WT/DS184/R
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ANNEX E
Questions and Answers
Contents Page
Annex E-1 Japan's Answers to Questions from the Panel 2
Annex E-2 Japan's Answers to Questions from the United States 29
Annex E-3 Responses of the United States to Questions from the Panel 32
Annex E-4 Responses of the United States to Questions from Japan 53
Annex E-5 Responses of Chile to Questions from the Panel 66
Annex E-6 European Communities' Answers to Questions from the Panel 67
Annex E-7 Korea's Responses to Questions to Third Parties 69
Annex E-8 Responses of Brazil to Questions from the Panel 73
Annex E-9 Japan's Answers to Questions from the Panel at the Second Meeting
of the Panel75
Annex E-10 Japan's Answers to Questions from the United States at the Second
Meeting of the Panel81
Annex E-11 Answers of the United States to Questions from Japan at the Second 
Meeting of the Panel89
Annex E-12 Answers of the United States to Questions from the Panel at the
Second Meeting of the Panel95WT/DS184/R
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ANNEX E-1
Japan's Answers to Questions from the Panel
 (6 September 2000)
Question 1: What is Japan's view of "in conf ormity with appropriate domestic procedures"
– if the US concluded that the evidence was no t appropriately received under its procedures, on
what basis may the Panel consider it?   Is Japan making a claim that the US authorities
improperly excluded evidence that should ha ve been included in the administrative record
under appropriate domestic procedures?  What violation of the Anti-Dumping Agreement(hereinafter "AD Agreement") is asserted in this regard?
Answer
1. The quote to which the Panel refers is from Article 17.5(ii) of the AD Agreement, a provision
that applies only with respect to claims brought  under the AD Agreement, not claims brought under
GATT 1994 Article X.  Therefore, to the extent the Panel is considering any of Japan’s GATT 1994
Article X claims, the quote to which the Panel refers is irrelevant.
2. As for claims brought under the AD Agreement, it is for the Panel to decide, not the
United States, whether evidence was made available “in conformity with appropriate domestic
procedures” pursuant to Article 17.5(ii).  After all, 17.6 (i) indicates that the Panel’s job is to
determine whether the authorities’ establishment of the facts was proper and whether their evaluation
of those facts was unbiased and objective.  Japan believes that certain pieces of evidence to which the
United States now objects were either (a) made available in conformity with appropriate domestic
procedures, but later inappropriately removed from the record by USDOC, or (b) never placed on the
record due to inappropriate domestic procedures.
3. First, NKK’s and NSC’s weight conversion fa ctors are properly before the Panel because
these companies corrected their previously submitted information within “a reasonable time” thus
permitting USDOC to use them “in the investigation without undue difficulties,” as stipulated by
paragraphs 1 and 3 of Annex II.  More importantly for purposes of Article 17.5(ii), the informationwas actually filed in accordance with a specific USDOC regulation allowing for submission of new
factual information seven days before verification.  This regulation is an “appropriate domestic
procedure,” recognizing that respondents often discover errors or new information during their
preparations for verification.  NKK and NSC submitted the disputed weight conversion factors in
reliance on this long-standing domestic procedure.  USDOC, however, ignored the procedure andexcluded the correction, thus failing to establish the facts properly, ultimately leading to the
inappropriate application of adverse facts available.
4. The evidence the United States seeks to exclude, therefore, is crucial to the Panel’s analysis of
Japan’s argument that the USDOC overreacted and improperly excluded this evidence in its effort toapply adverse facts available.  The Panel cannot properly evaluate the USDOC use of “facts
available” without understanding what information was excluded.  Importantly, Article 17.5 (ii) does
not refer only to information accepted by the authorities.  The drafters wisely recognized that
information might be offered to authorities, but then inappropriately rejected.  An authority cannot beWT/DS184/R
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permitted to exclude evidence inappropriately,  and then take advantage of the incomplete
administrative record to defend itself in the examination of its action by a WTO panel.
5. Second, Article 17.5(ii) also recognizes that some domestic procedures for establishing the
administrative record may not have been “appropriate.”  Japan provided certain evidence in its FirstSubmission precisely because such information was never placed on the administrative record.  The
evidence is necessary to show that the US (a) acted in bad faith by conducting a biased and non-
objective investigation and/or (b) failed to establish the facts properly.  If an authority has acted in bad
faith, it is no wonder that evidence of such acts is not on the administrative record.  It stands to reason,
therefore, that if a party is to establish its case that an authority has acted in bad faith, then the Panel
must consider non-record evidence.  Likewise, if an  authority has failed to establish the facts properly,
then it is quite possible that it improperly excluded facts from the record.  The Panel must be madeaware of such facts to determine whether the authority has failed in its obligations.
6. Article 17.5 must not be interpreted, as the United States suggests, to prevent the Panel from
determining the consistency of US actions with WTO obligations by considering all of the relevant
facts.  Otherwise, a member could refuse to accept a responding company’s factual submissions,secure in the knowledge that a panel would examine only record evidence.
7. Japan’s submission of 10 August 2000 details why each specific piece of evidence to which
the United States objects is relevant to the Panel’s review.
8. The context in which Japan has made a specific claim with regard to excluded evidence is
also in the context of its argument under Article 6.1 of the AD Agreement that the Department did not
give NSC and NKK ample opportunity to submit relevant evidence.
1  However, the exclusion of
certain other evidence is one way among many in which USDOC has improperly established the facts
and/or evaluated facts in a biased and non-objective manner, thereby leading to several of the otherclaims Japan has made in this review.
Question 2: Could Japan list the exhibits ch allenged by the US which Japan claims were
submitted to the US authorities but were subsequently rejected and not put on the
administrative record?
Answer
9. This question concerns NKK’s and NSC’s subm issions of weight conversion factors, which
were submitted by respondent companies prior to closing of the USDOC administrative record, but
subsequently expunged from the record by USDOC.2  Japan referred to the inappropriate exclusion of
this information in:
• Exhibit JP-28 -- affidavit of Daniel L. Porter, Counsel to NKK
• Exhibit JP-46 -- affidavit of Daniel J. Plaine, Counsel to NSC
None of the other exhibits in Japan’s First Submission actually contains the information expunged
from the record by USDOC, largely because Japan tried to minimize the extent of the proprietaryinformation supplied in this panel review.  Ja pan did, however, provide exhibits showing where
information was redacted, as follows:
                                                     
1 Japan’s First Submission, paras. 117-119.
2 Exhibits JP-29(f) and JP-45(i) contain USDOC’s letters of 12 April 1999 to NSC and NKK,
respectively, formally rejecting the companies’ conversi on factor information and requiring them to resubmit
the letters excluding the rejected information.WT/DS184/R
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• Exhibit JP-29(d) contains the public redacted version of NSC’s 23 February 1999
submission of the weight conversion factor and explanation of why the factor had not
been submitted previously.  This version was supplied after USDOC requested NSC to
remove the weight conversion factor from the letter.
• Exhibit JP-29(e)  contains the public redacted version of NSC’s 2 March 1999
submission of backup data to its weight conver sion factor.  Again, this version was filed
after USDOC demanded that NSC remove certain information from the letter, including
the actual weight data used to derive the conversion factor.
• Exhibit JP-45(g)  contains the public version of NKK’s 23 February 1999 submission
of the weight conversion factor, includin g an explanation of how the factor was
calculated.  Although this is the original version filed, before USDOC demandedexclusion of the conversion factor informati on, the public version of the submission does
not contain the conversion factor that was ultimately excluded.
Upon request of the Panel, Japan offers to provid e the original confidential versions of these
submissions, which contain the information ultimat ely excluded by USDOC.  The documents already
provided, however, should provide enough information for the Panel to understand the information at
issue.
Question 3: Could Japan explain where in it s request for establishment of a panel, it
requested the panel to examine the USDOC genera l practice of applying adverse facts available
as a separate “measure” that is before the Panel?  The claim in section E "Conformity"
challenges the "above detailed laws, regulation s, and administrative rulings" as being not in
conformity.  Could Japan indicate where the "general practice" of facts available is "detailed
above"?  Does Japan believe there is any oth er reason why the Panel should consider this
practice, if it were not mentioned in the request?
Answer
10. The USDOC general practice of applying "adverse facts available" is reflected in a series of
administrative rulings, or final determinations , made by USDOC.  USDOC applied that general
practice in the hot-rolled steel case, as reflected in its final determination.  That final determination,
which is one of the rulings being challenged in this dispute, thus reflected the specific decision toapply adverse facts available in this case as well as the general policy on adverse facts available.  The
United States has argued that it did not take any exceptional steps in this case, thereby essentially
acknowledging that it applied a long standing general practice with respect to "facts available."
11. Japan’s claim is that the US practice of applying adverse facts available is contrary to US
obligations under Article XVI:4 of the WTO Agreement and Article 18.4 of the AD Agreement.  As
this claim is set out in Section E of Japan’s panel request for establishment of a panel, it is within thePanel’s terms of reference.  The reference to Section E to “the above-detailed laws, regulations, and
administrative rulings of general application” was not intended to and does not have the narrow focus
implicit in the Panel’s question.  Rather, it refers broadly to US anti-dumping laws, regulations, and
practices, which certainly include the US practice of applying adverse facts available.  In this regard,
although the United States insists on reading Section A and Section E in the Japanese panel request inisolation, they must be read together.  Japan did not include language about bringing practices into
conformity in each of the substantive requests because Japan believed the general request at  the end
of the panel request -- which clearly referenced the earlier discussion of specific substantive issues --
was clear and unambiguous enough.WT/DS184/R
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12. Even if the Panel believes that Japan could have been more clear in its request, the United
States still has not demonstrated any concrete prejudice to its ability to defend its interests with
respect to this issue.  Further, what we are really talking about here is whether the Panel should adopt
a ruling that is limited to the facts of this case or to  future cases as well.  Given that the United States
admits to having applied in the hot-rolled steel case its routine practice with respect to facts available,any ruling in favour of Japan on this topic should be applied not merely with respect to this case, but
all future cases as well.  Either way, however, Japan has made the same arguments both as regards the
practice in general and as applied in this case.
3
13. We refer the Panel once again to Japan’s 10 August 2000 submission on this topic.
Question 4: Japan suggests that the US shou ld have looked at the "overall level of
cooperation" in determining whether to apply fa cts available to KSC, NSC, and NKK.  Could
Japan explain where in Article 6.8 AD Agreement it finds that this provision provides for the
use of facts available based on the degree of cooperation.  Assume, for purposes of argument,
that Article 6.8 does not limit the use of facts available based on the degree of cooperation.
Could Article 6.8 of the AD Agreement be understood to indicate that where necessary facts arenot available, the determination can be made without "filling in the gap", but simply on the
basis of the facts otherwise available.  Japan seem s to suggest that "facts available" should only
be used to "fill in gaps" in the information provided to the investigating authority.  Please
comment.
Answer
14. The Panel seems to misunderstand Japan’s point.  We have never suggested that a party’s
level of cooperation should affect whether to apply  facts available.
15. Article 6.8 does not directly address the level of cooperation provided by a party.  Instead,
Article 6.8 merely gives the authority for resorting to facts available, assuming the circumstances
identified in Article 6.8 exist.  However, both the application and choice of facts available is
specifically restrained in Article 6.8 by its referen ce to Annex II.  Annex II provides a roadmap for (a)
determining whether to apply facts available at all (paragraphs 1, 3, and 5) and (b) circumscribing the
sources on which an authority may rely for facts available (Paragraph 7).  Once it is determined that
an authority has no choice but to apply facts available, Paragraph 7 indicates that the authority musttake special care in choosing the facts available.  As a general matter Paragraph 7 calls on the
authority to find information that most closely approximates reality.  This is why Paragraph 7 calls on
the authority to use “special circumspection” in choosing the facts available, and to “check the
information from other independent sources.”  This is where Japan finds support for the notion that
the whole purpose of the facts available provisions of the AD Agreement is to fill gaps caused bymissing information.
16. The final sentence of Paragraph 7 does not change this overriding purpose.  Rather, it
provides justification for not rewarding  a non-cooperative party for its failure to cooperate.   In doing
so, however, the sentence makes quite clear that only when a party withholds  information might a less
favourable result occur.
17. We reiterate, however, that by no means does the last sentence of Paragraph 7 permit an
authority to choose information that is specifical ly aimed at punishing a party.  The gap-filling
purpose of the facts available provisions still applies.  What changes when a party is deemeduncooperative through the withholding of information is the inferences an authority might make in its
choice of facts available.  (See Japan’s answer to Question 7.)  But still, Paragraph 7 only says that the
                                                     
3 Japan’s First Submission briefly notes the general practice in paragraphs 59 and 60, but then discusses
the application of that general practice at length in paragraphs 61-128.WT/DS184/R
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result might  be less favourable due to an authority’s application of facts available in this instance; it
does not give license for an authority to purposefully punish a respondent for lack of cooperation.
Rather, the authority must assess whether the facts available chosen are logical and reasonable within
the requirements of Article 6.8 and Annex II, as explained in paragraph 15 above.
18. Importantly, in the hot-rolled steel inves tigation, USDOC did not face the situation where
respondents were uncooperative and withheld inform ation.  Rather, in the case of NSC and NKK, the
information was actually provided -- not withheld  -- once the companies realized that they could
produce it.  Article 6.8, therefore, should not have even been triggered for these companies; facts
available need not have even been applied.  As for KSC, the information USDOC requested but which
KSC did not provide was never withheld because KSC never had control of it -- as demonstrated to
USDOC through KSC’s repeated efforts to obtain the requested information from CSI, a petitioner inthis case.  Furthermore, KSC offered alternative information, which USDOC could have used.  In
other words, even assuming facts available might have been warranted for KSC under Article 6.8,
USDOC had no reasonable basis to infer that the second highest dumping margin was the most
appropriate data to fill the gap.
Question 5: Could Japan provide the Panel with specific references to, or copies of,
documents or other information which in Japan's view demonstrates that the Japanese
respondents requested the USDOC for assistance in  providing the information requested in the
USDOC questionnaire?
Answer
19. KSC:  There are many examples of KSC’s request for assistance.  On 9 November 1998, the
day after KSC received CSI’s 6 November 1998, letter, refusing the visit from KSC’s attorneys and
accounting consultant, KSC’s attorneys specifically met with USDOC to apprise the agency of thesituation.  See Exh. JP-42(n) .  Following up on the meeting, KSC submitted a letter to USDOC on
10 November 1998.  See Exh. JP-42(i) .  Moreover, in a 3 December 1998 letter to USDOC, KSC
reminded USDOC “we have received no response from the Department.”
4  That statement was made
not only based on the belief that USDOC should have provided KSC a response to its meeting and its
letters, but also in an effort to elicit a response from USDOC.  Also, in that letter, KSC pleaded with
USDOC to be a part of a meeting that USDOC staff was going to have with petitioners’ counsel ( i.e.
CSI’s counsel), specifically addressing CSI’s refusal to provide KSC the necessary information, “sothat all involved will have a complete understanding of the issues involved.”  Rather than provide any
guidance or assurances that it would also address KSC’s concerns, USDOC again did nothing in
response.
20. KSC continued its efforts to persuade USDOC to provide them some guidance.  In its letter to
USDOC of 18 December 1998, KSC was more specific in its request for assistance.  KSC stated thatit had “received no information, guidance, or response  from the Department, except for a series of
questions in the Department’s supplemental Section A questionnaire, which ask KSC to provide
information about CSI.”  See Exh. JP-42(n)  (emphasis added).  KSC could not have been clearer
about its difficulties in obtaining information from CSI and its need for additional assistance from
USDOC.
21. NKK:  NKK explicitly asked USDOC for further guidance on how to respond to the request
for a weight conversion factor.  Following receipt of USDOC’s 4 January 1999, Supplemental
Sections B, C, and D Questionnaire ( Exh. JP-45(c) ), NKK’s attorneys called the relevant USDOC
official for clarification of USDOC’s request and were told that the supplemental question soughtsimply to confirm that NKK did not have a conversion factor to report.  See Exh. JP-28 .  The
                                                     
4 KSC Letter to USDOC of 3 Dec. 1998 (attached as Exh. JP-78 ).WT/DS184/R
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USDOC official did not explain that a better estimate of the weight of the affected sales would
suffice.5
22. Importantly, providing notice to the authority of a party’s difficulties in supplying the
requested information is all that is required under Article 6.13 to invoke an authority’s responsibilityto provide assistance.  Article 6.13 places the burden on authorities to “take due account of any
difficulties experienced by interested parties” and “provide any assistance practicable.”  These
obligations are not dependent on a party’s request for assistance.  Each of the companies made it clear
to USDOC that they were experiencing difficulties.  It is USDOC that failed to respond.
23. Furthermore, with respect to NKK and NSC,  both companies implicitly requested USDOC’s
assistance ( i.e., accommodation) in permitting it extra time to provide the requested factor.  See Exh.
JP-29(d)-(e); JP-45(g) (providing the requested conversion factors).
Question 6: Could Japan please clarify what, if any, it considers to be the difference between
"adverse inferences" or use of "adverse facts available" and a "less favourable result" as
referred to in Paragraph 7 of Annex II of the AD Agreement?
Answer
24. There is effectively no difference between the US nomenclature “adverse inferences” and use
of “adverse facts available.”  “Adverse facts available” is simply a common short-hand expression forthe application of facts available using inferences that are adverse to the affected party.  According to
the US statute, the authorities first determine that facts available are necessary.  See 19 U.S.C. §
1677e(a) ( Exh. JP-4(k) ).  Then, if a party “has failed to cooperate by not acting to the best of its
ability,” the authority “may use an adverse inference that is adverse to the interests of that party in
selecting from among the facts otherwise available.”  See 19 U.S.C. § 1677e(b) ( Exh. JP-4(k) ).
25. Read on their own, these words as set forth in the statute appear reasonable enough.  As
discussed in response to Question 4 above and Question 7 below, there may be instances when an
authority must make inferences to respond to missing information.  The words in the statute alone,
however, do not fully explain what USDOC means when it makes adverse inferences.  As explained
in Japan’s First Submission, the United States does not look for credible information; rather, it
chooses facts “sufficiently adverse so as to effectuate the statutory purpose of the adverse factsavailable rule to induce respondents to provide the Department with complete and accurate
information.”  No effort at all is made by USDOC to discern whether its choice of facts available is
logical or reasonable.
26. Therefore, there is a big difference between the manner in which the United States uses of the
words “adverse inference” or “adverse facts available” and the words “less favourable” in Paragraph 7
of Annex II.  As Japan explained in its First Submission, the last sentence of Paragraph 7 of Annex II
mentions only the possibility of “less favourable” results, simply stating that failure to cooperate
“could  lead to a result which is less favourable to the party.”  (Emphasis added.)  The United States
reads this sentence as giving it carte blanche to use any facts available it chooses.  But, nothing aboutthis sentence removes an authority’s obligation under the first and second sentences of Paragraph 7 to
use special circumspection in choosing facts available.  The facts chosen and inference based
thereupon must be logical and reasonable given the circumstances, the result may turn out to be less
favourable, but the facts themselves must be proper.
27. The difference, then, between “adverse inference” and a “less favourable result” is that the
former -- at least the way in which the United States applies it -- authorizes punishment of a
                                                     
5 This  issue is not relevant to NSC.  The nature of the difficulty faced by NSC was a misunderstanding
among corporate divisions rather than a lack of assistance from USDOC.WT/DS184/R
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recalcitrant party; the latter warns of a more uncertain outcome for failing to cooperate.  While both
concepts may permit the use of an inference that may prove to be adverse, Paragraph 7 does not
authorize authorities to use the highest or second highest dumping margin available without paying
any attention to the reasonableness of the figure.  This is the whole point of the requirement in
Paragraph 7 that an authority use special circumspection in its choice of facts available.  The USchoice of a margin “sufficiently adverse so as to effectuate the statutory purpose of the adverse facts
available rule to induce respondents to provide the Department with complete and accurate
information” does not honour the requirements of Paragraph 7.
Question 7: Is Japan of the view that a party th at impedes the investigation should be treated
exactly the same as a cooperating party with respect to use of facts available?  Does Japan
consider that such a party is entitled to the "n eutral representative" facts available, in the same
way as a party which is simply unable to provide information?  What about the case of a party
who refuses access to information, i.e.  refuses to allow certain information to be verified -- does
Japan consider that such a party is entitled to  the "neutral representative" facts available, in
the same way as a party which is simply unable to provide information?  Article 6.8 provides
that in all three situations, determinations may be  made on the basis of facts available.  In the
event Japan considers that the same neutral treatm ent is not required in all three cases, on what
basis would Japan distinguish between an interested party who "refuses access to" information,
"otherwise does not provide" information, or "significantly impedes the investigation"?
Answer
28. No.  Japan recognizes that a party that significantly impedes the investigation may well be
treated differently.  Japan’s point is that Article 6.8 and Annex II do not authorize punishment.
29. At the outset, as explained in response to Question 4, Japan wishes to clarify that Article 6.8
merely enumerates circumstances that may warrant facts available; it does not itself indicate what
specific facts might be used once the decision to apply facts available is made. Nonetheless, the
language of Article 6.8 should be read closely given the limitations it places on an authority to even
apply facts available.  First, facts available may be used when a party “refuses access to, or otherwise
does not provide, necessary  information within a reasonable period .”  (Emphasis added.)  Only the
lack of necessary  information justifies facts available and parties must have a reasonable period  in
which to provide such information.  Second, the authority may apply facts available when a party
“significantly  impedes  the investigation.”  (Emphasis added.)  This is very strong language.  “Impede”
means to “interfere with the progress of” an investigation.  “Significantly” means “having or likely to
have considerable influence or effect.”  The provision therefore implies serious obstruction of an
investigation.  Finally, determinations “ may be made on the basis of the facts available.”  The absence
of information therefore does not automatically resu lt in the application of facts available.  The
authority must make some reasonable judgment, based on the limiting principles of Article 6.8, in
deciding whether to use facts available.  Once the decision is made to apply facts available, any
inference to be drawn based on a respondent’s behaviour must be logical and reasonable.
Question 8: The United States has suggested that, because it used information supplied by
the particular respondent companies themselves as  the "facts available", it was not relying on a
secondary source of information.  Could Japan please comment on this argument, and its
implications, if any?
Answer
30. The US interpretation of Annex II, Paragraph 7 is far too broad.  The United States reads
“secondary source” as information from sources other than the parties themselves.6  However, this
                                                     
6 US First Submission, para. B-163 (emphasis added); see also id. at para. B-110.WT/DS184/R
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cannot be the intention of Paragraph 7.  Primary information is that which is specifically requested.
Any other information – even other information supplied by the party – is secondary.  To interpret
Paragraph 7 otherwise would limit unduly the authority’s obligation to use special circumspection in
selecting facts available and to corroborate those facts.
31. Paragraph 7’s use of the phrase “special circumspection” emphasizes the exceptional exercise
of care authorities must observe in relying on secondary information.  The purpose of using such a
high level of care when relying on secondary information is to ensure that the information used is
reliable and as close to reality as possible.  The US interpretation of Paragraph 7 defeats this purpose
by creating a huge loophole.
32. Moreover, this US interpretation actually undercuts the US argument.  If secondary sources
means only information not provided by the affected pa rty, the entire paragraph is limited to instances
in which the authority uses information from other sources as facts available.7  Yet, the United States
relies on the last sentence of Paragraph 7 to support its application of adverse facts available in this
case.  According to the United States, the reference to “less favourable” results implies that authorities
can select facts that are adverse if a party is uncooperative.  If Paragraph 7 does not apply to the use ofinformation from the respondent, then the “less favourable” language does not apply and cannot be
used to defend the use of adverse facts available.  The United States cannot have it both ways.
Question 9: Japan states that the United States, when negotiating the AD Agreement,
proposed language similar to its interpretation  that only margins based "entirely" on facts
available must be excluded from the calculation of the rate under Article 9.4.  Could Japan
please provide the relevant references, and copies of relevant documents, to support its
contention.
Answer
33. Japan has located an official transmission from Japan’s Mission in Geneva summarizing oral
discussions held during a “Group of 8” meeting on 23 October 1991.  A message sent on
5 November 1991 reports that the US negotiator argued  for inserting the word “solely” after the word
“established” in the relevant provision of the “New  Zealand III” draft text.  If the US proposal had
prevailed, Article 9.4 would have read, in pertinent part:
…provided that the authorities shall disregard for the purpose of this
paragraph any zero and de minimis margins and margins established
solely  under the circumstances referred to in Paragraph 8 of Article 6.
Since others did not agree, this US proposal and alternatives suggested by other countries were all
rejected, and the provision remained unchanged.8
34. The word “solely” has the exact same meaning as the word “entirely,” at least in this context,
and therefore supports the point that the Members specifically rejected language that would have
supported the US position on this issue.
                                                     
7 Paragraph 7 must be read as a whole.  The opening language of sentence two (“In such cases”) ties
that sentence to the first sentence, which contains the re ference to “a secondary source.”  The use of “however”
ties the third sentence to the rest of the paragraph, linking “less favourable” results to use of facts available from
“secondary sources.”
8 Official Transmission From Japan’s Mission in Geneva (5 Nov. 1991) (original and English
translation) (attached as Exh. JP-79 ).WT/DS184/R
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Question 10: Assume, for purposes of argument, that the use of facts available was proper in
this case.  All three margins for investigated respondents were based, in part, on facts available.
In such a situation, how does Japan suggest th at a margin for uninvestigated producers should
be calculated?  If the response is that the margins of investigated producers should be
recalculated to exclude the "portions" based on  facts available, could Japan indicate what
provision of the AD Agreement authorizes such recalculations?
Answer
35. Japan indeed suggests calculating the all-others rate based on the non-facts-available portions
of the margins for the investigated producers.  In the hot-rolled steel case, it would mean thefollowing:
• Calculating KSC’s margin without regard for its export sales to CSI.
• Calculating NSC’s and NKK’s margins without regard for their sales of product
measured by theoretical weights (or calculating them with the conversion factors that
were in fact submitted by these companies and, for NKK, verified).
• Weight averaging all three margins together , taking into consideration the lower
export  quantities resulting from using only a portion of KSC’s and NSC’s export
sales (NKK’s sales involving theoretical weights were in the home market, so
excluding them would not affect weighting by export quantities).
36. This method is authorized by Article 9.4, which sets parameters around an authority’s
discretion to calculate the margin for uninvestigated  producers.  Some of these parameters limit the
magnitude of the margin— i.e., it may not exceed certain limits established in subparagraphs (i) and
(ii).  Other parameters are methodological— i.e., the authority’s calculations shall disregard margins
of zero and de minimis  as well as margins based on facts available.  Since the text of Article 9.4
precludes the use of margins tainted by “facts available,” and does not have the limiting word
“entirely” as assumed by the United States, Japan believes its suggested approach better reflects
Article 9.4.  Within these parameters, Japan believes USDOC can and should calculate the all-others
rate using record data that is not based on the facts available.
Question 11: (Part 1) The AD Agreement specif ically provides for required preliminary
determinations before provisional measures may be imposed, or undertakings offered or
accepted.  There appears to be no similar requirement with regard to critical circumstances.  Is
it Japan's view that the determination provided for in Article 10.7 cannot be made before a
preliminary determination?  If so, please explain.
Answer
37. Japan believes that, as a practical matter, the determination provided for in Article 10.7
generally cannot be made before a preliminary determination of dumping.  Japan has reached this
conclusion for three reasons.
38. The first and primary reason is that Article 10.6(ii), and the chapeau of Article 10.6,9 require
the imports in question to be “dumped” before the authority can make a finding of critical
circumstances.  “Alleged dumping” is not sufficient.10  Japan believes that Article 10.6’s requirement
                                                     
9 See Brazil’s Third Party Submission, para. IV.4.
10 Cf. Article 5 of the AD Agreement (“Initiation and Subsequent Investigation”).WT/DS184/R
Page E-11
that the imports in question be “dumped” effectivel y prevents the determination referred to in Article
10.7 from being made until a preliminary determination that dumping has in fact occurred.
39. Second, it is difficult to imagine how an au thority could determine that “massive dumped
imports of a product in a relatively short time … is likely to seriously undermine the remedial effectof the definitive anti-dumping duty to be applied,” as required by Article 10.6(ii), before conducting
any investigation itself.
40. The third reason relates to the sufficiency of the evidence of importer knowledge of dumping.
It is logically impossible to find “sufficient evidence” for importer knowledge of dumping, because
USDOC made this finding before any preliminary finding of dumping and even before the USDOC
asked respondents to submit questionnaire response s.  USDOC concluded that importers should have
been aware that they were dealing in dumped merchandise solely because the petitioners alleged  that
dumping margins for NKK and NSC exceeded 25 per cent.
11  This alone cannot constitute sufficient
evidence, because petitioners’ alleged dumping margins are self-serving estimates made without the
benefit of the respondent’s internal sales data or any external analysis by the authorities.  This
deficiency in petitioners’ data is demonstrated by the ultimate dumping determination with respect toNKK and NSC once their information was placed on the record and evaluated by USDOC.  Ironically,
USDOC then concluded that NKK and NSC -- the two companies whose estimated margins formed
the basis of the “25 per cent test” -- specifically did not dump by margins exceeding 25 per cent.
12
(Part 2) In paragraph 34 of its oral statement, Japan argued that "with low standards for both
initiation and preliminary critical circumstances determinations, the authority can effectively
block imports well before the truth comes out".  Does Japan consider that the two standards are
identical?  Could Japan please explain in what respect, if any, "sufficient evidence" under
Article 10.7 differs from "sufficient evidence" under Article 5.3?
Answer
41. Japan does not consider the two standards to be identical.  “Sufficient evidence to justify the
initiation of an investigation” under Article 5.3 must be a lower  standard than “sufficient evidence
that the conditions set forth in {Article 10.6 } are satisfied,” as required by Article 10.7.  It is well
established 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.  That is,
evidence which would be insufficient, either in quantity or in quality,to justify a preliminary or final determination of dumping, injury or
causal link, may well be sufficient to justify initiation of the
investigation.
13
Conversely, what might be sufficient to justify initiation of the investigation under the lowerevidentiary standard is not sufficient to support a preliminary determination of critical circumstances.
The USDOC, in this investigation, made its preliminary determination of critical circumstances based
                                                     
11 See US First Submission, para. 269.
12 USDOC Final Dumping Determination , 64 Fed. Reg. at 24370 (Exh. JP-12) .
13 Mexico—Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) From the United States,
adopted 24 Feb. 2000, WT/DS132/R, at para. 7.94 (quoting Guatemala—Anti-Dumping Investigation
Regarding Portland Cement From Mexico, 19 June 1998, WT/DS60/R, at para. 7.57 and citing United States—Measures Affecting Imports of Softwood Lumber From Canada, adopted 27-28 Oct. 1993, SCM/162, BISD40S/358, at para. 332 (“Mexico—High Fructose Corn Syrup”).WT/DS184/R
Page E-12
primarily on the same evidence underlying its decision to initiate the investigation.  Article 10.7
requires more.
Question 12: The USITC made a negative final critical circumstances determination and anti-
dumping duties were not imposed retroactively under Article 10.6 of the AD Agreement.  Can
Japan explain what the "measure" is which it is challenging in this resp ect in light of the fact
that the final measure did not include a critical circumstances finding?
Answer
42. This situation presents a classic example of a WTO-inconsistency that is capable of repetition
yet evading review.  To allow USITC action to  prevent any review of USDOC misconduct would
allow USDOC routinely to impose commercially prohibitive provisional measures, shutdown trade,
but later reverse those findings in its final determination to avoid WTO review.  Such an approach
should not be permitted.
43. Moreover, as the Appellate Body recently made clear:
Once one of the three types of measures listed in Article 17.4 is
identified in the request for establishment of a panel, a Member may
challenge the consistency of any preceding action  taken by an
investigating authority in the course of an anti-dumpinginvestigation.
14
Japan identified in its panel request the definitive anti-dumping duties on imports of certain hot-rolledsteel products from Japan.  The preceding actions and determinations taken by USDOC in the course
of its investigation are therefore properly before the Panel.
44. The USDOC adopted a new policy statement on early critical circumstances decisions, and
has now applied this new policy in a number of cases.
15  Pursuant to this new policy, the USDOC
makes decisions prematurely and without adequate information.  That new policy -- both generally
and as applied in this case -- is an action that should be addressed by this Panel (in addition to the
violations associated with the statute itself).
Question 13: (Part 1) In paragraph 26 of the US  oral statement, the US claims that "Japan
does not contest the Department's discretion to make an early determination of critical
circumstances per se".  Does Japan agree with this US statement?
Answer
45. The United States is theoretically correct.  However, by requiring the decision to be made “as
soon as possible after initiation,”16 USDOC systematically prevents its determinations from:
                                                     
14 United States—Anti-Dumping Act of 1916 , 28 Aug. 2000, WT/DS136/AB/R, WT/DS162/AB/R, at
para. 73 n.39. (emphasis added) ( “US—Anti-Dumping Act of 1916”) .
15 See, e.g., Preliminary Determination of Critical  Circumstances:  Certain Non-Frozen Apple Juice
Concentrate From the People’s Republic of China, 64 Fed. Reg. 61835 (15 Nov. 1999); PreliminaryDetermination of Critical Circumstances:  Certain Solid  Fertilizer Grade Ammonium Nitrate From the Russian
Federation, 64 Fed. Reg. 60422 (5 Nov. 1999); Preliminary Determination of Critical Circumstances:  Certain
Cut-To-Length Carbon-Quality Steel Plate From Japan, 64 Fed. Reg. 20251 (26 Apr. 1999).  Thesedeterminations will be provided in Japan’s Second Submission.
16 USDOC Critical Circumstances Policy Bulletin, 63 Fed. Reg. at 55364 (Exh. JP-3).WT/DS184/R
Page E-13
(a) satisfying the legal requirements of Article 10.6 that the imports are found to
be “dumped” and that “massive imports,” if any, are “likely to seriously
undermine the remedial effect of the anti-dumping duty to be applied,” and
(b) being made on the basis of “sufficient evidence” as required by Article 10.7.
The timing itself was not the problem; but the rush to judgment largely created the problems.  As
explained in response to Question 11, by making the critical circumstances determination before the
preliminary determination of dumping, the United States cannot determine that the imports in
question are “dumped,” a requirement of Article 10.6.  Nor could the United States determine that the
imports are “likely to seriously undermine the remedial  effect of the anti-dumping duty to be applied,”
because nothing is yet known about the magnitude of dumping or the availability of any remedy.
Japan also reminds the Panel that, on its face, the US statute does not even require either of these
findings, regardless of when the preliminary decision might be made.
46. In addition, the premature finding prevents the decision from being made on the basis of
“sufficient evidence.”  The only evidence USDOC had was the petition.  Though this might be
sufficient to initiate an investigation, it alone is not sufficient to conclude that critical circumstances
exist.  See Response to Question 11.  By making the decision before the Japanese mills were even
asked to submit their questionnaire responses, US DOC ensured that the record would be incomplete
and one-sided in favour of the petitioners.  Thus USDOC violated GATT Article X:3.
(Part 2) Article 10.7 allows protective action to be taken at any time "after initiation" once the
investigating authorities have "sufficient eviden ce" of the elements set forth in Article 10.6.
This is similar in structure to the provision in Ar ticle 5.3 allowing initiation if there is "sufficient
evidence" of the elements of dumping, injury a nd causation set forth in Articles 2 and 3. Where
does Japan find a timing requirement for the preliminary decision to withhold appraisement or
take other measures under Article 10.7?
Answer
47. Although Article 10.7 does not provide a specific deadline , limitations on the timing of an
authority’s decision under Article 10.7 are implicit in the requirement of “sufficient evidence” as well
as in certain substantive requirements of Article 10.6, i.e., that the import in question is found to be
“dumped” and that massive dumped imports would be likely to seriously undermine the remedial
effect of the definitive anti-dumping measure.  Japan simply contends that USDOC, by making the
preliminary determination of critical circumstances as early as it did, did not have a sufficient record
before it to satisfy the requirements of Articles 10.6 and 10.7.
48. Japan does not believe there is any fixed timetable, provided there is “sufficient evidence.”
The speed with which an authority can collect and analyze “sufficient evidence” will vary case-by-case.
Question 14: Could Japan please comment on th e US position that the use of the words
"would cause  injury" in Article 10.6(i) of the AD Agr eement implies that the injury might lie in
the future and only be a threat at present?
Answer
49. The US interpretation of “would cause injury” to  connote future events is illogical:  it would
limit the collection of retroactive duties only to instances of threat of injury.  This would beinconsistent with the overall retroactive purpose of Article 10.  Article 10.6(i) simply cannot be read
to describe future events, such as the threat of injury, in light of the use of the present tense inWT/DS184/R
Page E-14
virtually all other verbs in Article 10 relevant to the factual predicate for what the United States terms
“critical circumstances.”
50. The United States also attempts to import Footnote 9 of Article 3 into Article 10, so that it can
claim an affirmative finding of threat of injury is an affirmative finding of injury pursuant to whichretroactive duties may be assessed.
17  As Japan established in its First Submission, Footnote 9 cannot
apply to “injury” as that term is used in Article 10 generally, and Article 10.6 particularly.  Article 10
consistently distinguishes between threat and injury, and Article 10.6 in particular speaks of injury in
the present tense.  The US position neglects the remedial purpose of critical circumstances.  How can
one retroactively redress that which was not yet occurred?  This overall remedial purpose is confirmed
by other provisions of Article 10.  If the authority’s final determination is that the US industry is
threatened with material injury, then Article 10.4 requires the refund of provisional measures.  Thesame concept applies to retroactive provisional measures when the preliminary injury determination is
based only on the threat of material injury.
Question 15: In paragraph 29 of its oral statement, the US argues that "[T]he 700 pages of
exhibits in the petition contain very substantial information on all of the relevant points".
Would Japan admit that the exhibits in the petition contained information, in the sense of
evidence, on all the points of relevance to  a determination under Article 10.7 of the
AD Agreement?
Answer
51. No.  The Panel’s question reflects the US emphasis on the quantity of petitioners’ allegations
and newspaper articles, as if more  inconclusive newspaper articles or longer  allegations at some point
become proof.  They do not.
52. As a threshold matter, the petition alone -- no matter how many exhibits might be attached to
it -- can never constitute “sufficient evidence” of the elements of Article 10.6, at least not in a
contested case.  Even the United States acknowledges that the petition at best tells only one side of the
story.18  One side of the story might be sufficient to initiate an investigation, but it is not a sufficient
record upon which to determine that critical circumstances exist.
53. Second, the attachments to the petition do not satisfy two critical aspects of the Article 10.7
determination:  that the imports actually be dumped (as required by Article 10.6’s references to “the
dumped  product in question” and “massive dumped  imports”), and that the massive imports, if any,
are “likely to seriously undermine the remedial ef fect of the definitive anti-dumping duty to be
applied.”  These two determinations must be made by the authority alone, and they cannot be made
until the preliminary determination of dumping.  See Responses to Questions 11 & 13.
54. Third, as a factual matter the petition’s exhibits do not establish the importer-knowledge
elements of Article 10.6(i): that “there is a history of dumping which caused injury or that the
importer was, or should have been, aware that the exporter practices dumping and that such dumping
would cause injury . . . .”  The Panel should note Paragraph B-273, footnote 288, of the US FirstSubmission, in which the United States has quoted from selected newspaper articles that it apparently
believes best illustrate the existence of “sufficient evidence.”  They do not.  To the contrary, they
prove Japan’s point.  Most of the articles are dated September 1998, just a few weeks before the
petition was filed and five months after the date USDOC concluded that importers knew or should
have known about dumping and injury ( i.e., April 1998).  The articles are vague ( e.g., “1998 is
shaping up to be a bad year” or “World prices are well below US prices”).  They do not identify (a)
                                                     
17 See US First Submission, para. B-256.
18 See US First Submission, para. B-72.WT/DS184/R
Page E-15
dumped imports of (b) hot-rolled steel from (c) Japan as (d) injuring US mills during (e) the period in
which USDOC concluded importers should have known this.
Question 16: In this case, the final injury de termination was of curr ent material injury.
Therefore, and assuming the other conditions were satisfied, retroactive duties could have been
imposed.  However, it is argued that with out an earlier action, taken under Article 10.7, to
secure the potential for imposition of retroactiv e duties, collection of retroactive duties would,
for many Members, be impossible.  Does Japan recognize any difference between the decision
under Article 10.7 to preserve the possibility of re troactive duties, and the decision to actually
apply duties retroactively under Article 10.6?
Answer
55. Japan believes that the strict standards of consistency with the obligations of the AD
Agreement must be met at each stage in the process, not just at the end of the process.  A Member
may act pursuant to Article 10.7 when it has met those requirements.  Article 10.7 should not be read
loosely early in an investigation in order to facilitate relief under Article 10.6 later in theinvestigation.
56. Moreover, this argument is particularly inap propriate in a US context.  Under US practice,
adopted by the US Customs Service on 26 May 1997,
19 US Customs withholds making any final
determination of duty liability for 314 days after entry precisely to permit retroactive collection ofanti-dumping duties.  So, it is unnecessary to make an early determination of critical circumstances to
secure the potential for imposition and collection of retroactive duties.  That potentiality already exists
as a matter of law -- as reflected by USDOC’s previous policy of waiting until the preliminary
determination of dumping to issue its critical circumstances determination.  The US argument is
simply disingenuous.   There is no reason for the United States to ignore its obligations underArticle 10.7.
Question 17: Japan seems to accept, in principle,  that sales to affiliated purchasers may not be
in the ordinary course of trade, although it dis agrees with the test the US applies in determining
whether they are or are not.  In paragraph 42 of  its first oral statement, Japan refers to the
language of Article 2.2 of the Agreement as setting out the mandatory and exhaustive list of
alternative methods for determination of normal va lue.  As Japan notes, Article 2.2 prefaces the
alternatives set forth (construct ed value and third country export price) with the statement that
these alternatives shall be applied "When there are no sales of the like product in the ordinary
course of trade in the domestic market of th e exporting country" or "when, because of the
particular market situation or the low volume of  sales in the domestic market of the exporting
country, such sales do not permit a proper compar ison."  Would Japan agree that in this case,
there were sales of the like product in the ordina ry course of trade, and there was no contention
that the particular market situation or the low volume of sales prevented a proper comparison?
If yes, does Japan contend that the stated alternatives are nonetheless the mandatory and
exclusive alternatives for determination of normal value?
Answer
57. Japan agrees that in this case there were home-market sales of hot-rolled steel in the ordinary
course of trade, and there was no contention that the particular market situation or the low volume of
sales prevented a proper comparison.  These ordinary-course sales included both the sales by therespondents to their “affiliates” (which, Japan again notes, simply denotes a company in which the
respondent owns as little as 5 per cent of its stock, or which owns as little as 5 per cent of the
                                                     
19 Memo from Director, Office of Trade Compliance, File ENT-1 FO:TC:C:E AD (26 May 1997),
available at www.cebb.customs.treas.gov/public (attached as Exh. JP-80 ).WT/DS184/R
Page E-16
respondent’s stock), as well as sales to “unaffiliated” customers.  Japan contends that USDOC should
have used all these ordinary-course sales – including sales to companies that did not survive the
99.5 per cent test – in its calculation of normal value.  Then there would be no need to reach the
alternatives specified in Article 2.2; Article 2.1 would be sufficient.
58. The alternatives specified in Article 2.2 become relevant in only one situation: if USDOC
concludes that there are no sales in the home market in the ordinary course of trade.  Then, its only
choices are to use third-country sales or constructed value.  Japan does not argue that authorities must
resort to third country sales or constructed value whenever any home market sales are found to be
outside the ordinary course of trade.
59. What USDOC may not do, when it determines that sales to any individual  affiliated customer
are outside the ordinary course of trade, is replace those sales with the affiliated customer’s
downstream resales.  Japan is using Article 2.2 to explain that USDOC has only three choices for
calculating normal value when it determines that sales to an individual customer are outside the
ordinary course of trade: use the respondent’s home- market sales to other customers, or, if there are
no sales  in the ordinary course (or one of the other situations described in Article 2.2 exists) then it
must use third-country sales or constructed value.  It may not use downstream resales.
Question 18: Assume that the information fo r the entire period of investigation shows
different trends from that for the latter period   -- for instance, less steep declines over three
years than from the second to the third year, or  an improvement when comparing the first and
third years, but a significant decline from the second year (much improved as compared to the
first) to the third year.  Is it Japan's  view that an investigating authority, in considering the
question of injury, is precluded from consider ing that the information for the more recent
period is more relevant and from acco rding it more weight in the analysis?
Answer
60. Japan does not argue that an authority is precluded from emphasizing the latter part of its
period of investigation as more relevant.  Japan does argue, however, that the USITC’s emphasis of
the last two years of the period in this case goes far beyond a mere discretionary emphasis.  The AD
Agreement requires authorities to examine explicitly all relevant trends over the period of
investigation.  Indeed, the USITC traditionally examines the volume, prices and impact of the subjectimports on the domestic industry over the entire peri od of investigation.  Trends between the first and
third years of a period that conflict with trends between the second and third years of a period would
be especially relevant.  Yet these are precisely the trends that the USITC ignored, instead focusing its
analysis of impact on the last two years of the period.
61. Articles 3.4 and 3.5 of the AD Agreement obligate authorities to examine trends over the
entire period of investigation, even if an author ity chooses to emphasize the final two years of the
period.  Article 3.4 requires “an evaluation of all relevant economic factors and indices.”  Trends over
an entire period of investigation unquestionably have a bearing on the state of an industry.  Even if an
authority finds the last two years of a period especially probative, its analysis of impact mustnevertheless include an explicit analysis of both.
62. Article 3.5 provides that “{t}he 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 Panel in Argentina—Footwear , in which an analogous
provision of the Safeguards Agreement was considered, held that the Argentine authority had
impermissibly focused its causation analysis on the first and fifth years of its period of investigation,
thereby ignoring relevant trends over the intervening years when “the relationship  between the
movements in imports (volume and market share) and the movements in injury factors. . . must beWT/DS184/R
Page E-17
central to a causation analysis and determination.”20  The panel recognized that the causal relationship
between subject imports, alternative causes of injury, and industry performance are only apparent
when viewed dynamically, over a period of years,  rather than statically, between two points.
63. When industry trends differ as between the first and third years of a period of investigation,
and the second and third years, an authority cannot focus on the latter to the exclusion of the former
without ignoring “relevant economic factors” in violation of Article 3.4 as well as relevant evident
concerning the causal relationship between dumped imports and injury, in violation of Article 3.5.
Though the authority may deem the final two years of the period more probative -- as most indicative
of present material injury, for example -- this does not relieve the authority’s obligation to examine
specific trends viewed over the entire period of investigation -- especially conflicting trends -- and to
make this consideration apparent in its final determination.
64. The USITC’s examination of impact  in this case focused on the last two years of its period of
investigation, and slighted its analysis of the first through third years of the period.  The contrast
between the paragraph at the bottom of page 17 and th e 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.  Thisunexplained shift for financial performance -- one of the most important factors to be considered --
does not constitute an “objective examination” as required by Article 3.1.
65. As in the Panel’s hypothetical, industry tren ds differed markedly between the two periods.
While industry profits and shipments declined between the second and third years of the period, thesemeasures both increased between the first and third years of the period.
21  In other words, these
objective measures of the domestic industry’s performance improved over the entire period of
investigation, despite a 420 per cent increase in subject import volumes.22  Thus, the USITC abrogated
its obligation to analyze these highly relevant trends in its analysis of impact, especially given their
conflict with its conclusions, in violation of Articles 3.1, 3.4 and 3.5.
Question 19: Can Japan please clarify to the Pa nel whether it is arguing that the USITC did
not gather information for all three years of the period of investigation and did not at all
consider data for the industry as a whole or is it Japan’s submission that although this
information was recited in the USITC determination, the USITC in its analysis ignored the
data?
Answer
66. Japan does not deny that the USITC gathered data over its entire three year period of
investigation and that the USITC at least mentioned domestic producers as a whole by referencing
overall industry data.  Rather, Japan argues that the USITC failed to adequately factor this informationinto its determination.  Specifically, the USITC failed to relate its merchant market findings to
producers as a whole, as required by Articles 3 and 4, and failed to make its examination of relevant
three year trends explicit in its analysis of impact, in violation of Articles 3.4 and 3.5.
67. As discussed in answer to Question 18, Articles 3.4 and 3.5 together require an authority to
examine relevant trends over the entire period of investigation, notwithstanding its emphasis on
certain trends over a portion of the period as more probative.  The USITC traditionally examines
                                                     
20 Argentina—Safeguard Measures on Imports of Footwear , 25 June 1999, WT/DS121/R, at para.
8.237 (emphasis in original) (“ Argentina—Footwear ”).
21 Between 1996 and 1998, total industry shipments increased from 63.6 million tons to 64.0 million
tons, operating profits increased from $430.8 million to  $560.5 million, and operating profit margins increased
from 2.0 per cent to 2.6 per cent.  USITC Final Injury Determination , USITC Pub. 3202 at III-6, VI-6 ( Exh. JP-
14).
22 Id. at 12 ( Exh. JP-14 ).WT/DS184/R
Page E-18
trends pertaining to volume, price and impact of th e subject imports on the domestic industry over the
entire period of investigation.  In this case, however, the USITC focused its impact analysis on the
final two years of the three-year period of investigation.  The USITC unquestionably possessed
information covering the entire period, identified market share and price trends over the entire period
in its analysis of volume and price,23 and even briefly cited market share and capacity utilization
trends over the entire period at the beginning of its impact analysis.24  Yet the USITC expressly
refused to analyze the industry’s performance between 1996 and 1998,25 rejecting respondents’
objection to its use of 1997 as the baseline of its analysis:
{W}e 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 likewiseshould have been a highly successful year for the domestic hot-rolled steel industry.
26
Even accepting this justification, the USITC had an obligation under Articles 3.4 and 3.5 to analyze
industry performance, and the impact of subject im ports and alternative causes of injury, over the
entire three year period.  The USITC’s determination that certain relevant factors -- including trends --
are less probative than others does not relieve it of the responsibility to make its analysis of such
factors explicit in its determination.  To the contrary, trends over the entire three year period of
investigation were especially relevant as they conflicted with trends over the last two years of the
period.
68. Just as the USITC was obligated to relate trends over the last two years of the period to trends
over the entire period, it was also obligated to relate trends in the merchant market segment to trends
for producers as a whole.  In light of this overarching requirement, the Panel in Mexico—High
Fructose Corn Syrup considered the manner in which authorities may analyze an industry segment as
a relevant economic factor under Article 3.4.  As a preliminary matter, the Panel expressly held:
{W}hile an analysis of the particular sector in which the competition between the
domestic industry and dumped imports is most direct is certainly allowed under the
AD Agreement, such an analysis does no t excuse the investigating authority from
making the determination required by that Agreement — whether dumped imports
injure of threaten injury to the domestic industry as a whole.27
The Panel further held that two Safeguards Panel reports, Argentina—Footwear  and Korea—Dairy ,
were applicable to an authority’s analysis of an industry segment in the antidumping context.  Both
Panel reports concluded that “the failure of the inve stigating authorities to either consider all sectors,
or to relate their conclusions concerning specific se ctors to the industry as a whole, resulted in injury
determinations that were not based on injury to the industry ‘as a whole’, inconsistent with therequirements of the Safeguards Agreement.”
28  Thus, an authority may analyze an industry segment
separately but must relate its findings to producers as a whole.
69. The USITC made no effort to relate its analysis of the merchant market segment to producers
as a whole, instead passively reciting overall industry statistics following merchant market segmentstatistics.  In particular, the USITC did not consid er as a condition of competition that the industry’s
                                                     
23 USITC Final Injury Determination, USITC Pub. 3202 at 12-13 ( Exh. JP-14 ) (volume trends
analyzed over the entire period), 13-16 (price trends examined over the entire period).
24 Id. at 17-18 ( Exh. JP-14 ).
25 Id. at 18-20 ( Exh. JP-14 ) (Analysis of industry performance was limited to trends between 1997 and
1998.).
26 Id. at 18 ( Exh. JP-14 ).
27 Mexico—High Fructose Corn Syrup, para. 7.160.
28 Id. at para. 7.155 n.625.WT/DS184/R
Page E-19
substantial captive production was shielded from import competition, or how direct import
competition in the merchant market segment impacted the industry’s captive segment.  In this regard,
the USITC essentially double-counted the impact of merchant market segment performance on
producers as a whole: once directly, in merchant market segment data, and again indirectly, in overall
industry data embodying the merchant market segment.
70. To fully appreciate the impact of the merchant market segment on producers as a whole, the
USITC should have analyzed the merchant market and captive segments separately, and then
considered how both related to the industry as a w hole.  Captive segment performance is no less of a
relevant economic factor than merchant market segment performance.
Question 20: Could Japan please clarify its appa rent view that a change in policy applicable
to all subsequent cases demonstrates biased admi nistration of the Member's laws, in violation of
Article X of the GATT 1994?  Is Japan of the view that the application of a longstanding and
consistently applied policy in one case can demonstrate failure to impartially administer that
policy?  If so, could Japan please explain?
Answer
71. Contrary to the Panel’s assumption, Japan is no t arguing that a change in policy applicable to
subsequent cases automatically demonstrates biased administration of the Member’s laws in violation
of Article X.  It is not the change in practice or non-application of a longstanding policy per se  that
results in an Article X violation, but rather the manner in which those changes or decisions not to
apply existing policies are made.  In this case, the United States anti-dumping authority changed its
policy or refused to carry out longstanding rules and practices in a non-transparent and biased manner
in at least four ways.
72.   The first way pertains to USDOC’s unprecedented acceleration of the case.  The acceleration
prejudiced respondents by effectively shortening the amount of time they had to prepare for the initial
questionnaire and by curtailing the authorities’ time for analysis, thereby resulting in error-ridden
determinations.
73. The second way pertains to NKK’s specific request for a correction of a substantial
ministerial error that inflated its margin by 12 pe rcentage points.  USDOC’s own regulations instruct
USDOC officials to correct such errors upon request within thirty days.29  In this case, however,
USDOC officials chose not to do so.  While the failure to apply a long-standing policy might not
always rise to the level of an Article X violation, the factual circumstances surrounding this particular
administration of USDOC rules illustrate a non-transparent, non-uniform, and impartial
administration of USDOC’s practice of correcting mi nisterial errors.  Here, USDOC ignored a 4-page
written request from NKK detailing USDOC’s error and specifically asking USDOC to make a
ministerial correction.30  Moreover, the US authority then used this incorrect, inflated margin as part
of its basis for a preliminary finding of critical circumstances.  That finding was, not surprisingly,
later overturned.
74. The third instance pertains to USDOC’s change in its critical circumstances policy.  This
change did not apply only to “subsequent” cases.  Rather, USDOC applied it retroactively  to the hot-
rolled steel investigation.  A fundamental element of due process is notice.  Here, USDOC’s issuance
of a policy bulletin was intended to serve that purpose.  Yet, USDOC acted in bad faith when it
applied that new policy retroactively to specific WTO Members in a specific investigation that hadalready been initiated.
                                                     
29 19 C.F.R. 351.224(e) (Exh. JP-5)
30 See NKK Letter to USDOC of 18 Feb. 1999 (Exh. JP-70)WT/DS184/R
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75. Finally, USITC changed its policy in a manner in consistent with Article X when it failed to
apply its longstanding policy of examining a three-year period for its injury determination.  Here,
USITC adopted a non-uniform method of analysis in order to reach an affirmative determination.
Anti-dumping agencies cannot tailor their methodologies so as to exact an affirmative determination
in particularly controversial cases.
76. The US conduct in this case therefore violated the fundamental requirement of due process
(demanded by the Appellate Body in US—Shrimp ), constitutes abus de droit  and violates the GATT
Article X:3(a) requirement of “uniform, impartial and reasonable” administration by the US of its
anti-dumping regime.
77. In short, the manner in which the United States administers its anti-dumping law cannot be
assessed in a vacuum.  The manner in which decisions are made and actions are taken is crucial to
determining whether the US administration of its anti-dumping law is uniform, impartial and
reasonable.  Partiality may occur, or be discerned, in many different situations.  For example, the
existence of a long-standing policy that is consistently applied may nonetheless show bias – it may be
consistently applied in a biased fashion and yet one single application could lead to a revelation ofsuch bias.  Thus, a panel may have to look beyond the text of a seemingly consistent regulation.  And,
as discussed above, where a Member alters a long-standing policy during the course of a significant
proceeding and applies the new policy to disadvantage the respondent in the proceeding, this too is
evidence of bias.
Question 21: How does Japan believe the "politic al context" should be taken into account by
the Panel?  For instance, if an action is consistent with WTO obligations, does it matter if that
action was taken in a context of intense political pressure?
Answer
78. Japan is not proposing that "political context" alone can create a WTO violation.  Rather,
Japan is arguing that political context is an important part of assessing the consistency of actions with
a Member's WTO obligations.
79. Article 17.6(i) underscores the importance of the context of an authority’s actions.  Panels are
to determine whether the "establishment of the facts was proper."  The panel cannot make this
judgement without looking at both the action and the context of that action.  This provision also refersspecifically to "whether the evaluation of those facts was unbiased and objective."  One must consider
the context of certain actions and certain decisions to judge whether or not the evaluation was biased
or unbiased.
80. Likewise, in considering under GATT 1994 Article X whether a Member administered its
measures in a uniform, impartial, and reasonable manner, the political context in which suchadministration occurred will shed light on whether it  met the requirements of Article X.  To that
extent, the panel should take into account the polit ical context.  A decision or action that, in the
abstract, might appear to be neutral clearly is unc overed as being biased where the context shows it
was not made in a reasonable or equitable manner.
81. Therefore, the political context to which Japan referred in this proceeding was provided as
supplementary evidence that the establishment of the facts in this case was not proper, that the
evaluation of the facts was not unbiased and objective, and that the administration of US anti-
dumping law was not uniform, impartial, and reas onable, as required by Article 17.6(i) of the AD
Agreement and Article X:3 of GATT 1994.WT/DS184/R
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Question 22: With reference to paragraph 12 of Japan's oral statement – if a Member's
regulations provide for a procedural action not required by the AD Agreement, on what basis
would Japan argue that a change in policy in this regard, or a failure to effectuate that action in
a particular case, is a violation under the AD Agreement?
Answer
82. In paragraph 12 of its opening statement, Japan was making points in connection with its
Article X claim.  Japan has never argued that the failure to correct the NKK clerical error itself
created any violation of the AD Agreement.  Japan does believe, however, that the failure to correct
the NKK clerical error provides important context for whether the USDOC was properly establishing
facts, and evaluating those facts in an objective and unbiased manner.
83. GATT Article X requires that Members promptly publish “laws, regulations, judicial
decisions and administrative rulings of general application” (hereinafter “laws”) in such a manner as
to enable governments and traders to become acquain ted with them.  Article X also requires Members
not to enforce such laws before they  have been officially published; and, it requires a Member toadminister its laws in a “uniform, impartial and reasonable manner.”  These obligations are not
limited to laws specified by the Anti-Dumping Agreement (or another WTO agreement).  They extend
to all laws “pertaining to the classification or the valuation of products for customs purposes, or to
rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports . . ..”
Here, the US failed to comply with GATT Article X.  Its published a regulation that provides for
correcting clerical errors.  But, in contrast to its practice in other cases, it failed to follow its regulation
and correct the error, and thereby treated NKK unfairly in the process.
QUESTIONS TO BOTH PARTIES
Question 39:  Does the US objection under 1 7.5(ii) AD Agreement have any relevance to the
consideration of evidence on Japan's Article X GATT claim, or the "on its face" claims
regarding US law?
Answer
84. No.  By its terms, Article 17.5(ii) applies only to claims under the AD Agreement.  Thus, it is
explicitly inapplicable to Japan’s claims under GATT 1994 Article X:3.  The text of Article 17.5(ii)
also makes clear that it is inapplicable to "on its face" claims against an anti-dumping law.  The
phrase “facts made available . . . to the authorities” refers solely to specific anti-dumping proceedings.
It has no meaning in the context of a challenge to the facial consistency of the US law itself.
85. A related issue arose in the recent Appellate Body decision in US—Anti-Dumping Act of
1916 , which found that Article 17.4 does not limit facial challenges to anti-dumping laws and
regulations.31  Although the Appellate Body did not directly address Article 17.5(ii), the logic of its
reasoning extends to Article 17.5(ii).
Question 40: Can the parties clarify their positi on concerning the acceptance of exhibits that
relate to the claim of Japan under Article X GATT 1994?  Should such exhibits be admitted
even if they were not made available under the appropriate domestic procedures as required by
the AD Agreement?  Could there be other reasons apart from the requirements ofArticle 17.5(ii) of the AD Agreement to exclude certain documents submitted by Japan to the
Panel?
                                                     
31 US—Anti-Dumping Act of 1916, para. 74.WT/DS184/R
Page E-22
Answer
86. All exhibits relevant to Japan’s GATT 1994 Ar ticle X claims are admissible and indeed must
be considered by the Panel.  In its preliminary objections, the United States relied on only
Article 17.5(ii) of the AD Agreement to challenge evidence submitted by Japan in support of itsArticle X claims.  This is not an appropriate legal basis for two important reasons.  First and foremost,
the AD Agreement does not apply to challenges made under the GATT 1994.  Article 17.5 establishes
dispute settlement procedures only for  disputes involving the AD Agreement.  It cannot be read to
apply to claims raised under other international agreements.
87. Second, and as importantly, the Panel is obligated to consider the proffered evidence because
of the nature of GATT 1994 Article X claims.  Japan’s main claim under Article X is that the
United States did not administer its anti-dumping law in a uniform manner.  The examination of thisclaim requires a comparison of the application of the US law in this case with the application of the
same US law in other cases.  The Article X claim therefore necessarily involves facts that could not
possibly have been made available during this specific anti-dumping investigation.  Therefore
Article 17.5(ii) cannot logically extend to Japan’s Article X claim.
88. The Panel must examine the behaviour of the US Government in administering its laws
within this investigation, or as between investigations, which requires facts that may or may not have
been part of the record.  For example, in the hot-rolled steel investigation, the background behind
USDOC’s acceleration of this case is important because it shows the non-uniform, partial, and
unreasonable nature of the investigation.  The Panel must hear all the evidence and then determine theprobative weight of that evidence, but there is no basis upon which the panel can a priori  exclude
evidence.  Indeed, if the Panel chooses to exclude evidence, the Panel runs the risk of violating its
own obligations under Article 11 of the DSU, including an objective assessment of the facts and the
conformity with the relevant covered agreements.
89. Other than Article 17.5(ii), there is no basis to exclude these documents.  DSU Article 11
requires an “objective assessment,” and thus requires consideration of any evidence Japan offers to
establish its prima facie case of a violation of Article X.  Japan notes that in Hormones , the Appellate
Body explained
that the refusal to consider “evidence submitted to a panel is incompatible with a panel’s duty to make
an objective assessment of the facts” under Article 11 of the DSU.
32
Question 41: Do the parties consider that documents which were submitted to the USITC  but
not to USDOC were made available "in accordance with appropriate domestic procedures" and
can therefore be considered by the Panel even when those documents are submitted to the Panel
with regard to claims concerning determinations made by USDOC?  According to the parties,
should the Panel consider as relevant this internal US distinction between proceedings before
the USITC and USDOC when considering the question of admissibility of evidence under
Article 17.5(ii) of the AD Agreement?
Answer
90. Japan views this as a hypothetical question because the US has not raised a claim regarding
specific evidence.  The answer to the first questi on is, in general, yes.  The answer to the second
question is, in general, no.
91. The US cannot insulate itself from scrutiny simply by bifurcating the administration of US
anti-dumping law.33  For WTO purposes, the bifurcation is irrelevant.  The structure of the “authority”
                                                     
32 EC Measures Concerning Meat and Meat Products (Hormones) , 16 Jan. 1998, WT/DS26/AB/R,
WT/DS48/AB/R, at para. 133 (“ Hormones ”).WT/DS184/R
Page E-23
selected by the US to administer its anti-dumping law cannot excuse the US from its obligations,
whether they are substantive or procedural.  A Member cannot be permitted to use a structural artefact
as an excuse allowing a branch or division of its government to disregard evidence submitted to
another branch or division.34  The language used in Article 17.5 (ii) also does not spell out any special
consideration for governmental structure within each Member.  The key here is that the Japaneserespondent companies submitted the evidence to  the Member, in this case, the United States
government.
92. Moreover, in fact the ITC does share information with DOC, and did so in this case. US law
requires the ITC, within five days of its preliminary determination of injury or threat, to “transmit to
the administering authority { i.e., DOC} the facts and conclusions on which its determination is
based.”
 35  As is evident from the internal memorandum  issued by USDOC in making its preliminary
critical circumstances determination,36 USDOC had full knowledge of USITC’s negative preliminary
determination with regard to current injury.
Question 42: Article 2.3 of the AD Agreement prov ides that where there is no export price or
the export price appears unreliable, the export price "may" be constructed on the basis of the
resale price to the first independent buyer, or if the products are not resold to an independent
buyer, or not resold in the same condition as impo rted, on "such other reasonable basis" as the
authorities may determine.  Assume the word  "may" were interpreted to mean that the
authority is not required to construct an export pr ice on the basis of the resale price to the first
independent purchaser in any case.  Please comment, including comment on what other
methodology might properly be available if this were a correct interpretation of Article 2.3.
Answer
93. Japan agrees that the permissive term "may" in Article 2.3 means that authorities can, but
need not, construct a price based on downstream prices to unrelated parties.  Authorities would
therefore be well within their discretion simply to accept the price to an affiliated party as sufficient
for purposes of the analysis.  Indeed, in this particular case USDOC did not express any specific
concerns on the reliability of the KSC price to CSI, and never tested those prices for reliability.  Since
anti-dumping investigations are usually a surprise, in many cases there will be no reason to suspect
that the price between affiliated parties has been manipulated to evade anti-dumping measures.
Question 43: Could the parties please clarif y their position concerning the degree of
cooperation required under Article 6.8 and Annex II of the AD Agreement?
                                                                                                                                                                    
33 Article 27 of the Vienna Convention on the Law of Treaties states:  “A party may not invoke the
provisions of its internal law as a justification for its failure to perform a treaty.”
34 See Guatemala—Anti-Dumping Investigation Regarding Portland Cement from Mexico, 2 Nov.
1998, WT/DS60/AB/R, at paras. 69-72; United States—Sections 301-310 of the Trade Act of 1974, 22 Dec.1998, WT/DS152/R, at para. 7.80; Brazil—Export Financing Programme for Aircraft, 9 May 2000,WT/DS46/RW, at para. 6.16 n.23 (Report of the Panel under Article 21.5); see also Ian Brownlie, Principles of
Public International Law 35-37 (4
th ed. 1990) (excerpts attached as Exh. JP-83 );  Restatement (Third) of the
Foreign Relations Law of the United States § 207(c) (1987) (“A state is responsible for any violation of itsobligations under international law resulting from action or inaction by … any organ, agency, official,employee, or other agent of a government or of any political subdivision, acting within the scope of authority orunder color of such authority.”) (excerpts attached as Exh. JP-84 ).
35 Antidumping and Count ervailing Duty Handbook , USITC Pub. 3257, at II-12 (Nov. 1999) (excerpts
attached as Exh. JP-82 ).
36 Memorandum From Roland L. MacDonald and Edward C. Yang to Joseph A. Spetrini Regarding
Antidumping Duty Investigations of Certain Hot-Rolled Carbon Steel Flat Products from Japan and the RussianFederation—Determination of Critical Circumstances, 23 Nov. 1998, at 2 ( Exh. US/B-42 ).WT/DS184/R
Page E-24
Answer
94. This question was answered in response to Questions 4 and 7 above.
Question 44: Was information submitted to and accepted by the USITC after applicable
deadlines?
Answer
95. The USITC accepted corrected questionnaire responses submitted by domestic producers over
two months after the applicable deadlines, after failing to compel the more timely correction of
questionnaire responses that were grossly and flagrantly distorted.  This is not to say that the USITClacked advance notice of these irregularities: a mere four days after the USITC had released its public
prehearing staff report, Japanese and Brazilian respondents filed a submission enumerating the
irregularities in meticulous detail.
37  While domestic producers had been instructed to provide the
results of operations for merchant market and captive shipments, valuing internal transfers at fair
market value, most valued internal transfers at anything but fair market value.38  Respondents
demonstrated that these distortions were calculated to depress industry performance, and manufacture
the appearance of injury.  Further, domestic producers had allocated most all SG&A (sales general &
accounting) expenses to merchant market sales, and none to internal transfers, thereby depressing
merchant market profits and contriving the appearance of injury in the merchant market segment.39
96. The Japanese and Brazilian respondents strongly urged the USITC to apply “facts otherwiseavailable” to draw inferences that would allow the USITC to plug the holes in the offending domestic
producers’ questionnaire responses.
40  At the very least, Japanese and Brazilian respondents requested
an opportunity to comment on any submission of revised data,41 and an opportunity to address the
distortions and omission at an in camera session of the USITC’s hearing, where confidentialinformation could be discussed.
42  The games domestic producers were playing with the record could
not have been clearer, and the seriousness of the Japanese and Brazilian respondents’ accusations
certainly demanded immediate action.
97. Immediate action, however, was not forthcoming.  As of the date of the hearing, on 4 May, no
revised questionnaire responses had been submitted.  In fact, both Chairman Bragg and Vice
Chairman Miller were motivated to take the highly unusual step of publicly admonishing petitionersfor their lack of cooperation.
43  Vice Chairman Miller stated:
Let me begin on not such an easy note, however.  Chairman Bragg mentioned in her
opening statement some problems and difficulties we've had with basically
                                                     
37 The USITC released its prehearing staff report on 22 April 1999.  Japanese and Brazilian
respondents filed their submission on 26 April 1999.
38 Submission by Japanese and Brazilian Responde nts to USITC of 26 Apr. 1999, at 3-4 (excerpts
attached as Exh. JP-85 ).  While the staff attempted to correct these distortions where it could, several
companies had to be omitted from the staff report, pending confirmation of their financial information.  Certain
Hot-Rolled Steel Products From Brazil, Japan, Russia:  Prehearing Report to the USITC of Investigation Nos.
701-TA-384 and 731-TA-806-808 (Final),  at VI-7 (22 Apr. 1999) (excerpts in Exh. JP-72 ).
39 Submission by Japanese and Brazilian Respondents to USITC of 26 Apr. 1999,  at 5-7 (excerpts
attached as Exh. JP-85 ).
40 Id. at 8-9 (excerpts attached as Exh. JP-85 ).
41 Id. at 11-12 (excerpts attached as Exh. JP-85 ).
42 Id. at 12-13 (excerpts attached as Exh. JP-85 ).
43 USITC Hearing Transcript (4 May 1999), at 9 (Chairman Bragg in her opening stated, “I would like
to emphasize to all counsel that responses to Commission questionnaires are mandatory, and I request yourassistance in ensuring that your clients respond to Commission requests for information fully and within thetime frame specified.”), 65-66 (Vice Chairman Miller.) (excerpts provided in Exh. JP-73 ).WT/DS184/R
Page E-25
companies that are part of the petitioners' group on getting certain data that we've
requested, and I have to just say that I find it very troubling and I'm disappointed
that we're having the problem in getting the industry to submit certain information
that we need for the purpose of our analysis . . .  And I guess in particular I've been
very troubled by the fact that it's essentially most, if not all, of the petitioningcompanies that chose not to provide the in formation that we needed with respect to
internal transfers while other companies were able to do so.  So I guess I want to
emphasize to you as the chairmen of your companies the difficulty that I think this
poses for the Commission, and that I don't really understand why it's worth the risk
to your case of posing this problem to the Commission at this point.
44
98. Still, rather than drawing the inferences, as urged by respondents, the USITC patientlyawaited domestic producers’ clarifications, and received revised questionnaire responses from eight
domestic producers in time for their inclusion in the final staff report, issued 28 May 1999.
45
Domestic producers had succeeded in distorting the record concerning industry profitability until thebitter end of the investigation, when respondents literally had less than a week to comment on the
corrected figures, and then only briefly, as final comments are strictly limited to fifteen pages inlength per respondent country.
46
99. Thus, domestic producers only submitted corrected domestic producers’ questionnaire
responses in time for the 28 May final staff report -- over two months after the domestic producers’
questionnaires had been due, on 22 March.  By then, the damage wrought on respondents’ rights andthe USITC’s analysis by the distorted record was arguably irreversible.
Question 45: Is the captive production prov ision relevant to the USITC's analysis of
causation?
Answer
100. Japan argues that the captive production provision distorts the USITC’s consideration of
causation in violation of Article 3.5.  Specifically, Article 3.5 provides that “it must be demonstrated
that the dumped imports are, through the effects of dumping . . . causing injury within the meaning of
this Agreement . . . based on an examination of all relevant evidence before the authorities.”  In light
of footnote 9 and Article 4.1, Article 3.5 requires an authority to demonstrate causation betweenimports and injury to domestic producers as a whole of the like product, and not merely an industry
segment.
101. The captive production provision forces the USITC largely to ignore the attenuated nature of
competition in the captive market, and accentuate injury indices from the merchant market segment,where import competition is most acute.  It would be logically inconsistent for USITC to both
recognize that captive production shields a significant portion of domestic production from import
competition while at the same time “primarily focusing” on merchant market data that amplifies
import penetration.  This is the only explanation for why USITC omitted any mention of the shielding
effect of captive production in its decision in this case,
47 which is otherwise a time-honoured fixture
of its anti-dumping determinations.48  By contrast, both Commission ers Crawford and Askey, who did
                                                     
44 Id. at 65-66 (excerpts provided in Exh. JP-73 ).
45 USITC Final Injury Determination , USITC Pub. 3202 at VI-1 ( Exh. JP-14 ) (“USX’s verification
and LTV’s and six other producers’ revised financial data were incorporated in this final report.  The financialdata were changed to revise the sales values, costs, and SG&A expenses of the transfers for these eight
producers.”).
46 19 C.F.R. § 207.30(b) (to be provided in Japan’s Second Submission).
47 USITC Final Injury Determination, at 9-21 ( Exh. JP-14 ).
48 See, e.g ., 1993 Flat-Rolled Steel Case , at 22 (excerpts in Exh. JP-59 ).WT/DS184/R
Page E-26
not apply the captive production provision or endor se the majority opinion as did Commissioner
Bragg, expressly noted that substantial captive production attenuated subject import competition.49
102. The significance of this condition of competition has been demonstrated in numerous other
cases.  USITC recognized the shielding effect of captive production in its contemporaneous cold-rolled steel determination, in which it found a similar degree of captive production, but did not apply
the captive production provision.
50  The 1993 hot-rolled steel case hinged on the degree to which
substantial captive production mitigated causation between subject imports and the domestic
industry’s widening financial losses.51  By forestalling such a finding, the captive production
provision prevents USITC from complying with Article 3.5.
Question 46: Could the parties please comment on  the relevance of the Panel's decision in US-
Wheat Gluten for the question of the consideration of other factors of injury in this case.  Is the
standard for consideration of other factors, and non-attribution of injury caused by such other
factors to imports, the same in the anti-dumping context as in the safeguards context under the
respective WTO Agreements?
Answer
103. The recent Panel report in US—Wheat Gluten  held that authorities must ensure that when
injury caused by alternative factors is subtracted, the remaining injury caused by imports rises to the
level of “serious injury.”  Specifically, the Panel considered whether USITC’s consideration of eachalternative cause of injury satisfied Article 4.2(b), which “prohibits the attribution to increased
imports of injury caused by other factors.”
52  It found that the USITC “weighed each other factor
individually against imports to determine whether such factor was ‘a more important cause of injury’,
and then excluded such other factor as a ‘cause of injury’ when it did not. . . .”53  After dismissing all
other alternative causes, USITC only presumed that the injury caused by imports alone remained“serious.” 
54 The Panel held this approach to be inconsistent with the Safeguards Agreement:
In our view, under USITC causation analysis applied in this case, it is not clear that
the increased imports of the product concerned cause “ serious  injury” to the domestic
industry.  We consider that USITC’s causation analysis does not ensure that imports,
in and of themselves, are sufficient to cause serious  injury to the domestic industry
once injury caused by other factors is not attributed to imports.55
                                                     
49 USITC Final Injury Determination, at 44, 51 ( Exh. JP-14 ).
50 Certain Cold-Rolled Steel Products From Argentina, Brazil, Japan, Russia, South Africa, and
Thailand , Inv. Nos. 701-TA-393 and 731-TA-829-830, 833-834, 836, and 838 (Final), USITC Pub. 3283 (Mar.
2000), at 19 (excerpts attached as Exh. JP-86 ) (“{T}he extent of competition between domestic production and
subject imports is somewhat limited, given the domestic producers’ large volume of internal transfers and
contractual sales.”) (“ Cold-Rolled Steel Case ”).
51 USITC begins its determination with a four-page section devoted to considering and rejecting
petitioners’ request that captive production be excluded from the Commission’s analysis.  1993 Flat-Rolled
Case  at 15-18 (excerpts in Exh. JP-59 ).  The Conditions of Competition section contains an entire paragraph
devoted to the shielding effect of captive production.  Id. at 21 (excerpts in Exh. JP-59 ).  In the heart of its
analysis of impact, USITC devotes over a paragraph to the shielding effect of captive production.  Id. at 53
(excerpts in Exh. JP-59 ).
52 United States—Definitive Safeguard Measures on Imports of Wheat Gluten From the European
Communities, 31 July 2000, WT/DS166/R, at para. 8.151 (“ US—Wheat Gluten”) .
53 Id. at para. 8.151.
54 Id. at para. 8.151.
55 Id. at para. 8.152 (emphasis in original).WT/DS184/R
Page E-27
This echoes and amplifies the Panel Report in Argentina—Footwear , which found that authorities
must perform an analysis separating the effects of alternative causes of injury from the effects of
subject imports.56
104. By extension, anti-dumping authorities must ensure that when injury caused by alternativefactors is subtracted, the remaining injury rises to the level of “material injury.”  Article 3.5 of the AD
Agreement is perfectly analogous to Article 4.2(b) of the Safeguards Agreement: both provide that
authorities must establish a causal link between imports and the requisite degree of injury, and that
injury caused by factors other than subject imports must not be attributed to subject imports.
57  Indeed,
the wording is almost identical:  “causal link” versus “causal relationship”; and “shall not be
attributed” and “must not be attributed.”  Moreover, the Panel Report in US - Wheat Gluten
specifically cites to prior panel decisions under the Tokyo Round Anti-dumping Code is support of itsdecision,
58 showing that the panel recognized the close analogy between the language in the two
agreements.
105. With respect to this case, to the extent USITC considered alternative causes of injury at all, it
held that each only “partly explained” the indus try’s declining performance in 1998, concluding that
subject imports “materially contributed” to the industry’s declining performance.59  A finding that
subject imports “materially contributed” to injury, however, is not the same as a finding that the injury
caused  by subject imports alone is “material.”  As it had in US—Wheat Gluten , USITC only found
subject imports to be a more important cause of injury than any other, without considering whether
the injury caused by subject imports alone was material, as required by Article 3.5 and footnote 9.
Question 47: When did producers of Japanese steel exit the US market and did imports of
Japanese steel start falling?  What are lead time s for orders of steel from Japan?  What are
shipment times for steel exports from Japan to the US?
Answer
106. According to US Commerce Department statistics, imports of subject hot-rolled steel from
Japan peaked in November 1998 at 399,927 metric tons, before declining steeply to a negligible
14,437 metric tons in January of 1999.60
107. USITC’s Prehearing Staff Report found, and the Final Staff Report confirmed, that “{l}eadtimes for Japanese product averaged 122 days from Japan in 1996-1997 and 113 days in 1998.”
61
                                                     
56 Argentina—Footwear , para. 8.267 (“{A} sufficient consideration of ‘other factors’ operating in the
market at the same time must be conducted, so that any such injury caused by such factors can be identified andproperly attributed.”).
57 Article 4.2(b) provides: “The {affirmative determination} shall not be made unless the investigation
demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports ofthe product concerned and serious injury or threat ther eof.  When factors other than increased imports are
causing injury to the domestic industry at the same time, such injury shall not be attributed to increasedimports.”  Article 3.5 similarly provides: “It must be demonstrated that the dumped imports are, through theeffects of dumping . . . 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 knownfactors other than the dumped imports which at the same time are injuring the domestic industry, and the injuriescaused by these factors must not be attributed to the dumped imports.”
58 US―Wheat Gluten, at para. 141 and 8.142.
59 USITC Final Injury Determination,  at 20-21 ( Exh. JP-14 ) (“Having taken these {other economic
factors} into account, however, we find that the substan tially increased volume of subject imports at declining
prices has materially contributed to the industry’s declining performance…”).
60 Japanese Respondents’ USITC Prehearing Brief (29 Apr. 1999), at 25, Exhibit 3 (excerpts attached
as Exh. JP-87 ).WT/DS184/R
Page E-28
“Lead time” was defined in the importers’ questionnaires as the number of days between order
placement with the importer and receipt of the shipment by the customer.62  Alluding to these three to
four month lead times, Japanese respondents obs erved that although Japanese imports peaked in
October and November of 1998, these imports would have been ordered sometime in July and
August, long before the antidumping petition’s filing on 30 September.63
108. Typical shipment times from Japan to the United States is one month to the west coast andone and one half months to the east coast.
                                                                                                                                                                    
61 USITC Final Injury Determination , at II-11 ( Exh. JP-14 ); Japanese Respondents’ USITC Prehearing
Brief, at 25 (excerpts attached as Exh. JP-87 ).
62 USITC Importers’ Questionnaire, Certain Hot-Rolled Steel Products From Brazil, Japan and Russia ,
Inv. Nos. 701-TA-384 and 731-TA-806-808, at 15 (excerpts attached as Exh. JP-88 ).
63 Japanese Respondents USITC Prehearing Brief, at 25 (excerpts attached as Exh. JP-87 ); USITC
Final Injury Determination,  at I-1 ( Exh. JP-14 ) (Petition filed on 30 September 1998.).WT/DS184/R
Page E-29
ANNEX E-2
Japan's Answers to Questions from the United States
(6 September 2000)
Question 1: Does Japan claim that, even if it pr evails on all of the facts available issues and
the Department’s 99.5  per cent test, that KSC, NKK and NSC will not, nevertheless, have
dumping margins over 15  per cent?
Answer
1. Japan believes this question is legally irrelevant.  The issue in this dispute is not the level of
alleged Japanese dumping.  The issue is whether the US Government adhered to its WTO obligations
in determining the level of anti-dumping duties.  Even if the Japanese mills were "dumping" in the
technical sense of the concept, that does not mean th e Japanese mills are not entitled to fair treatment,
consistent with US obligations under the WTO.
Question 2: Does Japan dispute that the increase in hot-rolle d steel exports from Japan to
the United States prior to the Department’s investigation was massive?
Answer
2. As a factual matter, Japan does not agree with the value laden word "massive."  Percentage
increases from a small base can lead to large percen tage increases.  Moreover, increases need to be
viewed in terms of the size of the market, and the rate at which demand is increasing.
3. More importantly, from a legal perspective, this question is irrelevant.  Japan is not
challenging the US Government findings about the size of the increase in imports.  Japan's claim
focused on other aspects of the US determination of critical circumstances, and the sufficiency of the
evidence to support those conclusions at the time they were made.  Meeting one requirement for
invoking critical circumstances does not justify essentially ignoring the other requirements.
Question 3: In paragraph 47 of its opening st atement, Japan appears to retreat from the
absolute position taken in paragraphs 57 th rough 60 of its written submission that an
administering authority may never use an adverse inference in selecting the facts available.  Has
Japan, in fact, retreated from this position?  Can Japan give a single example of a situation in
which an administering authority would be permitted to make an adverse inference?
Answer
4. Japan has not retreated from its position.  Japan has never embraced the absolutist position
which the United States tries to attribute to Japan.   This is why Japan challenged the way in which
USDOC applies the US statutory provision on facts available in practice, rather than the statutory
provision itself.  In practice, USDOC does not merely make inferences that may prove to be adverse,
but rather specifically seeks to punish respondents.WT/DS184/R
Page E-30
5. Japan believes that the AD Agreement never authorizes the use of punishment.  Authorities
may find it necessary to turn to "facts available," and those facts may in many instances be "less
favourable" than the result that would have obtained  if the parties had provided information to the
authorities.  But, the United States insists on reading the concept of "less favourable" much too
broadly -- not just as authorizing the use of inferences which may prove to be adverse, but as allowingbroad discretion to punish foreign respondents.
Question 4: In paragraph 51 of its opening statement, Japan states:  Implicit  in all of its
letters to USDOC was a request that USDOC provide some guidance as to what it should do.
(Emphasis supplied.)  Yet in at least two places in its first submission, Japan states that KSC
had specifically asked USDOC for its guidance (Japan 1st sub. & 67) and KSC asked USDOC
for its guidance (Japan 1st sub. & 76.)  Is Japan, in its opening statement, retreating from its
position in its first submission  that KSC explicitly asked Co mmerce for guidance on the CSI
matter?  If not, will Japan provide record citati ons for the assertions in its first submission that
KSC did request guidance from USDOC?  (Currently, the first submission has no such
citations.)
Answer
6. We answered this question in response to Panel Question 5.
Question 5: In its first submission, at paragra ph 140, Japan stated that its interpretation was
that Article 9.4 required the Department to disregard the facts available portions of these
margins  for purposes of calculating the all-others rate and should have used only that portion of
the margins  not based on facts available.
At paragraph 56 of its opening statement, in contrast, Japan no longer mentions
removing facts available portions of the margins.  Instead, Japan now states that a plain reading
of the phrase is that a margin established using facts available, whether partially or entirely,
cannot be used to calculate the all-others rate.
1. Has Japan conceded that the Agreement does not call for removing portions of
the calculated margins?
2. As Japan also acknowledges in para. 140 of its first submission, all mandatory
respondents’ margins were based on partial facts available.   Under Japan’s new
reading of Article 9.4, would the Department then be required to disregard the
margins for all three mandatory respondents?
Answer
7. Japan has not changed its position.  Japan believes that the authorities should base the "all
others rate" on those portions of margins for res ponding companies that reflect actual information, not
"facts available."
Question 6: Paragraph 23 of the Japanese stat ement says that nothing stops the United
States from considering as a condition of competition the merchant market v. captive portions
of an industry; the problem in this case, according to Japan, is that the statute mandates the
approach.  Does this mean that an investigatin g authority’s analysis is in accordance with the
Agreement if, as a matter of discretion, it lo oks at the merchant market v. captive sales as a
condition of competition?WT/DS184/R
Page E-31
Answer
8. The US hypothetical is a far cry from the actual operation of the captive production provision.
9. Japan agrees that the authorities are to consider all relevant economic factors, and that the
distinction between the merchant market and the captive market could be one of those relevant
economic factors.  For this analysis to be consistent with the AD Agreement, it would need to have
several features very different from the current captive production provision.
10. First, the authority would need to have discretion to evaluate the particular relevance in a
particular case, and should not be shackled by a mandatory instruction to consider.
11. Second, the authority should be free to accord this factor balanced consideration, no more or
less than other factors.  The authorities should not be instructed to elevate this one factor as the
"primary focus" at the expense of other relevant factors.
12. Third, the authority should have the discretion to consider as a condition of competition the
"shielding effect" of captive consumption, and should not be forced to focus on the potential effects in
the merchant market to the exclusion of the shielding effect in the captive segment.WT/DS184/R
Page E-32
ANNEX E-3
Responses of the United States to Questions from the Panel
(6 September 2000)
Question 23.  Does the US consider that the Panel is limited by Article 17.6(ii) [ sic. 17.5(ii)] of
the AD Agreement in the consideration of evidence with respect to claims under Article X ofGATT 1994?
1. The Panel should first consider the scope of the new evidence referred to in this question. Of
all the new evidence offered by Japan in this dispute, the only new evidence cited in Japan’s Article X
argument (paras 282 - 324) are two news report s of Department of Commerce Secretary Daley’s
statements to the Congressional Steel Caucus.  (JP-19 and JP-20).  These are offered to show"partiality" in two instances: the decision to accelerate the investigation (First Submission of Japan, at
para. 299) and the adoption of the new critical circ umstances policy (id., para. 309).  None of the
other new evidence that is the subject of the United States’ preliminary objections are cited or referred
to in any way in Japan’s Article X argument.
2. So, the issue is whether the Panel should consider these two press reports -- allegedly
showing "partiality" -- in considering Japan’s Article X claim.  Under Article 17.5(ii) of the
Anti-Dumping Agreement, this Panel is to examine this matter based upon "the facts made available
in conformity with appropriate domestic proced ures to the authorities of the importing Member."
Under Article 17.6(i), in assessing the facts of th e matter, this Panel "shall determine whether [the
authorities’] evaluation of those facts was unbiased and objective."
3. The Japanese respondents in the underlying antidumping investigation could have submitted
these press reports to the administering authority during the course of the investigation, if theythought they were relevant.  This would have permitted the Commerce Department to take this
information into account in conducting its investigation, and would have permitted the other
interested parties to the investigation (including US steel companies) an opportunity to comment and
to "have a full opportunity for the defence of their interests" under Article 6.2 of the Anti-Dumping
Agreement.  The Japanese respondents chose not to do so.  At the same time, they did choose tosubmit a letter in this proceeding and in the companion hot-rolled steel from Brazil case, protesting
alleged bias by the Department in the conduct of the anti-dumping investigations, especially with
regard to the expedited schedule.  See US Response to question number one from Japan, concerning
the fact that this evidence of alleged bias is on the Department’s administrative record.
4. As discussed further below, the very nature of the proceeding under examination by this Panel
– an investigation, on an administrative record, by national authorities –  means that the administering
authorities make their decisions based solely on the facts and evidence presented to them.  It also
means that the rights of other interested parties to defend their interests depend on their ability to
comment on information presented to the authorities during the course of the investigation. See, e.g. ,
Article 6.2 of the Anti-Dumping Agreement.  The nature of this proceeding makes it inappropriate fora Panel to consider evidence that was not submitted on the administrative record to the national
authorities.  Article 17.5(ii) reflects this principle with respect to the Anti-Dumping Agreement, but
this principle has also been applied in the context of disputes under the Safeguards Agreement, where
there is no "Article 17.5(ii)".  E.g., United States - Measures Affecting Imports of Woven Wool ShirtsWT/DS184/R
Page E-33
and Blouses from India  (United States -- Shirts and Blouses) , WT/DS33/R, Report of the Panel, as
modified by the Appellate Body, adopted 23 May 1997, para. 7.21;  Korea - Definitive Safeguard
Measure on Imports of Certain Dairy Products , Report of the Panel adopted 21 June 1999,
WT/DS98/R, para. 7.30;  United States – Definitive Safeguard Measures On Imports of Wheat Gluten
From The European Communities, WT/DS166/R, Report of the Panel (July 31, 2000), para. 8.6.
5. That this Panel should disregard extra-record evidence in examining Japan’s Article X claim
is underscored by the particular claim at issue here.  It would defy law and logic for this Panel to find
that the authorities’ decision was "unbiased and objective", based on the standards of the
Anti-Dumping Agreement, but not "impartial" under Article X.  This could not have been the
intention of those who negotiated the specific provisions applicable to the review of antidumping
investigations, Articles 17.5 and 17.6 of the Antidumping Agreement.  To the contrary, it would
suggest that there is a conflict, with respect to this issue, between the Anti-Dumping Agreement and
Article X.  In the event of such a conflict, the An ti-Dumping Agreement prevails to the extent of the
conflict, under the general interpretive headnote to Annex 1A.  Therefore, this Panel should not
consider, for purposes of Article X, evidence that could have been presented to the administering
authorities during the investigation, but was not.
Question 24.  The USDOC has a system for the di sclosure of confidential information under
administrative protective order.  Under that system, are the questionnaire responses of one
respondent made available to other respondents in the investigation?  If the answer is yes, was
such disclosure made in this case, and, if so, when was this disclosure made?
6. Under Commerce’s procedure for disclosure of confidential information under administrative
protective order ("APO"), the questionnaire responses of one respondent  are not made available to
other respondents  in the investigation.  However, the questionnaire responses of a respondent are
made available to other respondents’ representatives  (generally, legal counsel) that are authorized
under the APO to receive such information.  See 19 C.F.R. §§ 351.103, 351.105, 351.304-351.306,
and 354.19; see also  www.ia.ita.doc.gov/apo/index.html.   In this case, the representatives for all three
Japanese respondents (NSC, NKK, and KSC) were co vered by the APO and, therefore, were entitled
to receive any questionnaire responses that were filed.  For example, the representatives for NKK
were entitled to and did receive the confidential versions of the questionnaire responses of KSC and
NSC.  See Certificate of Service for KSC's Response to Sections B, C, and D of USDOC's Anti-
Dumping Duty Questionnaire (21 Dec. 1998) (APO Version); Certificate of Service for NSC's
Response to Sections B, C, and D of USDOC's Anti-Dumping Duty Questionnaire (21 Dec. 1998)
(APO Version).1  Disclosure of the questionnaire responses was made at the time that the information
was filed with Commerce.  The USDOC's regulations require that when a respondent files a
document, such as a response to a  questionnaire, with the Department, it must simultaneously serve
that document on all persons on the service list for the proceeding, and must include a certificate to
this effect.  19 C.F.R. § 351.303(f).
Question 25.  Could the US list the exhibits of Japan it considers should not be accepted by the
Panel and mention for each of those exhibits the reason why it should not be accepted?
7. Affidavit of Daniel L. Porter, Counsel to NKK  (Exh. JP-28 ): The Panel should not accept this
sworn testimony by Mr. Porter because it was not presented to the Department during the
investigation and thus not made part of Commerce’s administrative record, consistent with its
                                                     
1 It should be noted that KSC's representatives opted not to receive the confidential versions of the
responses of NSC or NKK.  See Letter from Howrey & Simon to USDOC (18 Nov. 1998) at 1 (Public
Document).  In addition, it is the United States' understanding that the representatives for NSC requested not toreceive the confidential versions of KSC's questionnaire responses.  See Certificate of Service for KSC's
Response to Sections B, C, and D of USDOC's Anti-Dumping Duty Questionnaire (APO Version).WT/DS184/R
Page E-34
domestic procedures.  The affidavit includes Mr. Porter’s testimony about undocumented, alleged
conversations with Commerce officials.  It is impossible for the Panel to establish the veracity of these
allegations without conducting a mini-trial  de novo  before the Panel, calling the persons involved
before it for examination and cross-examination.  If these conversations had been important to NKK,
it could have submitted evidence of them to the Department during the investigation, so that theycould have been analyzed, addressed by the other parties, and made part of the administrative record.
Mr. Porter’s affidavit also includes testimony about his firm’s judgment of the impact on NKK’s
margin of Commerce’s facts available and arm’s-length determinations.  It is impossible for the Panel
to judge the accuracy of these calculations.  Moreover, Mr. Porter has not even clearly stated what
changes were made to the Department’s computer program to calculate these values.  Finally, the
remainder of Mr. Porter’s affidavit constitutes an indiscriminate blend of factual information already
on the record with argument, most of which has already been set forth in Japan’s first submission.For example, the statement at paragraph 17 of the affidavit that NKK’s conversion factor was
submitted "within the limits established by USDOC regulations" constitutes argument on a disputed
point, yet is presented as if it were fact.
8. Affidavit of Daniel J. Plaine, Counsel to NSC  (Exh. JP-46 ): The Panel should not accept this
sworn testimony by Mr. Plaine for the same reasons for which it should not accept Mr. Porter’s
affidavit.  In particular, the Department notes th e indiscriminate blending of fact and argument on
disputed points, such as at paragraph 11 rega rding what allegedly happened at verification, at
paragraph 19, where it is not clear what conversion factor, if any, was used in calculating the "actual
margins" referred to in that paragraph, and at paragraph 26, where it is apparently assumed that all of
NSC’s home market sales to affiliates were made in the ordinary course of trade.
9. Affidavit of Robert H. Huey, Counsel to KSC  (Exh. JP-44 ): The Panel should not accept this
sworn testimony by Mr. Huey because it was not presented to the Department during the investigation
and thus not made part of Commerce’s administrative  record, consistent with its domestic procedures.
The affidavit consists of Mr. Huey’s testimony about his firm’s judgment of the impact on KSC’s
margin of Commerce’s facts available and arm’s-length determinations.  It is impossible for the Panelto judge the accuracy of these calculations.  Even if we assume that Mr. Huey’s firm ran the computer
programs accurately -- i.e., in the same way that the Department would have done had it made the
assumptions Mr. Huey made (such as the assumption that all home market sales to affiliates were in
the ordinary course of trade), the fact remains that  his testimony constitutes extra-record evidence and
may not be considered by the Panel.
10. Affidavit and Resumes of Edward J. Heiden and John Pisarkiewicz, Statisticians
(Exh. JP-56 ): The Panel should not accept this sworn testimony by Messrs. Heiden and Pisarkiewicz
because it was not presented to the Department during the investigation and thus not made part of
Commerce’s administrative record, consistent with its domestic procedures. If the Japanese
respondents had thought it was important to present their arguments concerning the appropriate
statistical test using the testimony of these statisticians, they could perfectly well have done so during
the investigation, when that testimony could have been analyzed, addressed by the other parties, andplaced on the record.  Instead, Japan chose to present this post-determination testimony to the Panel,
where the statisticians may not be examined or cross-examined.
11. Newspaper and Other Articles : The Panel should not consider the following articles,
appended to Japan’s First Submission: Exh. JP-16 through 23, 25 through 27, 32(a) through (e),
33, 36 through 38.   As we explained in our First Submissi on at paragraph 68, Japan could have, but
failed to, put this information on the record dur ing the investigation.  Japan cannot now supplement,
or belatedly attempt to buttress, that record before the WTO.  Indeed, even Japan appears to concede
this point, by admitting in its Response to the Prelimin ary Objections that at least some of  its articles
are "alternative sources for substantive arguments made during the investigations" (paragraph 26) or
sources which "make the same argument" as that made during the investigation (paragraph 27).  IfWT/DS184/R
Page E-35
material from the record is adequate to make Japan’s points, the Panel should insist that only such
materials be used.  Otherwise, parties in future WTO anti-dumping cases will be given the green light
to append to their submissions whatever evidence or facts they think will strengthen points not made
as strongly as they would have liked before the investigating authority, during the proceeding.
Moreover, Japan now has provided other articles and materials that Japanese producers provided tothe USITC which Japan regards as making the some of the same points that it attempts to make before
this Panel.  The United States has no objection to Japan’s substituting documents that make equivalent
points but were on the USITC’s record.
12. In addition, some of Japan’s exhibits challenged by the United States in its first submission
were, in fact, on the record before the USITC.  In paragraph 24 of the Response of Japan to the
Preliminary Objections of the United States of America, Japan provides a chart listing citations
challenged by the United States as being extra-record and citations to the administrative record wherethose documents appeared in the USITC’s proceeding.  As Japan’s first written submission did not
provide us with the location of these documents in the administrative record, we apparently missed
some of these documents in our search of the recor d.  We thus withdraw our request to have the panel
disregard the documents listed in that chart for all the documents except the Paine Webber article,
2
insofar as these documents involve issues concerning the USITC  However, Exh. JP-32(f), JP-34,
and JP-35  are all cited in the "Economic Context" portion of Japan’s First Submission, at notes 36,
40, and 42.  It is unclear to what, if any, of the issues of the case these articles pertain.  To the extent
that they may concern Commerce issues, the United States would still urge the Panel to disregard
them, given that they were not before the Department, and because of the bifurcation of the
administrative proceedings, as we explain further in our response to the Panel’s question number 41.
13. As to the Paine Webber article,3 we note that Japan lists its citation as "cited at Respondents’
USITC Prehearing Brief, n.127-28."  Thus, although Japanese producers made statements to the
USITC based on that article, they chose not to provide the article, itself, to the USITC.  The
Article therefore was not part of the record before the authority, and the authority had before it only
respondents’ representations.  As a result, we submit that Japan should not put the article, itself,before this Panel, but it should provide to the panel what it provided to the USITC -- the portion of the
text of Respondents’ Prehearing Brief
Question 26.  The United States changed its poli cy concerning the timing of determinations of
sufficient evidence of critical circumstances to justify taking measures necessary to collect
anti-dumping duties retroactively.  However, it a ppears that this change in policy was for all
future cases.  Could the United States verify whet her this is in fact so?  Could the United States
please clarify the status of USDOC "Policy Bulletins" under US law?
14. Yes, the change in US policy concerning the timing of preliminary critical circumstances
determinations set forth in Policy Bulletin 98/4 was for all ongoing and future cases.  The Policy
Bulletin in question, which is entitled "Change in Policy Regarding Timing of Issuance of Critical
Circumstances Determinations," states that "{t}his policy is effective 7 October 1998 with respect toall ongoing and future investigations ."  Exhibit JP-3 (emphasis added).  Indeed, the USDOC has
applied its revised policy not only in the investigation at issue here, but also in the investigation of
                                                     
2 The articles listed in that chart are: Preston Pipe & Tube Report (Nov. 1998) and Preston Pipe &
Tube Report  (Sept. 1998), Exh. JP-67 ; Scott Robertson & Frank Haflich, "US mills lift slab purchases,"
American Metal Market  (8 Feb. 1999), Exh. JP-32(f) ; Charles Yost, "Thin Slab Casting/Flat Rolling: New
Technology to Benefit US Steel Industry," in USITC, Industry Trade and Technology Review, 1996 ITC Lexis
428 (Oct. 1996), Exh. JP-34(b) ; Donald Barnett and Robert Crandall, "Steel Decline and Renewal," in Industry
Studies  (2d ed. Larry Duetsch, ed. 1998), Exh. JP-35 .
3 Paine Webber, "Steel: A Gauntlet for All, Rewards for the Select," Steel Strategies  # 24 (June 1998),
Exh. JP-34(a) .WT/DS184/R
Page E-36
Certain Hot-Rolled Flat-Rolled Ca rbon-Quality Steel Products from the Russian Federation and in at
least three other cases.  See Certain Non-Frozen Apple Juice Concentrate From the People's Republic
of China , 64 Fed. Reg. 61835 (15 Nov. 1999) (prelim. crit. cir. determ.); Solid Fertilizer Grade
Ammonium Nitrate From the Russian Federation , 64 Fed. Reg. 60422 (5 Nov. 1999) (prelim. crit. cir.
determ.); Certain Cut-to-Length Carbon-Quality Steel Plate From Japan , 64 Fed. Reg. 20251
(26 Apr. 1999) (prelim. crit. cir. determ.); Certain Hot-Rolled Flat-Rolled Carbon Quality Steel
Products From Japan and the Russian Federation , 63 Fed. Reg. 65750, 65751 (30 Nov. 1998)
(prelim. crit. cir. determ.).
15. Policy Bulletins are official documents which define or explain the Department’s
interpretation of law, or method of analysis, of a topic under the antidumping or countervailing duty
law.  Policy bulletins are publicly available statements of policy, which may be found at the
Department’s website.  See www.ia.ita.doc.gov/policy/iapolicy/htm.   Under US law, Commerce has
the authority to change its policies, either before or during an investigation, as long as it clearly
explains the reasoning for the change in position, parties have the opportunity to comment on the new
position within the context of specific proceedin gs, and the new position is consistent with the
anti-dumping laws.  See Association Colombiana de Exportadores de Flores v. United States , 19 F.
Supp.2d 1116 (20 July 1998);  Hoogovens Staal BV v. United States , 4 F. Supp.2d 1213
(13 Mar. 1998).  Policy Bulletins are particularly useful for providing the public with notice of
general  statements of practice (or change in practice) as developed during the course of administrative
proceedings (as compared to regulations , which are promulgated less often and require more
significant administrative process). However, the Department may similarly make statements of
policy in case-specific determinations.  In this case, Commerce’s change in policy was consistent withthe statute and the AD Agreement, and the parties had ample opportunity to comment on and provide
evidence pertaining to the new policy within the context of this proceeding.
4
Question 27.  Is the US of the view that a party that impedes the investigation should be treated
exactly the same as a cooperating party th at fails to provide the requested necessary
information with respect to use of facts availa ble?  Article 6.8 provides that in all three
situations mentioned in Article 6.8, determinations may be made on the basis of facts available.
In the event the US considers that  the treatment should be diffe rent in all three cases, on what
basis would the US distinguish between an interested party who "refuses access to"
information, "otherwise does not provide" information, or "significantly impedes the
investigation"?
16. The treatment of parties in the application and selection of facts available depends upon the
situation.  For example, with respect to respons es to Commerce dumping questionnaires, a party may
be substantially or largely cooperative, as was the case with the Japanese respondents in this case, but
may not be cooperative in part, by impeding the investigation, or by refusing access to, or not timely
providing, some of the necessary information.  As it did in this case, Commerce takes into account
those actions, or lack of actions, in determining whether to apply facts available and, if so, whether totake an adverse inference.  Thus, whether a party that impedes the investigation should be treated
exactly the same as a cooperating party that fails to provide the requested information would depend
upon the facts of the case – i.e., to what extent the party impeded the investigation, or failed to
provide the requested information and the reasons for that failure, and the extent of the party’s
cooperation as to the rest of the requested information.
17. In this regard, the US statute, which applies to both USDOC and USITC, breaks the
application of facts available into two parts: a dete rmination of whether to apply facts available, and,
if this determination is affirmative, whether to use an inference that is adverse to the interests of that
party in selecting among the facts otherwise available.  19 U.S.C. § 1677e(a) and (b). The US statute
                                                     
4 See Preliminary Critical Circumstances Memo, at 3 (Exh. US/B-42) .WT/DS184/R
Page E-37
directs the investigating authority to use facts otherwise available where certain circumstances apply,
such as whether the party has withheld information, failed timely to provide it, or significantly
impeded an investigation.  Id. § 1677e(a).  The statute separately permits the authority to take an
adverse inference against a party if the authority finds that the party has failed to cooperate by not
acting to the best of its ability. Id. § 1677e(b).  Thus, our statute does not direct the investigating
authority to make distinctions between a party wh ich "refuses access to" information, "otherwise does
not provide" it, or "significantly impedes the investigation," in considering whether to apply facts
available, and, if so, in considering whether to take an adverse inference.
Question 28.  The US seems to suggest that the term "injury" for the purposes of a
determination under Article 10.7 of the AD Agreement also includes threat of injury, but that
the same term "injury" for a final determination under Article 10.6 of the AD Agreement only
relates to current material injury.  Can the US  please explain this apparent difference in
interpretation of that same term?
18. The United States does not mean to suggest this  difference in interpretation of the same term.
The term "injury," as used in Article 10.6 and applicable, by reference, to Article 10.7 of the AD
Agreement, has the same meaning for purposes of  both preliminary and final determinations of
critical circumstances.  Under the definition provided in Article 3, footnote 9 of the Agreement, the
term "injury" includes threat of injury "unless otherwise specified."  Neither Article 10.6 nor
Article 10.7 excludes threat from the definition of the term "injury."  Thus, under Article 10.6, a final
affirmative determination of critical circumstances would be proper if an administering authority
finds: (1) that the importer was, or should have been, aware that the exporter practices dumping andthat such dumping would cause material injury or threat thereof ; and (2) that the material  injury or
threat thereof  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 is likely to
seriously undermine the remedial effect of the definitive anti-dumping duty to be applied.  Sufficient
evidence of these same factors is also necessary when making an affirmative preliminary criticalcircumstances determination under Article 10.7.
19. Confusion on this point may have arisen because of the separate and distinct requirements
under Articles 10.2 and 10.4 of the Agreement, regarding the retroactive imposition of anti-dumping
duties for the period of provisional measures once there is a final determination regarding injury
(under US law, a final determination of injury issued by the USITC).  Under Article 10.2, retroactive
duties may only be applied if: (1) there is a final determination of current material injury (but not
threat thereof), or (2) there is a final determination of threat of injury and the effect of the dumped
imports would, in the absence of the provisional measures, have led to a determination of injury.
Thus, if the final injury determination in this case had been a finding solely of  "threat of injury," an
additional finding under 10.2 may have been necessary.  Additionally, Article 10.4 requires that
(except as provided under Article 10.2), where there is no finding of current injury, definitive
anti-dumping duties may be imposed only from the date of the determination of threat of injury.However, because the USITC Final Determination in this case did indeed find current material injury,
these provisions are not applicable here.
Question 29.  The US appears to ar gue that the use of the words " would cause  injury" in
Article 10.6(i) of the AD Agreement suggests that the injury might also lie in the future and thus
only be a threat of injury at the time of making the determination.  In this line of argument,however, the term "injury" seems to be limited to current material injury and does not appear
to include "threat of injury".  Can the US clarify its position in this respect in light of its overall
argument that unless otherwise specified, the te rm "injury" means both current material injury
and threat thereof?WT/DS184/R
Page E-38
20. As expressly set forth in Article 3, footnote 9 of the AD Agreement, unless otherwise
specified, the term "injury" means both current material injury and threat thereof .  The term " would
cause  injury" in Article 10.6(i) is no exception.  Because the term "injury" in Article 10.6(i) is not
qualified or limited, it must be read to mean "material injury or threat of material injury."  Thus,
irrespective of the words "would cause," Article 10.6(i) refers to both "injury"  and "threat thereof."A contrary reading would be proper only if the prov ision stated, "would cause injury (but not threat
thereof," as it does in Article 10.2.
21. The use of the words " would cause
 injury" clarifies the question to be resolved under
Article 10.6(i) and further establishes that the term "injury" in that provision includes threat of
material injury.  Article 10.6(i) does not impose a general requirement that there be injury to the
domestic industry (or a finding of such).  Rather, Article 10.6(i) inquires into whether importers had
knowledge (or should have had knowledge) that dumping existed and that such dumping "would
cause injury."  Because the question under Article 10.6(i) relates to knowledge by importers (an
imprecise fact), it is appropriate that the inquiry be simply whether the importers knew or should have
known that dumping practices "would cause" injury (or threat thereof).  In other words, it would be
difficult, if not impossible, for importers to know precisely whether dumping was, at that time,
causing injury to the domestic industry, or whether it was threatening the industry.  Importers are notexpected to know the exact state of the domestic industry ( i.e., whether dumping practices are
presently threatening the industry or causing current material injury) at a given time.  Rather, the
question under Article 10.6(i) simply inquires as to whether importers should have been aware that
the dumping would  ultimately cause injury.  Thus, although the term "injury" within the Agreement
includes both current material injury and threat of injury, the use of the phrase " would  cause
" within
Article 10.6(i) actually clarifies that the question is whether importers should have known that the
domestic industry would be injured  (i.e., was being threatened ) by dumping practices.  
Question 30.  The Panel understands that in making its critical circumstances determination,
USDOC considered it necessary to rely on other information such as newspaper articles and the
information contained in the petition because USITC had preliminarily found threat of injury.Why would USDOC feel it needs more information in a case in which USITC finds only threat
of injury if, as the US argues, it is clear that the term injury in Article 10.6 of the AD Agreement
also includes threat of injury and Article 10.7  of the AD Agreement thus also only requires
sufficient evidence of such threat of injury?
22. Article 10.6(i) involves a question of importer knowledge.
5  In cases where the USITC makes
a preliminary finding of current  material injury, under US practice, the Department presumes, based
upon the finding of current injury, that importers knew or should have known  that the dumping would
cause injury.  However,  in instances in which the USITC makes a preliminary finding that the
domestic industry is  threatened with injury as a result of dumping, but is not facing current material
injury, the threat of injury may be less apparent  to the importers.  Thus, where there is a USITC
preliminary finding of threat, but no present material injury, the US looks to other evidence in therecord to determine whether importers should have known that the dumping was impacting (i.e.,
threatening) the domestic industry.  In this case, the record contained extensive informationsuggesting importer awareness of injury (or threat  thereof), including: (1) the ITC preliminary
determination of threat; (2) various national and international news articles and press reports ( e.g., the
Wall Street Journal, American Metal Market, etc.) discussing massive dumped imports andplummeting domestic prices; (3) the evidence support ing the high margins in the petition; (4) the
101 per cent increase in imports over the short period of time; and (5) the injury information in the
petition.
                                                     
5 Note that, although Article 10.6(i) directs administering authorities to determine whether "the
importer was, or should have been, aware that the exporter practices dumping and that such dumping would
cause injury," it does not prescribe a specific method for making such determination.WT/DS184/R
Page E-39
Question 31.  The US argues that in US prac tice there is no difference between the requirement
of a "reasonable basis to believe or suspect" a nd the standard of "sufficient evidence" of the
AD Agreement.  Can the US further expand on this argument and provide examples from its
practice that would support this argument?
23. As a practical matter, the Department uses the two phrases interchangeably, as we detail
below. Under US law, the phrase "reasonable basis to believe or suspect" in used in several contexts
which arise during early stages of anti-dumping or  countervailing duty proceedings.  For example, the
phrase is utilized in the statutory provisions governing determinations of whether to initiate
sales-below-cost investigations, determinations of whether to initiate on certain allegations in
countervailing duty investigations, and preliminary determinations of whether critical circumstances
exist.  See, e.g.,  19 U.S.C. §§ 1671(e), 1673b(e)(1), 1677b(b).  The use of the phrase, "reasonable
basis to believe or suspect" does not mean that there is not "sufficient evidence" of the required
conditions leading to initiation or preliminary determinations.
24. Thus, where there is a requirement that there be a "reasonable basis to believe or suspect" that
a certain condition exists, the Department must find "sufficient evidence" of that condition.  This
evidentiary requirement is explicit in Department determinations.  Most significantly, the Departmenthas consistently determined that the "reasonable basis" standard requires a finding of sufficient
evidence, and has used the two phrases intercha ngeably in the context of preliminary critical
circumstances determinations.
6  In addition, the Department has made similar determinations in the
context of initiating countervailing duty investigations.7  Furthermore, the Department’s reviewing
court, the US Court of International Trade ("CIT"), has addressed this issue on two occasions.  InHuffy Corp. v. United States,  the CIT found that, "{i}n reviewing the record, . . . even if the
appropriate statutory standard is applied, plaintiffs failed to present to the ITA sufficient evidence to
create reasonable grounds to believe or suspect  that sales were being made at below cost in the home
market."  632 F. Supp. 50, 58 (Mar. 27, 1986) (emphasi s added).  Additionally, in a recent case, the
CIT found that Commerce had not based its determination to conduct a below-cost test on sufficientevidence.  The Court explained, "Commerce did not poi nt to the ‘reasonable grounds,’ if any, it had to
                                                     
6 See, e.g., Notice of Preliminary Determination of Sales at Less Than Fair Value: Certain Polyester
Staple Fiber From the Republic of Korea, 64 Fed. Reg. 60776, 60779 (8 Nov. 1 999) (Section 733(e)(1) of the
Act provides that if a petitioner alleges critical circumstances, the Department will determine whether there is areasonable basis to believe or suspect that: (A)(i) there is a history of dumping and material injury by reason of
dumped imports in the United States or elsewhere of the subject merchandise . . . .  Based on the recentexistence of this order, there is sufficient evidence to determine that there is a history of dumping of the subject
merchandise and a history of material injury as a result thereof.) (emphasis added); Preliminary Determination
of Critical Circumstances: Solid Fertilizer Grade Ammoni um Nitrate From the Russian Federation, 64 Fed. Reg.
60422, 60423 (5 Nov. 1999) ("Section 733(e) of the Act provides that the Department will determine thatcritical circumstances exist if there is a reasonable basi s to believe or suspect that: (A)(i) there is a history of
dumping ....  The existence of an antidumping order on ammonium nitrate in the EC is sufficient evidence of
history of injurious dumping.").
7 See, e.g., Notice of Initiation of Countervailing Duty Investigations: Certain Pasta From Italy and
Turkey, 60 Fed. Reg. 30280, 30284 (June 8, 1995) ("The Department does not consider the creditworthiness of a
firm absent a specific allegation by the petitioner whic h is supported by information establishing a reasonable
basis to believe or suspect that the firm is uncreditworthy. . . . Because petitioners have not provided sufficient
evidence of the Turkish pasta producers’  uncreditworthin ess, we are not including a creditworthiness allegation
in our investigation at this time.") ; See  Notice of Initiation of Countervaili ng Duty Investigations:  Oil Country
Tubular Goods From Austria and Italy,  59 Fed. Reg. 37965, 37967 (July 26, 1994) ("For the purposes of
initiation, in determining whether petitioners have provided sufficient evidence of competitive benefit, the
Department will determine whether a petitioner has provided a reasonable basis to believe or suspect that
[certain conditions have been met]."); see also Initiation of Countervailing Duty Investigation:
Porcelain-on-Steel Cooking Ware from Spain,  51 Fed. Reg. 26730 (July 25, 1986) (Department stated that "a
simple assertion, such as that made by petitioners . . . does not provide sufficient evidence to support an
allegation," and thus, does not provide "reasonable grounds within the meaning of {the Act}.").WT/DS184/R
Page E-40
suspect . . . below-cost sales . . . .  Moreover, {the statutory provisions} define what constitutes
sufficient evidence with which to form a reasonabl e suspicion, and there is not evidence in the Final
Results that Commerce relied on the type of information required to form the ‘reasonable grounds to
believe or suspect’ that below-cost sales existed before it initiated the investigation."8  RHP Bearings
Ltd. v. United States,  2000 Ct. Intl. Trade LEXIS 95, at 35 (Aug. 3, 2000).  In other words, both the
Department and the CIT have recognized that where there is a requirement that there be a "reasonable
basis to believe or suspect" that a certain condition exists, the Department must find "sufficient
evidence" of that condition.
25. It is important to note that, the fact that the phrase "reasonable basis to believe or suspect" is
utilized in US law for both initiations of certain types of investigations and preliminary critical
circumstances determinations does not mean that the type of evidence for the two types of  inquiries is
the same.  Rather, it merely indicates that, consistent with Article 10.7, the determination may bemade at an early stage, prior to the receipt of a ll potential evidence.  In other words, a finding that
there is a "reasonable basis to believe or suspect" that certain conditions exist must be based upon
sufficient evidence of those conditions for purposes of the particular type of determination at issue .
Thus, consistent with Article 10.7, the US statute utilizes the phrase "reasonable basis to believe or
suspect" to indicate that preliminary critical circ umstances determinations made be made at any time
after initiation ( i.e., once there is sufficient evidence, but potentially prior to the receipt of all record
evidence).
Question 32.  On page 10 of its oral statement, Japan quotes from the US first submission that
the US acknowledges that "it is recognized that information submitted in a request for initiation
is likely to be adverse to the interests of the responding party".  Does the US believe that such
"likely adverse" information may constitute the sufficient evidence necessary for a
determination under Article 10.7 of the AD Agreement?  Please explain.
26. Yes.  The information contained in a petition may constitute sufficient evidence to establish
that withholding of appraisement or assessment (or other necessary measures as described byArticle 10.7) is necessary.  The US agrees that information submitted in a request for initiation is
likely, in many cases, to be adverse to the interests of the responding party.  It is impossible, however,
at initiation, for an investigating authority to know  whether the data in the petition are more adverse
or more favorable to the respondents than their own data.  In fact, in this case, the dumping margins
calculated in the petition were actually less th an the final dumping margin calculated by the
Department for KSC.  Compare  Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products From
Japan , 64 Fed. Reg. 24329, 24370 (6 May 1999) (final determ.) with Petition for the Imposition of
Anti-Dumping Duties:  Certain Hot-Rolled Carbon Steel Flat Products from Japan (30 Sept. 1998) at
21, 21-22 n.33 (Public Version).  Nevertheless, although a petition may contain data that are adverse
to the interests of the responding party, the data must be based on and supported by the available
evidence.  Indeed, the petition often reflects actual data that are within the range of margins for
exporters and producers, albeit potentially in the top of the range.  As such, the information in apetition may constitute the sufficient evidence necessary for a determination under Article 10.7.
27. It is also important to take note of the purpose and instruction of Article 10.7.  In making a
determination under Article 10.7, an administering authority is not making a precise finding of
                                                     
8 Note that, the relevant statutory provision (relating to below-cost allegations) details the facts that
must be considered for that analysis, but does not discuss the meaning of sufficient evidence in general, nor doesit describe the type of evidence to be relied upon.  The Statement of Administrative Action ("SAA"), however,does provide guidance on what constitutes "sufficient evidence" for purposes of the COP inquiry.  The SAAstates,  "{r}easonable grounds" will exist when an interested party provides specific factua l information  on
costs and prices, observed or constructed indicating that sa les in the foreign market in question are at below-cost
prices."  SAA at 163.WT/DS184/R
Page E-41
dumping and consequent injury.  Rather, an administering authority is determining whether there
exists sufficient evidence of critical circumstances (i.e., knowledge by importers of the existence of
dumping and that such dumping would cause injury , and massive dumped imports within a relatively
short period of time) to warrant immediate action - withholding of appraisement or assessment, or
other necessary measures.  The US would not propos e that a final margin of dumping (an extremely
precise calculation containing many variables) be calculated based solely upon facts contained in a
petition without first providing the respondents with an opportunity to provide their own data.  The
Agreement does not provide for such.  However, Article 10.7 does provide that measures may be
necessary after initiation in order to preserve the ultimate anti-dumping remedy.  Thus, a petition
containing sufficient evidence establishing importer awareness and massive dumped imports over a
short period of time that has been scrutinized for accuracy, as was the case here, may properly provide
a basis for a preliminary critical circumstances determination under Article 10.7.
Question 33.  In paragraph 42 of its first oral statement, Japan refers to the language of
Article 2.2 of the Agreement as setting out the mandatory and exhaustive list of methods for
determination of normal value.  As Japan notes, Article 2.2 prefaces the alternatives set forth
(constructed value and third country export pric e) with the statement that these alternatives
shall be applied "When there are no sales of the like product in the ordinary course of trade inthe domestic market of the exporting country" or "when, because of the particular market
situation or the low volume of sales in the dome stic market of the exporting country, such sales
do not permit a proper comparison."  Does the US consider that, in this case, there were sales of
the like product in the ordinary course of trad e, and there was no contention that the particular
market situation or the low volume of sales pr evented a proper comparison, and that therefore
the stated alternatives are not the mandatory and exclusive alternatives for determination of
normal value?
28. Yes.  The United States does consider that, in this case, even after certain sales to affiliates
were eliminated from the home market because they were found to be "not in the ordinary course oftrade," other home market sales of the like product which were made in the ordinary course of trade
remained.
29. Article 2.1 of the Agreement defines normal value as "the comparable price, in the ordinary
course of trade, for the like product when destined for consumption in the exporting country."  The
downstream sales of the like product from affiliated resellers to the first unaffiliated buyer for
consumption in Japan were made in the ordinary course of trade and clearly come within this
definition.  No party disputes that the downstream sales in question are of the "like product."Moreover, because these sales are to unaffiliated  parties, there is no suspicion of unreliability by
virtue of affiliation.  Indeed, no party has suggested that the downstream sales are "outside the
ordinary course of trade" for any reason.
30. Furthermore, there was no contention that a particular market situation or low volume
prevented a  proper comparison from being made between these downstream home market sales and
the US export sales.  Article 2.2 provides that when "there are no sales" in the home market meeting
the above criteria, the alternative bases for normal value are third country sales or constructed value.
Because in this case there are sales meeting the criteria for the preferred option of using home market
sales as the basis for normal value for each of the products sold to the United States, the Departmentwas not permitted under the Agreement to reach those secondary alternatives.  Thus, the question ofwhether they are "mandatory and exclusive" secondary alternatives is irrelevant.
Question 34.  Suppose that sales were made in the home market to, among others, two
customers, one of whom is an affiliated customer , while the other is not.  Assume also that the
weighted average price of the sales to those two customers is identical.  It seems it would be
possible, under the US 99.5 per cent test, that the sales to the affiliated customer will beWT/DS184/R
Page E-42
disregarded in the determination of normal va lue, while sales to the unaffiliated customer
having the same weighted average price would not be disregarded, if the weighted average price
of all sales to all unaffiliated customers were more than 0.5 per cent higher than the weighted
average price to the affiliated customer.  Is this a correct understanding of the implications of
the 99.5 per cent test in operation?  If so, please  explain how the US can conclude that sales that
are, on average, identically priced may be cons idered as having been made in the ordinary
course of trade when they are made to an una ffiliated customer and outside the ordinary course
of trade when made to an affiliated customer?
31. The Panel is correct that, when it applies the 99.5 per cent test in the above-described
situation, the Department would disregard sales to an affiliated customer whose sales were made at
the same weighted average prices as those to an unaffiliated customer which purchased at priceswhich were more than 0.5 per cent below the weighted average for the group of all unaffiliated
customers.
9
32. As an initial matter, it should be noted that the margin calculation, which is prescribed by the
Agreement, operates in the same fashion.  Just as affiliated customer sales fail the arm’s length test
when their prices fall below the weighted-average sales price to all unaffiliated customers, export
sales are considered "dumped" when their average prices fall below the weighted-average price of all
home market sales used to calculate normal value.  The fact that there may exist a single home marketprice that is identical or lower than the export price does not eliminate the dumping.
33. We do not disregard sales to the unaffiliated company because they are, by definition, made at
arm’s length and are appropriately considered, along with other arm’s-length sales, in determining thenormal value of the merchandise.  However, because sales to affiliated parties are inherently suspect
with respect to the extent to which the prices are based on market influences, the United States
presumes that such sales should be disregarded.  It could reasonably have disregarded all such sales in
the home market, regardless of price levels to affiliates, as Canada and Mexico do, and relied solelyon arm’s-length sales to unaffiliated parties.
34. The current test is designed to make limited ex ceptions to this presumption to increase the
volume of sales available for comparison and reduce the need to rely on downstream sales.  But this
purpose must be balanced against the need to avoid undermining an accurate calculation of normal
value–which otherwise would be based on prices to unaffiliated customers in the market as a whole
and in most instances on average  prices in the market as a whole.  Thus, if pricing to an affiliate
appears not to understate pricing in the home market as a whole  (as reflected in average prices to all
unaffiliated customers), we can have a sufficient level of confidence that normal values will not besignificantly distorted by including these sales.
35. Because there is no requirement that sales to affiliates ever be considered in the ordinary
course of trade, there is certainly no requirement th at such sales be deemed "ordinary" when made at
the level of the lowest-priced sale to an unaffiliated  party, rather than at the level of the average
 of
sales to unaffiliated parties.  The logical extension of such a practice would be to include all sales to
affiliates that were priced at the level of the lowest-price sales to an unaffiliated customer.  This
plainly would allow respondents to distort the normal value by making targeted low-priced sales to an
unaffiliated customer and overweighting the low end of the price range to affiliated customers.
Normal value could no longer be assumed to reflect arm’s-length prices in the market as a whole.
                                                     
9 This situation could occur because the overall we ighted average, across all unaffiliated customers,
would, by the very nature of an average, include values both above and below that average.  Sales to someunaffiliated companies will be characterized by higher-than-average prices, and sales to other bylower-than-average prices.  It is possible that the difference between the average and the rate for the
lowest-price company will be greater than 0.5 percent, thus producing the situation described above.WT/DS184/R
Page E-43
Thus, when an affiliate does not pass the test, we simply choose not to deviate from our preference for
using downstream sales to unaffiliated customers to avoid possible distortions.  Given the inherent
concern with respect to the influence affiliation has on pricing, Commerce’s interpretation of
Article 2.2, through the use of the 99.5 per cent test, is a permissible interpretation.
Question 35.  Could the US explain whether, when sales are found to be outside the ordinary
course of trade for having failed the 99.5 per cent test, the US will in all cases replace those sales
to affiliated customers with re-sales by those affiliated customers?  If not, what other
methodologies may be applied according to the US?
36. In most, but not all, cases, when home market sales are found to be outside the ordinary
course of trade because they have failed the 99.5 per cent test, the Department will rely on sales to
downstream unaffiliated customers, or to downstream affiliated customers that pass the 99.5 per centtest.  In addition, the Department’s regulations, at 19 C.F.R. § 351.403(d), permit it to exclude
downstream sales from the normal value calculation if sales to affiliated parties are less than five per
cent of the total value of the exporter or producer’s home market sales.  During the investigation, the
Department granted requests from both NSC and KSC that they be excused, pursuant to this
provision, from reporting small amounts of home market downstream sales.  See Preliminary
Determination , at 64 Fed. Reg. 8296 and Final Determination  at Comment 12.  We also make
exceptions when respondents can demonstrate that they are unable to obtain downstream sales
information by allowing them to avoid having to report downstream sales.
Question 36.  The US argues that if sales to an  affiliated customer pass the 99.5 per cent test, the
prices of all sales to that customer will be used  in the determination of normal value.  Can the
US explain how the fact that the prices of all sa les to that affiliated customer are used in the
determination of normal value demonstrates the reasonableness of the 99.5 per cent test under
the AD Agreement?
37. The fact that we use all sales to an affiliate that passes the test demonstrates that the 99.5 per
cent test has no predictable or necessary effect on the calculated dumping margin.  For any given
affiliate that passes, there typically will be some products sold to that affiliate at prices less than the
average price to unaffiliated customers as well as other products sold at prices higher than the
unaffiliated average.  The products actually used for comparison purposes – to determine normal
value for exported subject merchandise – may in fact be those products sold to the affiliate at lower
than average prices.  Conversely, when sales to an affiliate are disregarded because the affiliate did
not pass the test, the sales disregarded may include some sales of products at higher than average
prices that would otherwise have been used for comparison purposes.  Thus, application of the
99.5 per cent test may increase or decrease normal value.  The test does not bias the analysis; it may
in fact benefit certain respondents.
38. The fact that all sales to a customer which pass es the arm’s length test are used in the margin
calculation is a natural consequence of the fact that the Department’ s arm’s length test is based on anaverage which is customer-specific, i.e., it is based on the pricing policies that are the result of
relationships between customers.  The alternative test proposed during the investigation, on the other
hand, was sale-specific; some sales would be deemed affected by the affiliation and others not.
Because affiliation is a relationship between customers and not between products, the focus on a
customer-specific outcome is one aspect of the reasonableness of the 99.5 per cent test.
39. In addition, the focus on the average price relationships of the affiliated customer is
permissible because "averaging" is itself one reasonable way to look at overall pricing behaviour
between buyer and seller.  In situations involving the sale of multiple products, furthermore, it
diminishes the likelihood of data manipulation by "bunching" sales of products to a given customer,WT/DS184/R
Page E-44
providing some products at lower-than-usual pric es as compensation for providing other products at
higher-than-usual prices.
Question 37.  In paragraph 37 of its first oral  statement, Japan has proposed an example of
what it asserts is bias in the United States 99.5 per cent test to determine whether sales to an
affiliated customer are outside the normal course  of trade.  Could the US please comment on
this example, with specific reference to ho w the United States would, under the applicable
statutory and regulatory provisions, and its established policies, respond to such a situation.
40. The situation described by Japan is one in which a producer sells to its very profitable affiliate
at an unusually high price in order to reduce the profits, and thus the tax liability, of the affiliate.
Japan complains that the United States "never takes this situation into consideration," and argues that
by not discarding such sales, in which the price is  distorted but higher than the market average, the
United States’ arm’s length test is "biased."
41. As an initial matter, Section 773 of the Department’s statute and section 351.403(b) of its
regulations provide that home market sales can only be used in the calculation of normal value if they
are made in the ordinary course of trade.  If sales are not made in the ordinary course of trade for
some reason other than because of affiliation, they can be excluded for that reason.  If a respondentwere to demonstrate, for example, that a reported  "sale" was merely a token vehicle for a transfer of
funds to avoid taxes, the sale might be disregarded.
42. A more usual approach is for respondents simply to report the high-price home market sale as
being "ordinary."   Commerce would apply its 99.5 per cent test, the affiliate to which the higher-price
sales were made would pass the test, and these sales would be retained in the database. The retentionof such higher-price sales in the home market database, however, in no way constitutes  "bias" toward
the respondent.  Were the Department to disregard higher-price sales to affiliates, it would normally
require that the respondent report the downstream sales, which would normally be at even higher
prices.  In most situations, therefore, the Depart ment’s lack of concern with higher-price sales to
affiliates may have the effect of  reducing margins, compared to the margins that would have resultedfrom margins based on downstream sales.
43. Nor is the respondent cheated of the benefit it might have had from a comparison to a
lower-priced downstream sale.  In those infrequent situations where downstream prices are below
prices to the affiliated reseller (as when losses are sought to be shifted to the affiliated reseller for taxpurposes), the respondent can simply report the downstream prices in the first place.  As noted in
paragraph 207 of USG’s first submission, Commerce instructs respondents that  "if you sold to an
affiliate who resold the merchandise, report the affiliate’s resales to unaffiliated customers [ i.e., home
market downstream sales] rather than your sales to the affiliate."  Where an affiliated customer resells
at a price below its acquisition cost, respondents are free to report those lower downstream sales
prices even if the sales to that affiliated reseller would have passed the 99.5 per cent test.
Question 38.  In paragraph 30 of its oral statement, the US states that "In order to be
inconsistent with an international agreement, a domestic law must require actions that are
inconsistent with the agreement".  Please explain.
44. Japan is arguing that the US statutory provision on critical circumstances is, on its face,
inconsistent with the Anti-Dumpin g Agreement, because it does not explicitly repeat the obligations
of the Anti-Dumping Agreement.  A statute is not on its face WTO-inconsistent, however, if it permitsan interpretation that is WTO consistent.  The statute does not have to mimic the words of the relevant
agreement.  In United States - Measures Affecting the Importation, Internal Sale and Use ofWT/DS184/R
Page E-45
Tobacco10 the Panel found that a law did not mandate GATT-inconsistent action where the language
of that law was susceptible of a range of m eanings, including ones permitting GATT-consistent
action.  Indeed, a law that does not mandate WTO-inconsistent action is not, on its face,
WTO-inconsistent, even if, as is not the case here, actions taken under that law are WTO-inconsistent.
For example, the panel in  EEC -- Regulation on Imports of Parts and Components11 found that "the
mere existence" of the anti-circumvention provision of the EC’s antidumping legislation was not
inconsistent with the EC’s GATT obligations, even though the EC had taken GATT-inconsistent
measures under that provision.12  The Panel based its finding on its conclusion that the
anti-circumvention provision "does not mandate the imposition of duties or other measures by the
EEC Commission and Council; it merely authorizes  the Commission and the Council to take certain
actions."13
45. That the US statutory provision on critical circumstances does not specifically address some
of the Agreement’s criteria for the imposition of retroactive measures does not mean that those criteria
are not addressed by the administering authority.  The statute does not prevent the Commerce
Department from considering those factors -- to the contrary, the Commerce Department’s policy
specifically recognizes those factors.  Therefore, the statute itself is not contrary to the Anti-Dumping
Agreement.  The same analysis would apply to Japan’s challenges to the " captive production" and"all-others" provisions of the US anti-dumping statute.
QUESTIONS TO BOTH PARTIES
Question 39.  Does the US objection under 17.5(ii) AD Agreement have any relevance to the
consideration of evidence on Japan's Article X GATT claim, or the "on its face" claims
regarding US law?
46. With respect to Japan’s Article X GATT claim, please see the US response to question 23
above.
47. With respect to Japan’s "on its face" clai ms, in which the Panel is considering the
WTO-consistency of a statute "on its face", and not as applied in a particular investigation, the United
States believes that Article 17.5(ii) does not limit the evidence that the Panel may consider with
respect to those claims.  Japan does not offer this new evidence, however, to support its claim that the
US statute is WTO-inconsistent on its face.  Rather, most of this evidence – i.e., the press and other
public reports and the attorney affidavits – is offered in support of Japan’s claim that the application
of the law in this particular investigation was WTO-inconsistent.  The only exception to this – and the
only exception offered by Japan –  is the affidavit by so-called "experts" (i.e., statisticians) that the
99.5 per cent test "can be unfair" and can lead to anomalous results.  The 99.5 per cent test, however,is not statutory, nor is it regulatory; indeed Commerce specifically declined to incorporate this testinto its regulations, because it wanted to leave it self open to considering other "arm’s length" tests in
the future.  Nothing requires the Commerce Department to apply this test in individual investigations.
Indeed, the Commerce Department has specifically kept open the possibility that a different approach
might be taken in individual investigations, if the 99.5 per cent test produces anomalous results.  If the
Japanese respondents thought that the evidence of the statisticians was important to show that the99.5 per cent test operates inappropriately, they had an obligation to present that evidence to the
decision-makers. Since they did not, this Panel should not base its examination of this matter on that
affidavit.
                                                     
10 Panel Report on United States -- Measures Affecting the Importation, Internal Sale and Use of
Tobacco, adopted 4 October 1994, BISD 41S/131 ("US -- Tobacco").
11 Panel Report on EEC -- Regulation on Imports of Parts and Components, adopted 16 May 1990,
BISD 37S/132 ("EEC -- Parts").
12 Id., paras. 5.9, 5.21, 5.25-5.26.
13 Id., para. 5.25.WT/DS184/R
Page E-46
Question 40.  Can the parties clarify their posi tion concerning the acceptance of exhibits that
relate to the claim of Japan under Article X GATT 1994?  Should such exhibits be admitted
even if they were not made available under the appropriate domestic procedures as required by
the AD Agreement?  Could there be other reasons apart from the requirements of
Article 17.5(ii) of the AD Agreement to exclude certain documents submitted by Japan to the
Panel?
48. Please see the US response to question 23 above.  For the reasons in that response, the
exhibits cited by Japan in its Article X argument (JP 19 and 20), should not be considered by thisPanel.
49. There are reasons other than Article 17.5(ii) that this Panel should disregard "extra-record"
documents submitted to it by Japan.  The very nature of the proceeding before this Panel – an
investigation, on an administrative record, by national authorities – means that the administering
authorities make their decisions based solely on the facts and evidence presented to them.  It alsomeans that the rights of other interested parties to defend their interests depend on their ability to
comment on information presented to the authorities during the course of the investigation. See, e.g. ,
Article 6.2 of the Anti-Dumping Agreement.  The nature of this proceeding makes it inappropriate for
a Panel to consider evidence that was not submitted on the administrative record to the national
authorities.
50. The Safeguards Agreement, Article 3, requires that safeguard measures be applied only after
an investigation by the national authorities, which includes opportunities for all interested parties to
present evidence and views, and respond to the eviden ce and views of other interested parties.  It does
not, however, have a provision explicitly limiting a Panel’s examination to the facts presented to the
national authorities, as does Article 17.5(ii) of the Anti-Dumping Agreement.  Nevertheless, in anumber of disputes arising under the Safeguards Agreement, panels have emphasized that their review
of Members’ determinations to take safeguard m easures is limited to the evidence used by the
importing Members in making its determinations.  E.g., United States - Measures Affecting Imports of
Woven Wool Shirts and Blouses from India  (United States -- Shirts and Blouses) , WT/DS33/R, Report
of the Panel, as modified by the Appellate Body, adopted 23 May 1997, para. 7.21;  Korea - Definitive
Safeguard Measure on Imports of Certain Dairy Products , Report of the Panel adopted 21 June 1999,
WT/DS98/R, para. 7.30.  Most recently, the Panel in United States – Definitive Safeguard Measures
On Imports of Wheat Gluten From The European Communities, WT/DS166/R, Report of the Panel
(31 July 2000), para. 8.6, stated that
With the framework established by the Agreement on Safeguards, it is for the USITC
to determine how to collect and evaluate  data and how to assess and weigh the
relevant factors in making determination of serious injury and causation.  It is not our
role to collect new data, nor to consider evidence which could have been presented to
the USITC by interested parties in the investigation, but was not.
Thus, it is not only Article 17.5(ii) of the Anti-Dumping Agreement, but also the nature of the
antidumping investigation itself, that directs that the Panel not consider extra-record evidence.
Question 41.  Do the parties consider that do cuments which were submitted to the USITC but
not to USDOC were made available "in accordance with appropriate domestic procedures" and
can therefore be considered by the Panel even when those documents are submitted to the Panel
with regard to claims concerning determinations made by USDOC?  According to the parties,
should the Panel consider as relevant this internal US distinction between proceedings before
the USITC and USDOC when considering the question of admissibility of evidence under
Article 17.5(ii) of the AD Agreement?WT/DS184/R
Page E-47
51. Under the "appropriate domestic procedures" in US antidumping duty investigations, there are
two separate administrative records: one for the investigation of dumping by the Commerce
Department and one for the investigation of injury by the US International Trade Commission.  With
very limited exceptions, information is not shared between the agencies.  See sections 334 and 777(b)
of the Tariff Act of 1930.  In conducting its investigation and making its determinations, theCommerce Department relies exclusively on the information presented to it and placed on its
administrative record; the same is true of the In ternational Trade Commission.  Under US procedures,
these administrative records are separate, and are not shared between the two agencies.  Therefore,
when examining this matter "based upon . . . the facts made available in conformity with appropriate
domestic procedures to the authorities of the importing Member", this Panel should disregard
documents that are submitted by Japan concerning determinations made by the Commerce
Department if those documents were not put on the Commerce Department administrative record.
This is so even if those documents were put on  the International Trade Commission administrative
record.  To do otherwise would be to examine a decision of the Commerce Department based on facts
that were not made available to the Commerce Department under its procedures.  This would be
contrary to Article 17.5(ii).
Question 42.  Article 2.3 of the AD Agreement provides that where there is no export price or
the export price appears unreliable, the export price "may" be constructed on the basis of the
resale price to the first independent buyer, or if  the products are not resold to an independent
buyer, or not resold in the same condition as impo rted, on "such other reasonable basis" as the
authorities may determine.  Assume the word  "may" were interpreted to mean that the
authority is not required to construct an export pr ice on the basis of the resale price to the first
independent purchaser in any case.  Please comment, including comment on what other
methodology might properly be available if this were a correct interpretation of Article 2.3.
52. The United States agrees with the Panel’s suggestion that the use of the word "may" in
Article 2.3 may permissibly be construed as meaning that the authority is not required  to construct an
export price on the basis of the resale price to the first independent purchaser in any case.  Indeed, as
occurred in this case, there are situations where an  authority might not construct export price in this
manner.  For example, as we noted at paragraph 122 of the United States’ first submission, Commerce
will construct export price in a manner other than on the basis of the resale price to the first
independent purchaser, if the value added by the affiliated person is likely to exceed substantially the
value of the subject merchandise, when sold to the unaffiliated party.  KSC urged that Commerce
apply this methodology (the "special rule") to its sales through CSI, but the value added by CSI’sfurther manufacturing did not meet the threshold for application of this rule.  Japan did not contest
this finding.  In addition, as we noted at paragraph 19 of the United States’ first submission,
Commerce did not construct an export price for the US sales through KSC’s affiliate, VEST.  Instead,
Commerce disregarded those sales altogether, because they accounted for such a small part – less than
five per cent – of KSC’s US sales.
53. Generally, however, Commerce interprets Article 2.3 in a manner causing it to seek to
construct export price on the basis of the resale price to the first independent purchaser.  This
interpretation ensures that the investigating author ity will be using sales and prices of the actual
products sold to the United States, even though they must be adjusted for costs incurred in further
manufacturing and/or resale.  Such information is likely to result in a more accurate  construction ofthe export price, without the problem of searching for surrogate product matches.  In addition, this
interpretation precludes exporters from manipulating dumping margins by sheltering low-priced sales
through their affiliates.
Question 43.  Could the parties please clarify their position concerning the degree of
cooperation required under Article 6.8 and Annex II of the AD Agreement?WT/DS184/R
Page E-48
54. Neither Article 6.8 nor Annex II of the AD Agreement addresses the matter of degree  of
cooperation, nor whether that cooperation may be with regard to some or all of the requested
information.  In fact, the word "cooperate" appears only at the end of paragraph 7 of Annex II, which
provides 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 than if the
party did cooperate ."  (Emphasis added.)  As we explained in response to question 27 above, the US
statute breaks the application of facts available into two parts: a determination of whether to apply
facts available, and, if this determination is affirma tive, whether to use an inference that is adverse to
the interests of that party in selecting among the facts otherwise available.  19 U.S.C. § 1677e(a) and
(b).  With regard to the second part of the statute -- deciding whether to take an adverse inference
against a party -- the investigating authority will consider whether the party has failed to cooperate by
not acting to the best of its ability to provide the requested information.  Id. § 1677e(b).  This
determination of cooperation will depend upon an analysis of all the facts and circumstances of the
case.  For example, in this case, all three Japanese respondents – NSC, NKK, and KSC – cooperated
by timely producing large amounts of information.  It was only with regard to part of the requested
information that Commerce determined they did not cooperate by not acting to the best of their
ability, such that an adverse inference was warran ted as to the facts available for that information.
Question 44.  What information was submitted to and accepted by the USITC after applicable
deadlines?
55. No information was submitted to and accepted by the USITC after applicable deadlines in the
investigation.  The deadline for submission of factual information was 3 June 1999, the deadline for
parties’ final comments was 7 June 1999.14
Question 45. Is the captive production prov ision relevant to the USITC’s analysis of
causation?
56. Article 3.5 of the Antidumping Agreement provides that "[i]t 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" (emphasis added).  As a result, all elements of
Article 3.2 (volume and effect of prices) and Article 3.4 (impact of dumped imports on the domestic
industry) are relevant to an analysis of causation.  The captive production provision pertains to the
analysis of Article 3.4 factors.  When the captive production provision applies, certain of the factors in
Article 3.4 ( i.e., those considered in determining market share and those affecting financial
performance) are considered as they relate to the merchant market as well as to the industry as a
whole.  The captive production provision therefore is relevant to the USITC’s analysis of causation.
57. The captive production provision, itself, however, does not have any special effect on the
causation analysis.  It is merely a tool used in analyzing some of the factors listed in Article 3.4 to
obtain a more complete picture of the affects of dumped imports on the domestic industry as a whole.Using a segmented analysis in this way does not have any particular affect on the causation
requirement listed in Article 3.5.
                                                     
14 See Transcript of 4 May 1999 Hearing at 334 (Statement of Chairman Bragg). ( Exh. US/C-20 ) The
Proposed Work Schedule ( Exh. US/C-21 ) identifies 3 June 1999, as the "[c]losing of the record and final
release of data to Parties," and 7 June 1999 as the date "[f]inal comments of Parties due."  The USITC notice,
pursuant to § 207.21 of its regulations (19 C.F.R. § 207.21, Exh. US/C-22(a) ), scheduling  the final phase of the
investigation similarly explained that, "[o]n 3 June 1999, the Commission will make available to parties allinformation on which they have not had an opportunity to comment [and] [p]arties may submit final commentson this information on or before 7 June 1999."  64 Fed. Reg. 10723 (5 March 1999) (included as Appendix A ofUSITC Views, Exh. US/C-1 ).  See also  19 C.F.R. § 207.30 (closing of record to parties submissions)
(Exh. US/C-22(b) ), 19 C.F.R. § 207.25 (posthearing brief to include information adduced at or after hearing and
answers to Commissioner questions) ( Exh. US/C-22(c) ).WT/DS184/R
Page E-49
Question 46.  Could the parties please comment on the relevance of the Panel’s decision in
US-Wheat Gluten for the question of the consideratio n of other factors of injury in this case.  Is
the standard for consideration of other factors,  and non-attribution of injury caused by such
other factors to imports, the same in the anti -dumping context as in the safeguards context
under the respective WTO Agreements?
58. The Wheat Gluten panel’s decision, insofar as it addresses the consideration of other factors
of injury under the Agreement on Safeguards, is not relevant to this case.  The United States has
announced its intention to challenge the panel’s decision to the appellate body, and, therefore, theDispute Settlement Body has not adopted the decision.  In brief, the Wheat Gluten  panel wrongly
interprets the Agreement on Safeguards, without explicit analysis of the relevant language or history
of that agreement, as requiring an authority to "ensur[e] that it was the increased imports alone which
were causing serious  injury."
15  So interpreting the Safeguards Agreement, the Wheat Gluten  panel
held that the extent of injury due to increased impor ts must be "isolated".  This interpretation of the
Safeguards Agreement, as the United States will demonstrate before the Appellate Body, is (1)
contrary to the ordinary meaning of the terms of Article 4 of the Safeguards Agreement and the
context of the relevant provisions, which recognize that increased imports may interact with other
factors to cause serious injury, (2) contrary to the negotiating history of the Safeguards Agreement,
which shows that the members declined to adopt the causation standard that the Wheat Gluten   panel
views as required, and (3) renders the Safeguards Agreement impracticable of application, as it
imposes a requirement that cannot in principle be met in most cases.
59. The United States will, if the Panel so desires, expand upon those arguments in this
proceeding.  It believes, however, that the Panel should decide this case on the terms and history of
the Anti-Dumping Agreement, not on that of the Safeguards Agreement.  It should remitconsideration of the Wheat Gluten  panel’s decision to the Appellate Body.
60. If the panel, however, decides that it may properly consider the Wheat Gluten  report, it can
only conclude that the reasoning of that decision does not apply to the Anti-Dumping Agreement.
The Wheat Gluten  panel itself did not intend its analysis to provide precedent for interpretation of the
non-attribution requirement of the Anti-Dumping Agreement.  As that panel noted, "significant
differences exist between" the legal context for anti-dumping and safeguards cases.
16  T h e  Wheat
Gluten  panel regarded these differences as limiting the relevance to the Safeguards Agreement of
Atlantic Salmon,17 cited in the United States’ first written submission herein.  That decision
interpreted the terms of the parallel non-attribution provision of the Anti-Dumping Agreement’s
precursor, the Tokyo Round Anti-Dumping Code, and was adopted by the Code Committee Members.
61. Accordingly, it is Atlantic Salmon , and not the decision in Wheat Gluten , that properly forms
the  background for this Panel’s interpretation of the non-attribution provision of the Anti-dumpingAgreement.  As that Atlantic Salmon  panel found, the Code parties did not regard it as requiring an
authority to demonstrate that dumped imports be the sole cause of material injury to a domestic
industry.
18  Although negotiation of the Anti-Dumping Agreement concluded after the Atlantic
Salmon  decision, the Anti-Dumping Agreement, largely modelled on the Code, does not create a "
sole cause" requirement, nor has Japan so argued.
                                                     
15 United States -- Definitive Safeguard Measures on Imports of Wheat Gluten from the European
Communities, Report of the Panel, 31 July 2000,  WT/DS166/R, ¶ 8.151 (emphasis in original).
16 Wheat Gluten , ¶ 8.142.
17 United States–Imposiiton of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic Salmon
from Norway, Report of the Panel Adopted by the Committee on Antidumping Practices on 27 April 1994(ADP/87).
18 Atlantic Salmon , ¶¶ 546, 549.WT/DS184/R
Page E-50
62. Moreover, Atlantic Salmon  and not Wheat Gluten  is instructive in the current case because, as
the Wheat Gluten  panel itself noted, price is not listed as a relevant factor required to be considered in
an injury determination under the Safeguards Agreement.19  In contrast, the express obligation to
examine price effects that existed under Articles 3:1 and 3:2 of the Tokyo Round Anti-Dumping Code
has been continued by Articles 3.1 and 3.2 of the Anti-Dumping Agreement.   Japan’s arguments in
this case concern whether the USITC’s analysis of price effects was adequate in view of other factors
that it regards as having placed downward pressures on US prices.  The Atlantic Salmon  decision
interpreted the obligation not to attribute to dumped imports injury due to other factors in precisely
this context.
63. In particular, in Atlantic Salmon , the panel and the United States agreed that there was a
factor other than dumped imports that might have put pressure on prices in the US market -- low-cost
imports that were not subject to the anti-dumping investigation.  The panel held that it was adequatefor the USITC to have determined that dumped imports accounted for a large portion of increased
imports and played a role in the price decline experienced by the US industry.  The panel concluded
that "it could not ... reasonably be found that the USITC had attributed to the Norwegian imports
effects entirely caused by imports from other supplying countries."
20  As to other asserted factors, the
panel held that the USITC’s findings established that the increased availability of Pacific salmon"could have had only a limited effect on domestic prices."
21 Similarly, the panel held that the USITC
satisfied its obligation to examine other factors in finding that the domestic industry’s performance
was worse than could be explained by internal industry problems.22
64. As is discussed in the United States’ first written submission, the USITC’s determination in
this case, particularly with respect to pric e effects, parallels the analysis upheld in Atlantic Salmon .  It
would be extremely anomalous to hold that the USITC’s determination here violated the
Anti-Dumping Agreement because of a panel decision purporting to interpret the Safeguards
Agreement.  The Atlantic Salmon  panel held that the non-attribution requirement,
"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 theseother 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 those imports."
23
65. As indicated by its use of the term "somehow", the panel was sceptical as to whether the
extent of injury due to other factors could be isolated, and the Anti-dumping Agreement does not state
that, in its examination of other factors, an authority should do so.
66. Rather, Article 3.5 of the Anti-dumping Agreement sets forth an analysis that follows the
Atlantic Salmon  panel’s description closely.  First, Article 3.5 states, "It must be demonstrated that the
dumped imports are, through the effects of dumping, as set forth in paragraphs 2 and 4, causing injury
within the meaning of this Agreement."  This sent ence is drawn virtually verbatim from Article 3:4 of
the Tokyo Round Code.  As the Atlantic Salmon  panel discussed concerning the Tokyo Round Code
                                                     
19 Wheat Gluten, ¶¶ 8.109, 8.110.
20 Atlantic Salmon, ¶ 557.
21 Atlantic Salmon, ¶ 558.
22 Atlantic Salmon,  ¶ 559.
23 Atlantic Salmon, ¶ 555.WT/DS184/R
Page E-51
provision,24 this sentence, through its  cross-reference to the articles setting forth specific factors,
requires a specific form of analysis for demonstrating causation.
67. Second, the second sentence of Article 3.5 of the Antidumping Agreement characterizes the
required demonstration as establishing  "a causal relationship between the dumped imports and the
injury to the domestic industry."  Thus, the necessary demonstration need not establish that otherfactors do not also have a causal relationship to the injury.
68. Third, the third sentence of Article 3.5 states that "the authorities shall also examine any
known factors other than the dumped imports which at the same time are injury the domestic industry,
and the injuries caused by these other factors must not be attributed to the dumped imports."  This
provision differs from the Tokyo Round Code only in making explicit what the Atlantic Salmon  panel
stated, namely, that such an examination is required.   Article 3.5 does not, any more than the Tokyo
Round Code equivalent, specify how such an examina tion shall be conducted.  Rather, it is entirely
consistent with the Atlantic Salmon  panel’s conclusion that, in conducting the required analysis of
causation factors, an authority must examine other known causes of injury to assure that it has not
attributed to dumped imports effects that were due to other causes.  Had the negotiators of the
Anti-dumping Agreement intended to require the "isolation" of the various causes of injury, and thus
a more exacting "standard" for the examination of other causes, they could have done so.  Instead,they adopted a provision that was consistent with prior precedent expressly rejecting such a
requirement.
69. The United States believes that the Wheat Gluten  panel should have reached a similar
conclusion in its construction of the Safeguards Agreement.  The non-attribution provision of that
agreement was drawn virtually verbatim from the Tokyo Round Anti-Dumping Code.  Accordingly,
the United States believes that, properly interpreted, the non-attribution requirements of the
Safeguards and Anti-Dumping Agreements are consistent.  However, even if the Wheat Gluten  panel
was correct in its interpretation of the Safeguards Agreement, the terms and history of the
Anti-Dumping Agreement are so different from those of the Safeguards Agreement, as construed by
the Wheat Gluten  panel, that that panel’s analysis cannot be properly applied to determinations under
the Anti-Dumping Agreement.
Question 47.  When did producers of Japanese steel exit the US market and did imports of
Japanese steel start falling?  What are lead time s for orders of steel from Japan?  What are
shipments times for steel exports from Japan to the US?
70. Neither annual nor monthly data show Japanese steel exiting the US market over the period of
investigation.  Dumped imports from Japan were highest in the final quarter of the period of
investigation, the fourth quarter of 1998.  Thereafter they declined significantly.
25  Lead times for
                                                     
24 Atlantic Salmon, ¶¶ 549-551.
25 Imports from Japan totaled 240,976 short tons in 1996, 548,822 short tons in 1997, and 2,684,756
short tons in 1998.  USITC Pub. 3202 at IV-2 (based on official statistics and questionnaire responses).  See US
imports for consumption by source and by month (public portion of confidential memorandum INV-W-124
(9 June 1999)) ( Exh. US/C- 23 ).WT/DS184/R
Page E-52
Japanese product, including shipment times, "averaged 122 days from Japan in 1996-97 and 113 days
in 1998.26
                                                     
26 USITC Views at II-11.WT/DS184/R
Page E-53
ANNEX E-4
Responses of the United States to Questions from Japan
(6 September 2000)
Question 1.  Does the USG believe an authority would ever knowingly leave evidence of bias on
the administrative record?  If not, does not this mean that evidence of bias will in most cases
need to come from extra record evidence?
1. Yes, under US law an authority must leave evidence of bias, or alleged bias, on the record, so
long as such evidence is timely and appropriately filed with the Department.  Section 351.104(a)(1) of
the Department’s regulations calls for it to "includ e in the official record all factual information,
written argument, or other material developed by, presented to, or obtained by" it during the course of
a proceeding that pertains to the proceeding.  Section 351.104(a)(2) provides for Department
personnel to return to the submitter documents which contain untimely-filed new factual informationand documents which do not meet the requirements with respect to business proprietary information.
There is no provision for purging documents from the record on a discretionary basis, because of
allegations of bias or for any similar reasons.
2. For example, the respondents in this case and in the companion case on hot-rolled steel from
Brazil made a joint public submission on 13 November 1998 protesting the manner in which theDepartment was conducting the investigation, especially with respect to the expedited schedule for
those investigations.  The letter alleged that this approach constituted evidence of bias, twice
suggesting that the Department’s decision to expedite the investigation indicated that it had prejudged
the outcome of the investigation.  That letter, which was timely and properly filed, remains part of the
official record.  Japan, however, has not included it in its exhibits for this case.  The United States
would be glad to provide the Panel with a copy of it, should the Panel request.
3. Finally, this question has no relevance to this dispute.  Apart from data on conversion factors
(which have no relevance to alleged bias), Japan is not alleging that any evidence whatsoever,
whether related to alleged bias or not, was improperly excluded from the administrative records in
these proceedings.  By arguing that evidence of bias would have been improperly excluded from the
administrative record, Japan is simply attempting to  justify the failure of its companies to submit
information for the record during the course of the antidumping duty investigation.  If this information
had been submitted for the administrative record, it would now be properly before the Panel.
Question 2.  Does the USG believe that objectiv e assessment of the facts in DSU Article 11 sets
forth a broader standard of review than AD Agreement Article 17.6?
4. We do not understand what is meant by a "broader standard of review".  The "standard of
review" generally refers to the amount of deference that is accorded the national authorities when a
Panel reviews their decisions.  It is not clear what the "breadth" of that deference means.  We note,
however, that, in the context of safeguards measures, a number of panels have found that Article 11
does not provide for de novo review of the authorities’ decision, and does not provide for review
based on facts not made available to the authorities:WT/DS184/R
Page E-54
We consider that for the Panel to adopt a policy of total deference to the findings
of the national authorities could not ensure an "objective assessment" as foreseen
by Article 11 of the DSU.  This conclusion is supported, in our view, by previous
panel reports that have dealt with this issue.1  However, we do not see our review
as a substitute for the proceedings conducted by national investigating authorities.
Rather, we consider that the Panel's function is to assess objectively the reviewconducted by the national investigating authority, in this case the KTC.  For us, an
objective assessment entails an examination of whether the KTC had examined all
facts in its possession or which it should have obtained in accordance with
Article 4.2 of the Agreement on Safeguards (including facts which might detract
from an affirmative determination in accordance with the last sentence of
Article 4.2 of the Agreement on Safeguards), whether adequate explanation hadbeen provided of how the facts as a whole supported the determination made, and,
consequently, whether the determination made was consistent with the
international obligations of Korea.  Finally, we consider that the Panel should
examine the analysis performed by the national authorities at the time of the
investigation on the basis of the various national authorities' determinations and
the evidence it had collected.2
Question 3.  The US oral statement in para 6 i ndicates that panels must determine whether facts
are established properly, yet argues in para 7 that panels are not fact finding bodies.  How can
the panel fulfill its obligation to determine whether particular facts have been properly
established without considering the factua l circumstances, and the evidence of those
circumstances, through which those facts were established?
5. The procedures used by the United States to establish the facts in this proceeding are clear
from the relevant regulations governing the collection of facts and evidence, found at 19 CFR parts201, 207 and 351, and from the record of the proceeding itself, which details the process of soliciting
and accepting information and views from interested parties.  Japan has not challenged those
procedures.  The only information that Japan has alleged was improperly excluded from the
administrative record is the information on conversion factors, submitted by NSC and NKK.
Although these data themselves are not on the administrative record, the fact that they were rejected,
and the reasons for their rejection, are on the administrative record for review by this Panel.  These
data themselves are not relevant to whether facts regarding their untimely submission  were properlyestablished.  In short, the United States believes that there is no need to rely on extra-record evidence,
not presented to the authorities during the investig ation, to determine whether the establishment of the
facts in this investigation was proper.
Question 4.  The US has been quite vocal in its support of the admissibility of amicus briefs in
panel proceedings.  Since such amicus briefs are by definition  facts that were not considered bythe authorities, does the US believe that no amicus briefs may be submitted to panels
considering anti-dumping measures?
                                                     
1 We recall that in United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear
("US – Underwear") , (adopted on 25 February 1997, WT/24/R), paras. 7.53-54, a case dealing with a safeguard
action under the ATC, the panel reached the conclusions that the standard of review was that established in
Article 11 of the DSU and commented on the implications of such standard of review for safeguard measures.
See also the Panel Report in Brazil – Countervailing Duty Proceeding C oncerning Imports of Milk Powder from
the European Community , adopted on 28 April 1994, SCM/179:  "It was incumbent upon the investigating
authorities to provide a reasoned opinion explaining how such facts and arguments had led to their finding.",para. 286.
2 Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products , Report of the Panel
adopted 21 June 1999,  WT/DS98/R, para. 7.30.WT/DS184/R
Page E-55
6. Amicus briefs are not "by definition facts that were not considered by the authorities".  Japan
confuses the appropriateness of considering amicus briefs with the consideration of new facts that
were not presented to the authorities during the antidumping investigation.  An amicus brief, like the
submission of a party, may well present legal and factual analysis based entirely on the facts made
available to the authorities during the antidumping investigation.  It is not itself a new "fact" any morethan Japan’s first written submission is a new "fact".  Taking into account an amicus brief, therefore,
is different from asking this panel to consider new facts that could have been put on the authorities’
administrative records, but were not.
Question 5.  In its closing statem ent, the US claims it does not know whether particular "facts
available" is adverse or not.  Yet in this case , the US determination shows the US believed its
choice of  "facts available" was sufficiently adverse to teach respondents a lesson. Did the US
believe that its choice of "facts available" in this case was adverse or not?
7. As the US explained in its closing statement, an investigating authority can never know for
certain that its choice of adverse facts available is truly adverse, because it does not have the actual
information against which to compare its choice of presumably adverse information.  This uncertainty
is reflected in paragraph 7 of Annex II, which refers to the fact that use of adverse facts available"could," rather than "would" lead to a result which is less favorable to the party than if it did
cooperate.  Nevertheless, in this case, Commerce’s choice of facts available for KSC, NSC, and NKK
was presumed to be sufficiently adverse, based on a judgment involving all the facts and
circumstances of the case, as to be likely to prevent respondents from obtaining a more favorable
result by failing to cooperate.
Question 6.  The US statute refers to two types of "facts available" --- with adverse inferences
and without adverse inferences. Under the US practice s, is it not true that either type of "facts
available" could lead to results "less favorable" than the actual information? For  "facts
available" without adverse inferences, what st eps does the USDOC take to ensure that such
information is not "less favourable?"
8. As we explained in response to question 5 above, an investigating authority can never know
for certain that its choice of adverse facts available is truly adverse, because it does not have the actual
information against which to compare its choice of presumably adverse information.  Thus, it is
theoretically possible that either type of facts available (neutral or adverse) could lead to results less
favorable than the unknown, actual information, just as it is theoretically possible that either type
could lead to results more favorable.  Nevertheless, an examination of all the facts of record canusually give Commerce a fair idea of whether its choice of information is likely to be adverse or
neutral.
Question 7.  If the information about KSC sales to CSI was so crucial to the investigation, why
did USDOC not ask CSI for the information?
9. Commerce did not ask CSI directly for the information, because Commerce properly
concluded that KSC had ample means to provide the information from its 50 per cent-owned affiliate
and because KSC repeatedly told Commerce that CSI would not provide the information and that
KSC wished to be excused from providing it. KSC simply failed to employ the means available to it
to obtain the information requested by Commerce, and Commerce applied adverse facts available forthat failure in a manner consistent with Article 6.8 and Annex II of the Agreement.  The
administrative record does reflect consideration of the idea that Commerce obtain the CSI information
under separate protective order, so that KSC would not have access to it.  However, KSC officials
advised Commerce at verification that CSI had rejected this idea.  See Verification Report at 23,
Exh. US/B-21/bis.WT/DS184/R
Page E-56
Question 8.  What is the difference between "logic al inferences" and "adverse inferences" in the
context of determinations about "facts available?"
10. The US statute and practice do not make a distinction regarding these terms and, in fact, do
not talk about "logical inferences."  Neither does the Anti-Dumping Agreement.  Japan may berecalling the Oral Statement by the European Comm unities, delivered before the Panel at the Third
Party Session on August 23, 2000.  At paragraph 7 of its statement, the EC said:
When selecting "facts available" the investigating authorities may take into
account, among other circumstances, the degree of co-operation of the party
concerned.  If an exporter refuses to provide certain information, it is reasonable to
infer that it does so because that information is less favourable than the
information contained in the complaint or than the information provided by other
exporters.  Such inferences are not "punitive". (Footnote omitted.)  Indeed, strictly
speaking, they are not even "adverse."  They are just logical inferences , based on
the assumed rationality of the exporter’s behaviour: a rational exporter would
co-operate, if it could expect to obtain a better result by doing so than on the basis
of "facts available".  (Emphasis added.)
See also  the Appellate Body’s recent decision in the Canadian Aircraft case, cited at the US First
Submission, paragraphs 70 of Part B, as well as US discussion at paragraph 79 of Part B, regarding
that case and the taking of a logical inference.
Question 9.  Why does USDOC believe the information on NSC/NKK conversion factors was
too burdensome to include in the determin ation once it was provided?  Why was this
information different from the other types of corrections/clarifications routinely submitted
pursuant to the special regulation allowing such submissions seven days prior to verification?
11. Japan’s question is based on several misconceptions with respect to the facts of this case.
12. First, the Department did not reject the NSC and NKK conversion factor data because it was
"too burdensome to include," but rather because it was first presented long after the reasonable
deadlines established for providing this information.  If administering agencies were compelled to
accept any information, no matter when provided, unless they could demonstrate, on an item-by-item
basis, that it was "too burdensome" to incorporate particular data elements into their analysis at that
time, the right of such agencies to establish and enforce reasonable deadlines for submission ofinformation requested in questionnaires would be entirely gutted and the law would not be
administrable.
13. Second, there is no regulation "allowing such submissions seven days prior to verification."
The so-called "Seven-Day Rule," codified at  19 C.F.R § 351.301(b)(1), does not govern the
submission of data requested in questionnaires, as the conversion factor data were.  Instead, section351.301(c)(2), regarding questionnaire responses and other submissions made on request, requires
that data requested in questionnaires be submitted by the questionnaire deadline.
14. Third, the conversion factors and their supporting data did not constitute
"corrections/clarifications" to information previously timely submitted in response to a questionnaire.
Instead, they were entirely new databases that both NSC and NKK had previously maintained wereboth unnecessary and impossible to provide.
Question 10.  Why does USG believe "neutral gap filler" will be information favorable to
respondents? Since respondents don’t  know what information will be used, how couldWT/DS184/R
Page E-57
respondents possibly know in advance whether information would be favorable or
unfavourable?
15. The Department cannot know for certain, for the reasons explained in the responses to
questions 5 and 6 above, whether "neutral gap filler" will be favorable, unfavourable, or neutral torespondents.  However, when Commerce chooses such information as facts available (because it is
declining or not able to take an adverse inference), it does not do so with the intention of selecting
information favorable to respondents.  Rather, it does  so with the aim of filling in information which
is likely neither favorable nor unfavourable, but rather neutral, or approximately what the information
would have been, had it been available, as best as Commerce can judge from the record.
Nevertheless, it can be said that, if an investigating authority used neutral facts available in all
situations, this would put respondents in a  position of  being able to know that they are likely to be
better off if they withheld certain unfavourable information.  In Commerce cases, respondents have
the greatest incentive to withhold information that  is least favorable, or adverse, to them, and
Commerce reasonably presumes that is why they did not cooperate in providing the information.
Therefore, using neutral facts available - information which is judged to be, to the extent possible,
neither favorable nor disfavourable - likely would benefit the respondent in most instances.  Thoughrespondents might not know exactly what would be used in lieu of the information withheld, the
likelihood that they would benefit by withholding adverse information would increase substantially
and result in enormous incentives to withhold information.
Question 11.  Why does USG read ADA 6.13 as meaning the authority should provide no
assistance to large companies? How does USG reconcile this with the mandatory language in
ADA 6.13 that authorities "shall take due account" and "shall provide any assistance
practicable?
16. The United States does not read Article 6.13 as meaning that the authority should provide no
assistance to large companies.  As we stated at paragraph 103 of Part B our first submission, theprovision, which includes the phrase, "in particular, with regard to small companies," should be given
particular force and effect with regard to small companies.  As we pointed out at paragraph 104 of
Part B of our first submission, KSC is not a small company.  Its sales revenue for fiscal year 1998
exceeded $9 billion.  Nevertheless, if it were appropriate that KSC should be provided assistance in a
given situation, Commerce would provide any assistance practicable, as Article 6.13 requires.  It was
not appropriate or practicable in this case, as we have explained, because KSC did not seek any
assistance, but repeatedly requested that it be excused altogether from providing the information.Moreover, as we also explained in our first submission, advising KSC on how to manage its own joint
venture was beyond any "assistance" which the Depa rtment might have been required to provide.
Question 12. Why does USDOC believe an isol ated margin for a single product category,
such as used for KSC, is somehow more represen tative than the average transfer prices for
various product categories?
17. The issue was not one of representativeness, because Commerce had already decided that it
would take an adverse inference with respect to KS C.  It therefore chose a margin which it believed
(although it could not know for certain) was likely to ensure that KSC would not benefit by its failure
to cooperate, in light of the inference that th e missing information was withheld because it was
adverse.  If the Department had decided not to ta ke an adverse inference w ith respect to KSC, and
instead to apply "neutral gap filler" facts available, it would have looked for a margin that might
represent approximately what Commerce could estimate that the non-adverse margin resulting from
KSC ’s constructed export price through CSI, to unaffiliated US purchasers, would have been.  (In
fact, as may be noted in paragraph 32 of Mr. Huey’s affidavit, Exh. JP-44, should the Panel considerthat affidavit, KSC’s own data suggests that that margin was quite high.)  In any event, Commerce
would not consider reliable or representative the three average transfer prices which KSC provided forWT/DS184/R
Page E-58
CSI (see Exh. US/B-24/bis) because the affiliation between KSC and CSI made these prices suspect.
In addition, they were average transfer prices for three very broad product categories, and thus too
imprecise to form a basis for comparison to normal values for particular models.  It was far more
reasonable to look to margins resulting from actual, verified sales by KSC to the U.S., in choosing
either "neutral gap filler" or adverse facts available.
Question 13.  USG argues that Section 351.301(b )(1) does not apply to data requested in
questionnaires.  But is not all information collected in an investigation provided pursuant to
questionnaires?  To what information does the regulation apply?
18. No.  Not all information collected in an investigation is provided pursuant to questionnaires.
Although most information provided by respondents in investigations is that requested in
questionnaires, the domestic industry and importers (neither of which receive questionnaires inantidumping investigations before the Department of Commerce), as well as responding exporters, or
even non-selected exporting companies may have factual information they believe the Department
should consider in conducting its investigation, including during the verification visits.  Rather than
creating an exception that swallows the rules gove rning deadlines for gathering information that the
Department knows it requires for the conduct of the investigation, this provision allows for any partiesto submit to the Department, up until a week before verification, additional information of which the
Department may not be aware, and which they wish the Department to take into consideration.  For
example, a party  might wish to place on the record a news Article providing information on certain
costs to be scrutinized at verification.
Question 14.  Why does USDOC treat average price levels below 99.5 per cent as outside
ordinary course of trade, but treats price levels higher as outside the ordinary course of trade
only if the price levels are aberrationally high?
19. DOC’s test is designed to allow it to use pri ces to affiliates in the home market to the extent
that those prices will not distort the picture of what is happening in the real, arm’s-length, market.  Wedo not consider sales to affiliates that pass the test to be a problem in this respect, because the test
indicates that these affiliates are not given favorable treatment due to the affiliation. Thus, in those
instances we make an exception to the general rule that sales to affiliates are outside the ordinary
course of trade.  Moreover, the 99.5 per cent test, which has a specific purpose, does not rule out the
possibility that a company could demonstrate that its high-priced sales are outside the ordinary course
of trade.
20. Furthermore, affiliation between parties taints  transactions between them.  This "taint"
normally would not result in sales prices being higher than the weighted average price to the arm’s-
length market, but rather lower.  The Agreement, in  Article 2.1, defines dumping in a similar fashion:
merchandise is dumped if it is "introduced into the commerce of another country at less than its
normal value."  Purchasing subject merchandise, even from an affiliate, at prices significantly higherthan average, if anything, may reflect an attempt to compensate for other sales, at below-averageprices.  Even among affiliates, there are stronger constraints to artificially high prices than to
artificially low prices.  And in the dumping context, there are incentives to sell to affiliated parties at
artificially low prices.
Question 15.  Why is it "fair" to test only whether prices are too low?
21. Please see the answer to Question 14 for the affirmative reasons why this test is "fair."
Japan’s question implies that, by not also finding home-market sales to be "outside the ordinary
course of trade" on the basis of above-average prices, the Department in some way prejudices the
interests of respondents.  Just the opposite is true.  Were the Department to also disregard sales to
home market affiliates who pay above-average prices, two things would happen.  First, respondentsWT/DS184/R
Page E-59
would be burdened with reporting downstream sales more frequently, because the current test allows
some sales to affiliates to be used in lieu of  downstream sales.  Second, the downstream sales that
would otherwise be used would normally be at even higher prices, possibly resulting in higher
margins.  Thus, the Department’s policy of allowing the use of only sales to affiliates that pass the test
is not  "unfair" to respondents (indeed, it may benef it them), but is merely a reflection of the fact that
the Department’s sole concern is with the much more common phenomenon of below-average price
sales to affiliates, due to price manipulation.
Question 16.  Can the US clarify its views on th e relationship between arm’s length transactions
and sales in the ordinary course of trade?
22. For a sale to be made in the ordinary course of trade, it normally must be a sale negotiated at
arm’s length.  A sale which is not made at arm’s length does not meet this fundamental condition and
is thus presumed to have been made outside the ordinary course of trade.  Thus, a home market sale
which is made between unaffiliated parties is assumed to be in the ordinary course of trade absent
some indication to the contrary, whereas a home market sale made between affiliated parties is
inherently suspect.  Accordingly, the Department will  consider a sale to an affiliate to have been made
in the ordinary course of trade – or equivalent to an arm’s-length sale – only if that affiliate passes its99.5 per cent test and is therefore deemed to have a pricing relationship similar to that of unaffiliated
customers.
23. Sales made in the ordinary course of trade, however, are not necessarily identical to sales
made at arm’s length.  A sale made to an unaffiliated party, even if it is at arm’s length, may still be
outside the ordinary course of trade for other reasons.  For example, referencing the non-exhaustivelist given at page 834 of the Statement of Administrative Action, such a sale may involve merchandise
produced according to unusual product specifications, merchandise sold at "aberrational" prices, or
merchandise sold pursuant to unusual terms of sale.  By the same token, a sale to an affiliate that
"passes" the 99.5 per cent test may be determined not to be in the ordinary course of trade for those, or
other reasons.  In sum, sales which are not made at, or equivalent to, arm’s length are only one sub-category of sales not in the ordinary course of trade.
Question 17.  Can the USG identify any examples of cases in which it disregarded home market
prices as being too high?
24. The United States has not identified any examples of cases in which it was even asked to
disregard the home market sales to an affiliated company because they were, on average, so high that
the respondent argued that the sales to that affiliate were outside the ordinary course of trade.  This isnot surprising, given that, as explained in our answ er to Question 15, it would not be to a respondent’s
advantage for the Department to disregard sales made to an affiliate at a high average price, because
those sales would be replaced by the affiliate’s downstream sales, which would likely be at a higher
price.
Question 18.  If the average price to affiliated  customers is 0.5 per cent below the average price
to unaffiliated customers, USDOC considers this ev idence that the price has been influenced by
the relationship.  If so, why is an average pr ice 0.5 per cent higher not also evidence that the
price has been influenced? What about an average price 2.5 per cent higher?
25. Prices between affiliated parties at any level are inherently suspect because they are not set
according to normal market influences.  Nevertheless, for the reasons set forth in the Department’ s
answers to Questions 14 and 15, the Department is not concerned with possible influence of this sort
(which is not related to manipulation of the results of antidumping proceedings and probably has little
effect relative to using the downstream sales), and therefore retains these sales in the home marketWT/DS184/R
Page E-60
database (unless they are shown to be outside the ordinary course of trade for some other reason)  in
order to lessen the need to resort to a greater extent to downstream sales.
Question 19.  Could the USG identify specifically the ways in which it "relied on" or in any way
addressed the preliminary USITC assessment of whether there was any current injury?
26. The US assumes that this question pertains to the Department of Commerce’s preliminary
determination of critical circumstances. The USITC preliminarily found that the US industry was
being threatened with material injury  by reason of the dumped imports from Japan.  The USITC did
not discuss current injury, nor did they make a finding of such.3  See Certain Hot-Rolled Steel
Products From Brazil, Japan and Russia - Written Views and Report of USITC Preliminary
Determination  (Nov. 1998)  ("USITC Views")  (Exh. JP-8).   In order to determine whether importers
knew or should have known that dumping existe d and would cause injury, the Department relied, in
part, upon the USITC’s affirmative finding of threat to the US industry.4   As the US explained in its
First Submission (paragraph 459 of Part B), because Article 10.6 utilizes the term "injury" without
qualification, it refers to both injury and threat of injury.  Thus, the Department’s reliance on the
ITC’s finding of threat of injury, and on other significant evidence ( see US First Submission at
paragraph 476 of Part B), for purposes of determining importer awareness, was consistent with theAgreement.
Question 20.  Does the USG believe that the sta ndard "sufficient evidence" for initiating a case
is the same as "sufficient evidence" to ju stify the extraordinary remedy of critical
circumstances?
27. As the US explained in its First Submission (paragraphs 467-470 of Part B), the "sufficient
evidence" standard must be viewed within the cont ext in which it is applied.  The type of evidence
that is sufficient for purposes of initiation of an anti-dumping investigation may or  may not be
sufficient for purposes of a preliminary critical circumstances determination.  In this case, in making
its preliminary critical circumstances determination, the Department of Commerce looked toadditional evidence outside of that presented at the time of initiation of the anti-dumping
investigation.
Question 21.  Beyond the general statement of purpose in the Policy Bulletin, where did USDOC
make specific factual findings about the remedial effect of imposing antidumping duties?
28. Because the finding is apparent in the Department’s analysis and in the record evidence, a
separate, delineated finding was not necessary.  Article 10.6(ii) states, "the injury is caused bymassive 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. . . ."  The Department considered the effect of the timing and volume of the
dumped imports.  First, the Department determined there was a 101  per cent  increase in imports over
                                                     
3 To the extent that there is any discussion of current material injury, it is found in Commissioner
Crawford’s separate determination that the US industry was suffering current  material   injury  by reason of the
dumped imports.  See USITC Views , at 19 (Exh. JP-8) .  In Commissioner Crawford’s views, she found that the
domestic industry “would have increased its prices, and therefore, its revenues, significantly had the subject
imports been fairly traded,” and thus, the domestic industry was materially injured as a result of the dumped
imports.  Id. at 26.  This is the only discussion in the USITC’s preliminary determination relating to current
material injury.
4 Note that the USITC also specifically found thr eat of material injury resulting from the surge of
dumped imports.  The USITC stated, “we find that the record reflects a significant increase in the volume ofimports in interim 1998 and immediately thereafter, as compared to prior periods, and this increase supports the
conclusion that the industry is threatened with material injury in the imminent future.”  See USITC Views, at 15.WT/DS184/R
Page E-61
a short time following the time when importers and exporters became aware that a dumping case was
likely, and that the producers accounting for the majority of the imports were dumping.  Additionally,
the record contained significant information indicating that the surge of dumped imports contributed,
or caused, threat to the US industry.  For example, the USITC preliminary determination states, "[w]e
recognize that petitioners have not specifically alleged that the volume of subject imports during1995-97 was injurious.  However, we find that the record reflects a significant increase in the volume
of imports in interim 1998 and immediately thereafter, as compared to prior periods, and this increase
supports the conclusion that the industry is threatened with material injury in the imminent future. . . .
In our view, these increases in volume and market penetration indicate a likelihood of substantially
increased subject imports in the imminent future."  USITC Views,  at 15.  Additionally, numerous
exhibits in the petition demonstrated that the surge  of dumped imports was severely impacting the US
industry - causing prices to collapse, forcing US producers to cut production and diminishingearnings.
5  This evidence shows that, without some remedial action, the surge of dumped imports was
likely to continue and compound the threat to the US industry even further.  Because the Department
considers these factors in its analysis, it stated in Poli cy Bulletin 98/4 that the "purpose of [the critical
circumstances] provision is to ensure that the st atutory remedy is not undermined by massive imports
following initiation of an investigation," see Critical Circumstances Policy Bulletin , 63 Fed. Reg.
55364 (15 Oct. 1998) (Exh. JP-3) .  As such, this factor was fully considered and addressed in the
preliminary determination of critical circumstances in this case as set forth above.  Because all of the
factors in Article 10.6 were fully considered and addressed therein, the preliminary determination was
consistent with the Agreement.
Question 22.  If the captive production provision seeks only to add an additional relevant factor
to be considered, why does the statute say "shall focus primarily" rather than simply saying
"shall consider."
29. At the outset, the United States notes that Japan’s question is misplaced because the captive
production provision does not "add an additional relevant factor to be considered."  The relevantfactors that the USITC must consider are listed in 19 U.S.C. § 1677(7)(C)(iii), and these factors
correspond to the factors listed in Article 3.4 of the Antidumping Agreement.  The captive production
provision merely requires the USITC, when considering certain of these listed factors, to examine the
merchant market segment as a step in considering injury to the industry.
30. The statute directs the USITC’s attention specifically to the merchant market segment
because it is there that evidence of injury by reason of dumped imports would be most readily
apparent.  From there, the statute then requires the USITC to consider the effects of dumped imports,
                                                     
5 See, e.g., Metal Bulletin  (24 Sept. 1998) (“The July figure fully supports our industry’s contention
that massive levels of steel are being dumped.”) (Exh. US/B-40(c)) ; Morgan Stanley, Dean Witter Industry
Report (21 July 1998) (“hot-rolled imports are in at a price of . . . 15-20  per cent below the domestic price, and
we believe that domestic pricing on these products will break down in later September or earlyOctober.”) (Exh. US/B-40(b)) ; Wall Street Journal at A4 (21 Sept. 1998) (“Steel imports to the US continued at
their record pace in July . . . lost ma rket share has hit the US steelmakers hard, particularly in the last three
months as the US industry’s pricing power has collapsed.  As a result, some steelmakers have cut theirproduction, and analysts are chopping their earnings estimates for the third and fourthquarters.”) (Exh. US/B-40(b)) ; Metal Bulletin at 33 (7 Sept. 1998) (“Nucor has cut production . . . in response to
low market prices . . . because of market turmoil in the wake of a flood of cheap imports.)  (Exh. US/B-40(b)) ;
Paine Webber - Metal Stock Strategies  (8 Sept. 1998) (“Prices in many cases are now below the marginal cost
of many producers.  The ‘death spiral,’ which in our view is sure to extinguish some present and plannedsteelmaking capacity, is in full force.”) (Exh. US/B-40(b)) ; Wall Street Transcript Corporation  - Industry Report
(20 July 1998) (“Imports were simply so large, and prices at which they entered markets so low, that steelpricing was compromised. . . .  Further, the prices at  which these products are being offered continues to erode
the pricing outlook for domestic steel.”) (Exh. US/B-40(b)) .  All of the cited newspaper articles are on the
Department’s administrative record.WT/DS184/R
Page E-62
including the effects of dumped imports on the merchant market, as well as on the industry as a
whole.  This scheme does not in any way place emphasis on the merchant market segment over the
entire industry.  Nor does it have anything whatsoever to do with the weight given to any factor.  In
fact, in the determination in this case, the significance of the consideration of the merchant market
followed by the industry as a whole was not lost  on the Commissioners.  Notably, Commissioner
Bragg took exception to this order of consideration -- not to the weight that the other Commissioners
in the majority were placing on the merchant market segment.6
31. Moreover, Japan’s apparent preference for the "shall consider" over the "shall focus
primarily" language is also misplaced.  As the USITC found, in accordance with the statements in the
Statement of Administrative Action, by using the "shall focus primarily" language, Congress has
required the USITC to consider both the merchant  market segment and the entire industry in its
examination of certain factors.  "Shall consider," without any description of how the consideration isto take place ( i.e. primarily), would leave open the possibility that an authority could consider the
merchant market exclusively.  Congress removed th is potential ambiguity by stating that the USITC
"shall focus primarily" on the merchant market and thus provided a more precise structure than that
proposed in the Japanese language.
Question 23.  Even if the word "primarily" conno tes more than one item of focus, [what] does
the term mean about the relevant weight to  be assigned the various areas of focus.
32. The captive production provision has no bearing on the weight that the USITC assigns to each
factor.  Commissioners assign weight to each factor based on the facts of the case before them.
Article 3.4 of the Antidumping Agreement provides that no "one or several of these factors [can]
necessarily give decisive guidance."  In keeping with this provision, 19 U.S.C. §  1677(7)(E)(ii),
states that "the presence or absence of any factor which the Commission is required to evaluate . . .
shall not necessarily give decisive guidance with respect to the determination of the Commission . . ."
The captive production provision does not inject into the impact section of the statute any new
obligations that would dictate the weight to be given to any particular factor.  The captive productionprovision merely calls for an extra step in the eval uation of certain of the factors listed in the impact
section of the statute before those factors are weighed with all other factors.  Thus, it does not disturb
the overarching principle, articulated in both the statute and the Anti-dumping Agreement, that the
weights to be assigned to each factor are determined by the Commissioners on a case-by-case basis.
Question 24.  In para 34 of its oral statement, th e US alludes to a two step approach.  In light of
the statutory requirement to "focus primarily" on the merchant market for market share and
financial performance, could the US clarify the relat ive weight to be assigned  to each step in the
analysis?
33. As stated above, the captive production provision merely interposes into the statutory scheme
an additional requirement to consider certain factors as they relate to the merchant market as well asthe entire industry.  It does not intervene in the assessment of relative weights that the Commissioners
are to assign to any factors.
Question 25.  How does the USG justify giving primary focus to the merchant market concept of
"sales" at the expense of other factors such as overall domestic industry concept of  "output?"
34. The United States does not systematically look at any factor listed in the Anti-Dumping
Agreement or the US statute "at the expense of" any other factor.  The Commissioners place emphasis
on the various factors based on the facts of each case.
                                                     
6 See, e.g.  USITC Views at nn. 59, 75.WT/DS184/R
Page E-63
35. In fact, it is Japan that argues for an approach that would systematically emphasize one factor
"at the expense of" another.  As we have argued extensively in our first written submission, sales
occur in the merchant market.  In recognition of that fact, the captive production provision provides
for an analysis of the merchant market to capture the effect that dumped imports are having on sales.
Without such a focus on the merchant market, th e USITC would be limited to evaluating only
domestic producers’ output (transfers plus sales) and would ignore the effects of dumped imports on
sales.
Question 26.  Where does the USITC explain th e way in which it resolved the inconsistent
trends in operating profit over the 1996-98 period between the industry overall and the
merchant market only?
36. The USITC was not required to resolve any inconsistent trends in the data.  Under Article 3.4
of the Anti-dumping Agreement, the USITC only had an obligation to consider all relevant economic
factors bearing on the state of the industry.  The USITC considered the operating profits for the 1996
to 1998 period for the merchant market and the entire industry.7  Thus, the USITC satisfied its
obligations under the Agreement.
Question 27.  In footnote 157 of its submission , the USG accuses Japan of not being clear what
"factor" of financial performance it means.  How does the USG address the fact that the
operating income ratio for the domestic industry as a whole in 1998 exceeded that of 1996, even
after the increase in imports?
37. Again, the USITC is not required to address every fact bearing on each factor.  It is charged
with examining relevant economic factors to assess injury.  The USITC satisfied this requirement.
The USITC looked at three year trends and noticed that during the last two years of the period, when
apparent consumption increased to record heights, operating income and the ratio of operating income
to net sales declined.  It explained this anomalous situation based on declining unit values and
shipments over this period.8
38. Japan takes issue with the fact that the USITC did not discuss the ratio of operating income to
net sales for 1996 (as stated above, the USITC did address the operating income for 1996).  The
USITC, however, considered the ratio of operating in come to net sales in light of the trends from 1996
to 1998 and noticed that the data for 1997 to 1998, in particular, posed a question that needed to be
resolved.  A comparison of 1996 to 1998 data does not respond to this question.  It is true that a
comparison of 1996 to 1998 data, alone, without cons ideration of 1997 data, would show an increase
in the ratio of operating income to net sales for the entire domestic industry, as Japan suggests.  Thistrend over the entire period does not mandate a negative determination, however.  As the panel found
in Argentine-- Footwear ,
9 simply because one indicator follows a trend different than other factors
does not mean that the USITC’s injury determination is fatally flawed.  Moreover, the USITC made
no finding that the domestic industry was healthy in 1996.  As a result, this panel should not be
swayed by Japan’s focus on the changes from 1996 to 1998.  It is possible (although the USITC madeno findings to this fact) that the USITC would have found the domestic industry performing poorly in
1996 and 1998.  Because the USITC did not have to resolve this question to reach its material injury
determination, Japan’s arguments are misplaced.  Further, it is clear that the USITC found that falling
                                                     
7 It looked at and compared the domestic industry’s declines in the unit costs of goods sold and the unit
values for the like product in the merchant market and the industry as a whole over the entire period.  USITCViews at 16 n.88.  It then also referred back to this discussion in its analysis of the impact of dumped imports onthe domestic industry.  USITC Views at 18 n.99.
8 USITC Views at 18.
9 Appellate Body Report, Argentina -- Safeguard Measures on Imports of Footwear (“Argentina --
Footwear”) , WT/DS121/8, adopted 14 Dec. 1999 at para. 139.WT/DS184/R
Page E-64
back towards the 1996 level was unacceptable and a sign of injury when aggregate demand was
substantially higher in 1998 than 1996.  Thus, in that sense, the comparison that Japan seeks in fact
occurred.  The USITC had a particular concern with the data from 1997 to 1998 and it addressed that
concern in its determination.  The USITC performed a well-reasoned analysis, considered all the
factors, and paid particular attention to the seemingly anomalous occurrence of poor performance bythe domestic industry at a time of increasing consumption.
Question 28.  Since USITC analyzed a three-year trend in profitability in the 1993 case, why did
the USITC consider only a two-year trend in the current case?
39. Japan mischaracterizes the USITC’s determinations in both the 1993 Flat Rolled Steel
investigation and the current case.  As noted above, in the current hot rolled investigation, the USITC
considered the profitability of the domestic industry over the three year period
10 but then provided an
extensive discussion of the 1998 anomaly.  Simply because the USITC looked for an explanation for
why, from 1997 to 1998, apparent consumption increased but the domestic industry performed worse
does not mean that the USITC ignored, or in any way failed to consider, the data for 1996, especially
in light of the discussion of the 1996 data that is apparent on the face of the determination.  As to the
Flat Rolled Steel  determination, Japan correctly points out that the USITC considered three year
trends, but it fails to mention that the USITC also considered trends within that period.11  The USITC
compared data from year-to-year within the period in both investigations.
40. Japan’s repeated reliance on the 1993 Flat Rolled Steel  case is misplaced.  Each investigation
turns on its own record facts and the USITC’s determinations are sui generis .  Although the two
investigations deal with the same or similar produ cts, as explained in detail in our first written
submission, the facts presented to the USITC during each investigation are very different.  In
particular, for example, in the 1993 investigation, the USITC found that domestic apparent
consumption, production, and shipments all followed the same trends -- decreasing and then
increasing over the period of investigation.  As already noted, in the current investigation, the USITC
had to address the fact that, while US apparent consumption was increasing to record heights, the USproducers’ production, shipments, and market share were declining.  These facts were not present in
the 1993 Flat Rolled Steel  investigation.  Therefore, the analyses in the two cases had to be different.
The USITC could not simply ignore the facts of the investigation before it and perform a rote analysis
based on the record in an investigation six years earlier.
Question 29.  Where does the USITC decision a ddress the price trends in non-subject imports?
What evidence is there that the USITC even co llected any information on non-subject import
price trends?
41. Nonsubject imports are relevant to the causation analysis articulated in Article 3.5 of
Anti-dumping Agreement only as they pertain to the proscription against attributing injury from other
causes to dumped imports.  That provision requires authorities to "examine any known factors other
than the dumped imports which at the same time are injuring the domestic industry"  so that injuryfrom other causes should not be attributed to the dumped imports.  A factor which Article 3.5 states
may be relevant to this analysis is the "volume and prices of imports not sold at dumping prices."
                                                     
10 USITC Views at 16 n.88 and 18 n.100 (comparing unit costs of goods sold to unit values).
11 Certain Flat Rolled Carbon Steel Products from Argentina, Australia, Austria, Belgium, Brazil,
Canada, Finland, France, Germany, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Poland,Romania, Spain, Sweden, and the United Kingdom , Inv. Nos. 701-TA-319-332, 334, 336-342, 344, and 347-353
(Final) and Inv. Nos. 731-TA-573-579, 581-592, 594-597, 599-609 and 612-619 (Final), USITC Pub. 2664
(August 1993) (“ 1993 Hot Rolled Steel ”) at 52-53 ( Exh. Jpn-59 ) .WT/DS184/R
Page E-65
42. The USITC examined the effects of nonsubject imports.  It noted that "[i]mports from
nonsubject countries maintained a stable presence in the US market throughout the period
examined."12  It thus satisfied the requirement to examine any known factors injuring the domestic
industry.  With an "essentially flat" market share, at a time when subject imports were rising sharply,
nonsubject imports were not responsible for the decreasing market share of the domestic industry.13  If
the price effects attributed to the dumped imports were in actuality from the nonsubject imports, then
it would be expected that those nonsubject imports would be entering the United States and sold to
purchasers in the same quantities as the dumped imports and capturing an increasing market share in
the same way as well.  Thus, the USITC’s findings on volume accounted for the risk that the
Commission could have mistaken the price effects of nonsubject imports for the effects of dumped
imports.
43. The USITC does not collect pricing data for nonsubject imports in the same way that it
collects pricing information for dumped imports.  As opposed to the product-by-product prices that
the USITC staff gathered for dumped imports, the USITC collected information on the value of
nonsubject imports.14  This different approach to data collection stems from the different issues that
the USITC resolves with respect to prices of dumped imports and prices of nonsubject imports.  With
respect to dumped imports, the USITC must determine whether they are having price effects on thedomestic industry by specifically considering, pursuant to Article 3.2 of the Anti-dumping
Agreement, whether the dumped imports undersold the domestic like product and whether the
dumped imports caused price suppression or depression of the domestic product.  This analysis
requires, by its own terms, a detailed price analysis. As to nonsubject imports, the USITC must not
attribute any injury caused by nonsubject imports to the dumped imports pursuant to Article 3.5.Such detailed price comparisons as are needed for dumped imports are therefore not required in the
context of nonsubject imports.
Question 30.  Why did the USDOC not correct the NKK clerical error?  Can the USDOC
identify any other examples of failing to correct properly alleged clerical errors?
44. As we explained in our first submission at paragraphs 28-29, Part A, and paragraph 14,
Part D, Commerce’s failure to correct NKK’s clerical error at the preliminary determination stage was
an oversight subsequently corrected in the final determination.  Such an oversight is not without
precedent in Commerce practice.  For example, in Certain Stainless Steel Wire Rods from France,
Amended Final Results of Antidumping Duty Administrative Review , 64 Fed. Reg. 47169
(30 Aug. 1999), www.ia.ita.doc.gov/frn/index.html,  Commerce corrected respondents’ alleged
clerical errors regarding the final results, but failed to correct petitioners’ alleged errors.  When
petitioners drew this oversight to Commerce’s attention, Commerce subsequently corrected their
errors as well.  In Solid Fertilizer Grade Ammonium Nitrate from the Russian Federation , Final
Determination of Sales at Less Than Fair Value,  65 Fed. Reg. 42669 (11 July 2000), Commerce did
not correct a respondent’s alleged clerical errors at the preliminary determination stage.  It did,
however, correct one of the errors in the final determ ination.  Just as the oversights in these cases in
initially failing to correct clerical errors do not reflect any evidence of bias on Commerce’s part, the
oversight in the instant case also does not reflect any evidence of bias.
                                                     
12 USITC Views at 10.
13 USITC Views at 11.
14 USITC Views at IV- 11.WT/DS184/R
Page E-66
ANNEX E-5
Responses of Chile to Questions from the Panel
(6 September 2000)
Question 48
Could Brazil, Chile, the EC and Korea explain their practice regarding affiliated party
sales in determining normal value.  How is it determined whether such sales are made in the
ordinary course of trade? If it is concluded th at such sales are not made in the ordinary course
of trade, are they excluded from the determin ation of normal value?  Is a constructed value
calculated for these sales, or a third country sale  price used, as a substitute for the sales price to
the affiliated purchaser?  Is there some other me thodology applied to calculate a sales price for
these transactions to use in the determination of normal value?
Reply
There are no regulations in this respect.  In practice, there is no particular treatment for sales
to affiliated companies, but only the "in the ordinary course of trade by reason of price" test, i.e. the
analysis of below-cost sales, for any sale.  Regardle ss of whether or not the domestic sale is made by a
related company, an analysis is made to determ ine whether sales are below total cost in accordance
with Article 2.2 of the Anti-Dumping Agreement.  Below-cost sales are not excluded from the
calculation of normal value.  If, as a result of the below-cost sales, the sales used to determine the
normal value are not sufficient in terms of footnote 2 to Article 2.2, either the third country sale price
or the constructed value is used.  No substitute prices are used for below-cost sales.  There is no othermethodology.
Question 49
Assume a party refuses to cooperate, for instance by refusing to respond to a portion of
the investigating authority's questionnaire, or significantly impedes the investigation.  Do
Brazil, Chile and Korea believe that in such case , adverse facts available may be used?  If not, is
there any case in which these Members believe th at adverse facts available may be used, or are
they of the view that in all circumstances, only "neutral" facts available may be used?
Reply
No.  In no way and under no circumstances does the Anti-Dumping Agreement permit the use
of "adverse" facts available.  The objective and spirit of the provisions of the Anti-Dumping
Agreement (Article 6.8 and Annex II) pertaining to cases when a party does not cooperate call for useof the information available.  But not the worst information.  The Agreement reads "… on the basis of
the facts available", and not "on the basis of the adverse facts available".  The Agreement does not
qualify the information.
The idea is to substitute or complete th e missing information when a company does not
cooperate, but it is not the intention of the Agreement to "punish" such companies.WT/DS184/R
Page E-67
ANNEX E-6
European Communities' Answers to Questions from the Panel
(6 September  2000)
Question 48
Could Brazil, Chile, the EC and Korea explain their practice regarding affiliated party
sales in determining normal value. How is it determined whether such sales are made in the
ordinary course of trade? If it is concluded th at such sales are not made in the ordinary course
of trade, are they excluded from the determin ation of normal value? Is a constructed value
calculated for these sales, or a third country sale  price used, a\ substitute for the sales price to
the affiliated purchaser? Is there some other meth odology applied to calculate a sales price for
these transactions to be used in the determination of normal value?
Reply
The EC practice depends on the extent of the relationship between the related parties. Where
the exporter has control over a related party, the EC authorities will use the price charged by the
related party to an independent buyer.
Where the exporter does not control the related party, Article 2.1, second paragraph, of the
EC’s Basic Anti-Dumping Regulation1  provides that:
“Prices between parties which appear to be associated or to have a compensatory
arrangement with each other may not be considered to be in the ordinary course of
trade and may not be used to establish normal values unless it is determined that theyare unaffected by the relationship.”
Sales not in the ordinary course of trade are excluded from the normal value calculation. The
EC authorities will normally calculate a constructed normal value if the remaining sales in the
ordinary course of trade are not sufficiently representative.
Question 50
The EC proposes, in Section B of its Oral Statement, an alternative methodology for
determining whether margins should be consid ered as based on facts available, and thus
excluded from the calculation of the weighted aver age provided for in Article 9.4 (i). But such a
method could result in the very situation abou t which it expresses concern, that there may be
NO margins not based on facts available, and thus no margins on the basis of which a weighted
average can be calculated. What, in the EC’s vi ew, may an investigating Member do in such a
circumstance? How does the EC propose that this test be applied in practice? What is the EC’s
practice in this regard?
                                                     
1 Council Regulation (EC) No 384/96 of 22 December 1995 on protection against dumped imports
from countries not members of the European Community, OJ(1995) No L 56/1 of 6.3.96.WT/DS184/R
Page E-68
Reply
The point made by the EC was that an interpretation of Article 9.4(i) which required to
exclude a dumping margin whenever facts available have been used would often lead to the result that
the method set out in Article 9.4(i) could not be applied. Indeed, almost every dumping calculation
includes small elements of facts available. This is not necessarily because the exporters are
uncooperative, but because small errors of a clerical nature have been made or because the
information requested was simply beyond the reach of the exporters (for instance, in the case of
transport costs).
The EC authorities have never encountered the situation described by the Panel. In the
unlikely situation that significant adverse facts avai lable were included in all the margins, there seems
to be no alternative but to resort to facts available for the non-sampled exporters. However, in that
case no adverse inferences should be drawn.
Question 51
In paragraph 22 of its oral statement, the EC notes that the US description of EC
practice in the situation of captive production is  incorrect. Could the EC specify in what respect
that description is incorrect, and provide the Panel with a correct description.
Reply
The EC recalls that the present dispute is concerned exclusively with the US law and practice.
The practice of other Members, therefore, is not directly relevant to this dispute.
The EC reiterates its position that the US description of the EC practice is not entirely
accurate and, therefore, requests once again that the Panel disregard such description.WT/DS184/R
Page E-69
ANNEX E-7
Korea's Responses to Questions to Third Parties
(6 September 2000)
Q48. Could Brazil, Chile, the EC and Korea explain their practice regarding affiliated party
sales in determining normal value.  How is it determined whether such sales are made in the
ordinary course of trade?  If it is concluded th at such sales are not made in the ordinary course
of trade, are they excluded from the determin ation of normal value?  Is a constructed value
calculated for these sales, or a third country sale  price used, as a substitute for the sales price to
the affiliated purchaser?  Is there some other me thodology applied to calculate a sales price for
these transactions to be used in the determination of normal value?
Reply
The Korea Trade Commission (“KTC”), as the organization responsible for conducting
antidumping investigations,  considers a set of related factors to determine whether particular sales aremade in the ordinary course of trade.   The relationship between the producer and the related party,
the amount or portion of the affiliated party sales, and other factors relating to the affiliated party sales
are considered together.  The KTC applies a  fairness standard to determine whether to use the
affiliated party sales in the calculation of normal value.  If the KTC determines that the affiliated party
sales are an inappropriate basis for establishing normal value, then it considers constructed export
price or third country sales price.
We would remind the Panel that Korea does not object to the application of a test for
affiliated parties per se .  We object to the application of a test which is arbitrary and creates an unfair
comparison because it may or may not compare comparable sales.  There is no attempt by the US to
make sure that other factors affecting comparability are taken into account before the test is applied,
and the test is biased as only higher priced affiliated party sales are included after the comparison.
Q.49 Assume a party refuses to cooperate, for in stance by refusing to respond to a portion of
the investigating authority’s questionnaire, or significantly impedes the investigation.  Do
Brazil, Chile and Korea believe that in such a case, adverse facts available may be used?  If not,
is there any case in which these Members believe that adverse facts available may be used, or
are they of the view that in all circumstances, only “neutral” facts available may be used?
Reply
The object and purpose of Article VI of the GATT and the Anti-Dumping Agreement is to
ensure that unfair trade practices in the form of dumping can be offset or prevented by anti-dumping
duties.  (See, e.g.  , Articles VI:1 and VI:2 of the GATT and Article 1 of the Anti-Dumping
Agreement.  Hereinafter, “Agreement”).  To that end, Article 2 of the Agreement provides numerousrules for how sales in both markets are to be determined, adjusted and compared.  The Agreement also
independently requires that there be a fair comparison between the export price and the normal value .WT/DS184/R
Page E-70
Article 6.8 of the Agreement recognizes that, in some circumstances, the evidentiary support
for such determinations, adjustments or comparisons, may not be available or the interested party may
refuse to supply it. Article 6.8 encompasses both deliberate acts (“refuses access to”) and involuntary
or negligent acts (“or otherwise does not provide”), resulting either in information remaining absent
after a “reasonable period of time” or whose absence “significantly impedes the investigation.”  Ineither circumstance, Annex II is to be followed.
Nowhere does Annex II endorse the concept of a “punitive” facts available, e.g. , as applied
by the US in this case against KSC as a result of  CSI’s actions.  At most, Annex II contemplates that
after an authority follows all the other requir ements for checking and confirming the secondary
information used, as provided for in Paragraph 7 of Annex II, it is permissible that the authority’s use
of such data produce a result which could be less favorable.  The US, by its own admission,
deliberately sought the information which was the least favorable and used it for that reason .
The concept of “adverse” versus “neutral” facts available is neither the starting point nor the
end of the analysis.  The issue is that the Agreement requires the authorities to use the most reliable
secondary information available, a determination reached only after “special circumspection.”“Circumspection” is defined as “Circumspect action or conduct; attention to circumstances that may
affect an action or decision; caution, care, heedfulness, circumspectness.”  The Compact Edition of
the Oxford English Dictionary (1971).  In other words, the decisions regarding whether to use a
secondary source and, if so, which source to use, should be made very, very carefully -- with “special
circumspection.”
Furthermore, once a secondary source is selected, it must be “checked” against other
independent sources.  This ensures that the information is reliable.
Most importantly, the Article 2.4 requirement of a “fair comparison” applies regardless of the
source of the information used.  Annex II provides no exception to the Article 2 requirements
regarding the calculation of normal value, export price or a fair comparison.
For all these reasons, the US selection of adverse secondary information in order to penalize
respondents is not consistent with the Agreement.  As explained in our Third Party Written
Submission, the selection of secondary information for the purpose of penalizing the respondent
sidesteps the required analysis discussed above.  The US cannot justify its selection of the secondaryinformation on this basis as consistent with the Agreement.
Q.52 The first sentence of Article 2.4 requires th at “A fair comparison shall be made between
the export price and the normal value”.  There are rules for the determination of normal value
set out in Article 2.2, and rules for the determination of export price in Article 2.3.  Article 2.4continues to set out specific rules for the comparis on of export price and normal value.  Could
Korea clarify for the Panel how it interprets a req uirement of fair comparison of export price
and normal value to also require overall “fairness” in the determination of normal value?
Reply
In the substantive meeting on 23 August, the EC argued that the first sentence of Article 2.4
applies only with respect to the ‘comparison’ between the export price and the normal value, because
the calculation of the normal value precedes that comparison and is not subject to any general
‘fairness’ requirement.  On the other hand, it was Korea’s view that ‘fairness’ should be interpreted ina broader sense, because fairness is a general principle of law.  Such an interpretation of Korea is
corroborated by the textual analysis of Article 2 of the Anti-Dumping Agreement as well.WT/DS184/R
Page E-71
Article 2.1 provides a basic guideline for determination of dumping.  What the paragraph says
is that there is dumping, if export price is less than normal value.  Thus, the basic guideline and the
key element of determination of  dumping is comparison between export price and normal value.
Article 2.2 and 2.3 provide for determination of normal value and export price in exceptional
circumstances, where export price and normal value are not available in the ordinary course of trade.
Article 2.4, after exceptional cases of export pri ce and normal value have been brought into the
purview of Article 2 through Art.2.2 and 2.3, gets  back to the key element of dumping, which is
comparison between export price and normal value.  Here, the text says that comparison should be
fair.
The title of Art.2 is ‘determination of dumping’.   Determination of dumping is to be done, as
we saw in the preceding paragraph, through fair comparison of export price and normal value.  In
EC’s view, fairness applies only to the comparison.  In other words, calculation of normal value and
export price does not have to be fair, because there is no fairness requirement in either Art.2.2 or
Art.2.3.
Such an interpretation is not acceptable for Korea for the obvious reason.  The determination
of dumping cannot be fair, if only part of the process is fair.  In other words, fair comparison of
normal value and export price would not lead to fair determination, if normal value and export price
were not established in a fair manner as well.  Besides, it should be pointed out as well that Article 2.2
and 2.3 do not deal with determination of normal value and export price as such, but determination of
those prices in exceptional circumstances.
Apart from the textual analysis as above, Korea’s interpretation of fairness requirement is
consistent with Article 2 in view of the object and purpose of the article.  The object and purpose of
Article 2 is to determine dumping margin, which , as was elaborated above, is to be done through fair
comparison of normal value and export price.  The object and purpose of the article  would not be
met, unless normal value and export price, which should be compared in fair manner, have been
established in a fair manner.
Finally, even if the Agreement lacked the “fair comparison” requirement in Article 2.4, the
requirement of fairness in the administration of anti-dumping laws nonetheless would exist and would
bind all WTO Members.  Absent such a requirement (often referred to in the reverse as abus de droit ),
none of the provisions would have any meaning what soever.  Is it seriously to be contended that a
party has a right to take actions which are “unfair” so long as the action is not specifically proscribed
or addressed by a specific provision of the Agreement?
Q53. In this case, the final injury determination was of current material injury.  So under
Korea’s view of Article 10.6, and assuming the other conditions were satisfied, retroactive duties
could have been imposed.  However, it is argued that without an earlier action, taken under
Article 10.7, to secure the potential for imposition of retroactive duties, collection of retroactive
duties would, for many Members, be impossible .  Does Korea recognize any difference between
the decision under Article 10.7 to preserve the possibility of retroactive duties, and the decision
to actually apply duties retroactively under Article 10.6?
Reply
We do not see how one could interpret Article 10.6 and Article 10.7 differently or separately
since Article 10.7 specifically incorporates by reference Article 10.6 and requires that once all the
conditions set out in Article 10.6 are satisfied by sufficient evidence (and not before) the authorities
can then act under Article 10.7.   In other words, the “measures” of Article 10.7 are merely the toolsfor effectuating the retroactive application of duties under Article 10.6.WT/DS184/R
Page E-72
Another way of stating this is that, apart from Article 10.6, there is no separate authority or
basis for acting under Article 10.7.  The authority or basis for action under 10.7 is found in
Article 10.6 and all of the preconditions of Article 10.6 must be met.
We do not read Article 10.7 to grant authority to “preserve the possibility” of imposing
retroactive duties before the conditions of Article 10.6 are met.  This would be a particularly flawed
interpretation since Article 10.7 says the opposite: “once” the conditions of Article 10.6 are met,
Article 10.7 measures can be taken. Since Article 10.6 addresses the application of retroactive,
definitive anti-dumping duties and Article 10.2 requires a finding of present injury (and not threat of
injury except under special circumstances) in order for definitive anti-dumping duties to be applied
retroactively, a preliminary determination of present injury and dumping must be made or a history of
dumping must be present so that the importer was  “aware” that injurious dumping was occurring,
prior to applying measures under Article 10.7.WT/DS184/R
Page E-73
ANNEX E-8
Responses of Brazil to Questions from the Panel
 (6 September 2000)
Question 48
Could Brazil, Chile, the EC and Korea explain their practice regarding affiliated party
sales in determining normal value?  How is it determined whether such sales are made in the
ordinary course of trade?  If it is concluded th at such sales are not made in the ordinary course
of trade, are they excluded from the determin ation of normal value?  Is a constructed value
calculated for these sales, or third country sale price uses, as a substitute for the sales price to
the affiliated purchaser?  Is there some other me thodology applied to calculate a sales price for
these transactions to be used in the determination of normal value?
Reply
The Brazilian experience involving sales to af filiated parties is quite limited.  When this
situation occurs, a comparison is made between sales to related parties and those to non-related
parties.  If a distinct pattern is detected and if the exporter cannot establish the existence of factors,
other than company affiliation, that may justify the different patterns, all sales to affiliated parties areconsidered to be not in the ordinary course of trade and are consequently disregarded.  Since the sales
to non-affiliated parties were always sizeable and representative, only these sales were used to
calculate the normal value.  Exporters have not yet questioned this procedure.
Question 49
Assume a party refuses to cooperate, for instance by refusing to respond to a portion of
the investigating authority's questionnaire, or significantly impedes the investigation.  Do
Brazil, Chile and Korea believe that in such a case, adverse facts available may be used?  If not,
is there any case in which these Members believe that adverse facts available may be used, orare they of the view that in all circumstances, only "neutral" facts available may be used?
Reply
The interpretation of Article 6.8 and its related Annex II cannot  include the right to penalize
respondents with adverse facts available, regardless of a respondent's behaviour.  Reading in a right to
punish respondents would (1) establish an impermissible interpretation of Article 6.8 and Annex II,and (2) broaden the rights of WTO Members in a manner inconsistent with Articles 3.2 and 19.2 of
the DSU.
Article 6.8 does not distinguish between situations where a party deliberately tries to obstruct
an investigation and where information simply is not otherwise provided.  Rather, Article 6.8 treatsthose situations exactly the same, by calling for the authority to fill in the information with facts
available.  The first sentence of Article 6.8 effectively establishes an equal footing between a case
where a party "refuses access" to data and that where a party simply "does not provide" the necessaryWT/DS184/R
Page E-74
information.  This plain language establishes that even when a party "refuses access" to information,
the consequence of such action is simply the use of "the facts  available".
Therefore, Article 6.8 is about filling in missing information, no matter what the cause.  It
does not treat uncooperative parties any differently from cooperative parties that simply do not havethe required information.  This equal treatment is no surprise given that it is often hard for an
authority to determine, for example, whether a party does not have information at its disposal or
whether the party is actually hiding information.  Therefore, Article 6.8 operates upon a presumption
of good faith and treats all parties equally.
According to the customary rules of treaty interpretation, Article 6.8 should first be read
according to the ordinary meaning of its text.  Th e primary meanings of the word "fact" in common
dictionaries are "an event or thing known to have happened or existed" and "a truth verifiable from
experience or observation".  The concept of an "adverse fact" introduced by the US is, in this way,
self-contradictory.  One single fact cannot be chosen in a way that it may configure a less favourable
result for a respondent.
Paragraph 7 of Annex II is entitled "Best Information Available", and it tries to ensure that
along the course of an investigation information  is used in such a way that it resembles the facts  as
closely as possible.  It contains the only mention of "cooperation" as it applies to an authority's choice
of "facts available" (i.e., paragraph 7 does not apply to the decision whether to apply facts available,
but only to the choice of "facts available").  Yet, even this provision does not permit use of facts
available to punish non-cooperative respondents as argued by the United States.  First, paragraph 7
uses the verb "could" when referring to unfavour able results, thereby removing any possibility that
authorities can affirmatively seek out figures that will punish or have a deterrent effect on respondent
behaviour.  Second, paragraph 7 instructs the authority to use "careful circumspection" in selecting its
choice of information available.  This phrase is an expression of "good faith" as discussed inparagraph 10 of our Third Party Submission and reinforces the notion that the information  selected
should reflect the facts  mentioned in Article 6.8.  The concept of punishing respondents simply does
not fit within this obligation to act in good faith and constrain oneself when choosing appropriate facts
to fill in the holes.
If representative information is available, then the authority should use it.  If representative
information is not available - or perhaps unreliable - because a party significantly impeded theinvestigation or refused to provide certain informati on, then such a party runs the risk of the authority
using information from the petition or other "secondary source".  The point, though, is to search for
the most reliable information, not to choose unrepresentative data for the sheer purpose of punishing a
party with an adverse result.  The language and spirit of Article 6.8 and of Annex II effectively
preclude an investigating authority from selecting information available in order to achieve a pre-
determined set of results, namely the one that is least favourable to a perceived non-cooperating party.
Information selection criteria cannot be based on a result oriented approach.  Such criteria should be
based on the quality of the information available;  in other words, which information available is best
suited to reflect a given indicator or a given fact.
The use of available facts has the purpose of facilitating the conduct of an investigation that
would otherwise be brought to a halt due to lack of essential information in sole possession of a
particular party.  This provision is not intended to punish a party that may not be cooperating.  In
brief, any interpretation of the AD Agreement that could grant an additional punitive power to the
investigative authorities would effectively expand the rights of the WTO Members under thatAgreement in violation of Articles 3.2 and 19.2 of the DSU.WT/DS184/R
Page E-75
ANNEX E-9
Japan's Answers to Questions from the Panel
at the Second Meeting of the Panel
(6 October 2000)
Question 1: In paragraph 5 of its oral statemen t Japan says that the use of facts available has
to be logical and reasonable.  In Japan’s view, can it ever be logical and reasonable to use
adverse inferences in the selection of facts available?  Please explain.
Answer
1. Depending on the particular circumstances in a case, the most logical and reasonable
inference may be adverse.  For example, if the particular factual circumstances demonstrate that a
respondent has withheld information intentionally, the logical and reasonable inference to be drawn
might well be more adverse to the respondent than the inference to be drawn under other
circumstances.  But there is a fundamental difference between making inferences that end up beingadverse because the particular factual circumstances make such an inference logical and reasonable,
and making inferences that are purposefully adverse for the sole purpose of punishing respondents
and inducing cooperation in future cases.  The United States routinely uses high dumping margins as
“adverse facts available” that are neither logical nor reasonable.  Indeed, they are not inferences at all,
but rather punishment.
2. The United States describes its adverse facts available practice in benign terms – arguing that
it is only drawing adverse inferences that are reasonable and logical.  But merely finding that a
company failed to cooperate to the best of its ability -- the standard set forth in the US statute -- does
not by itself justify any adverse inference.  It mu st first be determined that information was in fact
withheld, as required by Paragraph 7 of Annex II.  Then, the authority must ensure that the inference
being made is logical and reasonable in light of the circumstances.  A failure to cooperate, even wheninformation is withheld, does not justify any facts available the authority can arbitrarily think of to
punish the respondent.  If this were the case, there would be no reason for the protections contained in
Annex II.
3. The Panel should compare the US descriptions of its supposedly benign practice with
USDOC’s actions in the hot-rolled steel case.  The severe punishment of KSC, NSC, and NKK
illustrates the true color of the practice.  Instead of  drawing particular inferences that are logical and
reasonable – and that in some cases might also be adverse – USDOC made adverse inferences as a
punishment and a warning.  With KSC, USDOC punished a respondent with the second highest
margin available, even though doing so would clearly reward the petitioner who failed to cooperate.With NSC and NKK, USDOC had the actual data it had requested in plenty of time to use in
calculating these companies’ margins, but applied th e most adverse margin or price in a blatant effort
to punish the companies for making a mistake.  It made no attempt to use facts that most closely
approximated the truth -- facts which were clearl y available and which should have been used.  The
use of adverse inferences for such purely punitive purposes goes beyond the mandate of Article 6.8
and Annex II.WT/DS184/R
Page E-76
Question 2: Paragraph 7 of Annex II of the AD Agreement provides that “special
circumspection” is due when authorities base their findings on information from a secondary
source.  Does Japan consider that the informat ion provided by a particular company in its
questionnaire response is information from a secondary source with respect to the application of
facts available to that same company?
Answer
4. Yes, information provided by a company in its questionnaire response can be considered as
information from a secondary source.  It is important  to consider both who provided the information
and what information has been provided.  A primary source is from the same company and responds
to a specific request for information.  A secondary source could be either from a different company, or
information other than that specifically requested.  A number from elsewhere in the response of a
company related to completely different sales or a completely different category of information is just
as much “secondary source” information as is data from a different source.
5. This case illustrates well the difference.  USDOC decided (wrongly) that it did not have
information on the conversion factors for NSC and NKK.  USDOC could have filled the gap in
information with logical and reasonable facts availa ble, for which it had many alternatives.  The most
obvious alternative would have been the conversion factor reported by KSC and accepted by USDOC
as reasonable.  Although from a different company, this surrogate information had a far more
plausible connection to the missing NSC and NKK conversion factors than did the highest dumping
margin or the highest normal value from the same co mpany.  But, rather than use this logical and
reasonable alternative, USDOC decided instead to punish NSC and NKK with the highest margin or
price it could derive from the companies’ sales lists.
6. Consider the illogic of the US interpretation of “primary” sources.  Under the US view, the
use of the KSC conversion factor, even with its close nexus to the category of information at issue,
would have required “special circumspection” as a secondary source.  (Japan, of course, considers that
“special circumspection” is required whenever such a secondary source is used.)  Yet any figures
from NSC’s and NKK’s responses -- from whatever cat egory of information within those responses --
could be used without any special circumspection or corroboration merely because these numbers
were provided by NSC and NKK themselves.  This is a totally unbalanced conclusion and, thus, the
US interpretation is not permissible.
Question 3: In paragraph 37 of its second oral statement, the US argues that “the fact that
KSC regularly ignored the shareholders agreement does not prove that it had no power under
that agreement - only that KSC did not always  choose to exercise that power.”  Could Japan
please comment on this statement?
Answer
7. The United States is trying to divert the Panel’s attention away from USDOC’s conduct by
focusing on what it thinks KSC should have done.  But, the issue here is USDOC’s  misapplication offacts available.  Unless the United States can identify action (or inaction) taken by KSC that was
aimed at withholding information from USDOC, then  there is no justification for USDOC’s decision
to apply an adverse inference to KSC.  No such action or inaction has been identified.  Japan,
however, has identified multiple  problems with USDOC’s actions.
8. First, the United States focuses its attention only on KSC and pretends that CSI was not
involved in the investigation.  But both KSC and CSI were interested parties to this investigation with
diametrically opposed interests in the outcome of the investigation.  When considering the plain
meaning of “withheld,” it seems far more logical to apply this term to the petitioner CSI, which wasWT/DS184/R
Page E-77
the party in control of the necessary information, than  to apply this term to KSC, which was trying to
obtain the information from CSI.
9. Second, the United States assumes that USDOC had no duty even to try to obtain the
information from CSI.  Yet, USDOC held its own separate meeting with representatives of CSI andother petitioners to discuss the issue and also failed to obtain the requested information.
1  I f  t h e
authority with the legal power to issue dumping ma rgins in response to CSI’s petition was not able to
obtain the information from CSI, on what basis can it possibly punish KSC for being unable to do so?
10. Third, the United States is holding respondents to  the standard of perfect knowledge.  While it
may be easy for USDOC to identify additional st eps that in hindsight could have been taken,
respondents struggling to comply with extensive and burdensome questionnaires on short notice may
sometimes overlook a step that could have been tried.  This is particularly true in this case.  CSI first
told KSC that CSI would help (according to Mr. D eclusin), and only later did CSI change its position
and refuse to assist (by order of CSI’s President and CEO).
Question 4:  The Panel understands that the USDOC and USITC have different rules and
deadlines with respect to information gathering and application of facts available.  The Panel
understands the US to have asserted that each  agency applied its own rules to the parties
appearing before it in an impartial manner.  Does Japan contend that the USDOC failed to
apply its own rules impartially to the parties appearing before it?  Does Japan contend that the
USITC failed to apply its own rules impartially to the parties appearing before it?  Does Japancontend that the difference between the rules applied by the USDOC and the USITC
demonstrates partiality or failure to uniformly administer the anti-dumping law?
Answer
11. With respect to the first question, the answer  is yes.  USDOC’s rejection of NSC’s and
NKK’s theoretical weight conversion factors was partial and non-uniform first because it deviated
from USDOC’s own normal practice.  As the United States admits in its own Question 9 posed to
Japan (see below), corrections are normally accepted as late as the first day of verification (although
this deadline is normally reserved for minor corrections, while the seven-day rule typically applies to
more significant corrections and other additions to the record).  The lack of impartiality and
uniformity of USDOC’s actions in this instance is evident from the fact that USDOC refused to acceptcertain information from NKK and NSC before verification despite its established practice of doing so
in previous cases and, for certain other information, in this very case.  USDOC’s practice shows that
questionnaire deadlines are never the last chance an interested party has to submit information for the
record.
12. As for the Panel’s second question, the answer is no.  Japan is not arguing that USITC’s
acceptance of petitioners’ untimely-filed questionnaire responses in this case themselves violate
USITC’s own procedural rules.  USITC’s actions are relevant in this context only in that they show
the impropriety of USDOC’s and USITC’s acti ons as a whole (i.e., the actions of the US
Government).
13. Finally, regarding the Panel’s third question, the answer is yes, based on the assumption that
this question addresses the consequence of the difference between the rules of USDOC and USITC,
which have specific roles to play vis-à-vis respondents and petitioners.  When we consider the fact
that the two agencies act in tandem as the US anti-dumping authority, the different rules applied bythe agencies exhibit a double standard for respondents and petitioners.  The rule USDOC applied in
                                                     
1 KSC asked to be a part of this meeting to try to resolve any problems with obtaining CSI’s
information.  See KSC Letter to USDOC of 3 Dec. 1998, at 1 ( Exh. JP-78 ).WT/DS184/R
Page E-78
this case -- which was a clear departure from USDOC’s established practice -- served to reject certain
corrected information submitted by NSC’s and NKK’s  after the questionnaire deadline.  Meanwhile,
the rule applied by USITC served to accept only petitioners’ corrections to the record even though
they were also submitted well after the questionnaire deadline. These disparate rules -- taken by the
US anti-dumping authority -- favor petitioners over respondents.  Article X:3 is specifically intendedto prohibit such double standards.
Question 5:  In light of the US statements at  the second meeting concerning rules of statutory
construction and interpretation of US law, does Japan still maintain, as it asserted in its second
oral statement, that the captive production  provisions “takes precedence” over the other
provisions of US law regarding the analysis and determination of injury?  If yes, please explain
on what basis Japan maintains this position.
Answer
14. Nothing in the US statements at the Second Meeting changes Japan’s position in its Second
Submission that the captive production provision in  19 U.S.C. § 1677(7)(c)(iv) supersedes 19 U.S.C.
§ 1677(7)(c)(iii), when applicable.  The United States grossly mischaracterizes Japan’s arguments
concerning statutory construction. 2   Japan nowhere argues that the captive production provision
repeals 19 U.S.C. § 1677(7)(c)(iii), by implication or otherwise.  This would be impossible, because
the captive production provision only applies when certain conditions are met, and expressly refers to
Section 1677(7)(c)(iii).  Japan only argues that when the captive production provision applies, itsupersedes those elements of 19 U.S.C. § 1677(7)(c)(iii) that conflict with its command to “focus
primarily” on market share and financial performance in the merchant market.
15. Japan cites canons of statutory construction concerning the interpretation of statutes
addressing the same subject matter, which are said to be “in pari materia.”3  Under these canons, “{i}t
is assumed that whenever the legislature enacts a provision it has in mind previous statutes relating to
the same subject matter.”4  The captive production provision and Section 1677(7)(c)(iii) are in pari
materia because “one statute deals with a subject in general terms, and another deals with a part of the
same subject in a more detailed way.”5  Both provisions concern USITC’s analysis of the impact of
subject imports on a domestic industry.  But while Section 1677(7)(c)(iii) sets forth USITC’s general
approach to analyzing the impact of subject imports on domestic producers as a whole, Section
1677(7)(c)(iv) creates a specific exception to this approach.  The express language of the captiveproduction provision modifies Section 1677(7)(c)(iii), providing that when the provision’s criteria are
met, “the Commission, in determining market shar e and the factors affecting financial performance
set forth in clause (iii) , shall focus primarily on the merchant market for the domestic like product.”
(Emphasis added).
                                                     
2 Oral Statement of the United States, Second Meeting, para. 25.
3 See generally 2B Sutherland Stat Constr § 51.01 (5th Ed. 1992) (additional excerpts attached as
Exh. JP-107 ).
4 Id. at § 51.02 (additional excerpts attached as Exh. JP-107 ).
5 Id. at § 51.05 ( Exh. JP-101(a) ).WT/DS184/R
Page E-79
16. When the captive production provision applies, USITC cannot “focus primarily” on the
market share and financial performance of both producers as a whole and the merchant market
segment; in other words, Sections 1677(7)(c)(iii) and 1677(7)(c)(iv) are in conflict.  Under the canon
of statutory construction cited by Japan, such conflicts are resolved in favor of the more specific
provision, in this case, the captive production provision.6  The more general provision is not repealed
by implication, but only disregarded in favor of the more specific provision, when it applies.
17. This is not a complex argument – Japan is only suggesting that the statute means what it says.
When the captive production provision applies, USITC is to “focus primarily on the merchant market
for the domestic like product” in determining “m arket share and the factors affecting financial
performance set for in clause (iii)” instead of determining market share and the factors affecting
financial performance with respect to the industry as a whole, as it would ordinarily underclause (iii) Indeed, in the hot-rolled steel case, three commissioners faithfully applied the captive
production provision, methodically analyzing each of the provision’s three criteria and, finding them
satisfied, modifying its analysis of impact accordingly:  “Because we have found the captive
production provision to apply in this case, we have focused primarily on the merchant market in
assessing market share and the factors affecting financial performance.”
7
18. After inventing an argument that Japan has never made, the United States attacks its strawman by citing Watt v. Alaska , “repeals by implication are not favoured. . . . The intention of the
legislature to repeal must be ‘clear and manifest.’”
8  As Japan does not argue that the captive
production provision repealed Section 1677(7)(c)(iii) by implication, this holding is completelyirrelevant.  Moreover, Japan cites Watt  not to support its argument that the more specific captive
production provision supersedes the more general Section 1677(7)(c)(iii), but to support its related
argument that when two provisions conflict, the more recent provision should prevail.
9  T h e
United States is silent on the Supreme Court case cited by Japan, Busic v. United States , which
affirms the canon that a “more specific statute will be given precedence over a general one.”10
19. Beyond its mischaracterization of such basic concepts of statutory construction, theUnited States also incorrectly asserted at the Second Meeting that Japan has abandoned a point made
in its First Submission – specifically, that “it was improper to consider, either primarily or
secondarily, data for the merchant market sector.”
11  In actuality, Japan recognized in its First
Submission that the panel report in Mexico—High Fructose Corn Syrup  does not completely preclude
a sectoral analysis.12  Japan only argued, “the commissioners could not have considered, either
                                                     
6 Id. (“Where one statute deals with a subject in general terms, and another deals with a part of the
same subject in a more detailed way, the two should be harmonized if possible; but if there is any conflict, the
latter with prevail, regardless of whether it was passed prior to the general statute, unless it appears that thelegislature intended to make the general act controlling.”) (citations omitted) ( Exh. JP-101(a) ).
7 USITC Final Injury Determination , USITC Pub. 3202 at 35 ( Exh. JP-14 ).   The United States argued
at the Second Meeting that the Statement of Administrative Action expresses Congress’ intent that the captiveproduction provision would be consistent with the AD Agreement and that USITC is therefore somehow free to
resolve ambiguities in the captive production provision “in a manner consistent with the United States’
obligation under the Agreement.”  Oral Statement of th e United States, Second Meeting, at para. 23.  Such
statements, however, do not ensure that a provision -- or its application -- is in fact consistent with theAgreement.  This is for the Panel to determine, not the United States.  In Japan’s opinion, as discussed above,the provisions are inherently inconsistent, and USITC did nothing in its final determination to overcome this
fact.
8 Oral Statement of the United States, Second Meeting, para. 26.
9 Japan’s Second Submission, para. 193 n.221.
10 Id. at para. 193 n.221 (citing Busic v. United States , 446 U.S. 398, 406, 65 L.Ed.2d 381, 389 (1980)).
11 Oral Statement of the United States, Second M eeting, para. 19 (incorrectly citing Japan’s First
Submission, para. 45 instead of para. 245).
12 Japan’s First Submission, para. 223.WT/DS184/R
Page E-80
primarily or secondarily, data for the merchant market in this case  without distorting their
judgment.”13  Far from abandoning this argument, Japan’s Second Submission actually amplifies it,
elaborating on how USITC cannot relate merchant ma rket segment findings to the industry as a
whole, as the AD Agreement requires, without also examining all other industry segments.14
                                                     
13 Id. at para. 245 (emphasis added).
14 See, e.g ., Japan’s Second Submission, para. 222.WT/DS184/R
Page E-81
ANNEX E-10
Japan's Answers to Questions from the United States
at the Second Meeting of the Panel
(6 October 2000)
Regarding CSI’s alleged inability to provide information requested by Commerce:
Question 1: Isn’t it true that, in CSI’s letter of December 14, 1998 (JP-42(m)), addressed to
KSC, CSI claimed it was unable under its accounting system to provide the information
requested with regard to only question one, when KSC in fact posed twelve questions (JP-
42(1))?
Answer
1. While it is true that CSI responded directly to only the first of twelve questions posed by
KSC, the first question sought the most important information – transfer prices and the prices to thefirst unaffiliated US customer for all sales of subject hot-rolled steel that CSI further manufactured.
The other eleven questions requested subsidiary information about product descriptions and
specifications, source documentation supporting any reported resales, price lists, documentation or
explanations of CSI’s sales process, frequency of changes in sales terms, and general financial or
corporate structure information.
1  The absence of the basic price/sales data rendered the remaining
information useless.  CSI itself noted in its response:
In reference to your letter of December 8, 1998, this is to inform you that CSI is
unable under its accounting system to provide the information on sales requested in
question 1.  While we could provide other information to you, it would be difficult for
us to provide such information within th e time frame specified in your letter.  It is
also our belief that without being able to provide the important information of salesprices requested, the provision of other data requested by you would be neither
usable nor useful in the investigation of Kawasaki and therefore would be a waste of
resources for both CSI and Kawasaki.
2
2. This letter does not make clear the reason for CSI’s refusal to provide the subsidiaryinformation.  The tone suggests unwillingness, but the fact remains that the absence of necessary price
information, which CSI was unable to provide, made the other requested information useless.  KSC
repeatedly informed USDOC of CSI’s inabilit y and/or unwillingness to provide necessary
information, including providing CSI’s 14 December 1999 letter.
                                                     
1 KSC Letter to CSI on 8 Dec. 1998 ( Exh. JP-42(l) ).  Note that each of the questions KSC posed to
CSI restated USDOC’s questionnaire verbatim.
2 Mr. Goncalves Letter to KSC of 14 Dec. 1998 ( Exh. JP-42(m) ) (emphasis added).WT/DS184/R
Page E-82
Question 2: Where precisely in the exhibits Japan has cited did KSC  inform Commerce  that
CSI was unable  to supply the requested information?  In  addition to providing the cites, please
quote actual statements by KSC.
Answer
3. KSC repeatedly informed USDOC that CSI was unable  to supply the requested information,
either by explicitly saying so in its letters to USDOC, or by referencing, or attaching to, CSI’s Letter
to KSC of 14 December 1998 ( Exh. JP-42(m) ) (in which CSI stated it was unable to supply the
information requested in Question 1 of KSC’s Letter of 8 December 1998).3  We have provided below
relevant quotes and references from Japan’s exhibits.
• KSC Letter to USDOC of 18 Dec. 1998 ( Exh. JP-93(a) ):  “Attached to this letter is the most
recent written response of CSI {CSI’s Letter to KSC of 14 Dec. 1998}  to our requests for
information. . . . CSI has declined to provide KSC with information necessary to respond to
Sections C and E. . . .”  The attached letter clearly indicated CSI’s inability to provide the
information.
• KSC’s Section C Questionnaire Response, at 2 (21 Dec. 1998) (excerpts in Exh. JP-42(p) ):
“CSI responded to this request a week later, on December 14, 1998, and with multiple
excuses indicated its inability /unwillingness to provide the necessary information, including
(1) that its accounting system was unable to provide information regarding its sales of further
manufactured products. . . .” (Emphasis added.)
• KSC Verification Exhibit 20 (Mar. 1999) ( Exh. JP-93(b) ):  KSC again provided USDOC
with {CSI’s Letter to KSC of 14 Dec. 1998}, which contained CSI’s statement that it was
unable to provide the information requested in question 1 of KSC’s Letter to CSI of
8 December 1998.
• KSC’s USDOC Case Brief, at 16, Exhibit 2 (12 Apr. 1999) ( Exh. JP-93(c) ):  In the text of its
case brief on page 16, KSC quoted in its entirety CSI’s Letter to KSC of 14 December 1998,which explicitly CSI’s inability to provide the information requested in question 1 of KSC’s
Letter to CSI of 8 December 1998.  Moreover, KSC again provided USDOC that letter in
Exhibit 2.
4. As the evidence demonstrates, KSC repeatedly informed USDOC that CSI was unable to
provide the information requested in Question 1 of KSC’s Letter of 8 December 1998.  Sometimes
KSC said it directly, other times KSC quoted the words of CSI.  Japan is alarmed that USDOC is not
familiar with the record of its own investigation.
Question 3: Isn’t it true that KSC told Commerce, in KSC’s questionnaire response of
December 21, 1998 (JP-42(p)), that CSI did not provide a reason for its claim that under its
accounting system it was unable to provide sales information?
Answer
5. Yes. KSC noted in its questionnaire response the terse CSI comment, which included no
explanation, to show that CSI was not at all forthcoming with KSC.  Whether the statement was true
or not is not something KSC was ever able to determine.  If USDOC questioned the veracity of the
                                                     
3 See Japan’s Second Submission, para. 46.WT/DS184/R
Page E-83
statement or wanted an explanation, it could have followed up with CSI directly after KSC informed
USDOC of CSI’s response.  CSI was, after all,  an interested party to the investigation.
Question 4: Isn’t it true that, in all of the following documents submitted to Commerce, KSC
said that CSI refused to supply, or would not supply, or would not cooperate with KSC to
supply (rather than was unable  to supply), the requested information:  JP-42(n) (KSC letter to
USDOC, 18 Dec. 1998); JP-42(p) (KSC response to section C of USDOC questionnaire); JP-
42(u) (KSC response to first USDOC section A supplemental questionnaire); JP-42(v) (KSC
response to sections B and C of Commerce supplemental questionnaire)?
Answer
6. Japan’s answer to US Question 2 above documents the numerous instances in which KSC
communicated this basic point to USDOC, and includes citations to some of the documents identified
here.  KSC assumed that USDOC would be reading not  just the text of its answers, but also the
attached correspondence from CSI.  The fact that KSC may not have provided full quotations from the
CSI correspondence in the text of each and every letter it submitted to USDOC does not change thefact that the correspondence is on the record.
7. Perhaps the best and most obvious example is from KSC’s Section C Questionnaire
Response, at 2 (21 Dec. 1998) (excerpts in Exh. JP-42(p) ).  KSC informed USDOC that CSI
responded to KSC’s latest request for information on December 14, 1998, and “with multiple excusesindicated its inability/unwillingness to provide the necessary information, including (1) that its
accounting system was unable  to provide information regarding its sales of further manufactured
products.”  With this and many other submissi ons, KSC clearly documented CSI’s unwillingness and
inability to provide necessary information.
Regarding the KSC/CSI transfer price information:
Question 5: Isn’t it true that the transfer price data which KSC submitted to USDOC (JP-
93(f) and US/B-24bis) excludes product characteristics such as prime, paint, quality, carbon,
strength, coil, tempered, and pickled?
Answer
8. No, this is not entirely true.  The table KSC provided in its Section A response showed which
types of steel it sold to CSI. 4  The table contained pertinent product characteristic data including
thickness, width, and specification.  From the specification, USDOC could have determined quality,
carbon, and strength, as explained in KS C’s Section C Questionnaire Response..5  F u r t h e r ,  K S C
indicated in its Section C Response that all sales to the United States were prime, unpainted product.6
9. The remaining product characteristics mentioned in the question (coil, tempered, and pickled)
were not provided -- but they were also ne ver requested by USDOC.  This is because USDOC
inappropriately assumes that all export sales to affiliates are unreliable -- an assumption Japan thinksis erroneous.  The United States cannot now defend this erroneous assumption by blaming KSC for
following USDOC’s questionnaire.
                                                     
4 KSC’s Section A Questionnaire Response, Exhibit 37 (16 Nov. 1998)  ( Exh. JP-93(f) ).  The
information  was provided in product groups, i.e. [“thinner gauge HRS for resale,” “HRS for Cold-Rolled” and
“Galvanized,” and “HRS for Pipes”].  (HRS is hot-rolled steel.)
5 KSC’s Section C Response, at C-2 (21 D ec. 1998) (additional excerpts attached as Exh. JP-108 ).
6 Id. at 7-8 (additional excerpts attached as Exh. JP-108 ).WT/DS184/R
Page E-84
10. In any event, the missing information was no t critical for determining whether KSC-to-CSI
prices were reliable.  A test of reliability does not depend on a comparison of products using
USDOC’s CONNUMs.  USDOC had the most importa nt product characteristics in the data KSC
provided in its Section A response.  These were more than sufficient to determine the reliability of the
gross unit prices at which KSC sold to CSI.
11. Furthermore, given the difficulties USDOC knew KSC was facing in obtaining downstream
data from CSI, USDOC could have requested the other product characteristics from KSC in order to
form a more reasonable basis for facts available if the KSC-to-CSI prices were, in fact, deemed
unreliable.
Question 6: Isn’t it true that this same inform ation excludes selling expenses such as rebates,
credit, advertising, warranty, technical services, indirect selling expenses, and packing expenses,
as well as terms such as order date, pay date, sales terms, payment terms, and quantity type?
Answer
12. This question misses the point.  USDOC does not need a full response to its questionnaire to
test whether the relationship has influenced the prices.  Given KSC’s data on prices, quantities, and
most product characteristics, USDOC could undertake a basic examination of the reliability of the
KSC-to-CSI prices without the missing data.  Furthermore, as discussed above, knowing that KSC
was having difficulty collecting the downstream information from CSI, USDOC could have askedKSC for more detail regarding its transfer sales to CSI.
Regarding Japan’s Second Opening Statement and KSC:
Question 7: How can Japan state in its Se cond Opening Statement (para. 10) that the
“USDOC ignored the fact that the compan y whose information USDOC demanded was a
petitioner” when the USDOC, in its final determination (JP-12), specifically addressed this fact,
as explained and quoted in the US 1st Submission (para. B-114)?
Answer
13. In its Oral Statement at the Second Meeting, Japan made this argument to highlight USDOC’s
refusal to give this fact any weight.  An authority can mention a fact, but then make a decision that
completely ignores the significance of that fact.  To do so is to ignore the fact at issue.
14. The quoted passage demonstrates that USDOC did not give full and fair consideration to the
very important fact that CSI was an active petitioner in the investigation.  The discussion quoted inpara. B-114 of the US First Submission only obliquely references CSI’s status as an active petitioner.
The vast majority of USDOC’s analysis treats this case like any other case involving affiliates, just
assuming that affiliates act in concert to the benefit of the whole.  USDOC’s discussion of what KSC
did or did not do and the possible benefits accruing to KSC and CSI is remarkably void of any
reasoned consideration of the obvious effect CSI’s status as petitioner would have on the situation.
15. The only perceptible reference to CSI as petitioner is where USDOC casually stated, “while
KSC’s business relationships may involve certain internal conflicts of interest, the use of an adverse
inference in determining the dumping margins on CSI sales does not contradict the Department’s
policies.”
7   It is exactly the “internal conflicts of interest” caused by CSI’s independent decision to
participate in the investigation as an adversary to KSC that created the problem.  If CSI had wanted to
help KSC in the defense, CSI would have coop erated, KSC could have met USDOC information
                                                     
7 USDOC Final Dumping Determination , 64 Fed. Reg. at 24368 ( Exh. JP-12 ).WT/DS184/R
Page E-85
demands, and there would have been no need for “facts available.”  CSI itself stated that its status as
petitioner affected its willingness to assist KSC.8  USDOC dismisses CSI’s obvious independent self-
interest, by assuming affiliates act in concert regardless of the circumstances.  USDOC’s theory that
KSC and CSI acted in concert was not supported by the facts in this case.  Thus, its adverse inference
was illogical and unreasonable.
Question 8: Why does Japan persist in referri ng to “cases” in the plural (Japan’s 2nd
Opening Statement para. 10 and Japan’s 2nd Submission para. 78) with regard to a USDOC case
involving a US importer/petitioner, when there is  only one such case (JP-93(h))?  Isn’t it true
that, with regard to this one case, Commerce found the petitioner to have had “exclusive
control” over the requested data?
Answer
16. While Japan has checked again and could find no other relevant cases directly on point, this is
unsurprising.  How often is the US affiliate of a foreign company authorized to file an anti-dumping
petition against its parent?  The very fact that KSC was unable to prevent CSI from joining the anti-dumping petition demonstrates KSC’s lack of control over CSI.
17. The United States is wrong to insinuate that USDOC declined to apply adverse facts available
in Stainless Steel Wire Rod From Taiwan  merely because it found the petitioner had “exclusive
control” over the requested data.  It is clear that USDOC made this decision based on no fewer thanfour factors, best summarized in the USDOC’s “Walsin Concurrence Memorandum,” which the
determination explicitly cites:
9
{A}t the time of response preparation and verification, Carpenter and Walsin were
not affiliated within the meaning of section 771(33)(E) of the Tariff Act of 1930…Inaddition to this fact, it is important to note Carpenter’s role as a petitioner in the
investigation of SSWR, its interest in domestic production of SSWR rather than
importation from Taiwan, and its lack of direct financial liability with respect to
imports of the subject merchandise which occurred after the suspension of
liquidation.”
10
Thus, aside from the issue of control over the requested information, USDOC also recognizedCarpenter’s ample incentive to sabotage Walsin’s questionnaire responses, given its role as petitioner,
its interest in domestic production, and its lack of direct financial liability for antidumping duties.
USDOC refused to punish Walsin for Carpenter’s self-interested behaviour, and applied neutral facts
available.
11
                                                     
8 See Japan’s Second Submission, para. 61 (quoting letters from CSI: “please remember that CSI is one
of the petitioners, and eventually we would be in a difficult position to supply some kind of information” and
“{t}his behaviour has been adopted here at CSI in order to protect the company as an American steel company,
regardless of the Brazilian and Japanese ownership.”).
9 Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod from
Taiwan , 63 Fed. Reg. 40461, 40464 (29 July 1998)  (“For further discussion, see Walsin Concurrence
Memorandum.”) ( Exh. JP-93(h) ).
10 Anti-Dumping Duty Investigation of Stainless Steel Wire Rod (SSWR) from Taiwan, A-583-828,
Walsin-Cartech Specialty Steel Corporation: Concurrence Memorandum for the Final Determination(20 July 1998) (excerpts attached as Exh. JP-109 ).
11 Stainless Steel Wire Rod from Taiwan , 63 Fed. Reg. at 40464 (“Given these unusual circumstances,
we have not determined that Walsin failed to act to the best of its ability. . . . Therefore, in applying factsavailable, we used the weighted-average margin for all of Walsin’s reported sales to the CEP sales that were not
reported. . . .”) (emphasis added) ( Exh. JP-93(h) ).WT/DS184/R
Page E-86
18. CSI’s incentive to sabotage KSC’s questionnaire response was no different.  CSI was a
petitioner.  Its primary interest was in domestic production, not importation, as evidenced by USITC’s
decision to not exclude any related parties from its preliminary investigation.12  CSI no longer
imported hot-rolled steel from KSC, so it would not have been financially liable for any future anti-
dumping duties.13
19. In any event, regardless of whether USDOC followed past practice, its treatment of KSCviolated its WTO obligations.  USDOC should have recognized KSC’s predicament and applied
special circumspection in its application of facts available, as required by Paragraph 7 of Annex II.  It
should also have rendered practicable assistance, as required under Article 6.13.  The adversarial
approach USDOC adopted in this case, and its ultimate resort to adverse facts available, violated the
letter and spirit of the Agreement.
Regarding NSC/NKK:
Question 9: Japan’s Second Written submission, at fn. 89, claims that the Polyester Staple
Fibre case shows that the “Seven-Day Rule ” does apply to information requested in
questionnaire.  It is undisputed that that case dealt with corrections to data already submitted,
and that Commerce regularly accepts such correction s as late as the first day of verification, as
it did in this case for all three Japanese res pondent firms.  Given that the deadline for
“corrections” is not seven days before verification , but the first day of verification, and that the
reference to the “Seven-Day Rule” in the Polyes ter Staple Fibre case is therefore clearly an
incorrect citation, and given that the chapeau  of 19 C.F.R. § 351.301(b) expressly provides that
the questionnaire deadlines in 19 C.F.R. § 301(c) take precedence over the general deadline in
19 C.F.R. § 351.301(b), how can the Polyester Staple Fibre case provide that the Department’s
general practice is to allow the submission of ne w data categories, including those that-like the
theoretical weight factors – are not correctio ns, long after the questionnaire deadlines?
ANSWER
20. The United States is drawing a distinction between corrections and new information that does
not apply in this case.  First, NSC’s and NKK’s submissions of conversion factors were in fact
corrections.  Both companies had incorrectly stated they did not have the information requested.  This
incorrect statement was then corrected.  Neither company left this question blank.  Both provided ananswer, and they then sought to co rrect that answer as soon as they discovered their initial answer was
incorrect.
21. Second, the conversion factor cannot reasonably be considered a “new data category.”  NSC
and NKK provided quantities, prices, and all the necessary adjustments.  The only outstanding issuewas whether and to what extent the quantities being reported needed to be adjusted.  In other words,
was the quantity that had been reported correct, or did it need to be corrected?
22. Third, the United States responded to a Panel question at the Second Meeting by arguing that
allowing new information creates a loophole and creates unfairness.  Neither claim is correct.Because the USDOC policy of accepting corrections itself contemplates new information coming later
                                                     
12 See USITC Final Injury Determination, USITC Pub. 3202, at 5-6 (“In the preliminary phase of this
investigation, we found that two domestic producers were related parties…We further found that appropriatecircumstances did not exist to exclude either of these producers from the domestic industry.  In the final phaseof this investigation, we have not found any evidence to warrant changing this finding.”) ( Exh. JP-14 ).
13 See KSC Letter to USDOC of 10 Nov. 1998 (“While CSI has historically been the importer of record
for all imported steel including KSC HRS, when a HRS shipment arrived potentially subject to retroactive
antidumping duties, CSI required that purchase to be entered by . . . Kawasho International.”) ( Exh. JP-42(i) ).WT/DS184/R
Page E-87
in the investigation, the addition of such information cannot be considered a loophole to the
questionnaire deadlines.  Nor is there any unfairness.  The “seven-day rule” allows for information to
be placed on the record prior to the verification, and weeks before the arguments by both sides.  This
case illustrates well the amount of time available for comment.  Petitioners had time to comment
before the verification, during the verification, and after the verification.  Petitioners had time to makearguments in their brief, and make arguments in the oral hearing.   Given these extensive
opportunities to comment, the United States cannot argue credibly that there was no time for
systematic analysis or comments by others.
23. We also note the illogic of the US argument.  If corrections can be made as late as the first
day of verification, then the seven-day rule must apply to other categories of information.  If this is
true, then it is unclear on what basis USDOC can justify rejecting NSC’s and NKK’s conversionfactors.
Regarding Affiliated Sales in Home Market:
Question 10: Japan continues to complain that it is unfairly harmed by Commerce’s failure to
exclude, as not in the ordinary course of trade, sales to an affiliate made at artificially high
prices, such as those which might be made to a cash-rich affiliate for subsequent resale as a
lower price for tax purposes.  In response to Pa nel Question 37 on this hypothetical situation,
the Department noted (at paragraph 43) that if the transfer price sales were, in fact, outside the
ordinary course of trade because the merchandise was sold to the affiliate at artificially high
prices, the producer could report the downstream sa les at the market price, even if these were
below the affiliate’s cost of acquisition .  (We note that the Department did not, as Japan suggests
in its Second Written Submission, state that it would accept downstream sales below the cost of
production ; such sales are expressly outside the ordinary  course of trade.)  In its Second Written
Submission, at paragraph 125 and fn. 124, Japan’s response is to question whether Commercewould, in “a real investigation,” accept the below acquisition cost sales.
In this investigation, KSC made a large perc entage of its home market sales through its
affiliated trading company, Kawasho.  KSC di d not report its transfer prices to Kawasho.
Instead, as permitted by the Department’s standard questionnaire, KSC reported only
Kawasho’s downstream sales.  (Preliminary  Analysis Memorandum for KSC, Exh. USB-6.)
NSC also directly reported downstream sales for its principal home market trading company, in
lieu of the transfer price sales to that company.  (Preliminary Analysis Memorandum for NSC,
Exh. USB-32.)
Given this situation, in this “real investigation,” could Japan please explain how the
Department would be in a position to know what an affiliate’s acquisition costs were if aproducer chose, instead of reporting the artifi cially high sales, to report the more ordinary
downstream sales instead?  If the Department does not even know what the acquisition costs
are, how can the Department decline to accept downstream sales on the grounds that they are
made below their acquisition cost?
Answer
24. The US question (as well as the accompanying essay) misses the point.  Japan is not
complaining that any high-priced sales were inapprop riately included in this case.  Rather, Japan has
demonstrated that the asymmetry of the US 99.5 per cent test makes it inherently unfair.  The USpolicy subjects low-priced sales to a severe test, and yet does no testing at all of high-priced sales.
25. The choices made by foreign producers in a given case reflect the constraints imposed by the
USDOC questionnaire.  USDOC cannot give instructi ons in a questionnaire – such as saying you mayWT/DS184/R
Page E-88
ignore the related party sales and simply report the downstream sales – and then complain that by
following such instructions the respondents did not provide the necessary information.  The USDOC
questionnaire is a further indica tion of the flawed USDOC policy.WT/DS184/R
Page E-89
ANNEX E-11
Answers of the United States to Questions from Japan
at the Second Meeting of the Panel
(6 October 2000)
US RESPONSES TO JAPAN’S QUESTIONS TO THE US
Question 1:  Where does the USITC determinatio n mention in any way the profit level for 1996?
How can the USITC evaluate a crucial fact without mentioning that fact?
1.  At the outset, we note that Japan seems to confuse the evaluation of factors required inArticle 3.4 of the Anti-dumping Agreement with examination of evidence (facts).  Articles 3.1 and 3.5
require that a determination of injury be based on “positive evidence” and an “examination of all
relevant evidence.”  The United States maintains that it performed an objective examination of all the
evidence, including the 1996 financial performance of the domestic industry, in its examination of the
impact of imports on the domestic industry, as required by Article 3.4.  Article 3.4 simply requiresthat the USITC provide “a persuasive explanation as to how the evaluation of relevant factors led to
the determination of injury."
1
2.  A panel recently faced with this issue assessed whether Thai authorities had “failed to
consider the factors listed in Article 3.4."2  At the outset, we note that the panel characterized the
obligation of the Thai authority as to “consider.”  Although the word “consider” does not appear in
Article 3.4, “examine”, which is the language in Article 3.4, is defined as “to consider or discuss
critically."3
3.  As the Angles  panel found, an appropriate consideration does not require a finding or
determination specifically about the factor considered.  Although a panel may prefer such an explicit
characterization, a reference to the factor need not be explicit on the face of the decision.  All that is
required is that the USITC demonstrate that it has “given attention to and taken into account” the
factor under consideration.4  The USITC has considered properly when it puts a factor “into context."5
In determining whether the USITC met this obligatio n, this Panel should take all “statements and
characterizations into account."6
4.  Accordingly, the USITC properly evaluated profits in its examination of the impact of
dumped imports when it provided a description of the financial performance of the industry.  The
USITC’s explicit findings demonstrate that it adequately considered profits in accordance with the
Anti-dumping Agreement.  The USITC discussed the 1997 to 1998 declines in operating income and
                                                     
1 Panel Report, Thailand -Anti-dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy
Steel and H-Beams from Poland (“Angles”), WT/DS122/R, circulated on 28 September 2000, para. 7.236.
2 Angles  at para. 7.238.
3 The Compact Edition of the Oxford English Dictionary 364 (1985).
4 Angles at paras. 7.161 & 7.180.
5 Angles  at para. 7.170.
6 Angles  at para. 7.165.WT/DS184/R
Page E-90
in the ratio of operating income to net sales.7  Referring back to its discussion of price effects, the
USITC also considered the unit cost of goods sold and unit values (the difference in these two
indicators being unit profits) from 1996 to 1998.8
5.  Japan has refined its argument such that it is now focused not on whether the USITC
considered profits, but on whether it considered profits over the entire period -- from 1996 to 1998.
The USITC clearly considered the 1996 data in rendering its determination.  In its discussion of thefinancial performance of the industry, the USITC specif ically cited to the table in the staff report that
included the information for 1996.
9  The USITC also explained why it considered the 1997 to 1998
period particularly probative and, in so doing, made clear that it had considered the 1996 data.
Respondents had argued to the USITC that 1997 was a banner year.  As a result, respondents asserted,
increases from 1996 to 1998 were more instructive to the USITC’s analysis than declines from 1997
to 1998.10  The USITC expressly rejected this argument.  Implicit in the explanation of why 1997 to
1998 was an appropriate period of comparison is a consideration of the 1996 information and arejection of the proposed 1996 to 1998 comparison.
11  In sum, the USITC did consider the 1996 data
but simply expressed its determination in a manner different than Japan would have this panel believe
is required -- instead of providing its reason for not relying on a 1996 to 1998 comparison (which
would in all likelihood have included a recitation of the 1996 data), the USITC clarified why it was
relying on 1997 to 1998 comparisons.  Either way, 1996 data clearly was considered.
6.  Moreover, the USITC found that the industry’s performance was  “substantially poorer than
what would have been expected given record levels of demand in 1998."12  This statement reflects the
USITC’s understanding that performance trends might (depending on the time period examined) be
regarded as growing, as in 1996 to 1998, rather than  falling, as in 1997 to 1998.  Further, the USITC’s
discussion of average unit values and unit cost of goods sold shows that it was cognizant of the profit
trends over the period, with 1998 profits lower than those in 1997 but still higher than in 1996.13
7.  The characterization of 1998 as underperform ing shows not only that the USITC was aware
of the trends over the entire period, but also that it found the negative impact of dumped imports ongrowth, another Article 3.4 factor, as instructive in its determination.  The USITC found that the
domestic industry should have been performing better in 1998 in light of the conditions of
competition at that time and that the dumped imports were preventing the industry from taking
advantage of the increased demand.  While Japan may “have preferred a more robust evaluation of”
profits
14, the USITC’s consideration of profits, and specifically the 1996 profit levels, is apparent in
the determination.
8.  This Panel should also note that Japan’s question rests on the false premise that the profit
level in 1996 was a “crucial fact.”  “In a given case, certain factors may be more relevant than others,
and the weight to be attributed to any given factor may vary from case to case."15  In some cases,
certain listed factors may not be relevant at all and their “relative importance or weight can vary
significantly from case to case."16  Here, the USITC’s report explained the weight it gave to the
                                                     
7 USITC Views at 18.
8 USITC Views at 18 n.100.
9 USITC Views at 18 nn.99 & 100.
10 Respondents’ Posthearing Brief at 19 (Exh. US/C-32) .
11 USTIC Views at 18.
12 USITC Views at 20.
13 USITC Views at 18 n.100.
14 See Angles  at 7.241.
15 Angles  at para. 7.225.
16 Angles  at para. 7.236.WT/DS184/R
Page E-91
evidence concerning each of the enumerated factors.  This Panel should not follow Japan’s lead in its
attempt to reweigh the evidence.
9.  Further, “it is for the investigating authoritie s in the first instance to determine the analytical
methodologies that will be applied in the course of an investigation, as Article 3 contains norequirements concerning the methodologies to be used."
17  Japan has not demonstrated that the
USITC’s methodology “introduced a flaw in the authority’s analysis."18  Thus, this Panel should not
find fault with the fact that the USITC did not rely on the 1996 profit levels.
10.  Finally, Japan’s argument about the 1996 profitability are not properly before this panel.
Based on High Fructose Corn Syrup , Japan is attacking the USITC’s determination by asserting that
the decision does not make the consideration of the Article 3.4 factors apparent.19   However, Japan
has not claimed a violation of Article 12 of the Anti-dumping Agreement, in which the requirements
to make “detailed findings” and respond to parties arguments appear.  Consequently, this panel need
not “make a specific finding as to the adequacy of the text” of the USITC’s determination.20
Question 2:  Where on the documents [had ] USITC “recognized the effects of captive
production” (para. 33) as opposed to simply noting the existence of captive production?
11.  In this case, the USITC noted the existence of captive production21 and, accordingly, some
Commissioners applied the captive production provis ion.  The captive production provision, in itself,
is a recognition of the fact that having significant amounts of captive production may skew an
analysis of injury.  Consequently, in applying the provision, three Commissioners necessarily did
more than merely note the existence of captive production.
12.  In addition, the determination is replete with references to the effects of captive production on
the USITC’s analysis.  In footnote 28, the US ITC found that dumped imports and the domestic like
product were sold in the same channels of distribution, notwithstanding the fact that domestic
producers internally transfer significant amounts of hot rolled steel.  On page 11, the USITCrecognized that minimills are more sensitive to competition than integrated producers in part because
“their captive operations are generally not as substantial.”  On page 19, the USITC found that
minimills had a worse financial performance than integrated producers because they had a “greater
dependence on the merchant market, where imports are concentrated.”  To say that those firms that
lack captive operations are more “sensitive” to import competition is equivalent to saying that thosefirms that have captive operations are relatively shielded from import competition.  The particular
method of explanation used by the USITC in this case stemmed from its comparison of the
performance of integrated producers with that of minimills to show that imports affected the industry
as a whole.  This analysis resulted in the conclusion that the integrated producers, who were less
sensitive to import competition, performed better than the minimills, and the results for both groups of
firms showed that the industry was adversely impacted by imports.  Finally, the USITC makes parallel
findings about the merchant market and the industry as a whole throughout its determination.  Byimplication, each of these parallel findings includes a finding about the captive segment of the market
because there are only two segments that make up the whole -- merchant market and captive
production.
13.  Japan seems to view the effects of captive production only as shielding the captive segment of
the market from competition, without recognizing that the merchant market sector remains affected by
                                                     
17 Angles  at para. 7.159.
18 Angles  at para. 7.159.
19 Japan ’s First Written Submission at para. 259.
20 Angles  at n.244.
21 USITC Views at 9.WT/DS184/R
Page E-92
import competition.  As a result, Japan’s challenge to the USITC’s analysis of captive production rests
largely on the fact that the USITC characterized the effects of captive production differently in this
case than it did in the 1993 Flat Rolled Steel  investigation.  The Panel should reject this argument
because the USITC properly recognized the effects of captive production in both cases in light of the
conditions of competition in the industry at the time.
14.  Two factors other than the captive production provision affect the different context from the
1993 decision in which the USITC discussed captive production in its 1999 decision.  In this case, an
additional layer was added to the analysis because, as respondents urged, one segment of the domestic
industry, minimills, was becoming increasingly important and was more heavily dependant upon the
merchant market.  Thus, in discussing the relative effects of captive operations in the context of the
relative impact of imports on minimills, the USITC was simply recognizing a change in the conditionsof competition since 1993.
15.  Moreover, the evidence concerning the effects of imports that the USITC was examining was
different in 1999 than it was in 1993.  In 1993, the domestic industry’s market share fell by one
percent while its profitability declined sharply.
22  Notably, subject imports generally had higher prices
that fell less than the price of the domestic product.23  Further, it was reported that the domestic
producers led price declines as minimills entered the market.24  These factors led the USITC to
conclude that something other than dumped imports was causing injury to the domestic industry.
Even then, however, the USITC characterized its analysis at that time as giving “separate
consideration to the effect of subject imports on the merchant market  segment of the industry."25  As
Japan suggests, however, the USITC discussed captive production in terms of the captive
consumption segment.  Thus, it is obvious that the USITC did not find the distinctions between an
analysis based on the captive segment and an analysis founded in the merchant market as telling as
Japan now claims.
16.  By contrast, in the current case, subject imports doubled their market share at a time of
increasing consumption26, subject imports increasingly undersold the domestic like product27, and the
domestic industry’s financial indicators were decreasing at the time of the highest import
penetration.28  Respondents argued that established and efficient minimills were driving down
domestic prices and causing injury to the domestic industry.  The USITC thus looked at price declines
for these producers, finding them exaggerated because of competition with imports.29  In this analysis,
the USITC was compelled to consider the merchant market where minimills generally participate inthe marketplace.
17.  In these two cases, the USITC discussed the same phenomenon, but did it using different
terms and with different emphasis because the conditions of competition in the hot rolled steel
industry had changed in the intervening years.  Thus, it is Japan’s desired rote analysis which wouldviolate the Anti-dumping Agreement and not the met hod employed by the USITC in this case.  Japan
                                                     
22 Certain Flat Rolled Carbon Steel Products from Argentina, Australia, Austria, Belgium, Brazil,
Canada, Finland, France, Germany, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Poland,Romania, Spain, Sweden, and the United Kingdom, Inv. Nos. 701-TA-319-332, 334, 336-342, 344, and 347-353(Final) and Inv. Nos. 731-TA-573-579, 581-592, 594-597, 599-609 and 612-619 (Final), USITC Pub. 2664(August 1993) (“Flat Rolled Steel”) at 52.
23 Flat Rolled Steel at 48.
24 Flat Rolled Steel at 49-50.
25 Flat Rolled Steel  at 17 (emphasis added).
26 USITC Views at 12-13.
27 USITC Views at 14-15.
28 USITC Views at 18.
29 USITC Views at 15-16.WT/DS184/R
Page E-93
would have this Panel reject the USITC’s decision in favour of a methodology which concerned itself
with facts that are no longer relevant to the industry today.  The Panel should decline this offer.
Question 3:  What is the textual basis for interpreting Article 6.13 as requiring the
respondents to ask for help?
18.  Article 6.13 states that "[t]he authorities shall take due account of any difficulties experienced
by interested parties, in particular small companies, in supplying information requested and provide
any assistance practicable."  In order for an investigating authority to be aware of an interested party’s
need for assistance, such that Article 6.13 applies, the party must communicate, in some objective and
understandable manner, its need for assistance.  Otherwise, the investigating authority will not be
aware of the need for that assistance, while the responding party could later claim that it should havegotten help for which it never communicated a need.  Thus, Article 6.13 necessarily assumes that
parties have identified any problems that they are experiencing.
19.  The Panel’s question number 5, of its first round of questions to Japan, asked:  "Could Japan
provide the Panel with specific references to, or copies of, documents or other information which inJapan’s view demonstrates that the Japanese respondents requested the USDOC for assistance in
providing the information requested in the USDOC questionnaire?"  In its response, at paragraph 22,
Japan argued that the obligations of Article 6.13 are not dependent on a party’s request for assistance
and that KSC and NKK "made it clear" to Commerce that they "were experiencing difficulties."
However, that was not the case.  As explained in the United States’ second submission atparagraph 18, KSC, rather than communicating to Commerce its supposed need for assistance in
dealing with its affiliate CSI, requested that Comm erce excuse KSC altogether from its responsibility
for providing the requested information.  See also  United States’ First Submission at para. B-106.  If
KSC’s request to be excused from reporting the requested information was meant in fact to be a
request for assistance, then KSC was asking the Depa rtment to be a mind-reader.  An interpretation of
Article 6.13 that would require the Department to provide assistance under such circumstances is
neither logical nor permissible.
20.  With regard to the difficulties alleged to have been experienced by NKK and NSC in
reporting the weight conversion factors, the United  States notes that the Department facilitated the
efforts of these companies to provide the factors in various ways.  First, the Department’s
questionnaire did not require any particular methodology be used in providing the conversion factors.Instead, it gave both companies wide latitude to arrive at such factors in the manner most suited to
their own processes and data maintenance systems.  It was the companies, not the Department, which
were most familiar with these processes and systems.  Thus, any action which the Department might
have taken to prescribe exactly how any particular company should have obtained internal data and
calculated the conversion factor would have limited  that company’s options, rather than constituting
"assistance."   Second, the Department provided additional response time when requested by NKK
and NSC.  Both companies were granted extensions of both the original questionnaire deadline and
the deadline for the supplemental questionnaire.  Third, the Department’s service requirements permit
counsel for one respondent to examine the approaches used by counsel for other respondents, as a
source of possible solutions, should they lack ideas about how a particular issue might be approached(without imposing any particular approach).  In this  case, for example, if NKK had been truly stymied
as to how it might calculate a conversion factor, its counsel could have examined KSC’s initial
questionnaire response (which was provided to NKK ’s counsel long before NKK’s response to the
supplemental questionnaire was due) to determine whether KSC ’s methodology might be adaptable
to NKK’s own databases.   NKK did not need to wait for the Department point out this obviouspossibility.  Similarly, the Department should not have had to point out the obvious fact that coils
would be weighed at the factory, not at the Tokyo office, and that weight data not available at the
Tokyo office might nonetheless exist at the factory.  Thus, while Japan complains that the Department
failed to give NSC and NKK sufficient "assistanc e" with regard to the conversion factors, theWT/DS184/R
Page E-94
Department in fact provided all the "assistance" it could to these large, sophisticated companies who
were, themselves, the masters of the information requested.WT/DS184/R
Page E-95
ANNEX E-12
Answers of the United States to Questions from the Panel
at the Second Meeting of the Panel
(6 October 2000)
US RESPONSES TO THE PANEL’S QUESTIONS TO THE US
Question 6:  According to the United States, did KSC provide KSC-to-CSI sales data with its
Section A response as Japan maintains (paragraph 9 of Japan’s Oral Statement)?  On what
basis did the United States conclude in this case that prices of KSC to CSI were unreliable
because of association?  Did it base this conc lusion on any facts particular to the KSC-CSI
relationship, or the facts in this case, or di d the United States presume such prices were
unreliable based on the fact of that relationship?
1. The United States presumed that the KSC/CSI transfer prices were unreliable based on the
relationship between the parties:  KSC owned 50 per cent of CSI.  Such a presumption represents apermissible interpretation of Article 2.3 of the Agreement.  That article states, in pertinent part, that
"[i]n cases ... where it appears to the authorities concerned that the export price is unreliable because
of association or a compensatory arrangement between the exporter and the importer or a third party,
the export price may be constructed on the basis of the price at which the imported products are first
resold to an independent buyer, or if the products are ... not resold in the condition as imported, on
such reasonable basis as the authorities may determine."  In this case, Commerce presumed that the
parent-subsidiary association between KSC and CSI caused any prices between them to be inherentlyunreliable, because of the potential for manipulati on of those prices.  In such a case, Commerce will
nearly always use the downstream sales to the first unrelated buyers as a basis for calculation of
export price.
2. This is not to say that Commerce always  insists on using downstream prices.  It is the
Department’s practice not to use downstream sales in two circumstances which presented themselves
in this case: where the "special rule" for further manufacturing applies and where there are a small
number of sales through a US affiliate.  As explained in the United States’ first submission, para.
B-122, and in the US response to question 42 of the Panel’s first questions, KSC requested that
Commerce exclude CSI’s sales pursuant to the "special rule" for further manufacturing.  Under thatrule, if substantial value is added (over 65 per cent) to  the imported product before it is sold to the first
unrelated buyer, Commerce will not construct export price, on the theory that it is not worth gathering
all the necessary information concerning further manufacturing and then "backing out" those data to
construct the price.  Instead, in such a situation, Commerce uses a surrogate export price.  In this case,
KSC did not meet the threshold for the “special ru le” and Commerce did not apply it.  By contrast,
KSC requested, and Commerce agreed, to exclude altogether its sales to its affiliate VEST, because
they represented such a small amount (less than 5 per cent) of KSC’s US sales.
3. Nevertheless, even if Commerce had wanted to calculate export price using the limited
KSC/CSI sales data which KSC did supply with it s Section A questionnaire response (JP-93(f) and
US/B-24bis), it would have been unable to do so, because that information was inadequate as a basis
for the calculation of export price.  KSC did not provide the data necessary for an accurateWT/DS184/R
Page E-96
product-by-product matching to Japan’s home market sales.  The missing information included:
product characteristics such as prime or not prime, painted or not painted, the quality, the amount of
carbon, the yield strength, coil or cut-to-length, temper rolled or not temper rolled, pickled or not
pickled, the edge trim, and with or without patterns in relief; selling expenses such as rebates, credit
expenses, advertising expenses, warranty expenses, technical services expenses, indirect sellingexpenses, and packing expenses; and terms such as order date, payment date, sales terms, payment
terms, and quantity type.  In fact, KSC never responded to Commerce’s Section C questionnaire,
which requested full matching data for KSC’s downstream sales through CSI.  See Exh. JP-42(p) and
(v).
4. Although KSC did supply limited KSC/CSI transfer price data (Exh. US/B24bis and
JP-93(f)), the data it supplied responded only to Commerce’s Section A questionnaire, whichrequested general quantity, price, and value data for further manufactured products.  Commerce
routinely requests such data, which can be used to determine whether the “special rule” for further
manufactured products, involving substantial value added, may apply.  When KSC later requested to
be excused from reporting its sales to CSI, it used th is volume and value data to support that request.
See Exh. JP-42(i).  While the KSC/CSI transfer price data were sufficient for, and indeed used by,
Commerce to determine the applicability of the specia l rule, they were completely inadequate to serve
as a basis for calculating export prices to be matched to identical or similar home market prices in
Japan for purposes of the margin calculation.
5. Finally, with regard to Article 2.3 generally, the United States does not wish to suggest, by
this answer to the Panel’s question, that the United States considers every export transaction that
involves an “association or compensatory arrangement between the exporter and the importer or a
third party” to require the construction of an export price, per se.   There are many forms of
association, some of which are quite remote.  Presumably, there are forms of compensatory
arrangements that would amount to simple adjustments to the export price, rather than indicating thatthe export price was not an arm’s-length price, and therefore was not an appropriate basis for the
dumping comparison.  It is possible that in many of these situations, the United States would not
consider the construction of an export price necessary.
6. The relationship between KSC and CSI, however, did not involve a mere “association”
between the exporter and the importer or some objective compensatory relationship.  Rather, it
involved a very close level of affiliation  - - KSC was the 50 per cent owner of CSI.  Given this
intimate level of affiliation, there is absolutely no way that the intra-corporate transfer price between
KSC and CSI constituted an arm’s-length price that could serve as an appropriate basis for a dumping
comparison.
Question 7:  The US (in paragraph 41 of its second oral statement) makes a distinction between
“corrections” to questionnaire responses that were accepted by USDOC and “new information”
such as the weight conversion factors that we re not.  Could the US please explain what it
considers the difference is between “corrections”  and “new” information submitted in response
to a request for such information in the questionnaire?
7. A "correction" is a revision to data that have previously been submitted.  While corrections
necessarily involve replacing the erroneous data with different, hence "new," data, the Department
generally accepts information which should have been provided by a questionnaire deadline only
when it constitutes a correction to data which were timely submitted.
8. NSC and NKK did not submit any conversion factors in their responses to the original or
supplemental questionnaires requesting these factors.  These factors and their supporting data were
entire categories of information   which had not been submitted by the questionnaire deadlines; thus,
they were not "corrections."WT/DS184/R
Page E-97
9. Japan’s position suggests that a respondent can simply assert that requested data are
"unnecessary" or that it is "unable to respond," and that such statements in a questionnaire response
would then enable it to submit any and all categories of data, for the first time, at verification, under
the rubric of "corrections" to such statements.   Under this theory, by merely inserting a boilerplate
"place holder" in its questionnaire response, a responding party could convert any information it
wished to withhold until after the preliminary dumping determination into a "correction" the
Department would be forced to accept.
10. NSC and NKK assert that their original claims – that the factors were unnecessary or
impossible to provide --  were made in "good faith".  An assertion of good faith does not require that
these factors be accepted as "corrections."  This is not a workable standard, and the Agreement doesnot impose any such standard.  Administering agencies have no way of verifying the truth of
allegations as to what motives a company may have for providing, or withholding, particular data at a
particular time.  Were the position espoused by Japan to be adopted, administering authorities would
have to accept any data a party chose to provide at verification, so long as a protestation of "good
faith" (which could never be refuted) were made.  Just as the Agreement does not require reasonabledeadlines to dissolve under the effects of a "place holder" excuse, it also does not dictate that such
deadlines must dissolve whenever a party invokes the mantra of  "good faith."  Were the Panel to
adopt either of these positions, it would be impossible to enforce the reasonable deadlines necessary
to gather and allow comment on information in a systematic fashion, prior to the preliminary
determination.
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