusion – it excludes only those affiliated-p arty prices that can be shown to a high degree of
certainty not to have resulted from normal price variability.  In effect, the proposed statistical
approach simply lowers the threshold at which sales to affiliated parties will be considered to be arm’s
length sales.  While lowering the threshold for accepting affiliated-party sales may provide increased
certainty that those sales prices excluded from the normal value calculations were in fact influenced
by affiliation (rather than by normal price variability), it provides no assurance that those sales prices
included were not so influenced.317  The Department’s 99.5 per cent test is designed to ensure that
sales outside the ordinary course of trade are not used as normal value; the test Japan urges the Panel
to impose falls short of that goal.
225. Unlike the Japanese proposal, the Department’s method is consistent with the normal process
under the Agreement for determining dumping margins.  Moreover, the margin calculation after
which the arm's length test is modelled does not use such a statistical methodology.  Dumping occurswhere export price is below normal value by a non- de minimi s margin calculated on an aggregate
weighted average basis (such as that used in the 99.5 per cent test), whether or not that margin
resulted from a practice of price discrimination or was a consequence of price variability.  Indeed, the
problems described in the hypothetical situations at Exhibit JP-53 are also inherent in the margin
calculation itself.   The margin calculation, which is prescribed by the Agreement, contains no
statistical mechanism such as that now proposed, by which to identify "outliers" that could not have
resulted from price variability.  There is no reason why the arm's length test must operate differently.
226. It is helpful to briefly illustrate how the Department’s test addresses the problem of price
variability.  Since an average is involved in the arm’s length test, some individual sales will be abovethe average and some individual sales will be below the average.  It is likely that some sales, though
made at arm’s length prices, will be found to be less than 99.5 per cent of the average price of
comparable products to unaffiliated customers, but will still be included in the normal value
calculation because, based on the overall weighted average, sales to that affiliate pass the 99.5 per
cent test and are therefore deemed to be at arm’s length.  This result is the Department’s normalpractice under the arm’s length test.
227. The use of price averages inherently accounts for price variability.  Thus, the Department’s
use of price averages and a 99.5 per cent baseline for determining whether the sales were arm’s length
transactions for purposes of “ordinary course of trade”, rather than running yet another statisticalcalculation in order to compute a standard deviation to use as the baseline, accounts for price
variability in a reasonable and fair manner whil e maintaining the focus on the overall relationship
between affiliated parties.
228. Japan also complains that the 99.5 per cent test is unfair because "it tests only lower prices,
and considers higher prices to be normal no matter how high".318  For example, it asserts that where
the arm's length price is $300 per ton, a weighted-average affiliated-party price of $298 per ton would
be deemed outside the ordinary course of trade, while a price of $500 per ton would be considered
ordinary.319  This is not necessarily the case, since aberrationally high prices, as well as prices that do
not pass the arm’s length test, may be considered by the Department to be outside the ordinary course
of trade.320  The Japanese respondents in this case, however, have never contended that any of their
                                                     
317 See LTFV Final Determination , 64 Fed. Reg. at 24342 (Exh. JP-12)  ("by lowering the threshold for
accepting affiliated party sales under their statistical approach from the Department's current standard, NKK's
test would increase the likelihood of testing error when pricing to affiliated and unaffiliated customers is not thesame ( i.e., the error of finding that affiliation has not affected price when, in fact, it has)").
318 First Submission of Japan at para. 168.
319 Id. at 48, para. 161.
320 See the Statement of Administrative Action (SAA) at 834 (stating that examples of sales made
outside the ordinary course of trade includes  "merchandise sold at aberrational prices")  (Exh. US/B-37) .WT/DS184/R
Page A-178
affiliated-party sales prices were, in fact, aberrationally high.  In any event, as Japan itself
acknowledges, "[p]rices of downstream sales can only be higher than the prices of a producer's direct
sales, in order to cover the additional transaction costs and profit".321  Thus, this aspect of the
Department’s test cannot be unfair to respondents because they can only benefit from the fact that the
structure of the arm's length test prevents some prices to affiliated home market customers from being
replaced by what by their own admission would be higher prices to downstream customers.
Furthermore, because the 99.5 per cent arm's length test does not automatically reject all affiliated
party sales, it is more favourable to the exporting country than the practices of Canada and Mexico,
which always require the use of the higher downstream prices.
229. The 99.5 per cent test imposes a reasonable requirement on affiliated party prices: on average,
they essentially must be as high as prices to unaffiliated parties.322  The test has been consistently
applied in a reasonable manner by the Department for a number of years.  In addition, the 99.5 percent test provides predictability, in that exporters fully understand the threshold at which their home
market sales to affiliated customers will be considered arm’s length transactions.  The Department’s
approach is reasonable and thus represents a permissible interpretation of Article 2.1 of the
Agreement.
3. Japan's claim that use of downstream sales is unfair lacks merit
230. Article 2.1 of the Agreement defines normal value as “the comparable price, in the ordinary
course of trade, for the like product when destined for consumption in the exporting country.”
Downstream sales of the like product to the first unrelated buyer for consumption in the home market
clearly come within this definition.  Hence, the Agreement authorizes the use of such downstream
sales in the calculation of normal value.
231. Japan argues that the use of affiliates’ downstream home market sales in lieu of sales to
affiliated parties is not permitted by Articles 2.2 and 2.3.
323  In particular, Japan argues that, because
Article 2.3 allows replacement of an exporter’s sales to an affiliate with the affiliate’s resales andArticle 2.2 says nothing about replacement of home market sales to an affiliate with the affiliate’s
resales, the Agreement does not allow such replacement.
324  However, Article 2.2 discusses when to
use third country sales and constructed value, and Article 2.2.1 deals only with sales below cost.
Neither provision explains what to do when sales, such as affiliated-customer sales, are excluded for
reasons other than being made at below cost prices.  As noted above, Article 2.2.1 is not, nor was itever intended to be, an exhaustive or even illustrative list of sales that could be considered outside the
ordinary course.  Therefore, the Agreement is subject to the permissible interpretation of the
Department as to the use of home market downstream sales through affiliated customers.
232. Japan refers to the Latin maxim expressio unius est exclusio alterius , which can be a guide to
the intent of the parties where it may be assumed that the parties, in listing a number of items but not
others, deliberately intended to exclude the non-listed items.
325  Japan suggests that Article 2.3 evinces
an intention of the parties to exclude the possibility that, where home market rather than export sales
are "unreliable because of association," members could calculate normal value based on the price at
which the foreign like product is "first resold to an independent buyer."  However, it should be noted
that expressio unius est exclusio alterius , as Lord McNair also remarked in his book excerpted by
Japan at Exhibit JP-54, must be "applied with caution".326  Indeed, the US Supreme Court has noted
                                                     
321 First Submission of Japan at para. 170.
322 LTFV Final Determination,  64 Fed. Reg. at 24342-43 (Exh. JP-12) .
323 First Submission of Japan at para. 170.
324 Id. at 49, para. 164.
325 Id.
326 Lord McNair, The Law of Treaties  400 (1961) (Exh. JP-54) .WT/DS184/R
Page A-179
that "the principle expressio unius est exclusio alterius  'is a questionable one in light of the dubious
reliability of inferring specific intent from silence'".327 It is significant that the rules of the Vienna
Convention do not refer to the maxim.  The purpose of treaty interpretation is, as stated in Article 31
of the Vienna Convention, to give effect to the intention of the parties to the treaty as expressed in
their words read in context.
233. Indeed, the context of Article 2.3 reveals that the provision is limited to export sales for
reasons other than the prohibition of the use of downstream home market sales.  First, it would have
been redundant for Article 2.3 to refer to home market affiliated-party sales, which may already be
rejected as outside "the ordinary course" and replaced by downstream sales pursuant to Article 2.1.
Second, the purpose of Article 2.3 is to make explicit the authority to construct export price, as a
prelude to discussing export sale adjustments in Article 2.4.328  Thus, it cannot be inferred from the
silence of Article 2.3 silence regarding home market sales that the parties intended to preclude theinclusion of downstream sales in the calculation of normal value.
234. Japan suggests that where affiliated customer sa les are rejected as outside the ordinary course
of trade, the Agreement requires the calculation of normal value on the basis of "sales to a third
country" or "constructed value" rather than downstream sales.
329  However, such a practice would
conflict with the Agreement's clear preference to calculate normal value based on home market sales
prices.  Article 2.2 plainly states that normal value may be based on third-country sales prices or on
constructed value "when there are no sales of the like product in the ordinary course of trade in the
domestic market of the exporting country, or when...such sales do not permit a proper comparison".Where downstream home market sales made in the ordinary course of trade exist, the Agreementpermits their use, rather than the use of constructed value or third country sales.  As explained below,
downstream home market sales allow for a proper comparison here because the Department
determined that home market sales were made at the same level of trade as the export transactions or
adjustments were made as appropriate.  Japan's proposed inference based on the expressio unius est
exclusio alterius  maxim is, therefore, inconsistent with this part of the Agreement.
235. Moreover, Japan's construction based on the expressio unius est exclusio alterius  maxim
could create absurd consequences in violation of Article 32(b) of the Vienna Convention.  A
prohibition on the use of downstream sales to calculate normal value would enable producers in
exporting countries to exclude from normal value all of their sales destined for consumption in thehome market simply by making them through affiliated resellers.  The absurd result would be that in
every such case, normal value would have to be calculated based on third country sales or constructed
value.
236. Finally, Japan argues that the downstream sales are at different levels of trade, and that the
Department is not taking this factor into accoun t in calculating normal value, such that a “fair
comparison” under Article 2.4 is not being made with respondent’s US sales.
330  This is not so.  The
Department determines normal value based on sales in the comparison market at the same level of
trade as the EP or CEP transaction, to the extent possible.331  If the comparison market sales are at a
different level of trade, the Department makes a level of trade adjustment under Section 773(a)(7)(A)
                                                     
327 Pauley v. Bethenergy Mines, Inc., 501 US 680, 703 (1991) (quoting Cass R. Sunstein, Law and
Administration After Chevron, 90 Colum. L. Rev. 2071, 2109, n. 182 (1990))  (Exh. US/B-38)
328 Article 2.4 provides that "in the cases referred to in paragraph 3, allowances for costs, including
duties and taxes, incurred between importation and resale, and for profits accruing, should also be made."
329 First Submission of Japan at para. 162.
330 First Submission of Japan at para. 165.
331 19 U.S.C. §1677b(a)(1)(B)(i); see also  Preliminary Determination , 64 Fed. Reg. at 8297
(Exh. JP-11) .WT/DS184/R
Page A-180
of the Act, where appropriate.332  In this case, the Department received no requests for level of trade
adjustments, but nevertheless conducted a level of trade analysis.333   Therefore, because the
Department conducts a detailed level-of-trade analysis for use in making its prior to making the
normal value calculation,  considers level of trade in making its margin comparisons, and makes
appropriate adjustment in accordance with Article 2.4, the alleged “apples-to-oranges comparison.334
Japan claims takes place when the Department uses affiliates’ downstream sales does not occur.
Japan ignores these aspects in its submission to the Panel.
4. Conclusion
237. As made clear by Article 2.3 of the Agreement, affiliated party transactions are inherently
suspect.  For this reason, the United States, like many other countries, excludes as outside the ordinary
course of trade those affiliated party sales not made at arm's length.  The 99.5 per cent test is
analogous to the margin calculation, which itself is  prescribed by the Agreement, and is therefore a
perfectly reasonable methodology by which to determine whether affiliated party sales are in fact at
prices below arm's length.  Under the applicable standard of review, the Department's methodology
must be upheld as a permissible interpretation of the Agreement.
VI. THE DEPARTMENT'S CRITICAL CIRCUMSTANCES DETERMINATION WAS
CONSISTENT WITH ARTICLE 10 OF THE ANTI-DUMPING AGREEMENT
238. The remedy of imposing anti-dumping measures to counteract injurious dumping usually
takes effect after an administering authority ma kes a preliminary determination of dumping and
consequent injury to the domestic industry.  However, the effectiveness of this remedy is seriously
undermined if exporters are able to dump massive quantities of the subject merchandise prior to theimposition of provisional measures.  For this reason, Articles 10.6 and 10.7 of the Anti-dumping
Agreement provide that where such critical circumstances exist, anti-dumping duties may be imposed
retroactively on imports that enter during the 90 days prior to the preliminary determination.  Without
these provisions for retroactive relief, exporters could dump massive quantities of their merchandise
in anticipation of an investigation or as soon as the investigation is initiated with no risk ofanti-dumping duties being imposed until the date of the preliminary determination.
239. In the petition filed in this case, the US steel industry alleged that critical circumstances
existed with respect to Japanese imports of hot-rolled steel and provided over 800 pages of extensive
data, documentation, and analysis showing high levels of dumping, massive import surges, decreasingprices and public knowledge of the impending anti-dumping investigations due to the existing
economic crisis.  The Department promptly reviewed the allegations and the voluminous supporting
facts and documentation, sought additional clarifying information, and on 30 November 1998,
published an affirmative preliminary finding of critical circumstances pursuant to Section 733(e) of
the Act, the US statute which implements Articles 10.6 and 10.7 of the Anti-Dumping Agreement.
This “early” preliminary critical circumstances determination (i.e., prior to the issuance of the
preliminary determination of dumping) was based upon the evidence contained in the petition and
amendments thereto, the USITC preliminary determination of threat of injury, and other publicly
available information before the Department at that time.  However, although the Department issued
the preliminary determination of critical circumst ances prior to the issuance of the preliminary
determination of dumping, it did not instruct the US Customs Service to require bonds or any other
security for the payment of estimated anti-dumping duties until after the preliminary determination of
                                                     
332 19 U.S.C. §1677b(a)(7)(A); see also Preliminary Determination , 64 Fed. Reg. at 8297
(Exh. JP-11) .
333 See Department’s Memorandum on Level of Trade , (12 February 1999)  (Exh. US/B-39) ; see also
LTFV Preliminary Determination, 64 Fed. Reg. at 8297  (Exh. JP-11) .
334 First Submission of Japan at para. 170; see also  Id. at 47, footnote 145.WT/DS184/R
Page A-181
dumping.  Additionally, because the USITC (in its final determination of injury) later found that
critical circumstances did not exist, no definitive  anti-dumping duties were ever assessed and all
bonds were released and all cash deposits were refunded.
240. Nevertheless, Japan claims that the Department’s “early” critical circumstances determination
in this case was impermissible under Articles 10.6 and 10.7 of the Anti-Dumping Agreement.  Japanfurther claims that the standards governing preliminary critical circumstances determinations under
Section 733(e) of the Act are inconsistent, on their face, with the requirements of Articles 10.6 and
10.7.  As demonstrated below, each of the arguments asserted by Japan is without merit.
A. 
ARTICLES 10.6 AND 10.7 OF THE ANTI -DUMPING AGREEMENT PERMIT AUTHORITIES TO TAKE
MEASURES NECESSARY FOR THE RETROACTIVE APPLICATION OF ANTI -DUMPING DUTIES AT
ANY TIME AFTER THE INITIATION OF AN INVESTIGATION
241. Under the Anti-Dumping Agreement, an administering authority normally may begin to take
provisional anti-dumping measures with respect to entries of subject merchandise only after making
an affirmative preliminary determination of dumping and injury to the domestic industry.335  Thus,
under normal circumstances, cash deposits or some other form of security may only be collected from
the time of the preliminary determination336, and definitive anti-dumping duties are not imposed until
the administering authority has made a final affirmative determination of dumping and injury.337
242. However, where critical circumstances exist, Articles 10.6 and 10.7 of the Agreement provide
for the imposition of anti-dumping measures retroactively for a period of up to 90 days prior to the
preliminary determination of dumping.  The purpos e of these provisions is to ensure that the
anti-dumping remedy is not undermined by massive import surges that occur in anticipation of, or in
response to, the initiation of an investigation.
243. Under Article 10.6 of the Agreement, an administering authority may impose anti-dumping
duties retroactively if it finds that two conditions are satisfied.  Specifically, the administeringauthority must find that:
(1) there is a history of dumping which caused injury or that the importer was, or should
have been, aware that the exporter practices dumping and that such dumping would
cause injury; and
(2) the injury is caused by massive dumped imports of a product in a relatively short time
which in light of the timing and the volume of the dumped imports and other
circumstances (such as rapid build-up of inventories of the imported product) is likely
to seriously undermine the remedial effect of the definitive anti-dumping duty to be
applied, provided that the importers concerned have been given an opportunity to
comment.
244. Article 10.7 of the Agreement further provides that “{t}he authorities may, after initiating an
investigation , take such measures as the withholding of appraisement or assessment as may be
necessary to collect anti-dumping duties retroactively, as provided in paragraph 6, once they have
sufficient evidence  that the conditions set forth in that paragraph are satisfied.” (Emphasis added).
Pursuant to Article 10.7, therefore, an administering authority may make a determination that critical
circumstances exist and may take those measures that are necessary to secure potential definitive
                                                     
335 See Articles 7.1 and 10.1 of the Agreement.
336 See Articles 7.1 and 7.2 of the Agreement.
337 See Article 10.2 of the Agreement.WT/DS184/R
Page A-182
anti-dumping duties at any time after the initiation of an investigation.338  The only restriction is that
retroactive duties may not be applied to merchandise entered before the date on which the
investigation was initiated.339
B. THE US CRITICAL CIRCUMSTANCES STATUTORY PROVISIONS ARE CONSISTENT WITH ARTICLES
10.6 AND 10.7 OF THE AGREEMENT
245. The US statutory framework for critical circ umstances determinations provides a remedy of
retroactive anti-dumping duties to combat surges of dumped imports that is consistent with Article 10
of the Anti-Dumping Agreement.  Specifically, the US statute governing preliminary determinations
of critical circumstances closely follows Articles 10.6 and 10.7 of the Agreement.
246. As noted above, in order to provide an imme diate response to import surges, Article 10.7 of
the Agreement authorizes administrative authorities to take appropriate measures for the retroactive
application of anti-dumping duties at any time after the initiation of an investigation if there is
sufficient evidence that critical circumstances exist under Article 10.6.  As such, Article 10.7 of the
Agreement necessarily provides for an early or preliminary critical circumstances determination.
Section 733(e) of the Act likewise provides for such an early or preliminary determination of critical
circumstances under US law.  Specifically, Secti on 733(e) provides, in relevant part, as follows:
SEC. 733. PRELIMINARY DETERMINATIONS(e) CRITICAL CIRCUMSTANCES
(1) IN GENERAL. - If a petitioner alleges critical circumstances in its original
petition, or by amendment at any time more than 20 days before the date of a final
determination by the administering authority, then the administering authority shall
promptly (at any time after the initiation of the investigation under this subtitle)
determine, on the basis of the information avai lable to it at that time, whether there is
a reasonable basis to believe or suspect that-
(A)(i) there is a history of dumping and material injury by reason of dumped
imports in the United States or elsewhere of the subject merchandise, or
(ii) the person by whom, or for whose account, the merchandise was imported knew
or should have known that the exporter was selling the subject merchandise at lessthan its fair value, and that there was likely to be material injury by reason of such
sales, and
(B) there have been massive imports of the subject merchandise over a
relatively short period.
(Emphasis added).
247. Section 733(e)(1) of the Act, in accordance with Article 10.7 of the Agreement, directs the
Department of Commerce to make a preliminary critical circumstances determination based upon “the
information available to it at that time.”  Thus, where a critical circumstances allegation is made, the
Department will promptly and thoroughly analyze the facts in the allegation, the petition (including
                                                     
338 For example, an administering authority may, at any time after initiation, suspend liquidation ( i.e.,
withhold appraisement or assessment) of subject entries if  there is sufficient evidence that critical circumstances
exist under Article 10.6 of the Agreement.
339 Article 10.8 of the Agreement.WT/DS184/R
Page A-183
the section pertaining to injury to the domestic industry)340, the USITC preliminary determination of
injury341, and other publicly available information ( e.g., press reports, US Census Bureau and US
Customs Service data, etc.) to determine whether critical circumstances exist.  If there is insufficient
evidence of critical circumstances, the preliminary critical circumstances determination will be
negative.  However, if the record facts are reliable and are sufficient evidence of critical
circumstances, the statute authorizes an affirmative preliminary determination of criticalcircumstances.
248. Finally, although Article 10.7 of the Agreement authorizes an administering authority to take
measures, such as the withholding of appraisement or assessment of duties, at any time after the
initiation of an investigation where critical circumstances are found, the US statutory provision is
more conservative.  Section 733(e)(2) of the Act directs the Department of Commerce to take action
upon an affirmative preliminary critical circumstance s finding only at the time of the issuance of a
preliminary determination of dumping.
342  Thus, although appraisement or assessment of entries of
merchandise can properly be suspended prior to a preliminary determination under Article 10.7 of the
Agreement, the US statute restricts such measures.343  In fact, in this case, no measures were taken on
imports from the Japanese respondents prior to Commerce’s Preliminary Determination.344
249. In sum, Section 733(e) of the Act provides for the Department to make a preliminarydetermination as to whether critical circumstances ex ist based on sufficient evidence in the record and
consistent with the requirements of Articles 10.6 and 10.7 of the Anti-Dumping Agreement.  As
demonstrated below, because the Department’s preliminary critical circumstances determination in
                                                     
340 Indeed, even prior to initiating an antidumping investigation, the Department takes steps to confirm
and corroborate the allegations and facts in the petition.  See, e.g., Initiation Checklist , at 15 (Exh. US/B-18).
341 Shortly following the initiation of an anti-dumping investigation by the Department of Commerce,
the International Trade Commission issues its preliminary finding regarding injury to the domestic industry.Thus, prior to issuing the preliminary determination of  critical circumstances, the Department of Commerce will
generally have the USITC’s analysis of domestic injury.
342 Section 733(e)(2) of the Act provides as follows:
SEC. 733. PRELIMINARY DETERMINATIONS
(e) CRITICAL CIRCUMSTANCES
(2) SUSPENSION OF LIQUIDATION. - If the determination of the
administering authority under paragraph (1) is affirmative, then any suspension ofliquidation ordered under subsection (d)(2) shall apply, or, if notice of such
suspension of liquidation is already published, be amended to apply, to unliquidated
entries of merchandise entered or withdrawn from warehouse, for consumption on orafter the later of-
(A) the date which is 90 days before the date on which the
suspension of liquidation was first ordered, or
(B) the date on which the notice of the determination to initiate the
investigation is published in the Federal Register.
343 Japan argues that the US statute requires Commerce to wait until the preliminary determination of
dumping because the Agreement requires such.  See First Submission of Japan at 51, n.156.  This contention is
incorrect.  As explained above, Article 10.7 of the Agre ement clearly permits preliminary critical circumstances
determinations at any time after initiation and provides that authorities may take necessary measures at that
time.  The fact that the US statute directs Commerce to issue instructions to the Customs Service in the first
instance at the preliminary determination of dumping is irrelevant to what is permitted by Article 10.7.Commerce only recently revised its policy to take advantage of the remedy provided by Article 10.7 ( i.e., early
critical circumstances decisions), after finding that such  policy was necessary in order to respond adequately to
unfair import surges.  See Change in Policy Regarding Timing of  Issuance of Critical Circumstances
Determinations,  63 Fed. Reg. 55364 (Oct. 15, 1998) (“ Critical Circumstances Policy Bulletin ”) (Exh. JP-3) .
344 See LTFV Preliminary Determination , 64 Fed. Reg. at 8299 (JP-11) .WT/DS184/R
Page A-184
this case was made in accordance with Section 733(e) of the Act, it was fully in accordance with
Articles 10.6 and 10.7 of the Agreement.
C. THE DEPARTMENT 'S PRELIMINARY DETERMINATION OF CRITICAL CIRCUMSTANCES IN THIS
CASE WAS FULLY IN ACCORDANCE WITH ARTICLES 10.6 AND 10.7 OF THE ANTI -DUMPING
AGREEMENT
250. Together with its petition seeking relief from injurious dumping, the US hot-rolled steel
industry provided extensive documentation and data showing high levels of dumping, massive import
surges, decreasing prices, and public knowledge of the impending anti-dumping investigation.
Consistent with its obligations under Articles 10.6 and 10.7 of the Anti-Dumping Agreement and
Section 733(e) of the Act, the Department promptly analyzed the evidence in the petition, the
USITC’s finding of threat of material injury and other publicly available data and preliminarily
determined that critical circumstances existed based on the substantial evidence available to it.345
251. The petition in this case contained over 800 pages of data, documentation, and analysis, withapproximately 700 pages of that being purely fact ual documentation.  Such documentation included
an extensive Japanese market research report detailing actual transaction prices for hot-rolled steel in
Japan (with product-specific information pertaining to physical characteristics, inland freight charges,packing costs and credit terms)
346, an actual offer for sale in the United States of Japanese-produced
hot-rolled steel347, affidavits348, Harmonized Tariff Schedule and US Census Bureau import
statistics349, national and international press reports350, Financial Disclosure Reports on major
Japanese producers (NSC, NKK, KSC and Sumitomo)351, consulting firm reports regarding the
domestic and foreign steel industries352, and published articles pertaining to metallurgy and
steel-making.
252. Upon receiving the petition, the Department analyzed the evidence provided, and determined
that additional explanation and factual information were needed.  The Department thus sent the
petitioners a questionnaire (“deficiency questionnaire”) requesting, among other things, additionalsupporting documentation pertaining to claimed import volumes, material injury, and knowledge by
                                                     
345 Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65751 (Exh. JP-9) .
346 The original market research report in Exhibit 14 to Volume 1 of the petition contains sensitive
business confidential information.  (Exh. US/B-40(a)).  A public summary of the exhibit has been provided
(“Public Summary of the Pricing Study on Japanese Hot-Rolled Carbon Steel Flat Products ”) along with a
Confidential Version of Figure 2 and Exhibit 16 to the petition, which includes ranged numbers.  Both the
Public Summary  and the Confidential Version are attached at Petition Volume 1, Exhibit 14.  (Exh.
US/B-40(a)).   As explained in the Public Summary of the Pricing Study on Japanese Hot-Rolled Carbon Steel
Flat Products,  “Exhibit 14 of the petition contains a pricing study on hot-rolled carbon steel flat products in the
Japanese market.  Specifically, it contains the actual tran saction prices for hot-rolled carbon steel flat products
produced and sold by Nippon Steel Corporation (“NSC”) and Nippon Kokan (“NKK”) . . . {and} a descriptionof the methodology used to prepare the pricing study, which shows that a market researcher with decades of
experience in Japan employed recognized research techniques to develop the data in the study and to
cross-check those data to ensure maximum accuracy.”  Public Summary of the Pricing Study on Japanese
Hot-Rolled Carbon Steel Flat Products,  at 1-2.  Petition, Volume 1 at Exhibit 14. (Exh. US/B-40(a)).
347 See Petition, Volume 1 at Exhibit 7 (Exh. US/B-40(a)) .
348 See, e.g. , Petition, Volume 1 at Exhibits 7, 13 (Exh. US/B-40(a)) ; Volume 2 at Exhibit 14, (Exh.
US/B-40(b)) .
349 See, e.g.,  Petition, Volume 1 at Exhibits 4-6, 1,  (Exh. US/B-40(a)) ; Volume 2 at Exhibits 1-3 (Exh.
US/B-40(b)) ; Volume 3 at Exhibit 6  (Exh. US/B-40(c)) .
350 See, e.g. , Petition, Volume 2 at Exhibits 7-8, 11, 16, 20, 24, 25, 40,  (Exh. US/B-40(b)) ; Volume 3 at
Exhibits 1-5, 9, (Exh. US/B-40(c)) .
351 See, Petition, Volume 2 at Exhibits 28-31, (Exh. US/B-40(b)) .
352 See Petition, Volume 2 at Exhibits 17 and 39 (Exh. US/B-40(b)) .WT/DS184/R
Page A-185
Japanese producers of the potential investigation.353  In response to the deficiency questionnaire, the
petitioners filed amendments to the petition on 9 October 1998 and 14 October 1998 containing
additional supporting documentation as requested.
253. In reaching its preliminary determination as to whether critical circumstances existed, the
Department recognized the need to ensure that the anti-dumping remedy was not undermined in thiscase by a sudden flood of massive imports.  Based on the evidence before it, the Department found a
massive surge in import volumes in which “imports of hot-rolled steel from Japan increased by more
than 100 per cent".
354  This was more than six times greater than the 15 per cent increase needed to
establish massive imports under the Department’s established practice.355  The Department also found
that importers knew or should have known both that the respondents were selling the subject
merchandise at less than fair value and that there was likely to be material injury.356  It based this
determination on the fact that the dumping margins documented in the petition were in excess of25 per cent, on the USITC’s preliminary determination of threat of injury, and on other publicly
available information, including “numerous press reports . . . regarding rising imports, falling
domestic prices resulting from rising imports, and domestic buyers shifting to foreign suppliers".
357  It
also considered comments submitted by the respondents on this issue.358  In other words,  the
Department determined that it was proper to issue a preliminary affirmative determination of criticalcircumstances only after analyzing the volume of corroborated evidence showing that critical
circumstances existed and in recognition of the need for immediate action.  Its determination was
supported by sufficient evidence and was consistent with Articles 10.6 and 10.7 of the Anti-dumping
Agreement.
254. Japan argues that the Department’s determination of critical circumstances violated the
Agreement in that: (1) a preliminary critical circumstances determination must be based on a
preliminary finding of current material injury, rather than threat of injury; (2) Commerce’s
determination was not supported by sufficient evidence as required by Article 10.7 of the Agreement;
and (3) the standards  for critical circumstances determinations in the US statute, on their face, fail tomeet the standards in Articles 10.6 and 10.7 of the Agreement.
359  As we show below, each of these
arguments is without merit.
1. Article 10.6 of the Agreement does not prohibit a finding of critical circumstances where
there is a threat of injury to a domestic industry
255. Japan claims that Commerce “ignored” the USITC’s determination of no current material
injury and dismissed the USITC’s expertise in inju ry determinations when it issued its affirmative
critical circumstances determination.  Japan further argues that Article 10.6 of the Agreement limits
the application of retroactive anti-dumping duties to situations where there is present injury, not threat
of injury.  These arguments lack any support.  First, the Department of Commerce did not ignore the
USITC’s determination.  In fact, Commerce relied on the USITC’s determination of threat of injury
and the findings set forth in that determination.  Second, Commerce’s reliance on the USITC’s findingof threat and other supporting factual information was consistent with Article 10.6 of the Agreement.
                                                     
353 See Letter from the Department to Skadden, Arps, Slate, Meagher & Flom LLP (October 6, 1998),
(Exh. US/B-41) .
354 Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65751 (Exh. JP-9) .
355 Id. at 65750; see also 19 C.F.R. §  351.206(h)(2).
356 Critical Circumstances Preliminary Determination , 63 Fed. Reg. 65750 (Exh. JP-9) ; Preliminary
Critical Circumstances Memo  at 2-4 (Exh. US/B-42) .
357 Id.
358 See Preliminary Critical Circumstances Memo  at 3 (discussing the respondents’ contentions
regarding the existence of critical circumstances) (Exh. US/B-42) .
359 First Submission of Japan at 50.WT/DS184/R
Page A-186
256. Japan argues that Article 10.6 requires a finding of current material injury in order to issue a
preliminary determination of critical circumstances.  However, Articles 10.6 and 10.7 specifically
authorize preliminary critical circumstances determinations and the suspension of assessment or other
measures in instances where there is threat of material injury.  Article 10.6 authorizes the imposition
of retroactive duties where “(i) there is a history of dumping which caused injury  or that the importer
was, or should have been, aware that the exporter practices dumping and that such dumping would
cause injury , and (ii) the injury is caused by massive dumped imports . . . .”  (Emphasis added).
Article 3, footnote 9 of the Agreement expressly states that “the term ‘injury’ shall, unless otherwise
specified , be taken to mean material injury to a domestic industry, threat of material injury  to a
domestic industry or material retardation of the establishment of such an industry. . .”  (Emphasis
added).  Article 10.6 does not “otherwise specify” that threat of material injury is not included within
the meaning of injury for purposes of critical circumstances determinations.  Thus, consistent with
Article 3, footnote 9, the term injury in Article 10.6 must include threat of material injury.
257. Japan notes that other Article 10 provisions do specify a distinction between injury and threatof injury.  In particular, Japan stresses that Article 10.2 distinguishes between “injury” and “threat
thereof".
360  However, this argument actually supports the Department’s determination in this case.
Indeed, while it is true that Article 10.2 distinguishes “injury” from “threat,” this merely emphasizesthe fact that Articles 10.6 and 10.7 do not specify such  a distinction.  In contrast to Article 10.2, there
is no exclusion of threat in Article 10.6.361
258. Japan further argues that, under Article 10.2, “retroactive duties may be levied after finding
threat only if there would have been a final injury determination absent provisional measures".362
Thus, Japan suggests that the preliminary determina tion in this case (based in part on the USITC’s
determination of threat of injury) was in error, because retroactive duties may only be applied if there
is a determination of current injury.  Japan confuses the application of Article 10.2 in two respects.
First, Article 10.2 applies to “final” determinations regarding injury and speaks to the situation where
an administering authority finds only threat of injury in its final determination.  Japan is challengingCommerce’s reliance on a finding of threat of injury for purposes of its preliminary  determination, not
its final determination.  In this respect, Article 10.2 is not applicable.  More importantly, the USITC’s
final determination in this case included an affirmative finding of current material injury.
363  Thus, the
discussion relating to threat of injury in Article 10.2 is not even pertinent here.364
259. Japan similarly cites to Article 10.4, arguing that remedies for threat of injury should beprospective only.  Again, however, Article 10.4 speaks only to the application of “definitive”
anti-dumping duties after a final determination is issued.
365  Thus, in instances where there is a final
determination of threat of injury, but no current injury, “definitive anti-dumping dut{ies}” may only
                                                     
360 See Article 10.2 of the Anti-Dumping Agreement.
361 Quoting from the Law of Treaties, Japan argues that “{u}nder a general principal of treaty
interpretation, by specifying ‘injury,’ the Agreement exclud es alternative concepts such as ‘threat of injury.’”
First Submission of Japan at 56 ( citing generally  Lord McNair, The Law of Treaties  399-410 (1961) (excerpts
in Exh. JP-54)  for the proposition: “Expressio unius est exclusio alterius (to specify one thing implies the
exclusion of another).”).  This principle, however, does not apply where, as here, the language of the Agreementspecifically states that to specify one thing ( i.e., injury) implies the inclusion  of another ( i.e., threat of material
injury).  See Article 3 n. 9 of the  Agreement.  Thus, contrary to Japan’s argument, the presumption is that threat
of injury is included within the meaning of injury, unless a particular provision specifically excludes it.
Article 10.6 does not specifically exclude threat of material injury.
362 First Submission of Japan at 56 (emphasis in original).
363 Certain Hot-Rolled Steel Products From Japan , 64 Fed. Reg. 33514 (June 23, 1999), (Exh. JP-13)
364 Article 10.2 addresses the application of retroac tive duties generally and does not specifically apply
to situations involving critical circumstances.
365 Article 10.4 of the Anti-Dumping Agreement.WT/DS184/R
Page A-187
be imposed prospectively from the date of the determination of threat of injury.  For the same reasons
noted above with respect to Article 10.2, Article 10.4 also does not apply here.
260. In fact, the language in Article 10.4 indicates that even where there is only a preliminary
finding of threat of injury, provisional measures are proper.  By suggesting that all cash deposits
collected prior to the final determination of threat must be refunded , the provision necessarily implies
that the provisional measures ( e.g., collection of cash deposits) - even where they were based upon a
preliminary finding of threat of injury - were appropriate when imposed.  In sum, because
Articles 10.2 and 10.4 apply to situations not present here ( i.e., final determinations of threat of
injury), Japan’s argument that “{i}t makes no sense to interpret Article 10.6 broadly as allowing
precisely the type of retroactivity that Articles 10.2 and 10.4 seek to prevent"366, is without merit.
261. Finally, Japan argues that Commerce improperly reversed its practice when it began issuing
affirmative critical circumstances determinations in 1997 in cases where the USITC preliminarily
found only threat of injury.  Specifically, Japan cites Brake Drums and Brake Rotors From the
People’s Republic of China , in which the Department stated that in instances in which the USITC has
found only threat of material injury, “it is not reas onable to conclude that an importer knew or should
have known that its imports would cause material injury".367   Japan is essentially arguing that the
Department changed its policy three years ago and, since that time, has been improperly relying on
threat of injury as a sufficient factor for imput ing knowledge.  Japan’s argument fails for several
reasons.  First, it is not a violation of the Anti-D umping Agreement for an authority to formulate and
revise its policies in the course of administering the Agreement.  The Brake Drums and Brake Rotors
case was one of the first critical circumstances decisions in which the Department applied the new lawimplementing the Agreement.  In June 1997, less than  four months after the Department issued the
Brake Drums and Brake Rotors  decision, the Department broadened the criteria used in determining
whether knowledge of injury exists for purposes of critical circumstances determinations.  In Certain
Cut-to-Length Carbon Steel Plate From the People’s Republic of China , the Department explained
that in instances in which the USITC preliminaril y found threat of injury, it would consider that
finding as well as other evidence in determining whether a reasonable basis exists to impute
knowledge of injury.
368
262. Thus, the Department’s current policy is to consider both the USITC’s finding of threat of
injury and other evidence on the record in deciding whether to impute knowledge of injury.  As the
Department explained in this case:
If, as in this case, the USITC preliminarily finds threat of material injury . . ., the
Department’s practice is to consider additional information such as the extent of the
increase in the volume of the subject merchandise during the critical circumstances
period and the magnitude of the margins, in determining whether a reasonable basis
exists to impute knowledge that material injury was likely.369
The Department’s policy therefore meets the requir ements of Articles 10.6 and 10.7 of the Agreement
with respect to imputing knowledge of injury.  In this case, because the Department’s reliance on the
USITC finding of threat of injury and the other substantial evidence before it in deciding whether to
                                                     
366 See First Submission of Japan at 57.
367 Brake Drums and Brake Rotors From the People’s Republic of China, 62 Fed. Reg. 9160, 9164
(Feb. 28, 1997) (final determination) (Exh. US/B-44) .
368 Certain Cut-to-Length Carbon Steel Plate From the People’s Republic of China , 62 Fed. Reg.
31972, 31978 (June 11, 1997) (preliminary determination) (Exh. US/B-45) .
369 Preliminary Critical Circumstances Memo at 2 ( citing Certain Cut-to-Length Carbon Steel Plate
From the People’s Republic of China , 62 Fed. Reg. at 31978) (US/B-42) .WT/DS184/R
Page A-188
impute knowledge of injury was permissible under Articles 10.6 and 10.7, Japan’s argument to the
contrary should be rejected.
2. The Department's preliminary determination of critical circumstances was supported
by sufficient evidence under Article 10.7
263. Japan argues that Commerce violated Article 10.7 of the Agreement because it did not base
its preliminary critical circumstances determination on sufficient evidence that: (1) the importer was,
or should have been, aware that the exporter pr acticed dumping and that such dumping would cause
injury; (2) the injury was caused by massive dumped imports of a product in a relatively short time;
and (3) the massive dumped imports were likely to seriously undermine the remedial effect of the
definitive anti-dumping duty to be applied.  As we demonstrate below, however, the Department had
sufficient evidence regarding all of these factors.
(a) The "Sufficient Evidence" Standard
264. The panel in Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup  from the
United States  (“HFCS ”) recently interpreted the “sufficient evidence” standard in the context of
determining whether an anti-dumping investigation was properly initiated.  In that case, the panel
explained that to determine whether there is sufficient evidence for purposes of initiating aninvestigation, a panel must examine “whether 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 initiating the investigation".
370  Accordingly, under the interpretation
of the “sufficient evidence” standard set forth in HFCS , the question in this case is whether an
unbiased and objective investigating authority evaluating the evidence could properly havedetermined that sufficient evidence of critical  circumstances existed for purposes of making a
preliminary determination under Article 10.7.
265. In addition, pursuant to the principles of treaty interpretation set forth in Article 31(1) of the
Vienna Convention, the “sufficient evidence”  standard in Article 10.7 of the Anti-DumpingAgreement must be read within the context in wh ich it is applied and in light of its object and
purpose.
371  The evidentiary standard for reviewing the sufficiency of preliminary determinations like
that at issue here must necessarily be lower than that applied to final determinations because of the
greater opportunity to engage in more complete fact gathering and analysis leading up to a final
determination.  This is even more so the case here where, under the express provisions of Article 10.7of the Agreement, administering authorities are permitted to make preliminary critical circumstances
determinations and take measures at any time “after initiating an investigation.”
266. Japan suggests that a critical circumstances determination is not proper unless it takes into
account all of the responses of the foreign producers.  However, by the time an authority is able to
analyze and verify all of the factual data submitted by foreign producers, it may be too late to provide
the remedy afforded in Article 10.7.  By enacting Article 10.7, the signatories to the Anti-dumpingAgreement determined that, under certain urgent circumstances, it is appropriate to take immediate
measures in order to prevent import surges and to secure potential duties (later refundable if the final
determination is negative).  In other words, if at the time of a critical circumstances allegation ( i.e.,
any time after initiation), there is sufficient evidence  in the record of an import surge (accompanied by
other Article 10.6 circumstances), the administering authority may take necessary measures.
372  I n
                                                     
370 HFCS , WT/DS132/R, Report of the Panel adopted on January 28, 2000, at para. 7.94, 7.95.
371 See Article 31(1) of the Vienna Convention.
372 Japan further argues that because early preliminary determinations have a “chilling effect” on trade,
they should be subject to more serious scrutiny.  However, this is the precise purpose of Article 10.7 - to halt
pre-order surges of massive dumped imports.   Given this objective, the Anti-Dumping Agreement permitsWT/DS184/R
Page A-189
providing for early critical circumstances determ inations prior to a preliminary determination of
dumping, the United States has acted in accordance with the express provisions of Article 10.7.
Indeed, the United States has implemented Article 10.7 consistently with Thailand, which has also
enacted a similar provision in its anti-dumping laws.373
267. In sum, the “sufficient evidence” standard in Article 10.7 must be read in its context and inlight of the purpose of Article 10.7 in providing for early critical circumstances determinations in
urgent circumstances.  As is demonstrated below, Commerce’s early preliminary critical
circumstances determination in this case was based upon the substantial evidence available to it in the
form of the literally hundreds of pages of factual documentation attached to the petition and the
amendments thereto as well as the additional news articles, import data, and other publicly available
information obtained by Commerce.  Commerce’s determination therefore satisfied the “sufficient
evidence” standard of Article 10.7.
(b) Evidence of importer knowledge dumping
268. With respect to the question of whether importers had knowledge of dumping, the
Department relied on the margins set forth in the petition.  In attacking the Department’s actions here,
Japan repeatedly claims that Commerce “blindly” relied on “mere allegations” in the petition tosupport the preliminary critical circumstances determination.  However, the approximately 700 pages
of exhibits submitted with the petition and the amendments thereto are not mere allegations - they are
evidence.
269. The petition established that estimated margins for NSC and NKK were 27.20 per cent and
28.25 per cent, respectively.  The basis for the margins was set forth in extensive exhibits contained in
the petition.  Specifically, in order to establish the “export price” (“EP”), the petition provided an
actual offer for sale in the United States of Japanese-produced hot-rolled steel.
374  Additionally, in
accordance with the Department’s practice for ca lculating EP, the petition estimated appropriate
adjustments to the gross price, subtracting amounts for the following expenses:375 foreign inland
freight charges376; ocean freight and insurance; unloading and wharfage377; a US trading company
mark-up378; a Japanese trading company mark-up379; and US Customs duties and fees.380  In order to
establish the “normal value” (“NV”) for comparison purposes, the petition provided actual transaction
prices in Japan for the product that was most similar to the product used to establish EP.381  Consistent
                                                                                                                                                                    
provisional measures where there is a finding of sufficient  evidence of certain facts.  This is the standard that
should be applied, regardless of any potential “chilling effect”.
373 See Anti-Dumping and Countervailing Act B.E. 2542, art. 31 (Tha.) (Exh. US/B-43) .
374 See Petition, Volume 1 at Exhibit 7  (Exh. US/B-40(a)) .
375 See Petition Volume 1 at p. 10, Figure 1 (Exh. US/B-40(a)) .
376 The basis for calculating foreign inland freight charges was contained in the Japanese market
research report attached as Exhibit 14 to the petition.  See Petition Volume 1 at Exhibit 14 (Exh. US/B-40(a)) .
377 In order to determine ocean freight, insurance, unloading and wharfage, petitioners provided data
from the US Census Bureau and US Customs Service regarding such charges.  See Petition, Volume 1 at
Exhibits 11-12 (Exh. US/B-40(a)) .
378 The petition included an industry expert affidavit detailing the typical mark-up for US-based trading
companies.  The affidavit further detailed the affiant’s background and experience with such matters.  See
Petition, Volume 1 at Exhibit 13, (Exh. US/B-40(a)) .
379 The basis for calculating the Japanese trading company mark-up was contained in the Japanese
market research report.  Petition Volume 1 at Exhibit 14 (Exh. US/B-40(a)) .
380 The basis for US Customs duties and fees was derived from the 1997 US Harmonized Tariff
Schedule.  See Petition, Volume 1 at Exhibit 4 (Exh. US/B-40(a)) .
381 The basis for determining NV was contained in the Japanese market research report attached as
Exhibit 14 to the petition.   See Public Summary of the Pricing Study on Japanese Hot-Rolled Carbon Steel FlatWT/DS184/R
Page A-190
with Department practice for determining NV, the petition further subtracted amounts for inland
freight charges, packaging expenses, and credit expenses.382
270. Based upon this factual information, after having closely scrutinized the petition for accuracy
and sufficiency at initiation383, the Department determined that the margins in the petition provided a
sufficient basis for imputing importer knowledge of dumping.384  Specifically, the Department
determined that “{b}ecause the estimated dumpi ng margins calculated in the petition - 27.20 and
28.25 per cent - are greater than 25 per cent, we may impute knowledge of dumping".385
271. Japan does not contest the Department’s “25 per cent margin test” for determining whether
importers were, or should have been, aware that dumping was occurring. Rather, Japan takes issue
with the Department’s decision to use the margins set forth in the petition.  Japan suggests that the
Department should have waited and relied on the margins calculated in the Preliminary Determinationbecause those margins included an analysis of the respondents’ submissions.  However, as
demonstrated above, the petition margins were derive d from extensive evidence that was sufficient to
determine that importers knew, or should have known, of the dumping.  Because the Anti-Dumping
Agreement does not dictate how an administering authority is to determine importer knowledge of
dumping and because the Department’s approach in this case was both reasonable and predictable,and is certainly a permissible interpretation of the Agreement.
272. Finally, it is important to note that Japan did not contest the sufficiency of the petition
evidence for purposes of initiation of the investigation.  While the United States agrees that the
standard for initiation is less stringent than that for a preliminary determination, Japan apparentlyrecognized that, for purposes of initiation, the evidence constituted more than  “mere allegations.”  In
accordance with Articles 5.2 and 5.3 of the Anti-dumping Agreement, “{s}imple assertion{s},
unsubstantiated by relevant evidence, cannot be considered sufficient” to establish a basis for
initiation of an investigation, and authorities must “examine the accuracy and adequacy of the
evidence provided in the applicati on to determine whether there is sufficient evidence  to justify the
initiation of an investigation".
386  Japan did not challenge, in any way, the sufficiency of the evidence
leading to initiation ( e.g., the Petition exhibits).  Now, however, Japan argues that the record
contained nothing more than unsubstantiated allegations.  If Japan truly believed that the Petition
contained no supporting evidence whatsoever, it would have challenged the Department’s
determination to initiate the investigation.
                                                                                                                                                                    
Products,  at 1-2, with a Confidential Version of Figure 2 and Exhibit 16 of the petition attached thereto (which
includes ranged numbers), Petition, Volume 1, at Exhibit 14.   (Exh. US/B-40(a)).
382 The basis for determining these expenses was contained in the Japanese market research report.  See
id.
383 When determining whether to initiate the investigation, the Department sought to ensure that the
allegations were properly supported by factual documentation, i.e., evidence.  See Initiation Checklist  at 6-8
(Exh. US/B-18) .  Specifically, the Department inquired as to whether the petition contained sufficient
supporting documentation of: volume and value of imports; US market share ( i.e., the ratio of imports to
consumption); actual pricing ( i.e., evidence of decreased pricing); relative pricing ( i.e., evidence of imports
under-selling US products); prices or costs and claime d adjustments; market research reports and affidavits
referring to sources of how information was obtained; curre nt price data (no more than one year old); price and
cost data from contemporaneous time periods; correct curre ncy rates used for all conversions to US dollars; and
conversion factors for comparisons of differing units of measure.  Id.  Additionally, the Department further
assessed the reliability of the factual support provided in the petition by comparing the evidence with publicly
available data.  Id. at 15-16.
384 See Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65750 (Exh. JP-9) ;
Preliminary Critical Circumstances Memo  at 2 (Exh. US/B-42) .
385 Preliminary Critical Circumstances Memo at 2 (Exh. US/B-42) .
386 Articles 5.2 and 5.3 of the Anti-Dumping Agreement.WT/DS184/R
Page A-191
(c) Evidence of import knowledge injury
273. For purposes of determining importer knowledg e that injury would result from the dumped
imports, the Department analyzed the USITC’s determination of threat of material injury, the
enormous increase in the volume of Japanese imports of the subject merchandise during the critical
circumstances period387, the magnitude of the margins, information in the petition regarding injury to
the domestic industry388, and numerous press reports regarding rising imports, falling domestic prices
as a result of the imports, and domestic buyers shifting to foreign suppliers.389  The Department
determined that this evidence overwhelmingly suppor ted a finding that importers were, or should have
been, aware that injury would be caused by reason of dumped imports.390  This determination was
supported by sufficient evidence on the record in accordance with Article 10.7 of the Agreement.
                                                     
387 The Department specifically found that “imports of Japanese hot-rolled steel increased 101 percent
during the period May - September 1998 (as compared to  December 1997 - April 1998), or over six times the
level of increase needed to find ‘massive imports’ during the same period.”  Preliminary Critical Circumstances
Memo  at 3 (Exh. US/B-42) .  This information was derived from U.S. Census Bureau import statistics.  See id at
Attachment 2.
388 In addition to Volume 1 of the petition relating specifically to “Critical Circumstances,” the petition
contained a separate volume, Volume 2, pertaining to “Injury”.  Both volumes contained extensivedocumentation showing that Japanese steel producers were, or should have been, aware that the flood of imports
into the United States was causing injury to the US hot-rolled steel industry.  For example, Volume 2 of the
petition included multiple industry-relat ed articles discussing the Japanese financial crisis, the flood of imports
into the United States, and the resulting price erosion on those products.  See, e.g.,  Petition, Volume 2 at Exhibit
8, “Nucor Cuts Flat-Roll, Galvanized Again,”  American Metal Market , 11 September 1998 (“For the second
time in less than two months, Nucor Corp., Charlotte, N.C., is lowering prices on hot-rolled and cold-rolled
sheet in the face of rising imports. . . .  Obviously, we’re doing this because of imports, said . . . Nucor’s
chairman.”); Petition, Volume 2 at Exhibit 9, Hotline Transaction Prices,  September 1, 1998 (demonstrating a
general fall in prices during the relevant period); Petition, Volume 2 at Exhibit 11, “Low Prices Force Nucor toCut Production,”  Metal Bulletin , 7 September 1998 (“Nucor has cut production . . . in response to low market
prices. . . .  Nucor reduced . . . weekly operations from se ven days to four because of market turmoil in the wake
of a flood of cheap imports.”); Petition, Volume 2 at Exhibit 15, Morgan Stanley Dean Witter Industry Report  ,
21 July 1998 (“Because of an increase in low-priced flat -rolled imports, we are assuming that flat-rolled prices
will break down in late September or early October . . . .” ); Petition, Volume 2 at Exhibit 16, “Steel Imports toUS Set Record in July; Japan Claims Its Shipments Are Slowing,”  Wall Street Journal, September 21, 1998
(“‘Japanese steel is just murdering’ the US steelmakers”); Petition, Volume 2 at Exhibit 17, “Nucor Cuts ListPrices of Steel Sheet - Sheet Prices Sure to Decline for All Domestic Producers,”  PaineWebber,
16 September 1998 (“We expect the US flat-rolled steel pricing outlook to continue to deteriorate for the
remainder of 1998.  Imports are likely to remain high.  World prices are well below US prices.”); Petition,
Volume 2 at Exhibit 18, “Analyst Interview - Steel: An Obtuse Approach,”  Wall Street Transcript Corporation,
29 July 1998 (Question: “You say that imports are too large to be comfortable.  Does this suggest that somesteel has once again been ‘dumped’?”  Answer: “During 1997, record levels of steel product imports came in theUS.. . . .  Despite the highest level of domestic steel consumption observed in several decades, the price of steelproducts declined during 1997.  Imports were simply so large, and prices at which they entered markets so low,
that steel pricing was compromised.”); Petition, Volume 2 at Exhibit 24, Weekly Steel Analysis,  World Steel
Dynamics, 11  June 1998 (“1998 is shaping up to be a bad year. ”); Petition, Volume 2 at Exhibit 25, Weekly
Steel Analysis , World Steel Dynamics,  July 16, 1998 (“The Japanese yen has weakened recently . . . .  At current
exchange rates, the Japanese are shipping an ever wi der variety of steel products to the United States at a
significant price discount to US price levels.”); Petition, Volume 2 at Exhibit 39, “Steel Industry Conditions
Still Worsening in the United States and Abroad,”  PaineWebber,  8 Sept. 1998, (“World export prices in recent
weeks have fallen even further . . . Prices in many cases are now below the marginal costs of many producers.The ‘death spiral,’ which in our view is sure to extinguish some present and planned steelmaking capacity, is infull force.”).  All of the cited articles are included in Exh. US/B-40(b) .
389 Id.
390 See Critical Circumstances Preliminary Determination , 63 Fed. Reg. at 65750 (Exh. JP-9) ;
Preliminary Critical Circumstances Memo  at 2-3, (Exh. US/B-42) .WT/DS184/R
Page A-192
274. Japan argues that because the USITC found no present material injury, Commerce could not
impute knowledge of injury to the importers.  Specifically, Japan argues that under Article 10.6 of the
Agreement, it was necessary for importers to have known that the dumping was causing present
injury.   This contention is simply incorrect.  Article 10.6 specifically states, in pertinent part, that an
affirmative critical circumstances determination may be made where an authority finds that “the
importer was, or should have been, aware that the exporter practises dumping and that such dumpingwould  cause injury . . . .”  (Emphasis added).  The use of the word “would” necessarily implies that
there need not be knowledge of present injury  for purposes of a critical circumstances determination
under Article 10.6.  In fact, as discussed in detail above, the term “injury,” unless otherwise specified,
includes “threat of material injury".
391  Thus, the Department’s reliance on the USITC’s finding of
threat of material injury, along with other releva nt record information, in finding importer knowledge
of injury in this case was consistent with the Agreement.
(d) Evidence that the injury was caused by massive imports over a relatively short period of time
275. Japan does not argue here that the Department failed to make its massive imports
determination based upon sufficient evidence.  Rather, Japan takes issue with the comparison period
selected by the Department to determine whether there was a massive surge of imports. Seemingly,
Japan concedes that if the comparison period selected is appropriate, then the imports were indeedmassive.
276. The Anti-Dumping Agreement provides that for a critical circumstances determination to be
issued, massive dumped imports must have occurred “in a relatively short period of time".
392  I t  i s
indisputable that a 100 per cent increase in imports from one six-month period to the next, andcontinuing at that high level through the date of initiation of the investigation, is a massive increase
over a relatively short period.  Japan argues, however, that having established a different time period
as the “normal” (but by no means absolute) period for analysis in its regulations, the Department was
precluded from changing that period.
277. There is no basis for this claim.  Section 351.206(i) of the Department’s regulations provides
that the Department will “normally” compare the three months following initiation of an investigation
to the three months preceding initiation in order to determine whether critical circumstances exist.
393
These comparison periods are appropriate where companies learn of the investigation when it isinitiated and then try to beat the preliminary dete rmination with a surge of imports of the subject
merchandise.  However, Section 351.206(i) provides that if the Department finds that importers,
exporters, or producers had reason to believe, at some point prior to the beginning of the proceeding,
that an investigation was likely, the Department may consider a period of not less than three months
from that earlier time for comparison purposes.
394
278. In this case, beginning in December 1997 and continuing through the filing of the petition in
September 1998, there was a steady stream of national and international press reports concerningsurges in steel imports from Asia, drops in steel prices, and meetings of steel producers and importers
where parties discussed the possibility of the filing of trade cases by the US industry.  In particular, in
Spring 1998, there were a significant number of press reports discussing concerns of steel producers
and others about the influx of imports from Asia and the likelihood of unfair trade actions due to the
significant increases in low-priced steel.
395  Thus, it was reasonable for the Department to conclude
                                                     
391 Article 3, n. 9 of the Anti-Dumping Agreement.
392 Article 10.6(ii) of the Anti-Dumping Agreement.
393 19 C.F.R. § 351.206(i).
394 Id.
395 See Preliminary Critical Circumstances  Memo  at 3 (Exh. US/B-42) ; see also   Petition, Volume 3 at
Exhibit 5, “July US Steel Imports Hit Record,”  Japan Economic Newswire,  19 September 1998 (“he also saidWT/DS184/R
Page A-193
that importers knew of the impending anti-dumping  investigation and, consequently, would build-up
inventories in order to avoid potential anti-dumping liabilities.  The petitioners’ decision to await
filing the petition until they had sufficient evidence should not deprive them of their remedy against a
massive surge of imports that occurred in anticipati on of an anti-dumping investigation.  Accordingly,
the Department properly applied Section 351.206(i) of its regulations in selecting the comparison
period it used here to determine whether there was a massive surge of imports.
279. Nothing in the Anti-dumping Agreement dictates the selection of a different comparison
period here.  Indeed, the Agreement does not specify how to determine whether massive imports
existed.  The Department’s actions under its regulations in this case reflect a reasonable method for
implementing the Agreement and should be sustained by the panel.396
(e) Evidence that the imports were likely to seriously undermine the remedial effect of imposing
anti-dumping duties
280. In reaching its preliminary determination of critical circumstances, the Department plainly
considered whether the massive surge of imports from Japan that it found was likely to seriously
undermine the remedial effect of an anti-dumping duty order.  Simply because the US statute does not
specifically mention this element does not mean that the Department does not consider it.  Indeed, itwas an integral part of the Department’s analysis in this case, as it is in all cases.
281. The Department’s recent policy bulletin relating to the timing of the issuance of critical
circumstances determinations makes clear that “the purpose of {the critical circumstances} provision
is to ensure that the statutory remedy is not unde rmined by massive imports following initiation of an
investigation".
397  In fact, as required by Article 10.6(ii) of the Anti-dumping Agreement, the
Department specifically looks to the timing and volume of the dumped imports to determine whether
critical circumstances exist.  In this case, only after finding that there indeed was a massive surge of
                                                                                                                                                                    
that importers accelerated deliveries in anticipation of do mestic steelmakers’ action, expected within this month,
to file charges against foreign producers for what they believe is the dumping ... of steel products in the United
States”); Petition, Volume 3 at Exhibit 9, Chris Adams, “Rising Imports Distress US Steelmakers” , The Wall
Street Journal, 8 Sept. 1998 (“steelmakers are expected to accelerat e plans to file trade complaints with the US
Department of Commerce and the US International Trade Commission.”);    Petition, Volume 2 at Exhibit 16,
“Steel Imports to US Set Record in July; Japan Claims Its Shipments Are Slowing,”  Wall Street Journal,
21 September 1998 (“Already US steelmakers have said they will file complaints with the CommerceDepartment and the US International Trade Commission against countries they say are selling steel in the US atunfairly low prices.  Although industry spokesman haven’t specified which countries will be targeted, people
with knowledge of their plans say Japan and Russia are expected to be among those included.”); Petition,
Volume 3 at Exhibit 3, CRU Monitor: Steel  (“Japanese integrated steelmakers remain worried about possible
anti-dumping actions from local producers . . . .”); “US Dumping Actions on the Horizon?,”  World Steel
Dynamics,  30 April 1998 (“World Steel Dynamics sees a fair to good possibility that some mills in the United
States could file trade suits against foreign mills perhaps as early as the third quarter of 1998 . . . .”); KeithDarce, “Cheaper Asian Steel Imports Are on the Rise,”  The Times-Picayune , 6 May 1998 (noting that if Asian
steel is imported below productions costs, dumping charges could be filed); Petition, Volume 3 at Exhibit 4
“More Steel Trade Cases Said Likely,”  American Metal Market,  7 May 1998 (“Steel buyers, convinced that US
trade laws as well as the complaint process in Washingt on are stacked against their offshore producers, expect
domestic mills to continue using this weapon against imports.”); Petition, Volume 3 at Exhibit 5, Metal Bulletin,
24 Sept. 1998 (“US industry executives were in Washington last week to discuss unfair trade cases . . . .”).  All
of the cited articles are included in Exh. US/B-40(c) .
396 See New Zealand - Imports of Electrical Transformers from Finland , L/5814, Report of the Panel,
adopted on 18 July 1985, 32/S55, 66-67, at paras. 4.2- 4.3 (after concluding that the agreement was silent
because it did not provide any specific guidelines fo r the calculation of the cost of production in an
anti-dumping case, the panel stated that “the method used in this particular case a ppeared to be a reasonable
one,” and it therefore found no violation of the Agreement.).
397 Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364 (Exh. JP-3) .WT/DS184/R
Page A-194
dumped imports (100 per cent increase) during the relevant time period ( i.e., once importers learned
of the impending anti-dumping investigation), the Department determined that critical circumstances
existed.  In other words, the Department necessarily found that without retroactive application of
provisional measures, the ultimate anti-dumping duty would be undermined.  A separate finding of
this was unnecessary.
D. THE STANDARD FOR CRITICAL CIRCUMSTANCES DETERMINATIONS PROVIDED FOR IN THE US
STATUTE IS CONSISTENT WITH ARTICLES 10.6 AND 10.7 OF THE ANTI -DUMPING AGREEMENT
282. Section 733(e) of the Act provides for the Department, upon receiving an allegation of critical
circumstances, to make the required determinations outlined in Article 10.6 of the Anti-dumping
Agreement at any time after the initiation of an investigation based upon “the information available to
it at that time.”  Japan claims that Section 733(e) is inconsistent with Articles 10.6 and 10.7 of the
Agreement in two respects.  First, Japan contends that Section 733(e) is deficient because it does notspecifically require that all of the standards of Article 10.7 be satisfied at the time of a preliminary
determination of critical circumstances.  In particular, Japan claims that the US statute does not
expressly require findings that the injury was caused by massive dumped imports or that the massive
imports were likely to seriously undermine the remedial effect of the duty.  Second, Japan argues that
the evidentiary standard for a preliminary critical circumstances determination under Section 733(e)of the Act is lower than that in Article 10.7.
283. These claims are completely without merit.  A law is not, on its face, inconsistent with a
WTO Agreement unless it mandates actions that are inconsistent with that Agreement.  In United
States - Measures Affecting the Importation, Internal Sale and Use of Tobacco
398 the Panel found that
a law did not mandate GATT-inconsistent action where the language of that law was susceptible of a
range of meanings, including ones permitting GATT-consistent action.  Indeed, a law that does not
mandate WTO-inconsistent action is not, on its face, WTO-inconsistent, even if, as is not the case
here, actions taken under that law are WTO-inconsistent.  For example, the panel in EEC --
Regulation on Imports of Parts and Components399 found that  “the mere existence” of the
anti-circumvention provision of the EC’s antidumping legislation was not inconsistent with the EC’s
GATT obligations, even though the EC had taken GATT-inconsistent measures under that
provision.400  The Panel based its finding on its conclusion that the anti-circumvention provision
“does not mandate the imposition of duties or othe r measures by the EEC Commission and Council; it
merely authorizes the Commission and the Council to take certain actions".401
284. Plainly, where, as here, the US critical circumstances provision itself does not mandate anaction inconsistent with the Anti-Dumping Agreemen t, Japan’s claim must fail.  That it does not
mandate inconsistent actions is demonstrated by the fact that, in applying this provision, the
Department specifically makes the findings required by the Anti-Dumping Agreement.
1. As part of its policy and practice under the US Statute, the Department makes all of the
findings required under Article 10.6 of the Agreement
285. Japan argues that Section 733(e) of the Act is facially inconsistent with Article 10.6 of the
Agreement because the US statute does not mandate a separate  finding that the injury was caused by
massive dumped imports.  However, the absence of such a requirement from the statute does not
                                                     
398 Panel Report on United States -- Measures Affecting the Importation, Internal Sale and Use of
Tobacco, adopted 4 October 1994, BISD 41S/131 (“US -- Tobacco”).
399 Panel Report on EEC -- Regulation on Imports of Parts and Components, adopted 16 May 1990,
BISD 37S/132 (“EEC -- Parts”).
400 Id., paras. 5.9, 5.21, 5.25-5.26.
401 Id., para. 5.25.WT/DS184/R
Page A-195
mean that this factor is not considered and analyzed as part of the Department’s critical circumstances
determination.  As a result of its complete analysis in cases like this, the Department does, in fact,
determine whether the massive imports are both dumped and causing injury (or threat thereof) to the
domestic industry.  As part of the Department ’s enquiry regarding knowledge of dumping, the
Department considers the dumping margins for the largest producers of the subject merchandise.  The
Department will find importer knowledge of dump ing where the producer has a dumping margin of
greater than 25 per cent.  Second, the Department makes a finding as to whether importers have
knowledge, or should have knowledge, that the dumpi ng is causing injury (or threat thereof) to the
domestic industry.  After determining that the importers have both knowledge of dumping and injury,
the Department then reviews the shipment data for each respondent (or US Census Bureau and
Customs Service import statistics, where shipment data are not on the record) in order to determine
whether there exists “massive imports.”  If there is an increase in imports of more than 15 per cent
during the relevant time period, the Department will find that the imports are “massive".402  Japan
argues that the Department, at this point, must al so find that those imports are dumped and are causing
injury to the domestic industry.  However, these separate findings are not necessary.  Indeed, the
Department has already made such conclusions.  First, it has already been determined that the
anti-dumping margins on these imports are above 25 per cent.  Thus, they are dumped.  Second, the
Department does not make a critical circumstances determination without considering the injury (orthreat thereof) to the domestic industry.
286. Second, it is evident from the record and the Department’s analysis that the surge of massive
dumped imports was causing injury or threat thereof.  The Department made a specific finding that
importers had knowledge that the dumping would cause injury or threat thereof.  This decision wasbased on the extent of the increase in the volume of imports of the subject merchandise during the
critical circumstance period, the magnitude of the dumping margins, the evidence in the petition
demonstrating injury to the US industry, numerous press reports discussing the intense hardship
caused by the flood of imports (specifically discussing rising imports and falling domestic prices) -
and importantly - on the USITC’s preliminary fi nding that the domestic industry was already
threatened with injury.  The massive surge of dumped imports (including a 100 per cent increase in
imports over a short time) could only compound the impact of the dumping on the domestic industry.
As explained above, the term injury in Article 10.6(ii) includes “threat of material injury.”  Thus,
because the US industry was already threatened with injury, the tremendous surge of dumped imports
could have only further threatened, or actually caused, injury.  The US statute did not require a
separate injury finding in this respect.  However, it does not preclude such analysis, and the
Department practice leads to a consistent application of Article 10.6(ii).  Furthermore, the Agreement
does not specify how the administering authority is to determine that “the injury is caused by massive
dumped imports.”  Because the Department’s implementation is reasonable based upon the language
of the Agreement, it is consistent with the Agreement.
287. Japan further argues that the US statute is inconsistent with Article 10.6 because it does not
mandate a separate finding that the massive imports are “likely to seriously undermine the remedial
effect of the definitive anti-dumping duty to be applied”.  However, as discussed previously, the
statutory framework (including the relevant regulation and the policy bulletin applicable to
preliminary critical circumstances determinations) does compel this finding.
403  As such, Section
773(e) of the Act is consistent with the Agreement on this basis as well.404
                                                     
402 See 19 C.F.R. § 351.206(h)(2).  When determining whether massive imports exist, the Department
examines: (1) the volume and value of the imports; (2) seasonal trends; and (3) the share of the domesticconsumption accounted for by the imports.  See id. at § 351.206(h)(1).
403 See 19 C.F.R. §  351.206(h) and (i);  Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364
(Exh. JP-3) .
404 See Section 301 Panel Report , at para. 7.27.WT/DS184/R
Page A-196
2. The evidentiary standard for preliminary critical circumstances determinations is not
lower in the US Statute than in Article 10.7 of the Agreement
288. Section 733(e) of the Act provides for the Department to make a preliminary critical
circumstances determination where there is “a reasonable basis to believe or suspect” that the
necessary conditions for such relief have been met.  Japan argues that this evidentiary standard is a
“much lower threshold” than the “sufficient evidence” standard set forth in Article 10.7 of theAgreement.  However, Japan provides no legal basis for this conclusion, and it is simply incorrect.
Indeed, the “reasonable basis to believe or suspect” standard set forth in Section 733(e) of the Act is
fully consistent with the “sufficient evidence” standard detailed in Article 10.7.
289. As demonstrated by the discussion above, even where a statutory provision does not contain
the precise words of a WTO agreement, this does not mean that it does not impose the same
requirements or standards, or permit the administering authority to take action consistent with theagreement.
290. Indeed, a review of previous Department of  Commerce critical circumstances determinations
shows that the “reasonable basis to believe or suspect” standard is similar or even identical to the
“sufficient evidence” standard found in Article 10.7 of the Anti-dumping Agreement.  For example, inCertain Polyester Staple Fibre From the Republic of Korea,  the Department explained as follows:
Section 733(e)(1) of the Act provides that if a petitioner alleges critical
circumstances, the Department will determine whether there is  a reasonable basis to
believe or suspect that : (A)(i) there is a history of dumping and material injury by
reason of dumped imports in the United States or elsewhere of the subject
merchandise . . . .  Based on the recent existence of this order, there is sufficient
evidence  to determine that there is a history of dumping of the subject merchandise
and a history of material injury as a result thereof.  (Emphasis added).
405
The Department’s use of the “reasonable basis to believe or suspect” and “sufficient evidence”
standards interchangeably in its decisions reflects that the two standards are not intended to be and, in
fact, are not different.  Accordingly, the evidentiary standard provided for in Section 733(e) of the Act
is not inconsistent with that in Article 10.7 of the Anti-Dumping Agreement, and Japan’s argument to
the contrary should be rejected.
                                                     
405 64 Fed. Reg. 60776, 60779 (8 Nov. 1999) (preliminary determination of critical circumstances)
(emphasis added) (Exh. US/B-46)  ; see also  Solid Fertilizer Grade Ammoni um Nitrate From the Russian
Federation , 64 Fed. Reg. 60422, 60423 (5 Nov. 1999) (preliminary determination of critical circumstances)
(“Section 733(e) of the Act provides that the Department will determine that critical circumstances exist if there
is a reasonable basis to believe or suspect that : (A)(i) there is a history of dumping . . . The existence of an
antidumping order on ammonium nitrate in the EC is sufficient evidence  of history of injurious dumping.”)
(emphasis added) (Exh.US/B-47).WT/DS184/R
Page A-197
PART C:  INJURY
I. INTRODUCTION
1. Japan raises claims concerning two United States actions with regard to material injury under
the Anti-Dumping Agreement.  It attacks a clause of the US anti-dumping statute and challenges the
adequacy of the findings of some Commissioners at the United States International TradeCommission (“USITC”) supporting the affirmative determination in the USITC’s investigation of
Certain Hot Rolled Steel Products from Japan .
1
2. Japan’s arguments concerning both of these claims substantially mischaracterize the
United States’ measures.  As a result, much of the discussion that follows will be devoted to
correcting Japan’s misstatements about the US statute and the USITC determination.  Since Japan
misstates the facts, almost all of its arguments are irrelevant to the United States’ measures.Consequently, Japan cannot be said to have met the burden of proof in this proceeding.  Nevertheless,
the United States demonstrates below why its statute and the USITC’s decision are in accordance with
the Anti-Dumping Agreement.
3. This section of the United States’ first  submis sion will address two issues: first, the so-called
captive production provision of the United States anti-dumping statute and, then, the USITC’s
determination, including the application of the captive production provision in this case.  As Japan’s
analysis demonstrates
2, this panel’s decision as to the statutory provision’s consistency with the
Anti-Dumping Agreement should not impact on the adeq uacy of the determination.  As Japan notes, a
plurality of affirmative votes by three of the six Commissioners constitutes an affirmativedetermination by the USITC under US law.  In this investigation,  three Commissioners did not find
the provision applicable but nevertheless made affirmative determinations.  The votes of those three
USITC Commissioners are sufficient to form the basis for an affirmative determination under US law.
II. THE CAPTIVE PRODUCTION PROVISION IS CONSISTENT WITH THE ANTI-
DUMPING AGREEMENT
4. The “captive production provision” of the US statute, section 771(7)(C)(iv) of the Tariff Act
of 1930, as amended (“the Act”)
3, becomes relevant to an injury determination when
vertically-integrated US producers sell a significant volume of their production of the domestic like
product to US consumers ( i.e., the merchant market) and internally transfer a significant volume of
their production of that same like product for further processing into a distinct downstream article
                                                     
1 Inv. No. 731-TA-807 (Final), USITC Pub. No. 3202 (June 1999) (“USITC Views”) ( Exh. US/C-1 ).
2 First  Submission of Japan at para. 44.
3 19 U.S.C. § 1677(7)(C)(iv) ( Exh. Jp-4(e) ).WT/DS184/R
Page A-198
(i.e., captive production).  Under certain conditions4, then, the statute directs the USITC to focus
primarily -- not exclusively -- on the merchant market in performing its analysis.5
5.. In enacting this provision, the United States Congress (“Congress”) recognized that, in certain
situations, dumped imports compete primarily with the domestic like product in the merchant market,
not with the inventory internally transferred for processing into a separate downstream article.6  Since
the main effects, if any, of imports would likely be felt in the merchant market, it is logical that this
should be a focus of the injury analysis.  If the investigation revealed that imports were having no
significant effect even on the merchant market, then it would be highly unlikely that imports would
not be having an impact on the industry as a whole.  Thus, Congress sought to provide for a more
focused analysis which allowed the USITC to obtain a more complete picture of the competitive
impact of imports on the domestic industry.7
6. What Congress did not do, despite the Japanese contention to the contrary8, was create a
provision requiring the USITC to focus on the merchant market and ignore the captive market or
focus on one segment of production to the exclusion of the industry as a whole.  In fact, Congress
expressly rejected this interpretation of the captive production provision when it approved the
Statement of Administrative Action, which said, “{t}he provision does not require the USITC to focusexclusively on the merchant market".
9  The statute does require the USITC in all cases to render a
determination of whether there is material injury to the domestic industry as a whole.
7. Congress’ express intent was to make the captive production provision consistent with the
Anti-Dumping Agreement.10  As will be demonstrated below, it achieved this goal.   Indeed, it is
Japan’s position in this case that would tend to create violations of the Anti-Dumping Agreement,
since Japan’s position would require investigating authorities to ignore factors that the Agreement
makes relevant.  Japan would require the investigating authorities to pretend that a single market for
hot rolled steel exists, and thus ignore the distinction between sales to the merchant market and
captive production.
                                                     
4 The provision provides for a multi-step analysis.  As a threshold matter, the USITC must first
determine that a significant amount of the like product is both internally transferred by the domestic industry forproduction of a downstream article and sold on the merchant market.  If this threshold criterion is satisfied, thenthree other questions must be answered in the affirmative: (1) whether the “domestic like product produced thatis internally transferred for processing into that downstream article does not enter the merchant market for thedomestic like product;” (2) whether the “domestic like product is the predominant material input in the
production of that downstream article;” and (3) whether “the production of the domestic like product sold in the
merchant market is not generally used in the production of that downstream article.”  §  771(7)(C)(iv) of theAct, 19 U.S.C. § 1677(7)(C)(iv).  There is no argument over whether the statutory criteria delineated by thestatute are appropriate or whether the three Commissioner s that applied the provision reasonably found that the
statutory criteria were satisfied.
5 The statute directs the USITC to “focus primarily on the merchant market for the domestic like
product” when assessing the market share and financial performance of the domestic industry.  §  771(7)(C)(iv)
of the Act, 19 U.S.C. § 1677(7)(C)(iv).
6 Statement of Administrative Action (“SAA”), H.R. Doc. No. 103-316, vol. I at 852 (1994) ( Exh.
US/C-2 ).  The SAA is “an authoritative expression by the Administration concerning its views regarding the
interpretation and application of the Uruguay Agreements, . . . {and} it is the expectation of Congress that future
Administrations will observe and apply the interpretations and commitments set out in this Statement.”  Thus,
the Statement of Administrative Action has been affirmatively approved by Congress.
7 SAA at 852.
8 First Written Submission of the Government of Japan in United States - Anti-dumping Measures on
Certain Hot Rolled Steel Products from Japan  (“First Submission of Japan”) at para. 218.
9 SAA at 852.
10 SAA at 852.WT/DS184/R
Page A-199
8. Since it has based its arguments on a transparent misreading of the United States statute,
Japan obfuscates the issues involved by making sweeping allegations about dangerous levels of
protectionism or anti-competitive behaviour11, questioning the continued validity of the anti-dumping
regime12 and imputing improper motives  to the United States.  These insinuations have no place in a
proceeding before the Dispute Settlement Body.  The issue with which this Panel is presented is
whether the United States’ actions or law violate the terms of the Anti-Dumping Agreement.  A panel
is called upon to provide “security and predictability in the multilateral trading system” and should
not “diminish the rights and obligations provided in the covered agreements".13  Japan is seeking to
have this Panel go beyond the issue at hand and render policy determinations that are beyond its
jurisdiction.  The Panel should reject such an attempt in no uncertain terms.
A. US LAW REQUIRES THE US AUTHORITY TO EXAMINE THE EFFECTS OF IMPORTS ON THE
DOMESTIC INDUSTRY AS A WHOLE , CONSISTENT WITH ARTICLES 3 AND 4 OF THE ANTI -
DUMPING AGREEMENT
9. Japan’s argument against the captive production provision rests on the misconception that the
provision requires the USITC to ignore the effects of imports on the domestic industry as a whole.14
Japan is simply wrong.  The United States agrees entirely that a determination under Article 3 of theAnti-Dumping Agreement concerning whether a “dom estic industry,” as defined in Article 4.1, is
materially injured requires an examination of “domestic producers as a whole of the domestic like
products.” An analysis of the effects of imports on the domestic industry that requires a focus on the
portion of the output of the domestic like product that competes in the marketplace with dumped
imports is entirely consistent with that requirement.  It, in effect, is merely a recognition that, under
certain conditions, the fact that domestic producers internally transfer a significant portion of theproduction while selling significant portions in the merchant market constitutes a “relevant
economic{}factor having a bearing on the state of the industry” under Article 3.4.
10. US law requires the USITC to determine whether “an industry in the United States” is
materially injured or threatened with material injury.
15  It defines “industry” as “the producers as a
{w}hole of a domestic like product,... .”  Therefore, on the face of the statute, the USITC is not
permitted to disregard any portion of the domestic producers’ output.  The captive production
provision’s elaboration on the factors that the Commission must consider in making an injury
determination does not detract from this expansive definition.  Rather, the captive production
provision itself, the directions that the United States Congress gave in enacting it, and the otherprovisions of the United States anti-dumping statute make clear that the USITC must find injury to the
producers as a whole.
1. The captive production provision, itself, shows that the USITC must consider the
industry as a whole
11. Japan’s depiction of the captive production provision is wrong both because of the
circumstances in which it applies and the nature of the analysis that the USITC is to perform when itdoes apply.  The captive production provision only applies when domestic producers  “internally
transfer significant production of the domestic like product . . . and sell significant production of the
domestic like product in the merchant market".
16  Therefore, the USITC may apply the provision only
when merchant market sales represent a significant proportion of  the domestic industry’s overall
                                                     
11 First Submission of Japan at paras. 44-45.
12 First Submission of Japan at para. 43.
13 Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”) at para. 3.2.
14 E.g. First Submission of Japan at para. 218.
15 19 U.S.C. § 1673d(1)(A) ( (Exh. Jp-4(c) ).
16 § 771(7)(C)(iv) of the Act, 19 U.S.C. § 1677(7)(C)(iv).WT/DS184/R
Page A-200
production and, consequently, the impact of imports on that segment are liable to have a significant
effect on the industry as a whole.
12. The statute does not, however, allow the USITC to assume, simply because a significant
portion of domestic production is destined for the merchant market, that impacts on that segment will
ipso facto  constitute material injury to the industry.  Rather,  if the provision’s threshold requirements
are satisfied, the USITC focuses  “primarily” on the merchant market.17  As those Commissioners
who applied the provision in this case found, the statutory language requires “in all cases that the
{USITC} determine material injury with respect to  the industry as a whole, including the industry’s
performance with respect to both merchant market operations and captive production".18
13. Japan’s contrary interpretation relies on a contorted interpretation of the statutory language.
The Japanese Government is arguing that the word “primarily” modifies “focus"19 to somehow
narrow it.  “Primarily” in no way connotes exclusivity, but manifestly attempts to incorporate more
than one focus into the USITC’s calculation.  The use of the term “primarily” thus clearly indicates
Congress’ intent that the USITC’s analysis of the factors should encompass more than the merchant
market.
14. Congress provided a very clear statement of its intended effect of the captive production
provision by approving the Statement of Administrative Action, the authoritative legislative history of
the Uruguay Round Agreements Act, in which the captive production provision was enacted.   The
SAA, explains that the captive production provision, “does not require the USITC to focus
exclusively on the merchant market".20  Consequently, Congress approved of an authoritative
expression squarely contradicting Japan’s proposed interpretation of the captive production provision.
Congress unequivocally directs the USITC to look beyond the merchant market in its evaluation of
the factors.
2. The statutory provisions governing injury, ta ken together, demonstrate that the USITC
must consider the industry as a whole, even when the captive production provision
applies
15. Looking at the captive production provision in light of the full statutory scheme governing
injury determinations, it is clear that Congress had no intention of excluding a portion of the domestic
industry’s production from the injury analysis.  When evaluating the effects of dumped imports, thestatute requires the USITC to consider the volume of dumped imports, the price effects of dumped
imports on the domestic like product, and the impact of the dumped imports on the domestic
producers of the like product.
21  In §  1677(7)(C), the statute delineates specific factors bearing on
each of these issues.22  The captive production provision does nothing to alter these fundamental
requirements of the statute.
                                                     
17 §  771(7)(C)(iv) of the Act, 19 U.S.C. § 1677(7)(C)(iv).
18 USITC Views at 35.
19 Again, the language of the statute directs the USITC to “focus primarily on the merchant market for
the domestic like product.”  §  771(7)(C)(iv) of the Act, 19 U.S.C. § 1677(7)(C)(iv).
20 SAA at 852.
21 19 U.S.C. § 1677(7)(B).
22 Section 1677(7)(C) discusses the “evaluation of relevant factors” and provides as follows:
               For purposes of subparagraph (B) -                    (i) Volume                    In evaluating the volume of imports of merchandise, the Commission shall consider
whether the volume of imports of the merchandise, or an y increase in that volume, either in absolute terms or
relative to production or consumption in the United States, is significant.
                    (ii) PriceWT/DS184/R
Page A-201
16.  The captive production provision, on its face, only affects some statutory factors dictated in
clause (iii) of section 1677(7)(C) and does not affect  other clauses of the statute.  When the provision,
appearing in subsection (iv) of 19 U.S.C. § 1677(7)(C), applies, “the Commission, in determining
market share and the factors affecting financial performance set forth in clause (iii) {of 19 U.S.C. §
1677(7)(C)}23, shall focus primarily on the merchant market for the domestic like product.”
17. As a result of this narrow application dictated in the statute, the USITC must perform an
initial layer of analysis for these market share and financial performance that it is not otherwise
required to do for any other factor.  For these factors, the USITC examines both the merchant market
and the total industry.  That the USITC must consider the impact of imports on the total industry in
addition to the merchant market is reenforced by the fact that the authority is required to “evaluate all
relevant economic factors described in {19 U.S.C. §  1677(7)(C)} within the context of the businesscycle and conditions of competition that are distinctive to the affected industry".
24  The factors
addressed by the captive production provision are not excluded from this overall directive.
18. Moreover, the factors that the USITC is to consider under subsection (iii) are not exclusive.
The chapeau of that subsection states that “the Commission shall evaluate all relevant economicfactors which have a bearing on the state of the industry in the United States.”  The statute is explicit
that such relevant economic factors are “including, but not limited to” the enumerated factors that
follow.  Thus, the USITC must, under US law, evaluate all relevant economic factors having a bearing
on the state of the industry.
19. Similarly, because the captive production provision on its face only affects the analysis of
certain factors enumerated in subsection (iii) pertaining to impact, it does not require a change in the
USITC’s analysis of the significance of volume s of imports under subsection (i) of 19 U.S.C. §
1677(7)(C).  That subsection provides, “In evaluating the volume of imports of merchandise, the
USITC shall consider whether the volume of imports of the merchandise, or any increase in thatvolume, either in absolute terms or relative to production or consumption in the United States, is
significant.”  Although the USITC takes into account the fact of the merchant market in its analysis of
the significance of imports, it nevertheless under subsection (i) considers them relative to production
                                                                                                                                                                    
                    In evaluating the effect of imports of such merchandise on prices, the Commission shall
consider whether -
               (I) there has been significant price underselling by the imported merchandise as compared
with the price of domestic like products of the United States, and
               (II) the effect of imports of such merchandise otherwise depresses prices to a significantdegree or prevents price increases, which otherwise would have occurred, to a significant degree.               (iii) Impact on affected domestic industry                    In examining the impact  required to be considered under subparagraph (B)(i)(III), the
Commission shall evaluate all relevant economic factors which have a bearing on the state of the industry in the
United States, including, but not limited to -
               (I) actual and potential decline in output, sales, market share, profits, productivity, return on
investments, and utilization of capacity,
               (II) factors affecting domestic prices,               (III) actual and potential negative effects on cash flow, inventories, employment, wages,
growth, ability to raise capital, and investment,
               (IV) actual and potential negative effects on the existing development and production efforts
of the domestic industry, including efforts to develop a derivative or more advanced version of the domestic likeproduct, and
               (V) in a proceeding under part II of this subtitle, the magnitude of the margin of dumping.
23 This subsection is titled “impact on affected domestic industry.
24 19 U.S.C. § 1677(7)(C) (emphasis added).WT/DS184/R
Page A-202
or consumption in the United States, not only relative to production or consumption for the merchant
market.25
20. In brief, Japan’s argument concerning the operation of the captive production provision is
contrary to the plain language of the statute, to the United States Congress’ expressed intention in
enacting it, and to the USITC’s interpretation of it .  Seeking to find support for its position, Japan
resorts to purely aspirational statements by lobbyists before the provision was passed.  Such
statements are not, however, a source for the interpretation of statutes under US law.26
21. The statements do not, in any event, support Japan’s position.  If anything, they show that
lobbyists failed to persuade the United States Congress to enact the provision that they desired.  Japan
cites the efforts of the Committee to Support US Trade Laws to influence Congress to enact a “captive
production provision prohibiting USITC from considering captive production in its injury andcausation analysis".
27  The definitive statement by Congress cited above shows that it was not
persuaded by these efforts because it stated the exact opposite.  Whereas the steel industry purportedly
lobbied for the consideration of the merchant mark et exclusively, Congress, in no uncertain terms,
expressed that the merchant market was not to be considered exclusively.  The lobbying efforts Japan
cites demonstrate that Congress explicitly rejected the construction of the captive productionprovision that Japan now proffers.
B. 
THE CAPTIVE PRODUCTION PROVISION MEETS THE REQUIREMENT TO CONSIDER RELEVANT
ECONOMIC FACTORS IN KEEPING WITH ARTICLE 3 OF THE ANTI -DUMPING AGREEMENT
1. The refined analysis provided for in the ca ptive production provision helps assure an 
objective examination of all relevant factors, as required by Articles 3.1 and 3.4
22. The captive production provision is entirely in accord with the specific obligations of
Article 3 of the Anti-Dumping Agreement.  As ha s been demonstrated, the provision does not alter
19 U.S.C. § 1677(7)(C)(i), which tracks the language of the first sentence of Article 3.2 concerning
the volume of dumped imports.  Likewise, although the captive production provision does imposeadditional fact-finding duties on the USITC in making determinations on the impact of dumped
imports on the affected industry under 19 U.S.C. § 1677(7)(C)(iii), it does not affect that subsection’s
requirement, like that of Article 3.4, to consider “all relevant economic factors”.  Because the captive
production provision does not prohibit the USITC from considering any evidence or from giving such
weight to that evidence as it may ultimately deem  appropriate, it is also consistent with the
requirement of Article 3.1 to conduct an “objective examination” of the volume, price effects and
consequent impact of imports.
23. Indeed, the captive production provision represents an analytical tool that assures the
consideration of all relevant factors, unlike the alternative on which Japan insists. Congress
recognized a relevant economic factor bearing on certain industries that internally transfer a
significant amount of their production of the domestic like product.  When an industry engages insignificant captive consumption, a substantial amount of the domestic industry’s production is
                                                     
25 The requirements of Article 3.1(a), to analyze effects of imports on prices, and of the second
sentence of Article 3.2, to examine price undercutting, depression and suppression, would appear to assume the
existence of  sales in a marketplace.  Thus, where a substantial proportion of output is not sold, the provisions of
the Agreement concerning price effects contemplate an  analysis of effects on only part of production.
26 In interpreting a statute, it is well established that, first, the text of the statue is examined, and, if the
statutory language is unclear, then the legislative history of the statue is examined.  See Blum v. Stenson , 465
U.S. 886, 896 (1984) ( Exh. US/C-4 ).  Efforts of lobbyists are not listed among the traditional sources of
legislative history.  See 3 Sutherland Statutory Construction 371 (5th Ed .1992) ( Exh. US/C-5 ).
27 First Submission of Japan at para. 219.WT/DS184/R
Page A-203
shielded from competition with the dumped imports.  However, if a significant part of its production
is destined for the merchant market as well, the impact of imports in the merchant market, alone, may
have an impact on the overall state of the industr y.  Thus, examining only aggregate information for
the industry as a whole would risk obscuring any effects that this segment may have.
24. Congress thus reasonably decided that the USITC should specifically examine the impact of
dumped imports on the segment of the industry where domestic producers compete directly with those
imports and assess how that competition is effecting the industry as a whole.  The captive production
provision ensures that the USITC takes into account a relevant economic indicator -- competition
between the domestic like product and dumped imports -- when assessing the impact of dumped
imports on the domestic industry.  Nothing in the examination required by Congress prohibits the
USITC from concluding that, notwithstanding observed effects in the merchant market segment,
imports are not materially injuring a domestic industry as a whole.
25. Japan’s position, however, would require an investigating authority to disregard the
significance that impacts specific to a merchant market sector might have for the industry as a whole.
Japan asserts that it is inappropriate to isolate the merchant market sales as either the primary or
secondary focus of analysis.28  Japan offers no basis for this amazing assertion.  Article 3.4 can
provide no support for it.  That Article requires investigating authorities to evaluate all relevant
economic factors.  It does not limit the methods by which they may choose to do so nor does it
provide any exceptions that would justify ignoring such factors.  As will be discussed below, WTO
precedent supports the use of sectoral analysis when accompanied by an analysis of the industry as a
whole.
26. Indeed, the non-objective nature of Japan’s position is illustrated by the fact that Japan itself
urges such a similar analysis when it contrasts the performance of minimills against that of the
integrated steel producers.29  Whereas the captive production provision calls for a segmented analysis
depending on the destination of merchandise, Japan argues for a segmented analysis based on the typeof producer.  It provides no basis for why the one kind of analysis should be prohibited while it urges
that the other kind of analysis is required.
27. Moreover, even in discussing the captive production provision itself, Japan relies on
irreconcilable positions.  Initially, Japan argues that the USITC improperly segments markets in itsanalysis, thereby not resting its determination on the industry “as a whole".
30  Later, however, it cites
with approval what it characterizes as the USITC’s past practice of distinguishing market segments
when there are internal transfers of the domestic like product.31  Thus, Japan’s arguments concerning
segmented analysis are plainly influenced by the results that it desires.  It urges an analysis that is
plainly contrary to the “objective examination” requirement of Article 3.1.
2. The captive production provision pinpoints evidence relevant to each factor as required
by Articles 3.4, 3.5 and 3.6 of the Anti-Dumping Agreement
28. Article 3.4 specifies illustrative relevant economic factors that  that an authority should
consider.  That list of relevant economic factors distinguishes between effects on “sales”, the first item
enumerated, and effects on “output”, the third ite m enumerated.  Article 3.4 thus recognizes that
imports may have effects on sales that they do not have on output.  Unlike Japan’s position, thecaptive production provision fully takes into a ccount the differences between these two factors.
                                                     
28 First Submission of Japan at para. 245.
29 First Submission of Japan at paras. 35-36.
30 First Submission of Japan at para. 222, 225; see also  para. 246.
31 First Submission of Japan at paras. 248-249.WT/DS184/R
Page A-204
29. Cases meeting the threshold conditions for applying the captive production provision may
present facts in which the distinction that Article 3.4 draws between effects on sales and on output are
particularly pertinent.  Internal transfers of product for captive consumption typically cannot properly
be called sales even though the United States recognizes such production as output.  If they are priced
at all, they are often assigned price values for accounting purposes only.  In such cases, the effects of
imports on sales may well be observable only in the merchant market.  Japan’s position, however,would require an authority in such a case not to examine effects on sales.
30. Thus, Japan’s argument that an injury determination may not focus either primarily or
secondarily on the merchant market is contrary to the requirement of Article 3.4 to examine the
effects of imports on sales in all cases, including when there is substantial captive consumption.  As a
result, Japan would systematically, in such cases, give effects on output dispositive weight over
effects on sales.  Nothing in the Agreement, however, supports giving effects on output such a priorityover effects on sales.  Indeed, although the United States does not claim that the order in which
factors are listed indicates the weight that they ar e to be accorded in any given case, it is noteworthy
that Article 3.4 lists effects on sales before effects on output.
31. As has been demonstrated, the United States statute does not limit the USITC’s analysis of
market share only to merchant market sales.  Rather, it requires the USITC to examine market share
primarily in terms of share of the merchant market.  The USITC proceeds, as it did in the current case,
also to examine market share in terms of share of total consumption.  Such an analysis is plainly
within the discretion provided by Article 3.4.
32. Japan’s contention that the captive production provision “ignores the attenuated nature of
import competition in the captive market".
32 is simply ill founded.  The provision does not, as Japan
alleges, require the USITC to ignore the possibil ity that, due to the sheltered nature of captive
production, apparent effects on the merchant market do not cause material injury to the industry as a
whole.  The USITC must still make a determ ination concerning the industry as a whole.
33. Rather, the captive production provision constitutes a command to the USITC not to ignore
evidence of injury resulting from impacts specif ic to the merchant market.  Thus, the captive
production provision is entirely consistent not only with Article 3.4, but also with Article 3.5's
requirement that all relevant evidence before the authority be examined.  Instead, it is Japan’s viewthat effects specific to the merchant market may not be either a primary or secondary focus of
examination that would violate Article 3.5.
34. Similarly ill founded are Japan’s argument s based on Article 3.6.  As Japan notes
33, this
provision requires that an administering authority assess “the effect of dumped imports in relation to
the domestic production of the like product.”  The United States statute so provides34, and the captive
production subsection does not furnish an exception to that requirement.  Japan seeks to move fromthat uncontroversial proposition to the proposition that effects on output must be given weight over
effects on sales.  Article 3.6, like Article 3.4, refutes this proposition.  Article 3.6 provides for
assessing import effects in terms of production “when available data permit the separate identification
of that production on the basis of such criteria as the production process, producers’ sales and profits.”
Thus, under Article 3.6, sales are no less important than the production process in the identification ofproduction.
                                                     
32 First Submission of Japan at para. 226.
33 First Submission of Japan at para. 240.
34 See 19 U.S.C. § 1677(4)(D)(“The effect of dumped imports ... shall be assessed in relation to the
United States production of a domestic like product if available data permit the separate identification of
production in terms of such criteria as the production process or the producer’s profits.”)WT/DS184/R
Page A-205
35. In sum, Japan’s challenge to the captive production provision is based on a thoroughgoing
misreading of both the US statute and Articles 3 and 4 of the Anti-Dumping Agreement.  WTO
precedent also refutes Japan’s arguments.
C. WTO PRECEDENT RECOGNIZES A SEGMENTED MARKET ANALYSIS AS CONSISTENT WITH
ARTICLE  3 AND ARTICLE 4
36. The reasoning of the panel in Mexico -- High Fructose Corn Syrup (“HFCS")35 provides
direct support for the kind of segmented market analysis36 delineated in the captive production
provision.  That panel properly distinguished between a market segmented analysis and a
determination based only on information about one market sector, to the exclusion of the remainder of
the domestic industry’s production.37  While it found that an analysis limited exclusively to one
market sector generally would not be sufficient for establishing injury38, it noted that nothing in the
Anti-Dumping Agreement precluded the use of segmented analysis where different sectors areanalyzed separately.
39  The panel found that an analysis focusing on the sector where dumped imports
and the domestic industry directly compete is permitted, although it does not “excuse the investigating
authority from making the determination required by the Agreement -- whether dumped imports
injure or threaten injury to the domestic industry as a whole".40
37. In fact, the HFCS  panel even went so far as to advocate for the use of a sectoral analysis in
certain circumstances.  It found that an analysis by sector could provide a “better understanding of the
actual functioning of the domestic industry and its specific markets and thus of the impact of imports
on the industry".41  Moreover, “in many cases, such an analysis can yield a better understanding of the
effects of imports, and a more thoroughly reasoned analysis and conclusion".42
38. The flaw that the HFCS  panel found with the Mexican government’s consideration of a single
segment does not exist in the US statute.  The panel found that the Mexican government “deliberately
excluded from its analysis” a portion of the domestic production43, thereby ignoring “possible effects
of imports on the portion of the domestic industry’s production” in the excluded sector of the market,and “ignored the effect of {that} sector on the condition of the domestic producers".
44  In contrast, the
captive production provision only requires the USITC to focus primarily -- not exclusively -- on the
merchant market segment in considering certain fact ors, and the statute requires the USITC to make a
determination about the industry as a whole.  When the USITC focuses primarily on the merchant
                                                     
35 Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the
United States , WT/DS132/R, 28 January 2000.
36 As noted above, one of the captive production provision’s threshold requirements is designed to
assure that merchant market sales represent a significant factor for the domestic industry as a whole.  The otherpreconditions are that “ the production of the domestic like product sold in the merchant market is not generallyused in the production of that downstream article” and that “the domestic like product produced that is internally
transferred for processing into that downstream article does not enter the merchant market for the domestic like
product”.  All three of these criteria help define captive production and merchant market sales as discretesegments.
37 HFCS  at para. 7.154.
38 An analysis of a specific sector could be sufficient if this sector was adequately representative of the
industry as a whole.  HFCS  at para. 7.155.
39 HFCS  at para. 7.154.
40 HFCS  at para. 7.160.
41 HFCS  at para. 7.154.
42 HFCS  at para. 7.154.
43 HFCS  at para. 7.159.
44 HFCS  at para. 7.160.WT/DS184/R
Page A-206
market it is performing an analysis akin to the consideration of factors found acceptable in HFCS45; it
is not making it the basis for the ultimate determination of injury.
D. THE INJURY ANALYSES OF OTHER AUTHORITIES FACED WITH SIMILAR FACTS DEMONSTRATE
THE REASONABLENESS OF THE UNITED STATES ' APPROACH
1. Canada
39. Faced with circumstances similar to those for which the United States’ captive production
subsection provides, the Canadian Import Trade Tribunal (“CITT”) has adopted a similar approach.
Its decisions demonstrate how an analysis that focuses on captive production does not, as Japan
claims, dictate results.46
40. In Tomato Paste in Containers Larger than 100 Fluid Ounces, Originating in or Exported
from the United States of America47, the CITT, like the United States statute, rejected the proposition
that captively consumed tomato paste should not be regarded as production of the domestic tomato
paste industry.  Although the CITT found that dumped import prices were too low in 1992 for
domestic producers to compete on a profitable basis, it did not find the industry materially injured by
imports.  Rather, it found the lost sale margin on merchant-market sales for one firm “small when
compared to the gross margin achieved on products th at Heinz produces from tomato paste.”  As to
the other producer, it found that its high level of capacity utilization due primarily to captive
production was the main reason for its decline in production for merchant market sales.
41. The CITT engaged in a similar analysis but reached the opposite result in Certain Cold Rolled
Steel Sheet Originating In or Exported from the Federal Republic of Germany, France, Italy, the
United Kingdom and the United States of America.48  There, the CITT calculated total production, as
well as performing a separate calculation for production for internal consumption and for the
merchant market.  Also, the CITT calculated empl oyment, capacity, capacity utilization, financial
expenses, depreciation and net income for all production.  It further calculated import and domestic
shares of market sales, net sales and costs of good sold.   Thus, the CITT made findings based on datafor both the industry as a whole and for data focusing on merchant market sales.  Its determination of
material injury was based on finding that the industry’s difficulty adjusting to increasing volumes of
low-priced dumped import prices was the direct cause of a shift from overall industry profitability to
overall losses.
49
42. Although these cases preceded the current version of the Anti-Dumping Agreement, the
CITT’s practice has continued since the Agreement.  For example, in  Certain Flat Hot Rolled
Carbon and Alloy Steel Sheet Products Originating In or Exported From France, Romania, The
Russian Federation and the Slovak Republic , CITT Enquiry No. NQ-98-004 (19 July 1999), the CITT
again focused on the effects of imports on the merchant market.  It addressed, and rejected as factually
unsupported, arguments similar to those that had been successful in Tomato Paste . Specifically, the
CITT responded to arguments that domestic producers were preferring to allocate production to more
                                                     
45 HFCS  at 7.154.
46 See Vienna Convention on  the Law of Treaties , Article 31.3 (b) (taking into account any subsequent
practice in the application of the treaty which establishes the agreement of the parties regarding itsinterpretation.)
47 Tomato Paste in Containers Larger than 100 Fluid Ounces, Originating in or Exported from the
United States of America , CITT Enquiry No. NQ-92-006, at 16 (30 March 1993) ( “Tomato Paste")  (Exh.
US/C-6 ).
48 Certain Cold Rolled Steel Sheet Originating In or Exported from the Federal Republic of Germany,
France, Italy, the United Kingdom and the United States of America , CITT Enquiry No. NQ-92-009, at 15-16,
19 (29 July 1993) ( Exh. US/C-7 ).
49 Id.WT/DS184/R
Page A-207
profitable downstream products.  The CITT, however, found that they did so because prices in the
merchant market had been forced down by low-priced imports.50  The CITT found that the industry at
the end of the investigative period needed to discount sales to the merchant market to maintain overall
capacity utilization and found material injury based on the fact that price erosion caused primarily by
dumped imports accounted for a significant part of the domestic industry’s financial losses.51
43. Thus, in all such cases, the CITT examined evidence concerning whether the impact ofimports on the merchant market segment had a materially injurious effect on the industry as a whole.
The CITT’s approach appears to differ somewhat from that required by the United States statute
52,
and in citing these cases the United States does not necessarily endorse their outcome on the facts.
Nevertheless, the CITT’s approach confirms the reasonableness of the requirement to focus in
appropriate cases on the effects of imports on merchant market sales.  Such practice by other countries
supports the conclusion that the United States’ provision is a permissible approach under theAnti-Dumping Agreement.
2. The European Communities
44. The arguments that Japan directs at the United States’ captive production provision, in fact,
appear to confuse it with the different approach that the European Communities have taken in the faceof the same circumstances.  The EC, like the United States, has recognized the difficulties that captive
production pose to an injury analysis.  The EC, however, unlike Canada and the United States,
excludes output for captive production from its injury analysis in such circumstances.
45. In such cases as Anti-Dumping Duties on Imports of Certain Flat Rolled Products of Iron or
Non-Alloy Steel , EC Decision No. 283/2000/ECSC (4 February 2000)
53 and Countervailing  Duties on
Imports of Certain Flat Rolled Products of Iron or Non-Alloy Steel , EC Decision No. 284/2000/ECSC
(4 February 2000)54, the EC has excluded all captive production from the production of the industry
under consideration.  It did so, not on the basis that the product produced for captive production was
different from the product produced for merchant-market production, but, rather, on finding that (1)no prices for transfers in the captive market were comparable to those in the free market (a.k.a.
merchant market), (2) movement of hot rolled coil s between the two markets are insignificant, and (3)
integrated EC producers did not purchase product for the captive market from independent parties.
55
46. Having made these determinations, the EC evaluated the impact of imports on the ECindustry only insofar as it produces the like product for merchant market sales.  As it stated, it
examined “the situation of the Community industry in terms of the development of the various
economic indicators such as production, sales, market share and profitability ... with respect to the
free market".
56  It considered developments in the subject firms’ captive production only insofar as
they might constitute another factor causing injury to the industry consisting of production for free
market sales.  Production capacity could be used for either free market or captive market production,
so the EC examined whether the decrease in production intended for the free market was due to an
                                                     
50 Certain Flat Hot Rolled Carbon and Alloy Steel Sheet Products Originating In or Exported From
France, Romania, The Russian Federation and the Slovak Republic , CITT Enquiry No. NQ-98-004 at 29, 30
(19 July 1999) ( Exh. US/C-8 ).
51 Id.
52 The United States’ statutory criteria are stricter than the CITT practice.  Faced with facts such as
those in the Tomato Paste  investigation, the USITC might have found under the US statute that the amount of
captive production was insignificant and thus th at a segmented analysis was not required.
53 Exh. US/C-9.
54 Exh. US/C-10.
55 EC Dec. No. 283/2000/ECSC, at para. 43.
56 EC Dec. No. 283/2000/ECSC, at para. 48.WT/DS184/R
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increased need for captive production.57  This EC analysis is quite different from the analysis that the
USITC performs under the US statute because the USITC examines whether the effects of imports on
production for the merchant market impact the industry as a whole, including its operations for
captive production.
47. The United States expresses no view as to the consistency of the EC's approach with the
Anti-Dumping Agreement.  The EC decisions are not the subject of this panel proceeding.  The EC
decisions, like the United States statute, reflect that captive production creates anomalies for the
injury factors set forth in Article 3 of the Anti-Dumping Agreement because those factors assume that
a like product will be sold in at least potential competition with imports.  The United States takes a
reasonable approach to addressing such circumstances, recognizing the anomalies that the EC too has
recognized, as well as fully and reasonably addressing all of Japan’s concerns arising from the
Anti-Dumping Agreement.
E. THE CAPTIVE PRODUCTION PROVISION IS CONSISTENT WITH ARTICLE XVI :4 OF THE WTO
AGREEMENT
48. As discussed above, Congress specifically undertook to make the captive production
provision consistent with US international obligations.58  It rejected proposals that would have raised
many of the questions that Japan has raised here and adopted a requirement that fully satisfies the
requirements of Articles 3 and 4 of the Anti-Dumping Agreement.  Since US laws are in conformity
with the Anti-Dumping Agreement, the United States is not in violation of Article XVI:4 of the WTO
Agreement.
III. THE USITC'S MATERIAL INJURY DETERMINATION IS CONSISTENT WITH
THE ANTI-DUMPING AGREEMENT
A. JAPAN 'S SUBMISSION IS BASED UPON A MISCHARACTERIZATION OF THE USITC 'S
DETERMINATION
49. As with other arguments that Japan has raised in this proceeding, Japan accuses the USITC of
not conducting an objective examination of the evidence.  It does so, however, both by ignoring the
nature of the USITC’s process and mischaracterizing the USITC’s findings.  The nature of both the
USITC’s investigation and its determination in this case demonstrate that those allegations are not
true.
1. The nature of the USITC's proceedings
50. The USITC is the United States authority with responsibility for determining, under US
anti-dumping law, whether a domestic industry is materially injured, threatened with material injury,
or the establishment of an industry is materially retarded, by reason of dumped imports.59  The USITC
is an independent agency, not part of any Executive Branch Department of the US government, that is
composed of six commissioners, not more than three of which may be members of the same political
party.60  In order to further ensure the nonpolitical nature of the USITC, in making appointments of
commissioners, the members of different political parties must be appointed alternatively61, the
Chairman and the Vice-Chairman of the USITC must be of different political parties62, and it is
                                                     
57 EC Dec. No. 283/2000/ECSC, at paras. 83-86.
58 SAA at 852.
59 19 U.S.C. § 1673d(b)(1).
60 19 U.S.C. § 1330(a) ( Exh. US/C-3(a) ).
61 19 U.S.C. § 1330(a).
62 19 U.S.C. § 1330(c)(3)(B).WT/DS184/R
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prohibited to have a Chairman designated who is of the same political party of the preceding
Chairman.63
51. In determining whether there is material injury  to an industry in the United States, threat of
material injury to such an industry, or material retardation of the establishment of an industry in the
United States by reason of subject imports, an affirmative vote on any of these issues shall be treatedas a vote that the determination should be affirmative.
64  Three affirmative votes are sufficient under
US law to carry an affirmative determination.65  In the present matter, all six members of the USITC
determined that an industry in the United States was materially injured, or threatened with material
injury, by reason of imports from Japan of hot rolled steel products that had been found by the
Department of Commerce to be sold in the United States at less than fair value.66  T h e  s i x
Commissioners unanimously voted in the affirmative, with three Commissioners finding that the
captive production provision was applicable, and three Commissioners finding that it was not.67
52. The USITC instituted the current investigation in 30 September 1998, following receipt of a
petition filed by representatives of the domestic hot rolled steel industry68.  The final phase of the
investigation was scheduled by the USITC following notification of a preliminary determination by
the Department of Commerce that imports of hot roll ed steel products from Japan were being sold at
less than fair value.  The USITC conducted a public hearing on 4 May 999, and all persons who
requested the opportunity were permitted to appear in person or by counsel.69
53. The USITC, consistent with Article 12.2 of the Anti-Dumping Agreement, explains its
findings and conclusions in this investigation at length and analyzes the extensive evidence collected.The USITC mailed questionnaires to 31 mills believed to produce hot rolled steel products.
70
Twenty-four firms, representing 95 per cent of production of hot rolled steel products in theUnited States, provided the USITC with data on their hot rolled operations.
71  The USITC also sent
questionnaires to 77 firms believed to have imported hot rolled steel products, and received usable
data from 52 of the firms.72  Twenty-four producers, which together accounted for approximately
98 per cent of US commercial shipments of hot rolled steel products in fiscal year 1998, provided
financial data.73  The petition in this investigation listed six firms believed to produce subject
merchandise in Japan, and, accordingly, the USITC requested information from each of the six
Japanese producers and exporters through their counsel.  Counsel on behalf of the Japanese
respondents provided complete data for all six mills, believed to account for approximately 90 percent of Japanese production of hot rolled steel product and about 87 percent of such exports to the
                                                     
63 19 U.S.C. § 1330(c)(3)(A).
64 19 U.S.C. § 1677(11) ( Exh. Jp-4(g) ).
65 Id.
66 The views of (then) Chairman Bragg, Commissioner Miller, Commissioner Hillman, and
Commissioner Koplan, finding material injury, constitute the majority opinion of the USITC .  Commissioner
Crawford also found material injury but provided her views separately.  Commissioner Askey found that thedomestic industry producing hot rolled steel was threatened with material injury by reason of dumped imports.
67 USITC Views at 9-10.
68 USITC Views at 1.
69 Id.
70 USITC Views at III-1.
71 USITC Views at III-1.
72 USITC Views at IV-1.  Twelve firms reported that they did not import hot rolled steel products
during the period for which data were collected and 13 firms did not respond to the USITC’s questionnaires.USITC Views at IV-I, n.1.
73 USITC Views at VI-1.WT/DS184/R
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United States in 1998.74  Additional information gathered during the course of this investigation
included answers from 63 purchaser questionnaires75, official statistics, and other public sources.
54. All parties were provided with opportunities to submit prehearing and posthearing briefs, as
well as to appear at a public hearing.  Additionally, all sides were permitted to submit final written
comments on evidence gathered during the course of the investigation.  In June 1999, based upon theextensive record developed in the investigation, th e USITC determined that an industry in the United
States was materially injured by reason of imports from Japan of hot rolled steel products that had
been found by the Department of Commerce to be sold in the United States at less than fair value.
76
2. The USITC's determination
55. The following discussion summarizes some key facets of the USITC determination,
particularly addressing misstatements of fact made in the First Written Submission of Japan.  At theoutset, the USITC determined that there was one like product consisting of all hot rolled carbon steel
products within the scope of the investigation.
77  It also defined the domestic industry as all domestic
producers of hot rolled steel.78
56. The USITC determined that the hot rolled steel  industry in the United States was materially
injured by reason of the dumped imports from Japan79, which significantly increased in volume over
the period of investigation, had price depressing effects on the domestic industry and had a significant
adverse impact on the domestic producers of the domestic like product.  Consistent with Article 3.1 of
the Anti-Dumping Agreement, the determination of material injury due to dumped imports was based
upon an objective examination of the positive evidence.  The USITC assessed whether the domesticindustry was materially injured by reason of imports and considered all relevant economic factors that
bear on the state of the industry in the United States.
80  No single factor was dispositive and all
relevant factors were considered within the context of the business cycle and the conditions of
competition that are distinctive to the domestic industry.81
(a) The Commissioners considered the effects that a significant amount of captive production had
on the industry as a whole
57. The Government of Japan is factually incorrect, both as to the relevant statute and USITC
practice, when it argues that the captive production provision requires the Commissioners to ignore
the domestic industry as a whole and to focus solely on the merchant market.82  In the present
investigation, among the distinctive conditions of competition that the USITC found relevant to its
determination was the fact that the domestic industry captively consumes over 60 per cent of its
production of the domestic like product for the manufacture of downstream articles.83  The  USI TC
also recognized that captive production is relatively sheltered from the effects of import competition.84
                                                     
74 USITC Views at VII-4.  The USITC similarly requested information from the 4 listed Brazilian
producers, and 16 firms believed to produce hot rolled carbon steel in Russia.  Id. at VII-2, VII-4.
75 USITC Views at II-1.
76 USITC Views at 3.  Commissioner Askey found th at the US industry was threatened with material
injury by reason of dumped imports.  Id.
77 USITC Views at 5.
78 USITC Views at 6.
79 Imports from Japan were cumulated with imports from Brazil and Russia, USITC Views at 9, and
Japan is not challenging that cumulation.
80 USITC Views at 9.
81 USITC Views at 9.
82 See 19 U.S.C. § 1677(7)(C)(iv).
83 USITC Views at 9.
84 USITC Views at 19.WT/DS184/R
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58. All six Commissioners voted in the affirmative as to injury to the domestic industry in this
investigation.  Three Commissioners found that the captive productive provision was not applicable to
this investigation, and therefore did not primarily focus on the merchant market.85  T h r e e
Commissioners found that the captive production provision did apply in this investigation86, and
accordingly evaluated the factors listed in the Agreem ent for both the industry as a whole and as to
the merchant market.87  Under the tie-vote provision88, either group of three votes would result in an
affirmative determination.  Thus, there would have been an affirmative determination regardless of
the application of the captive production provision.
59. The Government of Japan has also misstated material facts by representing that the USITC
failed to consider relevant factors relating to captive production in its analysis of injury and causation
and that the USITC allegedly overlooked the fact that captive production is insulated from import
competition.89  The Commissioners evaluated the factors required by Article 3 of the Anti-Dumping
Agreement for the whole industry, however, with three Commissioners also focusing on the merchant
market.90  The Commissioners also explicitly noted that some hot rolled steel producers were more
sensitive to the injury caused by dumped imports because they had more merchant market sales and
less substantial captive operations.91  Japan ’s misrepresentations are explicitly rebutted by the written
USITC determination.
(b) The USITC considered all relevant economic factors over the entire period of investigation
60. The Government of Japan has repeatedly and mistakenly stated that the USITC improperly
limited its analysis of the domestic industry to two years.92  The record evidence clearly indicates that
the period of investigation was three years, and, accordingly, includes data for the years 1996, 1997,
and 1998.  Further, despite the incorrect factual assertions made by Japan, the USITC clearly
examined trends over the three year period for such relevant factors as absolute volume of dumped
imports93, market share94, overall consumption95, domestic shipments96, prices97, underselling by
                                                     
85 It appears that Japan is not challenging Commissioner Askey ’s finding of threat of material injury to
the domestic industry due to the dumped Japanese imports.  See First Submission of Japan at para. 82.
86 USITC Views at 9, 10.
87 Japan appears to concede this point in part in their brief, stating that “{u}nder US law, if three
commissioners find current injury, this is sufficient for an affirmative determination.  Three othercommissioners found that the provision did not apply, but one of these commissioners nevertheless considered
the same merchant market data in parallel with data on the industry as a whole .” First Submission of Japan at
para. 244 (emphasis added).  See e.g.,  USITC Views at 12, discussing the volume of the dumped Japanese
imports as to both the whole industry and the merchant market.
88 19 U.S.C. § 1677(11).
89 First Submission of Japan at para. 226.
90 See USITC Views at 12-21.
91 USITC Views at 11, noting that “{w}hen compared to BOF producers, EAF producers are generally
more sensitive to competition in the merchant market because more of their production is sold in the spot
market, their captive operations are generally not as substantial, and they generally maintain a lower proportion
of long term contracts.”
92 Although the Japanese repeatedly assert that the USITC did not use a three year period of
investigation, in  apparent contradiction to their own ar gument, they also state that a three year period was used.
See, e.g.  First Submission of Japan at 15, para. 38 stating, “{d}emand for steel continued its growth throughout
the period investigated by USITC (1996 through 1998) . . . .”
93 USITC Views at 12 (dumped imports increased from 1.3 million short tons in 1996 to 3.0 million
short  tons in 1997 and to 7.0 million short tons in 1998).
94 USITC Views at 12 (the market share of dumped imports more than doubled from 1996 to 1997, and
then doubled again from 1997 to 1998).
95 USITC Views at 12 (overall consumption in the U. S. market increased throughout the three year
period of investigation).WT/DS184/R
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dumped imports98. costs of goods sold (COGS)99, production capacity100, capacity utilization101,
employment102, and capital expenditures.103  It is incongruous to argue that “the first year of the period
was ignored"104, despite the fact that the USITC determination clearly demonstrates that a three year
period of investigation was used and that three year trends were extensively discussed.105
61. In particular, the USITC discussed the fact that dumped import volumes more than doubled ineach year over the three year period of investigation.
106  The USITC also found that the market shares
of US consumption of dumped imports doubled from 1996 to 1997, and doubled again from 1997 to
                                                                                                                                                                    
96 USITC Views at 12, 13 (domestic producers’ merchant market shipments, as measured by volume
sold, were 21.5 million short tons in 1996 and 21.8 million short tons in 1998; domestic producers’ totalshipments by volume were 63.3 million short tons in 1996 and 63.8 million short tons in 1998).
97 USITC Views at 14 n.76 (average unit value of dumped imports declined from $305.36 per short ton
in 1996, to $304.46 per short ton in 1997, and to $266.20 per short ton in 1998.  The average unit value of
imports from Japan declined from $430.66 per short ton in 1996, to $379.72 per short ton in 1997, and to
$298.46 per short ton in 1998.  For merchant market sales, domestic producers’ average unit values were$347.01 per short ton in 1996, increased to $353.86 per short ton in 1997, and then declined below the 1996level to $330.51 per short ton in 1998.  Overall, domestic producers’ average unit values were $343.24 per shortton in 1996, increased to $350.87 per short ton in 1997, and declined below the 1996 level to $335.02 per shortton in 1998.)
98 USITC Views at 14, 15 (In 1996, there were 29 instances of underselling by dumped imports and 32
instances of overselling.  In 1997, the underselling by the dumped imports became more prevalent than in 1996,with 48 instances of underselling by the dumped imports and 16 instances of overselling.  In 1998, undersellingby the dumped imports was also prevalent with 45 instances of underselling by the dumped imports and 22instances of overselling.  In 1998, the dumped imports from Japan increasingly undersold the domestic
merchandise).
99 USITC Views at 16 (the domestic industry’s unit COGS declined during the period of investigation,
but this decline was dwarfed by the decline in the domestic industry’s average unit values.  For merchant marketsales, the domestic industry’s unit COGS declined by 2.9 per cent from 1996 to 1998 and by 0.9 per cent from1997 to 1998; whereas the domestic industry’s average unit values declined by 4.8 per cent from 1996 to 1998and by 6.6 per cent from 1997 to 1998.  Overall, unit COGS declined by 3.5 per cent from 1996 to 1998 and by
1.8 per cent from 1997 to 1998; whereas average unit values declined by 2.4 per cent from 1996 to 1998 and by
4.5 per cent from 1997 to 1998).
100 USITC Views at 17 (the domestic industry increased its capacity from 67.3 million short tons in
1996, to 70.0 million short tons in 1997, and to 73.5 million short tons in 1998).
101 USITC Views at 17 (capacity utilization rates declined from 94.5 per cent in 1996, to 92.6 per cent
in 1997, and to 87.5 per cent in 1998).
102 USITC Views at 18 (the number of workers declined from 33,965 in 1996, to 33,518 in 1997, to
32,885 in 1998.  Hours worked also declined over the three year period from 73,597 in 1996, to 71,634 in 1997,to 68,574 in 1998).
103 USITC Views at 18 (capital expenditures declined  significantly from $1. 7 billion in 1996, to $908
million in 1997, and $71 5 million in 1998).
104 First Submission of Japan at para. 265.
105 Japan appears to endorse Commissioner Askey’s analysis and use of the  three year trends.   See
First Submission of Japan at para. 266.  Commissioner Askey made an affirmative determination based on the
threat of material injury by reason of the dumped imports, finding that Japanese imports increased substantiallyover the period of investigation; that the Japanese hot rolled steel producers had excess capacity; that Japanese
market share doubled between 1996 and 1997 and then grew 350 per cent between 1997 and 1998; and that
dumped imports are likely to have a significant depressing or suppressing effect on domestic prices.  USITC
Views, Additional and Dissenting Views of Commissioner Thelma J. Askey at 54-55.
106 On a quantity basis, the cumulated subject imports increased from 1.3 million shorts tons in 1996 to
3.0 million short tons in 1997, and increased again to 7.0 million short tons in 1998, an overall increase of
419.8 per cent from 1996 to 1998, and of 132.5 per cent from 1997 to 1998.  On a value basis, the cumulatedsubject imports increased from $410 million in 1996 to $91 4 million in 1997, and increased again to $1.9 billion
in 1998, an overall increase of 353.1 per cent from 1996 to 1998, and of 103.3 per cent from 1997 to 1998.WT/DS184/R
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1998.107  The USITC also found significant the fact that, as the market share of nonsubject imports
remained essentially flat over the three year period of investigation, and as the dumped imports’
volume and market share were dramatically increasing, the US producers share of the market
declined.108  Over the three year period examined, the harm caused by the Japanese imports also was
clear to the USITC from the decrease in domestic producers’ merchant market shipments, as
measured by volume sold, from 1996 to 1998, at a time of constantly increasing US consumption.109
One of the key factors in the USITC determination is that, as overall consumption in the US market
increased throughout the period of investigation, reaching record highs in 1998110, the domestic
producers were unable to participate in the increasing demand because dumped imports dramatically
increased in terms of both volume and market share.111
62. The USITC likewise found that price trends and underselling data supported the conclusion
that dumped imports had significant price depressing effects on the domestic like product.112
Although prices for both the dumped imports and the domestic like product showed a mixed trend
throughout 1996 and mid-1997, they declined thereafter, both as measured by quarterly pricing data
and by average unit values.113  In nearly all instances, the price of the imported and domestic product
declined significantly in 1998, at a time when the rise in the volume of dumped imports reached its
highest rate.114
63. Instances of underselling by the dumped imports increased over the three year period ofinvestigation.  In 1998, the final year of the period of investigation, and thus most probative as to the
existence of current material injury, underselling by the dumped imports was prevalent.
115  T h e
increased rate of underselling of Japanese imports in 1998 coincided with a shift by Japaneseproducers to the sale of more commodity grade products.
116  The USITC found that the increased
frequency of underselling supported a finding that dumped imports had significant price depressing
effects in 1998.
64. The substantially increasing volume of dumped imports at declining prices had a significant
negative impact on the domestic industry, as seen in the declining production, shipments, market
                                                     
107 USITC Views at 12.  In the merchant market, the share held by dumped imports increased from 5.0
per cent of apparent US consumption, as measured by volume sold in 1996, to 10.2 per cent in 1997, and thenincreased again to 21.0 per cent in 1998.  For the industry as a whole, the share held by dumped importsincreased from 2.0 per cent of apparent US consumption, as measured by volume sold in 1996, to 4.2 per cent in1997, and then increased again to 9.3 per cent in 1998.
108 In the merchant market, the domestic producers’ market share declined from 80.4 per cent of
apparent US consumption in 1996, as measured by volume sold, to 77.8 per cent in 1997, and declined again to
65.6 per cent in 1998.  The domestic industry’s market share for the industry as a whole, declined from 92.3 percent of apparent US consumption in 1996, as measured by volume, to 90.8 per cent in 1997, and declined againto 84.8 per cent in 1998.  USITC Views at 12.  Nonsubject imports’ market share of US consumption was 5.7per cent in 1996, 5.0 per cent in 1997, and 5.9 per cent in 1998.  The market share held by all nonsubjectimports, by value, was 6.3 per cent in 1996, 5.5 per cent in 1997, and 6.3 per cent in 1998. USITC Views at
Table C-1.
109 USITC Views at 12, 13.
110 Total apparent US consumption of hot rolled steel  rose from 68.5 million short tons in 1996, to 71.0
million short tons in 1997, and to 75.3 million short tons in 1998.  On a merchant market basis, apparent USconsumption of hot rolled steel rose from 26.7 million shor t tons in 1996, to 29.3 million short tons in 1997, and
33.3 million short tons in 1998.  USITC Views at 10.
111 See USITC Views at 12.
112 USITC Views at 15, 16.
113 USITC Views at 14.
114 USITC Views at 14.
115 USITC Views at 15.
116 USITC Views at 15.WT/DS184/R
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share, prices, capacity utilization, and financial condition.117  As stated above, a key factor in the
USITC determination was the fact that the dumped imports captured nearly all of the growth in the
market in 1998, at a time of record demand.  These dumped imports prevented the domestic industry
from increasing its sales in response to overall increasing US apparent consumption.118  In fact,  the
domestic industry lost market share throughout the three year period of investigation.119  The USITC
also found that the domestic industry increased its  capacity at a rate largely commensurate with the
increasing US consumption from 1996 to 1998120, but this increased capacity almost immediately
became excess capacity.121
65.   The domestic industry’s performance indicators indicated a sharp decline in 1998 despite the
record demand.122  From 1997 to 1998, as apparent consumption increased significantly, operating
income declined by more than half.123  On merchant market sales, the ratio of operating income to net
sales declined from 5.9 per cent in 1997 to 0.6 per cent in 1998, and overall, the ratio declined from5.5 per cent in 1997 to 2.6 per cent in 1998.
124
66. The USITC found the domestic industry’s performance was substantially poorer than what
would be expected given the record levels of demand in 1998.125  Production and capacity utilization
rates for nearly the whole industry showed double di git declines from the first half of 1998 to the
second half of 1998, both on an overall basis and for the vast majority of individual firms (including
both integrated mills and minimills).126  For the merchant market, apparent US consumption, when
measured by volume, increased by 1.69 per cent from 16.5 million short tons in the first half of 1998
to 16.7 million short tons in the second half of 1998.127  However, overall apparent consumption,
when measured by value, declined by 21.64 per cent from the first half to the second half of 1998.The USITC concluded that this fact further confirmed that prices declined in the second half of 1998,
when dumped imports reached their highest levels
128, thus contributing to material injury.  A
comparison of the financial data reported in the preliminary and final phases of the investigation
strongly suggested that the industry’s operating income worsened from the first half of 1998 to the
second half of 1998, when dumped imports reached their highest levels during the three year period ofinvestigation.
129
(c) The USITC looked at other potential causes of injury to the domestic industry
67. The USITC examined, as a condition of competition, the fact that the domestic hot rolled steel
industry consists of both integrated (or “BOF”) and minimill (or “EAF”) producers.130  In doing so,
the USITC considered the different conditions under which these producers compete.  It found that
EAF producers are generally more sensitive to co mpetition in the merchant market than BOF
                                                     
117 USITC Views at 20, 21.
118 USITC Views at 17.
119 USITC Views at 17.
120 USITC Views at 17.
121 USITC Views at 17.  The industry capacity utilization rates declining from 94.5 percent in 1996, to
92.6 per cent in 1997, and to 87.5 per cent in 1998.  As with the industry as a whole, both integrated producers
and minimills’ capacity utilization steadily declined from 1996 to 1998, despite the overall increasing US
consumption. Id.
122 USITC Views at 17.
123 USITC Views at 18.
124 USITC Views at 18.
125 USITC Views at 20.
126 USITC Views at 20.
127 USITC Views at 20.
128 USITC Views of 20.
129 USITC Views at 20.
130 USITC Views at 11.WT/DS184/R
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producers, in part, because their captive operations are generally not as substantial.  The USITC also
noted that EAF producers were more sensitive to competition because more of their production is sold
in the spot market and they generally maintain a lower proportion of long term contracts.131  I n
addition, EAF producers are generally more recent en trants to the industry than BOF producers, and,
when compared to BOF producers, EAF producers’ lower costs and higher productivity permit them
on average to sell hot rolled steel at lower prices.132
68. The USITC performed a detailed analysis of the competition between these two types ofproducers in order to ensure that any resulting adverse effects were not attributed to the dumped
imports.  Although minimills had a competitive advantage and, therefore, somewhat constrained the
prices that integrated mills could command, the USITC found it significant that both EAF and BOF
producers’ prices declined significantly during the period of investigation, as reflected in unit values
of shipments and sales.
133  Moreover, domestic producer prices declined dramatically in the latter part
of 1998, as dumped import volumes increased at their fastest rate, and domestic prices recovered only
as dumped imports exited the market.134  The USITC concluded from these facts that evidence
concerning intra-industry competition did not detract from the evidence establishing that dumped
imports caused significant price declines in the latter part of the period of investigation.135
69. Further demonstrating this point, the USITC noted that the trends for the industry as a whole,including declines in operating income and the ra tio of operating income to net sales, were also
apparent for integrated mills and minimills individually.
136  In a comparison of these two types of
producers, EAF producers, which are more sensit ive to competition from imports, had a worse
financial performance than BOF producers in 1997 and 1998.137  In fact, for merchant market sales,
EAF producers had lower operating income to net sale s ratios than BOF producers.  This lower ratio
logically follows from the higher se nsitivity of EAF producers to the effects of imports.  Tellingly, the
EAF producers demonstrated lower operating income to net sales ratios than BOF producers at a
period of dramatically increasing dumped imports.  Thus, while the USITC recognized that increased
competition within the domestic industry was a relevant economic factor, it found that this factor onlypartially explained the domestic industry’s declining performance in 1998.
138  Consistent with its
obligation under the Agreement, the USITC examined the known factor of increased competition in
the domestic industry, and any injury caused by this factor was accordingly not attributed to the
dumped imports.
70. Another condition of competition that the US ITC identified was a labour strike at General
Motors Corp. (“GM”) which lasted for five weeks in June and July 1998.139  The USITC took into
account GM’s estimate that the total amount of flat rolled steel (including hot rolled, cold rolled and
corrosion resistant steel) that it did not purchase as a result of strike related work stoppages was about
685,000 tons.140  It evaluated the significance of this fact in light of the total apparent US consumption
of hot rolled steel of over 75 million tons in 1998.141  The USITC further noted that, despite the GM
strike, the merchant market and overall consumption of hot rolled steel were at all-time highs in
                                                     
131 USITC Views at 11.
132 USITC Views at 11.
133 USITC Views at 15.
134 USITC Views at 15.
135 USITC Views at 15, 16.
136 USITC Views at 19.
137 USITC Views at 19.
138 USITC Views at 19.
139 USITC Views at 11.
140 USITC Views at 11.
141 USITC Views at Table C-I.WT/DS184/R
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1998.142  Thus, the USITC found material injury by reason of dumped imports notwithstanding the
strike.
71. In light of the increasing dumped import volume and market share and declining dumped
import prices, the USITC reasonably determined that the domestic industry producing hot rolled steel
is materially injured by reason of dumped imports from Japan.143  The USITC specifically recognized
that other economic factors, including increased intra-industry competition and the GM strike,
contributed to the industry’s poorer performance in 1998.  However, after taking these factors into
account, the USITC’s determination demonstrates the causal relationship between the substantially
increased volume of dumped imports at declining prices and the industry’s deteriorating performance,
as reflected in nearly all economic indicators.144
B. THE USITC REASONABLY ASSESSED CAPTIVE PRODUCTION IN A MANNER CONSISTENT WITH
THE ANTI -DUMPING AGREEMENT
1. All six commissioners made affirmative determ inations regardless of their views on the 
proper method for examining of captive production
(a) Japan's argument mischaracterizes the role of captive production in the determination
72. As an initial matter, this panel should note that only three Commissioners of the USITC found
that the captive production provision applied to the hot rolled steel industry.145  T h e  t h r e e
Commissioners that found that captiv e production provision did not apply146 likewise made an
affirmative determination with respect to imports of hot rolled steel from Japan.  The affirmative
votes of these three Commissioners who did not apply the provision, standing alone, are sufficient for
an affirmative determination against imports of Japanese dumped hot rolled steel.147  As a result, even
if this panel finds that three Commissioners improperly applied the captive production provision, the
affirmative determination against Japanese hot rolled steel would be unaffected.  Thus, the challenge
to the provision as applied in this case necessarily should fail.
73. Perhaps recognizing this limitation, Japan poses an independent attack on the method of
analysis actually employed by the majority of Commissioners, accusing them of “ignoring captive
consumption as an important condition of competition".148  While three of these four Commissioners
used the captive production provision in their analysis, Chairman Bragg149 found that the provision
did not apply.  She further found, however, that she had the discretion to consider the merchant
market in her analysis.150  Thus, Chairman Bragg joined in the majority’s views, noting only that she
would have reversed the order in which data for the merchant market and the industry as a whole were
considered.151  In order to include Chairman Bragg’s views in their challenge, Japan thus remarkably
has taken the position that the USITC erred by having “considered, either primarily or secondarily, the
                                                     
142 USITC Views at 16.
143 USITC Views at 21.
144 USITC Views at 20, 21.
145 USITC Views at 35.
146 USITC Views at 25.
147 See § 771(11) of the Act, 19 U.S.C. § 1677(11).  Japan only focuses on the section of the statute
providing that an affirmative determination exists when three Commissioners find current material injury.  First
Submission of Japan at para. 244.  This statutory provision clearly provides that a finding of threat of material
injury, such as that by Commissioner Askey in this case, constitutes an affirmative determination as well.
148 First Submission of Japan at para. 250.
149 The chairmanship of the USITC has changed since the time of the investigation, but, for purposes of
this discussion, the Commissioners will be referred to by the titles that they had at the time of the investigation.
150 USITC Views at 29.
151 USITC Views at 12-21 & nn. 59, 75, 92.WT/DS184/R
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data for the merchant market...".152  Therefore, Japan appears to be arguing that the majority’s views
violate the Anti-Dumping Agreement, the captive production provision notwithstanding.
74. Whether Japan is challenging the use of the captive production provision or contesting the
general assessment of captive production in this case153 is immaterial because the USITC properly
considered captive production in this investigation.  The three Commissioners applying the provisionfound that they were not permitted to disregard the industry’s captive consumption.
154  They clearly
stated that the statute required them to “determine material injury with respect to the industry as a
whole, including the industry’s performance with respect to both merchant market operations and
captive production".155  Based on this requirement, these three Commissioners, joined by Chairman
Bragg, undertook an analysis which explicitly exam ined the injury factors with respect to both the
merchant market and the entire domestic market in this investigation.
75. For example, as a condition of competition, the USITC discussed the rising apparent domestic
consumption in both the merchant market and the total US market.156  Likewise, despite Japan’s
arguments to the contrary157, when considering the volume of dumped imports, the USITC
specifically referenced the market share of dumped imports in the merchant market and in the
domestic market for hot rolled steel as a whole, noting that the market share by volume more thandoubled from 1996 to 1997 and then again from 1997 to 1998.
158  The USITC then contrasted these
increases with the domestic industry’s declining market share in both markets over the period.159
76. Based on these findings, the USITC drew conclusions that were consistent with the Article
3.2 directive to “consider whether there has been a significant increase in dumped imports”.  Notably,this provision does not provide any parameters or limitations for what constitutes a “significant”
increase.  The significance of the increase depends upon the facts of each case, and, in this matter, the
USITC reasonably concluded that the increase was significant.
77. Japan insists that, had the USITC only noticed that import penetration levels never reached
double digits, it would have been compelled to find import volumes insignificant.  Japan’s argument,
of course, fails to note that the USITC’s findings specifically state the maximum import penetration
                                                     
152 First Submission of Japan at para. 245.
153 First Submission of Japan at para. 245 (“USITC’s application of the captive production provision
confirms the provision’s flawed analytic approach... .”); para. 247 (“The impact of the captive production
provision on USITC’s determination of facts, and its analysis of those facts... .”).
154 USITC Views at 35 (“The SAA makes clear, however, that we are not to focus exclusively on the
merchant market”).
155 USITC Views at 35.
156 USITC Views at 10.  The three Commissioners who applied the captive production provision were
joined in this discussion by Chairman Bragg, who did not apply it.
157 First Submission of Japan at paras. 245-246.  In these paragraphs, Japan also characterizes operating
profits as “consistent” and “drop{ping} to break-even levels.”  The USITC looked at the same evidence and
simply came to a different conclusion.  The USITC looked at the data for the entire market (Table C-1) and the
merchant market (Table C-2) and found that operating income declined by more than half.  USITC Views at 18.Simply because Japan has a different interpretation of the same evidence does not render the USITC positionillegal.  Finally, in these same paragraphs, Japan claims that the U.S. industry’s financial performance was betterin 1998 than in 1996, and because it looked at the merchant market, the USITC did not consider this fact.  Many
factors make up a consideration of an industry’s fina ncial performance, and it is not clear which factors, in
particular, Japan alleges that the USITC did not consider.
158 USITC Views at 12.  The USITC specifically rec ognized that in the merchant market the market
share held by dumped imports increased from 5.0 per cent by volume of apparent US consumption in 1996 to10.2 per cent in 1997 and 21.0 per cent in 1998.  For the industry as a whole, the USITC found that dumpedimports held 2.0 per cent of the market in 1996, 4.2 per cent in 1997, and 9.3 per cent in 1998.  Id.
159 USITC Views at 12.WT/DS184/R
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reached -- 9.3 per cent.160  More importantly, Japan fails to note the applicable provisions of the
Agreement in making its argument.  Article 3.2 does not fix any particular percentage of import
penetration as “significant” or “insignificant”.  Rather, Article 3.2 requires an examination of the
increase in imports to determine whey that increase is significant “either in absolute terms or relative
to production or consumption”.  The USITC took all these measures into account, specifically
analyzing the doubling and redoubling of the absolute volumes of import, their rapid increase as ashare of total consumption (again by several times), and their effects in preventing increases in US
production.
161  The USITC, in examining these factors, took into account all relevant economic factors
bearing on the state of the industry consistent with Article 3.4 of the Agreement.162  Japan states no
reason why these findings are not in accordance with the Agreement.
78. Similarly, the majority of Commissioners, who focused on the merchant market, continued
their analysis by examining the domestic prices in both the merchant market as well as the overalldomestic market for hot rolled steel.
163  Moreover, they determined that the price declines were not a
result of declining costs because prices were falling more than costs in both the merchant market and
the market overall.164
79. Finally, in examining the impact of the dumped imports on the domestic industry, and inresponse to arguments made by respondents during the course of the investigation, the USITC
considered and rejected arguments that the domestic industry’s troubles were due to intense
competition between minimills and the integrated mills because the data for merchant market sales
and total sales for both types of domestic producers showed declines in operating income and ratios of
operating income to net sales.
165
80. In making this finding, the USITC took into account the fact that minimills performed worsethan integrated producers.  It attributed this poor er performance, in part, to the minimill ’s “greater
dependence on the merchant market, where imports are concentrated".
166  Thus, despite Japan’s
consistent contention that the USITC ignored this fact167, the USITC took into account the fact that
captive production is largely shielded from the effects of imports.
81. In any event, the trends exhibited in the merchant market mirrored the trends for the industry
overall.  Consequently, the Japanese challenge to the majority’s analysis based on the fact that they
considered the merchant market data should be dismissed as irrelevant.
82. Moreover, as noted above, even those Co mmissioners who did not apply the captive
production provision found that they had the discretion to consider the captive production as a
condition of competition.168  These Commissioners examined data for both the domestic industry as a
whole and for merchant market operations.169  Some of these Commissioners merely placed different
emphasis on the merchant market data.
                                                     
160 USITC Views at 12.
161 USITC Views at 12-13.
162 Moreover, this panel should not heed Japan’s emphasis on import penetration and omission of the
other factors because, under 3.2 of the Anti-Dumping Agreement, “no one or several of {the} factors cannecessarily give decisive guidance.”  Thus, while Japan hinges its case on few highlighted factors, these are notoutcome determinative, and the USITC construed these and other factors in a manner consistent with theAnti-Dumping Agreement.
163 USITC Views at 14 n.76, 15 n.83.
164 USITC Views at 16 and n.88.
165 USITC Views at 19 nn.105 & 106.
166 USITC Views at 19.
167 First Submission of Japan at paras. 251, 254.
168 USITC Views at 29.
169 USITC Views at 29.WT/DS184/R
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(b) The views of the Commissioners who did not apply the captive production provision do not
undermine the validity of the views of those Commissioners who did apply it
83. Japan has made an attempt to discredit the USITC’s views by drawing a false distinction
between the views of Chairman Bragg (who did no t apply the captive production provision) and the
views of the Commissioners who did apply this provision.  Whereas Japan states that thoseCommissioners who applied the provision ignored captive production, it avers that Chairman Bragg
considered the merchant market “in parallel” with the industry as a whole.
170  Japan appears to
differentiate the opinions in this manner despite the fact that, as already mentioned, Chairman Bragg
joined in the majority opinion with the three Commissioners who applied the captive production
provision. These four Commissioners thus all had the exact same views and analysis, and the Japanese
attempt to distinguish them is disingenuous.  Japan’s characterization of Chairman Bragg’s analysis is
the correct characterization of the decision -- these Commissioners considered the merchant market“in parallel”  with the industry as a whole.
84. Commissioner Crawford stated that she examined the data for the merchant market but chose
to base her determination on the “total domestic market and the domestic industry as a whole".
171
Although she used a different approach from the majority of the USITC for analyzing the effects of
the significant captive consumption because she did not “evaluate the effects of imports on the
merchant market"172, Commissioner Crawford did examine the e ffect of having only 40 percent of the
domestic like product compete with dumped imports in the merchant market.173  She found that the
dumped imports could “ at best be considered as moderate substitutes” for the domestic like product
because of the large amount of domestic captive consumption.174  This finding of a moderate degree
of substitutability, in turn, affected her analysis of prices when she found that, at fairly traded prices, it
is likely that the demand for dumped imports would have shifted to the domestic like product and that
the shift in demand from dumped imports would have been extremely large.175
85. The analysis performed by Commissioner Crawford undercuts Japan’s argument that themajority made an affirmative material injury finding only because it “ignore{d} the attenuated nature
of import competition” in the captive market.
176  As already noted, those Commissioners that
explicitly relied on data from the merchant market did not ignore the fact that the captively consumed
production is shielded from competition.  In any event, even after finding that domestic and imported
products have limited substitutability because of the large amount of captive consumption, and thussquarely addressing the shielding issue, Commissioner Crawford still found that dumped imports
materially injured the domestic producers.  Therefore, Japan’s suggestion that proper consideration of
the captive production provision should inevitably lead to a negative material injury finding is belied
by the material injury finding Japan does not challenge.
86. Finally, although Commissioner Askey also made an affirmative determination, Japan
inexplicably relies on her decision in support of its position.
177  Commissioner Askey, like the other
Commissioners, found that the financial indicators were worse in 1998 than in 1997 and that dumped
imports rose and captured market share by supplying increased demand.178  She took a different view
                                                     
170 First Submission of Japan at paras. 244, 250.
171 USITC Views at 29 & n.21.
172 USITC Views at 39.
173 USITC Views at 44.
174 USITC Views at 44.
175 USITC Views at 47.
176 First Submission of Japan at para. 226.
177 First Submission of Japan at paras. 251-52.
178 USITC Views at 52.WT/DS184/R
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of the evidence than the other Commissioners, however , in that she determined that the industry’s
continued profitability and high capacity utilization rates weighed in favour of a negative material
injury determination.  Instead, she found that the evidence pointed toward a threat of material injury.
Japan claims that Commissioner Askey’s recognition that captive production shielded the domestic
industry from import competition “led inexorably to her negative determination on present material
injury".179  It fails to take into account, however, that her findings on captive production did not lead
her ultimately to make a negative determination in this investigation.
87. Moreover, the logical link from a recognition of the limited competition to a negative material
injury determination is not readily evident.  As already noted, Commissioner Crawford drew the same
conclusion about the nature of competition but still found present material injury.  In any event,
Commissioner Askey still made an affirmative determination, although it was one based on threat of
injury and not material injury.  Therefore, any incorrect application of the captive productionprovision by the other Commissioners not only did not dictate the outcome of this case, but an
application of the provision in a manner that Japan deems appropriate would have led to the same
result.
88. All six Commissioners made an affirmative determination in this investigation whether or not
they applied the captive production provision and whether or not they focused on data for the
merchant market.  Therefore, the captive production provision is irrelevant to the outcome of this
investigation.  In any event, those Commissioners who examined data for the merchant market also
properly considered the industry as a whole.  Thus, the USITC’s analysis was consistent with the
Anti-Dumping Agreement.
2. Contrary to Japan's argument, the treatment of captive production did not result in
different outcomes in the 1993 hot rolled de termination and the current hot rolled case
89. Japan seeks to ascribe error to the USITC’s determination in this matter by drawing a false
comparison between the outcome in this case and the outcome in an earlier hot rolled steelinvestigation, which was completed before Congress enacted the captive production provision.
180  The
facts of these two cases are substantially different, however, so that any comparison between them is
meaningless.  Therefore, to the extent that the approaches to captive production were different in these
two cases, any attempt to impute the different outcomes to this divergence should fail.
(a) The approach to captive production in the 1993 hot rolled case was not pivotal in its outcome
or point to a practice contrary to the analysis in this case
90. In 1993, as part of a larger case dealing with flat rolled steel, the USITC issued a negative
determination as to hot rolled steel products.181  In that case, the USITC took a slightly different
approach to an assessment of captive production than that articulated in the captive production
provision.  It took captive production into account as a condition of competition182, but it did not
provide a factor-by-factor assessment for the mercha nt market and the industry as a whole.  Although
Japan claims that the recognition of a substantial amount of captive production that was shielded from
injury was a “factor that contributed significantly to {the USITC’s} negative injury and threat
                                                     
179 First Submission of Japan at para. 251.
180 First Submission of Japan at paras. 248-250.
181 Certain Flat Rolled Carbon Steel Products from Argentina, Australia, Austria, Belgium, Brazil,
Canada, Finland, France, Germany, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Poland,Romania, Spain, Sweden, and the United Kingdom , Inv. Nos. 701-TA-319-332, 334, 336-342, 344, and 347-353
(Final) and Inv. Nos. 731-TA-573-579, 581-592, 594-597, 599-609 and 612-619 (Final), USITC Pub. 2664(August 1993) ( “1993 Hot Rolled Steel” ) (Exh. Jp-59 ).
182 1993 Hot Rolled Steel  at 21.WT/DS184/R
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determinations” and “proved pivotal” to the outcome in that case183, the USITC, in fact, based its
negative determination on the lack of a causal nexus between dumped imports and the injury to the
domestic injury.184  In fact, the USITC first analyzed the evidence and found no causal nexus; then,
following that finding, and quite apart from it, re iterated its conclusion that the dumped imports had
little or no effect on the substantial amount of production that was captively consumed.185  Therefore,
as detailed further below, the difference in approaches to captive production in 1993 Hot Rolled Steel
and the current hot rolled case did not determine the difference in results.
91. As an initial matter, Japan is incorrect in characterizing the approach to captive production in
1993 Hot Rolled Steel  as the “traditional approach” to captive production analysis.186  Although this
type of analysis was used by the USITC in many cases prior to the enactment of the captive
production provision, other cases used an approach similar to that codified in the captive production
provision.  For example, in Stainless Steel Wire Rod From Brazil and France (“SSWR”)187 which was
completed before Congress enacted the captive production provision, the USITC examined data from
the merchant market side-by-side with the data for the industry as a whole in a manner very similar to
the way the analysis was done in the current investigation.  In SSWR , the USITC found that
“{a}pparent US consumption (including captive consumption) of SSWR on the basis of quantity
increased . . . {and} {o}pen market apparent consumption grew at an even faster rate".188  I t  a l s o
examined net sales (including company transfers) and “trade only net sales.” and “operating income
margins” along with operating margins for “trade only operations".189  Finally, the USITC examined
the volume and increase in volume of dumped imports for both the merchant market and the industry
as a whole.190  Thus, the captive production provision is consistent with the analysis performed in
investigations predating it.
(b) The facts of the current case and the 1993 hot rolled case are significantly different and do not
support Japan's attempted analogy between the cases
92. Nevertheless, to the extent that the analyses in 1993 Hot Rolled Steel  and the current case
diverge, the differences did not dictate the different outcomes in these cases.  The USITC found nocausal nexus in 1993 Hot Rolled Steel  based on conditions of the industry at the time, and these
conditions did not exist at the time of the later determination currently under review.  For example,
the USITC found that “slab offerings”, prime quality or secondary products that are sold to purchasers
other than the primary purchaser for which they were produced, were sold to about one-fourth of all
purchasers and were discounted by 5 to 20  percent.
191  It found that these slab offerings were one of
many other factors affecting the domestic industry.192  Slab offerings were not a relevant factor in the
determination currently under review.
93. Also, in the 1993 Hot Rolled Steel  case, in part as a result of a recession, total apparent
consumption of hot rolled steel dropped and th en rose again, from 51.6 million tons in 1990 to
44.5 million tons in 1991 to 50.6 million tons in 1992.193  Thus, consumption over the entire period
had actually declined slightly.  Further, the domestic industry’s share of this consumption fell only
                                                     
183 First Written Submission of Japan at paras. 219, 239.
184 1993 Hot Rolled Steel  at 52.
185 1993 Hot Rolled Steel  at 53.
186 First Submission of Japan at para. 250.
187 Inv. Nos. 731-TA-636 and 637, USITC Pub. 2721 (January 1994) ( Exh. US/C-11 ).
188 SSWR  at I-13.
189 SSWR  at I-15 nn.53, 54.
190 SSWR at I-21 and nn.98, 99.
191 1993 Hot Rolled Steel  at 21.
192 1993 Hot Rolled Steel  at 52.
193 1993 Hot Rolled Steel  at 21.WT/DS184/R
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slightly over each period in the investigation, from 94.4 percent in 1990 to 93.3 per cent in 1992194,
while the market share of dumped imports remained low over the period, although they increased
slightly, ranging from 1.9 to 3.8 per cent in 1990 to 3.3 to 4.4 per cent in 1992.  Thus, based on these
relatively minor increases in the already low market shares of dumped imports, the USITC concluded
that the dumped imports were not significant.
94. The facts of that case stand in stark contra st to the hot rolled case currently under review.
During the current period of investigation, demand for hot rolled steel was strong, reaching record
highs in 1998.195  Total apparent US consumption was 68.5 million tons in 1996 and rose to
71.0 million tons in 1997, further increasing to 75.3 million tons by 1998.196  Domestic producers’
total market share declined over this same period, from 92.3 percent of total apparent US consumption
in 1996 to 90.8 per cent in 1997 and 84.8 per cent in 1998.  Meanwhile, the total market share held by
dumped imports from 1996 to 1997 more than doubled each year, going from 2.0 per cent of apparentUS consumption in 1996 to 4.2 per cent in 1997, and then doubling again in 1998 to 9.3 per cent.
197
Thus, the USITC noted that, at the same time as dumped imports were increasing their volume andmarket share dramatically, the domestic industry’s market share declined.  Moreover, the USITC
found that “domestic producers were prevented from participating in the increasing demand as
dumped imports increased their market share".
198  The inverse relationship between the dumped
imports and the domestic like product that existed during the current period of investigation and the
high levels and increases in demand evidenced during that time simply did not exist in the 1993 Hot
Rolled Steel  case.
95. In addition, during the 1993 Hot Rolled Steel  investigation, prices of the dumped imports
were generally higher than the domestic like product, and, although they fell irregularly over the
period, they generally fell less than the domestic prices.  In fact, some prices of dumped imports
actually rose over the period.  At the same time, the prices for the domestic like product fell over the
period.199  A clear correlation between underselling and falling prices thus did not exist during the
1993 Hot Rolled Steel  investigation where overselling was the norm.  Once again, these facts bear no
resemblance to the facts currently at hand.  The USITC found that prices for the dumped imports and
the domestic product showed mixed trends through mid-1997, and then fell through the end of the
period.  It also found a mixed pattern of underselling, with more instances of underselling in 1997 and
1998.  It determined that “the increased frequency of underselling is consistent with the price
depressing effects of the subject imports in 1998".200
96. Finally, the only finding from the 1993 Hot Rolled Steel  case that Japan highlights is the
finding about the industry’s poor operating performance.201  Japan correctly notes that the industry’s
operating performance in that case was substantially worse than that in the present one.202  F o r
example, in that case, the domestic industry started with an operating income of $39 million in 1990
and saw that sum drop to $1.3 billion operating loss by 1992.203  In the present case, although the
USITC found that the domestic industry’s operating income declined by more than half, by 1998 theindustry still had an operating income of $560 million.
204
                                                     
194 1993 Hot Rolled Steel  at 21.
195 USITC Views at 10.
196 USITC Views at 10.
197 USITC Views at 12.
198 USITC Views at 12.
199 1993 Hot Rolled Steel  at 48.
200 USITC Views at 14-15.
201 First Submission of Japan at para. 248.
202 First Submission of Japan at para. 248.
203 1993 Hot Rolled Steel  at 23.
204 USITC Views at 18, Table C-1.WT/DS184/R
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97. Japan ignores the findings of the USITC in each case that led to this seemingly anomalous
result, however.  The USITC did not find that the US industry in 1993 was not suffering injury.
Rather, it found no injury by reason of dumped imports because it found, “no causal nexus between
increases in import penetration and pricing and declines in the domestic industry’s performance.  For
example, the market share of the cumulated subject imports increased more from 1991 to 1992 than
from 1990 to 1991.  Conversely, profitability of the domestic industry declined from 1990 to 1991and rebounded slightly from 1991 to 1992".
205  In the current case, as described above, timing issues
supported an affirmative determination.  For example, the USITC found that the declines in the ratio
of operating income to net sales was due largely to declines in the unit values of the domestic
industry’s shipments and sales, and the unit values “fell significantly in 1998 as subject imports
increased in volume and market share".206  The two cases have different results based on the factual
distinctions, not because of any difference in the methodology for analyzing captive production.
C. THE USITC PROPERLY USED A THREE -YEAR PERIOD OF INVESTIGATION AND CONDUCTED AN
OBJECTIVE EXAMINATION OF THE DATA COLLECTED OVER THAT PERIOD
98. The USITC correctly analyzed the data it collected by comparing the information within the
period of investigation, i.e., from year-to-year and in interim periods, in addition to comparing the
information at the beginning of the period with the information at the end of the period.  TheAnti-Dumping Agreement does not establish any partic ular period of investigation pertinent to injury
determinations, and it certainly does not delimit any method by which the data collected for that
period must be analyzed.  It is thus within the discretion of the administering authority to ascertain a
reasonable means for interpreting the data, and the USITC appropriately analyzed the data in this
case.
1. The USITC used a three-year period of investigation
99. The Japanese argument with regard to the USITC’s collection and use of data is somewhat
misleading and unclear.  At times it seems to acknowledge that the USITC used a three year period of
investigation
207, while at other times it appears to be arguing that the USITC did not collect data for a
three year period.208  The record clearly reflects that the USITC collected data over a three year
period.  Table C-1 of the USITC’s report provides a summary of the data collected over the course of
the investigation.209  A simple reading of this table shows that data was collected by the USITC staff
for the years 1996, 1997, and 1998.  Thus, the USITC properly collected data over a three year period.
100. Although its argument is ambiguous, Japan does not appear to be contesting the appropriateness
of using a three year period of investigation.  Regardless, the Anti-Dumping Agreement is silent as to
the period of data collection, and the United States made a reasonable choice in using a three year
period.  The reasonableness of this decision is underscored by the opinion given by the Committee on
Anti-Dumping Practices in a recommendation, including a statement in favour of using at least a three
year period for data collection in injury investigations.210
                                                     
205 1993 Hot Rolled Steel  at 52-53.
206 USITC Views at 18.
207 First Submission of Japan at para. 261 (“USITC focused on data for only two years of its three-year
period of investigation”).
208 First Submission of Japan at para. 262 (“with only two data sets, one cannot know whether a high
level for the first year is anomalous or not”); para. 267 (“{i}n manipulating its traditional three year period ofinvestigation...”).
209 USITC Views at C-3.
210 Committee on Anti-Dumping Practices, Recommendation Concerning the Periods of Data
collection for Anti-Dumping Investigations,  adopted by the Committee on 5 May 2000, G/ADP/6, at para. 1(c).WT/DS184/R
Page A-224
2. The USITC, consistent with Article 3 of the Anti-Dumping Agreement, established the
causal relationship between dumped imports and material injury based upon an
objective evaluation of changes in relevan t economic factors over the three-year period
(a) The USITC evaluated data over the entire period investigated
101. Japan contests the methodology used by the USITC for analyzing the information obtained
over the three year period.211  Its allegation that the USITC “eschewed its traditional three year
analysis and, instead, compared 1998 with 1997” is simply untrue.  The USITC, in fact, examined the
data over the full three year period.  For example, when considering the volume of dumped imports,
the USITC found that they “increased over the investigation period, more than doubling from 1996 to
1997 and more than doubling again from 1997 to 1998".212  In addition, the USITC found that “{t}he
market share held by subject imports also more than doubled from 1996 to 1997 and again from 1997
to 1998".213  With regard to price, the USITC also mentioned the mixed trend of prices for both the
domestic like product and the dumped imports from 1996 to mid-1997, and then remarked upon thefact that prices fell for the remainder of the period with the greatest decreases occurring in the third
and fourth quarters in 1998.
214  Finally, the USITC discussed the trend of performance over the entire
period of investigation for those impact factors listed in Article 3.4 that it determined were relevant to
its investigation.215
102. Japan merely is asking this panel to reweigh the factors considered by the USITC when itasserts that “all the major domestic industry performance indices improved”  over the 1996 to 1998
period and that this improvement normally would result in a finding of no material injury.
216  Th e
USITC looked at these indicators over the entire period and came to a different conclusion.  No
combination of factors can give decisive guidance as to the ultimate finding of material injury.217  As
already noted, it is not the role of this panel to reassess the factors already considered by the USITC.
The USITC may reasonably find that the overall picture shows material injury even when some of the
indicators are not declining.218  In this case, the USITC looked at the state of the domestic industry
from 1996 to 1998 and, consistent with the Anti-dumping Agreement, concluded that it was suffering
material injury.
(b) Reliance on recent trends is appropriate in determining current material injury because it
appropriate recognizes changes in economic circumstances
103. To the extent that Japan correctly notes the USITC’s focus on the most recent period for
evaluating some factors and is challenging that method of evaluating the facts, its challenge shouldnot prevail.  In Argentina -- Footwear , the Appellate Body found that, for the purposes of safeguards
actions, an examination of recent imports is necessary in order to determine whether the product “is
                                                     
211 First Submission of Japan at para. 263, et. seq.
212 USITC Views at 12.
213 USITC Views at 12.
214 USITC Views at 14.
215 USITC Views at 12-13 (discussing shipments), 17- 18 (discussing capacity and capacity utilization),
nn. 100, 101 (discussing productivity, employment, wages, inventory, and factors bearing on profitability -- one
firm filed for bankruptcy and unit production costs).  Production is accounted for in the USITC’s finding that
capacity increased commensurate with demand but “the domestic industry’s increased capacity almostimmediately became excess capacity.”  USITC Views at  17.  In other words, production did not increase.
216 First Submission of Japan at para. 263.
217 Article 3.4 of the Anti-Dumping Agreement.
218 Appellate Body Report, Argentina -- Safeguard Measures on Imports of Footwear (“Argentina --
Footwear”) , WT/DS121/8, adopted Dec. 14, 1999 at para. 139.WT/DS184/R
Page A-225
being imported” in increased quantities.219  The Safeguards Agreement and the Anti-Dumping
Agreement thus share the same goal of assessing the present condition of the domestic industry and
dumped imports.  If, for purposes of an injury determination in a safeguards investigation, the
Safeguards Agreement requires  an examination of the most recent period, the Anti-Dumping
Agreement can hardly be said to prohibit  a focus on recent events for an injury finding in
anti-dumping investigations.
104. Moreover, the USITC’s findings on trends in the most recent period are consistent with
Article 3.4's command to examine all relevant economic factors and Article 3.5's dictate to examine
all relevant evidence before the authorities.  In the present case, as discussed above, the USITC found
that the behaviours of dumped imports and the domestic industry underwent a dramatic change in the
1997 to 1998 period.  For example, in 1998, total apparent consumption was at a record high.220  In
addition, in 1998, when dumped imports’ volume and market share had the largest increases from theprevious year, the US industry had its greatest declines.
221  Further, “from 1997 to 1998, total apparent
US consumption increased by 6.0 per cent, while domestic shipments declined by 1.0 per cent, as
measured by volume".222  Finally, there was an increased frequency of underselling in 1998.223  As a
result, a focus on this period was warranted.  All these factors combined show that the import pattern
of dumped imports was changing in the later period, and these changes in the marketplace are relevanteconomic factors bearing on the decision of whether dumped imports are causing material injury to
the domestic industry as a whole.  Therefore, the USITC reasonably gave particular attention to this
latter period.
105. Regardless, Japan contests the use of the later period in this case because it claims that 1997
was a banner year for the steel industry such that any comparison to this year would necessarily skew
the result toward an affirmative determination.
224  Japan’s arguments, however, ignore the USITC’s
findings concerning the changes in relevant economic factors that had occurred over time.  The
USITC noted, for example, that the domestic industry had greater productivity and lower costs in
1998 than in 1997.225  As a result, operating income should have been increasing, not decreasing, as it
in fact was.  Moreover, demand increased from 1997 to 1998 (a point noticeably absent from Japan’s
banner year argument), yet production and shipments declined and operating income as a ratio to net
sales also dropped.226  These changes created a new economic context for the  performance of the
industry.
106. The USITC found that numerous factors had declined from 1996 to 1997 and continued to
decline in 1998.  For example, it specifically noted declines in the domestic industry’ s market
share227, domestic shipments228, prices229, capacity utilization230, employment indicators231, and capital
                                                     
219 Argentina-Footwear  at para. 130.  The Appellate Body found a that “‘is being imported’ implies
that the increase in imports must have been sudden and recent.”  Argentina-Footwear  at para. 130.  The
Anti-Dumping Agreement language does not share in the Safeguard Agreement’s suddenness requirement.
220 USITC Views at 10.
221 USITC Views at 12.
222 USITC Views at 13.
223 USITC Views at 15.
224 First Submission of Japan at para. 264.
225 USITC Views at 18.
226 USITC Views at 10, 12-13, 18.
227 USITC Views at 12 (the market share of dumped imports more than doubled from 1996 to 1997,
and then doubled again from 1997 to 1998).
228 USITC Views at 12, 13 (domestic producers’ merchant market shipments, as measured by volume
sold, were 21.5 million short tons in 1996 and 21.8 million short tons in 1998; domestic producers’ totalshipments by volume were 63.3 million short tons in 1996, and 63.8 million short tons in 1998).
229 USITC Views at 14 (For merchant market sales, domestic producers’ average unit values were
$347.01 per short ton in 1996, increased to $353.86 per short ton in 1997, and then declined below the 1996WT/DS184/R
Page A-226
expenditures.232  Regardless of those indicators that Japan points to in justifying its banner year
argument, the USITC controlled sufficiently for any factors that would distort its reasoning, noted the
basis for its determination, and reasonably concluded that the performance in 1998 should have been
better than in 1997.  Although the factors that Japan focuses on differ from those that the USITC
highlighted, Article 3.4 provides that no one or several of these factors necessarily can give decisive
guidance.  Therefore, this panel should find that  the USITC’s interpretation of the evidence was
reasonable.
(c) Reliance on recent trends is in keeping with USITC practice
107. Contrary to Japan’s contention, the USITC’s attention to the latter period was in no way
“unique".233  The USITC frequently looks to the most recent period in conducting its analysis.  In fact,
it has found that “we consider data for the latter pa rt of the period of investigation to be the most
probative of the condition of the industry and the impact of subject imports on that industry".234
108. The USITC focuses on the latter periods when there is some change in the industry thatwarrants this type of analysis.  For example, even Japan notes that in Fresh Garlic From the People’s
Republic of China
235, the USITC found the domestic industry suffered material injury primarily from
price depression and volume displacement of dumped imports in the last year of the period ofinvestigation.
236  In conducting its analysis, the USITC focused on the “massive increase” of dumped
imports in the last year of investigation which resulted in domestic industry operating losses for the
first time during the period.237  Similarly, in Certain Emulsion Styrene-Butadiene Rubber from Brazil,
Korea and Mexico238, the USITC found that the domestic industry was not materially injured because
the increases in dumped imports occurred early in the period of investigation.  Moreover, this mode ofanalysis has been employed by the USITC for many years.  In 1982, the USITC made an affirmative
countervailing duty determination in Nitrocellulose from France
239, noting that “the greatest declines
in the indicators of the condition of the domestic industry occurred during the most recent months”.
                                                                                                                                                                    
level to $330.51per short ton in 1998.  Overall, domestic producers’ average unit values were $343.24 per short
ton in 1996, increased to $350.87 per short ton in 1997, and declined below the 1996 level to $335.02 per short
ton in 1998.)
230 USITC Views at 17 (capacity utilization rates declined from 94.5 percent in 1996, to 92.6 percent in
1997, and to 87.5 percent in 1998).
231 USITC Views at 18 (the number of workers declined from 33,965 in 1996, to 33,518 in 1997, to
32,885 in 1998.  Hours worked also declined over the three year period from 73,597 in 1996, to 71,634 in 1997,to 68,574 in 1998).
232 USITC Views at 18 (capital expenditures declined  significantly from $1. 7 billion in 1996, to $908
million in 1997, and $71 5 million in 1998).
232 USITC Views at 18 (capital expenditures declined  significantly from $1. 7 billion in 1996, to $908
million in 1997, and $71 5 million in 1998).
233 USITC Views at 18 (capital expenditures declined  significantly from $1. 7 billion in 1996, to $908
million in 1997, and $71 5 million in 1998).
234 Fresh Atlantic Salmon from Chile , 731-TA-768 (Final), USITC Pub. 3116 (July 1998) at 14 ( Exh.
US/C-12 ).
235 Inv. No. 731-TA-683 (Final), USITC Pub. 2825 at I-27 (Nov. 1994) ( Exh. US/C-13 ).
236 First Submission of Japan at n.247.
237 Japan attempts to assuage the impact of the USITC’ s analysis by citing the USITC’s
acknowledgement of declines in domestic industry profitability throughout the period of investigation.
However, simply because the USITC acknowledged other industry conditions within the period is irrelevant.The 576.2 percent increase in the volume of dumped imports in the last year of the period of investigationconstituted a significant change in the industry resulting in a sudden and sizable loss of injury to the domesticindustry.
238 Inv. No. 731-TA-794-796 (Final), USITC Pub. 3190 (May 1999) at 16 ( Exh. US/C-14 ).
239 Inv. No. 701-TA-190 (Preliminary), USITC Pub. No. 1304 (Oct. 1982) at 6 ( Exh. US/C-16 ).WT/DS184/R
Page A-227
109. The cases cited by Japan to counter this argument do not have any bearing on the issue at
hand.  In Elastic Rubber Tape from India240, the USITC found that the performance of the industry in
the latter period was a one-time “anomalous” event.  It, therefore, properly did not base a decision of
injury on that information.  In Stainless Steel Round Wire From Canada, India, Japan, Korea, Spain,
and Taiwan241, the USITC’s determination was negative (a point the Japanese seem to ignore)
precisely because of the domestic industry’s improvement in the latter part of the period.  The USITCnoted that in the later period, at the peak of dumped import underselling, the domestic industry’s
operating profit margins increased.
242  In Certain Carbon Steel Plate from China, Russia, South
Africa, and Ukraine , the USITC made a negative present injury determination, not because of the
trends in the latter parts of the period of investigation, but because it found that the adverse impact
during this period was “not of sufficient magnitude” to warrant a finding of material injury. Therefore,
despite the Japanese allegation to the contrary, consid ering the later part of the period of investigation
and putting emphasis on the condition of the industr y at that time is consistent with past USITC
practice when the information is relevant to the determination that the USITC must make.
110. The USITC properly collected data for a three year period of investigation.  In addition, it
evaluated that data in a manner consistent with its obligations under the Anti-Dumping Agreement.  It
looked at information over the entire period and, in addition, properly gave particular consideration to
the information from the later period when change s in the industry’s performance warranted such
emphasis.
D. THE USITC DETERMINATION , CONSISTENT WITH ARTICLED 3, EXAMINED THE RELEVANT
FACTORS AND DID NOT ATTRIBUTE THE ADVERSE EFFECTS OF OTHER KNOWN FACTORS TOTHE JAPANESE DUMPED IMPORTS
1. The requirements of Article 3 of the Anti-Dumping Agreement
111. Japan appears to allege that the USITC’s determination of injury was inconsistent with the
Anti-Dumping Agreement in that its examination of  the causal relationship between dumped imports
and injury to the domestic industry was inadequate.  This objection is completely without merit.  Thecausation standard relevant to this review is set forth in Article 3.5 which states, in part, that “{i}t
must be demonstrated that the dumped imports are . . . . causing injury within the meaning of this
Agreement.  The demonstration of a causal relationship between the dumped imports and the injury to
the domestic industry shall be based on an examination of all relevant evidence before the
authorities".
243  The USITC’s determination clearly articulated its reasons for finding the causal link
between the dumped imports and material injury.  The USITC determination was based upon an
objective examination of the positive evidence including the volume of the dumped imports, the effect
                                                     
240 Inv. No. 731-TA-805 (Final), USITC Pub. 3200 (June 1999) at 14 ( Exh. US/C-17 ).
241 Inv. Nos. 731-TA-781-786 (Final), USITC Pub. 3194 (May 1999) at 16-17 ( Exh. US/C-18 ).
242 See id.  at 15.
243 Article 3.5 states:
It must be demonstrated that the dumped imports are, through the effects of dumping, as set forth in
paragraphs 2 and 4, causing injury within the meaning of this Agreement.  The demonstration of a causalrelationship between the dumped imports and the injury to the domestic industry shall be based on an
examination of all relevant evidence before the authorities.  The authorities shall also examine any known
factors other than the dumped imports which at the same time are injuring the domestic industry, and the injuriescaused by these other factors must not be attributed to  the dumped imports.  Factors which may be relevant in
this respect include, inter alia , the volume and prices of imports not sold at dumping prices, contraction in
demand or changes in the patterns of consumption, trade-restrictive practices of and competition between theforeign and domestic producers, developments in technology and the export performance and productivity of the
domestic industry.WT/DS184/R
Page A-228
of the dumped imports on prices in the domestic market, and the consequent impact of these imports
on the domestic producers of such products.244
112. Japan specifically alleges that the adverse effects of other market factors were wrongfully
attributed to the dumped imports.  Article 3.5 of the Anti-Dumping Agreement sets forth the relevant
obligation with respect to other causes of injury, namely: “{t}he authorities shall also examine anyknown factors other than the dumped imports which at the same time are injuring the domestic
industry, and the injuries caused by these other factors must not be attributed to the dumped imports.”
The USITC’s determination more than satisfied this requirement.  It is significant that Japan has not
challenged the USITC’s factual findings of increasing dumped imports, declines in prices for the
domestic product, or the negative impact on the domestic industry of the dumped imports during the
period of investigation.  As required by the Anti-Dumping Agreement, the USITC demonstrated,
through undisputed facts, that the dumped imports ar e causing injury to the US industry.  While the
authority is also to examine other known factors, th e purpose for doing so is to assure that it is not
attributing to dumped imports injury due to other known factors, not to demonstrate what effects other
factors may or may not be having.  Article 3.5 thus requires only a specific demonstration of the
causal link, not a demonstration concerning other known factors.
113. The fact that the USITC did not attribute injury from other causes to the dumped imports is
obvious from its discussion of the facts, from which it demonstrated the causal relationship between
dumped imports and material injury.  Nonetheless, the USITC explicitly discussed alleged alternative
causes of injury and gave a detailed discussion of the reasons that it believed that the dumped imports
were causing material injury despite any contributions made by these alternative causes.  Therefore,the USITC satisfied the requirements of the Article 3.5 second sentence, both by its affirmative
findings concerning the significance of dumped imports and by its explicit findings concerning
asserted alternative causes.
114. The Anti-Dumping Agreement does not require the USITC to somehow quantify the injury
from causes other than the dumped imports supported by the Agreement.  The requirement not to
attribute the harm from other causes to the dumped imports, as stated in Article 3.4, was  interpreted
in United States -- Imposition of Anti-Dumping Du ties on Imports of Fresh and Chilled Atlantic
Salmon from Norway , ADP/87 (27 April1994) ( United States - Atlantic Salmon) .  In that case, which
arose under the Tokyo Round Anti-dumping Code, the panel specifically stated that the requirement “not to attribute injuries caused by other factors to the imports ... did not mean that, in addition to
examining the effects of imports under Articles 3:1, 3:2 and 3:3, the USITC should somehow have
identified the extent of injury caused by these ot her factors in order to isolate the injury caused by
these factors from the injury caused by the imports from Norway".
245
115. Although Article 3.5 of the Anti-Dumping Agreement clarifies that the USITC is obligated to
examine any “known factor” other than the dumped im ports which is injuring the domestic injury, it
repeats the language of the Tokyo Round Code, defining the obligation not to attribute injuries caused
by other actors.  As the Code Committee panel observed in Atlantic Salmon , that Agreement set out
numerous factors that authorities are required to consider in establishing a causal link between
dumped imports and injury, but it established no criteria for satisfying the requirement not to attribute
injury from other causes to the dumped imports.  The same is true of the Anti-Dumping Agreement.
                                                     
244 This examination was consistent with the ITC’s obligation under Article 3.1 of the Agreement
which states:
A determination of injury for purposes of Article VI of GATT 1994 shall be based on positive evidence
and involve an objective examination of both (a) the volume of the dumped imports and the effect of thedumped imports on prices in the domestic market for like products, and (b) the consequent impact of theseimports on domestic producers of such products.
245 United States -- Atlantic Salmon  at 555.WT/DS184/R
Page A-229
Thus, the USITC’s analysis in the present case, which expressly, and with particularity, examined
other known factors, more than satisfied the requirements in the Agreement.
2. The asserted other factors
116. Japan’s arguments simply ignore the USITC’s actual findings.  Consistent with Article 3.4 of
the Anti-Dumping Agreement246, the USITC found the injury caused by the dumped imports, holding
that no single factor was dispositive and that all relevant factors must be considered within the context
of the business cycle and noting the conditions of competition that are distinctive to the affected
industry.  Japan appears to argue that there were four alternative causes of injury to the domestic
industry, namely a strike at General Motors (GM), increased intra-industry competition particularly
from EAF (Electric Arc Furnace, also known as “minimill”) producers, price effects of nonsubject
imports, and a decline in demand for a subsection of the hot rolled steel industry.  The USITC
specifically considered and then rejected these arguments, and its conclusions regarding all otherknown causes are readily apparent from all the findings it made.
(a) The General Motors strike
117. As to the GM strike, the USITC acknowledged th e respondents’ arguments that the strike was
responsible for declines in domestic prices in 1998.  However, consistent with the Agreement, theUSITC evaluated the dumped Japanese imports’ effects on prices by examining the significant price
undercutting by the dumped imports and whether the effect of such imports was otherwise to depress
prices to a significant degree or prevent price increases, which otherwise would have occurred, to a
significant degree.
247  The USITC explicitly stated that it considered the Japanese argument and did,
in fact, agree that the GM strike had some effect on overall demand in 1998 and, hence, played somerole in contributing to declining domestic prices.
248
118. However, the Commissioners observed that the strike only lasted for five weeks and the total
quantity of material not purchased during the GM strike (no more than 685,000 tons of all types of flat
rolled steel249) was not large enough to explain the extent of price declines which occurred in 1998.250
The GM strike affected a very modest 685,000 tons of US production of all flat rolled steel, in
comparison to total apparent US consumption of hot rolled steel of over 75 million tons in 1998;
                                                     
246 See Article 3.4 “This list {of relevant economic factors} is not exhaustive, nor can one or several of
these factors necessarily give decisive guidance.”
247 Consistent with Article 3.2, the USITC recognized that the quarterly pricing data indicated a mixed
pattern of underselling by the dumped imports, but that the frequency of underselling increased significantly inthe later part of the period of investigation.  Specifically, in 1998, the USITC found that underselling by thedumped imports was prevalent: with 45 instances of underselling by the dumped imports and 22 instances ofoverselling.  The USITC further found that the increased frequency of underselling was consistent with the price
depressing effects of the dumped imports in 1998.  USITC Views at 14, 15.
248 USITC Views at 16.
249 GM estimated that the total amount of flat rolled steel, including hot rolled, cold rolled, and
corrosion resistant steels that was not purchased by it and its suppliers as a result of the strike-related workstoppages was about 685,000 tons.  GM did not provide a figure limited to hot rolled steel only.  USITC Views
at 11.  The USITC evaluated the relatively minor 685,000 tons (of which only a portion was hot rolled steel) in
light of total apparent US consumption of hot rolled steel, and which was 75,251,116 tons in 1998.  See USITC
Views at 16.  See also  USITC Views at IV-13, Table IV-9.
250 The quarterly pricing data, in nearly all instance s, demonstrated that the price of the imported and
domestic product declined significantly in 1998.  The USITC found that the price declines were mostprecipitous in the third and fourth quarters of 1998, at a time when the volume of dumped imports was peaking.
USITC Views at 14.WT/DS184/R
Page A-230
however, average unit values decreased from $308.85 in 1997 to $297.22 in 1998, a 3.8 per cent
decrease.251
119. The USITC further noted that, despite the GM strike, the merchant market and overall
consumption of hot rolled steel were at all-time highs in 1998.252  One would reasonably expect prices
to increase, not decrease, in times of record demand for the product.253  The USITC, therefore, based
on an objective examination of the relevant evidence, reasonably concluded that the GM strike was, at
most, a partial explanation for declining prices in 1998.254  As the Code Committee panel recognized
in United States-Atlantic Salmon , there may be other causes of price suppression effects and an
authority need not isolate the particular effects of dumped imports from the effects of other causes in
order to establish that dumped imports have a significant price depressive effect.  Rather, the Atlantic
Salmon  panel found it sufficient that the USITC had not attributed to dumped imports “effects entirely
caused by ‘other factors’.255  In keeping with that decision, the USITC’s findings here make clear that,
taking into account the partial price suppressive effect of the GM strike, nevertheless dumped imports
caused significant price depression.
120. In blatant disregard for the content of the USITC’s determination, Japan alleges that the
agency made “no effort to distinguish the effects of the General Motors strike from the effects of thesubject imports".
256  The USITC decision demonstrates that the Commissioners examined the
performance of the industry in the face of increasing apparent consumption and a substantially
increasing volume of dumped imports.257  The USITC observed that prices declined significantly in
the second half of 1998, when dumped imports reached their highest levels.  The USITC therefore
found, consistent with its obligations under the Anti-Dumping Agreement, that there was a causalrelationship between the significant price declines at a time of record US consumption and the rapid
increase of dumped imports of hot rolled steel, which were fairly substitutable with the domestic like
product.  Consequently, the USITC appropriately found that the dumped imports had significant price
depressing effects on the domestic product.
(b) Minimill competition
121. The USITC also explicitly considered and rejected respondents’ argument that the domestic
industry’s poor performance in 1998 was not causally related to the dumped imports but rather was a
                                                     
251 USITC Views at Table C-I.
252 USITC Views at 16.
253 The USITC found that US apparent consumption was strong during the period of investigation, and
appeared to be at a record high in 1998.  USITC Views at 10.
254 USITC Views at 16.
255 US-Atlantic Salmon  at 557.
256 First Submission of Japan at 85, para. 277.  The USITC’s objective examination of the effects of the
GM strike discredits Japan’s repeated allegations of bias and political motivation.  In separate steelinvestigations, which concerned an industry more sensitive to the consequences of the GM strike, the USITC
relied on the effects of that strike in making a negative determination as to material injury by reason of dumped
imports.  Certain Cold Rolled Steel Products From Argentina, Brazil, Japan, Russia, South Africa, and
Thailand , Inv. Nos. 701-TA-393 & 731-TA-829-30, 833-34, 836, & 838 (Final), USITC Pub. 3283
(March 2000) ( Exh. US/C-19 ).  In those investigations, the GM strike had added importance in that
approximately 80 percent of overall GM purchases are of cold rolled and corrosion-resistant steel (as opposed to
hot rolled).  Id. at 23.  The USITC noted in that investigation that the majority of responding cold rolled
domestic producers and importers reported that the strike had a significant effect on the market, and that thetiming of the GM work stoppage corresponded more closely with the drop in domestic prices than does thelargest increase in dumped imports.  Based on the different facts in those investigations, the USITC found thatthe contribution of dumped imports to price declines was minimal.  Id. at 24.  The USITC addressed the effects
of the GM strike based on an objective examination of the evidence in each investigation it conducted.
257 USITC Views at 20.WT/DS184/R
Page A-231
reflection of increased competition within the industry.  The USITC acknowledged that a condition of
competition pertinent to the hot rolled steel industry was the fact that the domestic industry consists of
both integrated (or “BOF”) producers and minimill (or “EAF ”) producers.258  Consistent with the
obligations under the Anti-Dumping Agreement, th e USITC evaluated the increased competition
between integrated and minimill producers as a relevant economic factor, and ensured through its
analysis that any injurious effect due to this factor was not attributed to the dumped Japanese
imports.259  The USITC specifically addressed the price effects of the increased competition in the
domestic industry consistent with the obligation under the Anti-Dumping Agreement not to attribute
any injury caused by such competition to the dumped imports.  The USITC noted that minimills have
lower costs and higher productivity rates than the integrated mills, and that this competitive advantage
to some degree constrained the prices the integrated mills could command for their hot rolled steel.260
122. However, the USITC reasonably concluded that minimill competition could not have causedthe adverse effects observed in the US hot rolled steel industry.  The evidence collected over the three
year period of investigation suggested that the dumped imports depressed both BOF and EAF prices.
Both BOF and EAF producers’ prices declined significantly during the period of investigation, as
reflected in unit values of shipments and sales.
261  The USITC noted that it was significant that the hot
rolled steel prices for an established and efficient minimill producer declined significantly during thelatter part of 1998 as dumped import volumes increased at their fastest rate.  Furthermore, this
producer’s prices recovered only as dumped imports exited the market.
262
123. The USITC noted that the same trends for the industry as a whole, including declines in
operating income and the ratio of operating income to  net sales, were also apparent in the separate
results of both integrated mills and minimills.263  However, EAF producers, who, lacking substantial
captive production, are more sensitive to competition from imports264,  had worse financial
performance than BOF producers from 1997 to 1998.265  For merchant market sales, EAF producers
had lower operating income to net sales ratios than BOF producers.  Accordingly, as EAF producers
are more sensitive to the effects of imports, and, as they demonstrated lower operating income to netsales ratios than BOF producers at a period of dramatically increasing dumped imports, the USITC
concluded that there was a causal relationship between the increased dumped imports and the
domestic industry’s injury.  As the EAF producers were more sensitive to the effects of imports, and
as their operating results did in fact more clearly re flect  injury in 1998 when imports were increasing
at a significant rate, the USITC found that operating results for the industry as a whole reflected acausal relationship between the dumped imports and the condition of the domestic industry.
                                                     
258 USITC Views at 11.
259 See similarly , US - Atlantic Salmon  at paras. 559-560, stating that the USITC had not failed to
conduct an examination of other known factors sufficient to ensure that it did not attribute to the dumpedimports injury caused by other known factors.  A potentia l other cause of material injury in that investigation
involved “internal industry problems,” and the USITC discussed the fact that the industry’s most recent
financial performance was worse than would have been anticipated, even taking into account start-up
conditions.
260 USITC Views at 15.
261 USITC Views at 15.
262 USITC Views at 15.
263 USITC Views at 19.
264 In comparison to BOF producers, EAF producers are generally more sensitive to competition in the
merchant market because more of their production is sold in the spot market, their captive operations are
generally not as substantial, and they generally maintain a lower proportion of long term contracts.  USITCViews at 11.  The EAF producers are more dependent on the merchant market, where imports are concentrated.
Id. at 19.
265 USITC Views at 19.WT/DS184/R
Page A-232
124. Furthermore, the USITC reasonably concluded that domestic competition could not explain
the industry declines at the end of the period investigated, at a time of record demand.  The USITC
specifically rejected the respondents’ argument that the domestic industry’s poor performance in 1998
was due to increased competition and not the effect of increased dumped imports.266  T h e  U S I T C
observed that minimill competition was an important condition of competition in 1997, yet the
condition of the domestic industry had deteriorated from the relatively successful performance thatyear.
125. The conditions of competition between integrated producers and minimills were generally
similar in 1998, and the domestic industry manifested several economic indicators of material injury.
In particular, the USITC observed that minimills substantially increased their capacity from 1996 to
1997, but that there was only an incremental increase in minimill capacity from 1997 to 1998.  As the
domestic industry’s injury was most evident in 1998, it was therefore reasonable to conclude thatdramatic increase in the volume of dumped imports, and not the increased capacity, were causally
related to the injury to the domestic hot rolled steel industry.
267
126. Japan attempts to discredit this finding by reiterating arguments made by Japanese
respondents before the USITC that there would be a delay between the addition of capacity andincreases in output by minimills.
268  This assertion by the Japanese respondents, however, was not
borne out by the evidence.  The USITC examined the data presented by the industry, and found that
the minimill’s capacity utilization rose between 1996 and 1997, the time when the capacity was
added, and decreased again in 1998, the time when Japan asserts production levels should have been
the highest.269  Moreover, the USITC found that net sales for minimills decreased from 1997 to
1998270, when Japan claims that their output was the greatest.
127. In other words, in the beginning of the period of investigation there was a substantial increase
in minimill capacity but no corresponding injury to the domestic industry.  In the latter part of the
period of investigation, there was a small increase in minimill capacity and signs of significant injuryto the domestic industry; there was a significant increase in the volume of dumped imports at this
time.  Therefore, it was reasonable for the USITC to conclude that the injury evident in 1998 was due
to the dumped imports and not increased competition as seen in the minor increase in capacity.
(c) Nonsubject imports
128. Contrary to Japan’s assertions, the USITC conducted an examination of the effects of
nonsubject imports that, in keeping with Article 3.5, assured that, in its analysis of the effects of
dumped imports, it did not attribute to those imports injury due to imports not sold at dumped prices.
129. The USITC made specific findings concerning the role of nonsubject imports that ensured
that any potential negative effects of this factor were not attributed to the dumped Japanese imports of
hot rolled steel.  Specifically, the USITC indicated that imports from non-subject countries maintaineda stable presence in the US market throughout the period of investigation.
271  When measured against
                                                     
266 USITC Views at 18, 19.
267 USITC Views at 19.  Most of the increase in minimill “low cost” capacity occurred from 1996 to
1997, rather than from 1997 to 1998.  EAF producers increased their capacity for each year over the period of
investigation.  BOF producers also increased their capacity  for each year over the period of investigation.  The
USITC noted that although the increase in capacity for EAF producers was greater than for BOF producers from1996 to 1997, that this trend reversed itself from 1997 to 1998.  Id. at n.104.
268 First Submission of Japan at para. 274.
269 USITC Views at 17, n.104.
270 USITC Views at n.106.
271 USITC Views at 10.WT/DS184/R
Page A-233
total US consumption, the market share of nonsubject imports was 5.7 percent in 1996, 5.0 per cent in
1997, and 5.9 per cent in 1998.272  In contrast, subject imports increased during the three year period
of investigation.273
130. This analysis assured that, in analyzing the effects of dumped imports, the USITC did not
falsely attribute to them effects that were in fact due to nonsubject imports.  The USITC found that thedumped imports suppressed US prices not only because they increasingly undersold US product
274,
but also because of their rapid increase.275  The USITC found this rapid increase of fairly substitutable
dumped imports to be the key factor explaining why prices declined significantly at a time of record
US consumption.  The USITC’s findings make clear  that nonsubject imports could not explain this
striking phenomenon.
131. Despite the fact that the USITC determination includes the above explicit findings, the
Japanese make the allegation that the “USITC completely ignored the impact of nonsubject
imports".276  The USITC’s findings, however, demonstrated that the nonsubject imports cannot be said
to have had any significant negative impact on the US industry.  There was thus no injury potentially
caused by the nonsubject imports that the USITC could have improperly attributed to the dumped
Japanese imports.  Accordingly, the analysis conducted by the USITC of nonsubject imports was fullyconsistent with the obligation of the United States under the Agreement.
(d) Pipe and tube demand
132. Japan also erroneously argues that the USITC was specifically required to include a finding
concerning a decrease in demand in the pipe and tube subsection of the hot rolled steel industry, andfailure to provide an explanation as to this allegation was a violation of the Anti-Dumping
Agreement.
277  It states that a faltering demand for pipe and tube products was an alternative source of
injury that was “ignored or slighted” by the USITC.278  The USITC did, however, consider demand as
a relevant economic factor having a bearing on the state of the industry.279  It did so by examining
aggregate demand for the domestic product, and found that demand for the industry as a wholeincreased every year over the period of investigation. This examination was relevant to the factors
enumerated in Article 3.4 such as market share, production, and capacity utilization.  The evidence
demonstrated that US apparent consumption of hot rolled steel increased from 1996 to 1997, and from
1997 to 1998.
280
                                                     
272 USITC Views at 10.
273 USITC Views at 10.  When measured by total US consumption, the market share of subject imports
was 2.0 per cent in 1996, 4.2 per cent in 1997, and 9.3 per cent in 1998.  Id. at n.49.
274 USITC Views at 15.
275 USITC Views at 16.
276 First Submission of Japan at para. 281.
277 First Submission of Japan at para. 271.  As will be shown, the USITC addressed Japan’s concerns.
Nevertheless, the United States is compelled to observe that Japan’s allegations on this matter are not properly
before the panel.  The requirements relevant to explanation of determinations are found in Article 12.Specifically, Article 12.2 requires that final determinations shall set forth in sufficient detail the findings andconclusions reached on all issues of fact and law considered material by the investigating authorities.  In its
request for a panel the Government of Japan did not allege that the United States was acting in a manner
inconsistent with Article 12 of the Anti-Dumping Agreement.  As Japan’s panel request did not cite Article 12,any argument concerning the inadequacy of the determ ination for failure to make findings on a particular
subject are beyond the terms of reference of this panel under Article 7:2 of the DSU.
278 First Submission of Japan at para. 271.
279 Article 3.4 of the Anti-Dumping Agreement.
280 USITC Views at 10.WT/DS184/R
Page A-234
133. Thus, despite a fluctuation in one subsection of the industry, the USITC found that aggregate
demand was strong during the period of investigation, increasing every year, and, indeed, appeared to
have been at a record high in 1998.281  The USITC found that imports injured the US industry by
preventing it from participating in the growth in demand despite the industry’s capacity to do so.  In
this context, it is apparent why the USITC would regard a decrease in one source of demand as
immaterial.
134. Given these findings, the USITC cannot be regarded as having attributed to the dumped
imports the adverse effects of a decline in demand for pipe and tube.  Indeed, in view of rising overall
demand, it is difficult to see how falling demand from one set of customers can be regarded as a factor
that is injuring the domestic in dustry within the meaning of Article 3.5 at all.  The USITC
determination does not in any way even allude to a conclusion that the adverse effects of a decrease in
demand in a subsection of the US market was attributable to the dumped imports, nor does Japanallege that it does so.  The USITC found that the domestic industry’s performance was substantially
poorer than what would have been expected given the record level of demand for hot rolled steel.
282
The USITC’s determination satisfies Article 3.5 by demonstrating the causal relationship between the
substantially increased volume of dumped imports at declining prices and material injury to the
domestic industry, without attributing to those imports injury due to other causes.283
135. The USITC found a causal relationship between the substantially increased volume ofdumped imports at declining prices and the US industry’s deteriorated performance, as reflected in
nearly all economic indicators.  In establishing the causal relationship between the dumped imports
and the material injury to the domestic industry, the USITC considered all relevant economic factorsand did not attribute to the dumped imports the effects of other known factors. Its decision fully
complies with the requirements of Article 3 of the Anti-Dumping Agreement.
                                                     
281 USITC Views at 10 and n.49.
282 USITC Views at 20.
283 USITC Views at 21.  See also , United States -- Atlantic Salmon  at para. 547 stating that the USITC
had not “disregarded” possible other causes of injury when it expressly recognized that some other factors mayhave adversely affected the domestic industry but that this did not detract from the fact that material injury wasalso caused by the dumped imports.  The Panel further stated that the USITC was required not to attribute
injuries caused by other factors to the dumped imports, but not that it was obligated to identify the extent of
injury caused by these factors in order to isolate the inju ry caused by these factors from the injury caused by the
dumped imports.  Id. at para. 555.WT/DS184/R
Page A-235
PART D:  OTHER ISSUES AND CONCLUSION
I. JAPAN'S CLAIMS UNDER ARTICLE X:3 OF THE GATT 1994 ARE UNFOUNDED
A. THE ACTIONS AT ISSUE ARE CONSISTENT WITH THE ANTI -DUMPING AGREEMENT AND DO NOT
VIOLATE ARTICLE X :3
1. Having failed to demonstrate that the US law and the application of that law are contrary to
the Anti-Dumping Agreement, Japan is trying to get a second “bite at the apple” by turning to
Article X:3 of the GATT 1994.  Japan is apparently alleging that this Panel should find that, even if
the contested decisions were consistent with th e Anti-Dumping Agreement, they might violate the
Article X:3 requirement that certain laws, regulations, judicial decisions and administrative rulings of
general application be administered in a uniform, impartial, and reasonable manner (which Japan
terms “due process”).
2. In considering the application of Article X:3 to this case, the Panel should note three things.
First, Article X:3 is limited to the administration of certain laws, regulations, judicial decisions and
administrative rulings of general application, not to the laws, regulations and administrative rulings
themselves.  Therefore, to the extent that Japan is complaining about laws, regulations and rulings of
general application, as contrasted with their administration, its complaint is not properly founded inArticle X:3.  As the Appellate Body said in Bananas:
The text of Article X:3(a) clearly indicates that the requirements of "uniformity,
impartiality and reasonableness" do not apply to the laws, regulations, decisions and
rulings themselves , but rather to the administration  of those laws, regulations,
decisions and rulings.  The context of Article X:3(a) within Article X, which is
entitled "Publication and Administration of Trade Regulations", and a reading of the
other paragraphs of Article X, make it clear that Article X applies to the
administration  of laws, regulations, decisions and rulings.  To the extent that the
laws, regulations, decisions and rulings themselves are discriminatory, they can beexamined for their consistency with the relevant provisions of the GATT 1994.
1
3. Second, Article X is a general provision of the GATT 1994, which covers the “Publicationand Administration of Trade Regulations”.  The Anti-Dumping Agreement, by contrast, lays out
numerous specific rules on the conduct of anti-dumping investigations, and thoroughly addresses not
only the substantive requirements of anti-dumping investigations, but procedural, or “due process”requirements as well.  Under the general interpretive note to Annex 1A of the Marrakesh Agreement,
if there is a conflict between the Article X:3 and provisions of the Anti-Dumping Agreement, the
provisions of the Anti-dumping Agreement apply to the extent of the conflict.
4. The Anti-Dumping Agreement specifies in Article 1 that “an anti-dumping measure shall be
applied . . . only pursuant to investigations initiated and conducted in accordance with the provisions
of this Agreement.”  Indeed,  Anti-Dumping Agreement Article 1 reflects that, regardless of the extentto which the administration of anti-dumping measures might be subject to the general strictures of
Article X:3, the Anti-Dumping Agreement itself was intended to govern specific actions taken under
                                                     
1 European Communities - Regime for the Im portation, Sale and Distribution of Bananas ,
WT/DS27/AB/R, Report of the Appellate Body, 9 September, 1997 (hereinafter “ Bananas ”), at para. 200
(emphasis in original).WT/DS184/R
Page A-236
domestic laws.2  The Anti-Dumping Agreement itself provides for procedural requirements applicable
to the imposition of anti-dumping measures.  Article 6 provides exporters opportunities to defend their
interests, and Article 12 requires public notice and explanation of determinations.  Further, under
Article 17.6 a panel may review whether an investigating authority has properly established and
objectively evaluated the facts, and interpreted relevant provisions of the Anti-Dumping Agreement
reasonably.  These provisions show that the Anti-Dumping Agreement was intended to address thepolicies expressed in Article X:3 with respect to specific actions taken under the Agreement.
5. It is plain that the arguments in Japan’s firs t submission ignore the proper role of Article X:3
in this dispute.  The Anti-Dumping Agreement author izes the actions complained of in this dispute.
Japan cannot meet its burden of demonstrating that these actions are not uniform, impartial and
reasonable if they are authorized by, and applied consistently with, the Anti-Dumping Agreement.
The Anti-Dumping Agreement negotiators would not have gone to the trouble of negotiating detailedrules governing anti-dumping investigations, if they thought those rules could be disregarded.
6. Introducing its Article X:3 claim, Japan explains that
The US Government essentially decided the case in the favour of the domestic
industry before it even began its investigation.  This bias surfaced repeatedly when
the US Government manipulated the facts and adopted impermissible legal
interpretations.
3
Plainly, whether the US Government manipu lated facts and adopted impermissible legal
interpretations is decided under Article 17.6 of the Anti-Dumping Agreement, which provides that thePanel should (i) determine whether the establishment of the facts was proper and their evaluation
unbiased and objective; and (ii) uphold the authorities actions if they are based on a permissible
interpretation of the Anti-Dumping Agreement.  It de fies logic and law to assert that a Panel might
find that an interpretation of the Agreement was permissible under Article 17.6(ii), but impermissible
and biased under Article X:3.  Article X:3 cannot be used to undercut the specific disciplines agreedupon in the Anti-Dumping Agreement.
7. As another obvious example, Japan asserts several times that the Department’s selection of
“facts available” was a “disproportionate penalty ”, thereby contravening the Article X:3(a)
requirement that the administration of laws be “reasonable”.
4  As demonstrated above, the
Department’s use of “facts available” -- including the choice of appropriate facts -- was entirely
appropriate and consistent with the very specific and detailed “ facts available” requirements set out in
the Anti-Dumping Agreement.  The Article X:3(a) “reasonableness” requirement cannot be
interpreted to prevent what the Anti-Dumping Agreement specifically allows.
8. In addition, in considering Article X:3(a), the Panel should keep in mind that a “uniform,
impartial and reasonable” system is not necessarily one in which each decision looks like the onebefore.  As discussed in the previous sections, administering authorities must have the flexibility, in
making its decisions and formulating its policies, to respond to different or evolving factual
circumstances.  Indeed, the Anti-Dumping Agreement specifically recognizes that many
determinations will be decided on the particular circumstances presented.  For example, Article 3.4
specifically eschews the proposition that any one particular criterion will control injurydeterminations.  It states that "the examination of the impact of the dumped imports on the domestic
                                                     
2 Article 1 of the Anti-Dumping Agreement provides that "The following provisions govern the
application of Article VI of GATT 1994 in so far as action is taken under anti-dumping legislation orregulations".
3 First Submission of Japan at para. 294.
4 Id., at para. 316.WT/DS184/R
Page A-237
industry concerned shall include an evaluation of all relevant economic factors and indices having a
bearing on the state of the industry" and proceeds to list examples of such factors and indices.  The
last sentence of the article repeats that "[t]his list is not exhaustive" and adds, "nor can one or several
of these factors necessarily give decisive guidance."  Article 3.4 not only refrains from telling
investigating authorities how to evaluate the various relevant factors, it also rejects the notion of
applying a particular benchmark linked to any one of the factors.  In doing so, it rejects the notion of“uniformity” that Japan seeks to impose on decision-making by its comparisons between the results in
this investigation and the results in other investigations.
9. In addition, the Panel should distinguish this dispute –  in which Japan is complaining about
specific decisions made in the context of particular facts under the Anti-Dumping Agreement – from
other Article X:3(a) disputes, in which the overall administration of some programme was alleged to
be arbitrary.  For example, the allegation addressed under Article X:3 by the Appellate Body inUnited States - Import Prohibition of Certain Shrimp and Shrimp Products
5 was that the entire
procedure under review was  “non-transparent and ex-parte,” that there was no formal notice of or
reasons provided for actions, and that there was no opportunity for review of or appeal from an action.
10. Such cases, in which the allegation is one of overall arbitrary application addressed by
Article X:3 are very different from the purpose for which Japan uses Article X:3 in the present case.
Japan has not alleged that the overall procedure of the anti-dumping law of the United States is
applied arbitrarily, or that Members are otherwise deprived of basic due process, such as notice and
opportunity for review in anti-dumping proceedings.  Rather, it disagrees with the specific results in
this proceeding.
11. Thus, for each of the issues raised by Japan, which are discussed in sections B and C above,
the Panel should apply the Anti-Dumping Agreement before considering whether, in light of the
provisions of the Anti-Dumping Agreement, th ere is any violation of Article X:3(a).  The
United States submits that, for the reasons outlined below, there is no such violation.
B. THE UNITED STATES ' ACTIONS WERE CONSISTENT WITH GATT ARTICLE X :3
12. The United States’ actions were consistent with GATT Article X:3, because, as the
United States established in Parts B and C of this submission – regarding the determinations of the US
Commerce Department and the US International Trade Commission, respectively – they wereauthorized by and implemented consistently with the pertinent, substantive provisions of the
Anti-Dumping Agreement.  The repetitious nature of much of Japan’s first submission regarding its
alleged due process claim
6 bears out the point, established above, that Article X:3 cannot be used as a
method to circumvent proper review under the pertinent WTO agreement.
13. With regard to Japan’s first Article X:3 claim that Commerce unfairly accelerated this
proceeding7, the United States has explained in the introductory section in Part A above, and has
elaborated upon with regard to critical circumstances in Part B above, that the extraordinary
circumstances of this period, involving an unprecedented surge of imports resulting from the Asian
financial crisis, fully justified the acceleration under both US domestic law and the AD Agreement.  It
does not matter what the Department did in 70 out of 76 subsequent cases, as Japan seems to believe,
or what it did with regard to questionnaires in all other cases in 1998.8  What matters is what the
                                                     
5 United States - Import Prohibition of Certain Shrimp and Shrimp Products , WT/DS58/AB/R, Report
of the Appellate Body, 12 October, 1998 (hereinafter “ Shrimp ”), at para. 188.
6 First Submission of Japan at 91-100.
7 First Submission of Japan  at 91-93, point 1.
8 First Submission of Japan at 91-92, notes 286 and 29 1.  With regard to questionnaires, Japan does not
make the claim, and cannot, that any of its three responding mills were deprived of the requisite amount of timeWT/DS184/R
Page A-238
Department did in this case, and the reasons for it.  That is the issue for the Panel to review, under the
pertinent provisions of the Anti-Dumping Agreement.
14. Next, Japan claims that the Department acted in a biased manner in not applying to NKK its
normal practice of correcting significant errors in preliminary determinations, shortly after those
determinations are issued.9  While Japan is correct in its recitation of the facts concerning
Commerce’s failure timely to correct the error – a correction not required under any provision of the
Anti-Dumping Agreement10 – Commerce did make the correction in its final determination.  Indeed,
as we explained in the introductory section of Pa rt A above and as Japan itself points out, Commerce
not only corrected the error, but did so retroa ctively to thirty days following NKK’s original
allegation of the error.11  Commerce ’s oversight in this matter was nothing more than that: an
oversight subsequently corrected.  It was hardly an act of bias against Japan.
15. Japan’s third bias contention regarding Commerce’s critical circumstances determination12 is
completely rebutted in the pertinent discussion above, as well as in the introductory section above,
and needs no further discussion here.
16. With regard to the application of facts available in this case, Japan attempts, in its fourth bias
count, to claim a pattern of disparate treatment between Commerce and the USITC, as to respondents
and petitioners, which allegedly constitutes bias.13  There is no such pattern.  With regard to the
Commerce Department, each application of facts available to NSC, NKK, and KSC is fully justified
on the individual, specific facts, as explained in detail in Part B above, and is consistent with the
Agreement.  To the extent that Japan is challenging the Commission’s alleged use of facts available, itfailed to include such a claim in its panel request, and thus the matter is outside this Panel’s terms of
reference, for the reasons explained in the preliminary objections section of Part A, above.
17. In any event, Japan’s contrast between the Department’s proceedings and the USITC’s, in
which domestic producers were asked to provide information after the USITC completed its hearing,cannot provide any basis for an allegation of bias.  What Japan fails to recognize is that, in the
investigations at issue here, both agencies me rely followed their routine procedures for data
collection.  Japan’s contention ignores the fundamental differences between the way that the two
authorities conduct their investigations in every case.   The differences between the willingness of the
two agencies to accept late-filed information spring , not from any difference in attitude toward the
information providers, but from systematic differen ces in the procedures that the authorities have
developed for making the different types of decisions they are called upon to make.
                                                                                                                                                                    
allowed under US domestic law and the Agreement for responding to questionnaires.  Indeed, they received
extensions of time in numerous instances, as explained in both Parts A and B above.
9 First Submission of Japan at 93-94, point 2.
10 See Part A, Introduction, above.  Moreover, Japan’s complaint regarding this matter arises under
U.S. law, not under the Agreement.  The task of a panel is to review the consistency of a member’s actions with
the Agreement and not with that member’s domestic laws, regulations or practices.  Under Article 3.2 of theDSU, the purpose of the dispute settlement system of the WTO is to: “preserve the rights and obligations ofmembers under the covered agreements, and to clarify the existing provisions  of those agreements
. . . .”
Further, Article 7.2 of the DSU requires panels to “address the relevant provisions in any covered agreement or
agreements cited by the parties to the dispute.”  Finally, Article 3.7 of the DSU provides that “. . .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”.  Thus, the clear focus
of the dispute settlement system is consistency of an action with a covered agreement.
11 First Submission of Japan at 94, paras. 302-304, n. 209.
12 First Submission of Japan  at 95-96, point 3.
13 First Submission of Japan  at 96-99, point 4.WT/DS184/R
Page A-239
18. It was by no means extraordinary for the USITC Commissioners to request at the USITC’s
hearing information that prior efforts had been unable to obtain.  At the USITC, Commissioners
participate in the information-gathering process by taking part in a hearing following the receipt of
questionnaire responses and prehearing briefs from  the parties.  Under its rules, the USITC may
obtain “relevant and material facts with respect to the subject matter of the investigation” during the
hearing.14  The Commission’s rules provide that participants in the hearing may also file written
answers to questions or requests made at the hearing.15  It is thus routine for Commissioners to request
information from parties -- both those favouring and those opposing an anti-dumping petition --
beyond what questionnaires have yielded.
19. In contrast, the data collection process of the Department of Commerce is geared toward
having full information disclosure before the st aff travel to the respondent companies for on-site
verification of their data.16  Parties may submit any information they believe to be relevant, in addition
to all of the information specifically requested in the Department’s questionnaires, prior to this date.
After this date, information gathering generally is complete.  The Department has the authority to
request information after this date; however, such requests are not a part of the Department’s normal
data collection process.  Although the Department may also hold a hearing, such a hearing is held
after verification and is solely for the purpose of presentation of legal arguments, rather than forintroduction of factual information.
17
20. These differences in process reflect fundamental differences in the nature of the facts into
which the two authorities are inquiring.  As Article 2 of the Anti-Dumping Agreement demonstrates,
the dumping calculation is largely an inquiry focusing on the sales prices and, where necessary, costsof specific, foreign firms.  An authority in making the relevant determination is making detailed
findings concerning what is often hundreds or even thousands of specific transactions by particular
firms, which are usually located overseas.  Thus, for purposes of the requirement of Article 6.6, that
authorities “during the course of an investigati on satisfy themselves as to the accuracy of the
information supplied by interested parties upon which their findings are based,” Commerce reliesprimarily on the on-site verification of records of specific transactions by qualified professional staff,
in keeping with Article 6.7.  Correspondingly, the timely provision of information regarding each
company’s transactions subject to investigation becomes of the utmost importance.
21. While the USITC, the US authority concerned with injury determinations, also is concerned
with obtaining timely and accurate responses, the na ture of its investigation leads to a different
approach, because of its focus on aggregate effects on the industry.  It is also concerned with assuring
that, pursuant to Article 3.4, it has evaluated “all relevant economic factors and indices having a
bearing on the state of the industry.”  Whereas the Department’s consideration of each price or cost
factor leads to an adjustment in its dumping margin calculation, the Commission’s determination is
not controlled by its findings as to each particular factor.  As Article 3.4 provides, not “one or several
of these factors necessarily gives decisive guidance.”  Moreover, as Japan has pointed out, the injurydetermination is concerned, not with transactions by  individual companies, but rather with the effect
of all dumped imports on the domestic producers as a whole, pursuant to Article 3.1 and Article 4.
Consequently, the USITC’s hearing helps assure thor ough examination of the parties’ views of the
relevant economic factors and the weight to be accorded to each factor.  The ability of the
                                                     
14 19 C.F.R. § 201.13(g).
15 19 C.F.R. § 207.25.
16 See 19 C.F.R. § 351.301(b)(1) which generally sets the deadline for submission of factual
information in an investigation seven days before the date on which on-site verification is scheduled tocommence.
17 See 19 C.F.R. § 351.301(c) which provides that during a hearing “an interested party may make an
affirmative presentation only on arguments  included in that party’s case brief and may make a rebuttal
presentation only on arguments  included in that party’ s rebuttal brief.”  (Emphasis added.)WT/DS184/R
Page A-240
Commissioners to have the questions that they ask at the hearing answered allows them to assure that
they have comprehensive information with which to evaluate the various asserted factors.
22. Thus, the USTIC is engaged in a very different endeavour than that engaged in by Commerce,
and their respective data gathering processes reflect these differences.  The Department is engaged in
a calculation.  The accuracy of each piece of data is fundamental to ensuring that the ultimate marginof dumping calculated is as accurate as possible.  By contrast, the USTIC is engaged in a process of
balancing a large amount of potentially contradictory data in which no one piece of data is
determinative of the outcome.
23. These differences are also reflected in the different ways that the two authorities use “facts
available”, as provided for in Article 6.8.    The United States Congress recognized these systematic
differences in enacting implementing legislati on following the Uruguay Round.   Specifically, the
Statement of Administrative Action to the Uruguay Round Agreements Act states as follows:
Commerce and the Commission use the facts available in different ways.  In general,
the Commission makes determinations by weighing all of the available evidence
regarding a multiplicity of factors relating to the domestic industry as a whole and bydrawing reasonable inferences from the evidence it finds most persuasive.  Therefore,
new section 776(a) generally will require the Commission to reach a determination by
making such inferences as the evidence of record supports even if that evidence is
less than complete.  In contrast, Commerce generally makes determinations regarding
specific companies, based primarily on the information obtained directly from thosecompanies.  Section 776(a) generally will require Commerce to reach a determination
of filling gaps in the record due to deficient submission or other causes.
18
24. As this Statement describes, and as was discussed above, the Department uses facts available,both adverse and non-adverse, in filling gaps necessary to make the calculations necessary to deriving
dumping margins.   In contrast, the USITC does not similarly “fill gaps”.  It almost never takesadverse inferences, against any party.  This is  both because its findings amalgamate data from
numerous firms, some responsive and others not, and because, even if it could take an adverse
inferences as to evidence concerning one relevant factor, such an inference would not inform it as to
how weigh that factor against the evidence of other factors.
25. In short, that the Department took an adverse inference when data was not timely provided
and that the Commission asked for and received information after its hearing data that had not been
previously provided does not reflect any bias.  Rather, it reflects systematic differences in the ways
the authorities, consistent with the Anti-Dumping Agreement, conduct their investigation.  Indeed, in
their comments to the USITC on the data that domestic producers submitted in response to the
Commission’s request
19, Japanese respondents did not advise the Commission that the Department
had rejected a submission in circumstances that they regarded as similar.  There is no basis forascribing to the Commission any improper motive in the conduct of its proceedings.
26. In fact, far from indicating any prejudgement of the case, the Commissioners’ request for
additional data on domestic producers’ captive production shows that they had an open mind and were
determined to obtain the most complete picture possible of effects on the industry.  It shows that theywere deeply concerned with knowing as much as possible about operations that the Japanese
respondents regarded as critical to their position.  Obtaining additional information about petitioners’
captive operations would be likely to assist, rather than prejudice, respondents, since captive
                                                     
18 SAA at 869.
19 Respondents' Comments on Final Release of Information, filed 7 June 1999WT/DS184/R
Page A-241
operations are most insulated from the effects of imports.  There is no merit whatsoever in Japan’s
bias claims.
27. Finally, there is also no merit, either legal or factual, in Japan’s statement that the USITC did
not give Japanese respondents an adequate opportunity to respond to the information that domestic
producers provided in response to the Commissioners’ questions.  Going beyond the requirements ofArticle 6.9 of the Anti-Dumping Agreement, the USITC throughout its proceeding disclosed to
interested parties all information under consideration and provided repeated opportunities for
submissions by which they could defend their interests.  To assure that interested parties also have
time to defend their interests as to information presented in posthearing briefs, the USITC under its
rule 19 C.F.R. § 207.30 (a), specifies a date before it finally closes the record on which it will disclose
to all parties to the investigation all information it has obtained on which the parties have not
previously had an opportunity to comment. Parties are then given an opportunity under 19 C.F.R. §207.30 (b) to comment on any information they have received (including information in other parties’
posthearing briefs) that they have received since they filed their posthearing briefs.
28. The Commission provided such an opportunity in this case.  Consequently, Japanese
respondents had an opportunity to respond to the domestic producers’ submission.  They did notcontend that the time allowed was inadequate.  Nor does Japan’s panel request in this proceeding,
although it alleges that the Department violated Artic le 6, allege that the USITC violated Article 6 in
any respect, including the requirement of Article 6.9 concerning providing sufficient time for parties
to defend their interests.  Thus, Japan’s statements that the USITC allowed domestic producers to
provide information too late for Japanese interests to have an adequate opportunity to respond aremerely rhetorical flourishes unsupported by the facts and beyond the claims that Japan has brought in
this case.
29. Japan’s final argument is that the USITC deviated from its prior practice and ignored the US
industry’s financial performance early in the period.  As demonstrated in Part C above, Japan’s claimis untrue, and is based on a misrepresentation both of the USITC’s practice and its determination in
this investigation.
30. In conclusion, the Panel must disregard Japan’s arguments that alleged inconsistencies by the
United States, amounting to an alleged denial of due process, constitute a violation of Article X:3.Instead, the Panel must judge each of these issues on its facts, with regard to the specific
Anti-Dumping Agreement provision invoked, and not be drawn into vague allegations of general bias
under a section of the GATT
II. THE SPECIFIC REMEDY SOUGHT BY JAPAN IS INCONSISTENT WITH
ESTABLISHED PANEL PRACTICE AND THE DSU
31. In its first submission, Japan has asked this Panel to recommend that, if the Panel’s findings
result in a determination that the imported product was not dumped or did not cause injury, or that
product was dumped to a lesser extent than the duties actually imposed, the DSB request that the
United States revoke its anti-dumping duty order and reimburse anti-dumping duties collected.
20  In so
doing, Japan has requested a specific remedy that is inconsistent with established GATT/WTO
practice and the DSU.  Therefore, should the Panel agree with Japan on the merits, the Panelnonetheless should reject the requested remedy, and instead should make a general recommendation,
consistent with the DSU and established GATT/WTO practice, that the United States bring its
anti-dumping measure into conformity with its obligations under the AD Agreement.
                                                     
20 First Submission of Japan at para. 325 (d) and (e).WT/DS184/R
Page A-242
32. The specific remedy21 of revocation requested by Japan goes far beyond the type of remedies
recommended by the overwhelming preponderan ce of prior GATT 1947 and WTO panels.  In
virtually every case in which a panel has found a measure to be inconsistent with a GATT obligation,
panels have issued the general recommendation that the country “bring its measures . . . into
conformity with GATT".22  This is true not only for GATT disputes, in general, but for disputes
involving the imposition of anti-dumping (and countervailing duty) measures, in particular.23
33. This well-established practice is codified in Article 19.1 of the DSU, which provides:
Where a panel or the Appellate Body concludes that a measure is inconsistent with a
covered agreement, it shall recommend that the Member concerned bring the measure
into conformity with that agreement. (footnotes omitted).
34. Indeed, in the first case to work its way through the WTO dispute settlement system, the
recommendations of both the panel and the Appellate Body carefully adhered to Article 19.1.24
35. The requirement that panels make general recommendations reflects the purpose and role of
dispute settlement in the WTO, and, before it, under GATT 1947.  Article 3.4 of the DSU provides
that “[r]ecommendations and rulings made by the DSB shall be aimed at achieving a satisfactorysettlement of the matter,” and Article 3.7 provides that “[a] solution mutually acceptable to the parties
to a dispute . . . is clearly to be preferred.”  To this end, Article 11 of the DSU directs panels to
“consult regularly with the parties to the dispute and give them adequate opportunity to develop a
mutually satisfactory solution.”  Ideally, a mutually agreed solution will be achieved before a panel
issues its report.  However, if this does not occur, a general panel recommendation that directs a partyto conform with its obligations still leaves parties with the necessary room to cooperate in arriving at a
mutually agreed solution.
25
36. Indeed, a Member generally has many options available to it to bring a measure into
conformity with its WTO obligations.  A panel cannot, and should not, prejudge by itsrecommendation the solution to be arrived at by the parties to the dispute after the DSB adopts the
panel’s report.
                                                     
21 By  “specific” remedy, the United States means a remedy that requires a party to take a particular,
specific action in order to cure a WTO-inconsistency found by a panel.
22 See, e.g.,   Canada - Measures Affecting Exports of Unprocessed Herring and Salmon,  L/6268,
Report of the Panel adopted 22 March 1988, BISD 35S/98, 115, para. 5.1.  The United States will spare the
Panel a lengthy citation of all other panel reports in which panels have made recommendations using similar
language;  the number of such reports is well in excess of 100.
23 See, e.g. , Canadian Countervailing Duties on Grain Corn from the United States , SCM/140 and
Corr. 1, Report of the Panel adopted 28 April 1992, BISD 39S/411, 432, para. 6.2; Korean Resins , ADP/92,
para. 302.
24 In Reformulated Gasoline , the Appellate Body recommended “that the Dispute Settlement Body
request the United States to bring the baseline establishment rules contained in Part 80 of Title 40 of the Code of
Federal Regulations into conformity with its obligations under the General Agreement .”  WT/DS2/AB/R, p. 29.
The panel in that case issued a virtually identical recommendation.  WT/DS2/R, Report of the Panel, asmodified by the Appellate Body, adopted 20 May 1996, para 8.2.
25 As noted by Prof. Jackson:
One of the basic objectives of any dispute procedure in GATT has been the effective
resolution of the dispute rather than “punishment” or imposing a “sanction” or obtaining“compensation.”  This objective has been reco gnized explicitly by GATT committees.  The
prime objective has been stated to be the “ withdrawal” of a measure inconsistent with theGeneral Agreement.
John H. Jackson, World Trade and the Law of the GATT  184 (1969) (citations omitted).WT/DS184/R
Page A-243
37. In addition, the requirement that panels issue general recommendations comports with the
nature of a panel’s expertise, which lies in the interpretation of covered agreements.  Panels generally
lack expertise in the domestic law of a defending party.26  Thus, while it is appropriate for a panel to
determine in a particular case that a Member’s legislation was applied in a manner inconsistent with
that country’s obligations under a WTO agreement, it is not appropriate for a panel to dictate which ofthe available options a party must take to bring its  actions into conformity with its international
obligations.
38. Japan’s proposed remedy is particularly inappropriate in view of the arguments that it makes
in this case.  Although Japan contests certai n aspects of the Department’s dumping margin
calculations, even if the Department were to calculate the margins as Japan prefers, it would still find
Japanese imports to be sold at dumped prices.  Likewise, as has been seen, Japan does not contendthat the Commission could not reach an affirmative determination on the evidence before it, but rather
that certain findings in one of the three USITC opinions reaching an affirmative determination were
erroneous.  Indeed, even if Japan were successful in its challenge to the United States statute’s captive
production provision, such a holding by the panel would not affect the decisions of a dispositive
plurality of USITC Commissioners. Thus, even on Japan’s own arguments, it would be possible for
the United States authorities to reach revised determinations in response to an adverse panel decision
that would not necessitate terminating the anti-dumping  order.  Especially in this case,  it should be
for the WTO Member and its investigating authorities to decide how to conform their measures to any
adverse Panel findings.
39. The compliance process under the DSU makes the precise manner of implementation a matter
to be determined in the first instance by the Member concerned, subject to limited rights to
compensation or retaliation by parties that have successfully invoked the dispute settlement
procedures.  In Article 19 of the DSU, the drafters precluded a panel from prejudging the outcome of
this process in their recommendations.
40. In sum, specific remedies are at odds with established GATT and WTO practice and the
express terms of the DSU.  Therefore, regardless of how the merits of this case are decided, Japan’s
request for specific remedies should be rejected.
CONCLUSION
41. Based on the foregoing, the United States respectfully requests the Panel to find that:
• The information submitted to this Panel by Japan that was not made available to US
authorities during the course of the anti-dumping investigation at issue will bedisregarded in this proceeding;
• Japan’s claim concerning the United States’s general practice with respect to “facts
available” 21 July 2000 was not raised in Japan’s request for the establishment of apanel and is therefore not included in this Panel’s terms of reference;
• The specific anti-dumping measures imposed by the United States on hot-rolled steel
from Japan are consistent with the provisions of the Anti-Dumping Agreement
identified by Japan in its submission at para. 325 (a);
                                                     
26 Indeed, Article 8.3 of the DSU provides that citizens of Members whose governments are parties to a
dispute normally shall not serve on a panel concerned with that dispute, absent agreement by the parties.WT/DS184/R
Page A-244
• None of the actions identified by Japan in its submission at para. 325 (b) was
inconsistent with Article X:3 of the GATT 1994;
• The United States’ anti-dumping laws, regulations, and administrative procedures
governing the issues identified by Japan in its submission at para. 325 (c) are not
inconsistent with the provisions of the Anti-Dumping Agreement identified in that
paragraph.
• The specific remedies requested by Japan in its submission at para. 325 (d) and (e)
are contrary to established practice and the DSU.WT/DS184/R
Page A-245
ANNEX A-3
Response of Japan to the Preliminar y Objections of the United States
(10 August 2000)
1. Japan hereby responds to two preliminary objections raised by the United States in its
24 July 2000 First Submission to the Panel in this dispute.
A. EXTRA -RECORD POST-INVESTIGATION EVIDENCE
2. The United States first claims that certain documents referred to in Japan’s First Submission
were not part of the administrative record of either the US Department of Commerce (“USDOC”) orUS International Trade Commission (“USITC”) and should therefore be disregarded by the Panel.
This objection, however, is premised on (1) a misint erpretation of the Anti-Dumping Agreement, (2) a
misunderstanding of the purpose of the documents included in Japan’s First Submission, and (3) in
some cases, a misrepresentation that the documents were extra-record when in fact they were on the
record.
1. The United States’ Interpretation Of Ar ticle 17.5 Of The Anti-Dumping Agreement Is
Simply Wrong
3. The United States bases its objection to so-called “extra-record” evidence on what it considers
to be limiting language in Article 17.5(ii) of the Anti-Dumping Agreement.  The United States’
reliance on this provision, however, is misplaced.  Article 17.5(ii) requires the Dispute SettlementBody (“DSB”) to establish a panel to examine a matter based upon “the facts made available in
conformity with appropriate domestic procedures to the authorities of the importing Member”.  The
provision says nothing about what was on or off the “administrative record” as defined by the
authority.  Instead it addresses facts “made available in conformity with appropriate domestic
procedures.”  Inherent in this clause is the possible existence of facts that were not on the official
administrative record, but were, in fact, “made available in conformity with appropriate domestic
procedures”, such as the information submitted by NSC and NKK that was expunged from the recordby USDOC (as discussed in greater detail in paragraphs 15 through 17 below).  Also inherent in the
provision is the possibility that the domestic procedures adopted were not “appropriate”.  In many
instances, this is exactly what Japan has argued:  that the procedures adopted by the United States
were biased and non-objective and therefore not “appropriate”.  It may be rational to interpret
Article 17.5 to preclude Members from submitting, for example, a new inland freight adjustment to aPanel when that information was not provided to  and examined by the authority in the original
investigation.  However, Members must be permitted to submit evidence that explains or
demonstrates how the authority’s investigation procedures or determinations were unfair,
unreasonable, or biased.
4. Indeed, much of what the United States calls “extra-record” information in its objection has
been provided to the Panel precisely because  it was not on the administrative record.  Remember that
part of the purpose of bringing this dispute is that under Article 17.6 of the Anti-Dumping Agreement
the United States has (a) acted in bad faith by conducting a biased and non-objective investigation
and/or (b) failed to establish the facts properly.  If an authority has acted in bad faith, it is no wonderWT/DS184/R
Page A-246
that evidence of such acts are not on the administrative record.1  It stands to reason, therefore, that if a
party is to prove that an authority has acted in bad faith, then non-record evidence must be considered
by the Panel.  Likewise, if an authority has failed to establish the facts properly, then it is quite
possible that it improperly excluded facts from the record.  The Panel must be made aware of such
facts to determine whether, in fact, the authority has failed in its obligation to establish the factsproperly.  Blind adherence to the US position woul d only encourage authorities to remove information
from the record so that it could not be used against them in dispute settlement proceedings before the
WTO.
5. Conveniently, the United States appears to ignore the fact that under US trade law, the rules
of evidence do not work in the same way as they work before US courts (as well as other courts
around the world).  Under the judicial rules of evidence, there are methods by which a party may
object in order to record the fact that a judge acted in a biased fashion.  Trade cases are different.Even if a party submits information, USDOC sometim es returns that information to the party and
expunges it from the record (as it did in this case).  USDOC’s role as prosecutor, judge, and jury
therefore gives it leeway to prohibit certain information from entering the record.  Furthermore, these
multiple roles make it virtually impossible for the respondent to claim bias during the course of an
investigation.
6. Furthermore, the United States’ position is in direct contrast to positions taken in other WTO
proceedings.  For example, the United States it self has promoted the submission of amicus curiae
briefs by non-governmental organizations that contained factual analysis opposed by interested
Member countries.
2  In another recent case, the United States convinced the panel to accept other
“extra-record” evidence that supported its legal arguments, under panels’ broad discretion to acceptevidence under DSU Articles 11 and 13.
3  The United States cannot now be allowed to take a
contradictory position in this case and oppose the submission of factual information essential to
Japan’s legal claims.  Rather, the Panel should exercise its substantial discretion to accept evidence.
DSU Article 11 states that a panel “should make an objective assessment of the matter before it,
including an objective assessment of the facts of the case and the applicability of and conformity withthe relevant covered agreements.”  Disregarding facts put forth by one of the parties that go to the
heart of the issues being examined by a panel would violate DSU Article 11.  Moreover, the Appellate
                                                     
1 As discussed in greater detail below, much of the challenged “extra-record” evidence were press
articles, reporting the political atmosphere surrounding the anti-dumping investigation.  The articles reported
statements by USDOC officials or meetings between the US industry representatives and relevant US
government officials.  In fact, one of the Japanese respondents argued during the investigation that USDOCshould formally place such evidence on the administrative record -- that is, that it be “made available inconformity with appropriate domestic procedures” under Article 17.5(ii).  USDOC denied the request andthereby kept this damaging evidence of bias off the record.  See USDOC Final Dumping Determination , 64 Fed.
Reg. at 24347 (Exh. JP-12).  The United States interpretation of Article 17.5, which would allow consideration
of only the administrative record the United States deems “official,” would deprive a panel of probative
evidence and lead to absurd results.
2 See United States—Imposition of Countervailing Duties on Certain Ho t-Rolled Lead Bismuth Carbon
Steel Products Originating in the United Kingdom , WT/DS138/AB/R, adopted 10 May 2000, at para. 38;
United States—Import Prohibition of Certain Shrimp and Shrimp Products , WT/DS58/AB/R, adopted
6 November 1998, at para. 79.
3 The United States itself has aptly argued that “it could attach as an Exhibit to its submission in an
anti-dumping case the phone book of Mexico City.  The issue would not be its admissibility, but rather whatevidentiary weight the Panel should attach to the information in the phone book.”  See Mexico—A nti-Dumping
Investigation of High Fructose Corn Syrup (HFCS) From the United States , WT/DS132/R, 28 January 2000, at
n.540.  Importantly, the Panel sided with the United States in that preliminary dispute under the Anti-Dumping
Agreement by accepting extra-record evidence.  Id. para. 7.34.WT/DS184/R
Page A-247
Body has made it clear that, based on DSU Articles 12 and 13,4 it is the responsibility of the panel to
determine the admissibility and relevance of evidence proffered by the parties to a dispute.5
7. By relying on an unreasonably narrow reading of Article 17.5(ii), the United States implicitly
argues that Article 17.5(ii) trumps the “objective assessment” requirements of DSU Article 11.  This
argument fails.  The Appellate Body has held that a provision from the Anti-Dumping Agreementtrumps the language of a more general provision only when there is a direct conflict .
6  Specifically,
the Appellate Body stated:
In our view, it is only where the provisions of the DSU and the special or additional
rules and procedures of a covered agreement cannot  be read as complementing  each
other that the special or additional provisions are to prevail .  A special or additional
provision should only be found to prevail  over a provision of the DSU in a situation
where adherence to the one provision will lead to a violation of the other provision,that is, in the case of a conflict  between them.
7
8. The Appellate Body specifically addressed Article 17 of the Anti-Dumping Agreement in
particular, stating, “[t]o read Article 17 of the Anti-Dumping Agreement  as replacing  the DSU system
as a whole is to deny the integrated nature of the WTO dispute settlement system established byArticle 1.1 of the DSU.”
8  The Appellate Body, therefore, concluded that the Panel had “erred in
finding that Article 17 of the Anti-Dumping Agreement ‘provides for a coherent set of rules for
dispute settlement specific to anti-dumping cases . . . that replaces the more general approach of the
DSU.”9
9. In this situation, there is no conflict between Article 17.5(ii) of the Anti-Dumping Agreement
and Article 11 of the DSU.  Indeed, Article 11 is necessary  in order for a Panel to ensure that the
procedures were “appropriate” under Article 17.5(ii) and that the facts were “proper” and analyzed in
an “unbiased and objective” manner under Article 17.6(i).  The US Submission asserts the existence
of a conflict, but it never actually identifies any conflict.
10. Moreover, Japan raises both “on-its-face” and “as-applied”  challenges  in this case.  Japan’s
on-its-face  challenges do not depend on administrative record evidence.  As discussed in more detail
below, for example, the statisticians’ affidavit supports, inter alia , Japan’s on-its-face  challenge
                                                     
4 DSU Article 12.2 provides that “Panel procedures should provide sufficient flexibility so as to ensure
high-quality panel reports.”  Article 13.1 states, “Each panel shall have the right to seek information and
technical advice from any individual or body which it deems appropriate.”  Similarly, Article 13.2 begins,“Panels may seek information from any relevant source . . . .”
5 See United States—Import Prohibition of Certain Shrimp and Shrimp Products,  WT/DS58/AB/R,
adopted 6 November 1998, paras. 104-106.  The Appellate Body stated:
The thrust of Articles 12 and 13, taken together, is that the DSU accords to a panel
established by the DSB, and engaged in a dispute settlement proceeding, ample and
extensive authority to undertake and to control the process by which it informs itself
both of the relevant facts of the dispute and of the legal norms and principles
applicable to such facts.  That authority, and the breadth thereof, is indispensably
necessary to enable a panel to discharge its duty imposed by Article 11 of the DSU to“make an objective assessment of the matter before it, including an objective
assessment of the facts of the case  and the applicability of and conformity with the
relevant covered agreements .” (Emphasis added in the report.)
6 Guatemala—Anti-Dumping Investigation Regarding Portland Cement from Mexico , adopted on
2 Nov. 1998, WT/DS60/AB/R, para. 65.
7 Id. (emphasis in original).
8 Id. at para. 67 (emphasis in original).
9 Id. at para. 68 (original emphasis removed).WT/DS184/R
Page A-248
against the United States 99.5 per cent arm’s length test.10  Article 17.5(ii) guides the Panel only with
respect to challenges of actual investigations.  It does not, however, guide the Panel with respect to a
on-its-face  challenge pursuant to, inter alia , Article 18.4 of the Anti-Dumping Agreement, which
requires Members to ensure the “conformity of its laws, regulations and administrative procedures.”
Perhaps the United States is confused, or it is now trying to confuse the Panel, but much of the so-called “extra-record” information speaks directly to the statutory, regulatory, and practical
implementation of the Anti-Dumping Agreement.
11. In addition to the Article 17.5 argument, the United States bases its challenge to allegedly
extra-record, post-investigation evidence on Article 6.1 of the Anti-Dumping Agreement, claiming
that the Japanese respondents had ample opportunity to place evidence on the record during the
investigation.  This assertion is not entirely true, for the reasons discussed below.  All of the evidence
to which the United States refers in making its arguments under Article 6 is relevant to this dispute —
particularly in light of the requirements of Article 17 —and should not be eliminated from the Panel’s
consideration.
12. Finally, Japan’s claims in the case are not limited to challenges under the Anti-Dumping
Agreement.  Importantly, Japan has also raised claims under Article X of the GATT 1994 .  These
claims are to be examined in conjunction  with the claims made by Japan under the Anti-Dumping
Agreement.  Obviously, Article 17.5(ii) of the Anti-Dumping Agreement does not apply to challenges
made under the GATT 1994.  The United States has provided no legal basis at all to dismiss so-called
“extra-record” evidence that relates directly or indire ctly to the Article X claims in this case.  The
United States ignores the GATT 1994 challenges.
2. Each Piece Of Evidence To Which The United States Objects Is Relevant To The
Dispute And Should Not Be Disregarded
13. Each piece of evidence to which the United St ates objects is relevant to the dispute and
should not be disregarded.  We address each category of evidence below.
(a) Attorney Affidavits
14. The attorney affidavits provide the Panel with  concrete evidence of the margin impact of
various violations committed by USDOC.  Japan felt compelled to provide such evidence to the Panel
because other panels (incorrectly, Japan believes) have rejected arguments that were not accompanied
by proof that the violation had an impact on the margin being calculated.
11  It is not USDOC’s
practice to include on its record what the margin results would have been, had it adopted any number
of other possible margin calculations; indeed, we would not expect it to do so.  Furthermore, it would
not be in USDOC’s interest to do so as it would prevent them from trying to remove certain factual
information from a panel’s consideration, as it is doing here.  We would be surprised if theUnited States argued for two mutually exclusive rules in disputes before the DSB:  one that says proof
of impact is required, but another that says such proof may not be presented.  It simply makes no
logical sense.
15. Beyond this proof-of-impact information, the only other non-record information in the
attorney affidavits is that which is proffered to show USDOC was either biased in its investigation orfailed to establish the facts properly.  In particular, the affidavits of Mr. Porter and Mr. Plaine provide
information about the disputed weight conversion factors that USDOC improperly expunged from the
                                                     
10 It also supports the Government of Japan’s “as applied” argument, in that it demonstrates the bias
with which USDOC analyzed the facts.
11 See, e.g., United States—Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled
Atlantic Salmon from Norway , adopted 27 April 1994, 41S/229 BISD, at para. 483.WT/DS184/R
Page A-249
record, such as how the factors were calculated.  The affidavits also present facts describing
USDOC’s verification procedures:  USDOC veri fied NKK’s weight conversion factor, but
affirmatively refused to verify NSC’s factor or the circumstances that led to NSC’s mistaken belief it
could not provide the factor.  USDOC excluded such clearly relevant information from its verification
report, which constitutes the administrative record of the verification.
16. In his affidavit, Mr. Porter also explains what guidance USDOC officials gave regarding
NKK’s response to supplemental questions about the weight conversion factor.   Indeed, USDOC
should have placed the content of this conversation on its administrative record because it was part of
its administrative proceeding.  The failure of US authorities to maintain complete records of the
administrative proceeding does not negate the status of the information as part of that proceeding.
This conversation is not new factual information that was not made available to the authorities; the
same official that participated in that conversation drafted the dumping determinations.
17. The affidavits are the only way to inform the Panel of USDOC’s improper establishment of
the facts.  The rashness of USDOC’s actions and the resulting unreasonable application of adverse
facts available are at the heart of Japan’s claims that USDOC’s application of the US statute was
inconsistent with the Anti-Dumping Agreement.  Im portantly, all of the facts in the affidavits were
“made available in conformity with appropriate domestic procedures” in accordance withArticle 17.5(ii).  USDOC itself violated those sa me domestic procedures by removing some facts
from the record or failing to place other facts on the record.  As demonstrated above, it makes no
sense to reject information from a panel’s consideration when the whole point of the argument is that
the authority failed to conduct a proper investigation.
18. The odd arguments presented in Paragraphs 66 and 67 of Part A of the US First Submission
also make no sense.  The United States appears concerned that members of the US domestic industry
are not being afforded an opportunity to respond to the allegations made in the affidavits by attorneys
representing the respondents in the underlying investigation.  The United States could easily sit down
with members of the US domestic industry and provide affidavits of its own if it so desired.
However, the United States did not and probably would not do this because the information in theaffidavits does not challenge the substance of this investigation, but rather it demonstrates the bias
demonstrated by the US anti-dumping author ities in carrying out this investigation .  The proper party
to respond to these allegations is the US Government.
(b) Statisticians’ Affidavit
19. The United States’ challenge to the statisticians’ affidavit is beyond the pale.
12  The point of
the affidavit is to offer additional proof that the arm’s length test is unfair— an obviously relevant
inquiry in determining whether the test results in a “fair comparison” as required by Article 2.4 of theAnti-Dumping Agreement.  In other words, this af fidavit is not offered to provide the Panel with
extra-record evidence; rather it represents expert testimony to assist Japan in making a legal argument
about what is and is not “fair.”
20. The United States appears to confuse an important distinction between disputes before the
WTO and disputes before its own courts.  The body of law that governs this dispute is the WTOAgreements; the body of law that governs an internal US dispute is US law.  Under US law, Japanese
respondents would not have had a reason to argue the meaning of the words “fair comparison” as they
appear in the Anti-Dumping Agreement.  We obviously do here, and must not be constrained in
crafting arguments concerning the meaning of those words.
                                                     
12 US First Submission, para. A-62 to A-67; Ja pan First Submission, para. 168 & Exh. JP-56.WT/DS184/R
Page A-250
21. Moreover, all of the data on which the statisticians’ more detailed analysis and conclusions
were based was indeed on the record of the original investigation.  So, what the United States appears
to be arguing with respect to this affidavit is that no new legal  arguments may be devised by parties
before the WTO with the assistance of experts if they were not raised before the authority in the
administrative proceeding that is the subject of the dispute.
22. This simply cannot be the case.  First, we note that such testimony has been permitted before
other panels.13  Second, it would be absurd to require parties to anticipate all possible WTO objections
during an anti-dumping proceeding, and then anticipate all possible expert opinion in support of these
WTO legal theories, and submit those opinions during the proceedings.  In fact, there is no
international law equivalent in WTO proceedings of “exhaustion of administrative remedies”.  A
Member does not lose its rights to make legal claims under the WTO if it does not raise that claim
under the domestic law proceedings of a Member country.  Third, Japan is not urging the Panel to
adopt any specific statistical test.  Rather, the affidavit is intended solely to support the legal argument
that the current US practice is “unfair.”
(c) Newspaper Articles and Scholarly Commentary
23. The United States also argues that some of the citations in Japan’s First Submission are
“extra-record” material and therefore should also be disregarded.14  Many of the documents the
United States identifies as extra-record, however, were in fact on the record and therefore “made
available” to USDOC, having either been cited or submitted by one or more of the respondents; others
merely reflect the substance of the arguments made before USITC or USDOC.  The remaining
documents describe the political pressure brought to bear on the US authorities during the
investigation; without these facts, the Panel cannot evaluate whether the United States acted in badfaith or properly established the facts.
(i) The United States Incorrectly Identified Articles As Not On The Record
24. The following table summarizes where several of the challenged articles either appeared on
the record or were cited in submissions on the record:
US First
Submission
ReferenceChallenged Citation Citation to Administrative
Record
Part A, footnote 85 Preston Pipe & Tube Report  (Nov. 1998)
(Exh. JP-67)attached to Respondents’
USITC Prehearing Brief asExhibit 21B
Part A, footnote 85 Preston Pipe & Tube Report  (Sept. 1998)
(Exh. JP-67)attached to Respondents’
USITC Prehearing Brief as
Exhibit 21D
Part A, footnote 85 Scott Robertson & Frank Haflich, “US
mills lift slab purchases,” American Metal
Market  at 1 (Feb. 8, 1999) (Exh. JP-32)attached to Respondents’
USITC Prehearing Brief as
Exhibit 4T
                                                     
13 See, e.g., United States—Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled
Atlantic Salmon from Norway , adopted 27 April 1994, 41S/229 BISD, at para. 170 (accepting and considering
an affidavit presenting a statistical analysis).
14 See US First Submission at A-23 to A-24.WT/DS184/R
Page A-251
US First
Submission
ReferenceChallenged Citation Citation to Administrative
Record
Part A, footnote 86 PaineWebber, “ Steel: A Gauntlet for All,
Rewards for the Select ,” Steel Strategies
#24 (June 1998) (Exh. JP-34)cited at Respondents’ USITC
Prehearing Brief, n.127-28,
inter alia
Part A, footnote 86 Charles Yost, “Thin Slab Casting/Flat-
Rolling: New Technology to Benefit US
Steel Industry,” in USITC, Industry Trade
and Technology Review , 1996 ITC Lexis
428 (Oct. 1996) (Exh. JP-34)attached to Respondents’
USITC Posthearing Brief,
Answers to Questions from
Commissioners, as Exhibit 1
Part A, footnote 86 Donald Barnett and Robert Crandall,
“Steel: Decline and Renewal,” in Industry
Studies  (2nd ed. Larry Duetsch, ed. 1998)
(Exh. JP-35)attached to Respondents’
USITC Prehearing Brief as
Exhibit 17
25. There can be no question that these articles were part of the original administrative record,
were “made available” in accordance with Article 17.5(ii), and constitute a valid basis for arguments
raised in Japan’s First Submission.
(ii) Other Documents Are Simply Alternative Sources For Arguments Made During The
Investigations
26. The United States challenges other citations in Japan’s First Submission, which do not appear
in the administrative record, but are alternative sources for substantive arguments made during the
investigations.15  Contrary to the US Government’s assumption, the citation to alternative sources
does not indicate a weakness in the factual basis on the record.16  Rather, the substantive arguments
were argued in full, with ample opportunity for rebuttal, in the underlying proceedings.
27. Specifically, the condition of the US steel industry during the period investigated was raised
at USDOC and USITC.  In a 26 October 1998, submission to USDOC, opposing petitioners’ request
for early critical circumstances preliminary determination, the Japanese respondents discussed the US
industry’s positive financial performance and strong domestic demand for hot-rolled steel.17
Respondents’ letter provided documented statistics about US producers’ profits from 1995 to
June 1998 —much of the same period summarized in the chart criticized by the US submission.  At
USITC, respondents analyzed the financial condition of the US industry, devoting significant portions
of their postconference, prehearing, and posthearing briefs to the subject.18  There were volum es of
information on the record to support their analysis.  And where US producers had not provided
                                                     
15 See id. at A-24, n.85 (citing a Graph of Hot-Rolled Industry Composite - Profit From Operations and
World Bank Annual Report 1999  (Exh. JP-33)); A-24, n.87 (citing Transaction Pricing Service, Purchasing
Magazine  (Exh. JP-36)).
16 For example, compare Exhibit JP -36 (Transaction Pricing Service, Purchasing Magazine ) to Exhibit
6 to Respondents’ Posthearing Brief, Answers to Question from the Commission, using the same source to plothot-rolled steel prices.
17 Willkie Farr & Gallagher letter to USDOC of 26 Oct. 1998, at 15-22 (Exh. JP-57).
18 Respondents’ USITC Posthearing Brief, at 17-20 (12 May 1999); Respondents’ USITC Prehearing
Brief, at 25-47 (29 Apr. 1999); Respondent’s USITC Postconference Brief, at 19-25 (27 Oct. 1998).WT/DS184/R
Page A-252
complete information, respondents made reasonable assumptions from the record and other evidence.
The fact that Japan’s First Submission cites two other sources to make the same argument does not
negate the extensive debate that occurred in the underlying investigations.  For the convenience of the
Panel, Japan chose the most succinct documentary support available.  But if the Panel prefers more
voluminous information from the record, additional excerpts from respondents’ briefs that did notappear in Japan’s First Submission are provided in an exhibit hereto.
19
28. Similarly, the United States challenges Japan’s reliance on a series of articles documenting
US producers’ purchases of imported steel to feed their downstream operations.20  Respondents
addressed this issue in detail in their USITC prehearing brief as evidence of an acute shortage of hot-
rolled steel in early 1998 —an important alternative cause of injury.21  Much of the specifics of this
discussion was based on US producers’ proprietary information.  Japan did not have access to this
proprietary information to prepare its First Submission, but the argument is important nonetheless.Therefore, it was necessary to find alternative sources to support the discussion.  Because the issue
was raised and argued during the USITC investigation, the US industry has not suffered from a lack
of opportunity to rebut the substance of the discussion.  To alleviate the US Government’s concerns
about so-called extra-record evidence, excerpts of respondents’ USITC prehearing brief are provided
at Exhibit JP-77 .
(iii) Evidence Of Bias Cannot Be Submitted During The Investigation
29. Article 17.6(i) charges the Panel with examining whether the authorities’ evaluation of the
facts on the record was “unbiased and objective.”  Political pressure from interested parties is one
source of bias that can clearly affect objectivity.  The remaining sources questioned by the
United States concern the highly charged political climate that surrounded the US anti-dumpinginvestigations.
22  The US steel industry and unions lobbied the US administration and Congress
aggressively to influence the outcome of the hot-rolled investigation.  Obviously, if these efforts were
successful (and the evidence suggest that they were), the US officials responsible for the
investigations would not react favourably to allegations by respondents that questioned the integrity of
the system.  Respondents’ most effective arguments before the agencies that stood as prosecutor,judge, and jury were the straight-forward factual and legal arguments presented throughout the
proceedings.  While there was a suspicion and concern that the lobbying efforts would bias the
agencies’ decision-making, there was always the possibility that the authorities would resist that
pressure and instead make decisions based on la w and facts.  Unfortunately, the bias won.
30. The Panel must consider this evidence to determine whether the authorities were biased or
unobjective.  Without this context, th e Panel would be reviewing the record as created by the
authorities themselves .  Logically, the authorities would not themselves place evidence of such strong
political pressure on the record or even allow such evidence to appear in the record.  In fact, NSC
tried to force USDOC to place on the record certain ex parte  discussions between USDOC officials
and US producers and others, but USDOC refused.
23  Under the US anti-dumping law, USDOC is
required to maintain a record of all ex parte  meetings between USDOC officials and “interested
parties” (including representatives of petitioners) at which information relating to an anti-dumpingproceeding is presented or discussed.
24
                                                     
19 See Exhibit JP-77.
20 See US First Submission at A-24, n.85 (citing articles regarding US mills’ purchases of semi-finished
steel (Exh. JP-32)).
21 Respondents’ USITC Prehearing Brief, at 109-113 (29 Apr. 1999).
22 See .. First Submission, at A-24 n.88 (citing press articles at Exhibits JP-16 to JP-23, JP-25 to JP-26
and the introduction of Japan’s First Submission).
23 See USDOC Final Dumping Determination , 64 Fed. Reg. at 24347 (Exh. JP-12).
24 19 U.S.C. § 1677f(a)-(c).WT/DS184/R
Page A-253
31. USDOC routinely breached this fundamental obligation.  After the petition was filed,
numerous meetings occurred between USDOC officials (and other members of the Administration)
and representatives of the petitioners or other domestic interested parties.  However, no memoranda
memorializing these or any other ex parte  meetings between petitioners or other interested parties and
members of the Administration concerning the issues presented in this matter were written and placedin USDOC’s official record.  Absent this other evidence that USDOC deliberately excluded from the
record, the Panel should exercise its discretion under Article 13 and consider these press articles about
the political atmosphere of the hot-rolled steel investigations and their impact on USDOC’s decision-
making.
B. E
STABLISHED PRACTICE OF APPLYING ADVERSE FACTS AVAILABLE TO PUNISH
RESPONDENTS
32. The United States has challenged Japan’s claims concerning USDOC’s established practice
and method of applying adverse facts available as outside the Panel’s terms of reference.25  T h e
United States is simply wrong.
33. First, it is important for the Panel to recognize that the United States is intentionally blurring
the distinction between challenging a statute on its face and challenging a general practice established
under a statute.  Japan has not challenged the US statutory provision permitting the application ofadverse facts available, but rather the manner in which that provision has been applied in general
practice by USDOC.  Therefore, the comparison set forth by the United States (First Submission,
Part A, Para. 70) between the panel request with respect to facts available and the panel request with
respect to “on its face” violations involving statutory provisions is misplaced.  Japan’s use of certain
language when making a direct challenge to the precise words of a statute did not preclude its abilityto challenge the application of a general practice using different language to describe the violation.
26
34. Not surprisingly, the United States dismisses —as it has with nearly all of Japan’s non-Anti-
Dumping Agreement claims —the basis for Japan’s claims against established practices.  Paragraph 60
of Japan’s First Submission states as follows:
60. The Panel should therefore deem USDOC’s established practice of applying
adverse facts available to punish respondents as inconsistent with Articles 6.8 and
Annex II.  Such established practices are subject to facial challenge under Article
XVI:4 of the WTO Agreement which requires that “Each Member shall ensure the
conformity of its laws, regulations, and administrative procedures with its obligations
as provided in the annexed Agreements.”27  The Panel in US—Section 301 found that
                                                     
25 US First Submission, at A-24 to A-27, para. 69- 76.  Noticeably, the United States did not make a
similar challenge to Japan’s claim regarding the USDOC’s 99.5 per cent arms’ length test.  There as well, Japanspecified only the “dumping determination,” but has included a general attack of the practice because it was thatgeneral practice that was employed by USDOC and applied to the Japanese respondents.  See Government of
Japan, Request for the Establishment of a Panel, para. A-1; Japan First Submission, para. 151.  With respect to
both the arm’s length test and adverse facts available, USDOC applied a general practice that should beaddressed both generally as well as in the context of this specific case.
26 In its panel request, Japan argued against USDOC’s application of facts available “ under its statute. ”
See Government of Japan, Request for the Establishment of a Panel, para. A-2.  USDOC applied facts available
in this case based on a general practice that it regularly employs “ under its statute .”  In other words, what was
applied by USDOC in this case was a general practice .
27 Article 18.4 of the Anti-Dumping Agreement confirms in substantially identical terms the same
requirement for domestic anti-dumping laws.  According to Article XVI:3 of the WTO Agreement, any conflictbetween a provision of the Anti-Dumping Agreement and a provision of the WTO Agreement has to be resolvedin favour of the provision of the WTO Agreement.  This suggests that Article XVI:4 of the WTO Agreement
ranks higher than Article 18.4 of the Anti-Dumping Agreement in the hierarchy of WTO provisions.  Japan willWT/DS184/R
Page A-254
the phrase “laws, regulations and administrative procedures” in Article XVI:4 should
be read broadly, stating:
even though the statutory language granting specific
powers to a government agency may be prima facieconsistent with WTO rules,  the agency responsible,
within the discretion given to it, may adopt internal
criteria or administrative procedures inconsistent
with WTO obligations which would, as a result,
render the overall law in violation  . . . ”
28
A Panel must therefore examine a Member’s anti-dumping law as a whole, including
the generally applicable interpretations of those laws and regulations adopted by the
domestic anti-dumping authorities.29  This includes interpretations such as USDOC’s
policy with respect to adverse facts available.
35. In short, Japan’s challenge to the established practice of applying adverse facts available in a
manner to punish respondents is based on Article XVI:4 of the WTO Agreement (as well as
Article 18.4 of the Anti-Dumping Agreement).  Japan’s panel request clearly stated:
E. CONFORMITY
By maintaining the above-detailed laws, regulations and
administrative rulings of general application which are not in
conformity with its obligations under the WTO agreements, the
United States has acted in a manner inconsistent with Article XVI: 4
of the Marrakesh Agreement as well as Article 18.4 of the Anti-
Dumping Agreement.
36. The panel on United States—Anti-Dumping Act of 1916 pointed out that when a domestic law
has been applied in specific instances, its WTO-conformity must be determined on the basis of the
actual practice under the law.  Specifically, the panel ruled that in such a case the issue was not only
whether the domestic law as such could possibly be interpreted in a WTO-consistent manner, but also
whether the law as actually interpreted and applied by the domestic authorities was WTO-consistent.
That panel therefore examined whether the Anti-Dumping Act of 1916 “as currently applied” by the
US courts and administration was consistent with the United States’ WTO obligations.30  As pointed
out above, the panel that examined US Section 301 similarly concluded that the consistency of
statutory provisions had to be determined in light of the criteria and procedures used to implement
them.  The United States was thus fully aware of the fact that Japan’s claim that the US laws,
regulations, and administrative rulings specified in the panel request are inconsistent with Article 18.4
                                                                                                                                                                    
therefore focus its discussion below exclusively on Article XVI:4.  However, if the Panel were to regard
Article 18.4 of the Anti-Dumping Agreement as the applicable provision, Japan’s references to Article XVI:4
should be understood as references to Article 18.4 of the Anti-Dumping Agreement.
28 United States—Sections 301-310 of the Trade Act of 1974 , 22 Dec. 1999, WT/DS152/R, at paras.
7.24-7.27 (emphasis added) (“ US—Section 301 ”).
29 Article XVI:4 reflects the fact that domestic law at odds with WTO law generally creates uncertainty
for private operators, thereby adversely affecting the competitive opportunities for the goods or services of other
Members.  The WTO agreements seek to ensure that goods or services of domestic and foreign origin areaccorded equal competitive opportunities.  A party doe s not act in good faith if it accepts an obligation
stipulating one behaviour, but adopts domestic law calling for another.  The US—Section 301 Panel embraced
this view.  Id. paras. 7.81, 7.90.
30 United States—Anti-Dumping Act of 1916— Complaint by the European Communities , 31 Mar. 2000,
WT/DS136/R, paras. 6.85-6.89 (unadopted).WT/DS184/R
Page A-255
of the Anti-Dumping Agreement and Article XVI:4 of the WTO Agreement would entail an
examination of the interpretation and application of t hose laws by the US authorities.  By including in
its panel request a reference to all “above-detailed laws, regulations, and administrative rulings” and
explicitly claiming them to be inconsistent with Article XVI:4 of the WTO Agreement, Japan thus
made it perfectly clear to both the United States and interested third countries that the matter it wassubmitting to the DSB comprised not only the actions taken in the specific case but also the US anti-
dumping law on which these actions were based.  This includes the law governing the application of
facts available as interpreted and applied by USDOC.  It is therefore unclear to Japan how the United
States can seriously claim to be surprised by Japan's request for a ruling on this topic.
37. Finally, regardless of whether Japan could have been more precise in its panel request with
respect to this issue, the United States has not demonstrated how Japan’s panel request has prejudiced
United States’ ability to defend itself.
31  As for the US argument that third parties have now missed
the opportunity to reserve their rights to intervene, these are third party rights, not US rights.   Even if
third parties would have been interested in the di spute if they had known more details, this will
happen in every case -- unless the complaining party includes a copy of its entire first submission
along with its panel request.  This has nothing to do with the ability of the United States to defend
itself.
38. In any event, the dispute surrounding the established US facts available practice serves first
and foremost to support Japan’s legal argument that the United States applied adverse facts available
against the three respondents based on an impermissible interpretation of the Anti-Dumping
Agreement.  Even if the Panel were to decide that Japan has improperly broadened its challenge
against the US practice in general, the Panel should still consider the section of Japan’s FirstSubmission titled “USDOC’s Established Practice of Applying Adverse Facts Available To Punish
Respondents Is Inconsistent With Article 6.8 and Annex II of the Anti-Dumping Agreement” as
general support for the argument that the United States acted inconsistently with the Anti-Dumping
Agreement in the hot-rolled steel investigation.
*     *     *     *
39. The United States has failed to provide adequate justification for the Panel to reject the
evidence and arguments challenged in the prelim inary objections contained in the US. First
Submission.  Instead, the US challenge to these items in Japan’s First Submission has merely served
to highlight several of Japan’s claims, including (a) that USDOC’s establishment of the facts was
improper ( see Anti-Dumping Agreement, Art. 17.6(i)); (b) that USDOC’s evaluation of those facts
was biased and non-objective  (see Anti-Dumping Agreement, Art. 17.6(i)); and (c) that WTO
Agreement Article XVI:4 provides justification for the Panel to rule on and issue a remedy addressing
established practices rather than merely the effects of those practices in any given dispute.
Japan hereby respectfully requests that the Panel reject the US preliminary objections.
_______________
                                                     
31 The Appellate Body has placed the burden on the responding country to demonstrate how it was
prejudiced by the method of listing violations in the panel request.  See Korea – Definitive Safeguard Measure
On Imports Of Certain Dairy Products , 14 Dec. 1999, WT/DS98/AB/R, at para. 129-131.  Even the mere listing
of articles can be sufficient if no prejudice is demonstrated.  Id. at para. 131.