WORLD TRADE
ORGANIZATIONWT/DS184/R
28 February 2001
(01-0629)
Original:  English
UNITED STATES – ANTI-DUMPING MEASURES ON
CERTAIN HOT-ROLLED STEEL PRODUCTS FROM JAPAN
Report of the Panel
The report of the Panel on United States - Anti-Dumping Measures on Certain Hot-Rolled Steel
Products from Japan is being circulated to all Members, pursuant to the DSU.  The report is beingcirculated as an unrestricted document from 28 February 2001 pursuant to the Procedures for the
Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1).  Members are reminded that in
accordance with the DSU only parties to the dispute may appeal a panel report.  An appeal shall be
limited to issues of law covered in the Panel report and legal interpretations developed by the Panel.
There shall be no ex parte  communications with the Panel or Appellate Body concerning matters
under consideration by the Panel or Appellate Body.
Note by the Secretariat:  This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60
days after the date of its circulation unless a party to the dispute decides to a ppeal or the DSB decides by
consensus not to adopt the report.  If the Panel Report is appealed to the Appellate Body, it shall not beconsidered for adoption by the DSB until after the completion of the appeal.  Information on the current statusof the Panel Report is available from the WTO Secretariat.WT/DS184/R
Page i
TABLE OF CONTENTS
Page
I. INTRO DUCTION ................................................................................................................. ...1
II. FACTUAL ASPECTS ............................................................................................................. .1
III. PARTIES' REQUESTS FOR FINDINGS AND RECO MMENDATIONS ........................4
A. JAPAN........................................................................................................................ ................4
B. UNITED STATES................................................................................................................ ......5
IV. ARGUMENTS OF THE PARTIES ........................................................................................6
V. ARGUMENTS OF THE THIRD PART IES ..........................................................................6
VI. INTERIM  REVI EW.............................................................................................................. ...6
VII. FINDINGS................................................................................................................... ..............6
A. P RELIMINARY OBJECTIONS .........................................................................................................6
1. Exclusion of certain evidence................................................................................................ ...7
(a) Argum ents................................................................................................................... ................7
(b) Finding..................................................................................................................... ...................8
2. Claim allegedly not within th e Panel's terms of reference ..................................................11
(a) Argum ents................................................................................................................... ..............11
(b) Finding..................................................................................................................... .................12
B. S TANDARD OF REVIEW ..............................................................................................................14
1. Arguments .................................................................................................................... ...........14
2. Finding ...................................................................................................................... ...............15
C. O VERVIEW OF JAPAN 'S CLAIMS .................................................................................................16
D. A LLEGED VIOLATIONS IN THE CALCULATION OF DUMPING MARGINS ......................................17
1. Alleged violations of Articles 2, 6, and 9 and Annex II of the AD Agreement in
the use of facts available in calculating dumping margins..................................................17
(a) NSC and NKK ................................................................................................................. .........17
(i) Arguments ................................................................................................................... ..............17
(ii) Finding.................................................................................................................... ..................21
(b) KSC......................................................................................................................... ..................24
(i) Arguments ................................................................................................................... ..............25
(ii) Finding.................................................................................................................... ..................27
2. Alleged violations of Article 9.4 of the AD Agreement on the face of US law and
in the calculation of an "all others" rate including margins established on thebasis of facts available ....................................................................................................... .....29
(a) Argum ents................................................................................................................... ..............29
(b) Finding..................................................................................................................... .................31
3. Alleged violations of Article 2 of the AD Agreement in the exclusion of certain
home market sales to affiliates and their replacement with downstream sales in
USDOC's determination of normal value.............................................................................33WT/DS184/R
Page ii
(a) Argum ents................................................................................................................... ..............33
(b) Finding..................................................................................................................... .................37
(i) The use of the "arm's-length" test by USDOC in determining whether affiliated party
sales are in the ordinar y course of trade ..................................................................................37
(ii) The replacement of excluded sales with sales by affiliated purchasers in the
determination of normal value.................................................................................................. 39
(iii) Additiona l findi ngs....................................................................................................... .............40
E. A LLEGED VIOLATIONS IN THE PRELIMINARY DETERMINATION OF CRITICAL
CIRCUMSTANCES .......................................................................................................................41
1. Arguments .................................................................................................................... ...........41
2. Finding ...................................................................................................................... ...............44
(a) Are the US statutory provisions concerning critical circumstances consistent with the
Agreement with respect to the evidentiary standard it sets forth and the conditions ofapplication it requires?....................................................................................................... .......45
(b) Is the USDOC preliminary critical circum stances determination concerning hot-rolled
steel from Japan inconsistent with Articles 10.6 and 10.7 of the AD Agreement ? .................49
F. A
LLEGED VIOLATIONS IN THE DETERMINATION OF INJURY AND CAUSATION ..........................53
1. Alleged violations of Articles 3 and 4 of the AD Agreement on the face of the
captive production provision and in its application by USITC in this case.......................53
(a) Does the captive production provision on its face violate Articles 3 and 4 of the
AD Agreement................................................................................................................... .......53
(i) Arguments ................................................................................................................... ..............53
(ii) Finding.................................................................................................................... ..................55
(b) Was USITC’s application of the captive production provision in this case consistent
with Articles 3 and 4 of the AD Agreement?............................................................................61
(i) Arguments ................................................................................................................... ..............61
(ii) Finding.................................................................................................................... ..................62
2. Alleged violations of Article 3 of th e AD Agreement in the USITC's injury and
causation analysis............................................................................................................. .......64
(a) Argum ents................................................................................................................... ..............64
(b) Finding..................................................................................................................... .................66
(i) Did USITC properly discuss and evaluate data covering the whole period of
investiga tion ?................................................................................................................ ...........67
(ii) Did USITC examine all known factors other than dumped imports and ensure that
injuries caused by these factors were no t attributed to the dumped imports ?.........................70
G. A LLEGED VIOLATIONS OF ARTICLE  X OF GATT 1994.............................................................76
1. Arguments .................................................................................................................... ...........76
2. Finding ...................................................................................................................... ...............77
VIII. CONCLUSIONS AND RECOMMENDAT ION..................................................................80
A. C ONCLUSIONS ...........................................................................................................................80
B. R ECOMMENDATION ...................................................................................................................81WT/DS184/R
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LIST OF ANNEXES
ANNEX A
First Submissions by the Parties
Contents Page
Annex A-1 First written submission of Japan A-2
Annex A-2 First written submission of the United States A-87
Annex A-3 Response of Japan to Preliminary Objections of the United States A-245
Annex B
Third Party Submissions
Contents Page
Annex B-1 Submission of Brazil as a Third Party B-2
Annex B-2 Submission of Canada as a Third Party B-17
Annex B-3 Submission of Chile as a Third Party B-21
Annex B-4 Submission of Korea as a Third Party B-26
ANNEX C
Second Submissions by the Parties
Contents Page
Annex C-1 Second Submission of Japan C-2
Annex C-2 Second Submission of the United States C-83
Annex C-3 Letter from the United States to Chairman of the Panel C-110
Annex C-4 Letter from Japan to Chairman of the Panel C-111
ANNEX D
Oral Statements, First and Second Meetings
Contents Page
Annex D-1 Opening Statement of Japan D-2
Annex D-2 Closing Statement of Japan D-13
Annex D-3 Opening Statement of the United States D-15
Annex D-4 Closing Statement of the United States D-24
Annex D-5 Oral Statement of Canada as a Third Party D-27
Annex D-6 Oral Statement of Chile as a Third Party D-30
Annex D-7 Oral Statement of the European Communities as a Third Party D-33
Annex D-8 Oral Statement of Korea as a Third Party D-37
Annex D-9 Opening Statement of Japan at the Second Meeting of the Panel D-40
Annex D-10 Closing Statement of Japan at  the Second Meeting of the Panel D-48
Annex D-11 Opening Statement of the United States at the Second Meeting of
the PanelD-50
Annex D-12 Closing Statement of the Un ited States at the Second Meeting of 
the PanelD-61WT/DS184/R
Page iv
ANNEX E
Questions and Answers
Contents Page
Annex E-1 Japan's Answers to Questions from the Panel E-2
Annex E-2 Japan's Answers to Questions from the United States E-29
Annex E-3 Responses of the United States to Questions from the Panel E-32
Annex E-4 Responses of the United States to Questions from Japan E-53
Annex E-5 Responses of Chile to Questions from the Panel E-66
Annex E-6 European Communities' Answers to Questions from the Panel E-67
Annex E-7 Korea's Responses to Questions to Third Parties E-69
Annex E-8 Responses of Brazil to Questions from the Panel E-73
Annex E-9 Japan's Answers to Questions from the Panel at the Second Meeting
of the PanelE-75
Annex E-10 Japan's Answers to Questions from the United States at the Second
Meeting of the PanelE-81
Annex E-11 Answers of the United States to Questions from Japan at the Second 
Meeting of the PanelE-89
Annex E-12 Answers of the United States to Questions from the Panel at the
Second Meeting of the PanelE-95WT/DS184/R
Page 1
I. INTRODUCTION
1.1 On 18 November 1999, Japan requested consultations with the United States under Article 4
of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the DSU),
Article 17.2 of the Anti-Dumping Agreement and Artic le XXII:1 of the General Agreement on Tariffs
and Trade 1994 ("GATT 1994").1 The United States and Japan consulted on 13 January 2000, but
failed to settle the dispute.
1.2 On 11 February 2000, Japan requested the establishment of a panel pursuant to Article XXIII
of the GATT 1994, Articles 4 and 6 of the DSU and Article 17 of the Anti-Dumping Agreement.2
1.3 At its meeting on 20 March 2000, the Dispute Se ttlement Body (DSB) established a Panel in
accordance with the request made by Japan in document WT/DS184/2. At that meeting, the parties to
the dispute also agreed that the Panel should have standard terms of reference.  The terms of reference
are, therefore, the following:
"To examine, in the 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".
1.4 On 9 May 2000, Japan requested the Director-General to determine the composition of the
Panel, pursuant to paragraph 7 of Article 8 of the DSU. On 24 May 2000, the Director-General
composed the Panel as follows3:
Chairman: Mr. Harsha V. Singh
Members: Mr. Yanyong Phuangrach
Ms. Elena Lidia di Vico
1.5 Brazil, Canada, Chile, the European Communities and Korea reserved their rights to
participate in the panel proceedings as third parties.
1.6 The Panel met with the parties on 22-23 August 2000 and on 27 September 2000. It met with
the third parties on 23 August 2000.
1.7 The Panel submitted its interim report to the parties on 22 January 2001.
II. FACTUAL ASPECTS
2.1 This dispute concerns the imposition by the United States of anti-dumping measures on
imports of certain hot-rolled flat-rolled-carbon-quality steel products ("hot-rolled steel") from Japan.
2.2 On 30 September 1998, several US steel manufacturing companies, the United Steelworkers
of America, and the Independent Steelworkers Union filed  petitions for the imposition of anti-
dumping duties on imports of certain hot-rolled steel products from Brazil, Japan, and Russia.4  The
                                                     
1 WT/DS/184/1.
2 WT/DS/184/2.
3 WT/DS/184/3.
4 Petition for the Imposition of Antidumping Duties: Certain Hot-Rolled Steel Flat Products From
Japan, 30 Sept. 1998 (“Petition”).WT/DS184/R
Page 2
petitions also alleged that critical circumstances existed with regard to imports from Japan. Effective
30 September 1998, the United States International Trade Commission ("USITC") instituted its
investigation to determine whether there is a reasonable indication that an industry in the
United States is materially injured or threatened with material injury, or the establishment of an
industry in the United States is materially retarded by reason of imports from the three countries of
certain hot-rolled steel products that are alleged to be sold in the United States at less than fair value.5
2.3 After an examination of the information presented in the petition filed with respect to hot-
rolled steel from Japan and the amendments thereto, the United States Department of Commerce
("USDOC") initiated an anti-dumping duty investigation on 15 October 1998.6 USDOC determined
that it was not practicable to examine all known producers/exporters and conducted its investigation
on the basis of a sample of Japanese producers. Based on information concerning production volumes
from all six Japanese producers, Kawasaki Steel Corporation (“KSC”), Nippon Steel Corporation
(“NSC”), and NKK Corporation (“NKK”) were selected for individual investigation and calculationof a dumping margin ( i.e, the "investigated respondents"), as these three companies accounted for
more than 90 per cent of all known exports of the subject merchandise during the period of
investigation.
2.4  Effective 16 November 1998, USITC issued an affirmative preliminary determination,
finding a reasonable indication that the US industry was threatened with material injury by reason ofhot-rolled steel imports from Brazil, Japan, and Russia.
7
2.5 Effective 30 November 1998, USDOC issued its affirmative preliminary critical
circumstances determination, finding that there is a reasonable basis to believe or suspect that critical
circumstances exist for imports of hot-rolled steel from Japan and Russia. USDOC also determined
not to make a preliminary determination of critical circumstances with respect to imports from Brazil.Based on its determination, USDOC stated that, u pon issuance of an affirmative preliminary dumping
determination, Commerce would direct the US Customs Service to suspend liquidation of all entries
of Japanese hot-rolled steel for a period of ninety days prior to the preliminary dumping
determination.
8 No specific measures were put into effect at this stage.
2.6 Effective 19 February 1999, USDOC issued a preliminary affirmative dumping
determination, finding that hot-rolled steel from Japan was sold in the United States at dumped
prices.9  USDOC calculated the following preliminary margins of dumping:
                                                     
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).  Under US law,
USITC "institutes" an investigation before the investigation is formally initiated, a decision which is made byUSDOC.
6 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).
7 Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia, 63 Fed. Reg. 65221, 65221 (25
Nov.  1998); see also Certain Hot-Rolled Steel Products From Brazil, Japan, and Russia, Inv.  Nos.  701-TA-384and 731-TA-806-808 (Preliminary), USITC Pub. 3142 at 1 (Nov. 1998) (“USITC Preliminary InjuryDetermination”).
8 Preliminary Determinations of Critical Circumstances:  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 Critical Circumstances Determination") .
9 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 PreliminaryDumping Determination").WT/DS184/R
Page 3
 
 KSC 67.59%
 NSC 25.14%
 NKK 30.63%
 All Others Rate 35.06%.
  
The "All Others" rate, applicable to companies not investigated, was calculated as the weighted
average of the margins calculated for the three invest igated respondents.  Pursuant to its earlier critical
circumstances finding, USDOC ordered suspension of liquidation and posting of cash deposits or
bonds for entries made 90 days prior to the 19 February 1999 effective date of the preliminary
determination of dumping, that is, retroactive to 21 November 1998.10
 
2.7 Following its preliminary affirmative dumping  determination, USDOC issued several more
requests for information, conducted verification at the three investigated respondents’ offices in Japan
(and the US in some cases), received interested party comments, and held a public hearing on
21 April 1999.  On 6 May 1999, USDOC published its final determination that respondents were
selling hot-rolled steel in the United States at the following margins of dumping:
KSC 67.14%
NSC 19.65%
NKK 17.86%
All Others Rate 29.30%.11
USDOC also made a final negative determination of  critical circumstances as to NSC and NKK based
on the fact that they had final dumping margins below the 25 per cent threshold used to impute
importer knowledge of dumping. However, USDOC continued to find that critical circumstances
existed as to KSC and the "all others" companies.
 
2.8 Following USDOC's preliminary determination of dumping, and while USDOC was
conducting the final dumping investigation, USITC instituted and conducted the final injury
investigation.  Following collection of information, submission of briefs by interested parties and a
public hearing held on 4 May 1999, USITC voted unanimously on 11 June 1999, that the US industry
was materially injured or threatened with material injury by reason of hot-rolled steel imports fromJapan.
12  On 23 June 1999, USITC published its final affirmative determination of injury.  USITC also
made a negative determination with respect to critical circumstances, concluding that the increase in
imports in a short period of time was not sufficient to warrant a finding that the imports would
undermine the remedial effects of the anti-dumping duty order.13
                                                     
10 In US practice, duties are not actually collected as a provisional measure.  Rather, the process of
determining the exact amount of duties of all types owed on a specific import transaction, called "liquidation", is
not carried out, i.e. is suspended, and a deposit or bond in the amount of the preliminary dumping margin is
required on all imports.
11 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 DumpingDetermination").
12 In US practice the Commissioners on the USITC vote individually, but all affirmative determinations
are counted together in assessing the ultimate outcome.  In this case, all six Commissioners made affirmative
determinations, but five found current material injury, while one found threat of material injury.
13 Certain Hot-Rolled Steel Products From Japan, 64 Fed. Reg. 33514, 33514 (23 Jun. 1999);  Certain
Hot-Rolled Steel Products From Japan, Inv.  No.  731-TA-807 (Final), USITC Pub.  3202 (Jun. 1999).WT/DS184/R
Page 4
2.9 On 29 June 1999, USDOC published an anti-dumping duty order imposing estimated
dumping duties on imports from Japan at the rates announced in its final determination.14 Since
USITC had not found critical circumstances to exist, USDOC ordered the refund of any cash deposits
and/or release of any guarantees provided for the period of the preliminary critical circumstances
finding, 21 November 1998 - 19 February 1999.
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. JAPAN
3.1 Japan requests that the Panel:
(a) 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 AD 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, andAnnex 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 AnnexII;
• 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  99.5 per cent arm’s length test was inconsistent withArticles 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 AD Agreement.
 
 (b) 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, prior to the fina l determination, 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 a pplying facts available with respect to
petitioners;
                                                     
14 Antidumping Duty Order; Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From
Japan, 64 Fed. Reg. 34778, 34780 (29 June 1999).WT/DS184/R
Page 5
• 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) find that the United States’ anti-dumping laws, regulations, and administrative
procedures governing:
• the use of adverse “facts available” are inconsistent with Article 6.8 and Annex II of the
AD Agreement;
• the calculation of an “all others” rate based on partial facts available are inconsistent with
Article 9.4 of the AD Agreement;
• the exclusion and replacement of certain home market sales in the calculation of normal
value by the  arm's length test are inconsistent with Articles 2.1, 2.2, and 2.4 of the
AD 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 AD 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 AD Agreement;
and recommend that the DSB request the United States to ensure, as stipulated in Article XVI:4 of the
WTO Agreement and Article 18.4 of the AD Agreement, the conformity of the above-listed elements
of its anti-dumping laws, regulations, and administrative procedures with its obligations under the
AD Agreement;
(d) recommend that, if the Panel's findings re sult 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 and
reimburse any anti-dumping duties collected;15
(e) recommend that, if the Panel's findings re sult 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 of
the difference.
B. UNITED STATES
3.2 The United States 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 be
disregarded in this proceeding;
                                                     
15 In its second submission, Japan clarified that it was "not requesting specific remedies in this case.
Japan did not mean to imply … that the Panel itself must re-determine either the dumping margins in the case,or whether there was injury by reason of imports.  Those tasks clearly belong to the US authorities." SecondSubmission of Japan, Annex C-1, footnote 391.  However,  Japan reiterated that "the Panel findings in this case
should be quite specific and concrete.  The Panel should not make general findings, noting violations without
specifying precisely what the US authorities did incorrectly, and then leave it to the US authorities to decidewhat to do. …  The Panel’s duty is to provide a very clear and detailed roadmap for how the US authorities canfulfill their international obligations in this case." Id., para 293.WT/DS184/R
Page 6
• Japan’s claim concerning the United States’ general practice with respect to “facts
available” was not raised in Japan’s request for the establishment of a panel and istherefore 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 under point (a);
• none of the actions identified by Japan under point (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 under point (c) are not inconsistent with the
provisions of the Anti-Dumping Agreement identified in that paragraph.
• The specific remedies requested by Japan in its first submission, reproduced at points
(d) and (e) above, are contrary to established practice and the DSU.
IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties are set out in their submissions to the Panel (see Annexes, as
listed above).
V. ARGUMENTS OF THE THIRD PARTIES
5.1 The arguments of the third parties, Brazil, Canada, Chile, the European Communities and
Korea, are set out in their submissions to the Panel (see Annexes, as listed above).
VI. INTERIM REVIEW
6.1 Both parties filed comments on the interim report on  29 January 2001.  The parties'
comments were limited to the identification of clerical errors.  Neither party requested an interim
review meeting.
6.2 In response to the parties' comments, the Panel corrected typographical and other clerical
errors throughout the Report, and also corrected typographical and other clerical errors it had itself
identified, consistent with WTO editorial standards.
VII. FINDINGS
A. P
RELIMINARY OBJECTIONS
7.1 The United States makes two preliminary objections.16  The United States requests that
certain evidence presented for the first time before this Panel be disregarded, and objects, as falling
                                                     
16 The United States requested a ruling on these preliminary objections at its first meeting with the
parties, which we did not issue, as we concluded it was not appropriate at that time.WT/DS184/R
Page 7
outside the Panel's terms of reference, to a claim made by Japan concerning the US "general practice",
including statutory and regulatory provisions, regarding the use of adverse facts available.
1. Exclusion of certain evidence
(a) Arguments
7.2 The United States claims that evidence which was submitted by Japan during this proceeding,
but which was not before the investigating authority during the anti-dumping investigation, may not
be examined by the Panel.  The United States, relying on Article 17.5(ii) of the AD Agreement,
argues that we are to examine the decisions of the investigating authorities on the basis of the facts
that were available to them and not on the basis of new facts revealed for the first time before the
Panel.  Consequently, the United States submits that we should disregard in toto  four affidavits
prepared for the purpose of these panel proceedings by the American attorneys of NSC, NKK, KSC
and by one statistician, as well as numerous newspaper Articles that were not presented in the course
of the investigation, or were presented to only one of the US authorities conducting theinvestigation.
17  In this latter regard, the United States argues that we should disregard documents
submitted by Japan concerning determinations made by the Commerce Department if those
documents were not put on the Commerce Department administrative record, even if those documents
were put on the USITC administrative record.
7.3 The US argument is based in part on Article 17.5(ii) of the AD Agreement which provides
that a  panel shall examine the matter before it on the basis of "the facts made available in conformity
with appropriate domestic procedures to the authorities of the importing Member" and the
interpretation given to this provision by, inter alia,  the Panel in Mexico- Anti-Dumping Investigation
of High Fructose Corn Syrup from the United States18 ("Mexico-HFCS" ).  The United States argues
that by presenting new testimony that was not before the appropriate authority, Japan seeks to havethe Panel go beyond its mission under Article 17.6(i) of the AD Agreement to determine whether the
establishment of the facts by the investigating authority was proper and its evaluation of those facts
unbiased and objective.
19  The United States further argues that the nature of the anti-dumping
investigation itself  directs that the Panel not consider extra-record evidence. Moreover, the United
States submits, to allow only Japanese producers an opportunity to present new evidence would goagainst the guarantee expressed in Article 6.1 of the AD Agreement that all interested parties may
present evidence.
7.4 Japan submits that the United States has failed to provide adequate justification for the Panel
to reject the challenged evidence and arguments.  First, Japan disagrees with the US interpretation of
Article 17.5 of the AD Agreement.  Japan submits that Article 17.5(ii) provides that a panel shall base
                                                     
17 The United States specified the exhibits to Japan's submissions which it asserted should not be
considered by the Panel in its answer to the Panel's question number 25 following the first meeting of the Panelwith the parties.  Responses of the United States to Questions from the Panel, Annex E-3,  para. 7 – 13.
18 Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States ,
("Mexico – HFCS "), WT/DS132/R, adopted 24 February 2000, para. 7.10.  The United States also refers to
United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from India ("United States --
Shirts and Blouses "), WT/DS33/R, adopted as modified (WT/DS33/AB/R) 23 May 1997, para. 7.21. This case
involved the Agreement on Textiles and Clothing; however, the United States asserts that the language ofArticle 17.5(ii) is substantially the same as the corresponding ATC language.  The United States further refers toKorea - Definitive Safeguard Measure on Imports of Certain Dairy Products , ("Korea - Dairy Safeguard ")
WT/DS98/R, adopted as modified (WT/DS98/AB/R) 12 January 2000, para. 7.30.
19 The United States claims that this also applies to the two Exhibits JP-19 and JP-20 that Japan
submitted in relation to its Article X claim and argues that these two exhibits which could have been submitted
to the authority, but were not, should not be consid ered by the Panel. Accord ing to the United States,
Article 17.5(ii) does not apply to Japan's on-its-face challenges, but asserts that no new evidence is submitted byJapan in relation to such claims.WT/DS184/R
Page 8
its examination on the facts made available in conformity with appropriate domestic procedures to the
authorities of the importing Member.  However, in Japan's view, Article 17.5(ii) does not say
anything about what was or was not on the "administrative record".  Japan argues that inherent in
Article 17.5(ii) is the possibility that facts were "made available" to the investigating authority, but
were for one reason or another not placed on the administrative record. Japan notes that
Article 17.5(ii) does not refer only to information accepted by the authorities, and thus recognizes thatinformation might be offered to the authorities but then inappropriately rejected.  In Japan's view,
Members must be permitted to submit evidence that explains or demonstrates how the authority's
investigating procedures or determinations were unfair, unreasonable or biased.  Japan maintains that
such information will, more often than not, be "extra-record" evidence, since it is the investigating
authority itself that determines what evidence is placed on the record. Japan argues that an authority
cannot be permitted to exclude evidence inappropriately and then take advantage of the incomplete
record to defend itself in the examination of its action by a WTO panel.  In this regard, Japan rejectsthe US reliance on the distinction between the administrative records of USDOC and the USITC,
arguing that information on the record of either authority may be relied upon before the Panel to
challenge the determination of either authority.
7.5 Japan also relies on statements made by the United States in other WTO proceedings
concerning admissibility of amicus curiae  briefs and other evidence which are contrary to its
arguments in this case.
20  Japan submits that the Panel should exercise its substantial discretion to
accept evidence.  Japan argues that the Appellate Body has made it clear that, based on Articles 12
and 13 of the DSU, it is the responsibility of the panel to determine the admissibility and relevance of
the evidence proffered by the parties to a dispute.21  Japan submits that the Appellate Body statements
on this matter are also valid with regard to this case since there is no conflict between Article 17.5(ii)of the AD Agreement and Articles 11 to 13 of the DSU and the provisions thus complement each
other.  Finally, Japan argues that the standard of Article 17.5(ii) of the AD Agreement only guides the
Panel with regard to its review of actual investig ations.  Japan maintains that Article 17.5(ii) is not
applicable to the evidence to be considered in connection with Japan's challenges to US statutory and
regulatory provisions, that do not depend on the administrative record, and is also not applicable tothe evidence to be considered in connection with Japan's claims under Article X:3 of GATT 1994.
(b) Finding
7.6 A panel is obligated by Article 11 of the DSU to conduct "an objective assessment of the
matter before it". In this case, we must also consider the implications of Article 17.5(ii) of the
AD Agreement as the basis of evidentiary rulings.  That Article provides:
                                                     
20 Japan refers to United States—Imposition of  Countervailing Duties on Certain Hot-Rolled Lead and
Bismuth Carbon Steel Products Originating in the United Kingdom , WT/DS138/AB/R, adopted 7 June 2000,
para. 38; United States—Import Prohibition of Certain Shrimp and Shrimp Products  ("United States – Shrimp "),
WT/DS58/AB/R, adopted 6 November 1998, para. 79.  Japan also points to a US statement in Mexico - HFCS
where the United States argued that “it could attach as an Exhibit to its submission in an anti-dumping case thephone book of Mexico City.  The issue would not be its admissibility, but rather what evidentiary weight thePanel should attach to the information in the phone book".  See Mexico - HFCS , footnote 540. Japan maintains
that the Panel in that dispute under the AD Agreement accepted extra-record evidence. Id.,  para. 7.34.
21 Japan refers to the Appellate Body Report in United States — Shrimp,   paras. 104-106.  The
Appellate Body stated:
"The thrust of Articles 12 and 13, taken together, is that the DSU accords to a panelestablished by the DSB, and engaged in a dispute settlement proceeding, ample and extensiveauthority to undertake and to control the process by which it informs itself both of the relevantfacts of the dispute and of the legal norms and principles applicable to such facts.  That
authority, and the breadth thereof, is indispensa bly necessary to enable a panel to discharge its
duty imposed by Article 11 of the DSU to “make an objective assessment of the matter beforeit, including an objective assessment of the facts of the case  and the applicability of and
conformity with the relevant covered agreements ". (Emphasis in original).WT/DS184/R
Page 9
"The DSB shall, at the request of the complaining party, establish a
panel to examine the matter based upon: …
(ii) the facts made available in conformity with
appropriate domestic procedures to the authorities of the importing
Member".
It seems clear to us that, under this provision, a panel may not, when examining a claim of violation
of the AD Agreement22 in a particular determination, consider facts or evidence presented to it by a
party in an attempt to demonstrate error in the determination concerning questions that were
investigated and decided by the authorities, unless they had been made available in conformity with
the appropriate domestic procedures to the authorities of the investigating country during the
investigation.  Thus, for example, in examining the USITC's determination of injury under Article 3
of the AD Agreement, we would not consider any evidence concerning the price effects of imports
that was not made available to the USITC under the appropriate US procedures.  Japan acknowledgesthat Article 17.5(ii) must guide the Panel in this  respect, but argues that it "complements" the
provisions of the DSU which establish that it is the responsibility of the panel to determine the
admissibility and relevance of evidence offered by parties to a dispute.  We agree, to the extent that it
is our responsibility to decide what evidence may be considered.  However, that Article 17.5(ii) and
the DSU provisions are complementary does not diminish the importance of Article 17.5(ii) inguiding our decisions in this regard.  It is a specific provision directing a panel's decision as to what
evidence it will consider in examining a claim under the AD Agreement.  Moreover, it effectuates the
general principle that panels reviewing the determin ations of investigating authorities in anti-dumping
cases are not to engage in de novo  review.
23
7.7 The conclusion that we will not consider new evidence with respect to claims under the
AD Agreement flows not only from Article 17.5(ii), but also from the fact that a panel is not to
perform a de novo review of the issues considered and decided by the investigating authorities.   We
note that several panels have applied similar principles in reviewing determinations of national
authorities in the context of safeguards under the Agreement on Safeguards and special safeguardsunder Article 6 of the Agreement on Textiles and Clothing.  There is no corollary to Article 17.5(ii) in
those agreements.  Nonetheless, these panels have concluded that a de novo  review of the
determinations would be inappropriate, and have undertaken an assessment of, inter alia ,  whether all
relevant facts were considered by the authorities.
24   In that context, the Panel in United States -
Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities
("United States  – Wheat Gluten") recently observed that it was not the panel's role to collect new data
or to consider evidence which could have been presented to the decision maker but was not.25
7.8 Japan points out that it is the investigating aut horities that control the receipt of information
during the investigation, and thus could unjustly reject information submitted by a party, which a
party might subsequently wish to present to a Pa nel reviewing the determination.  This possibility
raises an interesting question which is not really at issue before us.  Japan has not made a claim that
the anti-dumping measure is inconsistent with the provisions of the AD Agreement because theUSITC or the USDOC wrongly rejected information submitted during the course of the
                                                     
22 We note that there is no claim under Article VI of GATT 1994 in this case, so we need not consider
whether Article 17.5(ii) has implications for the evidence a panel may consider in that context.
23 See, for example, Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland
Cement from Mexico ("Guatemala – Cement II") , WT/DS156/R, adopted 17 November 2000, para. 8.19.
24 Panel Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the
European Communities ("United States - Wheat Gluten") , WT/DS166/R, para. 8.6, adopted as modified
(WT/DS166/AB/R) 19 January 2001.;  Panel Report,  Korea-Dairy Safeguard , para. 7.30, Panel Report,
Argentina – Safeguard Measures on Imports of Footwear ("Argentina - Footwear Safeguard") , WT/DS121/R,
para. 8.117, adopted as modified (WT/DS121/AB/R) 12 January 2000.
25 Panel Report, United States - Wheat Gluten ,  para. 8.6.WT/DS184/R
Page 10
investigation.26  Thus, the principal question presented by the United States' preliminary objection is
whether we should exclude from our consideration in this dispute certain evidence that was not
submitted to the US investigating authorities during the investigation.
7.9 It is important to note that, in this case, Japan's claims are not limited to challenges under the
AD Agreement to the final anti-dumping measure imposed by the United States.  Japan also claims
that certain US statutory provisions are inconsistent with the AD Agreement on their face, and claimsthat the United States did not administer its anti-dumping laws, regulations, decisions and rulings  in a
"uniform, impartial and reasonable manner", in vi olation of Article X of GATT 1994.  There is no
claim that the challenged evidence is relevant to the claims of inconsistency of certain statutes on their
face.
27  Japan does, however, argue that the challenged evidence is relevant to the claims under
Article X of GATT 1994.  In our view, the evidence to be considered in connection with Japan's
Article X claim is not limited by the provisions of Article 17.5(ii) of the AD Agreement  To the extent
there are any limits to the evidence that may be considered in connection with Japan's claim underArticle X of GATT 1994, these would derive from the provisions of the DSU itself, and not the
AD Agreement.
7.10 Under Article 13.2 of the DSU, Panels have a general right to seek information "from any
relevant source".  We note that, as a general rule, panels have wide latitude in admitting evidence in
WTO dispute settlement.
28  The DSU (as opposed to the AD Agreement) contains no rule that might
be understood to restrict the evidence that panels may consider.  Moreover, international tribunals are
generally free to admit and evaluate evidence of every kind, and to ascribe to it the weight that they
see fit.  As one legal scholar has noted:
"The inherent flexibility of the international procedure, and its tendency to be free
from technical rules of evidence applied in municipal law, provide the "evidence"with a wider scope in international proceedings….  Generally speaking, international
tribunals have not committed themselves to the restrictive rules of evidence in
municipal law.  They have found it justified to receive every kind and form of
evidence, and have attached to them the probative value they deserve under the
circumstances of a given case".
29
It seems to us that, particularly in considering allegations under Article X of GATT 1994, we should
exercise our discretion to allow the presentation of evidence concerning the administration of the
defending Members' anti-dumping laws, which might in any event go beyond the specific facts made
available to the administering authority in accord ance with appropriate domestic procedures during
the course of a single anti-dumping investigation.
7.11 This places us in the difficult situation of atte mpting to determine, at the outset, in the context
of a preliminary objection, exactly which evidence is relevant to which of Japan's claims, and make
exclusionary rulings ab initio .  With respect to the newspaper articles the United States has
challenged, we note that they may be relevant to  Japan's claim of bias under Article X of GATT 1994,
and therefore consider that it is not appropriate to exclude them at the outset.  With respect to the
attorneys' and statistician's affidavits, we note that while they contain certain factual statements, theyalso set out arguments and analysis in support of Japan's claims in this dispute, which may
                                                     
26 Japan does assert that two of the affidavits challenged by the United States contain facts concerning
the weight conversion factors that were not considered by the USDOC.  However, as is clear from our decision
regarding the issue of the application of facts availa ble, the specific facts concerning the weight conversion
factors are not relevant to our determination and were not considered.
27 In this context, we note that we doubt whether the limitation in Article 17.5(ii) would affect a panel's
ability to consider new evidence in the context of a challenge to a statute on its face.
28 Appellate Body Report, United States - Shrimp ,  paras. 104-106.
29 Kazazi, Mojtaba, Burden of Proof and Related Issues – A Study of Evidence Before International
Tribunals, Malanczuk, Peter, ed. (The Hague, Kluwer Law International) at pp. 180, 184.WT/DS184/R
Page 11
appropriately be brought before a panel.  Thus, we have determined not to exclude the four affidavits,
the newspaper articles, and the profit and web-site information contained in exhibits JP-16-23, 25-28,
32(a) - 32(f), 33, 34-38, 44, 46, 56,  105, and note 353 of Japan's second written submission.  To the
extent that these exhibits purport to present fa cts relating to the USDOC or USITC determinations
different from or additional to those that were made available to those authorities in conformity with
appropriate domestic procedures  during the course of the investigation, we have not taken such factsinto account in our review of those determinations.
7.12 There is, however, a significant distinction between questions concerning the admissibility of
evidence, and the weight to be accorded to the evidence in making our decisions.  That we have
concluded that it is not appropriate to exclude from this proceeding at the outset evidence put forward
by Japan has no necessary implications concerning the relevance or weight of that evidence in our
ultimate determinations on the substantive claims before us.  Moreover, we wish to emphasize that we
have conducted our examination of the challenged final anti-dumping measure and the underlyingdeterminations of the USDOC and USITC in strict observance of the requirements of Article 17.5(ii).
2. Claim allegedly not within the Panel's terms of reference
(a) Arguments
7.13 The United States asserts that Japan's claim that the USDOC's "general practice" concerning
adverse facts available violates the AD Agreement was not made in the request for establishment of apanel.  The United States maintains that Japan did not refer USDOC's "general practice" regarding
facts available, which is based on the US statute, to the DSB, but only referred the specific application
of this practice to the companies in volved in the investigation underly ing this dispute.  Thus, in the
US view, the Japanese claim regarding the USDOC's "general practice" on facts available falls outside
the Panel's terms of reference.
7.14 The United States notes that Japan made clear in its request for establishment of a panel those
instances in which it challenged both the law on its face and the specific application of statutory
provisions in the underlying investigation.  The United States asserts that the broad counts of
conformity under Article XVI:4 of the Marrakesh Agreement and Article 18.4 of the AD Agreement
set out in section E of the request for establishment do not lead to the conclusion that USDOC'sgeneral practice on facts available, which was not mentioned in the panel request, may now be
challenged.  The United States finds support for its claim in the Appellate Body's statement in Korea
– Definitive Safeguard Measures on Imports of Certain Dairy Products
30 ("Korea-Dairy Safeguard")
that "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"  and similar statements in
Guatemala – Anti-Dum ping Investigation Regarding Portland Cement from Mexico31 ("Guatemala –
Cement I") .
7.15 Japan maintains that it properly made a claim concerning USDOC's general practice
regarding adverse facts available.  Japan explains that it did not challenge US statutory provisions in
this respect but rather the manner in which these provisions have been applied in practice by
USDOC.32  Japan submits that its claim is based on Article XVI:4 of the WTO Agreement, and is
clearly set out in section "E. CONFORMITY" of the request for establishment.33  Japan argues that by
                                                     
30 Appellate Body Report, Korea – Dairy Safeguard,  para. 139.
31 Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from
Mexico ("Guatemala – Cement I") , WT/DS60/AB/R, adopted 25 November 1998, paras. 72 and 77.
32 Japan argues that this is also evident from its arguments in this regard in paragraph 60 of its first
submission.
33 Japan argues that the specific determination challenged in this dispute reflected the specific decision
to apply adverse facts available in this case as well as the general policy on adverse facts available. Japan furtherWT/DS184/R
Page 12
including in this section of 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, it made it perfectly clear to both the United States and interested third countries that
the matter it was submitting 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,  including the law governing the
application of facts available as interpreted and applied by USDOC, which constitutes the "generalpractice" on facts available.  Finally, Japan argues that the United States failed to demonstrate how
Japan's panel request has prejudiced the United States' ability to defend itself.
34  Japan therefore
requests the Panel to reject the US preliminary objections.
(b) Finding
7.16 We consider that the United States' preliminary objection raises two separate but related
issues. First, has Japan identified as a measure at issue in this dispute the US "general practice"
concerning facts available ?  Second, and assuming that Japan has not identified the US "generalpractice" in this regard as a separate measure in dispute, has Japan, in the context of its challenge to
the definitive anti-dumping measure, stated a claim regarding the "general practice" concerning facts
available with sufficient clarity, consistent with Article 6.2 of the DSU.
7.17 The Appellate Body has made it clear that a matt er referred to the DSB consists of a measure
and the claims concerning that measure.
35  In this dispute, it is clear that Japan has raised the final
anti-dumping measure as a measure at issue.  Japan has also identified certain provisions of US laws
and regulations as measures at issue -- these provisions are specifically identified in paragraphs A.3
(law governing calculation of the all others rate), A.5 (law governing preliminary critical
circumstances determinations), and B.2 (law re garding treatment of captive production in injury
analysis) of its request for establishment.  However, based on our review of the request forestablishment, we do not see that Japan has raised the US "general practice" regarding facts available
as a measure at issue in this dispute .
7.18 The  "general practice" regarding which Japan asserts it has raised a claim is the USDOC's
practice of, when applying adverse facts available, looking for facts that are "sufficiently adverse" to
accomplish the goal of inducing respondents to provide complete and accurate information.  Thispractice, while it is based on the US statute, is not explicitly set out in either the US statute,
regulation, or any other binding policy statement of USDOC.  Rather, it has been set out in the
determination in this and other investigations to explain the USDOC's choice regarding the particular
facts available it will consider in making its determ ination.  Even assuming that a claim regarding the
consistency of a "general practice" can be made in the WTO dispute settlement system, we are of theopinion that the request for establishment in such a case must identify such practice with sufficient
clarity.
36
                                                                                                                                                                    
argues that Section A and Section E of the request for establishment, which relate to these two claims
respectively, must be read together.
34 Japan argues that 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.  Japan  refers in this
respect to the Appellate Body Report,  Korea – Dairy Safeguard,   para. 129-131.
35 Appellate Body Report, Guatemala – Cement I , para. 73.
36 Japan has relied on the Panel's decision in United Sates - Sections 301-310 of the Trade Act of 1974
("United States – Section 301" ), WT/DS152/R, adopted 27 January 2000, paras. 7.24 – 7.27,  in support of its
contention that a "general practice" can be challenged directly. First Written Submission of Japan, Annex A-1,para. 60.  However, we note that in that case, the measure in dispute was the statutory provisions, unlike here.
The Panel in that decision explained that in deciding  whether those statutory provisions were or were not
consistent with the relevant WTO obligations, it was necessa ry to consider the internal  criteria or administrative
procedures of the agency administering the law, i.e., "practice" to reach a conclusion.  In our view, this is very
different from a conclusion that a particular "general  practice" can be the subject of a claim in a disputeWT/DS184/R
Page 13
7.19 The US "general practice" concerning facts available is not identified on the face of the
request for establishment as a measure in dispute. Japan has explicitly acknowledged that it has not
challenged the US statute governing the application of facts available.37 Japan argues that its claim
concerning the conformity of the US anti-dumping laws, regulations, and administrative rulings, set
out in paragraph E of its request for establishment, necessarily must be understood to include a
challenge to the "general practice" in question.38
7.20 Japan did not separately set forth in the request for establishment an assertion specifically
with respect to USDOC's general practice on facts available (or the statutory and regulatory
provisions underlying that practice).  Indeed, the phrase "general practice" does not appear in the
request for establishment at all.  Nor is there mention of the USDOC's interpretation or application of
the statutory provisions regarding facts available in general, as opposed to its decision to apply facts
available in this case.  Moreover, the very fact that the other aspects of US law which are challenged
on their face are spelled out in the request for establishment, as set out in paragraph 7.17 above, wouldlead the reader to conclude that there is no such ch allenge to the general practice regarding application
of adverse facts available. Thus, in our view, the request for establishment does not identify USDOC's
"general practice" regarding application of facts available as a measure in dispute.
7.21 Nor can we conclude, as Japan would apparently have us do, that the general claim regarding
"Conformity" set out in paragraph E of the request fo r establishment is sufficient to bring the "general
practice" on facts available before us.  That claim asserts that, by maintaining "the above-detailed
laws, regulations and administrative rulings of general application" which are allegedly not in
conformity with its obligations under the WTO Agreements, the United States has acted
inconsistently with Article XVI:4 of the Marrakesh Agreement, as well as Article 18.4 of the
AD Agreement.  These two provisions generally require that Members bring their laws andregulations into conformity with the WTO Agreemen ts. The "general practice" regarding application
of facts available is not identified among the "laws, regulations and administrative rulings of general
application" detailed in preceding sections of the request for establishment.  The specific section of
the request for establishment addressing the application of facts available, paragraph A.2, does not
refer to an inconsistency in the statute, regulations, policy or "general practice" regarding applicationof facts available, but to the determination  regarding the application of facts available under the
applicable statute.  We do not find that this statement is sufficient to bring into this dispute USDOC's
"general practice" regarding the application of facts available.  To conclude otherwise would
effectively allow a Member to challenge all statutes, regulations, and "general practices" in the
context of a challenge to a measure imposed pursuant to such provisions or a challenge to any one ofsuch provisions.  Such a ruling would eviscerate the obligation to set forth, in the request for
establishment, with sufficient specificity, the challenged measure or measures, and the claims
regarding such measure or measures.
7.22 The Appellate Body has noted
"As a panel request is normally not subjected to detailed scrutiny by the DSB, it is
incumbent upon a panel to examine the request for the establishment of the panel
very carefully to ensure its compliance with both the letter and the spirit of
Article 6.2 of the DSU .  It is important that a panel request be sufficiently precise for
two reasons: first, it often forms the basis for the terms of reference of the panel
                                                                                                                                                                    
challenging a measure simply because that measure was adopted based in part on the application of that
practice. Such a claim must itself be set forth in the request for establishment with sufficient clarity.
37 See above, para. 7.15.
38 Japan has not argued, and we therefore do not address whether, the US "general practice" in question
is "sufficiently related" to the anti-dumping measure or statutes at issue in this dispute, within the meaning ofthe Panel's decision in Japan – Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R,
adopted 22 April 1998, para. 10.8.WT/DS184/R
Page 14
pursuant to Article 7 of the DSU; and, second, it informs the defending party
and the third parties of the legal basis of the complaint ." (emphasis added) 39
In this case, we conclude that Japan has failed to state a claim at all with respect to the "general
practice" of the USDOC concerning application of facts available.  Assuming such practice could be
challenged separately from a challenge to the statutory provision on which it is based, Japan has failed
to present this problem in the request for establishm ent in this dispute.  Thus, we conclude that the
USDOC "general practice" regarding application of facts available is not within our terms of
reference.  Given that we find no claim was stated in this respect in the request for establishment at
all, we consider that neither the United States no r potential third parties were informed of the legal
basis of a complaint in this respect.
7.23 As a consequence of our ruling in this regard, we will assess the consistency with the
AD Agreement of the USDOC's decision to apply fact s available in the investigation underlying this
dispute, but will not make a general ruling as to the consistency, on its face, of the USDOC's "general
practice" in the application of adverse facts available.
B. STANDARD OF REVIEW
1. Arguments
7.24 Japan  argues that Article 17.6(i) of the AD Agreement, which sets forth the standard of
review to be applied to the case at hand, is a two pa rt standard of review.  In Japan's view, it requires
that the Panel determine, firstly, whether the authorities' establishment of the facts was proper, which
includes an assessment of whether all relevant facts were considered including those that might
detract from an affirmative determination, and secondly, whether their evaluation of those facts was
unbiased and objective.  Japan asserts that the factual arguments in this case go directly to the USgovernment's improper establishment of the facts and the non-objective and biased evaluation of the
facts so as to favour the interest of the domestic industry.  Japan also contends that Article 17.6(ii),
which guides the Panel's interpretation of the AD Agre ement, implicitly refers  to the customary rules
of interpretation of Articles 31 and 32 of the Vienna Convention on the Law of Treaties.  Japan
submits that these rules assume that at the end of the interpretation process the interpreter will craftone unambiguous interpretation of the provision in question.  Finally, Japan claims that the general
standard of review of Article 11 of the DSU applies to its challenge of the US laws and practice under
Article X:3 of GATT 1994.  This standard requires the Panel 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 covered agreements".
7.25 The United States considers that under Article 17.6(i) of the AD Agreement, the task of the
Panel is not to conduct a de novo  evaluation of the facts if the authority's establishment of the facts is
proper and its evaluation unbiased and objective, even though the Panel might have reached a
different conclusion.  The United States asserts that the role of the Panel is to examine whether the
evidence before the investigating authority was su ch that an unbiased and objective investigating
authority evaluating that evidence could properly have made the same determination.  The scope of
the Panel's review is limited by Article 17.5(ii) of the AD Agreement to the facts that were before theinvestigating authority when it made its determination, i.e. the evidence contained in the
administrative record.  With respect to Article 17.6( ii), the United States asserts that this provision
requires panels to respect multiple permissible interpretations in their review of the legal
interpretation by an investigating authority of th e AD Agreement.  The United States submits that
Article 17.6(ii) reflects a deliberate choice by the negotiators to allow for multiple interpretations.The United States rejects Japan's argument that Articles 31 and 32 of the Vienna Convention require a
                                                     
39 Appellate Body Report , European Communities – Regime for the Importation, Sale and Distribution
of Bananas  ("European Communities – Bananas "), WT/DS27/AB/R, adopted 25 September 1997, para. 142.WT/DS184/R
Page 15
panel to choose one interpretation of ambiguous language in the AD Agreement.  Customary rules of
interpretation, applied to Article 17.6(ii), prohibit an understanding of that provision under which the
express language allowing for multiple permissible interpretations would be rendered a nullity.  The
United States further argues that in accordance with Article 31(3) of the Vienna Convention on the
Law of Treaties, where the AD Agreement is ambiguous or silent with respect to a particular
methodology, but that methodology has been subsequently adopted as standard practice by a numberof signatories to the Agreement, the practice of those signatories must be taken into account with
regard to determining whether that methodology c onstitutes a "permissible interpretation" of the
Agreement.  The United States therefore considers that the relevant question in every case is not
whether the challenged determination rests upon the best or "correct" interpretation of the
AD Agreement but whether it rests upon a "permissible interpretation" (of which there may be many).
The United States finally submits that actions that are reviewed under the applicable deferential
standard of review of the AD Agreement cannot also be reviewed under a different standard of reviewas Japan is suggesting merely because the claim has been phrased differently.
2. Finding
7.26 Article 17.6 of the AD Agreement sets out a special standard of review for disputes arising
under that Agreement.  With regard to factual issues, Article 17.6(i) provides:
"in its assessment of the facts of the matter, the panel shall determine whether the
authorities' establishment of the facts was proper and whether their evaluation of
those facts was unbiased and objective.  If the establishment of the facts was proper
and the evaluation was unbiased and objective, even though the panel might have
reached a different conclusion, the evaluation shall not be overturned;"
The question of whether the establishment of facts was proper does not, in our view, involve the
question whether all relevant facts were considered including those that might detract from an
affirmative determination. Whether the facts were properly established involves determining whether
the investigating authorities collected relevant and reliable information concerning the issue to be
decided - it essentially goes to the investigative process.  Then, assuming that the establishment of thefacts with regard to a particular claim was proper, we consider whether, based on the evidence before
the US investigating authorities at the time of the determination, an unbiased and objective
investigating authority evaluating that evidence  could have reached the conclusions that the US
investigating authorities reached on the matter in question.
40  In this context, we consider whether all
the evidence was considered, including facts which might detract from the decision actually reachedby the investigating authorities.
7.27 With respect to questions of the interpretation of the AD Agreement, Article 17.6(ii) provides:
"the panel shall interpret the relevant prov isions of the Agreement in accordance with
customary rules of interpretation of public international law.  Where the panel finds
that a relevant provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the author ities' measure to be in conformity with
the Agreement if it rests upon one of those permissible interpretations."
                                                     
40 We note that this is the same standard as that applied by the Panel in Mexico - HFCS , which, in
considering whether the Mexican investigating authorities had acted consistently with Article 5.3 in determiningthat there was sufficient evidence to justify initiation, stated: "Our approach in this dispute will … be to examine
whether the evidence before SECOFI at the time it initiated the investigation was such that an unbiased and
objective investigating authority evaluating that evidence could properly have determined that sufficientevidence of dumping, injury and causal link existed to justify initiation." Panel Report, Mexico - HFCS,
para. 7.95.WT/DS184/R
Page 16
Thus, in considering those aspects of the US determination which stand or fall depending on the
interpretation of the AD Agreement itself rather than or in addition to the analysis of facts, we first
interpret the provisions of the AD Agreement. As the Appellate Body has repeatedly stated, panels are
to consider the interpretation of the WTO Agr eements, including the AD Agreement, in accordance
with the principles set out in the Vienna Convention on the Law of Treaties (the "Vienna
Convention").  Thus, we look to the ordinary meanin g of the provision in question, in its context, and
in light of its object and purpose.  Finally, we may consider the preparatory work (the negotiating
history) of the provision, should this be necessary or appropriate in light of the conclusions we reach
based on the text of the provision.  We then evaluate whether the US interpretation is one that is
"permissible" in light of the customary rules of interpretation of international law.  If so, we allow that
interpretation to stand, and unless there is error in the subsequent analysis of the facts under that legal
interpretation under the standard of review under Article 17.6(i), the challenged action is upheld.
7.28 While the parties have not raised any issues ab out burden of proof, we note that in WTO
dispute settlement proceedings, the burden of proof with respect to a particular claim or defence rests
with the party that asserts such claim or defence.41  The burden of proof is "a procedural concept
which speaks to the fair and orderly management and disposition of a dispute".42  In the context of the
present dispute, which is concerned with the assessment of the WTO consistency of a definitive anti-dumping measure imposed by the United States, Japan is obliged to present a prima facie  case of
violation of the relevant Articles of the AD Agreement.  In this regard, the Appellate Body has stated
that ". . .  a prima facie  case is one which, in the absence of effective refutation  by the defending party,
requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima
facie  case".
43 Thus, where Japan presents a prima facie case in respect of a claim, it is for the United
States to provide an "effective refutation" of Japan's evidence and arguments, by submitting its own
evidence and arguments in support of the assertion that the United States complied with its obligations
under the AD Agreement.  Assuming evidence and arguments are presented on both sides, it is then
our task to weigh and assess that evidence and those arguments in order to determine whether Japan
has established that the United States acted inconsistently with its obligations under theAD Agreement.
C. O
VERVIEW OF JAPAN 'S CLAIMS
7.29 Japan submits that the United States violated various provisions of the AD Agreement in its
imposition of anti-dumping duties on imports of certain hot-rolled steel products from Japan. Japanclaims that the use of adverse facts available to determine the dumping margin for the three
investigated respondents is inconsistent with Articles 2.3, 2.4, 6.1, 6.6, 6.8, 6.13,  9.3, and Annex II of
the AD Agreement. Japan claims that the US statute, on its face and as applied in this case, requiring
the inclusion of margins calculated based on facts available in the determination of a dumping margin
for all other non-investigated producers is inconsistent with Article 9.4 of the AD Agreement.  Japan
further considers the exclusion of certain home-market sales to affiliates from the normal value
calculation on the basis of the application of the "arm's length" test, and their replacement withdownstream sales, is inconsistent with Articles 2.1, 2.2, and 2.4 of the AD Agreement. Japan claims
that the US preliminary determination of critical circumstances is inconsistent with Articles 10.1,
10.6, and 10.7 of the AD Agreement.  Japan further claims that US "captive production" provision on
its face, and as applied in this case, is inconsistent with Articles 3.1, 3.2, 3.4, 3.5, 3.6, and 4.1 of the
AD Agreement, and that the USITC's analysis of injury and causation were inconsistent withArticles 3.1, 3.4, and 3.5 of the AD Agreement. Japan claims that certain actions undertaken by the
                                                     
41 Appellate Body Report, United States – Shirts and Blouses , page 14.
42Appellate Body Report, Canada - Measures Affecting th e Export of Civilian Aircraft,
WT/DS70/AB/R, adopted 20 August 1999, para. 198.
43 Appellate Body Report, European Communities – Measures Concerning Meat and Meat Products
(Hormones ), WT/DS26/AB/R,WT/DS48/AB/R, adopted 13 February 1998, para. 104.WT/DS184/R
Page 17
United States were inconsistent with its obligations under Article X:3 of  GATT 1994.  Finally, Japan
claims that certain laws, regulations, and administrative procedures governing various aspects of the
investigations and determination in the underlying  anti-dumping proceeding are not in conformity
with its obligations, and thus that the United States  has acted inconsistently with Article XVI:4 of the
Marrakesh Agreement and Article 18.4 of the WTO Agreement.
7.30 We note that we need not reach conclusions on all of these claims in order to resolve the
dispute before us.  The Appellate Body has observed that a "panel need only address those claims
which must be addressed in order to resolve the matter in issue in the dispute".44  We keep in mind,
however, the Appellate Body's further injunction that "[a] panel has to address those claims on which
a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and
rulings so as to allow for prompt compliance by a Member with those recommendations and rulings
"in order to ensure effective resolution of disputes to the benefit of all Members"".45
D. ALLEGED VIOLATIONS IN THE CALCULATION OF DUMPING MARGINS
1. Alleged violations of Articles 2, 6, and 9 and Annex II of the AD Agreement in the use of
facts available in calculating dumping margins
7.31 Japan claims that the use of facts available by USDOC in the case of sales by the investigated
respondents was inconsistent with, inter alia , Article 6.8 and Annex II of the AD Agreement since the
requirements for the use of facts available were not met.  Secondly, Japan claims that USDOC 'schoice of facts available of an adverse nature, based on the application of the US statute which
provides that adverse inferences may be drawn if a party fails to cooperate with the investigating
authority, was inconsistent with those provisions of the AD Agreement.  Third, Japan argues that the
specific application of facts available in this case was inconsistent with Articles 2.3 and 2.4 of the
AD Agreement, and that the consequent application of the dumping margin thus calculated wasinconsistent with Article 9.3 of the AD Agreement.
(a) NSC and NKK
7.32 The price per ton of steel in coils is sometimes based on the actual weight of the coil, and
sometimes on the "theoretical weight" of the coil, which is an estimated weight based on the
dimensions of the product.  All three investigated Japanese respondents made sales on both basesduring the period of investigation.  In order to be able to calculate the dumping margins in this case on
the basis of a consistent unit of measurement, in the original questionnaire, USDOC requested the
investigated Japanese respondents to provide a weight-conversion factor between sales made on an
actual weight basis and sales made on a theoretical weight basis.
(i) Arguments
7.33 Japan argues that NSC originally replied in good faith to the request for a weight conversion
factor that "lacking an actual weight, NSC has no way of calculating the requested theoretical–to-
actual weight conversion factor".
46  After the preliminary determination of USDOC and while
preparing for verification, NSC discovered informatio n in its records that actual weights for sales
made on a theoretical weight basis did in fact exist and were kept in a production database separate
from the main sales database maintained at corporate headquarters.  Thereupon, NSC submitted a
conversion factor based on this information 14 days before verification.
                                                     
44 Appellate Body Report, United States – Shirts and Blouses , page 20.
45 Appellate Body Report, Australia – Measures Affecting Importation of Salmon , WT/DS18/AB/R,
adopted 6 November 1998, para. 223.
46 NSC Supplemental Section B Questionnaire Res ponse, at Supp. B-24 (Exh. JP-29); First Written
Submission of Japan, Annex A-1, para. 95.WT/DS184/R
Page 18
7.34 With respect to NKK, Japan asserts that NKK responded to the USDOC request for a
conversion factor for sales made on the basis of theoretical weight that it was impracticable or
impossible to provide a conversion factor with regard to such sales.  After the preliminary
determination, NKK discovered that KSC had used a "best estimate" as a surrogate for a weight
conversion factor and that this approach had been accepted by USDOC.  NKK submitted its own
weight conversion factor based on the same best estimate methodology, 9 days before thecommencement of verification.
7.35 Japan claims that USDOC acted inconsistently with the AD Agreement in refusing to accept
the information provided by each company.  Japan maintains that USDOC erred in concluding that
these companies had failed to cooperate in the investigation to the best of their ability, and therefore
erred in concluding that the application of adverse facts available was appropriate.  Japan submits that
the issue is not whether the deadline established for responses to questionnaires by USDOC was
reasonable, but whether NSC and NKK submitted the information within a reasonable period.  Japanargues that flexibility when the circumstances warrant is the hallmark of reasonableness.  According
to Japan, USDOC should have accepted the information, which was submitted before verification,
allowing USDOC and petitioners time to review the information and comment on it.
7.36 Japan argues USDOC could have used the submitted conversion factors without undue
difficulty, referring to paragraph 3 of Annex II.  Japan submits that the United States failed todemonstrate that it was prejudiced in any way by the late submission of the information, which could
have been verified.
47  Moreover, Japan argues, USDOC violated paragraph 5 of Annex II in
disregarding and rejecting information provided by the party acting to the best of its ability.  Japan
asserts that the United States violated paragraph 7 of Annex II by applying facts available in spite of
the fact that both companies cooperated as set forth in that paragraph.  In Japan's view, neithercompany withheld information and both cooperated w ith the authority so that the basic conditions for
a facts available determination were not fulfilled.
7.37 Japan also claims that NKK was not given proper notice of the need to supply a conversion
factor or a proper opportunity to respond and defend itself, which Japan asserts was required by
Article 6.1 of the AD Agreement, contending that USDOC officials instructed that NKK need notsubmit any conversion factor.  Japan argues that USDOC failed to properly verify the information on
weight conversion factors provided by NKK a nd NSC, as required by Article 6.6 of the
AD Agreement. Japan also submits that USDOC failed to take into account difficulties faced by NSC
and NKK as required by Article 6.13 and did not provide assistance to the companies as required by
that provision.
7.38 Japan objects to the choice of facts available used in both cases. Japan asserts that the United
States, in accordance with its general practice in this regard, drew an adverse inference based on the
alleged failure of the companies to cooperate,  and deliberately applied the highest margin calculated
as the margin for the sales of both companies made in theoretical weight. Japan submits that the use of
adverse facts available in the determination of margins for the theoretical weight sales of NSC and
NKK was inconsistent with the AD Agreement.
7.39 Japan also asserts the USDOC's rejection of evidence and application of adverse facts
available with regard to NSC and NKK was inc onsistent with Article 2.4 of the AD Agreement,
which requires that the investigating authorities make a “fair comparison . . . between the export price
                                                     
47 Indeed, Japan asserts that the information about weight conversion factors was included in the
schedule for verification, and was in fact verified in the case of NKK, but that the information and the
verification of that information was expunged from the ad ministrative record after USDOC decided to reject the
submissions as untimely and to apply facts available.  We note that  the specific facts regarding the weightconversion factors, or their impact on the calculation of the dumping margins, are not relevant to ourdetermination, and we have not taken into consideration the evidence proffered by Japan in this regard.WT/DS184/R
Page 19
and the normal value.” Japan asserts that for NSC's theoretical weight export sales, USDOC did not
calculate an export price, but instead assigned the highest margin determined for that product type to
those sales. Japan argues that USDOC could have used some form of conversion factor to generate
surrogate export prices for those sales. Japan submits that the resort to facts available does not excuse
authorities from their obligations, least of all from the obligation to make a fair comparison between
export price and normal value. With regard to NKK, which had only made sales in theoretical weightin the home market, Japan submits that USDOC relied on isolated transactions with no relationship to
NKK's overall average normal value as adverse facts available. Thus, Japan asserts, USDOC inflated
the normal value on those sales.  Finally, Japan maintains that USDOC's alleged failure to calculate
the margins correctly under Article 2 in turn led to measures inconsistent with Article  9.3 of the Anti-
Dumping Agreement, which requires that “The amount of the anti-dumping duty shall not exceed the
margin of dumping as established under Articl e 2.”  Japan asserts that USDOC's erroneous
application of facts available led to inflated dumping margins, and therefore was inconsistent withArticle 9.3 of the Anti-Dumping Agreement.
7.40 The United States submits that facts available were applied to sales of NSC and NKK in
accordance with Article 6.8 of the AD Agreement since the information requested with regard to the
weight conversion factor was not submitted within the reasonable deadlines set by USDOC.  The
United States acknowledges that USDOC Regulation section 351.301(b) provides a general rule thatinformation submitted at least 7 days prior to verification is considered timely.  However, the United
States points out, an exception exists in section 351.301(c) for responses to questionnaires, which
must be submitted within the deadline mentioned on the questionnaire (or any extended period
granted).  The requested information on weight conversion factors was not submitted within the time
allowed for responses to the questionnaires.  The United States argues that it is therefore clear thatNSC and NKK failed to provide the information in accordance with the US regulatory deadlines,
despite sufficient time to do so - including extens ions, a total of 87 days was allowed for responses to
the questionnaire.
7.41 The United States argues that Article 6.8 of the AD Agreement does not provide a definition
of a “reasonable period”, and neither does Annex II.  According to the United States, the deadlines setby USDOC were reasonable and USDOC was therefore permitted to disregard information that was
provided one month after the deadlines had expired.  The United States points to paragraphs 1 and  3
of Annex II as establishing timeliness as an independent condition for acceptance of information.  The
United States argues that it would render the timeliness requirement of Annex II meaningless if
Japan's argument were accepted that, so long as the information concerned is of minor importance, ithas to be accepted if it is submitted before the verification takes place.
7.42 The United States submits that ample opportunity was given to furnish the information and
present evidence as required by Article 6.1 of the AD Agreement.  NSC and NKK ultimately had 87
days to respond to the questionnaires, far more than the 30 days required by Article 6.1.1 of the
AD Agreement, but rather than providing the requested weight conversion factor, they merely
repeatedly answered that it was either not possible or not necessary to provide the information.
48  The
United States argues that although paragraph 6 of Annex II requires that an opportunity be given topresent evidence and to give further explanations if  the information is rejected, it also refers to the
time constraints on the investigating authority and cannot be construed to provide an endless
opportunity to submit new information.
7.43 The United States further argues that the application of adverse facts available in the case of
NSC and NKK was permissible under paragraphs 5 and 7 of Annex II.  Paragraph 5 requires the
                                                     
48 The United States objects to Japan's argument that some officials from USDOC misinformed NKK
of the need to submit the information requested.  As we do not reach Japan's claim under Article 6.1 in thisregard, we do not address this question.  We do note, however, that there is no dispute that USDOC notified theinvestigated respondents of the request for informatio n on weight conversion in the original questionnaire.WT/DS184/R
Page 20
authority to accept information even if it is not ideal if the company has acted to the best of its ability.
But, the United States argues, NSC and NKK did not act to the best of their ability since they could
have submitted the information well within the deadlines, as demonstrated by the fact that they did so
ultimately.  The United States argues that when a company fails to act to the best of its ability  it is
deemed uncooperative and USDOC was therefore permitted under paragraph 7 of Annex II to apply
adverse facts available.
7.44 The United States argues that USDOC did not act inconsistently with Article 6.6 of the
AD Agreement when it refused to verify the untimely submitted conversion factors of NSC and NKK.
Article 6.6 of the AD Agreement provides clearly th at the investigating authority is only required to
verify the information, submitted in a timely manner, on which its findings are based.  The United
States argues that this was not the situation here, and consequently verification of the weight
conversion factor information submitted was not required.49  Finally, the United States asserts that
USDOC provided all the assistance required by Article 6.13 of the AD Agreement.50
7.45 The United States maintains that USDOC'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
Articles 2.4 and 9.3 of the Agreement. The United States submits that USDOC applied adverse facts
available to sales of NSC and NKK made on the basis of theoretical weight in accordance with
Article 2.4 of the AD Agreement.  The United States explains that with regard to the theoreticalweight sales of NKK, USDOC used the highest per-product weighted average price and averaged
them together with the actual weight sales data , and then compared the product specific weighted
average export price to those weighted average normal values which were most similar matches
ensuring a fair comparison under Article 2.4 of the AD Agreement.  For NSC, USDOC immediately
assigned a dumping margin based on actual weight sale s of the same product since, in the view of the
United States, nothing in Article 2.4  of the AD Agreement or Article 6.8 requires the authorities to
first calculate an export price and only then to determine the appropriate margin of dumping.  Since
the margins of dumping in all three cases were established in accordance with Article 2 of the
AD Agreement,  the United States argues that Japan's claim of a violation of Article 9.3 of the
AD Agreement must automatically fail as well.
7.46  Because NSC and NKK could have provided the information in a timely manner but did not
do so, they failed to act to the best of their abil ity and did not cooperate with USDOC with respect to
this information request.  As a consequence, the United States maintains that USDOC was justified in
rejecting the untimely data, and applying an adverse inference in its choice of facts available.
7.47 In the view of the United States, the facts available provisions of the Agreement, including
paragraph 7 of Annex II, allow for an adverse inference to be taken when a party does not cooperate
in providing the information at issu e.  The United States asserts that this possibility to take adverse
inferences is important to provide an incentive for exporters to respond to the questionnaires in a
complete and timely manner.  The United States asserts that 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 longafter the reasonable deadlines have passed for its submission, the Agreement does not compel the
                                                     
49 The United States considers irrelevant the fact that the verification was originally scheduled to
include the conversion factor.  USDOC planned to verify information it would gather provisionally until adecision would have been taken on its acceptance.  Once USDOC decided not to accept the weight conversion
factor information on the basis of untimeliness, it was no longer obliged to verify it.
50 The United States moreover argues that this provision requires the authorities to take due account of
difficulties experienced in particular by small compan ies, which neither NSC nor NKK are, and maintains that
no request for assistance was ever made.WT/DS184/R
Page 21
investigating authority to accept and use the late-provided data.51  Similarly, the United States argues,
the Agreement permits authorities to use an advers e 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 author ities 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 United States concludes thatthe interpretation proposed by Japan with respect to the use and selection of the facts available would
render meaningless any Member’s right to establish deadlines, which the United States considers
unacceptable and not intended by the Agreement.
7.48 With regard to the specifics of this case, Brazil considers that NSC and NKK were punished
for not respecting the deadlines in the submission of a minor piece of information.  Korea considers
that a punitive margin was applied in the case of NSC and NKK.  Moreover, Korea submits, by
applying a dumping margin as the facts available, rather than simply using secondary sourceinformation for the missing conversion factor, USDOC failed to make a fair comparison as required
by the AD Agreement.
52
(ii) Finding
7.49 Japan claims that USDOC acted inconsistently with the requirements of Article 6.8 and
Annex II of the AD Agreement in resorting to facts available in the determination of the dumpingmargin for NSC and NKK.
53  The United States maintains that the use of facts available was based on
a permissible interpretation of Article 6.8, and was justified in the circumstances of this case.  Japan
also asserts that the particular "adverse" facts available used were inappropriate, as they were chosen
based on an unjustified determination that NSC and NKK had failed to cooperate to the best of their
ability.  The United States contends, on the other hand, that adverse inferences are permissible in thechoice of facts available, and that the decision to apply such an inference in this case was fully
justified.
7.50 The first question we must address in resolving this issue is under what circumstances does
Article 6.8 of the AD Agreement allow an investigating authority to resort to the use of facts
available.  Article 6.8 provides:
"In cases in which any interested party refuses access to, or otherwise does not
provide, necessary information within a reasonable period or significantly impedes
the investigation, preliminary and final determinations, affirmative or negative, may
be made on the basis of the facts available.  The provisions of Annex II shall be
observed in the application of this paragraph."
Annex II sets out additional conditions and considerations relevant to the application of facts available
in a particular case.
7.51 The conditions for applying "facts available" under Article 6.8 seem fairly clear on the face of
that provision.  If an interested party "refuses access to" necessary information within a reasonable
period, "otherwise does not provide" necessary information with a reasonable period, or "significantly
                                                     
51 The United States argues that USDOC's practice of accepting minor corrections to timely presented
data does not constitute a blanket loophole covering data re spondents have declined to submit at all in their
questionnaire responses.
52 As we do not address Japan's purported claim regarding USDOC's "general practice" concerning
facts available, we have not summarised the parties' an d third parties' arguments in this regard.  They can be
found in the Annexes to this report.
53 As discussed above, we have concluded that the United States' "general practice" concerning facts
available is not within our terms of reference.  Therefore, we are limiting our analysis to the USDOCdetermination in this case.WT/DS184/R
Page 22
impedes the investigation" the investigating authority may make determinations on the basis of the
facts available.  Thus, Article 6.8 ensures that an investigating authority will be able to complete an
investigation and make determinations under the AD Agreement on the basis of facts  even in the
event that an interested party is unable or unwilling to provide necessary information within a
reasonable period.
7.52 The question before us is whether the USDOC was justified in concluding that NKK and NSC
refused access to or otherwise did not provide necessary information within a reasonable period.54
Japan argues extensively that USDOC erred in applying "adverse" facts available in this case.However, before the question of applying "adverse" facts available need be addressed, we must first
assess whether USDOC was justified under Article 6.8 AD Agreement to make its determination on
the basis of facts available.  If USDOC acted inconsistently with Article 6.8 in resorting to facts
available at all, then the specific choice of which facts it applied is, in our view, moot.
7.53 The issue in the case of both NSC and NKK in the first instance is whether USDOC acted
consistently with Article 6.8 and the provisions of Annex II in rejecting information that was actually
submitted to it, and resorting to facts available instead.  Both companies submitted the requested
information concerning a weight conversion factor for their theoretical weight sales well after the
deadlines for response to the questionnaires in which the information was requested had passed, but
before verification.
7.54 The United States argues that these submissions were not in accordance with US regulatory
provisions on the deadlines for submission of information, and thus that it was reasonable to return the
information and refuse to verify it and consider it in making its determinations.  However, these
deadlines are not provided for in the AD Agreement itself.  The AD Agreement establishes that facts
available may be used if necessary information is not provided within a reasonable period.  What is a"reasonable period" will not, in all instances be commensurate with pre-established deadlines set out
in general regulations.  We recognize that in th e interest of orderly administration investigating
authorities do, and indeed must establish such deadlines.  However, a rigid adherence to such
deadlines does not in all cases suffice as the basis for a conclusion that information was not submitted
within a reasonable period and consequently that facts available may be applied.
55
7.55 In this regard, we note paragraph 3 of Annex II, which provides, in pertinent part "All
information which is verifiable, which is appropriately submitted so that it can be used in the
investigation without undue difficulties, which is supplied in a timely fashion, … should be taken into
account when determinations are made."  Particularly where information is actually submitted in time
to be verified, and actually could be verified,56 we consider that it should generally be accepted,
unless to do so would impede the ability of the inve stigating authority to co mplete the investigation
within the time limits established by the Agreement. Such might be the case, for instance, if an entire
questionnaire response were submitted only just before the time scheduled for verification.  However,
in this case, it seems clear that the information could have been verified and used, but was instead
                                                     
54 There is no assertion that the three investigated respondents significantly impeded the investigation.
55 Japan asserts that the information was submitted as soon as the companies became aware of their
ability to provide the information and before verification, and that the late submission was in accordance with
certain provisions in the relevant US regulations. The Un ited States argues that Japan misinterprets the relevant
US regulations, and that the information was submitted one month after the expiration of the applicabledeadline.  We are not here concerned with interpre ting US regulations or assessing whether NSC and NKK
acted in accordance with US regulations in submitting the weight conversion factors. The question we areaddressing is whether USDOC was entitled, under Article 6.8, to reject information it considered to have beensubmitted after the established USDOC deadlines, but still prior to verification, and to decide instead to apply
facts available.
56 It appears that NKK's weight conversion factor information was in fact verified, but was
subsequently rejected as untimely and the relevant portions  were expunged from the verification record.  64 Fed.
Reg. 24363 (6 May 1999), Exh. JP-12.WT/DS184/R
Page 23
rejected as untimely.  One of the principle elem ents governing anti-dumping investigations that
emerges from the whole of the AD Agreement is the goal of ensuring objective decision-making
based on facts.  Article 6.8 and Annex II advance that goal by ensuring that even where the
investigating authority is unable to obtain the "fir st-best" information as the basis of its decision, it
will nonetheless base its decision on facts, albeit perhaps "second-best" facts.  This does not, however,
justify refusing to consider information simply becau se it is submitted outside a pre-determined time-
period, if it is submitted within a period that is reasonable under the circumstances - that is, a period
that allows the information to be verified and used in the determination, due account being taken of
the time limits in the AD Agreement for completing the investigation and the time needed for the
investigating authority to do so.  We consider it significant, in this case, that the information
submitted past the deadline, but before verification, was not new information concerning such matters
as prices, costs, or adjustments that had never previously been provided, and which would require
extensive verification.  It does not appear that any consideration was given to whether the weightconversion factor could have been taken into account  in this case.
7.56 In its final determination, USDOC explained its decision with respect to NSC:
"The evidence indicates that the requeste d 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 orthe 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 also supports 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 areinsufficient to rebut the evidence establishing that the requested information was
readily available. …
Because NSC's conversion data was untimely and did not constitute a minor
correction the Department informed NSC at verification that it would not accept the
theoretical to actual weight conversion factors and returned the data onApril 12, 1999. …
Because NSC failed to timely provide requested information, …, the
Department has made its determination with respect to the theoretical weight sales on
the basis of the facts available.  Further, the Department finds that NSC, by not
submitting a theoretical weight conversion factor it could have provided whenoriginally requested until well after the time for response had passed, failed to
cooperate by not acting to the best of its ability…The fact that NSC ultimately did
provide such a factor is proof that it could have done so much earlier…."
57
7.57 It is thus clear to us that in the case of NSC the USDOC rejected information that was
actually submitted to it, albeit not by the deadline specified, despite the fact that the information was
available in sufficient time to allow its verification and use in the calculation of NSC's dumping
margin.  In our view, based on the evidence before the USDOC at the time of the determination, anunbiased and objective investigating authority evaluating that evidence could not have reached the
conclusion that NSC had failed to provide necessary information within a reasonable period.  Thus,
we conclude that USDOC acted inconsistently with Article 6.8 in applying facts available in making
its determination of NSC's dumping margin.
7.58 With regard to NKK, USDOC stated in its final determination:
                                                     
57 64 Fed. Reg. 24361-362 (6 May 1999), Exh. JP-12.WT/DS184/R
Page 24
"Because NKK's conversion factor data were not timely submitted, the Department
rejected these factors in a letter dated April 12, 1999.  The Department, therefore, has
not considered these data or retained them in the official record of the proceeding.  …
The Department does not agree with NKK's assertion that these data were verified.
Rather, at verification, the Department specifically informed NKK and its counsel
that the Department would not accept the conversion factor and would specificallyinstruct NKK to submit this information on the record if the Department determined
that it was timely.  However, any arguments as to the accuracy of these data are moot
because the data in question are no longer part of the record before the Department…
Further the Department finds that NKK, by not submitting a theoretical weight
conversion factor it could have provided when originally requested until well after the
time for response had passed, failed to cooperate by not acting to the best of its
ability.  NKK's claims that it could calculate a conversion factor in February of 1999but 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
the Department 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 itultimately did calculate, explaining why a more accurate one might not be
practicable.  Instead, NKK merely dismissed the Department's repeated requests.  The
fact that NKK ultimately did provide such a factor is the proof that they could have
done so much earlier."
58
7.59 It is thus clear to us that in the case of NKK as well,  USDOC rejected information that was
actually submitted to it, albeit not by the deadline specified, despite the fact that the information was
available in sufficient time to allow its verification and use in the calculation of NKK's dumping
margin.  In our view, based on the evidence before USDOC at the time of the determination, an
unbiased and objective investigating authority evaluating that evidence could not have reached the
conclusion that NKK had failed to provide necessary information within a reasonable period.  Thus,we conclude that USDOC acted inconsistently with Article 6.8 in applying facts available in making
its determination of NKK's dumping margin.
7.60 Having determined that an objective and unbiased investigating authority could not, on the
basis of the evidence in this dispute, have reached the conclusion that NKK and NSC failed to provide
necessary information within a reasonable period, we do not consider it necessary or appropriate toaddress Japan's additional claims and arguments regarding the application of adverse facts available in
the underlying investigation, or  the consistenc y of USDOC's actions with Articles 2.4, 6.1, 6.6, 6.13,
and 9.3 and Annex II of the AD Agreement.
(b) KSC
7.61 In its original questionnaire, USDOC requested Japanese producers who sold the subject steel
products to affiliated purchasers in the United States to provide information concerning resale prices
and further manufacturing costs to be used in the calculation of a constructed export price pursuant toArticle 2.3 of the AD Agreement.  KSC makes a substantial portion of its sales to the United States to
California Steel Industries ("CSI"), a company of whic h it owns 50 per cent, in a joint venture with a
Brazilian company Companhia Vale de Rio Doce ("CV RD").  Although CSI is an affiliate of KSC, it
was itself a petitioner in the anti-dumping investigation. KSC originally requested to be excused from
responding to this section of the questionnaire, asserting that it was unable to provide the requestedinformation.  USDOC continued to require KSC to provide the requested information.  KSC
                                                     
58 64 Fed. Reg. 24363 (6 May 1999), Exh. JP-12.WT/DS184/R
Page 25
responded that it was unable to provide the requested information.  KSC maintained that it did not
control CSI, and could not obtain the necessary information from CSI. USDOC concluded that KSC
had failed to act to the best of its ability  in seeking the requested data from CSI, and therefore
determined to apply adverse facts available in dete rmining the dumping margin attributable to sales to
CSI. USDOC used the second highest product-specific dumping margin calculated for KSC's sales to
unaffiliated customers in the United States as the dumping margin for the sales through CSI.
(i)  Arguments
7.62 Japan argues that USDOC violated Article 6.8 and Annex II of the AD Agreement in
determining that KSC had failed to cooperate or withheld information, and that the use of adverse
facts available was therefore justified.  Japan notes that CSI was not merely an affiliated customer of
KSC, it was itself a petitioner in the anti-dumping investigation of hot-rolled steel imports from Japan.
Japan argues that KSC did not withhold any in formation from USDOC since the information
requested was never in its possession but was kept by CSI.  Japan points out that USDOC treated KSCand CSI as a single entity, thus assuming that KSC had sufficient control over CSI to compel its
cooperation.   Japan maintains that despite its efforts, KSC was unable to convince CSI to hand over
the requested information.  Japan argues that without the voluntary cooperation of the co-owner
CVRD, KSC was powerless to compel CSI to provid e the requested information.  Japan submits that
the Shareholders Agreement, which the United States asserts gave KSC certain power to obtain therequested information does not, in fact, reflect how the company operated in practice.
59  Japan further
emphasises that KSC did attempt to exercise its rights under the Shareholders Agreement , but was
nonetheless unable to obtain the requested information.
7.63 Moreover, Japan submits, USDOC failed to provide any assistance as required by Article 6.13
of the AD Agreement and paragraph 7 of Annex II.  KSC invested substantial resources attempting toconvince CSI and CVRD to help KSC to respond to USDOC’s request.
60  KSC 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. Japan argues that KSC explained to USDOC
that the Shareholders Agreement did not operate to allow either KSC or CVRD any real control of
CSI's day-to-day operations.61 Japan submits that only one person controlled the day-to-day conduct
of CSI, its President Mr Gonçalves as evidenced by the decision of CSI to become a petitioner in this
case.62  Japan submits that the USDOC failed to properly establish the facts by ignoring the evidence
that CSI was unwilling to provide the requested in formation and CVRD, KSC's joint venture partner,
was a competitor of KSC in the US market and thus did not have an interest in assisting KSC in the
US AD investigation either. KSC th erefore did not possess the information requested and did not have
the power to obtain this information.  Consequently, Japan maintains that the USDOC acted
inconsistently with Article 6.8 of the AD Agreement in concluding that resort to adverse facts
available was appropriate.
7.64 Japan asserts that USDOC's use of the second-highest margin from KSC’s sales as facts
available for the CSI transactions was inconsistent with Article 2.3 of the Anti-Dumping Agreement
governing the calculation of export price. Japan argues that USDOC did not have any specific
concerns regarding the unreliability of KSC's export price to CSI, but proceeded to calculate an export
                                                     
59 According to Japan, the letters on CSI’s letterhead from Mr. Gonçalves, CSI’s President and CEO,
provide objective evidence of how CSI operated.  See Mr. Gonçalves Letter to KSC of 29 Oct. 1998 (Exh.  JP-
42(f)); Mr. Gonçalves Letter to KSC of 6 Nov. 1998 (Exh. JP-42(h)); Mr. Gonçalves Letter to KSC of 14 Dec.1998 (Exh. JP-42(m)).  Japan points to additional information demonstrating how the Shareholders’ Agreementwas regularly ignored by the company and its shareholders at Exh. JP-93(d).
60 See timeline of events and letters of KSC allegedly requesting assistance in Exh.  JP-42.
61 KSC Sales Verification Report, at 21-22 (excerpts in US/B-21 and Exh. JP-42(y)); Shareholders’
Agreement, annexed to Exh. JP-42.
62 In Japan's view, this is one among many ways in which the actual operation of CSI failed to comply
with the apparent intent of the Shareholders Agreement.  Exhibit JP-93(d) provides a complete list.WT/DS184/R
Page 26
price, necessitating the resale and further manufacturing information, based on the assumption that
because KSC and CSI were affiliated, CSI’s resale prices were necessary.  When those prices were
not provided, Japan asserts that USDOC did not determine an export price for KSC’s sales to CSI, and
instead applied a margin from other sales.  Japan ma intains that this was inconsistent with Article 2.3,
which permits the calculation of a constructed export price , not the imposition of a margin .  Finally,
Japan maintains that by wrongly applying adverse facts available, the United States ultimately appliedan anti-dumping duty higher than the margin of dumping, inconsistent with Article 9.3 of the
AD Agreement.
7.65 The United States argues that the application of adverse facts available to a part of KSC's
sales was permitted under the AD Agreement, since KSC failed to act to the best of its ability with
regard to submitting the requested data concerning its sales through CSI, its US affiliate.  The United
States points out that USDOC requested the information three times, and that KSC twice requested to
be excused from giving the information and on the third occasion alleged that it was not possible tosubmit the data due to the unwillingness of CSI.  However, the United States maintains that KSC
never even raised the issue before the Board of Directors of CSI, of whom two out of four are
appointed by KSC, never tried to enforce certain rights under the Shareholders' Agreement in an effort
to obtain the requested information, and never direc tly raised the issue with its joint venture partner
CVRD.
63  The United States submits that even if cooperation was refused by CVRD, internal means
of forcing the issue and obtaining the information were available to KSC under the Shareholders'
Agreement.  In the US view, KSC's failure to us e these means indicates that it acquiesced in the
refusal of CSI to submit the requested information.  As a result, KSC failed to provide the requested
information within a reasonable period, and therefore USDOC was fully entitled to apply adverse
facts available to that part of KSC sales to the United States that entered the United States market
through CSI.
7.66 The United States argues that the assistance requirement of Article 6.13 of the AD Agreement
invoked by Japan relates in particular to small companies while KSC is one of Japan's largest
corporations and one of the biggest steel producers in the world.  The United States asserts that it was
not USDOC's responsibility to advise KSC on the steps to take to respond to the questionnaire andargues that the information requested was clear and unambiguous. In any case, the United States
submits, contrary to Japan's assertions, KSC never requested such assistance.
7.67 Finally, the United States maintains that it did not act inconsistently with the requirements of
Article 2.3 in applying, as facts available, a margin based on other KSC sales as the margin for the
sales to CSI, rather than seeking to calculate an export price based on facts available.  The UnitedStates maintains that KSC's refusal to provide the information necessary to construct an export price,
made it necessary for USDOC to use the margin information as it was impossible to construct an
export price based on available facts. The United States rejects Japan’s further argument that
USDOC's determination was inconsistent with Ar ticle 9.3 of the Agreement, maintaining that
USDOC correctly calculated KSC's margin, and was therefore entitled to impose a definitive measure
in the amount of the margin calculated.
7.68 With regard to the specifics of this case, Brazil questions the use of facts available in light of
the fact that KSC was confronted with the refusal of  CSI, which was itself a petitioner in the case, to
provide the information. Korea objects to the use of fact available to KSC since it was CSI and not
KSC that failed to cooperate.  Chile consider s that the US acted inconsistently with the
AD Agreement by punishing KSC for not providing the information that was held by CSI, a petitioner
in this case. According to Chile, it was unreas onable for USDOC to require  cooperation between two
companies having such a clear conflict of interests.  Chile asserts that in any case, Article 6.8 and
Annex II do not permit the choice of the most adverse facts available when a party fails to cooperate
                                                     
63 KSC Sales Verification Report at 20-22 (Exh.  JP-42 (y)); First Written Submission of the
United States, Annex A-2, para.B-20.WT/DS184/R
Page 27
and certain information is not provided.  The EC disagrees with Japan that facts available may only be
used as neutral gap fillers. When selecting facts available, the authorities may take into account the
degree of cooperation of the party concerned. If an exporter refuses to provide certain information, a
logical inference may be drawn that the information is adverse to his interests.
(ii) Finding
7.69 Pursuant to Article 6.8 of the AD Agreement, and as discussed above, where a party
"otherwise does not provide" necessary informat ion within a reasonable time, the investigating
authorities may make their determination based on facts available.  It is undisputed in this case that
KSC did not provide the requested information regarding resale prices and further manufacturing
costs with respect to its sales through its affiliate CSI.  Thus, it appears that USDOC was justified in
deciding to apply facts available with respect to the information not provided by KSC concerning
CSI's further manufacturing costs, as this necessar y information was not provided within a reasonable
period.
7.70 Indeed, Japan's argument with respect to the application of facts available concerning KSC
focuses not on the application of facts available per se , but rather on the "adverse" nature of the facts
available actually used.  The parties' argument in this regard focuses on paragraph 7 of Annex II of the
AD Agreement, which  provides in relevant part:
"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".
The parties have argued extensively concerning whether this provision allows an investigating
authority to conclude that a party has failed to cooperate and therefore resort to the application of
"adverse" facts available .  Japan maintains that this provision merely recognizes the possibility that a
failure to cooperate might result in a less favourable result for the non-cooperating party, but does not
allow for any deliberate action on the part of investigating authorities to ensure such a less favourable
result.  The United States, on the other hand, argues that the entire purpose of allowing investigating
authorities to resort to facts available would be defeated if, regardless of the failure of a party to
cooperate, investigating authorities were obliged in all circumstances to seek out "neutral" factsavailable.
7.71 As discussed earlier, we have concluded that Japan did not set out a claim with respect to
USDOC's general practice in applying adverse facts available in its request for establishment.
Therefore, we will limit our analysis to the application of facts available in the particularcircumstances of this case. We consider the questi on whether paragraph 7 of Annex II, together with
the remainder of Annex II and Article 6.8, allow for a deliberate application of facts available with the
intent of obtaining a result less favourable for a particular respondent to be a question that implicates
the US statute and regulations, which are not within our terms of reference in this dispute.  However,
it seems clear to us that any "less favourable" result under paragraph 7 of Annex II may only be
appropriate in the case of an interested party who does not cooperate. The USDOC decision to apply
adverse facts available in the case of KSC was based on the underlying determination that KSC hadfailed to cooperate by  failing to act to the best of its ability to comply with the USDOC request for
information concerning resale prices and further manufacturing costs.  Therefore, we consider first
whether an objective and unbiased investigating authority could reasonably have concluded, based on
the facts before the USDOC, that KSC had failed to cooperate and that relevant information was being
withheld.
7.72 In its final determination, USDOC found, in pertinent part:WT/DS184/R
Page 28
"In essence, for purposes of the [constructed export price] calculation, the [US]
statute treats the exporter and the US affiliate collectively, rather than independently,
regardless of whether the exporter controls the affiliate.  Accordingly, KSC's
argument that it does not "control" CSI is misplaced and irrelevant.
Because the statute requires that the Department base its margin calculations for the
CSI sales on record information concerning the CSI sales themselves, the Departmentrequired that KSC and CSI, collectively, provide the necessary price and cost data for
KSC's US sales through CSI.  It is also undisputed that KSC and CSI failed to
provide this necessary information….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 cooperate by not acting to the best of their ability to comply with
the Department's requests for information w ith respect to the CSI sales.  Therefore,
we have used an adverse inference in select ing the facts available with respect to the
CSI sales.
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.
While it is clear that KSC and CSI collectively have not acted to the best of their
ability, we also disagree with KSC's claim that it alone acted to the best of its ability.
… After careful consideration of all of the evidence on the record, the Department
finds that KSC did not act to the best of its ability with respect to the requested CSI
data.
CSI is a joint venture between KSC and a large Brazilian mining operation,
Companhia Valle do Rio Doce ("CVRD").  Through their respective US affiliates,
KSC and CVRD each own 50 per cent of CSI.  KSC's claim that it acted to the best of
its ability with respect to this issue rests on its assertion that it was powerless to
compel CSI to provide the Department with this data, given that CSI as a petitioner inthis case, refused to cooperated.  Some of the most important evidence contradicting
KSC on this issue, including information pertaining to the board and the
Shareholders' Agreement, constitutes business proprietary information, and are
discussed only in our proprietary Analysis Memorandum , which is hereby
incorporated by reference.  Generally, however, the record shows that, although KSC
could have been much more active in obtaining the cooperation of CSI in this
investigation, it limited its efforts to merely requesting the required data andotherwise took a "hands-off" approach with respect to CSI's alleged decision not to
provide this data.  For example, KSC officials stated that KSC did not instruct its
members of the CSI board to address the issue, did not invoke the Shareholder's
Agreement, and did not discuss this issue with its joint venture partner.  This does not
reach the "best efforts" threshold embodied in § 776(b).  Furthermore, the fact thatKSC has provided a great deal of information and has substantially cooperated with
respect to other issues does not relieve it of the requirement to act to the best of its
ability to provide the requested CSI informa tion.  With respect to the CSI sales, KSC
has provided only minimal volume and value information and has not acted to the
best of its ability to obtain further information.  Thus, as to the missing CSI data, itWT/DS184/R
Page 29
cannot be said that KSC was fully cooperative and made every effort to obtain and
provide the information requested by the Department.   Therefore, even though full
cooperation by KSC would not constrain the Department from using adverse facts
available specifically with respect to th e CSI sales, we do not agree with KSC's
argument that it has "substantially cooperated" during this investigation….
While the Department has considered that the record supports KSC's claim that it did
make some effort to obtain the data and the CSI's management rebuffed these efforts,
the record also shows that KSC essentially acquiesced in CSI's decision not to
provide this data. Given KSC's relationship with this 50/50 joint venture, as detailed
in the Home Market Sales Verification Report , dated 26 March 1999, this did not
constitute making its best efforts to obtain the data."64
7.73 Our review of the facts on which USDOC based this conclusion, including confidential
information, leads us to the conclusion that an  unbiased and objective investigating authority
evaluating the evidence that was before the USDOC could not reasonably have reached the
conclusion that KSC had failed to cooperate and that relevant information was thus being withheld.
"Cooperate" has been defined as "work together for the same purpose or in the same task."65  In our
view, USDOC's conclusion that KSC failed to act to th e best of its ability to comply with the request
for information in this case went far beyond any reasonable understanding of any obligation tocooperate implied by paragraph 7 of Annex II.  CSI was a petitioner in the investigation of hot-rolled
steel imports from Japan, and thus had interests directly opposed to those of KSC.  Indeed, this very
fact suggests that KSC lacked the ability to co ntrol such important decisions of policy by CSI.
USDOC's own conclusion that KSC "acquiesced" in CSI's refusal to provide the requested
information itself suggests that KSC was not able to direct CSI's actions in this regard. CVRD, KSC'sjoint venture partner in CSI, was itself KSC's competitor in the US market for the steel products under
investigation, and thus also had interests adverse to those of KSC.  While it is conceivable that KSC
could have undertaken certain measures under the Shareholders' Agreement with the possible result of
forcing CSI to provide the requested information, such actions would have inevitably disrupted the
on-going business relationships of the three compan ies. We do not consider that USDOC's conclusion
that KSC's not having taken such measures justified the conclusion that it had failed to cooperate was
a decision that could properly be made by an unbiased and objective investigating authority on the
basis of the evidence before USDOC.   In the absence of a justified conclusion that there was a lack of
cooperation, there is no basis under paragraph 7 of Annex II for a result which is less favourable than
would have been the case had the party cooperated.
7.74 We therefore conclude that USDOC acted inconsistently with Article 6.8 and Annex II
paragraph 7 of the AD Agreement in applying adverse facts available in making its determination of
KSC's dumping margin.  We  therefore do not consider it necessary or appropriate to address Japan's
additional claims and arguments under Articles 2.3 and 9.3 regarding the application of adverse facts
available in the determination of KSC's dump ing margin in the underlying investigation.
2. Alleged violations of Article 9.4 of the AD Agreement on the face of US law and in the
calculation of an "all others" rate including margins established on the basis of factsavailable
(a) Arguments
7.75 Japan argues that Article 9.4 of the AD Agreement provides in clear and mandatory terms that
any margins based on facts available shall be disregarded for the purposes of determining an all others
rate. Japan submits that the US statute, section 735(c)(5) of the Tariff Act of 1930 (as amended),
                                                     
64 64 Fed. Reg. 24367-68 (6 May 199), Exh. JP-12.
65 New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993.WT/DS184/R
Page 30
impermissibly limits the exclusion provided for under Article 9.4 to only margins based entirely on
facts available.  Japan argues that the statutory distinction between margins based entirely on facts
available, which are excluded, and margins based only partially on facts available, which can still
form the basis for an “all others” rate, is, on its face, inconsistent with the AD Agreement  In Japan's
view, Article 9.4 is clear and explicit in prohibiting the inclusion of any margins based even in part on
facts available in the calculation of the all others rate, and the US interpretation of Article 9.4 isimpermissible.  Japan notes that facts available may be used in determining a company's dumping
margin under Article 6.8 of the AD Agreement due to a particular action or inaction of that particular
company, and asserts that Article 9.4 of the AD Agreement establishes that other non-investigated
companies should not be punished for the lack of cooperation of another company.
7.76 Second, Japan argues that, applying the statute in its determination of an all others rate,
USDOC violated Article 9.4 of the AD Agreement since it used as the basis for the calculation of the
all others rate the margins calculated for the three investigated respondents, each of which was basedin part on facts available.  Japan submits that the USDOC determination of an “all others” rate on the
basis of margins that were calculated based in part on facts available was inconsistent with Article 9.4
of the AD Agreement.
7.77 The United States argues that Article 9.4 of the AD Agreement permits the inclusion of
margins partially  based on facts available in establishing an all others rate.  Likewise, the United
States argues, merely because a factor in the calculation of the overall margin for each of certain
investigated producers is de minimis  or zero does not mean that such margins cannot be used in the
determination of an all others rate under Article 9.4 of the AD Agreement.  The United States argues
that margins are only "established under the circumstances referred to in paragraph 8 of Article 6",
and to be disregarded in the determination of a margin of dumping for non-investigated producers orexporters as provided for in Article 9.4, if they are entirely  based on facts available.  Thus, when only
an element included in the overall calculation of the margin is determined in this manner, as was the
case in the investigation on imports of hot-rolled steel products from Japan, the United States
maintains that such margins may be included in the calculation of the all others rate.
7.78 The United States argues that the term “margin” is used throughout the AD Agreement as
referring to the overall margin for a producer or exporter, and not just to portions of it.  In this regard,
the United States notes that Article 5.8 of the AD Agreement, which provides that an investigation is
to be terminated immediately when the margin of dumping is de minimis , is generally understood not
to require termination merely because one transaction of a producer shows a de minimis  margin.
Thus, the United States maintains that only  if the overall margin for the producer is de minimis  does
Article 5.8 require termination of the investigation.  The United States refers to the customary rule of
interpretation that the terms of an Agreement be given the same meaning throughout the Agreement to
argue that the same meaning should apply in Article 9.4, and therefore only if the overall margin was
based on facts available does Article 9.4 require its exclusion from the all others rate.  The United
States also argues that, to the extent the term margin might be ambiguous, it is clear that Members are
free to adopt any permissible interpretation.
7.79  The United States also argues that the interpretation argued by Japan would be unworkable,
since it is often the case that parts of the margin will be based on facts available.  For instance, in this
case, there were no margins calculated that did not rest, in part, on facts available, and thus Japan's
interpretation of Article 9.4 would make it impossible to calculate an all others rate consistently with
the AD Agreement.  Moreover, this would undermine the purpose of Article 6.10 of the
AD Agreement which explicitly allows the invest igation of less than all exporters where a full
investigation of all producers or exporters would be too burdensome for the investigating authority.
The United States also rejects Japan’s allegation that the non-investigated producers would be
“punished” for the respondents' lack of cooperation if they were to receive an all others rate based in
part on margins established on facts available.  In the United States' view, Article 9.4 establishes aWT/DS184/R
Page 31
neutral formula for the calculation of the all othe rs rate, which the USDOC properly applied in this
case.
7.80 Brazil considers that Article 9.4 of the AD Agreement provides in a clear and unequivocal
manner that margins established on the basis of facts available are to be excluded in the determination
of an all others rate.  The distinction in US law between margins based entirely or only partially on
facts available is not present in the AD Agreement and it cannot be argued that it is a permissibleinterpretation of the Agreement, Brazil submits, si nce it completely changes the meaning of the
relevant provision in the AD Agreement.
7.81 Chile argues that the US practice to include margins partially based on facts available in the
determination of an all others rate violates Article 6.13 of the AD Agreement and 9.4 of the
AD Agreement and unduly inflates the margin for the non-investigated exporters or producers.
7.82 The EC agrees with Japan that by providing for the exclusion from the all others rate only of
those dumping margins which are based entirely on facts available, US law is inconsistent with
Article 9.4. The EC would nevertheless argue that Article 9.4 does not require investigating
authorities to disregard the dumping margin in every instance where facts available have been used, as
long as the resort to facts available was limited and no adverse inferences were drawn.
(b) Finding
7.83 Article 9.4 of the AD Agreement establishes a maximum level for anti-dumping duties to be
applied to imports from exporters or producers not included in the investigation, as provided for in
Article 6.10 of the AD Agreement.  It 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 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 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 provid ed the necessary information during the
course of the investigation, as provided for in subparagraph 10.2 of Article 6"
(emphasis added).
7.84 Section 735(c)(5) of the Tariff Act of 1930, as amended, and the implementing regulations of
the USDOC establish the method to be applied by USDOC in determining the estimated "all others"
rate, which is the rate applicable to uninvestigated producers.  US law generally provides that USDOC
shall determine the estimated weighted average dumping margin for each exporter and producer
individually investigated, and then determine the estimated all-others rate for all exporters andWT/DS184/R
Page 32
producers not individually investigated.66  Section 735(c)(5) specifies, with respect to the 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 theestimated 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 determined entirely  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 estimatedweighted average dumping margins determined for the exporters and producers
individually investigated".
67
7.85 Thus, US law creates a distinction between rates based "entirely" on facts available, which are
excluded from the calculation of an "all others" rate, and individual rates based on facts available inpart, which, under the US law, can be used in the calculation of an "all others" rate.  In this case,
USDOC investigated three respondents and calculated an all others rate applicable to the remaining
Japanese producers, by taking the weighted average of the margins calculated for the three
investigated respondents.
 68  USDOC relied on facts available with respect to some elements of the
calculation in determining the overall margin for each of the three investigated respondents.
7.86 In order to resolve the issue that is before us, we must determine whether Article 9.4 "admits
of" the interpretation put forward by the United States, and set out in the relevant US law.
Specifically, we must consider whether the phrase "shall disregard…margins established under the
circumstances referred to in paragraph 8 of Articl e 6" can, as United States contends, be understood to
be limited to margins established entirely  under the circumstances referred to in paragraph 8 of
Article 6.   In our view, it can not.
7.87 We note first that the exclusion provided for in Article 9.4 is mandatory - there are no
exceptions provided for.  Thus, any margins that fall within the categories established in Article 9.4
must not be considered  in determining the maximum duty applicable to uninvestigated producers.
Second, we note that the category of "margins established under the circumstances referred to in
[Article 6.8]" is not qualified in any way.  Thus, in  our view, the provision is clear and explicit on its
face.  Any margin established under the circumstances referred to in Article 6.8 must  be disregarded
in determining the maximum anti-dumping duty applicable to uninvestigated producers.
7.88 The question then becomes when is a margin "established under the circumstances referred to
in [Article 6.8]".  In the United States' view, a dumping margin refers only to the overall margin
established for a particular product from a particular source.  Consequently, a margin is only
"established" based on facts available if the overall margin attributed to a particular producer orexporter was determined on the basis of facts available.  Any "interim" use of facts available on the
                                                     
66 19 U.S.C. § 1673d(c)(1)(B)(i) (Exh.  JP-4).
67 19 U.S.C. § 1673d(c)(5) (emphasis added) (Exh.  JP-4).
68 USDOC Final Dumping Determination , 64 Fed. Reg. at 24370 (Exh.  JP-12).WT/DS184/R
Page 33
way to determining the margin does not, in the Un ited States' view, result in a margin established
under the circumstances referred to in Article 6.8
7.89 We note, however, that Article 6.8 itself does not refer to the establishment of margins per se ,
but rather specifies that in certain circumstances a determination may be made on the basis of facts
available.  We can perceive of no textual basis in Article 6.8 to suggest that a determination should be
considered made under the circumstances referred to in that Article only if the determination is madeentirely  on the basis of facts available.  We generally agree with the United States that a "margin" is
the overall margin for a particular product from a particular source.
69  Where we part company from
the United States is in our understanding of what it means to "establish a margin under the
circumstances referred to in [Article 6.8]".  The establishment of a dumping margin is a complex
calculation comprising many elements.  However, the " determination"  with respect to the margin of
dumping is the end result of all the calculation steps - the final margin that may be applied to the
dumped products from the particular source. In our view, a margin determined under thecircumstances referred to in Article 6.8 includes a margin determined on the basis of a calculation in
which some element was established on the basis of facts available.
70
7.90 We therefore conclude that the US statute governing the calculation of the all others rate,
section 735(c)(5) of the Tariff Act of 1930, as amended, is, on its face, inconsistent with Article 9.4 of
the AD Agreement insofar as it requires the consideration of margins based in part on facts availablein the calculation of the all others rate.
71  Having found the statute governing the United States'
actions in this regard inconsistent with  the AD Agreement, and there being no dispute that the
USDOC applied that statute in its determination in this case, we must perforce conclude that the
calculation of the all others rate in this case was inconsistent with the United States' obligations under
Article 9.4 of the AD Agreement. In addition, having determined that the statute is inconsistent on itsface with the relevant specific provision of the AD Agreement, we consequently conclude that the
United States acted inconsistently with Article 18.4 of the AD Agreement and Article XIV:4 of the
Marrakesh Agreement in maintaining that provisi on after the entry into force of the AD Agreement.
3. Alleged violations of Article 2 of the AD Agreement in the exclusion of certain home
market sales to affiliates and their repla cement with downstream sales in USDOC's
determination of normal value
(a) Arguments
7.91 Japan argues that USDOC's exclusion of certain home market sales to affiliates from the
determination of normal value, based on the application of the "99.5 per cent" or "arm’s length" test,
and the replacement of such sales with re-sales by the affiliates to unaffiliated customers, isinconsistent with Articles 2.1, 2.2 and 2.4 of the AD Agreement.  Japan challenges USDOC’s
established practice in this regard on its face, and USDOC’s application of that practice in the
investigation of imports of hot-rolled steel from Japan.
                                                     
69 Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen
From India ("EC – Bed Linen" ), WT/DS141/R, para. 6.118 (presently under appeal).
70 This does not require the conclusion that a zero or de minimis  margin, which must also be
disregarded under Article 9.4, relates to "portions" of margins or individual transactions having a zero or de
minimis  price difference.  In this respect, we consider that Article 9.4  refers to overall margins that are zero or
de minimis .
71 We recognize that this conclusion has certain pr actical consequences, as it leaves it unclear how
Members are to establish the maximum rate of duty a pplicable to uninvestigated producers or exporters in a
case, such as this one, where there are no margins that were not established under the circumstances referred to
in Article 6.8.  However, this situation could also arise under the US interpretation.  Merely because the
AD Agreement does not explicitly address the question of how to resolve this situation does not mean that sucha calculation cannot be made in a manner consistent with the requirements of the AD Agreement.  Thus, ourconclusion does not make it is impossible for Members to comply with the obligations of the AD Agreement.WT/DS184/R
Page 34
7.92 Japan agrees with the general definition of the term "ordinary course of trade" used by the
United States -- “the conditions and practices which, for a reasonable period of time prior to the
exportation of the subject merchandise, have been normal" for sales of the foreign like product.72  In
addition, Japan appears to agree that sales to affiliated purchasers may not be in the ordinary course of
trade.  However, Japan argues that the "arm's length" test applied by the United States is an
unreasonable basis for determining whether such sales are in the ordinary course of trade, and thatArticle 2 does not allow a Member to treat sales th at fail the "arm's length" test as "outside the
ordinary course of trade".  Japan argues that th ere is nothing in the AD Agreement that supports the
premises of the "arm's length" test - that sales made to affiliates
73 at average prices more than 0.5 per
cent below the average prices for the same product sold to unaffiliated customers are outside the
"ordinary course of trade".  According to Japan, 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 made in the ordinary
course of trade. Japan submits that Article 2.2 of the AD Agreement makes clear that the exclusion ofsales as outside the ordinary course of trade is a rigorous undertaking, and that the "arm's length" test
is too mechanical and not consistent with the rigorous tests applicable to determining whether sales
below cost may be considered outside the ordinary course of trade.
7.93 Second, Japan argues that Article 2.2 of the AD Agreement prescribes what an authority shall
do if there are no home market sales in the ordinary course of trade.  In Japan's view, Article 2.2 doesnot permit the replacement of home-market sales to an affiliate with the affiliate's re-sales.
74
Article 2.2 of the AD Agreement provides that in such a case, the authorities must compare exportprice either with sales to a third country or with a constructed value (cost of production plus a
reasonable amount for administrative, selling and general costs and for profits).  Japan submits that
only Article 2.3 of the AD Agreement concerning export price expressly provides for the possibilitythat the investigating authority may construct a price on the basis of the price at which the product is
first resold to an independent buyer.  On the basis of the principle "expressio unius est exclusio
alterius ", Japan argues that the absence of such a power in Article 2.2 of the AD Agreement implies
that the USDOC practice is not permitted in the context of a determination of normal value.
7.94 Finally, Japan asserts that USDOC practice to exclude sales that fail the "arm's length" test
violates the requirement of Article 2.4 of the AD Agreement to make a "fair comparison" between
normal value and export price.  Japan argues that a "fair" comparison does not permit statistically
arbitrary rules that reject low-priced sales from the calculation of normal value thereby artificially
inflating the dumping margin.  Japan submits that there are two main problems with the test, first that
it tests only for lower prices and considers higher prices to be normal, and second that it fails toaccount for the degree of variability in prices, producing absurd outcomes.  Japan submits that  a
standard deviation analysis that captures both the frequency and the magnitude of the variation or
some other statistically valid test could ensure a fair comparison.
75
7.95 Japan submits that the use of downstream sales to replace home market sales that failed the
"arm's length" test, also violates the requirement of Article 2.4 that a fair comparison be made with
the respondent's US sales.  Japan argues that prices of downstream sales can only be higher than the
                                                     
72 Section 771(15) of the Tariff Act of 1930, as amended.   See also 19 CFR §351.102.
73 Under US law and regulation, we understand that an investigated exporter or foreign producer may
own as little as 5 per cent of another company for the sale to be considered as taking place between affiliatedparties.
74 Japan agrees that in this case there were home-market sales of hot-rolled steel in the ordinary course
of trade and Article 2.2 therefore does not apply. Japan's Answers to Questions from the Panel, Annex E-1,para. 57.
75 Japan submitted a statistician's affidavit concerning this issue, to which the United States objected as
not among the "facts made available in conformity with appropriate domestic procedures to the [USauthorities]".  We did not consider these facts concerning the application of the "arm's length" test  in reachingour conclusions in this dispute.WT/DS184/R
Page 35
prices of a producer's own direct sales76, and the downstream home-market sales are often made at a
different level of trade and therefore cannot be compared in a fair manner to export sales made
directly to unaffiliated customers.
7.96 The United States argues that Article 2.1 of the AD Agreement, which requires that normal
value be based on sales made in the ordinary course of trade, allows for more than one permissible
interpretation.  The United States submits that the USDOC's "arm's length" test of sales to affiliates isone way of examining whether sales were made in the ordinary course of trade.  The United States
asserts that it is generally recognized that sales to affiliates are suspect and it is expressly recognized
in Article 2.3 of the AD Agreement that association may lead to prices that are unreliable.  The United
States points out that other Members have a similar practice of doubting the reliability of prices of
sales to affiliates.
77
7.97 Since Article 2.1 of the AD Agreement does not specify how to determine whether sales are
made in the ordinary course of trade, the United States asserts that the "arm's length" test is onepermissible way of making this determination, on th e basis of consideration whether sales to affiliates
are made at prices that are comparable to those of sales to unaffiliated customers.  In the United States
view, in the absence of guidance in the AD Agreement on how to assess whether sales are outside the
ordinary course of trade, it cannot be argued that a difference of 0.5 percentage points between the
prices of sales to affiliated and unaffiliated customers is too small.  The United States submits that theauthority is free under the AD Agreement to consider a difference of 0.5 per cent significant.
78
7.98 The United States considers that USDOC's "arm's length" test, which compares the average
price of sales to each affiliated customer to the average price of sales of the same product by the same
producer to all unaffiliated customers, is preferable to the alternative suggested by Japan, because it
focuses on the relationship between the seller and the customer, not on a particular product.  TheUnited States believes that the standard deviation analysis suggested by Japan would lower the
threshold and provide no certainty that sales included in the calculation of normal value are not
affected by the relationship between the seller and the buyer.  Moreover, USDOC's weighted average
methodology is consistent with the way dumping margins are normally calculated under the
AD Agreement.
79  The United States further asserts that USDOC may otherwise consider
                                                     
76 Japan argues that it is not fair to compare an export price, ex-factory, with normal value based on
downstream sales without making any adjustments to address differences in price comparability due to the
reseller's added costs and profit.
77 First Written Submission of the United States , Annex A-2, section B, footnotes 265–269. The
United States considers its own practi ce more transparent and concrete than that of some other Members and
better suited for its own administration of the dumping law.
78 The United States specifically argues that there is no reason to require a difference of at least 2 per
cent merely because this is the de minimis  dumping margin.  Moreover, the United States points out that 0.5 per
cent is the de minimis  standard it applies in the context of administrative reviews, a practice the United States
asserts was sanctioned by the Panel in United States-DRAMs . The United States asserts that the Panel held that,
because the function of the 2 per cent de minimis  standard in Article 5.8 was to determine "whether or not an
exporter is subject to an anti-dumping order," it did not preclude Members from adjusting the threshold for other
purposes.  Specifically, the Panel found "log ical explanations for applying different de minimis  standards in
investigations and Article 9.3 duty assessment procedures," and upheld the application of a 0.5 per cent de
minimis  test in administrative reviews. See  Dynamic Random Access Memory Semiconductors of one Megabit
or Above from Korea , ("United States – DRAMs ") WT/DS99/R, adopted 19 March 1999, para. 6.90.   Article 5.8
contains no de minimis  standard for comparisons involved in determining whether sales have been made outside
the "ordinary course of trade".
79 The United States further argues that the Japanese producers could be glad that higher priced sales
were included since it means that such sales would not be replaced with even higher priced downstream sales.
The United States further asserts that it is logical that only lower prices are targeted by the test since it is throughselling to their affiliates at lower prices that producers will try to manipulate normal value.WT/DS184/R
Page 36
aberrationally high prices, as well as prices that fail the "arm's length" test, to be outside the ordinary
course of trade - these are simply not what is being tested for by the "arm's length" test.80
7.99 The United States maintains that nothing in the AD Agreement precludes the replacement of
sales excluded as a result of the application of the "arm's length" test with downstream sales to
unaffiliated customers. The United States submits that Article 2.2 of the AD Agreement does not give
a definition of the ordinary course of trade and only deals with the situation where there are no such
sales or insufficient  sales, which was not the case here.  There is no provision that prescribes how
sales to affiliates should be treated.  Article 2.2.2 of the AD Agreement concerning sales below cost is
merely one example of sales that are not considered to be made in the ordinary course of trade and
does not determine the treatment of sales to affiliates.  In sum, the United States considers that the use
of downstream sales to replace sales to affiliates that failed the arm's length test falls within the
definition of normal value of Article 2.1 of the AD Agreement.
7.100  The United States considers that Article 2.2 of the AD Agreement expresses a clear
preference for actual home market sales over sales to a third country or a construction based on cost
of production.  In this context, the United States asserts that the downstream sales it uses to replace
excluded sales to affiliates are, in fact, "sales in the ordinary course of trade" in the home market, and
as such, are preferable to the alternatives provided for in Article 2.2.  According to the United States,
Japan’s argument in fact leads to the absurd result that as soon as sales are made to affiliates, normalvalue would have to be either constructed based on cost of production or based on sales to third
countries.
7.101  The United States submits that USDOC establishes normal value in a permissible way when it
excludes sales to affiliates that fail the "arm's length" test, and when it replaces those sales with re-
sales to unaffiliated customers, and then compares the determined normal value and export price inaccordance with the requirements of Article 2.4, i.e. at the same level of trade, and making due
allowance for differences that affect price comparability.
81  Therefore, the United States asserts that
Japan’s claim that USDOC’s "arm's length" test and its use of downstream sales in certain
circumstances violates the “fair comparison” requirement of Article 2.4 of the AD Agreement must
fail.
7.102  Brazil submits that there is no legal basis in the AD Agreement for USDOC's "arm's length"
test, and objects to the very low threshold of affiliation applied by the United States, which, in Brazil's
view, will very often lead to the exclusion of perfectly normal sales under the "arm's length" test.  It
considers that Japan correctly presents the WTO inconsistencies of USDOC's "arm's length" test.
Brazil submits that the test excludes prices that are clearly comparable under any reasonable standard.Moreover, Brazil argues, the averaging methodology used in the test removes prices that might be
higher than most sales to unaffiliated customers and products that might prove to be a more
appropriate match to export sales.
7.103  Brazil also argues that there is no textual basis for USDOC' s replacement of certain affiliated
party sales with the resale price of the downstream sale.  Brazil argues that the silence in Article 2.2 as
to the use of resale prices in determining normal value is meaningful in light of the express provisions
concerning the use of resale prices in determining export price under Article 2.3 of theAD Agreement.  Brazil is of the opinion that the substitution of higher downstream resale prices
increases the normal value so as to vitiate any fair comparison.  Brazil concludes that the fact that
                                                     
80 Statement of Administrative Action (SAA), at 834 (stating that examples of sales made outside the
ordinary course of trade include "mer chandise sold at aberrational prices")  (Exh.  US/B-37).
81 The United States points out that in this case USDO C did not receive any requests for level of trade
adjustments but nevertheless conducted a level of trade analysis.   Department’s Memorandum on Level ofTrade, (12 February 1999)  (Exh.  US/B-39); see also  USDOC Preliminary Dumping Determination , 64 Fed.
Reg. at 8297 (Exh.  JP-11).WT/DS184/R
Page 37
USDOC only disregards the lower priced sales that fall outside the "arm's length" test and replaces
certain related-party sales with higher downstream prices demonstrates the bad faith in which the
United States has implemented the AD Agreement.
7.104  Korea argues that the "arm's length" test is in consistent with the AD Agreement.  In Korea's
view, the only basis for considering home market sales as outside the ordinary course of trade is set
out in Article 2.2.1 concerning sales below cost, and even then only under certain conditions.  InKorea's view, the "arm's length" test mixes together all models of subject merchandise sold to
affiliated and unaffiliated parties, without taking into account differences in prices and/or product that
existed independent of the factor of affiliation.  Moreover, Korea considers the test biased since
USDOC disregards only lower priced sales, guaranteeing that higher-priced sales remain in the
database for the calculation of normal value.
7.105   Chile supports Japan's view that the "arm's length" test, because it excludes only lower priced
sales to affiliated customers, does not allow for a fair comparison between normal value, which isartificially inflated as a result of the application of the test, and export price.  Moreover, Chile
considers that a difference of 0.5 per cent in price does not constitute a sufficiently significant price
difference.
7.106  According to the EC, the "arm's length" test  applied by the US authorities is not a
"permissible" interpretation of the terms "in the or dinary course of trade" in Article 2.1. The EC
considers that it is unreasonable and contrary to Article 2.1 for the US authorities to treat in all
circumstances a 0.5 per cent difference in average prices as irrefutable evidence that sales are not
made in the ordinary course of trade.
(b) Finding
7.107  The parties are in general agreement that sales between affiliated parties may not be in the
ordinary course of trade, and therefore not included in the determination of normal value.
82  However,
Japan disagrees with: (i) the "arm's-length" test applied by the USDOC in determining whether
affiliated party sales are not in the ordinary course of trade, and (ii) the methodology applied by the
USDOC in using the resale price of the affiliated purchaser as a substitute price for sales excluded
from the calculation of normal value on the basis of the application of the "arm's length" test.83
(i) The use of the "arm's-length" test by USDOC in determining whether affiliated party sales
are in the ordinary course of trade
7.108  Turning to the first issue, we note that Ar ticle 2.1 of the AD Agreement specifies that a
product is to be considered as dumped if the export price is less than "the comparable price, in the
ordinary course of trade, for the like product wh en destined for consumption in the exporting
country."  However, the AD Agreement does not define the concept of "ordinary course of trade",
either in Article 2.1 or elsewhere, and establishes no general tests for determining whether sales are
                                                     
82 We do not address Korea's argument that only sales below the cost of production may be considered
as not in the ordinary course of trade, as third parties may not raise claims before the Panel.
83 We note in this regard that Japan purports to make a claim concerning the "general practice" of the
United States with respect to the application of the "arm's length" test and the replacement of excluded sales. Aswith its purported claim concerning the "general practi ce" regarding facts available, we do not consider that
Japan has stated a claim in this regard in the request for establishment.  Although the United States has not
raised a specific objection in this regard , we limit ou r ruling to the question whether the United States acted
inconsistently with its obligations under the AD Agreement in applying that test in this case, and do not rule onthe consistency of that test with the AD Agreement per se , as we consider that issue to be outside our terms of
reference.WT/DS184/R
Page 38
made in the ordinary course of trade, or not.84   It seems clear to us, and the parties do not dispute, that
investigating authorities must determine whether sa les in the home market are made in the ordinary
course of trade in order to determine which of these sales are to be considered in the determination of
normal value.  The parties also seem to be in gene ral agreement that sales to affiliates may, in some
circumstances, be made not in the ordinary course of trade.  It thus seems indisputable that an
investigating authority may "test" home market sales to affiliated customers to decide whether theyare made in the ordinary course of trade and consequently are to be considered in determining normal
value.  The difference between the parties is in their position as to whether the USDOC's "arm's
length" test is an appropriate basis for making this decision.
7.109  The "arm's length" test, as we understand it, is intended to test for differences in pricing to
affiliated customers as compared with pricing to un affiliated customers.  In the United States' view,
such differences demonstrate that sales to affiliated customers are not in the ordinary course of trade.
We can certainly accept, as Japan appears to accept, that a pattern of prices to affiliated customers thatis different from the pattern of prices to unaffiliated purchasers might support a conclusion that sales
to affiliated customers are not in the ordinary course of trade.  However, a test intended to distinguish
sales that are "in the ordinary course of trade" from those that are not must be based on a permissible
interpretation of that term as used in the Agreement.
7.110  Our concern with the "arm's length" test arises because it does not, in fact, test for differences
in prices of sales to affiliated customers as compared with unaffiliated customers, which might
indicate that sales are not made in the ordinary course of trade.  Rather, the "arm's length" test only
tests whether prices to affiliated customers are lower , on average, than prices to unaffiliated
customers.
85  There is no reason to suppose, and the United States has not proposed any, that
affiliation only results in sales that are outside the ordinary course of trade because they are lowerpriced on average than sales to unaffiliated customers.  One example of prices to affiliated customers
that are higher as a result of affiliation, and might be considered not in the ordinary course of trade,
would be where prices between affiliates are established in order to allocate profits, and consequently
tax burdens, among affiliates.  These prices might, on average, be higher than prices to unaffiliated
customers, but would not be caught by the USDOC's "arm's length" test.
7.111  The United States argues before us that it would, if the situation arose, test for "aberrationally
high" prices to affiliated customers.  However, merely that the United States might apply a different
test in other circumstances does not mean that the "arm's length" test is based on a permissible
interpretation of "sales in the ordinary course of trade".  Moreover, it is clear that the "arm's length"
test was applied in this case without consideration of any particular factual circumstances.  USDOCstated, in the preliminary determination
"Sales to affiliated customers in the home market not made at arm's length prices (if
any) were excluded from our analysis because we considered them to be outside the
                                                     
84 Article 2.2.1 of the Agreement does provide that sales made below cost may be treated as not in the
ordinary course of trade and disregarded in calculating no rmal value if certain conditions are satisfied.  Thus, it
implies that sales below cost are not in the ordinary course of trade.  Further, Articles 2.2.1.1 and 2.2.2 containdetailed rules on the calculation of costs in assessing whether sales are made below cost.  However, merely that
one category of sales that may be considered not in the or dinary course of trade is set out in the Agreement does
not illuminate how an investigating authority is to determine, with respect to sales other than sales below cost,whether such sales are in the ordinary course of trade.  We  note in this regard that although an illustrative list of
sales outside the ordinary course of trade was the subject of discussion in the negotiation of the AD Agreement,no such list was ultimately agreed to.  See, GATT Doc. MTN:GNG/NG8/15 (19 March 1990) at page 13.
85 We note that we have doubts as to whether a price difference of, on average, 0.5 per cent, can
reasonably be considered as sufficiently different so as to support the conclusion that the lower priced sales are
not in the ordinary course of trade.  However, we do not consider it necessary or appropriate to resolve this
question, as our conclusion rests on the more basic problem that the "arm's length" test does not, in our view,reasonably relate to the question whether sa les are in the ordinary course of trade.WT/DS184/R
Page 39
ordinary course of trade.  See 19 CFR 351.102.  To test whether these sales were
made at arm's length, 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 theaffiliated party were at arm's length and used those sales in determining [normal
value]. …
86
7.112  The result of application of the "arm's length" test , in this case and in general, is the exclusion
from the determination of normal value of prices that are, on average, lower.  As a result, the
application of the "arm's length" test cannot but skew the normal value upward, thereby making a
finding of dumping, or a higher margin of dumping, more likely.87   This reinforces our view that the
"arm's length" test does not rest on a permissible interpretation of the term "sales in the ordinarycourse of trade".
(ii) The replacement of excluded sales with sales by affiliated purchasers in the determination of
normal value
7.113  Turning to the second issue, the replacement, in the calculation of normal value, of
"excluded" sales by downstream sales, we note that Article 2.1 establishes that normal value is the"comparable price, in the ordinary course of trade, for the like product when destined for consumption
in the exporting country".  The United States argues that the downstream prices it uses as
replacements for excluded home market sales to affiliated companies meet this definition, and that
therefore, the USDOC decision to use these prices in establishing normal value is based on a
permissible interpretation of the Agreement. We do not agree.
7.114  It is important to keep in mind the overall object and purpose of the AD Agreement, to
establish rules for the imposition of anti-dumping duties.  Among these is the obligation, set out in
Article 6.10, to "as a rule, determine an individual margin of dumping for each known exporter or
producer concerned of the product under investigation".  To this end, investigating authorities
routinely collect information from the known exporters and producers concerned regarding their homemarket and export sales, in order to enable the calculation of a dumping margin.  In our view, the
"comparable price, in the ordinary course of trade" on the basis of which normal value is to be
determined under Article 2.1 must  be the price of the sales by each known exporter or producer for
which a dumping margin is calculated.  The "replacement" prices used in this case in the calculation
of normal value for investigated Japanese producers were the prices of sales made by affiliates  of the
companies being investigated for purposes of determining whether dumping was occurring and if so,
the margin of dumping.  While it may be true that those sales were, in the broad sense, in the ordinary
course of trade, in our view they are simply not sales which may be taken into account in determining
normal value for the companies for which dumping margins were being established, as they are not
sales in the ordinary course of trade of those companies.
7.115  We consider that the overall structure of Article 2 supports our conclusion in this regard.
Article 2.1 defines dumping as a situation where export price is lower than normal value, which is the"comparable price, in the ordinary course of trade, for the like product when destined for consumption
in the exporting country".  Article 2.2 then provides alternative methods for establishing normal value
when there are no such sales, the volume of such sales is too low to permit a proper comparison, or
the particular market situation does not permit a proper comparison.  Article 2.3 next provides
                                                     
86 USDOC Preliminary Dumping Determination, 64 Fed. Reg. 8295 (19 February 1999), Exh. JP-11
87 This is particularly true when the application of the "arm's length" test is combined with the
replacement of excluded sales with downstream sales to af filiates, which are more likely than not to be higher
priced sales.WT/DS184/R
Page 40
alternative methods for establishing export price in situations where there is no export price or the
export price is deemed unreliable.
7.116  Once normal value and export price have been determined in accordance with the provisions
of Articles 2.1 through 2.3, Article 2.4 then establishes rules governing the comparison of normal
value and export price.88  Thus, Article 2 as a whole sets out the basic rules for all aspects of the
determination of dumping.  Of course, investigating authorities will have to make numerous decisionsalong the way to determining a margin of dumping for each investigated company, not all of which
are specifically addressed in Article 2 itself.  However, these decisions must, in all cases, not be
inconsistent with  the specific requirements of Article 2, as well as the rest of the AD Agreement.
7.117  The alternative methods for the calculation of normal value and export price provided for in
Articles 2.2 and 2.3 of the AD Agreement are not the same. We see no basis on which to conclude
that because Article 2.3 allows for the construction of an export price on the basis of a first resale to
an independent buyer, a similar action must be allowed for the determination of normal value. It is byno means clear to us that calculation of a constructed normal value by a method parallel to that
provided for constructed export price would be acceptable under the AD Agreement.
89  In any event,
however, that is not what USDOC did in this case.  There was no attempt to make allowances for
costs, including duties and taxes, incurred between th e original sale to the affiliated purchaser and the
first resale to an independent buyer, as is required when export price is constructed pursuant toArticle 2.3. The consideration of level of trade does not compensate for this lack.
90  In our view, the
replacement of excluded sales by investigated companies to affiliates with the downstream sales by
those affiliates in the calculation of normal value is inconsistent with the AD Agreement.
7.118  There was no allegation in this case that there were no or insufficient sales in the ordinary
course of trade by the investigated companies to allow for the calculation of normal value on the basisof those sales, as required by Article 2.1.  Neither party contends that there was a need to calculate
normal value according to one of the alternate method s provided for in Article 2.2.  Thus, in our view,
in order to be consistent with Article 2.1, normal value was to be determined on the basis of the prices
of sales made by the investigated companies themselves , in the ordinary course of trade.  We can
see no basis in the AD Agreement for the replacement of certain excluded home market sales bydownstream sales of the goods in the calculation of  normal value for the investigated respondents in
this case.  We therefore conclude that the "replacement" of excluded sales to affiliates with the sales
by those affiliates to downstream purchasers in this case was not consistent with Article 2.1 of the AD
Agreement.
(iii) Additional findings
7.119  Having found that the "arm's length" test does not relate to a permissible interpretation of the
term "sales in the ordinary course of trade", we conclude that its application in this case led to a
determination as to whether certain sales were made in the ordinary course of trade inconsistent with
Article 2.1 of the Agreement.  As a consequence of our finding in this regard, we do not consider it
                                                     
88 Article 2.5 deals with the situation where the products are not imported from the country of origin
directly, Article 2.6 defines like products, and Article  2.7 establishes that the foregoing rules are without
prejudice to the second Supplementary Provision to paragraph 1 of Article VI of Annex I to GATT 1994.
89 Indeed, it might be argued that because the ne gotiators of the AD Agreement provided for
calculation of a constructed export price on the basis of first resale to an independent buyer in Article 2.3, thatthey did not provide a similar possibility for constructing a normal value on the same basis indicates that such amethodology is precluded.
90 The parties both acknowledge that the downstream sales of the affiliated company are likely to be
higher priced than the excluded sales to the affiliated company.  First Written Submission of Japan, Annex A-1,
para.170, Second Submission of the United States, Annex C-2, para 28. Thus, the use of downstream sales byaffiliated companies to replace excluded sales to affiliate d companies in calculating normal value is likely to
skew normal value upward.WT/DS184/R
Page 41
either necessary or appropriate to consider whether th at test also is inconsistent with the more general
obligation of fair comparison set out in Article 2.4 of the AD Agreement.
7.120  Similarly, having found that the USDOC acted inco nsistently with Article 2.1 in replacing, in
the determination of normal value, certain "e xcluded" sales by investigated companies with
downstream sales made by purchasers affiliated with  the investigated companies, we do not consider
it necessary to go on to consider whether the replacement of excluded sales with sales by affiliateswas consistent with Articles 2.2 and 2.4 of the AD Agreement.
E. A
LLEGED VIOLATIONS IN THE PRELIMINARY DETERMINATION OF CRITICAL CIRCUMSTANCES
1. Arguments
7.121  Japan claims that USDOC's preliminary critical circumstances finding is inconsistent with
Articles 10.1, 10.6 and 10.7 of the AD Agreement because (i) USITC had preliminarily found only a
threat of injury to the industry while Article 10.6 of the AD Agreement requires evidence of current
injury; and (ii) the preliminary determination of critical circumstances was not supported by sufficientevidence as required by Article 10.7 of the AD Agreement.  Japan moreover asserts  that the
evidentiary standard in the US statute governing preliminary critical circumstances findings on its
face is inconsistent with the "sufficient evidence" standard of Article 10.7 of the AD Agreement.
Finally, Japan argues that the US statute does not require evidence of all the conditions set forth in
Article 10.6 of the AD Agreement.
7.122  Japan submits that the USDOC preliminary critical circumstances determination inevitably
also is inconsistent with Article 10.1 of the AD Agreement since it allowed for the possibility that AD
duties would be levied retroactively in spite of the fact that the requirements of Articles 10.6  and 10.7
of the AD Agreement had not been satisfied.
7.123   Japan asserts that the investigating authorities cannot predicate a finding of critical
circumstances on a mere threat of injury.  Japan therefore claims that USDOC’s preliminary critical
circumstances determination, which Japan asserts was based on a preliminary finding by the USITC
of threat of injury, is inconsistent with Article 10.6 of the AD Agreement.  Japan asserts, in support of
its view, that Article 10.6 of the AD Agreement uses the term “injury”, while Articles 10.2 and 10.4
of the AD Agreement contain a clear distinction between “injury” and “threat” thereof, and allows forretroactive imposition of duties only in the case of current  material injury.
7.124  Second, Japan argues that USDOC's preliminar y critical circumstances determination is
inconsistent with Article 10.7 of the AD Agreement because it was not based on "sufficient evidence"
that the requirements of Article 10.6 of the AD Agreement were satisfied.  Japan claims that USDOC
based its critical circumstances determination on information contained in the petition and in certainpress reports.  In Japan's view, such information is one-sided and necessarily biased and can therefore
never constitute sufficient evidence as required by Article 10.7 of the AD Agreement.  In particular,
Japan asserts that USDOC lacked sufficient evidence of the existence of dumping as required by
Article 10.6(ii) of the AD Agreement and the chapeau of Article 10.6, since it based its conclusion
entirely on information contained in the petition.  Japan further argues that USDOC did not have
sufficient evidence of injury to the industry caused by dumped imports, since it relied on press reports
and ignored the preliminary findings of the USITC which stated that the "industry was relativelyhealthy during much of the period examined".  Japan finally argues that USDOC lacked sufficient
evidence of "massive dumped imports over a relatively short period”.  Japan submits that USDOC
departed from its normal practice of assessing the period before and immediately after the filing of a
petition, and instead picked a period of five months preceding and following April 1998 as the basis
for determining whether there were massive dumped imports over a relatively short period.  JapanWT/DS184/R
Page 42
argues that this date was arbitrarily chosen on the basis of press reports that allegedly announced the
likely filing of a petition for anti-dumping measures by US producers.91
7.125  In addition, Japan alleges that the US statutory provision governing preliminary critical
circumstances determinations, section 733(e) of the Tariff Act 1930, as amended, is inconsistent on its
face with Article 10.7 of the AD Agreement. That Article requires that the authorities “have sufficient
evidence” that the conditions set forth in paragraph 6 of Article 10 of the AD Agreement are satisfied.Japan argues that section 733(e) of the Tariff Act of 1930, as amended, sets a lower evidentiary
standard by requiring only  a "reasonable basis to believe or suspect" that certain conditions are
satisfied, rather than "sufficient evidence" that those conditions are satisfied.
92  Moreover, Japan
argues that the US statutory provisions governing critical circumstances determinations do not require
all of the findings of fact required by Article 10.6 of the AD Agreement.  Japan refers in particular to
the absence in the US statute of a requirement to  make a preliminary finding of dumping and of an
assessment of whether the remedial effect of the AD duty is undermined by the dumped imports.
Japan submits that the US statute also does not require sufficient evidence of the causal link between
massive imports and injury.
7.126  The United States submits that neither the US statute nor USDOC’s preliminary critical
circumstances determination is inconsistent with Article 10 of the AD Agreement.  The United States
claims that, contrary to Japan's assertion, Article 10.6 of the AD Agreement and 10.7 of theAD Agreement expressly authorise that preliminar y critical circumstances determinations be made
based on a threat of material injury to the domestic industry.
93 The United States refers in this regard
to the ordinary meaning of the word injury. The United States argues that the term "injury" is defined
in footnote 9 of the AD Agreement as “material in jury to a domestic industry or threat of material
injury to a domestic industry, unless otherwise specified”.  The United States notes that Article 10.6of the AD Agreement does not "otherwise specify".  Thus, in the US view, “injury” in Article 10.6 of
the AD Agreement includes both material injury and threat thereof.
7.127  The United States argues that Articles 10.6 and 10.7 of the AD Agreement permit "such
measures be taken as may be necessary to collect AD duties retroactively" to be taken at any time
after the initiation of the investigation.
94  The United States submits that, in accordance with
Article 10.7 of the AD Agreement, USDOC made a preliminary critical circumstances determination
on the basis of sufficient evidence that the conditions set forth in Article 10.6 of the AD Agreement
were satisfied.95  The United States asserts that USDOC had sufficient evidence that the importers
                                                     
91 USDOC Preliminary Critical Circumstances Determination , 63 Fed. Reg. at 65751.  (Exh.  JP-9)
92 Japan argues on the basis of the ordinary meaning of the words as found in the dictionary that what
is “reasonable” is not “sufficient.”  According to Japan, “sufficient” is a standard: whatever is enough to satisfy
a legal test.  “Reasonable” is a range, which can be “less or more than might be thought likely or appropriate.”
And what one “believes or suspects” is not necessarily “evidence.”  “Evidence” is proof, Japan submits.
“Believe or suspect” describes a range much less than proof.  “Suspect” is in fact flatly incompatible withevidence, Japan argues; it is instructive that the definition of “suspect” includes “[i]magine something evil,wrong, or undesirable .  .  .  on little or no evidence; believe to be guilty with insufficient proof or knowledge.”“Believe” is mere trust or confidence. According to Japan, that does not reflect the factual inquiry required toestablish “proof.” Japan opines that USDOC is essentially directed by the statute to decide that critical
circumstances exist on mere suspicion or belief, without any real evidence.
93 Responses of the United States to  Questions from the Panel, Annex E-3, para.18.
94 The United States submits that section 733(e) of the Tariff Act of 1930, which provides that no
action can be taken before a preliminary finding of dumping is made by USDOC, is more restrictive than
Article 10.7 of the AD Agreement, which on its face allo ws action to secure potential retroactive duties at any
time after initiation once there is sufficient evidence of critical circumstances.
95 The United States asserts that the standard in the AD Agreement of “sufficient evidence” requires
that an objective and unbiased Investigating Authority could properly have reached the conclusion that such
evidence existed.  The United States argues that the standard in case of preliminary determinations andprovisional measures is necessarily lower than in case of a final determination.WT/DS184/R
Page 43
knew or should have known that the exporter was practising dumping.  The United States emphasises
that the several hundreds of pages of exhibits to the petition are not "mere allegations" of dumping,
but contain substantial factual information on the export price and normal value of the subject
products and thus constitute evidence.  On the basis of this information, knowledge of dumping was
imputed to the importers on the basis of dumping margins in excess of 25 per cent.96  The United
States argues that since the AD Agreement does not dictate how to determine whether the importerswere aware that products were being dumped, it is both reasonable and permissible to deduce such
knowledge from the degree of the dumping margin as preliminary established.
97
7.128  The United States asserts that USDOC also had sufficient evidence of massive imports over a
short period of time.  USDOC compared two six month periods and established that there was an
increase in imports of 100 per cent.  The United States asserts that nothing in the AD Agreement
dictates which date to choose to assess whether there have been massive imports over a short period.
Therefore, USDOC was permitted to choose the date on which it became common knowledge thatanti-dumping proceedings would be initiated in the near future, and the date of April 1998 was
therefore reasonable.  The United States argues that because petitioners wait to submit their petition in
order to gather more evidence does not mean that they should be deprived of their remedy against
massive dumped imports that entered the country in anticipation of the anti-dumping investigation.
98
7.129  The United States refutes Japan’s challenge to the consistency of section 733(e) of the Tariff
Act of 1930, as amended.  First, the United States submits that it is clear that section 733(e) does not
mandate any WTO inconsistent action and can therefore not be found to be inconsistent on its face
with the AD Agreement.  Moreover, the United States submits, the evidentiary standard of "a
reasonable basis to believe or suspect" is similar to that of "sufficient evidence" and both are used
interchangeably by USDOC.99  The United States asserts that it is not a lower evidentiary standard.
The United States further argues that it is general USDOC practice to make all the determinations as
required by Article 10.6 of the AD Agreement c oncerning massive imports, knowledge of dumping
and injury and the causal link between the dumping and the injury.
7.130  Brazil supports Japan's argument that the US critical circumstances determination was
inconsistent with Article 10.6 of the AD Agreement, as in Brazil's view a preliminary finding ofmaterial injury to the industry and not just threat thereof is required.  Brazil argues that the USDOC
determination was not based on sufficient evidence as required by Article 10.7 of the AD Agreement
but on mere allegations of the petitioners.  Moreover, Brazil submits that the evidentiary standard in
                                                     
96 Japan argues that knowledge of dumping cannot be determined without a preliminary dumping
finding.  The United States submits that Article 10.6 directs the administering authority to determine whetherimporters should have known that dumping was occurring and that such dumping would cause injury.  The
Agreement does not specify how to determine such awareness.  The United States asserts that although Japan
would prefer a requirement that there be a determined dumping margin, this is simply not necessary under the
Agreement.  The United States concludes therefore that if USDOC’s method for determining importer
knowledge is a permissible interpretation of the Agreement, and if it rests upon sufficient evidence, it must beupheld.
97 The United States notes in this respect that Japan never alleged that the evidence contained in the
petition of the US industry was not sufficient to initiate an investigation under Articles 5.2 and 5.3 of theAD Agreement.
98 The United States stresses that Section 351.206(i) of USDOC's regulations provides that USDOC
will “normally” compare the three months following initiation of an investigation to the three months precedinginitiation in order to determine whether critical circumst ances exist.  These comparis on periods are appropriate
where companies learn of the investigation when it is initiated and then try to beat the preliminary determinationwith a surge of imports of the subject merchandise.  However, the United States points out, Section 351.206(i)provides that if USDOC finds that importers, exporters, or producers had reason to believe, at some point prior
to the beginning of the proceeding, that an investiga tion was likely (as it did in this case), USDOC may consider
a period of not less than three months from that earlier time for comparison purposes.
99 The United States provides examples in its answer to question 31 of the Panel, footnote 6. Responses
of the United States to Questions from the Panel, Annex E-3, para. 24, footnote 6.WT/DS184/R
Page 44
the US statutory provisions is lower than that set forth in the AD Agreement and that US law does not
require a finding of all the elements of fact of Article 10.6 of the AD Agreement.
7.131  Korea agrees with Japan's view that USDOC's critical circumstances determination was not
based on sufficient evidence of current injury, but only of threat of injury, and is therefore
inconsistent with Articles 10.6 and 10.7 of the AD Agreement.  Korea asserts that this interpretation,
that evidence of current material injury is necessary, comports with the limited object and purpose ofArticle 10.6 of the AD Agreement which is to assure that the remedial effects of the final duties are
not eviscerated. Korea argues that, if only threat of injury exists, the remedial effect will not be
undermined since the prospective application of the duties will precisely prevent injury from
occurring.
7.132  Chile is of the opinion that information from petitioners is not "sufficient evidence" and the
USDOC critical circumstances determination therefore is inconsistent with Articles 10.7 of the
AD Agreement.
2. Finding
7.133  We recall certain of the facts that are relevant to our examination of the matter before us.  On
8 October 1998, USDOC issued a policy bulletin stat ing that the USDOC would, if adequate evidence
of critical circumstances was available, issue preliminary critical circumstances determinations prior
to preliminary dumping determinations.
100  On 30 November 1998, USDOC issued an affirmative
preliminary critical circumstances determination regarding imports of hot-rolled steel from Japan.
7.134  Although USDOC made a preliminary determin ation of critical circumstances, no measures
"necessary to collect anti-dumping duties retroactively" were actually taken until the preliminary
determination of dumping by USDOC, effective  19 February 1999.101  USDOC made a second and
final critical circumstances determination as part of its final dumping determination on 6 May 1999.Under US law, however, it is the USITC, in its final determination of injury, which determines
whether critical circumstances exist that warrant the retroactive application of duties to 90 days prior
to the date of application of provisional measures.  USITC in its final injury determination of
23 June 1999 made a negative critical circumstances finding.  USITC concluded that “we do not find
that the record evidence indicates that the subjec t imports from Japan would seriously undermine the
remedial effects of the order”.
102 Therefore, anti-dumping duties were ultimately not collected
retroactively.
7.135  Japan is challenging the consistency of the USDOC preliminary critical circumstances
determination with Articles 10.6 and 10.7 of the AD Agreement.  Japan claims that by violating these
two provisions, USDOC also acted inconsiste ntly with Article 10.1 of the AD Agreement.
7.136  Article 10.1 of the AD Agreement reads as follows:
"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
                                                     
100 Change in Policy Regarding Timing of Issuance of Critical Circumstances Determinations, 63 Fed.
Reg. 55364 (15 October 1998) ("Policy Bulletin"), Exh.  JP-3
101 At that time, USDOC directed the US Customs Service to suspend liquidation and require the
posting of bonds or cash deposits retroactively to 90 days prior to the date of publication of the preliminarydumping determination, i.e. 90 days prior to 19 February 1999. USDOC Preliminary Dumping Determination,
64 Fed. Reg. 8299. Exh. JP-11 .
102 Certain Hot-Rolled Steel Products From Japan, 64 Fed. Reg. 33514, 33514 (23 June 1999) . Certain
Hot-Rolled Steel Products From Japan, Inv.  No.  731-TA-807 (Final), USITC Pub.  3202 (June 1999) ("USITCReport"),  page 23.WT/DS184/R
Page 45
1 of Article 7 and paragraph 1 of Article 9, respectively, enters into force, subject to
the exceptions set out in this Article"
7.137  Articles 10.6 and 10.7 of the AD Agreement provide that:
"10.6 A definitive anti-dumping duty may be levied on products which were
entered for consumption not more than 90 days prior to the date of application ofprovisional measures, when the authorities determine for the dumped product in
question that:
(i) there is a history of dumping which caused injury or that the importer
was, or should have been, aware that the exporter practises 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 duty to be applied, provided that the importers concernedhave been given an opportunity to comment.
10.7 The 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 for in paragraph 6, once they havesufficient evidence that the conditions set forth in that paragraph are satisfied".
7.138  Japan’s claims concern only the US preliminary  critical circumstances determination, which
is governed by Article 10.7 of the AD Agreement, which authorizes preliminary measures necessary
to collect duties retroactively.  We will first address Japan's claims concerning the US statutoryprovisions on critical circumstances.  Japan argues that the US statute does not require a finding of all
the conditions necessary for the retroactive imposition of duties and sets an evidentiary standard
which is lower than the "sufficient evidence" standard of the AD Agreement.  Secondly, we will
discuss Japan's claim that USDOC acted inconsistently with Article 10.6 of the AD Agreement by
making an affirmative critical circumstances determination in the absence of a finding of currentmaterial injury to the industry.  Finally, we will address Japan's claim that USDOC's preliminary
critical circumstances determination was not supported by sufficient evidence of all the conditions of
Article 10.6 of the AD Agreement and therefore was inconsistent with Article 10.7 of the
AD Agreement.
(a) Are the US statutory provisions concerning critical circumstances consistent with the
Agreement with respect to the evidentiary standard it sets forth and the conditions of
application it requires?
7.139  Section 733(e)(1) of the Tariff Act of 1930, as amended, requires USDOC to make certain
preliminary determinations in a case in which a petitioner requests the imposition of anti-dumping
duties retroactively for 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—WT/DS184/R
Page 46
(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".103
7.140  Japan argues that the evidentiary standard set forth in the statute is inconsistent with the
requirements of Article 10.7, and also that the statute does not require all of the conditions of the
AD Agreement for making a preliminary critical circumstances determination.
7.141   It is well established in GATT/WTO practice that a statute is inconsistent on its face with a
Member’s WTO obligations only if it is mandatory and requires WTO inconsistent action or prohibits
WTO consistent action.104  The Appellate Body recently stated, in United States – Anti-Dumping Act
of 1916 :
"88. As indicated above, the concept of mandatory as distinguished from
discretionary legislation was developed by a number of GATT panels as a threshold
consideration in determining when legislation as such – rather than a specific
application of that legislation – was inconsistent with a Contracting Party's GATT 1947obligations.  The practice of GATT panels was summed up in United States – Tobacco
 
as follows:
… panels had consistently ruled that legislation which mandated
action inconsistent with the General Agreement could be challenged assuch, whereas legislation which merely gave the discretion to the  executive
authority  of a contracting party to act inconsistently with the General
Agreement could not be challenged as  such;  only the actual application of
such legislation inconsistent with the General Agreement could be subject
to challenge.  (emphasis added)
89. Thus, the relevant discretion, for purposes of distinguishing between mandatory
and discretionary legislation, is a discretion vested in the  executive  branch  of
government". (footnotes omitted)
105
We therefore consider whether the statute in question requires USDOC to take action which
contravenes the US obligations under the WTO AD Agreement.
7.142  The statute provides that if the petitioner alleges critical circumstances, USDOC shall
promptly determine  whether there is a reasonable basis to believe or suspect that critical
circumstances exist.  On the basis of this determination such measures may be taken as necessary to
                                                     
103 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).
104 The Panel in United States – Section 301  also recognized the "classical test in the pre-existing
jurisprudence that only legislation mandating a WTO inconsistency or precluding WTO consistency, could, as
such, violate WTO provisions". Panel Report, United States – Section 301 , para. 7.54.
105 Appellate Body Report, United States – Anti-dumping Act of 1916 , WT/DS136/AB/R and
WT/DS162/AB/R, adopted 26 September 2000, paras 88 - 89.WT/DS184/R
Page 47
collect anti-dumping duties retroactively.  We do not believe that this provision of the US statute
requires USDOC to take WTO inconsistent action.  Nor does it preclude USDOC from acting
consistently with the Agreement.
7.143  First, the evidentiary standard set forth in the US statute is "a reasonable basis to believe or
suspect".  Article 10.7 of the AD Agreement on the other hand uses the term "sufficient evidence".  It
is a well accepted principle of international law that for the purposes of international adjudicationnational law is to be considered as a fact.
106  The analysis of the consistency of the US statute with
Article 10.7 must take into account, therefore, its application in practice, as interpreted and applied by
the administering and judicial authorities.  We recognize that the actual terms used in the US statute
differ from those of the Agreement.  However, we believe that the consistency of this evidentiary
standard is not determined by a semantic difference.  Rather, we must examine how this standard has
been applied in practice.
7.144  In our view, "sufficient evidence" refers to the quantum of evidence necessary to make a
determination. "A reasonable basis to believe or  suspect" on the other hand, seems to refer to the
conclusion reached on the basis of evidence presented, that is, a legal mindset that certain facts exist,
based on the evidence presented.  It appears that in past cases the US authorities have applied the
standard as set out in the statute interchangeably with a standard expressed as "sufficient evidence"
and have made affirmative determinations when sufficient evidence was adduced that the conditionsof application were satisfied.
107  We therefore consider that the US statute, as it has been applied is not
inconsistent with the requirement of the AD Agr eement that the investigating authority must have
sufficient evidence of the conditions of Article 10.6 before taking measures necessary to collect the
duties retroactively.108
7.145  Japan further argues that the US statute does not require evidence that all the conditions of
Article 10.6 of the AD Agreement are satisfied, as requ ired by Article 10.7.  Japan claims in particular
that the statute does not require sufficient evidence of dumping, injury and causation, and that it does
not require evidence that massive dumped imports are likely to seriously undermine the remedial
effect of the duty.  We recall that the question we must address in this regard is whether the statute
requires action inconsistent with, or prevents actions consistent with, the requirements of theAgreement.
7.146  In our view, the US statute allows the investigating authority to make its determinations
consistently with the AD Agreement in this respect.  We recognise that the statute does not explicitly
set out the same requirements as are set out in Article 10.6.  However, this does not imply that
USDOC is precluded from taking these elements into consideration, in so far as necessary.  In ourview, the text of the US statute in this regard  does not preclude USDOC from determining whether
there is sufficient evidence that the conditions set out in paragraph 10.6 are satisfied.  The question
then becomes whether USDOC did so in this case.  We will discuss this question below.
7.147  We note that Article 10.7 requires that there be sufficient evidence that the conditions of
Article 10.6 are satisfied. Article 10.6 of the AD Agreement of course presupposes a final dumping
and injury determination, without which no definitive dumping duties may be applied in any case.
                                                     
106 Certain German Interests in Polish Upper Silesia , 1926, PCIJ Rep., Series A, No. 7, p.19; See also
Panel Report, United States – Section 301,  para. 7.18.
107 The United States refers to various instances in which the two standards have been used
interchangeably by USDOC in anti-dumping and countervailing duty cases, See First Written Submission of theUnited States, Annex A-2,  para 290 and footnote 405.
108 We note that Japan made several claims concerning USDOC’s preliminary critical circumstances
determination arguing a lack of sufficient evidence in support of its determination.  However, as we will discuss
in detail below, Japan did not argue that the lack of sufficient evidence was somehow due to a flawedevidentiary standard, but instead pointed to the evidence actually relied upon, which Japan considersinsufficiently reliable and probative.WT/DS184/R
Page 48
Rather than being conditions set out in  Article 10.6, we consider that findings of dumping and injury
are a precondition for any definitive duty to be applied.  Article 10.7 of the AD Agreement provides
that certain preliminary  measures may be taken “after initiation”.  This implies that at the time of the
critical circumstances determination, the authority has already determined, under Article 5.3, that the
petition contained sufficient information of dumping, injury, and a causal link to justify the initiation
of the investigation.  For a preliminary critical circumstances determination, Article 10.7 requires, inaddition, sufficient evidence of the specific conditions of Article 10.6 as set forth in 10.6 (i) and (ii).
It does not, however, in our view necessarily require additional or different evidence of dumping or
injury from that on which the decision to initiate was based.
7.148  We note that the US statute governing preliminary critical circumstances determinations does
not expressly refer to the question whether massi ve dumped imports seriously undermine the remedial
effect of the duty.  However, we do not consider that the Agreement requires that a separate
determination be made with regard to this aspect of Article 10.6 at the preliminary stage ofconsidering whether to take action under Article 10.7.  Rather than a "condition" of Article 10.6 of
which there must be sufficient evidence in order to act under Article 10.7, in our view, this
requirement establishes the conclusion that must be reached in order to justify retroactive application
of the anti-dumping duty under Article 10.6.
109  Consideration of this question at the preliminary stage
of deciding whether to apply measures under Arti cle 10.7 would, in our estimation, at best be
speculative. Our view is reinforced by the fact that  the possible undermining of the remedial effect of
a definitive anti-dumping duty is not a question of which evidence would be available at the very
early stages of an investigation, after initiation, when the determination under Article 10.7 may be
made and authorized precautionary measures taken. The conclusion that the remedial effect of a
definitive duty would be undermined by the effect of massive dumped imports can only meaningfullybe addressed at the end of the investigation, when it has been determined that the imposition of a
definitive anti-dumping measure is warranted, based on a final determination of dumping, injury, and
causal link.  To require investigating authorities to undertake what is likely to be an impossible,
meaningless task under Article 10.7 is not, in our view, necessary or appropriate.
7.149  Moreover, in this respect, we note the US regulation set out in 19 CFR § 351.206 (h).  It
provides that, in assessing whether imports of the subject merchandise have been massive, USDOC is
to examine the volume and value of the imports, the seasonal trends and the share of domestic
consumption accounted for by the imports, and establishes that imports over a relatively short period
of time may be determined based on the knowledge of exporters that an anti-dumping proceeding was
likely or had been initiated. We recall that Article 10.6 (ii) of the AD Agreement provides that injurymust be caused by massive dumped imports “which in light of the timing and the volume of the
dumped imports  and other circumstances (such as a rapid build-up of inventories) is likely to seriously
undermine the remedial effect of the definitive anti-dumping duty to be applied”. Thus, the
Agreement requires that the likelihood that the remedial effect of the duty will be undermined be
assessed in light of timing and volume of the dumped imports. In our view, by requiring that the
assessment of massive dumping in a relatively short period be made in light of the exporters'
knowledge of an initiation or a likely initiation, USDOC addresses whether massive imports are likely
to seriously undermine the remedial effect of the duty.
7.150  On the basis of the foregoing, we conclude that the US statute, section 733(e) of the Tariff
Act of 1930, as amended, is not, on its face, inconsistent with Articles 10.1, 10.6 and 10.7 of the
AD Agreement.  Having reached this conclusion, we also find that the United States has not acted
inconsistently with its obligations under Article XVI:4 of the Marrakesh Agreement and Article 18.4of the AD Agreement in maintaining this statutory provision.
                                                     
109 In this respect, we note that the USITC, which makes the final determination establishing whether
definitive duties will be collected retroactively, is required to consider this element under section 735(b)(4)(A)of the Tariff Act of 1930, as amended; 19 U.S.C. § 1673d(b)(4).WT/DS184/R
Page 49
(b) Is the USDOC preliminary critical circumstances determination concerning hot-rolled steel
from Japan inconsistent with Articles 10.6 and 10.7 of the AD Agreement ?
7.151  Japan further challenges the specific preliminary critical circumstances determination made
by USDOC in the investigation of imports of hot-rolled steel from Japan.  As a preliminary matter, we
note that we understand Japan to argue that a Member is precluded from making a preliminary
determination of critical circumstances in the absence of a preliminary determination of materialinjury to the domestic industry. According to Ja pan, USDOC's preliminary determination of critical
circumstances thus violated Article 10.6 of the AD Agreement since USITC had found threat of injury
to the industry, but not current material injury, in its preliminary determination. However, Article 10.6
sets out the conditions for retroactive application of “ definitive  anti-dumping duties”(emphasis
added).  In the case of imports of hot-rolled steel products from Japan, no duties were actually levied
retroactively, since USITC in its final determination of injury found that the conditions of Article 10.6
were not satisfied.  In our view, Article 10.6 does not directly govern the determination at issue here –rather, USDOC's preliminary critical circumstances determination must be judged against the
obligations set out in Article 10.7.  Those obligations, while related to the obligations set out in
Article 10.6, are not necessarily identical. This is not to say that the basis of the final injury
determination is irrelevant to whether definitive duties may be levied retroactively under Article 10.6.
It is only that in this case, since we are not considering whether there is a violation of Article 10.6, weneed not determine whether, under Article 10.6, duties can only be levied retroactively if there is a
final determination of material injury and not where there is a final determination of threat of injury.
It is a different question, which we discuss below, whether a preliminary determination of critical
circumstances under Article 10.7 requires sufficient evidence of current material injury to the
domestic industry, or whether sufficient evid ence of threat of injury may be enough.
7.152  We first address what constitutes “sufficient evidence” for the purposes of a determination
under Article 10.7.  Second, we must determine what are the conditions of paragraph 6 of Article 10
of which sufficient evidence is required by Ar ticle 10.7.  Finally, we consider whether USDOC's
determination that there was sufficient evidence of the required elements of Article 10.6 to make an
affirmative preliminary critical circumstances determination is one that an objective and unbiasedinvestigating authority could make on the basis of the evidence that was before USDOC in this case.
7.153  Article 10.7 of the AD Agreement does not define “sufficient evidence”.  However, Article 
5.3 also reflects this standard, in requiring that the authorities examine the accuracy and adequacy of
the evidence provided in the application “to determin e whether there is sufficient evidence to justify
the initiation of an investigation”.  The Article 5.3 requirement of "sufficient evidence to initiate an
investigation" has been addressed by previous GATT and WTO panels.  Their approach to
understanding this standard has been to examine whether the evidence before the authority at the time
it made its determination was such that an unbiased and objective investigating authority evaluating
that evidence could properly have made the determination.
110  These Panels have noted that what will
be sufficient evidence varies depending on the determination in question.  The Panel in Mexico –
HFCS  quoted with approval from the Panel's report in the Guatemala – Cement I  case that "the type
of evidence needed to justify initiation is the same as that needed to make a preliminary or finaldetermination of threat of injury, although the quality and quantity is less".
111
                                                     
110 Panel Report, Mexico – HFCS,  para 7.95. (referring to Guatemala – Cement I , para.  7.57 and
United States - Softwood Lumber , SCM/162, BISD 40S/358, para. 335, (adopted  27 –28 October 1993)).  The
Panel in Guatemala – Cement I  also stated that “the quantum and quality of evidence required at the time of
initiation is less than that required for a preliminary, or final, determination of dumping, injury and causation.
made after investigation”, Panel Report, Guatemala – Cement I,  para 7.57, referring to United States – Softwood
Lumber,   para 332.
111 Panel Report, Mexico – HFCS , para. 7.97; Panel Report, Guatemala – Cement I , para 7.77WT/DS184/R
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7.154  The question before us is whether USDOC had sufficient evidence of the conditions of
Article 10.6 to entitle USDOC to take such measures as may be necessary to collect AD duties
retroactively.  We are of the view that what constitutes "sufficient evidence" must be addressed in
light of the timing and effect of the measure imposed or the determination made.  Evidence that is
sufficient to warrant initiation of an investigation may not be sufficient to conclude that provisional
measures may be imposed.  In a similar vein, the possible effect of the measures an authority isentitled to take under Article 10.7 of the AD Agreement informs what constitutes sufficient evidence.
Whether evidence is sufficient or not is determined by  what the evidence is used for.  In sum, whether
evidence is sufficient to justify initiation or to ju stify taking certain necessary precautionary measures
under Article 10.7 is not a standard that can be determined in the abstract.  We will therefore consider
the impact of a finding of sufficient evidence for the purposes of Article 10.7 and examine the
evidence on which USDOC relied in making the challenged preliminary critical circumstances
determination.
7.155  Article 10.7 provides that once the authorities have sufficient evidence that the conditions of
Article 10.6 are satisfied, they may take such measures as, for example, the withholding of
appraisement or assessment, as may be necessary to collect anti-dumping duties retroactively. We
read this provision as allowing the authority to take certain necessary measures of a purely
conservatory or precautionary kind which serve the purpose of preserving the possibility of laterdeciding to collect duties retroactively under Article 10.6.  Unlike provisional measures, Article 10.7
measures are not primarily intended to prevent injury being caused during the investigation. They are
taken in order to make subsequent retroactive duty collection possible as a practical matter. Measures
taken under Article 10.7 are not based on evaluation of the same criteria as final measures that may be
imposed at the end of the investigation.  They are of a different kind - they preserve the possibility ofimposing anti-dumping duties retroactively, on the basis of a determination additional to the ultimate
final determination.
7.156  Our understanding in this regard is confirmed by the fact that, unlike provisional measures,
which can only be imposed after a preliminary affirmative determination of dumping and injury,
Article 10.7 measures may be taken at any time "after initiating an investigation".  In light of thetiming and effect of the measures that are taken on the basis of Article 10.7, we consider  that the
Article 10.7 requirement of “sufficient evidence that the conditions of Article 10.6 are satisfied" does
not require an authority to first make a prelimin ary affirmative determination within the meaning of
Article 7 of the AD Agreement  of  dumping and consequent injury to a domestic industry. If it were
necessary to wait until after such a preliminary determination, there would, in our view, be no purposeserved by the Article 10.7 determination.  The opportunity to preserve the possibility of applying
duties to a period prior to the preliminary determination would be lost, and the provisional measure
that could be applied on the basis of the preliminary affirmative determination under Article 7 would
prevent further injury during the course of the investigation.  Moreover, the requirement in Article 7
that provisional measures may not be applied until 60 days after initiation cannot be reconciled with
the right, under Article 10.6, to apply duties retroactively to 90 days prior to the date on which a
provisional measure is imposed, if a preliminary affirmative determination is a prerequisite to theArticle 10.7 measures which preserve the possibility of retroactive application of duties under
Article 10.6.
7.157  The question that remains is whether USDOC had sufficient evidence that all the conditions
of paragraph 6 of Article 10 of the AD Agreement we re satisfied.  Japan argues that USDOC did not
have sufficient evidence of dumping and material injury caused by the dumped imports.  Japan alsosubmits that USDOC did not have sufficient evidence that massive dumped imports were likely to
seriously undermine the remedial effect of the duty.
7.158  We note that Japan did not challenge the initiation of the investigation, which was, pursuant
to Article 5.3, based on a determination that there was sufficient evidence of dumping, injury, and a
causal link.  We can perceive of no reason, given the precautionary nature of the measures that mayWT/DS184/R
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be taken under Article 10.7, why that same information might not justify a determination of sufficient
evidence of dumping and consequent injury in the context of Article 10.6 as required by Article 10.7.
7.159  Turning to the conditions of which there mu st be sufficient evidence, we note that
Article 10.6 requires authorities to determine that, for the dumped product in question,
"(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 dumpingwould cause injury, and
(ii) the injury 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 duty
to be applied, provided that the importers concerned have been given an opportunity
to comment".
7.160  USDOC determined that the importers knew or should have known that exporters were
dumping and that such dumping would cause inju ry.  USDOC normally considers dumping margins
of 25 per cent or more and a USITC preliminary determination of material injury to impute
knowledge of dumping and the likelihood of conseque nt material injury.  USDOC determined that the
information in the petition indicated that the estimated dumping margins were over 25 per cent for theJapanese respondents. The evidence of dumping in the petition was, in our view, sufficient for an
unbiased and objective investigating authority to reach this conclusion.  We note, in this regard, that
Japan has not alleged that an imputed knowledge of dumping is,  per se , inconsistent with
Article 10.7, but rather argues that USDOC did not have  sufficient evidence of dumping at all, for the
purposes of Article 10.7.
7.161  In this case, USITC had made a preliminary determination of threat of material injury.
Consequently, USDOC looked to the information regarding injury to the domestic industry in the
petition, and considered press reports regarding increasing imports, declining prices, and shifts in
purchasing to import sources, as well as the USITC preliminary determination.  On this basis USDOC
found sufficient evidence that importers knew or should have known that material injury caused by
dumping was likely.  In our view, the evidence relied  on by USDOC in this regard was sufficient for
an unbiased and objective investigating authority to reach this conclusion.
7.162  In any event, we note that Article 10.6 itself refers to a determination that an importer knew
or should have known that there was dumping that would cause injury. The term "injury" is defined in
footnote 9 to Article 3 of the Agreement to include threat of material injury or material retardation ofthe establishment of an industry, unless otherwise specified.  Article 10.6 does not "otherwise
specify".  Consequently, in our view, sufficient evid ence of threat of injury would be enough to justify
a determination to apply protective measures under Article 10.7.
7.163  The role of Article 10.7 in the overall context of the AD Agreement confirms this
interpretation.  This provision is clearly aimed at preserving the possibility to impose and collect anti-
dumping duties retroactively to 90 days prior to the date of application of provisional measures.
Thus, Article 10.7 preserves the option provided in Article 10.6 to impose definitive duties evenbeyond the date of provisional measures.  Assume arguendo  Article 10.7 were understood to require
sufficient evidence of actual material injury.  In a situation in which, at the time Article 10.7 measures
are being considered, there is evidence only of threat of material injury, no measures under
Article 10.7 could be taken.  Assume further that in this same investigation, there was a final
determination of actual material injury caused by dumped imports. At that point, it would beimpossible to apply definitive anti-dumping duties retroactively, even assuming the  conditions set out
in Article 10.6 were satisfied, as the necessary underlying Article 10.7 measures had not beenWT/DS184/R
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taken.112  Thus, in a sense, Article 10.7 measures serve the same purpose as an order at the beginning
of a lawsuit to preserve the status quo  - they ensure that at the end of the process, effective measures
can be put in place should the circumstances warrant.
7.164   The third condition of Article 10.6 of which sufficient evidence is required by Article 10.7, is
that the injury be caused by massive dumped imports in a relatively short period of time.  In this case,
USDOC assessed the question whether there were massive dumped imports in a relatively short timeby comparing imports during a period of five months  preceding and following  April 1998.   That date
was established based on press reports which, USDOC concluded, established that importers,
exporters, and producers knew or should have known that an anti-dumping investigation was likely.
113
USDOC found an increase of imports of hot-rolled steel of more than 100 per cent between the period
December 1997-April 1998 and May-September 1998.114
7.165  The Agreement does not determine what period should be used in order to assess whether
there were massive imports over a short period of time.  Japan asserts that the latter part ofArticle 10.6 (ii) of the AD Agreement, referring to  whether the injury caused by massive imports is
likely to seriously undermine the remedial effect of the duty, implies that the period for comparison is
the months before and after the initiation of the investigation. Japan argues that since the duty cannot
be imposed retroactively to the period before the initiation, the remedial effect of the duty cannot be
undermined by massive imports before initiation.
7.166  We disagree with this conclusion. Article 10.7 allows for certain necessary measures to be
taken at any time after initiation of the investigation . In order to be able to make any determination
concerning whether there are massive dumped imports, a comparison of data is obviously necessary.
However, if a Member were required to wait until information concerning the volume of imports for
some period after initiation were available, this right to act at any time after initiation would bevitiated.  By the time the necessary information on import volumes for even a brief period after
initiation were available, as a practical matter, the possibility to impose final duties retroactively to
initiation would be lost, as there would be no Article 10.7 measures in place.  Moreover, as with the
situation if a Member were required to wait the minimum 60 days and make a preliminary
determination under Article 7 before applying measures under Article 10.7, the possibility ofretroactively collecting duties under Article 10.6 at the final stage would have been lost.
7.167  Moreover, in our view, it is not unreasonable to  conclude that the remedial effect of the
definitive duty could be undermined by massive imports that entered the country before the initiation
of the investigation but at a time at which it had become clear that an investigation was imminent.
We consider that massive imports that were not made in tempore non suspectu  but at a moment in
time where it had become public knowledge that an investigation was imminent may be taken into
consideration in assessing whether Article 10.7 m easures may be imposed.  Again, we emphasize that
we are not addressing the question whether this would be adequate for purposes of the final
determination to apply duties retroactively under Article 10.6
                                                     
112 We note that our findings concern the obligations regarding determinations of whether to apply
"such measures … as may be necessary" under Article 10.7.  We are not ruling on the obligations regardingretroactive application of final anti-dumping duties under Article 10.6.
113 USDOC's selection of this period was made pursuant to 19 CFR §351.206(i) and the USDOC Policy
Bulletin of 8 October 1998.  The selection of a date before the date of initiation as the point around which thevolume of imports would be compared is provided for in cases where USDOC considers that exporters,
importers, and producers had reason to believe an investigation would be initiated before the actual initiation.
114 We note that USITC in its final determination on injury and critical circumstances compared the
volume of imports in the months preceding and following the initiation of the investigation and found on the
basis of this comparison that imports declined following initiation, based on a comparison of data for 5 months
prior to and following initiation, and increased slightly based on a comparison of data for 3 months prior to andfollowing initiation.  USITC found this increase not significant enough to warrant a finding that the importswould undermine seriously the remedial effect of the duty. USITC Report,  page 22. (Exh. JP- 14)WT/DS184/R
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7.168  We have carefully considered the information on which USDOC based its preliminary critical
circumstances determination.  We consider that an objective and unbiased investigating authority
could, on the basis of the evidence before USDOC, determine that there was sufficient evidence that
the conditions set forth in Article 10.6 were satisfied, and its preliminary critical circumstances
determination is therefore consistent with Article 10.7.  We therefore find that the preliminary critical
circumstances determination was not inconsistent with Article 10.1 of the AD Agreement either sinceit complied with the conditions of Article 10.7 of the AD Agreement.
F. A
LLEGED VIOLATIONS IN THE DETERMINATION OF INJURY AND CAUSATION
1. Alleged violations of Articles 3 and 4 of the AD Agreement on the face of the captive
production provision and in its application by USITC in this case
7.169  Japan claims that the US captive production provision both on its face and as applied by
USITC in the case of imports of hot-rolled steel from Japan violates Articles 3 and 4 of the
AD Agreement. We will first consider the on-its-face challenge of the US statutory provision. Ifnecessary we will thereafter consider Japan's arguments concerning the application of the provision in
this case.
(a) Does the captive production provision on its face violate Articles 3 and 4 of the
AD Agreement
(i) Arguments
7.170  Japan argues that the captive production provision of US law, section 771(7)(c)(iv) of the
Tariff Act of 1930, on its face violates Articles 3 and 4 of the AD Agreement, which require that an
authority consider a domestic industry in its entirety throughout its injury and causation analysis.
Japan alleges that under the captive production provision, the USITC must focus its injury analysis on
the merchant market and potentially may find material injury on the basis of the merchant marketeven if the industry as a whole is not experiencing material injury.  Japan submits that 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 4 on its face,
regardless of its application in this case.
7.171  Japan submits that the US statute is inconsistent with Article 4.1 of the AD Agreement.  In
Japan's view, the definition of domestic industry in Article 4.1 requires authorities to consider
domestic producers as a whole and their overall output. Japan argues that the captive production
provision and its mandatory focus on merchant market data necessarily precludes any balanced
assessment of the data of an industry as a whole and more specifically ignores the attenuated nature of
import competition in the captive market.
115
7.172  Japan argues that the captive production provision exaggerates the market share of imports
relative to all domestic production and thus is in consistent with Article 3.2 of the AD Agreement.
Japan argues that the captive production provision narrows the analysis to the merchant market.116
Japan claims that the captive production provision also violates Article 3.4 of the AD Agreementsince it requires the authority to evaluate the key factors mentioned in Article 3.4 based on a narrow
                                                     
115 Japan asserts that the captive production provisio n forces the USITC to ignore the economic reality
that the greater the importance of the captive market, i.e. the higher the proportion of domestic production of thelike product consumed in downstream captive production, the less likelihood there is that imports that competeonly on the merchant market could possibly affect the industry's overall performance.
116 Japan argues that in this narrow analysis apparent consumption inevitably decreases and the
imports’ market share increases, since the volume of subject imports remains unchanged, but the volume ofdomestic shipments shrinks because the authority focuses primarily on the merchant market instead ofexamining the industry as a whole.WT/DS184/R
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segment of the industry, rather than the industry as a whole as provided for in that provision. Japan
argues that the statutory provision leaves no discretion to consider fully both the merchant market and
the overall industry, nor does it require an explanation of how the merchant market relates to the
industry as a whole or is representative of it.
7.173  Japan claims that the captive production provision is also inconsistent with Article 3.5 of the
AD Agreement, which requires the establishment of a causal link between dumped imports and injuryto the industry, because it requires the USITC to ignore the "shielding" effect of captive production
and to focus instead on the injury to that portion of the industry serving the merchant market.  Japan
submits that the provision thus makes it impossible for USITC to consider fully "all relevant evidence
before the authorities" as Article 3.5 of the AD Agreement requires.
7.174  Japan further submits that the captive production provision violates the requirement in
Article 3.6 of the AD Agreement to analyse the effect of imports on all domestic production.  In sum,
Japan claims that the captive production provision does not allow for an objective examination asrequired by Article 3.1 since an examination can only be objective if it takes into consideration all
information concerning the industry as a whole.  Finally, Japan alleges that the captive production
provision violates Article XVI:4 of the Marrakesh Agreement since it mandates an analytic approach
that focuses on one segment of the industry in violation of Articles 3 and 4 of the AD Agreement.
7.175  The United States argues that the captive production provision, which requires USITC to, in
certain circumstances, focus primarily on the merchant market, is consistent with the AD Agreement.
The US emphasises that in all cases, including in the case at hand, USITC must render a
determination with regard to injury to the industry as a whole, and cannot ignore the captive segment
of the domestic industry.
7.176  The United States  argues that the US statute explicitly requires that the USITC examine the
industry as a whole.  The definition given in the US statute of the domestic industry is similar to that
of Article 4.1 of the AD Agreement.  The captive production provision does not require the exclusion
of any other segments of the market.  Nor does it require that emphasis be placed on some factors
more than on others.  The United States submits that the refined analysis suggested by the captive
production provision is consistent with Articles 3.1 and 3.4 of the AD Agreement.  It only operates asan analytical tool to reveal the impact of imports on a segment of the industry when this segment is a
significant indicator of the state of the industry as a whole, and it thus improves the required overall
industry analysis.
7.177  The United States  further argues that the captive production provision is consistent with
Articles 3.4, 3.5 and 3.6 of the AD Agreement.  Article 3.4 of the AD Agreement distinguishesbetween the effect of imports on sales and their effect on output, which is precisely the sort of
distinction made by the captive production provision.  The United States rejects Japan's argument that
the captive production focus violates Articles 3.5 and 3.6 of the AD Agreement, which require
consideration of the effect of dumped imports on domestic production as a whole, since the US
statutory provisions also require such an overall industry analysis.
7.178  In sum, the United States claims that the captive production provision is consistent with the
AD Agreement and therefore does not violate Article XVI:4 of the Marrakesh Agreement  either.
7.179  Canada submits that failure to allow inves tigating authorities to differentiate between
production that is internally transferred and production that is sold into the domestic market in
competition with dumped imports, in appropriate circumstances, would deprive Article 3 of the
Antidumping Agreement of its proper application and result in investigating authorities being unable
to accurately determine whether a domestic industry had been injured, or threatened with injury.WT/DS184/R
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7.180  The EC agrees with the US that, where a significant portion of domestic output of the like
product is for captive use, it is not inconsistent with the AD Agreement to focus the injury analysis on
the "merchant" or "free market", since it is there that the immediate injurious effects of the dumped
imports takes place. The EC considers that such a focus is even needed in order to avoid that the
effects of dumped imports become obscured through the use of aggregate data.
7.181  Chile considers that Articles 3 and 4 of the AD Agreement clearly support Japan's claim that
an authority is to examine injury w ith regard to the industry as a whole.
7.182   Brazil supports Japan's claim that an authority is required to examine the domestic industry
as a whole, not merely part of it, when determining injury and causation.  Brazil considers that
consideration of only one segment of an industry is simply not permitted under the AD Agreement.
Brazil is therefore of the view that the US captive production provision, which requires the authority
to ignore the captive portion of the industry, is inconsistent with the AD Agreement.
7.183  Korea asserts that Article 3.4 of the AD Agreement requires an analysis of "all relevant
economic factors and indices bearing on the state of the domestic industry", i.e. the industry as a
whole.  It considers that an authority may not unduly emphasize a particular segment of the industry
at the expense of the industry as a whole.
(ii) Finding
7.184  Section 771(7)(c)(iv) of the Tariff Act of 1930 provides that, in a case in which domestic
producers internally transfer significant production of the domestic like product for the production of
a downstream article, and under certain specified circumstances, the USITC, in its injury analysis
shall focus primarily  on the merchant market for the domestic like product in determining market
share and factors affecting financial performance.117 This provision is commonly referred to as the
captive production provision since it distinguishes between the merchant market, the segment of themarket consisting of commercial shipments on the open market, and the captive segment of the
market - production which is internally consumed by the producer in the production of downstream
products.  In the investigation underlying this dispute, the USITC found that the domestic industry
comprised US producers of  hot-rolled carbon steel flat products.  The USITC further found that these
same producers used hot-rolled steel they had produced in the manufacture of downstream productssuch as cut to length, tubular, cold-rolled, and plated  or galvanized steel.  This "captive" consumption
of hot-rolled steel by the domestic producers thereof was the subject of substantial argument by the
parties to the investigation.  In particular, its effect on the domestic industry underlies the dispute
regarding the US captive production provision and its application in this case.
                                                     
117 Section 771(7)(c)(iv) of the Tariff Act of 1930, as amended (19 U.S.C. § 1677(7)(C)(iv)) provides
as follows:
"If domestic producers internally transfer significant production of the domestic like productfor the production of a downstream Article and sell significant production of the like productin 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 theproduction of that downstream product, and(iii) the production of the domestic like product sold in the merchant market isnot 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)[of section 771(7)(c)], shall focus primarily on themerchant market for the domestic like product".WT/DS184/R
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7.185  Japan alleges that the US captive production provision violates Articles 3.1, 3.2, 3.4, 3.5, 3.6
and 4.1 of the AD Agreement concerning the determination of injury to the domestic industry.  The
thrust of Japan's argument is that the captive production provision's "primary focus" on the merchant
market is inconsistent with the Agreement's requirement to determine injury to the "domestic
industry" which is defined in Article 4 as domestic producers as a whole of the like products.
7.186  In relevant part, Article 3 provides as follows:
"Determination of Injury9
3.1 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
domestic market for like products, and (b) the consequent impact of these imports on
domestic producers of such products.
3.2 With regard to the volume of the dumped imports, the investigating
authorities shall consider whether there has been a significant increase in dumped
imports, either in absolute terms or relative to production or consumption in the
importing Member.   With regard to the effect of the dumped  imports on prices, theinvestigating authorities shall consider whether there has been a significant price
undercutting by the dumped imports as compared with the price of a like product of
the importing Member, or whether the effect of such imports is otherwise to depress
prices to a significant degree  or prevent price increases, which otherwise would have
occurred, to a significant degree.  No one or several of these factors can necessarilygive decisive guidance.
3.4 The examination of the impact of the 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, including actual and potentialdecline 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, growth, ability to raise capital or investments.  This list is not
exhaustive, nor can one or several of these factors necessarily give decisive guidance.
3.5 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 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.  The authorities shall also examine any
known factors other than the dumped imports which at the same time are injuring thedomestic industry, and the injuries caused 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 the foreign and domestic producers,developments in technology and the export performance and productivity of the
domestic industry.
3.6 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 identificationof that production on the basis of such criteria as the production process, producers'
sales and profits.  If such separate identification of that production is not possible, theWT/DS184/R
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effects of the dumped imports shall be assessed by the examination of the production
of the narrowest group or range of products, which includes the like product, for
which the necessary information can be provided.
___________________
9 Under this Agreement the term "injury" shall, unless otherwise specified, be taken
to mean material injury to a domestic industry, threat of material injury to a domestic industryor material retardation of the establishment of such an industry and shall be interpreted inaccordance with the provisions of this Article.
7.187  In relevant part, Article 4.1 of the AD Agreement provides as follows:
"For the purposes of this Agreement, 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 of those products,"
7.188  In addressing Japan's claim that the US statute is inconsistent with the AD Agreement on its
face, we must resolve two questions.  First, we must determine what is required by the
AD Agreement, that is, whether the investigating authority is in all cases required to make a
determination of injury to the domestic industry as a whole.  If so, we must then consider whether theprimary focus on the merchant market with respect to market share and financial performance set out
in the "captive production" provision of the US statute is inconsistent, on its face, with this
requirement?
7.189  We consider that the definition of the domestic industry of Article 4.1 of the AD Agreement
provides a clear answer to the first question.  The domestic industry consists of the domesticproducers as a whole of the like products, or of t hose producers whose collective output constitutes a
major proportion of the total domestic production of those products.  The terms "domestic industry"
and domestic producers are also used interchangeably in Articles 3.1 and 3.4 of the Agreement.
Article 3.1 of the AD Agreement provides that a determination of injury has to involve inter alia  an
objective examination of the "impact of these imports on domestic producers of such like products ".
Article 3.4 of the AD Agreement expands on this obligation and provides that the "examination of the
impact of the dumped imports on the domestic industry concerned " shall include an evaluation of all
relevant economic factors having a bearing on the state of the industry.  Article 3.5 of the
AD Agreement requires that a causal relationship be demonstrated "between the dumped imports and
the injury to  the domestic industry ".  We conclude that the requirement to make a determination of
injury to the domestic industry read in light of the definition of the domestic industry of Article 4.1 of
the AD Agreement, implies that the injury must be  analysed with regard to domestic producers as a
whole of the like product or to those whose collective output constitutes a major proportion of the
total domestic production of those products.
7.190  In our view, the AD Agreement thus clearly requires an investigating authority to make a
final determination as to "injury" as defined in the Agreement to the industry as a whole.  However,
the Agreement does not prescribe a particular method of analysis.  Specific circumstances might wellcall for specific attention to be given to various aspects of the industry's performance or to specific
segments of the industry, as long as the end-result of this analysis is consistent with the Agreement's
requirement to examine and evaluate all relevant factors having a bearing on the state of the industry
and demonstrate a causal relationship between the dumped imports and the injury to the domestic
industry.
118
                                                     
118 We recall that in the case of Mexico - HFCS , the Panel emphasised that the definition of the
domestic industry in an anti-dumping investigation has unavoidable consequences for the conduct of theWT/DS184/R
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7.191  We thus must examine whether the US "captive production" provision is on its face
inconsistent with the established requirement of th e Agreement to determine injury for the industry as
a whole, as Japan is alleging.  We note that the United States agrees with Japan that the
AD Agreement requires a determination concerning injury with respect to the industry as a whole.
According to the United States, the US statute is fully consistent with this obligation as it requires
USITC to consider the industry as a whole.  The United States asserts that the captive productionprovision, on its face, only affects some statutory factors required to be considered under 19
U.S.C. § 1677(7)(C)(iii) and does not affect the general requirement to determine injury for the
domestic industry as a whole, which is set forth in 19 U.S.C. §  1677(4)(A) and which governs the
entire determination of injury.
7.192  The question before us is whether the captive production provision and the required "primary
focus" on one segment of the market, the merchant market, with respect to market share and financial
performance of the industry, is inconsistent with the obligations imposed on WTO Members inconducting an injury analysis for the purpose of an anti-dumping investigation.  It is established
GATT/WTO practice that the consistency of a law on its face may be challenged independently from
any application thereof only in so far as the law is mandatory and not discretionary in nature.  In other
words, only if a law mandates WTO inconsistent action or prohibits WTO consistent action can the
legislation be challenged on its face in a dispute settlement proceeding.
119
7.193  We do not doubt that the captive production of the US statute is mandatory in nature and may
thus be challenged before a panel.  The language of the provision (" shall  focus primarily") makes it
clear that USITC is required by statute to focus primarily on the merchant market in certain
circumstances and under certain conditions.  The question remains however whether the statute
mandates action that is inconsistent with the United States' obligations under the AD Agreement .
7.194  We recall that in relevant part, the captive production provision provides that "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".  The key to
answering the question posed lies in the ordinary meaning of the words "focus primarily".  Japan
argues that the use of the word "focus" skews the analysis to the merchant market at the expense ofthe rest of the domestic industry and the modifier "primarily" narrows the focus even more.
7.195  The verb "to focus" is defined as "to concentrate"
120 on something.  "Primary" is defined as
"of the first importance, chief"121.  Literally, the captive production provision thus requires USITC to
concentrate in chief on the merchant market when considering market share and financial
performance of the industry.  Such a specific direction to focus the analysis of certain factors with
                                                                                                                                                                    
investigation and the determination that must be made. Panel Report, Mexico – HFCS , para.  7.147. In relevant
part, the Panel found that:
"7.154 It is important to differentiate the consideration of factors relevant to the injuryanalysis on a sectoral basis, so as to gain a better understanding of the actual functioning ofthe domestic industry and its specific markets and thus of the impact of imports on theindustry, 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.  There is certainly nothing in the AD Agreement which
precludes a sectoral analysis of the industry and/or market.  Indeed, in many cases, such ananalysis can yield a better understanding of the effects of imports, and more thoroughlyreasoned analysis and conclusion.  However, this does not mean that an analysis limited tothat portion of the domestic industry's production sold in one market sector is sufficient forestablishing injury or threat of injury to the domestic industry, consistently with the
AD Agreement".
119 See discussion above, para. 7.141.
120 Concise Oxford Dictionary, ninth edition, Clarendon Press, Oxford, 1995.
121 Concise Oxford Dictionary, ninth edition, Clarendon Press, Oxford, 1995.WT/DS184/R
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attention for a particular segment of the domestic market does not, in our view, necessarily imply that
the overall injury analysis is not performed with re spect to the industry as a whole.  The statute does
not require a general and exclusive focus on the merchant market when considering market share and
industry performance, but only a "primary" focus.122  It certainly does not require a determination of
injury based only on consideration of the merchant market.
7.196  We believe that the context of the captive production provision confirms our view.  The
general obligation for injury determinations is set out in section 735(b)(1)(A) of the Tariff Act of
1930, as amended.  That provision requires  USITC to make a final determination of whether "an
industry in the United States is materially injured or is threatened with material injury by reason of
imports". Section 771(4)(A) of the Tariff Act of 1930, as amended, defines the relevant industry as
"the producers as a whole of a domestic like product , or those producers whose collective output of a
domestic like product constitutes a major proportion of the total domestic production of the
product".123  US law specifically requires USITC, in making this determination, to consider "the
impact of imports of such merchandise on domestic producers of domestic like products".124  I n
addition to the volume of imports and the effect of imports on prices, which the statute provides
"shall  be considered",125 the statute further provides that "such other economic factors as are relevant
to the determination regarding whether there is material injury by reason of dumped imports may be
considered".126  The statute also sets out, in  subsection C, entitled "Evaluation of Relevant Factors",
specific elements to be considered when evaluating the volume of imports, the effects of imports on
prices and their impact on the affected domestic industry, thus expanding on the more general
obligation set out in subsection (B)(i) to consider th e volume of imports and their effect on prices and
impact on domestic producers.127  The captive production provision is set forth in
section 771(7)(C)(iv) of the Tariff Act of 1930, and is thus an additional instruction with respect tothe "Evaluation of Relevant Factors".  We do not agree with Japan's position that the captive
production provision constitutes an exception to the obligation to make a determination of material
injury to the domestic industry as a whole.  In our view, it is an instruction to "focus primarily" on
certain "other economic factors as are relevant", and defines the circumstances in which such factors
are relevant.  Those factors are the market share and factors affecting financial performance in themerchant market, and the circumstances are the factual situation of the industry with regard to captive
production.  However, we can find no basis in the text of the US law to conclude that the captive
production provision eliminates the general obligation on  USITC to make a determination regarding
material injury to the domestic industry.   Nor does it, in our view,  diminish the obligation to examine
all relevant economic factors having a bearing on the state of the industry as a whole in making a finaldetermination of injury caused by dumped imports.  Finally, we note that US law explicitly provides
that "The presence or absence of any factor which the [USITC] is required to evaluate under
subparagraph (C) or (D) shall not necessarily give d ecisive guidance with respect to the determination
by the [USITC] of material injury."
128  The captive production provision, being set out in
subparagraph (C) would thus fall within the scope of this instruction.
7.197  Thus, we understand US law to require USITC to make a determination whether there is
material injury to the domestic industry, and to provide guidance on the analysis to be undertaken inmaking that determination.  The captive production provision is one of these latter sections, and thus
defines an analytic step that must, in certain circumstances, be undertaken along the way to making
                                                     
122 Contrary to Japan's argument, we believe this modifier does not further narrow the focus. On the
contrary, we believe it implies that after having primarily focused on the merchant market, the authority is tofocus also on the industry as a whole. We consider that  the modifier makes it clear that the focus is neither
general nor exclusive but only primary.
123 19 U.S.C. § 1677(4)(A).
124 19 U.S.C. § 1677(7)(B)(i)(III).
125 19 U.S.C. § 1677(7)(B)(i).
126 19 U.S.C. § 1677(7)(B)(ii).
127 19 U.S.C. § 1677(7)(C)(i) – (iii).
128 19 U.S.C. § 1677(7)(E)(ii).WT/DS184/R
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the statutorily required determination of material injury to the domestic industry as a whole.  It does
not affect the nature of the determination of injury that must be made, only the analysis underlying
that determination.  While there is no guarantee that this analysis will result in a determination
consistent with US obligations under the AD Agreement, it does not require any action inconsistent
with those obligations.
7.198  This is our reading of the statutory captive production provision. Equally important, this is
our understanding of how the relevant US authorities have interpreted and applied this provision.  We
recall that, for the purposes of international law, domestic legislation is to be considered as a fact.129
In this respect, we believe it is of great importance that the Statement of Administrative Action notesthat "the captive production provision does not require USITC to focus exclusively on the merchant
market".
130 The SAA is "an authoritative expression by the Administration concerning its views
regarding the interpretation and application of the Uruguay Round agreements, both for purposes of
US international obligations and domestic law … it is the expectation of Congress that futureAdministrations will observe and apply the interpretations and commitments set out in this
Statement".
131    In this case, the SAA confirms our conclusion based on the text and context of the
captive production provision that the primary focus on the merchant market does not imply an
exclusive focus on the merchant market in determining injury, and therefore does not mandate USITC
to act in violation of the Agreement's established obligation to assess injury for the industry as a
whole.132  As the Panel noted in United States - Sections 301 - 310 of the Trade Act of 1974,  "The
SAA thus contains the view of the Administrati on, submitted by the President to Congress and
receiving its imprimatur, concerning both interpretation and application and containing commitments,
to be followed also by future Administrations, on which domestic as well as international actors can
rely."133   Moreover, this is the interpretation applied by the USITC itself, as set out in its decision in
this investigation.134
7.199  We therefore find that the captive production provision is not on its face inconsistent with
Articles 3 and 4 of the AD Agreement.  Having reached that conclusion, we also conclude that the
United States did not act inconsistently with its obligations under Article XVI:4 of the Marrakesh
Agreement and Article 18.4 of the AD Agreement in maintaining this statutory provision. We nextturn to the question whether the USITC, in applying  that provision in the investigation underlying this
dispute, acted inconsistently with Articles 3 and 4 of the AD Agreement.
                                                     
129 See above, para. 7.143.
130 SAA, at 852.
131SAA, p. 1. We note that US law, 19 U.S.C. §3512(d), provides that "[t]he statement of
administrative action approved by Congress under sec tion 3511(a) of this title shall be regarded as an
authoritative expression by the United States concerning the interpretation and application of the UruguayRound Agreements and this Act in any judicial pr oceeding in which a question arises concerning such
interpretation or application".
132 We note that the three Commissioners who applied the captive production provision in their Views
concluded, with regard to the effect of applying the cap tive production provision, that "[T]he SAA makes clear,
however, that we are not to focus exclusively on the merchant market. We read the statute as requiring in allcases that the Commission determine material injury with respect to the industry as a whole, including theindustry's performance with respect to both merchant market operations and captive production". USITCReport, Views of Vice Chairman E. Miller, Commissione r Jennifer A. Hillman, and Commissioner Stephen
Koplan Concerning Captive Production , page 35.
133 Panel Report, United States - Section 301,  para. 7.111.
134 It is an established principle of US statutory construction that the administering agency's
interpretation of a statute is entitled to deference if the statute is "silent or ambiguous with respect to [a] specificissue". Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 US 837, 842-43.WT/DS184/R
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(b) Was USITC’s application of the captive production provision in this case consistent with
Articles 3 and 4 of the AD Agreement?
(i) Arguments
7.200  Japan claims that the application of the captive production provision in this case violated
various provisions of Articles 3 and 4 of the AD Agreement.  Japan argues that three Commissioners
considered the captive production provision applicable and focused primarily on the merchant marketin their analysis.  Japan asserts that a fourth Commissioner de facto  considered the merchant market
data in parallel with data on the industry as a whole.  Japan claims that this focus on the merchant
market fundamentally altered the results of the investigation and distorted the Commissioners'
judgement.
135
7.201  Japan claims that the specific determination in this case based on the captive production
provision violates Articles 3 and 4 of the AD Agr eement.  Japan asserts that the USITC did not make
an objective examination as required by Article 3.1 of the AD Agreement since it did not focus ondomestic producers as a whole.  The USITC’s focused analysis of injury also violated Articles 3.2,
3.4, 3.5 and 3.6 of the AD Agreement since it failed to examine all relevant evidence concerning the
industry as a whole.
7.202  Japan submits that although USITC mentioned both merchant market data and overall
industry data, this in no way diminishes USITC' s impermissible emphasis on merchant market data
and it asserts that under a balanced analysis, USITC would have considered both the merchant and
captive segments of the industry.  This, according to Japan, would be the only way in which USITC
could relate its segmented approach to the industry as a whole.
7.203  The United States submits that the USITC analysis  in this case was not inconsistent with the
AD Agreement by virtue of the application of the captive production provision by three of the sixCommissioners.  The United States notes that all six Commissioners made affirmative determinations,
five of current material injury and one of threat of material injury, while only three applied the captive
production provision.  This implies, according to the United States, that the application of the
provision in this case did not change the outcome, which was in any case affirmative.  Moreover, the
United States maintains that USITC did not fail to make its determination on the basis of the domesticindustry as a whole - indeed, information on the relevant economic factors was considered with
respect to both the merchant market (the primary focus under the provision) and the industry as a
whole.  The United States asserts that USITC found that, both in the merchant market and with regard
to the industry overall, consumption rose as did the volume of imports.  The United States further
notes that the declining financial trends that the USITC established in the merchant market alsoappeared in the overall industry analysis.  Contrary to Japan’s claim that USITC did not “relate its
merchant market findings to producers as a whole,” the United States argues that the USITC
determination shows how a primary focus on the merc hant market for certain factors is consistent
with such an analysis of the industry as a whole.  The United States further submits that USITC
compared the performance in the merchant market with overall performance of those domestic
producers (integrated producers) most shielded  from import competition and USITC found their
operating income to be falling both from merchant market sales and overall.
136  I n  s u m ,  t h e
United States claims that the captive production provision was irrelevant to the affirmative finding of
USITC.
                                                     
135 Japan does not dispute the fact that USITC collected information concerning the industry as a
whole, but argues that merely citing overall industry da ta is not enough and it does not, in Japan's view diminish
USITC's impermissible emphasis on merchant market data. Second Submission of Japan, Annex C-1, para. 231.
136 USITC Report,  page 19.WT/DS184/R
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(ii) Finding
7.204  The question before us is whether the USITC's determination of injury is consistent with the
requirements of Articles 3 and 4 of the AD Agreement, in light of the focus on the merchant market
by some Commissioners with respect to some factor s examined, or whether that focus so taints the
determination that we cannot conclude that an objective and unbiased investigating authority could
make the determination the USITC made, on the basis of the facts on the record and in light of theexplanations given.  Under the applicable standard of review, we are not to overturn the evaluation of
the administering authority if the establishment of the facts was proper and the evaluation unbiased
and objective, even though we might have reached a different conclusion.
7.205  The USITC report forms the basis for our examination of the consistency of the USITC's
injury analysis with the requirements of the WTO AD Agreement concerning injury to the industry as
a whole.  We consider that the definition of the domestic industry used for the purposes of the
investigation is a first important indicator of the scope of the investigation.  The USITC reportexplains that
"[I]n defining the domestic industry, the Commission's general practice has been to
include in the industry all of the domestic production of the like product, whether toll-
produced, captively consumed or sold in the domestic merchant market.  Based on our
finding that the domestic like product consists of all hot-rolled steel, we define thecorresponding domestic industry as all producers of hot-rolled steel in the
United States , as we did in the preliminary determination"
137.  (emphasis added)
7.206   USITC examined whether the domestic industry so defined was injured or threatened with
material injury by reason of imports of hot-rolled steel from Japan.  The report discusses variousconditions of competition before entering into the examination of the volume of the imports, their
effect on prices and the overall impact of the dumped imports on the domestic industry.  USITC
considered captive production to be one of the relevant conditions of competition.  It stated that "the
domestic industry captively consumes the majority, i.e. over 60 per cent of its production of the
domestic like product in the manufacture of downstream articles".
138  Based in part on this conclusion,
Vice Chairman Miller and Commissioners Hillman and Koplan found that the captive production
provision was applicable, and applied it in making their affirmative determination of material injury to
the domestic injury producing hot-rolled steel caused by dumped imports.  The three other
Commissioners considered that not all of the statutory conditions for applying the captive production
provision were fulfilled and thus did not find the provision applicable.  Nonetheless, two of theseCommissioners made an affirmative determination of material injury to the domestic injury producing
hot-rolled steel caused by dumped imports, and the third made an affirmative determination of threat
of material injury to that industry caused by dumped imports.
7.207  The report contains data concerning both the industry as a whole and the merchant market in
particular.  USITC appears to have discussed these data independently from the application of the
captive production provision, which in any case only requires a focus on the merchant market with
regard to market share and factors affecting financial performance.  As Chairman Bragg,Commissioner Crawford and Commissioner As key, who did not apply the captive production
provision, note in their Views Regarding The Captive Production Provision:
"even in circumstances in which the captive production provision does not apply, the
Commission has the discretion to consider the significant volume of captive production
as a condition of competition.  Accordingly, we have examined data both for the
                                                     
137 USITC Report, page 5.
138 USITC Report, page 9.WT/DS184/R
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domestic industry as whole and for merchant market operations for purposes of our
determination".139
7.208  We believe that the alleged distorting effect of the captive production provision should be
examined in particular with regard to the USITC' s analysis of market share and factors affecting
financial performance, since these are the factor s with respect to which a primary focus on the
merchant market is required.  The relevant sect ion of the USITC report on market share discusses
market share held by imports in the merchant market as well as in the overall US market and
concludes that in both cases market share held by subject imports more than doubled from 1996 to
1997 and again from 1997 to 1998.  In relevant part, USITC concluded as follows:
"In the merchant market, the share held by subject 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 then increased again to 21.0 per cent in 1998.  For the industry as a whole, theshare held by subject imports increased from 2.0 per cent of apparent US consumption,
as measured by volume sold in 1996, to 4.2 per cent in 1997, and then increased again
to 9.3 per cent in 1998".
140
7.209  The section in the report dealing with "imp act of the subject imports on the domestic
industry" discusses various economic factors having a bearing on the state of the industry.  The report
notes for example that capacity increased, while capacity utilization declined from 94.5 per cent in
1996 to 87.5 per cent in 1998.  With regard to production and sales, USITC concludes that both
merchant market data and overall industry data show a decline from 1997 to 1998.  With regard to the
domestic industry's financial performance indicators, USITC made the following analysis:
"From 1997 to 1998, as apparent consumption increased significantly, operating income
declined by more than half.  On merchant ma rket 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 from 5.5 per cent in 1997 to 2.6 per cent in 1998".141
7.210  The USITC conclusion on material injury by reason of imports of hot-rolled steel products
from Japan was as follows:
 "Accordingly, in light of the domestic industry's declining production, shipments,
market share, prices, capacity utilization, and financial condition, in the face of
increasing subject import volume and market share and declining subject import prices,we determine that the domestic industry producing hot-rolled steel is materially injured
by reason of LTFV imports from Japan".
142
7.211  It is clear that USITC considered data for the domestic industry as a whole as well as
merchant market data.  On its face, the report sets out a complete and substantially motivated analysis
of the state of the domestic industry as a whole.  The report discusses data for the industry as a whole
with regard to all relevant factors, including ma rket share and financial perfomance of the industry,
the two factors to which the captive production provision applies.
                                                     
139 USITC Report, page 29.  We note, that in a footnote, Commissioner Askey clarifies that she
believes that it is inappropriate to focus on the merchant market if the captive production provision does notapply.
140 USITC Report, page 12.  The report also discusses trends in consumption in the merchant market
alongside data for the industry as a whole.
141 USITC Report, page 18.
142 USITC Report, page 21.WT/DS184/R
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7.212  We considered the data contained in the report in order to assess whether the evaluation of the
USITC of the facts and data concerning market share and financial performance was that of an
unbiased and objective investigating authority.  We note that the USITC report includes two tables
detailing the same sort of information for the industry as a whole and for the merchant market.143
These tables appear to support the conclusions of the report that the trends that are apparent in themerchant market also appear in the overall US market, albeit sometimes less pronounced.
7.213  Japan asserts that the application of the captive production provision's primary focus for
certain factors on the merchant market by three of the Commissioners so influenced their overall
evaluation that it cannot be said with certainty what their conclusion would have been had they not
applied the captive production provision.  We do not consider it appropriate to engage in speculations
about what could have or might have been.  Upon careful examination, we consider that the USITC
determined that the domestic industry producing hot-rolled steel as a whole, defined in the report as
the domestic producers as a whole of hot-rolled steel in the United States, was materially injured, orthreatened with material injury.  We further cons ider that the determination was one that could
properly be reached by an objective and unbiased investigating authority on the basis of the
information before the USITC, and in light of the explanations given in its analysis.  The mere fact
that the analysis also included a discussion with regard to a certain segment of the industry most
affected by the subject imports, in our view, does not at all necessarily imply that the analysis wasfaulty.  Quite the contrary is true.  As the Panel in Mexico – HFCS  stated:
"There is certainly nothing in the AD Agreement which precludes a sectoral analysis of
the industry and/or market.  Indeed, in many cases, such an analysis can yield a better
understanding of the effects of imports, and more thoroughly reasoned analysis and
conclusion".
144
Again, however, such an analysis does not excuse the investigating authority from making thedetermination required by the AD Agreement concerning injury to the domestic industry as a whole.
7.214  We conclude that the analysis performed by USITC established injury with regard to the
industry as a whole, in spite of, or regardless of, the application of the captive production provision by
three of the Commissioners.  We note that in any case all six commissioners made an affirmative
injury or threat of injury determination whether they applied the captive production provision or not.
This to us confirms our view that the application of the captive production provision did not
undermine the examination of injury to the industry as a whole which is required under theAD Agreement.
7.215  We therefore find that the USITC's analysis was consistent with the obligations of the United
States under Articles 3.1, 3.4, 3.5, 3.6 and 4.1 of the AD Agreement in so far as it examined and
determined injury to the domestic industry as a whole.
2. Alleged violations of Article 3 of the AD Agreement in the USITC's injury and causation
analysis.
(a) Arguments
7.216  Japan submits that the USITC injury and causation analysis is inconsistent with Articles 3.1,
3.4 and 3.5 of the AD Agreement since it focused on data for only two years of the normal three-year
period of investigation and ignored or marginalized alternative causes of injury.
                                                     
143 USITC Report, Tables C-1 and C-2, pages C-3-6
144 Panel Report, Mexico – HFCS , para. 7.154.WT/DS184/R
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7.217  First, Japan submits that the USITC eschewed its traditional three-year analysis and instead
compared industry data for 1998 with those for 1997.145  Japan points to a recommendation of the AD
Committee to argue that an investigating authority is to examine imports, prices and the industry
performance over a three-year period of investigation, and asserts that this was the USITC's
longstanding practice.  Japan alleges that if applie d in the hot-rolled steel case, a three-year analysis
would have revealed that virtually all the major domestic industry performance indices improvedbetween 1996 and 1998.  According to Japan, the base year 1997, which Japan asserts was used by
USITC in this investigation, happened to be the best year the industry had experienced in a decade
and any comparison with this record-breaking year almost guaranteed an affirmative determination of
injury.  Japan asserts in particular that the USITC's analysis reveals an unexplained shift from a three-
year to a two-year analysis for financial performance.
146  In support of its argument, Japan refers to
the views of Commissioner Askey who considered the entire three-year period of investigation in her
analysis, and found no material injury to the domes tic industry by reason of imports, but only threat of
injury.
7.218  Japan submits that by manipulating the period of investigation, USITC violated Article 3.1 by
failing to base its material injury determination upon "positive evidence" and an "objective
examination".  Moreover, Japan argues that USITC violated Article 3.4 of the AD Agreement by
failing to consider and to “make apparent" its consideration of the Article 3.4 factors for the first yearof the period.
147 Japan further alleges that the USITC determination was also inconsistent with
Article 3.5 of the AD Agreement by failing to conduct a proper causation analysis that covered the
full three years period and took into account the injury trends for this three year period.
7.219  Japan also claims that USITC acted inconsistently with Article 3.5 of the AD Agreement by
inadequately analyzing "other" causes of injury.  Japa n refers in particular to the strike at General
Motors (the largest steel consumer in the US) in 1998, the increased capacity of and production by
low-cost mini-mills, and faltering demand for pipe and tube due to collapsing oil prices.  According to
Japan, USITC did not consider the price effects of non-subject imports, as explicitly required by
Article 3.5 of the AD Agreement.  Japan asserts that the USITC mentions certain other relevant causal
factors but fails to reconcile the facts and arguments presented by the parties.
7.220  Japan further submits that USITC failed to isolate the injury caused by these alternative
factors in order to ensure that such injury is not  attributed to dumped imports.  According to Japan,
the United States – Wheat Gluten  case made it clear that an anti-dumping investigating authority must
ensure that when injury caused by alternative factor s is subtracted, the remaining injury still rises to
the level of "material injury".148
7.221  The United States asserts that the USITC conducted an objective examination of data
covering a period of investigation of three years and thoroughly examined possible known alternative
causes of injury.  USITC based its causal analysis on an evaluation of the changes in all relevant
                                                     
145 Japan argues that this case was the only case out of 133 final determinations issued from
January 1990 in which the first year of the period of investigation was ignored.
146 USITC Report, page 18.
147According to Japan, it is immaterial that the omitted data appear in an appendix to the determination,
as USITC declined to factor them into its analysis or  even mentions them.  Japan submits that USITC nowhere
in its discussion of impact even mention that shipments and profits increased between 1996 and 1998.  Thisleads Japan to the conclusion that US ITC examined certain factors over three years and others over two years,
depending on which trends best supported an affirmative determination.
148 Japan considers that this Panel report concerning  the application of the Safeguards Agreement is
very relevant to this case since the standards concerni ng causality are almost identical in Article 3.5 of the
AD Agreement and 4.2(b) Safeguards Agreement.WT/DS184/R
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factors over a period of three years and the data used also covered three years.149  The United States
disagrees with Japan's assertion that 1997 was an exceptionally good year for the US industry which
would preclude any fair comparison with information for that year.  According to the United States,
many factors started to decline in 1996 and continued to decline in 1997 and 1998.  Moreover, the
United States argues, in 1998 productivity was higher and costs lower than in 1997, but nevertheless
domestic industry performance indicators indicated a sharp decline in 1998.  The United Statessubmits that USITC reliance on recent trends is not unique but rather customary
150 since the most
recent data are in general more relevant and probative for the state of the industry.  The United States
asserts that it was appropriate for the USITC to place more weight on the most recent trends.  The
United States argues that the USITC's comparison  of 1997 and 1998 data reflected its evaluation of
the probative value of the 1996 – 1998 data in view of the changes in demand in the market that
occurred since 1996.
7.222  Second, the United States argues that, in accordance with Article 3.5 of the AD Agreement,
the USITC examined all relevant factors and ensured that injury caused by other factors was not
attributed to dumped imports.  The United States asserts that Article 3.5 of the AD Agreement does
not, however, require that a separate determination be made of the effects of the alternative causes.
Nor, in the US view, is it required to quantify injury from other causes. According to the United
States, the United States - Wheat Gluten  Panel report is not relevant to this case since it was not
concerned with the application of the AD Agreement but rather provided what the United States
considers to be an incorrect interpretation of the Safeguards Agreement.  The report of the Panel in
United States – Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon
for Norway ("United States -  Atlantic Salmon") , which according to the United States should guide
the Panel in its interpretation of the non-attribution provision of the AD Agreement, found that theauthority is not required to demonstrate that dumped imports are the sole cause of material injury to
an industry.  Neither is an authority required to id entify the extent of the injury caused by alternative
factors.
151  The USITC examined other known alternative causes and thus complied with the
requirement of Article 3.5 of the AD Agreement.  The United States submits that all known
alternative causes suggested by Japan were exte nsively discussed by USITC and USITC did not
attribute to the dumped imports the effects of other known factors.
7.223  According to Brazil it must be demonstrated that imports in and of themselves were a cause
of material injury to the industry, otherwise, th e prohibition against attribution to dumped imports of
injury caused by other factors in Article 3.5 of the AD Agreement would be meaningless.  Brazil
submits that USITC did not ensure against the attribut ion to imports of the effects of other factors as it
made no efforts to isolate the effects of the other factors affecting the industry.
7.224  Chile argues that USITC acted inconsistently with the AD Agreement and failed to conduct
an objective examination by analyzing data from th e most recent two years only and by not examining
possible alternative causes of injury more thoroughly.
(b) Finding
7.225  We will first consider Japan's claims concerning the allegedly WTO inconsistent focus of
USITC on data for two years of the three-year period of investigation.  We will then consider the
                                                     
149 The United States argues that the USITC explicitly evaluated capacity, capacity utilization,
productivity, unit costs of goods sold, unit values, employment, wages, and capital expenditures from 1996 to1998, referring to  USITC Report, pages  17 - 18.
150 The United States mentions several cases in support of this statement in its first written submission.
First Written Submission of the United States, Annex A-2, para.  C-108.
151 United States – Imposition of  Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic
Salmon for Norway  ("United States – Atlantic Salmon "),  ADP/87 (27 April 1994), at  555; See Responses of the
United States to Questions from the Panel, Annex E-3, paras. 58 – 69.WT/DS184/R
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USITC treatment of alternative causes of injury in light of the requirements of Article 3.5 of the
AD Agreement.
(i) Did USITC properly discuss and evaluate data covering the whole period of investigation ?
7.226  We note with regard to Japan's claim concerning USITC's alleged focus on two years of the
three-year period of investigation that the AD Agreement does not specify the period of investigation
and thus does not prescribe that the data used in the injury analysis have to cover three years.152
While the United States does not dispute that a three-year period of investigation should be considered
for the purpose of making an injury determina tion, it asserts that the USITC in this case did consider a
three-year period of investigation (1996 – 1998) and analysed all relevant economic factors having a
bearing on the state of the industry on the basis of data covering this three-year period.  Japan
acknowledges that the USITC gathered data for the entire three-year period and that those data are
mentioned in the USITC report in various tables and annexes.  However, Japan argues, USITC failed
to adequately factor this information into its de termination and failed to compare the state of the
industry at the end of the period of investigation in 1998 with the state of the industry in 1996.
7.227  We note that throughout the USITC report there are various instances in which USITC does
discuss trends in the data for the three-year period.  For example, the USITC report discusses data
from three years when examining the conditions of competition153 and the evolution in the volume of
imports and the market share held by imports.154  The price effects of subject imports are also
evaluated over the entire period of investigation 1996 – 1998.155  In the section of the report
concerning impact of the subject imports on the domestic industry, the factors regarding capacity and
capacity utilization are likewise discussed for the entire three-year period of investigation.156
7.228  Japan's argument thus appears mainly based on the section of the USITC report that examines
the impact of the subject imports on the domestic industry, and  in particular, the data concerningfinancial performance of the industry.
157  We note that the USITC report discusses production and
sales as well as financial performance of the industry by comparing data for 1998 with data from
1997, without explicitly mentioning the 1996 values.  In relevant part, the USITC report reads as
follows:
"The domestic producers' production and shipments declined from 1997 to 1998, both
on a merchant market and overall basis.98 The domestic industry's financial
performance likewise deteriorated significantly.  From 1997 to 1998, as apparent
consumption increased significantly, operating income declined by more than half.99
                                                     
152 We note that the Committee on Anti-Dumping Practices recently adopted a recommendation which
provides that "the period of data collection for injury investigation normally should be at least three years".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.  We note, however, that this
recommendation was adopted after the investigation at issue in this dispute had been completed.  Moreover, therecommendation is a non-binding guide to the common understanding of Members on appropriateimplementation of the AD Agreement.  It does not, however, add new obligations, nor does it detract from theexisting obligations of Members under the Agreement.  See G/ADP/M/7 at para 40, G/ADP/AHG/R/7 at para. 2.Thus, any obligations as to the length of the period of investigation must, if they exist, be found in the
Agreement itself.
153 USITC Report, pages 10 – 11.
154 USITC Report, pages 12 – 13.
155 USITC Report, pages 13 – 16.
156 USITC Report, pages 17 – 18.
157 This is apparent from Japan's answer to Pane l question 18: "The contrast between the bottom of
page 17 and the top of page 18 of the USITC decision is quite dramatic.  The USITC inexplicably shifts from a
three-year analysis to a two-year analysis.  This unexplained shift for financial performance – one of the mostimportant factors to be considered – does not constitute "an objective examination" as required by Article 3.1".
Japan's Answers to questions from the Panel, Annex E-1, para. 64.WT/DS184/R
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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 from
5.5 per cent in 1997 to 2.6 per cent in 1998.100 101 This decline was due largely to
declines in unit values of the industry's hot-rolled steel shipments and sales.  As
described above, unit values fell significantly in 1998 as subject imports increased in
volume and market share".
___________________
98  CR & PR at Tables C-1 and C-2
99  CR & PR at Tables C-1 and C-2
100 CR & PR at Tables C-1 and C-2.  In addition the domestic industry's productivity improved
and COG's declined from 1997 to 1998.  The domestic industry's productivity (measured inshort tons per 1,000 hours worked) increased from 864.8 in 1996, to 905.3 in 1997 and to
938.7 in 1998.  As discussed in our analysis of the price effects of the subject imports, the
domestic industry's unit COG's declined from 1996 to 1998, but not by as much as the declinein the industry's unit values.  CR & PR at Table C-1.
101 CR & PR at Table C-1.  Aside from productivity, which increased during the investigation
period, a number of the industry's other employment indicators declined somewhat during theperiod of investigation.  CR & PR at Table III-5 (the number of workers declined from 33,965
in 1996, to 33,518 in 1997, to 32,885 in 1998; hours worked declined from 73,597 in 1996, to
71,634 in 1997, to 68,574 in 1998; wages paid were essentially flat from 1996 to 1998; hourlywages increased somewhat from $23.04 in 1996 to $24.13 in 1997, to $24.46 in 1998; unitproduction costs were $26.65 in 1996 and 1997 and declines somewhat to $26.06 in 1998).  USproducers' inventories were also relatively stable during the investigation period, both on anabsolute basis and relative to production and shipments.  CR & PR at Table III-4.  Capital
expenditures declined significantly from $1. 7 billion in 1996, to $908 million in 1997, and to
$715 million in 1998.  CR & PR at Table VI-7.  We also note that one firm filed for bankruptcy
protection in September 1998 and another in February 1999.  See CR & PR at Table III-1 nn.1& 3; Petitioners' Prehearing brief at 51-52, 54; Respondents' Joint Prehearing Brief at 143.Both firms ***.  See Questionnaire Responses of Geneva and Acme Metals, Inc." (footnotes in
original)
 158
7.229    The USITC report contains the following explanation for comparing 1998 data with data for
1997 and omitting to discuss 1996 data:
"The respondents have argued that 1997 was a banner year for the domestic industry
and, hence, is not an appropriate year with which to compare the domestic industry'sresults in 1998.  However, US apparent consumption increased throughout the period
of investigation, both from 1996 to 1997 and from 1997 to 1998, reaching record
levels.  Accordingly, we disagree that 1997 is not an appropriate point of comparison
for the domestic industry's results in 1998.  In a year in which US consumption
reached record levels, and the US industry increased its productivity and lowered its
costs, 1998 likewise should have been a highly successful year for the domestic hot-
rolled steel industry.  Instead, the domestic industry, although it maintained anoperating profit, performed consistently worse".
159 (footnotes omitted)
7.230  We turn to the question whether the USITC failed to properly establish the facts or to make an
unbiased and objective evaluation because it did not explicitly discuss the data for the first year of the
period of investigation with regard to certain factor s examined and failed to compare the data at the
                                                     
158 USITC Report, page 18.
159 USITC Report, page 18.WT/DS184/R
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end of the period of investigation with those gathered for the first year of this period.  We note that
Japan admits that USITC gathered data for the entire period of investigation for all factors of
Article 3.4 of the AD Agreement.  Japan also agrees that the data for the three years of the period of
investigation are reported in various tables in  the report.  As noted above, with regard to most factors
these data are explicitly discussed and evaluated in the determination for all three years, 1996, 1997
and 1998.  With regard to production, sales and certain factors affecting financial performance,USITC discusses and compares data for the years 1997 and 1998 only.
7.231  Article 3.4 of the AD Agreement, provides in pe rtinent part 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, including …".
The clear requirement for the investigating authority under this provision is " to evaluate  all relevant
factors having a bearing on the state of the industry" (emphasis added).
160 There is no disagreement
among the parties that USITC mentioned and discussed, to a certain extent, the challenged factors.Japan's claim is that the USITC di scussion did not sufficiently evaluate certain factors by failing to
discuss data for the year 1996 and to compare the industry performance in 1996 with the situation in
1998.
7.232  We believe it would not be sufficient if the investigating authority merely mentioned data for
certain of the Article 3.4 factors without undertaking an evaluation of that factor. An evaluation of a
factor implies putting data in context and assessing such data both in their internal evolution and vis-
à-vis other factors examined.  Only on the basis of the evaluation of data in the determination would a
reviewing panel be able to assess whether the conclusions drawn from the examination are those of an
unbiased and objective authority.
161
7.233   In this case, USITC did not explicitly discuss data for production, sales and financial
performance of the industry for the first year of the period of investigation, 1996, although it is clear
that the data were before the USITC at the time it made its determination.  It did evaluate and assess
the declining trend for these factors from 1997 to 1998.  USITC explained why it focused on 1997-
1998 in its evaluation of these factors.  The United States argued before us that the reason USITC did
not compare data for 1996 with those for 1998 was because "changes created a new economic contextfor the performance of the industry".
162  We do not find a similar explanation in the USITC report.
Indeed, we regret that, with regard to these spec ific factors, USITC did not even mention data for
1996 in its discussion and did not explain why it considered those data no longer relevant in light of
the changed economic circumstances, although it explained why it focused on the comparison
between 1997 and 1998.
7.234  We are of the view that in this case it was not improper of USITC to focus on the sudden and
dramatic decline in industry performance from 1997 to 1998, at a time when demand was still
increasing. The period USITC considered explicitly (1997 – 1998) is the most recent period, and is
the period that coincides with the period of the alleged dumped imports.  In our view, to the extent
that Japan is suggesting that USITC should have  made a static end-point-to-end point comparison,
comparing 1996 levels to 1998 levels, we note that such a comparison, by ignoring  intervening
changes in circumstances and conditions in which the industry is operating, would present a lesscomplete picture of the impact of dumped imports.
163  In our view, a proper evaluation of the impact
                                                     
160 We agree with the view of the panel in Mexico – HFCS  that "consideration of the Article 3.4 factors
is required in every case, even though such consideration may lead the invest igating authority to conclude that a
particular factor is not probative in the circumstances of a particular industry or a particular case, and therefore
is not relevant to the actual determination".  Panel Report, Mexico – HFCS ,  para. 7.128.
161 Panel Report, Thailand - Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy
Steel and -Beams from Poland , WT/DS122/R (circulated 28 September 2000, appeal pending),  para. 7.236.
162 First Written Submission of the United States, Annex A-2, para. C – 105.
163 In this regard, we share the views of the Panel in Argentina – Footwear : "An end-point-to-end-point
analysis, without consideration of intervening trends, is very unlikely to provide a full evaluation of all relevantWT/DS184/R
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of dumped imports on the domestic industry is dynamic in nature and takes account of changes in the
market that determine the current state of the industry.  USITC gathered the information and
discussed in some detail developments in the performance of the domestic industry over the entire
period of investigation.  Against this background, it discussed the impact of imports both over the
period of investigation, and with specific reference to the period 1997-1998, a period when demand
continued to increase, but the performance of the domestic industry worsened.  We believe USITCthus performed a dynamic analysis for all relevant factors.  Merely that it did not explicitly address
production, sales, and financial performance during 1996 does not, in our view, undermine the
adequacy of the USITC's evaluation of the relevant economic factors, in light of its analysis and
explanations, so as to render its examination of the impact of dumped imports on the domestic
industry inconsistent with the AD Agreement.
7.235   It is another question whether the evaluation and the conclusion with regard to these factors
is supported by the facts.  It is important in this respect to keep in mind that we are bound in ouranalysis by the standard of review set forth in Article 17.6 of the AD Agreement.  The question we
face in this respect is whether the USITC failed to conduct an objective and unbiased evaluation
because it did not explicitly compare production, sales and financial performance of the industry in
1998 with the situation in 1996.  We do not find this to be the case.  USITC provided a reasoned and
reasonable explanation of why it compared data for 1998 with data for 1997.  Although it might havebeen preferable for USITC to have acknowledged the fact that these factors did not decline if one
compares 1996 to 1998 in an end-point-to-end-point comparison, this lack is not sufficient in and of
itself to conclude that the investig ating authority failed to evaluate all relevant factors objectively and
in an unbiased manner.  We note that Commissioner Askey, who found threat of injury, in her
separate views emphasised that the industry in 1998 "remained profitable and its profitabilitygenerally exceeded 1996 levels".
164  Based partly on this observation, Commissioner Askey concluded
that the industry was not presently injured by the subject imports and she went on to find threat of
injury.  We believe this statement by Commissioner Askey supports the view that these data could be
weighed and assessed differently.  It is however, not for us to reweigh and re-evaluate the data that
were before the USITC.
7.236  In sum, we find that USITC properly evaluated all relevant factors over the period
investigated and in this respect therefore did not violate Article 3.4 of the AD Agreement.  We find
that USITC conducted an objective examination of the impact of the imports on the domestic
industry, consistent with Article 3.1 of the AD Agreement.
(ii) Did USITC examine all known factors other than dumped imports and ensure that injuries
caused by these factors were not attributed to the dumped imports ?
7.237  We turn next to the question whether USITC established a causal relationship between the
dumped imports and the injury to the domestic industry consistently with Article 3.5 of the
AD Agreement.
7.238  There are two aspects to Japan's argument in this regard.  Both relate to the way USITC dealt
with possible alternative causes of injury to the domestic industry.  First, Japan alleges that USITC
inadequately analysed other factors affecting the industry. Second, Japan submits that USITC failed toensure that injury caused by these other factors was not attributed to the dumped imports. The
United States, in response to these arguments, points to the various paragraphs in the USITC report in
which other factors affecting the industry are discussed. The United States further argues that the
USITC was not required under the AD Agreement to establish that dumped imports are the sole cause
                                                                                                                                                                    
factors as required". Panel Report,  Argentina – Footwear ,  para. 8.217.  This statement was of course made in
the context of the Agreement on Safeguards, but the relevant provision in the Safeguards Agreement,Article 4.2(a) is very similar to Article 3.4 of the AD Agreement.
164 USITC Report, Additional and Dissenting Views of Commissioner Thelma J. Askey, page 52.WT/DS184/R
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of injury and that its analysis did ensure that any injuries that were caused by other factors were not
attributed to dumped imports.
7.239  We will first consider the factors that Japan alleges were ignored or marginalized by USITC
in order to assess whether the statement in the USITC report, “[I]n assessing whether the domestic
industry is materially injured by reason of subject imports, USITC considered all relevant economic
factors that bear on the state of the industry in the United States” is justified.165
7.240  Japan alleges that USITC ignored the impact of the increase in capacity of mini-mills and the
ensuing expansion of US steel supply.166  We note however that the USITC, in discussing the
capacity of the domestic industry observed that
“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, at a rate
largely commensurate with the increasing US consumption from 1996 to 1998”.167
The USITC further observed that "there were some additional increases in capacity from 1997 to 1998
by EAF producers, but as discussed below, these increases were not as great as the increases in
capacity by EAF producers from 1996 to 1997".168  USITC thus considered increased capacity, and
increased mini-mill capacity in particular, but found that it was largely commensurate with increases
in demand and that most of the increased capacity was in place by 1997, when the industry was
performing well.
7.241  Moreover, the report goes on to discuss Japan's argument that the industry’s poor
performance in 1998 reflects increased competition within the domestic industry, particularly from
EAF producers:
“Minimill competition was an important condition of competition in 1997, yet the
domestic industry performed well that year.  The incremental increase in mini-mill
capacity from 1997 to 1998, particularly in light of the substantially larger increase in
minimill capacity from 1996 to 1997, does not account for the bulk of the downturn
in the domestic industry’s financial indicators from 1997 to 1998”.169
We therefore consider that USITC discussed the increased capacity as well as intra-industry
competition and recognised that increased competition within the domestic industry contributed to the
domestic industry’s poorer performance in 1998.  USITC however found that “it only partially
explains the substantial declines in the domestic industry’s performance in 1998”.170  We consider that
USITC appropriately examined this factor.
7.242  Japan also argues that the USITC did not properly examine the effect on the industry of the
strike at General Motors.  In particular, Japan faults USITC for failing to distinguish the effects of the
General Motors strike from the effects of the subject imports and for not considering the impact of the
strike on the industry during the second half of 1998 in the proper context, which in Japan's view
required considering the effect of the strike on merchant market demand, rather than on overall
consumption.
                                                     
165 USITC Report, page 9.
166 We note  that respondents before the USITC argued that imports were drawn into the US market due
to a shortage of domestic supply  of hot-rolled steel in early 1998.  USITC Report, page 13, footnote 71.
167 USITC Report, page 17.
168 USITC Report, page 18, footnote 102.  EAF, or "electric arc furnace" producers, are the mini-mills
at issue.  The terms are used interchangeably in this report.
169 USITC Report, page 19.
170 USITC Report, page 19.WT/DS184/R
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7.243  We note that USITC explicitly addressed the 1998 General Motors strike in its report,
considering it as a condition of competition.  The strike lasted five weeks in June and July of 1998.
The total amount of all flat-rolled steel (including hot-rolled, cold-rolled and corrosion resistant
steels) that was not purchased was about 685,000 tons.171  USITC concluded in this respect that
“the GM strike had some effect on overall demand in 1998 and hence played some
role in contributing to declining domestic prices.  However, the strike lasted only fiveweeks and the total quantity of material not purchased during the GM strike (no more
than 685,000 tons of all types of flat-rolled steel) was not large enough to explain the
kind of price declines that occurred in 1998.  Indeed, despite the GM strike, merchant
market and overall consumption of hot-rolled steel were at an all-time high in 1998.
Thus, at most, we consider the GM strike to be only a partial explanation for
declining prices in 1998”.
172
7.244  This statement, in our view, demonstrates that USITC did not ignore the General Motors
strike as an alternative factor, and did indeed examine its effect on the industry, finding that despite
the strike, consumption increased in 1998.  It is true that USITC did not consider the effect of the
strike on merchant market consumption as opposed to overall consumption, but we do not find that
this is required under the AD Agreement.  While this  might have been an interesting additional point
to address, as we discussed above, it is the impact of imports on the domestic industry as a whole  that
needs to be examined and assessed in light of other causal factors.  This, we consider, USITC has
done with respect to the General Motors strike.
7.245  Japan asserts that declining demand for hot-rolled steel from the pipe and tube industry was
an important alternative causal factor that was not addressed in the USITC report.  Japan argues that
the US argument before the Panel regarding why USITC failed to discuss this element is nothingmore than a post hoc  rationalization.   Japan submits that this omission is a plain violation of the
requirement of Article 3.5 of the AD Agreement to examine all relevant evidence and any known
factors other than dumped imports which at the same time are injuring the domestic industry.
7.246  We agree with Japan that errors made during the investigation cannot be rectified in
subsequent submissions before a WTO panel.  However, in this case, it seems clear to us that thefactor allegedly not examined, a decline in demand by pipe and tube producers, is merely a subset of a
factor that was explicitly examined at length by USITC -- overall consumption or demand for hot-
rolled steel.  While there may have been a decline in demand from this particular user industry,
USITC determined that both for the hot-rolled steel industry as a whole and in the merchant market,
demand increased substantially throughout the period of investigation.  As discussed previously, theinvestigating authority is obliged to consider the impact of imports on the industry as a whole, which
the USITC did with respect to changes in demand.  We do not agree with Japan that a failure on the
part of USITC to discuss a decline in one particular aspect of demand, in a case in which the overall
increase in demand for the product was thoroughly examined and discussed in examining the impact
of imports, constitutes a violation of Article 3.5 of the AD Agreement.
7.247  Finally, Japan argues that USITC failed to examine the prices of non-dumped imports and
only collected information on the volume of non-subject imports.  Japan submits that Article 3.5requires consideration of the volume and prices  of imports not sold at dumping prices.  USITC
examined non-subject imports and found that they ma intained a stable presence in the US market
throughout the period of investigation.
173 We disagree with Japan that Article 3.5 of the
AD Agreement requires  that the investigating authority explicitly examine the volume and price
                                                     
171 It is noteworthy that General Motors did not provide a figure limited to hot-rolled steel, the domestic
like product.
172 USITC Report, page 16.
173 USITC Report , page 10.WT/DS184/R
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effects of non-subject imports.  Article 3.5 provides in relevant part that "factors which may be
relevant in this respect include inter alia , the volume and prices of imports not sold at dumping
prices" (emphasis added).  The obligation imposed by Article 3.5 in this respect is to examine any
known  factors which at the same time are injuring the industry, and includes volume and prices of
imports not sold at dumped prices among the examples of potential other factors injuring the industry.
Japan did not present a prima facie  case that the prices of the non-dumped imports were a known
factor injuring the industry or that they were othe rwise relevant to USITC's examination of the effects
of other known factors that might be causing injury.
7.248  We now turn to the second aspect of Japan's claim concerning the causal analysis performed
by USITC, concerning the "non-attribution" requirement of Article 3.5 of the AD Agreement.  Japan
argues that USITC failed to ensure that injury caused by other known factors was not attributed to the
dumped imports.
7.249  Article 3.5 of the AD Agreement provides:
"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 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.  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 injuries caused 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 restrictivepractices of and competition between the foreign and domestic producers,
developments in technology and the export performance and productivity of the
domestic industry".
7.250  Article 3.5 of the AD Agreement thus requires the investigating authority to demonstrate that
dumped imports are, through the effects of dumping, as set forth in Article 3.2 and 3.4, causing injurywithin the meaning of the Agreement.
174  The following sentences of this provision clarify how this
causal link is to be established.  First, Article 3.5 requires that the demonstration of a causal
relationship be based on an examination of all relevant evidence.  Second, Article 3.5 provides that
the authorities shall examine any known factors other than the dumped imports which are at the same
time injuring the domestic industry.  Third, the authorities are to make sure that injuries caused bythese other factors are not attributed to the dumped imports.
7.251  Article 3.5 thus seems to warn against quick and overly simplistic conclusions by requiring
the investigating authorities to consider and examine other known factors that are at the same time
injuring the domestic industry before determining that dumped imports are causing material injury
within the meaning of Articles 3.2 and 3.4.  It does not suffice to merely consider these other factors.
The authorities must also make sure that imports are not regarded as causing injuries that are in fact
caused by these other factors.  We note that the Agreement uses the plural "injuries".  This to usindicates that many factors may be injuring the industry in various ways. We consider that the
authority is to examine and ensure that these other factors do not break the causal link that appeared to
exist between dumped imports and material injury on the basis of an examination of the volume and
effects of the dumped imports under Articles 3.2 and 3.4 of the AD Agreement.
                                                     
174 This is, in our view, clearly a reference to footnote 9 to Article 3 of the AD Agreement, which
defines "injury" as "material injury to a domestic industry, threat of material injury to a domestic industry ormaterial retardation of the establishment of such an industry".WT/DS184/R
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7.252  The AD requirement requires that "a causal relationship " between dumped imports and
material injury to the industry be demonstrated and that authorities in their examination of other
factors causing injuries make sure that they do not mistake coincidence in time for a causal
relationship.  In this context, we consider the decision of the Panel in United States – Atlantic Salmon,
a decision under the Tokyo Round AD Code, to be useful and persuasive on this issue. We note that
the relevant language addressed by that Panel, conc erning non-attribution of injuries caused by other
factors to the dumped imports, is identical in Ar ticle 3:4 of the Tokyo Round Anti-Dumping Code to
that in Article 3.5 of the AD Agreement.
7.253  Japan argues that the addition of the explicit requirement to "examine any known factors
other than the dumped imports" which are injuring the domestic industry, as opposed to the
recognition of the possibility that other factors are injuring the domestic industry, constitutes "a
significant substantive change in the underlying treaty text [which] renders United States - Atlantic
Salmon  totally inapposite".175  We do not agree.  In our view, the operative language at issue is the
injunction that "the injuries caused by other factors  must not be attributed to the dumped imports"
(emphasis added).  This language is unchanged in Article 3.5 of the AD Agreement from Article 3:4
of the Tokyo Round Code.  The specific requirement that the authorities "examine any known factors
other than the dumped imports which at the same time are injuring the domestic industry", as opposed
to the Tokyo Round Code language which recognized that "There may be other factors which at thesame time are injuring the industry", clarifies the investigative obligation of the authority, but does
not change the standard of non-attribution.  We consider the decision of the Panel in United States -
Atlantic Salmon remains relevant and persuasive on this latter point.
7.254  The panel in United States - Atlantic Salmon  observed that:
"the primary focus of the requirement in Article 3:4 of a demonstration of a causal
relationship between imports under investigation and material injury to a domestic
industry was on the analysis of the factors set forth in Articles 3:2 and 3:3, i.e.  the
volume and price effects of the imports, and their consequent impact on the domestic
industry.  In this connection, the Panel recalled its conclusions regarding the findings
made by the USITC with respect to these factors.  Under Article 3:4 the USITC wasrequired not to attribute injuries caused by other factors to the imports from Norway.
In the view of the Panel this did not mean that, in addition to examining the effects of
the imports under Articles 3:1, 3:2 and 3:3, the USITC should somehow have
identified the extent of injury caused by these other factors in order to isolate the
injury caused by these factors from the injury caused by the imports from Norway.Rather, it meant that the USITC was required to conduct an examination sufficient to
ensure that in its analysis of the factors set forth in Articles 3:2 and 3:3 it did not find
that material injury was caused by imports from Norway when material injury to the
domestic industry allegedly caused by imports from Norway was in fact caused by
factors other than these imports…"
176
7.255  We have above concluded  that USITC did examine other known factors that were at the
same time causing injuries to the industry, such as the GM strike and intra-industry competition.  Weconsider that the conclusion that the effects of the strike can only have been minimal is supported by
the facts since both on a merchant market basis and overall, demand was still increasing and the
amount of hot-rolled steel affected by the strike was relatively small.  USITC also  recognised, as we
have discussed above, that “increased competition within the domestic industry has contributed to the
                                                     
175 Second Submission of Japan, Annex C-1, para. 256.
176 United States – Atlantic Salmon , para 555.WT/DS184/R
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domestic industry’s poorer performance in 1998”, but concluded that “it only partially explains the
substantial declines in the domestic industry’s performance in 1998”.177
7.256  We note that USITC concluded its analysis as follows:
"In sum, the domestic industry's performance was substantially poorer than what
would be expected given record levels of demand in 1998.  We recognize that other
economic factors – especially increased intra-industry competition – have contributedto the industry's poorer performance in 1998.  Having taken these factors into account
however, we find that the substantially increased volume of subject imports at
declining prices has materially contributed to the industry's deteriorating
performance, as reflected in nearly all economic indicators.  Accordingly, in light of
the domestic industry's declining production, shipments, market share, prices,
capacity utilization and financial condition, in the face of increasing subject import
volume and market share and declining subject import prices, we determine that thedomestic industry producing hot-rolled steel is materially injured by reason of LTFV
imports from Japan".
178
7.257  We find that the USITC's analysis of the effects of the dumped imports on the domestic
industry, in light of, and taking into account the impact of other factors on the state of the industry, is
consistent with the requirement of Article 3.5 of the AD Agreement to demonstrate a causalrelationship between dumped imports and material inju ry without attributing injuries caused by other
factors to the dumped imports.
7.258  Japan argues, on the basis of the Panel report in United States - Wheat Gluten , that it needs to
be demonstrated that dumped imports alone have caused material injury and that the injury caused by
other factors must somehow be deducted from the ov erall injury found to exist, in order to determine
whether the remaining injury rises to the level of material injury.  After these arguments were made,
but before we had completed our consideration of the interim report, the Appellate Body issued its
decision in the appeal of United States - Wheat Gluten.
179 As that decision bears directly and
substantially on our analysis in this regard, and in particular on Japan's argument, we considered it
appropriate to take the Appellate Body's decision in to account, and delayed issuance of the interim
report to do so.
7.259  The Appellate Body found that the Panel had concluded that increased imports must,
themselves, be capable of causing injury that is "serious", and explained its view of the Panel's
reasoning leading to this interpretation as comprising the following steps:
"first, under the first sentence of Article 4.2(b), there must be a "causal link" between
increased imports and serious injury;  second, the non-"attribution" language of the
last sentence of Article 4.2(b) means that the effects caused by increased imports
must be  distinguished  from  the effects caused by other factors;  third, the effects
caused by other factors must, therefore, be  excluded  totally from the determination of
serious injury so as to ensure that these effects are not "attributed" to the increased
imports;  fourth, the effects caused by increased imports  alone , excluding the effects
caused by other factors, must, therefore, be capable of causing serious injury.63
______________
                                                     
177 USITC Report, page 19.
178 USITC Report, pages 20-21.
179 Appellate Body Report, United States - Wheat Gluten , WT/DS166/AB/R, adopted 19 January 2001.WT/DS184/R
Page 76
63 We base our understanding of the Panel's reasoning on paragraphs 8.138, 8.139, 8.140 and
8.143 of the Panel Report ."180
The Appellate Body agreed with the first and sec ond steps, but found no support in the text of the
Safeguards Agreement for the latter two steps, and therefore "reversed the Panel's interpretation of
Article 4.2(b) of the Agreement on Safeguards  that increased imports "alone", "in and of themselves",
or "per se ", must be capable of causing injury that is "serious".181
7.260  The Appellate Body was considering the language of Article 4.2(b) of the Safeguards
Agreement, which provides in pertinent part that "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."  Japan's argument relied on the similarity of this language to the language of the
AD Agreement to argue that the standard set forth by the Panel in United States - Wheat Gluten
should also apply in the anti-dumping context.  In light of the decision of the Appellate Body, which
reversed the decision of the Panel on this very point, we reject Japan's argument that the USITC was
obligated under the AD Agreement to demonstrate that dumped imports alone have caused material
injury by deducting the injury caused by other factors from the overall injury found to exist, in order
to determine whether the remaining injury rises to  the level of material injury.  The AD Agreement
requires that the investigating authority demonstrate that dumped imports are causing materialinjury.
182  The USITC determined that the domestic indu stry "is materially injured by reason of" the
dumped imports.  We consider that the USITC's consideration of the alternative causes of injury, as
discussed above, was consistent with its obligati ons under the AD Agreement, and that the USITC did
not attribute to dumped imports injury caused by other factors.
7.261    We therefore find that the USITC demonstrated the existence of a causal relationship
between dumped imports and material injury to the industry consistently with the requirements of
Article 3.5 of the AD Agreement.
G. ALLEGED VIOLATIONS OF ARTICLE  X OF GATT 1994
1. Arguments
7.262  Japan claims that the United States violated the obligation of Article X:3(a) of GATT 1994 to
administer its measures in a uniform, impartial and reasonable manner by (i) accelarating all aspects
of the proceedings, (ii) revising its policy concerning critical circumstances during the proceeding,
(iii) failing to immediately correct a calculation er ror in NKK's preliminary dumping margin, (iv) not
taking any adverse action against US steel companies that refused to provide highly material
information while applying adverse facts available to Japanese producers, and (v) deviating from itspractice and considering data from only two years when examining the state of the industry.
183
7.263  Japan argues that the standards contained in Article X:3 represent in one sense the notion of
good faith and in another sense the "fundamental requirements of due process”.  Japan submits that
Article X of GATT 1994 goes beyond the elements of due process established in the AD Agreement
and is in essence a comparative provision that ensures that certain parties are not afforded less due
process rights than others. According to Japan, when parties are treated differently in different cases
or in a single investigation, based simply upon differences in the administration of anti-dumping rules(which may or may not be consistent with the AD Agreement), these fundamental principles are
                                                     
180 Id., para. 66.
181 Id., para 79 (footnote omitted).
182 We note that the term "material injury" is not defined in the AD Agreement.
183 Japan is not arguing that a change in policy applicable to subsequent cases automatically
demonstrates biased administration of one's laws, but that in this case, the United States changed its policy orrefused to carry out longstanding rules and practices in a non-uniform, biased and unreasonable manner.WT/DS184/R
Page 77
violated.  Japan claims that in its investigation into imports of hot-rolled steel from Japan, the United
States ignored the principle of good faith and did not act in a reasonable and equitable manner.
7.264  The United States argues that it administered its laws and regulations in a perfectly uniform,
impartial and reasonable way.  The United States first points out that Article X:3 only refers to the
administration  of a Member’s laws, and not to the law itself.  Secondly, the United States claims that
since the AD Agreement is the more specific relevant rule, containing both procedural and substantiveprovisions, its provisions should prevail in case of conflict over the general rule of Article X:3.  This
also implies that if the measure is consistent with the AD Agreement, no claim can be brought under
Article X:3, since this general provision cannot be used to undercut the specific disciplines of the
AD Agreement.  The United States also warns that  a distinction must be made between the way one
specific case was dealt with and the overall administration of laws and regulations envisaged in
Article X:3.  The United States stresses the fact that Japan is not arguing that the overall AD practice
of the United States is arbitrary or does not ensure the necessary due process rights, but onlychallenges the way this case has been dealt with.
2. Finding
7.265  In considering these claims, we first consider the scope and applicability of Article X:3 of
GATT 1994 to this case.  Article X:3(a) of GATT 1994, which is at issue here, provides:
"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."
7.266  In considering the applicability of Article X:3(a) in this case, we look to decisions of the
Appellate Body which address this question.  The Appellate Body, in considering Article X:3(a), hasmade it clear that the provision does not apply to laws, regulations, decisions and rulings in
themselves, but applies "rather to the administration of those laws, regulations, decisions and
rulings…To the extent that the laws, regulations, decisions and rulings themselves are discriminatory,
they can be examined for their consistency w ith the relevant provisions of the GATT 1994."
184
Moreover, the Appellate Body has held that where another WTO Agreement deals specifically and in
detail with the issue in question, panels should a pply the provisions of such agreement first, after
which there would be "no need … to address the alleged inconsistency with Article X:3(a) of the
GATT 1994"185 in the event that the Panel finds a violation of the more specific provision.186  As to
the scope of Article X, the Panel in EC-Poultry Products observed that "Article X is applicable only
to laws, regulations, judicial decisions and administrative rulings of general application."187  T h e
Panel considered that an import license issued to a specific company or applied to a specific shipment
did not meet this criterion.   The Appellate Body upheld the Panel's finding, noting that it agreed with
the Panel that "licences issued to a specific co mpany or applied to a specific shipment cannot be
considered to be a measure 'of general application' within the meaning of Article X."188
7.267  Based on these previous decisions, we consider that certain principles are clear.  First, we
consider that Article X:3(a) addressed the administration  of a Members laws, regulations, decisions
and rulings.  In this case, it is not at all clear to us that Japan has presented such a challenge.  Inessence we understand Japan to argue that five separate actions or categories of action taken by the
                                                     
184 Appellate Body Report, EC - Bananas ,  para 200 (emphasis in original).
185 Id., para. 204.
186 Japan - Measures on Imports of Leather , BISD 31S/94, adopted 15 May 1984; EEC-Regulation on
Imports of Parts and Components , BISD 37S/132, adopted 16 May 1990; United States-DRAMs ,  para. 6.92.
187 Panel Report, European Communities - Measures Affecting the Importation of Certain Poultry
Products  ("EC – Poultry Products "), WT/DS69/R, adopted as modified (WT/DS69/AB/R) 13 July 1998,
paras. 269-270.
188 Appellate Body Report, EC-Poultry Products ,  para 114.WT/DS184/R
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USDOC in the course of making its decision to impose the challenged final anti-dumping duty
measure demonstrate a lack of uniform, impartial and reasonable administration of the US anti-
dumping law.  We will consider each of these actions or categories of action separately, first with
respect to whether we have found a violation of some other, more specific WTO obligation. Where
we have found that a particular action or category of action is not inconsistent with a specific
provision of the AD Agreement, we are faced with the  question whether a Member can be found tohave violated Article X:3(a) of GATT 1994 by an action which is not inconsistent with the specific
WTO obligations governing such actions.  We have serious doubts as to whether such a finding would
be appropriate.  Some of Japan's arguments concerning the alleged lack of uniform, impartial, and
reasonable administration of the US anti-dumping la w assert that USDOC made different decisions in
this case than it has made in other cases, or that the decisions were in violation of controlling US legal
authority.  It is not, in our view, properly a panel's task to consider whether a Member has acted
consistently with its own domestic legislation.
7.268  Finally, we have been presented with arguments alleging violation of Article X:3(a) of GATT
1994 which relate to the actions of the United States in the context of a single anti-dumping
investigation.  We doubt whether the final anti-dumping measure before us in this dispute can be
considered a measure of "general application".  In this context, we note that Japan has not even
alleged, much less established, a pattern of decision-making with respect to the specific matters it israising which would suggest a lack of uniform, impartial and reasonable administration of the US
anti-dumping law.  While it is not inconceivable that a Member's actions in a single instance might be
evidence of lack of uniform, impartial, and reasonable administration of its laws, regulations,
decisions and rulings, we consider that the actions in question would have to have a significant impact
on the overall administration of the law, and not simply on the outcome in the single case in question.Moreover, we consider it unlikely that such a conclusion could be reached where the actions in the
single case in question were, themselves, consistent with more specific obligations under other WTO
Agreements.
7.269  With regard to Japan's specific claim that USDOC unduly accelerated the proceeding, Japan
cites as evidence the fact that USDOC initiated the investigation on 15 October 1998, whichaccording to Japan was five days earlier than normal, and sent out questionnaires four days after
initiation, instead of 30 days, as Japan maintains is the USDOC's normal practice.
189  The preliminary
finding of dumping was issued 120 days after initiation, which Japan asserts is 25 days earlier than
normal.  Japan asserts that the USDOC has only rarely accelerated proceedings, and has more
commonly extended them, in similar circumstances, and that the accelerated actions in this case wereneither impartial nor reasonable in light of the complex nature of the case.  Japan submits that
USDOC's actions to accelerate deadlines constitute a pattern of abusive exercise of rights and a
violation of the obligation of good faith administration of the anti-dumping remedy.
7.270  In considering this allegation, we note that the total "acceleration" which is allegedly the
source of a partial or biased process in this case was 25 days.  Those 25 days were at the expense of
the investigating authority, which issued its questionnaires to the parties earlier than under its usual
timetable.  There is no allegation that the questionnaires somehow were defective or erroneous in amanner which prejudiced any party's interest, by virtue of having been issued earlier than under
USDOC's normal timetable.  There is  no allegation that any extensions of time in any aspect of the
investigation, including for submitting responses to questionnaires, were requested by a Japanese
party and were denied.
190  Finally, there is no basis on which it could be considered that USDOC
                                                     
189 Japan provides  a summary of the timing of questionnaires in other cases in 1998 in Exh. JP-69.
190 Indeed, it appears that while the questionnaires were issued to the parties earlier than the norm,
extensions of time were granted to respond, as the deadline for responses was significantly longer than the 30
days required by Article 6.1.1 of the AD Agreement - responses were in the end due 87 days after issuance ofthe questionnaires.  There is also no evidence or allegation that any requests for extensions of time by any otherparty participating in the investigation were denied.WT/DS184/R
Page 79
somehow failed to have sufficient time to con duct the investigation, as the investigation followed
USDOC's usual timetable after the questionnaires were issued.  We simply cannot see any basis on
which to find that  USDOC failed to administer the anti-dumping law in a uniform, impartial, and
reasonable manner simply because USDOC chose to act faster than it normally did in issuing the
questionnaires in this investigation.  Its actions were within the limits of its authority under US law,
the AD Agreement establishes no obligations as to the timing of issuance of questionnaires, and thereis no allegation that any party's interests were adversely affected by USDOC's actions.
7.271  Japan also asserts that USDOC deviated from its normal practice of correcting clerical errors
following preliminary determinations.  NKK broug ht a clerical error to USDOC's attention in
accordance with US regulation, and in a timely manner.  USDOC did not make the correction
immediately, but did eventually issue a correction, with retroactive effect. Japan submits that this
unexplained departure from USDOC's own practice lacks the uniformity, impartiality and
reasonableness mandated by Article X:3(a).  
 Japan does not argue that the failure to correct the NKK
clerical error itself created any violation of the AD Agreement.
7.272  In our view, the mere fact that  USDOC did not correct an error in its calculation at the first
possible time, particularly where, as Japan acknowledges, it was under no legal obligation to do so
under the AD Agreement, does not rise to a level that demonstrates a failure to administer the anti-
dumping law in a uniform, impartial, and reasonable manner.  This is particularly so since USDOCdid in fact eventually correct the error, with retroactive effect.
7.273  Japan claims that USDOC's review of its critical circumstances policy during the proceedings,
and its subsequent application of this new policy to the case at hand, were inconsistent with the
United States' obligations under Article X:3(a).  In Japan's view, the timing of the policy change was
not impartial, and the application of the policy not reasonable or uniform since an arbitrary datebefore the filing of the petition was chosen as a re ference point rather than the date of initiation.
Japan alleges that the substance of the decision was not uniform either since it was based on
allegations contained in the petition and went against the conclusion of the USITC on injury.
7.274    We certainly recognize the possibility, and indeed the likelihood, that the USDOC's decision
to review its critical circumstances policy at the time it did, and to apply the revised policy in thiscase, may have been motivated by concerns outside the scope of the anti-dumping investigation itself.
However, we have determined above that the USDOC's preliminary critical circumstances
determination was not inconsistent with the United States' obligations under Article 10.7 of the
AD Agreement as to its substance.  That is to say, the United States was entitled to make the
preliminary critical circumstances determination it made in this case.  Thus, the only basis for Japan'scontention is that USDOC made its determination earlier than it had in previous cases.  This in itself
was not inconsistent with Article 10.7, which allows such determinations to be made after initiation,
when it is determined that sufficient evidence exists of the necessary conditions. Moreover, USDOC
undertook this action as a result of a change in its policy which was made generally applicable, and
has in fact been applied in other cases.
191  Finally, we note that the issuance of early critical
circumstances determinations, as well as the choice of reference point for comparing volumes of
imports to assess whether they were massive, was already provided for in US law and regulation, andcould have been applied in this case on that ba sis, without necessarily informing the public of a
change in generally applicable policy.  We have not found the controlling US legal provisions to be
inconsistent with the United States' obligations under the AD Agreement   Thus, Japan is asking us to
conclude that by changing its policy in a manner not inconsistent with its domestic law, and not
inconsistent with its WTO obligations under the AD Agreement, and applying that decision on thefacts of this case, resulting in a determination not inconsistent with its obligations under the
                                                     
191 Merely that the policy change has since been applied in other cases does not demonstrate that it was
proper, but it does undermine its weight, whatever that may be, as an indication of failure to impartiallyadminister the anti-dumping law.WT/DS184/R
Page 80
AD Agreement, USDOC violated Ar ticle X:3 of GATT 1994.  We do not find any basis for such a
conclusion.
7.275  Japan asserts that USDOC's decisions to appl y "facts available" in calculating dumping
margins for Japanese companies must be contrasted with the fact that USITC did not apply facts
available in assessing injury to the domestic industry.  Japan's argument rests on the factual premise
that the domestic industry failed to provide requested information within applicable deadlines, whichwas the basis of USDOC's decision to apply facts available.  However, the United States has
explained, and we accept that explanation, that the deadlines for receiving information are different
before the USITC and the USDOC, and that in fact, the domestic industry did not fail to provide
information in a timely manner under the USITC's applicable regulations.  Thus, the factual predicate
for the application of facts available did not exist in the case of the USITC's determination, and there
is no disparity of treatment.  Consequently, even assuming that a difference in the treatment of
different categories of parties before the two agencies responsible for administering the anti-dumpinglaw in the United States could constitute a violation of Article X:3 of GATT 1994, Japan has failed to
establish that this happened as a matter of fact.
7.276  Finally, Japan claims that the use of a two year period of investigation by the USITC in its
injury analysis violated Article X:3(a).  As discussed above, we have found that it is simply not
correct as a matter of fact that USITC relied on a two year period of investigation.  USITC clearlycollected  information for all three years of the period of investigation established in this case, and
that information was before it at the time it made its decision.   Moreover, we have found that the
USITC's analysis and determination of injury were not inconsistent with its obligations under the
AD Agreement.  There is in our view no basis for co ncluding that the USITC's actions in this regard,
which are not inconsistent with the United States' obligations under the AD Agreement nonethelessviolate Article X of GATT 1994.
7.277  The elements raised by Japan in support of its contention relate almost exclusively to
individual actions and decisions made in the context of resolving the single anti-dumping proceeding
underlying this dispute. We do not consider that Japan has made a prima facie  case that these
individual actions, which of themselves are not  inconsistent with US obligations under the
AD Agreement, demonstrate that the United States administered its anti-dumping laws in a manner
which was not uniform, impartial and reasonable.   We therefore conclude that the United States did
not act inconsistently with Article X:3 of GATT 1994 in making its determinations and imposing the
final anti-dumping measure in dispute.
VIII.  CONCLUSIONS AND RECOMMENDATION
A. C
ONCLUSIONS
8.1 In light of the findings above, we conclude
(a) that the United States acted inconsistently with Articles 6.8 and Annex II of the
AD Agreement in its application of "facts available" to Kawasaki Steel Corporation
(KSC), Nippon Steel Corporation (NSC) and NKK Corporation;
(b) that section 735(c)(5)(A) of the Tariff Act of 1930, as amended, which mandates that
USDOC exclude only margins based entirely on facts available in determining an all
others rate, is inconsistent with Article 9.4 of the AD Agreement, and that therefore
the United States has acted inconsistently with its obligations under Article 18.4 of
the AD Agreement and Article XVI:4 of the Marrakesh Agreement by failing to bring
that provision into conformity with its obligations under the AD Agreement; andWT/DS184/R
Page 81
(c) that the United States acted inconsistently with Article 2.1 of the AD Agreement in
excluding certain home-market sales to affiliated parties from the calculation of
normal value on the basis of  the "arm's length" test.   In addition, in light of the
findings above, we conclude that the replacement of those sales with sales to
unaffiliated downstream purchasers was inconsistent with Article 2.1 of the
AD Agreement.
8.2 In light of the findings above, we conclude
(a) that the United States did not act inconsistently with its obligations under
Articles 10.1, 10.6 and 10.7 of the AD Agreement in determining the existence of
"critical circumstances". We further find that sections 733(e) and 735(a)(3) of the
Tariff Act of 1930, as amended, concerning the determination  of critical
circumstances are not inconsistent with Articles 10.1, 10.6 and 10.7 of
AD Agreement;
(b) that section 771(7)(c)(iv) of the Tariff Act of 1930, as amended, the "captive
production" provision, is not inconsistent with Articles 3.1, 3.2, 3.4, 3.5, 3.6 and 4.1
of the AD Agreement.  In addition, we further conclude that the United States did not
act inconsistently with its obligations under Articles 3.1, 3.2, 3.4, 3.5, 3.6 and 4.1 of
the AD Agreement in applying that provision in its determination concerning injuryto the US industry;
(c) that the United States did not act inconsistently with Articles 3.1, 3.4 and 3.5 of the
AD Agreement in its examination and determination of a causal connection between
dumped imports and injury to the domestic industry; and
(d) that United States did not act inconsistently with Article X:3 of GATT 1994 in
conducting its investigation and making its determinations in the anti-dumping
investigation underlying this dispute.
8.3 With respect to those of Japan's claims not addressed above we have:
(a) concluded that the claim was not within our terms of reference ("general practice"
concerning adverse facts available; "general practice" of excluding certain home-market sales from the calculation of normal value), or
(b) concluded that, in light of considerations of judicial economy, it is neither necessary
nor appropriate to make findings.
8.4 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie  to constitute a case of nullification or
impairment of benefits under that agreement.  Acco rdingly, we conclude that to the extent the United
States has acted inconsistently with the provisions of the AD Agreement, it has nullified or impaired
benefits accruing to Japan under that Agreement.
B. 
 RECOMMENDATION
8.5 Japan has requested that we make specific and concrete findings regarding precisely what the
US authorities did incorrectly.  This we have done.  However, Japan also asserts that we should not
leave it to the US authorities to decide what to do in the face of our decision, but that we have a dutyto provide a clear and detailed "roadmap" for how the US authorities can fulfill their international
obligations in this case.  We do not agree with Japan's view of our responsibilities in this regard.WT/DS184/R
Page 82
8.6 Article 19.1 of the DSU is explicit concerning the recommendation a panel is to make in the
event it determines 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).
Article 19.1 goes on to provides that:
"In addition to its recommendations, the panel or Appellate Body may suggest ways
in which the Member concerned could implement the recommendations".
Such suggestions on implementation, however, are not part of the recommendation, and are not
binding on the affected Member.
8.7 Thus, in our view, the language of Article 19.1 constrains us to recommend that the
United States bring its measures into conformity with the provisions of the AD Agreement, and
permits us to make suggestions regarding implementation of that recommendation.
8.8 We therefore recommend that the Dispute Settlement Body request the United States to bring
its measure into conformity with its obligations under the AD Agreement.
8.9 Japan further requests that we recommend that, if reconsideration of this case by the US anti-
dumping authorities in accordance with our findings results in a determination that the importedproduct was either not dumped or that it did not injure the domestic industry, the United States should
revoke its anti-dumping duty order and reimburse any anti-dumping duties collected, and that if
reconsideration of this case by the US anti-dumping authorities in accordance with our findingsresults in a determination that the imported product was dumped to a lesser extent than the duties
actually imposed, the United States should reimburse the duties collected to the extent of the
difference.  In other words, Japan wants us to recommend that the DSB request the United States to
undertake certain specific actions in the event that its implementation of our decision has certain
consequences.
8.10 The United States argues that the remedy sought by Japan, i.e.  the revocation of the duty and
the reimbursement of the amounts collected, goes beyond WTO practice and the remedies provided in
Article 19.1 of the of the DSU.  The United States asserts that the specific implementation of a panel
decision is a matter for the Member to decide upon, especially in cases such as this where it could be
that a measure may remain in place and only certain calculations were found to be inconsistent with
the AD Agreement.
8.11 As noted above, the scope of our recommendation is established by Article 19.1 of the DSU.
While we are free to suggest ways in which we believe the United States could appropriatelyimplement our recommendation, we decide not to do so in this case.  We have found a variety of
different violations of the United States' obligations under the AD Agreement, which may necessitate
differing responses in order to bring the measure c oncerned into conformity with the United States'
obligations under the AD Agreement.  We consider th at in the first instance the modalities of the
implementation of our recommendation are for the United States to determine.  In this regard, we noteArticle 21.3 of the DSU, which provides:
"At a DSB meeting held within 30 days after the date of adoption of the panel or
Appellate Body report, the Member concerne d shall inform the DSB of its intentions
in respect of implementation of the re commendations and rulings of the DSB".
(footnote omitted).WT/DS184/R
Page 83
In our view, this language clearly establishes a distinction between the recommendation of a panel,
and the means by which that recommendation is to be implemented.192  The former is governed by
Article 19.1, and is limited to the particular form set out therein.  The latter may be suggested by a
panel, but the choice of means is decided, in the first instance, by the Member concerned.
8.12 Viewing Japan's request as a request that we suggest ways in which the United States could
implement our recommendation, we decline to make such conditional suggestions.  First, we notethat, under US law, duties are not actually collected in the amounts determined as the dumping margin
in the investigation, but on the basis of the calculations in subsequent administrative reviews.  Thus, it
is not clear to us that there are any "duties collected" that would be subject to such a suggestion.
8.13 Second, and more importantly, we recall that suggestions under Article 19.1 relate to ways in
which a Member could implement a recommendation to bring a measure into conformity with a
covered agreement. Japan's request for reimbursement raises important systemic issues regarding the
nature of the actions necessary to implement a recommendation under Article 19.1 of the DSU, issueswhich we do not believe have been fully explored in this dispute.
8.14 On the basis of the foregoing, we decline Japan's request for a conditional suggestion
regarding revocation of the anti-dumping order and reimbursement of anti-dumping duties collected.
_______________
                                                     
192 See Panel Report, Guatemala-Cement I ,  para. 8.3.