WT/DS184/R
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ANNEX C
Second Submissions by the Parties
Contents Page
Annex C-1 Second Submission of Japan 2
Annex C-2 Second Submission of the United States 83
Annex C-3 Letter from the United States to Chairman of the Panel 110
Annex C-4 Letter from Japan to Chairman of the Panel 111WT/DS184/R
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ANNEX C-1
Second Submission of Japan
(13 September 2000)
TABLE OF CONTENTS
Page
INTRODUCT ION................................................................................................................... ...............7
I. PRELIMINARY OB JECTIONS.............................................................................................9
II. STANDARD OF REVIEW ....................................................................................................11
A. T HE DISPUTE SETTLEMENT UNDERSTANDING ("DSU")...........................................................11
B. T HE AD A GREEMENT ...............................................................................................................11
1. This case fits squarely within the factual standa rd of review .............................................11
2. The United States distorts the legal standard of review ......................................................12
(a) No interpretation should escape the disciplines of the Vienna Convention, even under
Article 17.6(ii) ............................................................................................................... ...........12
(b) The United States misstates the do ctrine of "subseque nt practice" ..........................................13
III. FACTS AVAI LABLE............................................................................................................ .13
A. T HE US P RACTICE OF APPLYING ADVERSE FACTS AVAILABLE VIOLATES THE AD
AGREEMENT ..............................................................................................................................1 4
1. Annex II does not authorize purpo seful adverse fa cts available ........................................14
(a) Parag raph 7 ................................................................................................................. ..............14
(b) Other Paragraphs in Annex II ................................................................................................ ...16
2. Article 6.8 does not authorize pur poseful adverse facts available......................................17
3. The legal authorities cited by the United States are not analogous or
authorit ative .................................................................................................................. ..........18
B. T HE APPLICATION OF ADVERSE FACTS AVAILABLE TO KSC V IOLATED THE AD
AGREEMENT ..............................................................................................................................1 8
1. The United States mi sstates the facts ....................................................................................19
2. The United States misinterprets the requirements of Paragraph 7 of Annex II...............21
(a) The United States misunderstands the plain meaning of the term "withheld"..........................21
(i) CSI’s President and CEO repeatedly made clear he could not and would not help
KSC respond to the USDOC.....................................................................................................22
(ii) Even though KSC was a part owner, it had no unilateral control of CSI.................................23WT/DS184/R
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(b) The United States misunderstands the plain meaning of "special circumspection" .................24
3. Article 6.13 unambiguously requires au thorities to take into account any
difficulties experienced by interested part ies and to provide assistance to those
parties........................................................................................................................ ...............25
4. USDOC’s failure to calculate a constructed export price for KSC violated
Article 2.3 of the AD Agreement ...........................................................................................26
C. T HE APPLICATION OF ADVERSE FACTS AVAILABLE TO NKK A ND NSC V IOLATES
THE AD A GREEMENT ...............................................................................................................27
1. The United States argues for unreasonable standards of timeliness and
unreachable standards for cooperation ................................................................................27
(a) Article 6.8 and Annex II establish a "reasonableness" standard for timely submission
of inform ation ................................................................................................................. ..........27
(i) The requirement of Paragraph 1 of Annex II for submission of information within a
"reasonable time" must be read in the context of USDOC general practice............................28
(ii) Paragraph 3 of Annex II requires authorities to take everything into account in
determining whether facts available are warranted.................................................................30
(b) The United States demanded an inappropriate standard of cooperation under Annex II..........31(i) The United States ignored the requirements of Paragraph 7 in choosing adverse
inferences..................................................................................................................... .............31
(ii) Paragraph 5 mandates acceptance of NKK’s and NSC’s corrections .....................................31
(iii) In both instances, USDOC ignored NKK’s and NSC’s additional cooperation during
verifica tion................................................................................................................... .............32
2. The United States improperly dismisses the duties the AD Agreement places on
authorities to conduct a fair investigation ............................................................................32
(a) NKK and NSC were entitled to reasonable guidance from USDOC under Article 6.13..........32
(b) The fair comparison requirements of Article 2.4 continue to apply to the calculation
of NKK’s and NSC’s margins ..................................................................................................34
IV. ALL-OTHERS  RATE ............................................................................................................3 5
V. AFFILIATED SALES IN  THE HOME MARKET.............................................................36
A. E
XCLUSION OF SALES TO AFFILIATES ......................................................................................36
1. The 99.5 percent test neither determines whether a sale is in the ordinary course
of trade nor results in  a fair comparison ..............................................................................36
2. The "everyone else does it" excuse is not only weak, but also wrong ................................38
3. Article 2.2 makes clear that any test for finding sales to be outside the ordinary
course of trade must be more rigorous than USDOC’s 99.5 percent test..........................39
B. R EPLACEMENT WITH DOWNSTREAM RESALES ........................................................................39
1. Article 2.1 does not justify use of do wnstream sales in the home market..........................40
2. If there are no home-market sales in the ordinary course of trade, then
Article 2.2 requires use of third-country sales or constructed value..................................40
3. The use of downstream resales also violates Article 2.4’s "fair comparison"
requirement .................................................................................................................... .........41
VI. CRITICAL CI RCUMSTANCE S ..........................................................................................42WT/DS184/R
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A. T HE AUTHORITIES CANNOT PREDICATE A FINDING OF CRITICAL CIRCUMSTANCES
ON "THREAT OF INJURY "..........................................................................................................42
B. USDOC’ S EARLY PRELIMINARY DETERMINATION OF CRITICAL CIRCUMSTANCES IN
THIS INVESTIGATION VIOLATED THE AD A GREEMENT ...........................................................43
1. There was no finding that imports were dumped ................................................................44
2. There was insufficient evidence of importer knowledge of dumping.................................44
3. There was insufficient evidence that import s had injured the domestic industry ............45
4. There was insufficient evidence of importer knowledge of injury .....................................45
5. There was no finding that imports were likely to seriously undermine the
remedial effect of any duty.................................................................................................... .46
6. Inappropriate measurement period for "massive imports" ...............................................47
7. The timing of the decision guaranteed that sufficient evidence would not exist ...............47
C. T HE US L AW, ON ITS FACE, VIOLATES THE AD A GREEMENT ................................................48
1. The US distinction between "mandatory" and "discretionary" laws is contrived...........48
2. The US law does not meet the requirements of Article 10 ..................................................49
(a) Absent findings............................................................................................................. ............50
(b) Insufficien t findings....................................................................................................... ...........51
VII. CAPTIVE PR ODUCTION ....................................................................................................51
A. T HE CAPTIVE PRODUCTION PROVISION VIOLATES THE AD A GREEMENT ON ITS FACE.........52
1. The plain text of the captive production provision impermissibly focuses
USITC’s analysis on an industry segment ............................................................................52
(a) The captive production provision does not add another factor to USITC’s analysis of
the domestic industry  as a whole ..............................................................................................5 3
(b) The captive production provision leaves USITC with no discretion to weigh overall
industry data as it sees fit................................................................................................... .......54
(c) The purported logic behind the captive production provision only underscores its
inconsistency with the AD Agreement .....................................................................................55
(d) The US Congress’ rejection of a more draconian captive production provision does
not imply that the steel industr y did not get wh at it wa nted .....................................................56
2. The captive production provision on its face violates Article 3 of the AD
Agreement...................................................................................................................... ..........57
(a) Artic le 3.2 ................................................................................................................. ................57
(b) Artic le 3.4 ................................................................................................................. ................57
(c) Artic le 3.5 ................................................................................................................. ................58
(d) Artic le 3.6 ................................................................................................................. ................60
3. Panel reports do not support the captive production provision .........................................60
4. Canadian and European Communities’ practices do not support the Agreement-
consistency of the captive production provision...................................................................62
D. T HE CAPTIVE PRODUCTION PROVISION VIOLATES THE AD A GREEMENT AS APPLIED
IN THIS CASE.............................................................................................................................62WT/DS184/R
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1. USITC might have reached a different conclusion had the captive production
provision not been applied ..................................................................................................... 62
2. USITC did not properly recognize the shielding effect of captive production..................63
3. The negative determination in the 1993 hot-rolled steel case resulted directly
from the shielding effect of captive consumption and demonstrates the decisiveimpact of the captive producti on provision in  this case ......................................................65
VII. CAUSATION DE TERMINATION ......................................................................................65
A. USITC F
AILED TO RENDER AN OBJECTIVE DETERMINATION BY MANIPULATING ITS
PERIOD OF INVESTIGATION TO JUSTIFY AN AFFIRMATIVE DETERMINATION .........................66
1. USITC selectively considered different periods to rationalize an outcome .......................66
2. USITC has always considered the enti re investigation period in analyzing
causation ...................................................................................................................... ............67
3. USITC has expressly refused to predicate past determinations on a two-year
analysis....................................................................................................................... ..............68
B. USITC I NADEQUATELY ANALYZED ALTERNATIVE CAUSES OF INJURY .................................69
1. Recent panel reports make clear that au thorities must isolate the injury caused
by alternative factors so as to not attr ibute this injury to  subject imports .......................70
2. USITC’s examination of each alternative cause of injury was inadequate .......................72
(a) Mini- mills .................................................................................................................. ...............72
(b) The General Motors strike ................................................................................................... .....74
(c) Non-subject imports and the pipe and tube recession...............................................................75
VIII. ARTICLE X CLAIM........................................................................................................... ...76
A. T HE US A DMINISTRATION OF ITS ANTI-DUMPING LAWS, RULES , REGULATIONS ,
AND PRACTICES WAS NOT "UNIFORM , IMPARTIAL , AND REASONABLE " ...............................76
B. T HERE IS NO DOUBT THAT ARTICLE  X A PPLIES TO A MEMBER ’S ANTI-DUMPING
ACTIONS ............................................................................................................................... .....76
C. T HE UNITED STATES VIOLATED ARTICLE  X:3( A) IN ITS INVESTIGATION OF HOT-
ROLLED STEEL FROM JAPAN ....................................................................................................77
1. USDOC improperly administered rules governing the use of facts available...................78
(a) Inconsistent treatment accorded  to the individua l respondents.................................................78
(b) USDOC’s non-uniform, partial, and unreasonable administration of facts available
rules as compar ed to USITC..................................................................................................... 78
2. USDOC failed to correct  ministeria l errors .........................................................................80
3. This case was unfa irly accelerated ........................................................................................81
4. The new critical circumstances policy applied retroactively to the Japanese
respondents.................................................................................................................... ..........81
5. USITC deviated from prior injury practice .........................................................................82
IX. CONCLUSION .................................................................................................................. .....82WT/DS184/R
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Business Confidential Information
In this Submission, including its Exhibits, Japan has placed Business Confidential
Information in brackets ("[]").  The bracketed information is highly confidential.  This information isprovided solely for the purpose of fully informing the Panel of the factual details of the Hot-Rolled
Steel investigations.  Japanese respondents would be seriously harmed if this information were used
for any other purpose or were made available to anyone outside the Panel, the Secretariat officials
assisting the Panel, and the official legal team of the United States and the third parties — especially
if this information were made available to any of Japanese respondents' competitors.  Japan therefore
respectfully requests that this information be protected and that it be omitted from the Panel's report.WT/DS184/R
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INTRODUCTION
1. Japan has demonstrated through its factual and legal presentations in this proceeding that the
United States has violated numerous provisions of the Agreement on Implementation of Article VI of
GATT 1994 ("the AD Agreement") as well as Article X of GATT 1994.  The United States has
attempted to deflect Japan’s substantive claims with faulty preliminary objections, convenientinterpretations of the relevant standards of review, and misconceived allegations that Japan’s case
relies on conspiracy theories.  These devices, however, cannot overcome the strength of Japan’s legal
claims.
2. This Second Submission focuses on the substance of these claims.  We do not repeat here the
political context in which the United States made the decisions in this case.  We instead merely wish
to remind the Panel that the context is important to discerning whether the United States has met its
obligations to conduct its investigations in an ob jective, unbiased, uniform, impartial, and reasonable
manner – standards that are critical to any case under the AD Agreement and Article X:3(a) of GATT
1994.
3. This case presents a number of actions and policies undertaken by the US authorities that violate
the AD Agreement, as follows:
• Facts Available:  USDOC has converted the "facts available" provisions of the AD
Agreement from an investigative gap-filling tool into an adversarial weapon to be used
against foreign respondents.  The general practice of using adverse facts available to punish
respondents is inconsistent on its face with both the letter and spirit of Article 6.8 and Annex
II of the AD Agreement.  Further, the application of the policy in this case demonstrates its
abusive nature.  KSC was punished for its failure to find a way to force a petitioner to
cooperate in the investigation for the benefit of a respondent.  NSC and NKK were punishedfor good faith misunderstandings in their initial questionnaire responses, which were
ultimately corrected before the closing of the factual record.  The US authorities misapplied
Paragraph 7 of Annex II and ignored the obligation of Article 6.13.
• All Others Rate:  USDOC interprets Article 9.4 as if it includes the word "entirely," and thus
calculates the "all other rate" applicable to companies not investigated based on margins
tainted by "facts available."  What the United States could not achieve in the negotiations of
the Uruguay Round, the United States unilaterally adopts as its interpretation of the treaty
text.
• Affiliated Parties:  USDOC applies an arbitrary and unfair 99.5 percent test to exclude nearly
all low-priced home market sales to affiliates while excluding high-priced sales to affiliates
only if they are "aberrationally high."  This  particular USDOC policy so clearly violates
Article 2.4 that not one of the five third parties in this case defends this policy, and four of the
five parties specifically condemn the policy.  Also, the United States uses downstream prices
to calculate normal value, without appropriate adjustment, in direct contravention of the
requirements of Article 2.2 to use a respondent’s available home market sales or other
specified alternatives.
• Critical Circumstances:  USDOC rushed to judgment to make an early finding of critical
circumstances long before it had sufficient evidence within the meaning of Article 10.6 to do
so.  USDOC formalized this approach of relyin g almost exclusively on the petition itself in a
new policy bulletin that ensures this problem will repeat itself.
• Captive Production:  The statutory provision on captive production impermissibly requires the
USITC to focus primarily on one segment, at the expense of the other segment and theWT/DS184/R
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domestic industry as a whole.  The statute does not simply add another factor, or allow
appropriate consideration of all factors.  The statute instead significantly skews the analysis in
favour of one segment.  This analytic approach thus violates the explicit requirement in
Articles 3 and 4 for injury determinations to be based on the domestic industry as a whole.
• Causation:  USITC impermissibly manipulated the periods examined to justify its outcome.
Rather than objectively determine the facts, USITC simply ignored the logical inconsistency
in its finding -- that the domestic industry increased its shipments and improved financial
performance even with an increase in imports.  Such self selection does not meet the
requirement of Article 3.1 for an "objective examination," or Article 3.5 for a determination
that subject imports themselves caused the material injury.  USITC also inadequately
considered alternative causes, and thus violated the Article 3.5 requirement not to attribute
other causes to the imports being investigated.  Selective discussion of favourable facts andignorance of unfavourable facts simply does not meet the requirements of Article 3.
4. Beyond these AD Agreement violations, the US authorities also breached their obligations under
GATT 1994 Article X:3(a) to administer the anti-dumping law in a "uniform, impartial, and
reasonable" manner.  These obligations exist independently of the AD Agreement, and the Panelshould therefore address these separate and independent claims.  They are summarized as follows:
• Notwithstanding USDOC’s application of punitive adverse facts available for far less severe
actions by respondents, USITC accepted corrected questionnaire responses from domestic
companies filed well after the initial deadline but before the closing of the factual record.  The
United States pretends this asymmetry does not exist, and in doing so has the audacity to
claim that the domestic companies made "timely" responses citing the USITC version of thevery regulation that USDOC claims did not apply to the foreign companies.
• Notwithstanding an existing and uniformly followed regulation, the authorities conveniently
overlooked clerical errors the correction of which would benefit foreign respondents, eventhough there was no dispute at all over the clerical error or the applicability of the regulation
at issue.
• Notwithstanding a longstanding practice of not accelerating cases, particularly complex cases,
the authorities pushed this case through in record time.  Instead of taking more time to
proceed carefully, the United States rushed to finish early.
• Notwithstanding an existing customs policy that would have easily allowed the authorities to
collect retroactive duties should they prove necessary later in the case, the authorities instead
capitulated to domestic industry demands to craft a new policy.  The authorities then rushed to
apply the new policy in this case regardless of the state of the factual record.
• Notwithstanding a long history of analyzing three-year trends, USITC chose to focus on only
two-years of the investigation period so as to avoid the logical inconsistencies of considering
all three years.
Although all of these decisions reflect the degree of political pressure on the US authorities, none of
these decisions complies with the obligation for "uniform, impartial, and reasonable" administration
of the law.
5. This case is very much about respect for the rule of law, and respect for international obligations.
The Panel decision in this case will show whether the obligations reflected in the AD Agreement andin GATT 1994 Article X:3(a) are meaningful or not.  If there are any limits on the discretion thatWT/DS184/R
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administering authorities enjoy, then this case presents multiple violations of those limits that this
Panel should discipline.
I. PRELIMINARY OBJECTIONS
6. The United States made preliminary objections concerning certain evidence submitted by Japan as
well as Japan’s claim against the US general practice of applying adverse facts available.  We addressonly the former here; the latter is addressed separately in the section concerning facts available.
7. Japan believes that its letter of 10 August 2000 and its answers to Panel Question 3 demonstrate
that all the factual information in this case are properly before the Panel.  There are three kinds of
claims in this proceeding: (a) "as applied" clai ms under the AD Agreement, (b) "on its face" claims
under the AD Agreement, and (c) claims under GATT 1994 Article X:3(a).  The issue raised by the
United States in its preliminary objections to certain evidence is the extent to which Article 17.5(ii) of
the AD Agreement limits the factual evidence that the Panel can consider with respect to these threetypes of claims.
8. The United States has conceded that "on its face" claims are not limited by Article 17.5(ii) of the
AD Agreement.
1  Japan agrees.  Indeed, "on its face" claims could not be limited by Article 17.5(ii)
because the claims are not based solely upon what an authority did in a specific investigation.
9. The same logic applies to Japan’s Article X claims. Article X claims are based on a different set
of facts than "as applied" claims under the AD Agreement.2  Article X is, inter alia , a comparative
task in which the Panel compares the treatment of one party to another party (such as petitioners
versus respondents), or the treatment of the resp ondents in this investigation to the treatment of
respondents in other US investigations in terms of the administration  of a law, regulation, or practice.3
Therefore, contrary to the US assertion in its response to Panel Question 23, it makes perfect logical
sense that a specific decision might not substantively violate the obligations of the AD Agreement,
but that the administration of rules leading to that decision violates Article X of GATT 1994.
Although a decision in isolation might not l ook biased for AD Agreement purposes, when the
administration leading to that decision is compared  to other instances, the partiality often becomes
crystal clear.4
                                                     
1 US Response to Panel Question 39.  The United States later in its response to Panel Question 39
makes a hypocritical statement that should be ignored.  After asserting that extra-r ecord evidence can be used to
support "on its face" claims, the US encourages the Panel to ignore Japan’s expert evidence from a statisticianbecause Japanese exporters should have submitted it to USDOC during the investigation.  The Japaneseexporters vociferously argued against the 99.5% test in the original investigation.  Japan should not now bepunished in making its "on its face" claim for the fact that perhaps the exporters did not find it worth the
resources to hire an expert statistician for an AD investigation before a biased authority that had used this
practice in nearly every prior case.  Expert testimony on the "fairness" of a particular methodology, however, isquite appropriate before a WTO panel considering the proper interpretation of the word "fair" under the ADAgreement.
2 The United States incorrectly suggests that the only contested evidence relevant to Japan’s Article X
claims is two newspaper articles.  All of the newspaper articles that provide background on the case and
illustrate the biased and zealous manner in which the domestic industry, Congress and the US AD authority
were operating help explain why the US AD authority resorted to non-uniform, partial and unreasonableadministrations of its rules.  See Exhibits JP–16-23, 25-27, 32(a)–(e), 37, 38 .  In addition to these articles, in its
Article X claims Japan also references NKK’s good-faith behaviour in trying to respond to USDOC’s weightconversion factor.  See Japan’s First Submission, para. 317.  In this way, Mr. Porter’s affidavit is also relevant to
Japan’s Article X claims.  See Exhibit JP–28 .
3 The difference between Japan’s GATT 1994 Article X claims and its claims under the AD Agreement
is set forth in greater detail in the section of this submission dealing with Article X.
4 A perfect example is USDOC’s refusal to correct its  clerical error that inflated NKK’s preliminary
margin by 12 percentage points.  While the decision not to correct an error before the Final Determination mightWT/DS184/R
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10. With respect to the "as applied" claims, this so- called "extra-record" evidence is essential for the
Panel to complete its task in this case.  Article 17.6(i) requires the Panel to determine whether the
authorities properly established facts and undertook an objective and unbiased evaluation of the facts.
Fitting together with it, DSU Article 11 requires panels to make an "objective assessment" of the
matters before it.  The Panel cannot determine whether the facts were properly established andobjectively assessed without considering the context of those facts.
5  Therefore, the Panel is obligated
under WTO rules to consider all proffered evidence that will shed light on these important issues.
11. Moreover, within the "as applied" claims, Japan makes both legal and factual claims.  In this
regard, the expert opinion of the statisticians does not present any new or extra-record facts.  Rather, it
is an expert opinion based on record facts that the USDOC arm’s length test is unfair.  The affidavits
of respondents’ counsel, contrary to presenting new factual information, for the most part document
margin impact based on record facts .  There is no basis, therefore, upon which to exclude the
statements.  The affidavits are explicit in demonstrating step-by-step how the affiants reached their
conclusions based on the record information or information improperly expunged from the record by
USDOC.
12. Newspaper articles are provided (a) to give the Panel context when it examines whether the US
authority properly established facts or assessed facts in an objective and unbiased manner6 and (b) to
summarize information for the Panel.7  The articles demonstrate the extent of lobbying exerted by the
domestic steel industry in this case on Congress which then exerted pressure on USDOC.  The articles
highlight the zealous nature of the actions taken by the United States in this case.  The articles place
certain extraordinary decisions made by USDOC in context so that the Panel can determine whether
an objective and unbiased authority would have reached these decisions.  There was no reason for theJapanese exporters in the underlying investigation to submit these articles.  The articles are
themselves about the investigation and USDOC’s conduct during the investigation.
13. As a result, all of the evidence submitted by Japan is worthy of the Panel’s consideration.
                                                                                                                                                                    
not create a substantive AD Agreement violation, when co mpared to the fact that USDOC maintains a consistent
practice of correcting these significant errors in other cases, the bias and partiality becomes clear.
5 Article 17.5(ii) does not say the Panel should rely only upon evidence before the authority.  The
provision operates in conjunction with DSU Article 11 which obliges the Panel to make an objective assessment
of all of the facts.  There is no conflict between Article 17.5(ii) of the AD Agreement and Article 11 of the DSU.The Appellate Body has been very clear that Article 17 of the AD Agreement does not trump the broader rightsand obligations of panels and members.  See United States—Anti-Dumping Act of 1916 , 28 Aug. 2000,
WT/DS136/AB/R, WT/DS162/AB/R, at para. 74 (" U.S.—1916 Act" ) and Guatemala—Anti-Dumping
Investigation Regarding Portland Cement from Mexico , adopted 2 Nov. 1998, WT/DS60/AB/R, at para. 65-67
("Guatemala—Cement ").  Moreover, the Appellate Body has established that panels have broad authority to
look at evidence and determine its probative value, speci fically so that panels can discharge their Article 11
obligations.  See United States—Import Prohibition of Certain Shrimp and Shrimp Products,  adopted
6 Nov. 1998, WT/DS58/AB/R, at paras. 104-106 (" U.S.—Shrimp" ).  The Appellate Body stated:
The thrust of Articles 12 and 13, taken together , is that the DSU accords to a panel established
by the DSB, and engaged in a dispute settlement proceeding, ample and extensive authority to undertake and to
control the process by which it informs itself both of the relevant facts of the dispute and of the legal norms andprinciples applicable to such facts.  That authority, an d the breadth thereof, is indispensably necessary to enable
a panel to discharge its duty imposed by Article 11 of the DSU to "make an objective assessment of the matterbefore it, including an objective assessment of the facts of the case  and the applicability of and conformity with
the relevant covered agreements ." (emphasis added in the report)
6 See Exhibits JP–16-23, 25-27, 32(a)–(e), 37, 38.
7 See Exhibits JP–32(a)–(e), 33, 36 .  As for Exhibit JP–34(a) , if an exporter referred the authority to
the article, then it is on the record and Japan can use that Article before the Panel.  It does not matter if theexporters provided copies of the Article or not.WT/DS184/R
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II. STANDARD OF REVIEW
A. THE DISPUTE SETTLEMENT UNDERSTANDING ("DSU")
14. The United States misunderstands the operation of the appropriate standards of review in this
case.  Although the AD Agreement does indeed contain a unique standard of review,8 Article 11 of
DSU does not lose its meaning as we described in Paragraph 10, and Japan has not brought this case
only under the AD Agreement .  Japan has raised simultaneous claims under GATT 1994 regarding the
US administration  of its anti-dumping rules that deserve equal attention and consideration by the
Panel.  Therefore, Article 11 of the DSU is the applicable standard of review for Japan’s Article X
claims under GATT 1994.
15. The United States has effectively conceded this fact.  Their only argument pertaining to the DSU
standard of review is to assert, with absolutely no support, that Article X:3 of GATT 1994 simply
cannot  apply to a Member’s anti-dumping actions.9  By focusing only upon the standard of review
under the AD Agreement, the United States has effectively conceded that Article 11 of the DSU
controls the Panel’s standard and scope of review with respect to Japan’s GATT 1994 Article X claim
– a claim that is separate and independent of the claims under the AD Agreement.  In this way, the
Panel should remain mindful of its obligation to consider all facts and evidence under Article 11 of
the DSU.  The United States cannot hide behind an alleged deferential standard of review contained inthe AD Agreement to limit the Panel’s review over the entire  case.
B. T
HE AD A GREEMENT
1. This case fits squarely within the factual standard of review
16. In theory, the parties are in agreement as to the operation of the standard of review.  Japan was
explicit in its First Submission that it is not asking  the Panel to reweigh the specific facts in this
case.10  Rather, each factual claim is based on either the improper establishment of the facts (including
the failure to consider essential facts) or the biased and non-objective evaluation of the facts.
17. Where the parties disagree sharply, however, is the level of deference the Panel is to pay to the
factual conclusions of a national authority.  Although Japan agrees that the Panel should not reweigh
the facts, the first sentence of Article 17.6(i) specifically directs the Panel to examine whether thenational authority properly established the facts and evaluated the facts in an objective and unbiased
manner.  This consideration requires absolutely no deference on the part of the Panel.  If the Panel
finds instances in which the national authority improperly established facts or failed to evaluate the
facts in an objective and unbiased manner, then those determinations fail to meet the basic
requirements of the AD Agreement.
18. The United States also misstates the "scope" of the Panel’s factual review.
11  First, Japan’s
challenges in this case are not limited to only the hot-rolled investigation.  To the extent, therefore,that Japan has made "on its face" challenges, Article 17.5(ii) is irrelevant.  Second, contrary to the US
                                                     
8 Oddly, in footnote 97 in Part A of its First Submission, the United States claims that this unique
standard of review also applies to matters pertaining to subsidies and countervailing measures.  This claim is
false.  The United States recently lost this argument before the WTO Appellate Body in United States—
Imposition of Countervailing Duties on Certain Hot- Rolled Lead and Bismut h Carbon Steel Products
Originating in the United Kingdom , adopted 7 June 2000, WT/DS138/AB/R,  at paras. 50-51.
9 US First Submission, para. A-88 (emphasis added).  The obvious applicability of GATT 1994
Article X to anti-dumping measures is discussed in more detail in the section of this submission covering
Japan’s actual Article X claims.
10 Japan’s First Submission, para. 49.
11 Japan’s detailed arguments on this topic are presented in Japan’s 10 August 2000 Response to US
Preliminary Objections.WT/DS184/R
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view, Article 17.5(ii) of the AD Agreement does not limit review to the "administrative record."
Importantly, the Panel must take into account facts that are "placed" before an authority, but not
placed on the actual record.  The US attempt to lim it the scope of the Panel’s review would, in fact,
preclude the Panel’s ability to carry out its factual standard of review in which it must examine the US
authority’s initial establishment of the facts, and consider whether the authority evaluated the facts in
an unbiased and objective manner.
2. The United States distorts the legal standard of review
(a) No interpretation should escape the disciplines of the Vienna Convention, even under
Article 17.6(ii)
19. In advocating unlimited deference to Member’s in terpretations of the AD Agreement, the United
States would have the Panel allow the United States to interpret the AD Agreement at its own will.
Article 17.6(ii) stipulates that panels must interp ret the anti-dumping provisions in accordance with
"customary rules of interpretation of public international law," a clear reference to the Vienna
Convention.12  Nearly every panel and Appellate Body d ecision now refers to the Vienna Convention
as the primary set of rules that govern treaty interpretation in the WTO context.  The deliberate
insertion into Article 17.6(ii) of a reference to the customary rules of interpretation requires an
interpretation "in good faith in accordance with the ordinary meaning to be given to the terms of the
treaty in their context and in the light of its object and purpose"  as stipulated in Article 31 of the
Vienna Convention.13  And Article 32 of the Vienna Convention instructs an interpreter as to how to
deal with ambiguity, if any, by referring to th e treaty’s supplementary materials.  Faithfully
interpreted, Article 17.6(ii) thus bars Members from arbitrarily interpreting the provisions of the AD
Agreement in a way that neglects their object and purpose.14  Accordingly, the attempts of the United
States to justify its interpretation by referring to the second sentence of Article 17.6(ii) must fail.
When the Vienna Convention and the language of Article 17.6(ii) are read together, in their entirety,
they do not give a Member carte blanche  authority to equate ambiguity with multiple interpretations
as the United States attempts here.
20. Even when the Panel finds a provision subject to more than one interpretation, that interpretation
must still be "permissible" on the basis of good faith  interpretation as elaborated above.15  The Panel
does not owe unrestrained deference to a Member’s legal interpretation of treaty text.  Rather, the
Panel must scrutinize the permissibility of that interpretation in light of the Vienna Convention rules
of treaty interpretation and a Member’s obligation to implement the WTO Agreements in good faith .
                                                     
12 See Steven P. Croley and John H. Jackson, WTO Dispute Procedures, Standard of Review, and
Deference to National Governments, 90 Am. J. Int’l L. 193, 200 (1996).
13 Vienna Convention on the Law of Treaties, art. 31.1 (emphasis added).
14 In footnote 105 in Part A of its First Submission, the United States challenges the opinion of two
GATT scholars that the anti-dumping standard of review allows for only one permissible interpretation.  Far
from recognizing the similarities between the standard of review and US law, the scholars point out thesignificant differences between the two bodies of law.  Moreover, they explain the negotiating history ofArticle 17.6(ii), which evolved from a US proposed standa rd that recognized the use of multiple interpretations
to the current and more limited standard of review that relies first and foremost on the Vienna Convention.  See
Steven P. Croley and John H. Jackson, WTO Dispute Procedures, Standard of Review, and Deference to
National Governments , 90 Am. J. Int’l L. 193, 209-211 (1996).  The United States is simply trying to achieve in
dispute settlement what it failed to achieve in negotiations.  See Gary N. Horlick and Peggy A. Clarke,"Standards for Panels Reviewing Anti-dumping Determinations under the GATT and WTO," in 41 Studies in
International Economic Law:  International Tr ade Law and the GATT/WTO Dispute Settlement System  315,
317-320 (Ernst-Ulrich Petersmann ed. 1997), which analyzes the consistent rejection by WTO Members of USproposals regarding the anti-dumping legal standard of review during the Uruguay Round.  (Attached as
Exh. JP-92 ).
15 The Government of Japan endorses the argument made by the Government of Brazil that the concept
of "good faith" serves as an important tool of interpretation that should guide the Panel in determining the limitsof "permissible."  See Brazil’s Third Party Submission, paras. 5-11.WT/DS184/R
Page C-13
(b) The United States misstates the doctrine of "subsequent practice"
21. Finally, the United States misleads the Panel as to the appropriate international practice under
Article 31(3)(b) of the Vienna Convention governing subsequent practice.  In this Article,
"subsequent practice" must be those which establish "the agreement of the parties."16  With no citation
whatsoever, the United States whittles down this tool of interpretation to require only that " a number
of signatories to the Agreement" have adopted the practice.17
22. Using this faulty premise, throughout its submission the United States alleges that other Members
have interpreted the AD Agreement in a manner identi cal to the United States.  In this submission,
however, Japan will point out that many Members do not interpret the AD Agreement in the same
manner as the United States, thereby nullifying any potential for the establishment of a "subsequent
practice" under the accepted Vienna Convention interpretive tool.  The concept of "subsequent
practice" is about agreement and a concordance of actions; it is not about codifying varied practices orthe practices of only a few dominant Members.
III. FACTS AVAILABLE
23. Japan’s argument on facts available is that not only the application of relevant provisions of the
US Statute in this case, but also USDOC’s general practice of applying adverse facts available,
violates the AD Agreement.  Although the US statut e itself may or may not be consistent with the
Agreement, the general policies and methodologies with which USDOC consistently applies it are
definitely not.  Rather than use the facts available provisions of the AD Agreement as an investigative
tool to find reliable information to fill gaps in information -- regardless of how those gaps are created
-- USDOC uses them as a mechanism to punish respondents.  Nowhere does the AD Agreement
support such a policy.
24. The extreme nature of USDOC’s facts available practice emerges in the arbitrary treatment of
KSC, NSC, and NKK in the hot-rolled steel case.  Each company cooperated with USDOC’s
information requests.  None of them refused to provide information; none of them refused on-site
verification.  When they had trouble reporting info rmation, they informed USDOC of their difficulty.
The United States itself admits the Japanese companies were "substantially or largely cooperative" inthis case.
18  Yet in the face of such facts, the United States now portrays them as the "bad secretary."19
25. The facts -- properly established and objectively evaluated -- belie this offensive analogy.  KSC
faced a situation in which USDOC has in the past applied special circumspection:  USDOC required it
to supply data from an affiliated US customer whose role as a petitioner in the case placed it odds
with KSC’s interest in providin g USDOC with complete informati on.  USDOC did not even consider
KSC’s good faith attempts to comply with USDOC ’s requests notwithstanding this conflict of
interest.  Rather than look for a reliable alternative, USDOC resorted to facts that would punish KSC.
26. USDOC also punished NSC and NKK.  In response to a good faith misunderstanding by NSC
about what information it had, and a good fa ith misunderstanding by NKK about what USDOC
                                                     
16 The Appellate Body has explained that, "the essence of subsequent practice in interpreting a treaty
has been recognized as a ‘concordant, common and consistent’ sequence of acts or pronouncements which is
sufficient to establish a discernable pattern implying the agreement of the parties regarding its interpretation."Japan—Taxes on Alcoholic Beverages , adopted 1 Nov. 1996, WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R, at 13 n.24 (citing Sinclair, The Vienna Convention on the Law of Treaties  137 (2
nd ed., 1984),
among others).
17 US First Submission, para. A-86 (emphasis added).  The United States also goes so far to say that a
varied subsequent practice among Members demonstrates that there are multiple interpretations of a provision.
Varied subsequent practice, rather, demonstrates a lack of agreement and a need for clarity.
18 US Response to Panel Question 27, para. 16.
19 US Closing Statement, page 2.WT/DS184/R
Page C-14
wanted, USDOC overreacted.  Rather than accept and then verify the information when it was
offered, USDOC instead excluded the information from  the record.  That the missing information had
little impact on the margin underscores the extreme nature of the USDOC policy.  Even though the
nature of the information and the impact on the margin showed that respondents could not possibly
have been trying to manipulate the results, USDOC assumed the worse and lashed out in a punitiveway.
27. The US defense of its policy underscores the wrong-headed manner in which USDOC approaches
its task.  Article 6.8 and Annex II of the AD Agreement do not permit the adversarial nature of
USDOC anti-dumping investigations.
A. T
HE US P RACTICE OF APPLYING ADVERSE FACTS AVAILABLE VIOLATES THE AD
AGREEMENT
28. The language of USDOC’s policy has a distinctly deterrent and punitive ring to it:  "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. . . ."20  I n  o t h e r
words, the policy says to the respondent "if you don’t obey, you will be punished."  The AD
Agreement does not permit this.  As we explained in response to Panel Questions 4, 6, and 7,
Article 6.8 and Annex II of the AD Agreement are carefully worded to ensure that authorities focuson obtaining the most necessary and reliable facts, not punishing respondents.
29. Japan has already addressed twice the reasons why its Panel request was sufficiently detailed on
this topic in its 10 August 2000 Response to US Preliminary Objections (paragraphs 32-37) and in its
6 September 2000 Answers to Panel Questions (paragraphs 10-12, answering Question 3).  We
merely reiterate here that the United States concedes it did nothing different in this case from what itdoes in every case.  If this is true, then the US preliminary objection is merely aimed at urging the
Panel to limit any remedy it issues on this topic to  the facts of this case.  We hope that the Panel
understands that such a limitation merely invites repetitive litigation on USDOC’s wrongful
application of adverse facts available.  If the Panel accepts that the United States applied a general
policy in this case that was inconsistent with th e AD Agreement, then the remedy should be aimed at
stopping the United States from continued application of such a policy in all future cases.
30. The United States cannot reconcile its practice to the AD Agreement.  Its punitive use of adverse
facts available ignores the requirement of Paragraph 7 to choose secondary facts with special
circumspection.  Rather than look for the most re liable information under the circumstances, USDOC
searches for the heaviest club it can find to beat the respondent over the head.  What the United States
fails to understand is that anti-dumping laws, as prescribed by the AD Agreement, are aimed at
reaching the truth through the investigative process.  Authorities are not permitted to treat respondentsas adversaries, like USDOC chooses to treat them .  The aim of the authority, at least as far as
Article 6.8 and Annex II of the AD Agreement are concerned, is to work with respondents and their
data, supplemented with other available information, to obtain facts that are as close to reality as
possible.
1. Annex II does not authorize pur poseful adverse facts available
(a) Paragraph 7
31. The United States relies most heavily on Paragraph 7 of Annex II to support its punitive use of
adverse facts available.  The United States claims that the "less favourable" language in the third
sentence of this Paragraph authorizes authorities to apply adverse facts available.
21  This interpretation
                                                     
20 USDOC  Final Dumping Determination , 64 Fed. Reg. at 24362, 24369 ( Exh. JP-12 ).
21 US First Submission, para. B-66 to B-67.WT/DS184/R
Page C-15
is misguided as it takes the sentence out of context and ignores the careful choice of words throughout
the paragraph.
32. As we explained in our response to Panel Question 4 (paragraphs 14-18), Paragraph 7 of Annex II
applies once the decision is made to apply facts available.  The entire thrust of the Paragraph is that
the authority must take special care in choosing the facts available -- in other words, to findinformation 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 one place, among many, 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 by
missing information.
33. The final sentence of Paragraph 7 does not change this overriding purpose.  The sentence merely
contemplates that if a party does not cooperate and withholds information, then a less favourableresult might occur than if the party had cooperated and did not withhold information.  The language of
Paragraph 7 obviously draws a line between the party that withholds and the party that does not.  But
in all cases, the overriding purpose behind making such inferences is fact-driven:  in other words,
upon applying special circumspection and checking the information against other information (as
required by Paragraph 7), the authority may decide that the most reasonable and logical manner inwhich to fill the gap caused by the missing information is to use facts which might turn out to be less
favourable to the respondent.  The purpose is not, as the US practice expressly states, to punish
respondents for not providing the information.  The fo llowing table helps to illustrate the differences
between what Paragraph 7 contemplates and the US general practice:WT/DS184/R
Page C-16
Requirement of AD Agreement
(To Find The Most Reliable Facts)US General Practice
(To Induce Respondents to Cooperate,
 i.e., To Punish)
• The title of Annex II generally calls on
authorities to find the "best information
available."• The US does not ask whether the information is
"best" under the circumstances.
• Paragraph 7 calls on authorities to use "special
circumspection" and "to check the informationfrom other independent sources."• The US does not apply special circumspection
or check its choice of facts available againstany other information.  In fact, the US claimsthat it has no reason to do so when the
information used belongs to the respondent
itself.
• In other words, when information is missing,
the authority must be very careful in its choiceof facts available.  Any choice  must be logicaland reasonable.  To the extent any inferences
are made concerning the respondent’s
cooperation, they too must be logical andreasonable.  The purpose is to use facts thatmost closely resemble reality.• The US has no intention to find facts that most
closely resemble reality.  Rather, theyspecifically seek to punish the respondent fornot cooperating when they use facts
"sufficiently adverse so as to effectuate the
statutory purpose of the adverse facts availablerule to induce respondents to provide theDepartment with complete and accurateinformation."
• In some cases, after applying special
circumspection, an authority may find that the
most logical and reasonable inference is onethat turns out to be less favourable to therespondent, including margins alleged in thepetition.  But, nonetheless, the purpose is to
find the most reliable facts.• The language of the US practice demonstrates
the difference in approaches.  "The purpose of
the adverse facts available rule," according tothe U.S., is to force respondents to cooperate,not to find the most reliable facts.
34. Even if the exporter does not or is not able to provide the requested information, the onus remains
on the investigating authority to determine whether dumping exists using facts available.  On this
point, the United States asserts erroneously that the Panel in U.S.—Atlantic Salmon did not reject the
principle that adverse inferences may be drawn where appropriate.22  U.S.—Atlantic Salmon did not
address the specific issue of whether a Member may adopt a practice of purposefully punishing anexporter with adverse facts available.  That dispute focused on the impact of the choice of facts
available on the non-sample group.  Nonetheless, certain principles relevant to this dispute can be
extracted from the Panel’s analysis in U.S.—Atlantic Salmon .  In particular, the panel considered
representativeness  to be an important goal when applying facts available.  The overall goal of an
investigation, therefore, is to calculate the correct margin, or at least a representative margin.  The
level of participation or non-participation of the exporters does not excuse investigating authorities
from seeking that goal.
(b) Other Paragraphs in Annex II
35. In grasping for some basis to support its punitive form of adverse facts available, the United
States attempts to read into other provisions of Annex II concepts that are not there.  The United
States argues that the warning set forth in Paragraph 1 of Annex II only makes sense if adverse facts
available are allowed.
23  Yet, the warning that authorities may use facts available when information is
not supplied within a reasonable time refers to the possibility  that the application of facts available
                                                     
22 Id. paras. B-77 to B-78.
23 Id. para. B-61.WT/DS184/R
Page C-17
will be less favourable.  In some cases, the facts available may be less favourable; and because of this
possibility, Paragraph 1 of Annex II requires authorities to warn the parties.  In other words, the
uncertainty of a less favourable result itself creates the incentive to cooperate.  There is no reason to
read into Paragraph 1 a warning of a purposefully adverse result.
36. The United States also asserts that because the warning specifically refers to the petition
information as the alternative, the use of adverse fa cts available is permitted.  According to the United
States, because the petition information will "document the highest degree of dumping," it is clear this
Paragraph authorizes the use of adverse facts available.24  This argument suggests that the AD
Agreement permits an authority to establish a practice of initiating investigations based on petition
information which "generally is presumed to be adve rse."  If this is the case, the United States may
well be violating in most cases the requirements of Articles 5.2 and 5.3 of the AD Agreement.
37. The United States also argues that if Japan’s position were valid, Paragraph 5 of Annex II would
not make sense, because there would be no sanction for not acting to the best of one’s ability.25  But
the thrust of Paragraph 5 is precisely the opposite -- to oblige the authority to accept information even
if it is not ideal, if the party has acted to the best of its ability.  Even then there is no mention of facts
available, adverse or otherwise.  There is no text ual basis for the assertion that this provision allows
an authority to punish an exporter that does not act to the best of its ability.
38. Finally, with respect to Paragraph 6, the United States says "there would be no reason  to require
investigating authorities to give exporters a ‘las t chance’ to explain before their information was
rejected, if that information could be replaced only with a neutral gap-filler."26  Paragraph 6 merely
says that the authority must provide the parties reasons why information is not accepted and the
opportunity for those parties to provide further explanations; if the explanations are consideredunsatisfactory, the authority’s reasons should be given in published determinations.  The authority
must allow further explanations because it may be unclear exactly what the authority is requesting or
it may be that the party may not have been given the opportunity to provide the requested information.
This provision therefore does not support adverse facts available.  Rather, Paragraph 6 embodies the
general requirements of fairness and good faith in that it provides for notice of when and whyauthorities might use facts available.  Paragraph 6 is therefore a due process clause that exists for the
benefit of the parties, not the authority.
2. Article 6.8 does not authorize purposeful adverse facts available
39. The United States illogically reads Article 6.8 provision to mean that "because the use of facts
available is the solution to the problem posed by non-cooperative respondents," authorities must be
able to induce respondents into cooperating by the prospect of a worse result.
27  But, as the United
States admits, this interpretation is simply not supported by the text of the article:  "Article 6.8 doesnot explicitly  provide that the selection of facts available may entail an adverse inference."
28
40. Article 6.8 provides "{i}n cases in which any interested party refuses access to, or otherwise does
not provide, necessary  information within a reasonable period or significantly impedes the
investigation, preliminary and final determinations, affirmative or negative, may be made on the basis
of the facts available."  (Emphasis added)  It says authorities can use facts available only when the
                                                     
24 Id. para. B-62.
25 Id. para. B-63.
26 Id. para. B-65.
27 Id. para. B-59.  The United States claims that the use of facts available is to solve the problems of
uncooperative respondents .  Yet, Article 6.8 clearly applies to all in terested parties, not simply to respondents.
The limitation by the United States of the alleged problem and solution to respondents simply serves to
highlight its misunderstanding of the purpose of the provision and its biased use of the provision againstrespondents.
28 Id. para. B-59 (emphasis added).WT/DS184/R
Page C-18
authorities do not have necessary information.  Nowhere in Article 6.8 is the word "adverse" used, nor
is there any reference to providing the authorities a mechanism to induce respondents to cooperate.
Rather, Article 6.8 treats all reasons for missing information in the same manner:  by permitting the
resort to facts available.  Even when a party "refuses access" to information, Article 6.8 merely
contemplates the use of " facts  available," not some adverse version thereof.  Because there is no
modification of the term facts available, the use of facts available must be as reasonable and as
representative as possible.
3. The legal authorities cited by the United States are not analogous or authoritative
41. The United States analogy of a dispute between sovereign states and those between a private party
and a government agency is improper.  The United States cites Canada—Civilian Aircraft  and
Argentina—Footwear to support its conclusion that the WTO has recognized that the use of adverse
inferences is a necessary tool for gathering information.29  These cases, however, involved the use of
adverse inferences during the course of the WTO dispute settlement proceeding.  WTO disputes are
entirely different from an anti-dumping investigation.  A dispute within the WTO system involves two
countries, one of which is accused of violating an international agreement.  The WTO system depends
on cooperation among governments and compliance with WTO Agreements.  For this reason,
Canada—Civilian Aircraft spoke about the "viability of the dispute settlement system."30
42. An anti-dumping investigation is distinct in that the private parties are not bound by an
international agreement.  Indeed, the exporter’s participation is optional; the AD Agreement is
indifferent as to whether an exporter participates.  The AD Agreement recognizes that an exporter
may lack the resources to participate, the reque sted information, or the ability to extract the
information requested by the deadline requested.  Th e duty of the investigating authority remains the
same, regardless of the level of participation of the exporter:  to calculate as accurately and reasonably
as possible, the dumping margins of a particular exporter.
43. Finally, the US argument that most countries use adverse inferences to induce cooperation as a
justification for the US practice is absurd.31  The various practices of other Members are irrelevant to
this inquiry.  Panels should not determine WTO-consistency based on how many other Members arealso violating a particular WTO agreement.
B. T
HE APPLICATION OF ADVERSE FACTS AVAILABLE TO KSC  VIOLATED THE AD
AGREEMENT
44. USDOC’s practice of punishing respondents with adverse facts available, as applied in this case,
violates the AD Agreement.  Indeed, the US rebuttal with respect to its use of facts available for KSC
demonstrates that USDOC improperly established the facts, and demonstrates an array of AD
Agreement violations.
                                                     
29 Id. paras. B-69 to B-71.
30 Notwithstanding its inapplicability here, the Canada—Civilian Aircraft  case makes the point that
even if adverse inferences are made, such inferences must still be logical or reasonable in light of thecircumstances.  In other words, they must be related to the facts involved, not merely aimed at punishment.Canada—Measures Affecting the Export of Civilian Aircraft , 2 Aug. 1999, WT/DS70/AB/R, at para. 200
("Canada—Civilian Aircraft ").  Further, we note that the authority for using adverse inferences in that case was
the Agreement on Subsidies and Countervailing Measures, Annex V of which specifically calls for use of
adverse inferences when government parties are involved.  No such provision exists in the AD Agreement.
31 US First Submission, para. B-72.  Moreover, the United States has misstated the doctrine of
"subsequent practice" as a matter of international law, as discussed above.WT/DS184/R
Page C-19
1. The United States misstates the facts
45. The US rebuttal contains numerous factual mischaracterizations with respect to KSC.  In raising
these mischaracterizations, Japan does not ask the Panel to substitute its own factual conclusions for
those of USDOC; rather, Japan demonstrates how USDOC (as well as the United States Government
in its First Submission) improperly established the facts.
• "KSC did not allege that CSI was unable to provide the requested information."  US First
Submission, para. B-18 (emphasis in original).
46. In fact, KSC repeatedly set forth CSI’s inability  to provide the requested information in a number
of submissions to USDOC.  In response to  a request from KSC, CSI stated that
CSI is unable  under its accounting system to provide the information on sales. . . .  It
is also our belief that without being able to provide  the important information of
sales prices requested, the provision of other data requested by {KSC} would neitherbe usable nor useful in the investigation of Kawasaki. . . ."
32
KSC first put that letter on the record on 18 December 1998,33 and then reiterated CSI’s
response that CSI’s accounting system was unable  to provide the information.34  In its
continued efforts to show USDOC CSI’s inabi lity to provide the requested information, KSC
twice submitted to USDOC Mr. Gonçalve s’ Letter to KSC of 14 December 1998.35
• "{T}he Shareholders’ Agreement is the only objective evidence on the record that shows
how CSI operated and was governed internally."  US First Submission, para. B-88.
47. This is a surprising and extreme statement.  The purpose of any shareholders’ agreement is to
define how a company should operate.  Such agreements alone do not necessarily reflect how a
company is run in practice.  KSC submitted several letters from CSI’s President and CEO, Mr.
Gonçalves, showing how CSI operate d in practice – including its participation as a petitioner in an
anti-dumping case against both its parent companies’ home countries.36  Much of this evidence
demonstrated that the Shareholders’ Agreement was regularly ignored by the company and itsshareholders.  Such evidence is no less objective than the Shareholders’ Agreement itself.
• "{T}here is no evidence on the record that KSC even invoked [  ]"  US First Submission,
para. B-93.
48. The United States conveniently ignores evidence that is clearly set forth in one of its own
exhibits.  The KSC Sales Verification Report acknowledges that KSC in fact invoked [  ].
37  T h e
report also specifically recognizes CSI’s letter refusing the suggested visit from one of KSC’s
                                                     
32 See Mr. Gonçalves Letter to KSC of 14 Dec. 1998 ( Exh. JP-42(m) ) (emphasis added) .
33 See KSC Letter to USDOC of 18 Dec. 1998, at Appendix A  (proprietary version attached as
Exh. JP-93(a) ).
34 See KSC Section C Questionnaire Response, at 2 (21 Dec. 1998) (excerpts in Exh. JP-42(p) )
(emphasis added).
35 See KSC Verification Exhibit 20 (Mar. 1999) (excerpts attached as Exh. JP-93(b) ); KSC’s Case
Brief at 16, Exhibit 2 (12 Apr. 1999) (excerpts  attached  as Exh JP-93(c) ).
36 All of the letters on CSI’s letterhead from Mr. Gonçalves, CSI’s President and CEO, provide strong
objective  evidence of how CSI operated.  See Mr. Gonçalves Letter to KSC of 29 Oct. 1998 ( Exh.  JP-42(f) );
Mr. Gonçalves Letter to KSC of 6 Nov. 1998 ( Exh. JP-42(h) ); Mr. Gonçalves Letter to KSC of 14 Dec. 1998
(Exh. JP-42(m) ).  Additional discussion demonstrating how the Shareholders’ Agreement was regularly
ignored by the company and its shareholders appears at Exh. JP-93(d) .
37 See KSC Sales Verification Report, at 21-22 (excerpts in US/B-21  and Exh. JP-42(y) ) ("KSC
invoked this Article in seeking permission to compile the necessary data, but CSI refused permission.").WT/DS184/R
Page C-20
attorneys and accounting consultant.38  The United States also ignores the language of the
Shareholders’ Agreement, which includes providing [  ]."39  Without question, the [  ].40  Thus, as
KSC’s [  ] KSC’s attorneys did in fact [  ] when  they asked CSI for access to CSI information to
prepare the response.41
• "There is nothing on the record indicating that KSC would have encountered any
opposition from CVRD if KSC had directly re quested CVRD’s assistance in obtaining the
information requested by Commerce .  .  .  ." US First Submission, para. B-96.
49. KSC informed USDOC that CVRD’s parent, CSN was a respondent in the companion
investigation of hot-rolled steel products from Brazil, and as such, CVRD was in effect a competitor
of KSC in the US market.42
• "KSC never asked for Commerce’s assistance in the investigation in any respect.
Specifically, KSC never asked Commerce what steps it should take to obtain the
information regarding its sales through CSI" or submit the information in another form.
US First Submission, para. B-106.43
50. KSC submitted numerous letters to USDOC outlining the difficulties KSC encountered in
attempting to obtain the CSI information.  It w ould be absurd to conclude that such repeated
communications to USDOC did not in any respect include a request for assistance.
51. Indeed, on 9 November 1998, the day after KSC rece ived Mr. Gonçalves’ Letter of 6 November
1998, refusing the KSC visit, KSC’s attorneys me t with USDOC to apprise the agency of the
situation.44  Following up on the meeting, KSC submitted a letter to USDOC on 10 November 1998.45
Moreover, in a 3 December 1998 letter to USDOC, KSC reminded USDOC that "we have received no
response from the Department."46  That statement was based on the belief that USDOC should have
provided KSC advice following its meeting and its letters, and was intended to elicit a response from
USDOC.  Also in that letter, KSC asked to atte nd a meeting between USDOC and petitioners’ counsel
(i.e. CSI’s counsel), specifically addressing CSI’s refusal to provide KSC the necessary information,
"so that all involved will have a complete understa nding of the issues involved."  USDOC refused to
allow KSC to attend the meeting.
52. KSC continued its efforts to persuade USDOC to provide guidance.  In its letter to USDOC of 18
December 1998, KSC was more specific in its request for assistance.  KSC stated that it, as yet, had
"received no information, guidance, or response  from the Department."47
                                                     
38 Id. at 22 (excerpts in US/B-21  and Exh. JP-42(y) ); see also  Mr. Gonçalves Letter to KSC of 6 Nov.
1998 ( Exh. JP-42(h) ).
39 Shareholders’ Agreement Art. [  ] ( Exh. JP-42(aa) ) (emphasis added).
40 Indeed, even CSI acknowledges that KSC’s attorneys and accounting consultant are [  ] under the
Shareholders’ Agreement.  See Mr. Gonçalves Letter to KSC of 6 Nov. 1998 ( Exh. JP-42(h) ) (noting "even
Kawasaki Steel being one of our shareholders , we usually apply some restrictions to the disclosure  of sensitive
data to their representatives .") (emphasis added).
41 See KSC Letter to Mr. Gonçalves of 5 Nov. 1998 ( Exh. JP-42(g) ) (requesting a four day visit with
CSI’s accounting staff).
42 See KSC Letter to USDOC of 10 Nov. 1998 ( Exh. JP-42(i) ).
43 The Court of International Trade opinion by Judge Restani should not be given weight because it too
is based on an incorrect factual premise that KSC never asked for guidance.  See Kawasaki Steel Corp. v. United
States, Court No. 99-08-00482, Slip Op. 00-91, at 19-20 (1 Aug. 2000) ( Exh. JP-93(e) ).
44 See KSC Letter to USDOC of 18 Dec. 1998 ( Exh. JP-42(n) ).
45 See KSC Letter to USDOC of 10 Nov. 1998 ( Exh. JP-42(i) ).
46 KSC Letter to USDOC of 3 Dec. 1998, at 1 ( Exh. JP-78 ) (emphasis added).
47 KSC Letter to USDOC of 18 Dec. 1998 ( Exh. JP-42(n) ) (emphasis added).WT/DS184/R
Page C-21
53. Notwithstanding that the US statement is inaccurate, whether or not KSC asked for guidance is
irrelevant.  As discussed further below in Section III.B.3, Article 6.13 obliges the investigating
authority to provide assistance once the interested pa rty notifies the authority of its difficulties.  The
AD Agreement does not oblige an interested party to ask for assistance.
•  "Commerce did request, and KSC refused to report, the transfer prices between KSC and
CSI."  US First Submission, para. B-123.
54. The US exhibits demonstrate that this statemen t is false.  KSC provided USDOC with detailed
product, quantity, and price information for its sales to CSI,48 and later referred USDOC to its
product-specific transfer price data.49  Moreover, as the United States admits earlier in its submission,
"Commerce examined documents relating to KSC’s sales through CSI" at verification. 50
55. The extent of the US mischaracterizations on all of these factual issues completely compromises
the US position.
2. The United States misinterprets the requirements of Paragraph 7 of Annex II
56. The US practice ignores the requirements for c hoosing facts available under Paragraph 7 of
Annex II.  For KSC, USDOC failed to comply with three aspects of the provision.  First, it chose an
adverse facts available margin with the express purpose to punish the company.  As discussed above,
this is inconsistent with the language of Paragraph 7 of Annex II and the entire concept of factsavailable.  Second, its choice ignored the critical question of whether KSC in fact "withheld" CSI’s
information, as required by Paragraph 7.  Third, it made no effort whatsoever to comply with the same
paragraph’s requirement to use "special circumspection" in choosing facts available.  The first of
these violations is addressed in detail above with regard to Japan’s general claim.  The second and
third are addressed below.
(a) The United States misunderstands the plain meaning of the term "withheld"
57. The United States argues that its choice of adverse facts was justified because KSC withheld
information from USDOC.  Even assuming that th e words "less favourable" could justify punitive
adverse facts available (which it does not), USDOC still violated the last sentence of Paragraph 7.
The plain meaning of "is being withheld" requires that a party have something in its possession that it
is actively  refusing  to turn over.
51  A party cannot "withhold" something unless it possesses it or at
least has the power to exercise control over it so as to keep the item from being turned over.  KSC did
not possess the information requested by USDOC, nor did it control CSI so as to be able to
affirmatively refuse to provide the information to USDOC.52
58. USDOC ignored evidence that showed CSI’s inab ility and unwillingness to cooperate with KSC,
as well as the competitive market relationship KSC maintained with both CSI and its joint venture
                                                     
48 KSC Section A Response at Exhibit 37 (16 Nov. 1998) (excerpts attached as Exh. JP-93(f) , with
sensitive business confidential information redacted).
49 KSC Supplemental Section A Response at 6-7 (4 Dec. 1998) (excerpts in US/B-24 ).
50 US First Submission, para. B-20.
51 The definition of "withhold" in the New Shorter Oxford English Dictionary is: "1. restraint or hold
back from action; keep under restraint; 2. keep back (what belongs to, is due to, or is desired by another); refrainfrom giving, granting or allowing."
52 The fact that under US law, KSC and CSI are treated as a single entity is not determinative.  Rather,
it simply illustrates the absurdity of US practice.  USDOC collapsed KSC and CSI, despite their conflicting
interests and CSI’s actual independence from KSC as exhibited through the events that actually transpired  See
19 U.S.C. § 1677(33) ( Exh. JP-4(i) ); 19 C.F.R. § 351.102(b) ( Exh. JP-5(a) ); 19 C.F.R §351.401(f) (attached as
Exh. JP-90(b) ).WT/DS184/R
Page C-22
partner, CVRD.  USDOC thus failed to properly establish the facts or evaluate them objectively and,
in turn, ignored its obligations under the AD Agreement.
(i) CSI’s President and CEO repeatedly made clear he could not and would not help KSC
respond to the USDOC
59. It is an uncontested fact that KSC did not itself possess the information USDOC deemed
necessary from CSI.  The issue, then, is whether KSC nonetheless controlled whether CSI would
release the information.  In fact, KSC did not cont rol CSI’s ability or willingness to provide the
information.
60. In response to an 8 December 1998 request for information from KSC’s attorneys,53 CSI’s
President and CEO Mr. Gonçalves stated as follows:
"CSI is unable  under its accounting system to provide the information on sales
requested in question 1. . . . It is also our belief that without being able to provide  the
important information of sales prices requested, the provision of other data requested
by {KSC} would neither be usable nor useful in the investigation of Kawasaki. . . ."54
So, in addition to not having the information itself, KSC was told that the entity that controlled the
information was unable to supply the most important part of it.
61. Furthermore, Mr. Gonçalves repeatedly refused to provide the requested information,55 citing
CSI’s role as a petitioner in the investigation:
• "{P}lease remember that CSI is one of the petitioners , and eventually we would be in a
difficult position to supply some kind of information."56
• "Besides the fact, that CSI is one of the petitioners .  . . some of the data {KSC} would like to
have access is confidential CSI data, and even Kawasaki Steel being one of our shareholders,
we usually apply some restrictions to the disclosure of sensitive data to their representatives.
This 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."57
• "It is also {CSI’s} belief that without being ab le to provide the important information of sales
prices requested, the provision of other data requested by {KSC’s attorneys} would be neither
usable nor useful in the investigation of Kawasaki and therefore would be a waste of
resources for both CSI and Kawasaki."58
So, beyond CSI’s apparent inability to help with respect to some requests, the company also refused
to help with others.
                                                     
53 KSC Letter to CSI of 8 Dec. 1998 ( Exh. JP-42(l) ) (emphasis added).
54 Mr. Gonçalves Letter to KSC of 14 Dec. 1998 ( Exh. JP-42(m) ) (emphasis added).
55 See KSC Letter to Mr. Gonçalves of 27 Oct. 1998 ( Exh. JP-42(e) ) (seeking cooperation in
responding to USDOC questionnaire, specifically including sales by CSI as reseller or further processor of the
subject merchandise originating from KSC); KSC Letter to Mr. Gonçalves of 5 Nov. 1998 ( Exh. JP-42(g) )
(requesting acceptance of a four-day visit with CSI’s accounting staff by one of KSC’s attorneys and KSC’saccounting consultant in order to review the information for the questionnaire response); KSC Letter to CSI of 8Dec. 1998 ( Exh. JP-42(l) ) (inquiring into its previous requests for information and specifically listing the
information requested pertaining to CSI from the Supplemental Questionnaire); KSC Letter to CSI of 7 Jan.1999 ( Exh. JP-42(t) ) (reminding CSI of its previous requests for information and requesting again all of the
information requested by USDOC in its questionnaires).
56 Mr. Gonçalves Letter to KSC of 29 Oct. 1998 ( Exh. JP-42(f) ) (emphasis added).
57 Mr. Gonçalves Letter to KSC of 6 Nov. 1998 ( Exh. JP-42(h) ) (emphasis added).
58 Mr. Gonçalves Letter to KSC of 14 Dec. 1998 ( Exh. JP-42(m) ).WT/DS184/R
Page C-23
62. To downplay the actions of Mr. Gonçalves, the United States depicts the President and CEO of
any company as a low-level employee.59  In actuality, the President and CEO of any company is the
highest-ranking "employee" and has considerable power to take actions on a daily basis in the best
interests of the company.60
63. The power of the President and CEO was even more pronounced in the case of CSI.  At
verification, KSC officials explained that the Shareholders’ Agreement between KSC and CVRD did
not operate to allow either company any real control of CSI’s day-to-day conduct. 61  In fact, the
Agreement was structured so that the rights of KSC and CVRD would be in exact balance.  Given that
neither KSC nor CVRD controlled the day-to-day conduct of CSI, that left only one person in a
position to do so:  Mr. Gonçalves.
64. Indeed, CSI’s decision to become a petitioner in the investigation is a perfect example of the
power Mr. Gonçalves had as President and CEO.  Contrary to Article [  ] of the Shareholders’
Agreement, CSI’s decision to become a petitioner was [  ].62  By the time of the [  ] in December, CSI
was already a petitioner.63  Moreover, CSI did not obtain KSC’s approval to become a petitioner.64
Thus, the ultimate decision to become a petitioner must have been made by the highest ranking officerof CSI, Mr. Gonçalves.
65
65. Petitioner CSI, therefore, had the power to act on its own, including maintaining possession of the
information USDOC wanted and prohibiting KSC – and USDOC – from seeing it.  Under such
circumstances, KSC could not withhold the information.
(ii) Even though KSC was a part owner, it had no unilateral control of CSI
66. The United States incorrectly concludes that KSC’s 50-percent ownership of CSI should have
given KSC the requisite power to obtain the information.66  Yet, because KSC only controls 50
percent of the shareholder votes and directors, KSC was not in a position to unilaterally reverse CSI’s
decision not to cooperate with KSC’s requests for information.  Instead, KSC needed the support of
its joint venture partner, CVRD.
67. Considering Mr. Gonçalves personal ties to bo th CVRD and CSN, however, KSC had reason to
believe that CVRD’s position would be the same as that of Mr. Gonçalves.  Mr. Gonçalves was
nominated by CVRD to be CSI’s President and CEO.  In addition, prior to becoming President and
CEO, Mr. Gonçalves had been an employee of CS N, CVRD’s partial owner.  As an employee of
CSN, Mr. Gonçalves was aware of the close rela tionship between CSN and CVRD.  Moreover, Mr.
Gonçalves, as well as KSC, appreciated that CSN was KSC’s competitor in the US market and as a
competitor of KSC, it would be in CSN’s, and CVRD’s favor for KSC to obtain a higher margin than
CSN.67
                                                     
59 US First Submission, para. B-83.
60 1 Corporation  ¶ 1713 (1997) (excerpts attached as  Exh. JP-93(g) )  ({T}he president of a corporation
is its business head and has power to do any act that the board of directors could authorize or ratify.").
61 KSC Sales Verification Report, at 21-22 (excerpts in US/B-21 and Exh. JP-42(y) ); Shareholders’
Agreement Art. [  ].
62 See Board Meeting Minutes of 28 July 1998 ( US/B-23/BIS ).
63 See Board Meeting Minutes of 10 Dec. 1998 ( US/B-23/BIS ).
64 KSC Sales Verification Report, at 21 (excerpts in US/B-21 and Exh. JP-42(y) ).
65 This is one among many ways in which the actual operation of CSI failed to comply with the
apparent intent of the Shareholders Agreement.  Exhibit JP-93(d) provides a complete list.
66 US First Submission, para. B-89.
67 KSC Letter to USDOC of 10 Nov. 1998 ( Exh. JP-42(i) ).WT/DS184/R
Page C-24
68. The United States suggests that the [  ] could have easily resolved the dispute.68  The [  ].69  With [
] it is highly unlikely that its convention would resolve in actuality any deadlock.
69. The US arguments supporting its claim that KS C could exert power over CSI are simply not
sensitive to the corporate realities of multinational companies that are owned by companies with
differing interests in a particular dumping proceeding.  Here we have an extreme case where KSC’sinterests are in conflict with both parties who w ould be in the best position to provide assistance.
CSI’s interests are in conflict with KSC’s as CSI is a petitioner.  KSC’s interests are in conflict with
CVRD, because CVRD’s part owner, CSN, is also  a respondent in the investigation and thereby
competes with KSC in the US market.
70. The United States focuses on how or whether KSC could have obtained the information, and
whether the respondent acted to the best of its ability.  The United States therefore implies that a party
must take all actions that USDOC thinks necessary, whether in reality they would prove futile or not.But whether or not all such actions are taken, the question remains:  did KSC withhold the
information?
71. The facts clearly show that KSC did not possess the CSI information, and that as a practical
matter, KSC did not have the power to obtain the information.  The United States failed to establish
that KSC in fact could have obtained this information, and, in turn, that it effectively withheld the
information.  The United States therefore applied facts available in violation of Annex II.
(b) The United States misunderstands the plain meaning of "special circumspection"
72. The United States misconstrues the requirement of "special circumspection in Paragraph 7."
 70
The United States claims that it applied circumspection by using the second-highest rather than the
highest margin given that the highest margin was not within the mainstream of KSC’s sales.  Also, theUnited States argues that in choosing the second highest margin, its use of adverse inferences was
"directly proportionate" to the significance of the underlying violation.
71
73. This argument demonstrates that the United States does not comprehend the true purpose of facts
available:  to fill in the gaps left when necessary information is unavailable and to do so in such a
manner to ensure the information used is reliable so  as to produce an accurate margin.  This is the
whole point of Paragraph 7’s requirement to use special circumspection and to corroborate any
information it chooses to use.  The phrase special circumspection cannot mean punishing a respondent
with the second worst results instead of the worst results.  Indeed, such an application is far from
circumspection -- "a cautious observation of the circumstances" and "taking everything into account."
Further, the phrase circumspection is modified by the adjective "special."  According to the New
Shorter Oxford English Dictionary, special means "exceptional in quality or degree; unusual, out of
the ordinary."  This modification of circumspection emphasizes the exceptional exercise of care
                                                     
68 US First Submission, para. B-96.
69 Shareholders’ Agreement Art. [  ] ( Exh. JP-42(aa) ) (emphasis added).
70 Actually, the primary argument made by the United States is that Paragraph 7 does not even apply.
The United States asserts that the special circumspectio n requirement is irrelevant because USDOC used KSC’s
own information, and not information from a secondary source -- i.e., a source other than the respondent itself.
US First Submission, paras. B-109 to B-110.  A secondary source, however, is anything other than the primarysource ( i.e., the actual information requested).  The use of margins from KSC’s other sales as a substitute for its
CEP sales was therefore a secondary source.  This must be the case as there is no reason to apply a differentstandard for checking the representativeness of data mere ly because the data used as facts available belongs to
the party.  In any event, the question of representativen ess -- which is required by Annex II, as discussed above
in paragraphs 41 through 43 -- still applies notwithstand ing the US interpretation of  "secondary source."  Note
also that if the United States is right about "secondary source," then it can no longer rely on "less favourable" tojustify adverse facts available.
71 US First Submission, paras. B-112 to B-113.WT/DS184/R
Page C-25
authorities must observe in relying on facts available -- they must ensure that the information used is
reliable and as close to reality as possible.
74. The United States claims that the use of any other facts would have rewarded KSC for not
cooperating.72  Ignoring for a moment that KSC did, in fact, cooperate, a less punitive facts available
margin would have rewarded KSC only if KSC kn ew that CSI’s information would produce a high
margin.  The facts show that neither of these were possible.  First, KSC did not know the actual
margin as it did not possess or even have access to CSI’s resale information.  Second, USDOC did not
know the actual margins and, thereby, did not k now when it would cross the threshold between
punishment and reward.  Thus, the US claim is not credible.
75. In a weak attempt to demonstrate that USDOC took everything into account, the United States
claims that it was in CSI’s best interests to cooperate as an affiliated importer and reseller of KSC hot-
rolled steel and that any benefit experienced by CSI from the application of adverse facts availableindirectly rewarded KSC as a shareholder of CSI.
73  USDOC cannot possibly decide what is and is not
in a company’s best interests.  CSI obviously  decided that, on balance, it enjoys the greatest benefit by
refusing to cooperate, and encouraging USDOC to apply facts available to KSC.
76. Besides the factual inaccuracies of this argument, the United States relies on circular logic.  It is
absurd for the United States to excuse the benefit to CSI by arguing that any benefit to CSI would alsobenefit KSC as a shareholder.  If this logic were true, then the United States would have contravened
its basic intention of penalizing KSC.  The United States cannot try to justify adverse facts available
to penalize KSC in one context, and then argue that its application was justified because it indirectly
benefited KSC.
77. Lastly, the United States asserts that it exercised special circumspection by using partial facts
available instead of total facts available.
74  This is absurd.  If the US interpretation were true, any
partial facts available would satisfy this requirement, regardless of how illogical or unreasonable the
available facts might be.
78. Ultimately, what matters most is that USDOC failed to consider carefully the fact that CSI was a
petitioner in this case -- a fact which led USDOC to excuse respondents in previous cases.75  Above
all else, this fact proves that USDOC failed to apply "special circumspection" when choosing which
facts available to use when CSI refused to cooperate.
3. Article 6.13 unambiguously requires authoritie s to take into account any difficulties
experienced by interested parties and to provide assistance to those parties
79. The United States attempts to dismiss the mandatory language of Article 6.13, by misreading the
actual language of the article, focusing inappropriately on KSC’s size, and shifting its obligations onto
KSC’s attorneys.76  These arguments ignore the simple fact that Article 6.13 unambiguously
establishes obligations upon the authority , and not upon the interested party or its lawyers.
80. Article 6.13 states "{t}he authorities shall take due account of any difficulties experienced by
interested parties, in particular small companies, in supplying information requested, and shall
provide any assistance practicable" (emphasis added).  The text of Article 6.13 is unambiguous.
                                                     
72 Id. para. B-113.
73 Id. para. B-114.
74 Id. para. B-116.
75 See, e.g., 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) (excerpts attached as Exh. JP-93(h) ) (noting that one
of the reasons the respondent was unable to report the information USDOC requested was the affiliate’sparticipation in the proceeding as a petitioner).
76 US First Submission, paras. B-103 to B-106.WT/DS184/R
Page C-26
Contrary to US claim, the phrase "in particular small companies" does not limit Article 6.13
exclusively to small companies,77 and does not absolve the authority of this responsibility when a
large company is subject to investigation.  Furthe r, Article 6.13 explicitly requires authorities to
examine carefully any kind of obstacles interested parties faced in supplying the requested
information to the authority.  Indeed, the use of the words "shall" and "any" demonstrate the broadscope of this obligation.  In this case, KSC made clear it had difficulties.
81. The United States attempts to sidestep USDOC’s obligation to provide assistance by claiming that
KSC should have known how to handle its affiliate and joint venture partner.  But, as discussed
above, USDOC ignored the competitive realities of  the situation.  Further, USDOC affirmatively
obstructed efforts to find a solution, when it scheduled a meeting with CSI to discuss the anti-
dumping case and refused KSC’s participation.
78  At the very least, attempting to suggest alternatives,
and seeing that they were not viable, would have better positioned USDOC to more fully appreciatethe difficulties KSC experienced and understand that KSC had in fact acted to the best of its ability.
This type of exchange is exactly the type of collaborative effort contemplated by Article 6.13.
82. In the final determination, USDOC identified afte r-the-fact avenues KSC should have explored to
convince the United States that it had acted to the best of its ability.  USDOC could have notified
KSC of those expectations during the investigation.  This would have both provided "practicableassistance" and put KSC on notice that unless it at least attempted these approaches, USDOC would
deem KSC as non-cooperative.  Instead, USDOC simply waited until the final investigation to
identify other avenues it required KSC to explore.  This predatory approach reveals that USDOC was
not acting as a neutral fact-finder, but instead in a biased manner that ultimately violated its
obligations under the AD Agreement.
4. USDOC’s failure to calculate a constructed export price for KSC violated Article 2.3 of
the AD Agreement
83. Instead of actually calculating an export price for KSC’s sales of hot-rolled steel to CSI, USDOC
used the second-highest margin from any of KSC’s sa les for all of those CSI transactions, in violation
of Article 2.3 of the AD Agreement.  The United States argues that if the authority considers that theexport price is unreliable because of an association, it need not test whether in fact the prices are
reliable.
79  But this interpretation ignores the rest of the text of Article 2.3.
84. Article 2.3 provides that authorities calculate  export price on the basis of resale price or "another
reasonable basis."  When read as a whole, the text of Article 2.3 shows there must be something that
brings the unreliability of the prices into question in order for the authority to later be able to judge the
reasonableness of its calculation.  Association alone cannot serve as the basis for the decision that the
prices appear unreliable.  Instead, Article 2.3 indicates that the phrase "because of association" is notthe justification for an unreliability determination.  Rather, the authority must find that the prices are
unreliable, and their unreliability must be caused by the association.
85. In its response to Japan’s suggestion that USDOC use KSC’s own prices to CSI to test the
reliability of the data, the United States incorrectly states that KSC refused to report the transfer price
between KSC and CSI.
80  As discussed above, however, the record shows that USDOC did in fact
have the information that would have allowed it to make a comparison between KSC’s sales to CSI
and those to its non-affiliated customers.81  USDOC simply ignored the data.  USDOC immediately
                                                     
77 Id. para. B-103.
78 KSC Letter to USDOC of 3 Dec. 1998 ( Exh. JP-78 ).  Japan wonders why USDOC did not take this
opportunity to specifically request the information from CSI directly.
79 US First Submission,  para. B-120.
80 Id. para. B-123.
81 KSC Section A Response at Exhibit 37 (excerpts attached as Exh. JP-93(f) ).WT/DS184/R
Page C-27
jumped to the assumption that because KSC and CSI were affiliates, CSI’s resale prices were
necessary.82
86. Had USDOC actually determined that KSC’s transfer prices to CSI were unreliable, the detailed
transfer price information still provided USDOC with a "reasonable basis" to calculate a surrogate
export price to compare to normal value, rather th an immediately applying a margin for sales through
CSI.83  USDOC instead chose to ignore its obligation under Article 2.3 to calculate an export price on
a "reasonable basis" once it summarily decided that the KSC-to-CSI price was unreliable.  The United
States again specifically relies on the factual inaccu racy that KSC did not provide such information to
justify disregarding the existence of perfectly acceptable normal values.84
87. We recognize that to apply facts available to calculate a surrogate export price, USDOC would
have to make certain assumptions about expenses.  This is precisely the objective of facts available,
and the obligation of the authority:  if it cannot obtain the ideal information in its investigation, theauthority should resort to secondary sources for information.  KSC’s sales to CSI were the best source
for such information.  The fact that the United States quickly jumped to a punitive application of the
second highest margin, and did not enlist KSC to he lp it develop a surrogate export price in the face
of CSI’s recalcitrance, demonstrates that the United States had no intent of trying to find the "best
information available," as the title of Annex II intends.
C. T
HE APPLICATION OF ADVERSE FACTS AVAILABLE TO NKK A ND NSC  VIOLATES THE AD
AGREEMENT
88. USDOC acted arbitrarily in its treatment of NKK and NSC.  An objective authority could not
have assessed the facts surrounding NKK’s and NSC’s errors as deserving such harsh punishment.
Moreover, USDOC failed to apply the requisite legal standards of the AD Agreement when it carriedout these punishments.  Specifically, USDOC actually received the information it needed from NSC
and NKK; both provided the information and offered to verify the information.  USDOC arbitrarily
decided the information had not been provided fast enough.  Ignoring the circumstances that led to the
inadvertent delays, USDOC punished the companies with adverse facts available.
1. The United States argues for unreasonable standards of timeliness and unreachable
standards for cooperation
(b) Article 6.8 and Annex II establish a "reasona bleness" standard for timely submission of
information
89. The United States equates deadlines with a "reasonable time" or a "timely fashion" under
Paragraphs 1 and 3 of Annex II.  The issue is not whether the deadlines were reasonable, but rather
whether NKK and NSC submitted the information within a reasonable period.
85  A deadline cannot
define what is a reasonable period of time for all in formation the authority will incorporate into its
determination .  Although deadlines may be necessary to obtain the majority of information from
                                                     
82 Note that one requirement for applying facts available under Article 6.8 is that the information be
"necessary."  This discussion proves that USDOC did not even determine whether it was necessary, and thus
violated Article 6.8.
83 The US suggestion that Japan treats the "reasonable basis" language of Article 2.3 as a separate facts
available provision is mistaken.  The reasonable basis re quirement of Article 2.3 only applies to Article 2.3 and
does not replace the facts available provisions.  For example, in KSC’s situation, the reasonable basisrequirement would have simply allowed USDOC to devise a reasonable manner in which to calculate the exportprice after it determined the KSC-to-CSI price was unrelia ble.  The facts available provisions would provide the
authority for USDOC to use the secondary information av ailable in order to calculate the export price on a
reasonable basis.
84 US First Submission,  para. B-124.
85 US First Submission, para. B-132.WT/DS184/R
Page C-28
respondents, it is not reasonable to claim that a de adline should mark the last moment the authority
will accept new information in all cases under all circumstances.  Flexibility, when circumstances
demand it, is the hallmark of reasonableness.  For example, to the extent there are small, lingering
categories of information that are submitted after a deadline, or collected by the authority during a
verification, the authority has received this information within a reasonable period of time toincorporate it into its dumping analysis and calculations.
90. Authorities also must consider the other informational demands on respondents during an
investigation; whether the authority’s initial request was clear (or whether there was some doubt as to
exactly what the authority was requesting); whether the authority assisted the company with follow-up
guidance as to the nature of its request and how to comply with it; and whether the information was
maintained in the normal course of business (or whet her it would have to be developed solely for the
investigation).  USDOC ignored all of these factors during its fact-finding for NKK and NSC.
(ii) The requirement of Paragraph 1 of Annex II for submission of information within a
"reasonable time" must be read in the context of USDOC general practice
91. The United States incorrectly claims that Paragraph 1 of Annex II equates "a reasonable time"
with deadlines established by the authority.
86  Paragraph 1 states that "if information is not supplied
within a reasonable time, the authorities will be free to make determinations on the basis of the facts
available."  Although "reasonableness" is subjective, it must be interpreted in context of the
proceeding itself and the authority’s prior practice.  In the ordinary legal meaning of the term,
reasonable means "suitable under the circumstances."87  This case does not present a situation where
the respondents provided nothing within USDOC’s questionnaire deadlines.  Respondents provided
an extraordinary amount of information in an extremely detailed manner.  The weight conversionfactors at issue here represented a very minor portion of the large volume of information submitted by
NKK and NSC.  When these companies discovered th at they could correct the record and submit the
requested information, they submitted the factors along with a long list of other corrections and
supplemental information.  All of these corrections were submitted well before verification, and
therefore in a reasonable time; USDOC and petition ers had substantial opportunity to review, respond
to, and use the information.  The fact that USDOC accepted NKK’s and NSC’s other corrections, and
thereby implicitly found that they were submitted in a reasonable period, proves that the conversion
factors were timely under the circumstances.
92. USDOC regularly accepts information after questionnaire deadlines, as recognized in its
regulation that allows parties to submit new factual information up until seven days before
verification.
88  The US argument against application of this regulatory deadline to NKK’s and NSC’s
submission of new factual information is entirely inconsistent with USDOC practice.89  Taken to the
                                                     
86 Id. paras. B-133 to B-139.
87 Black’s Law Dictionary 1265 (6th Ed. 1990).
88 In this very case, USDOC accepted approximately 200 pages of new factual information submitted
by petitioners the same day NKK and NSC submitted their weight conversion factors.  Petitioners’ 22 February1999 submission to USDOC provided a number of press articles about KSC, NKK, or NSC; the Japanese steelindustry generally; factors affecting demand; and other general information.
89 The United States is trying to convince the Panel that the regulation does not apply to information
requested in a questionnaire.  See US Response to Japan’s Question 9, para. 12.  USDOC itself recently took the
opposite position.  See Issues and Decision Memorandum for the Investigation of Certain Polyester Staple Fiber
From Taiwan , 65 Fed. Reg. 16877 (30 Mar.  2000), <http://ia.ita.doc.gov/frn/summary/taiwan/00-7925-1.txt>
(attached as Exh. JP-94) ("Decision Memorandum" ).  In this recent case, USDOC faced a challenge from
petitioners to disregard corrections submitted by a responde nt just before verification.  USDOC first noted that
respondent’s original questionnaire and supplemental questionnaire responses were all submitted within the time
limits established by USDOC.  USDOC also noted that respondent’s corrections were timely in accordance with19 C.F.R. § 351.301(b)(1) (the same provision at issue in the hot-rolled steel case).  Then, citing the overridingpurpose of the US anti-dumping statute, which "is to determine margins as accurately as possible," USDOCWT/DS184/R
Page C-29
extreme, this interpretation would prevent submissi on of any corrections or supplemental information
before verification.  Yet corrections are necessary when a respondent’s prior questionnaire responses
were either incorrect or incomplete.  This is USDOC’s standard practice, which it otherwise followed
in the hot-rolled steel investigation.
93. The weight conversion information submitted by NKK and NSC was a correction.90  T h e
companies mistakenly believed that they could not respond to USDOC’s request.  When it became
clear to NKK (without any assistance from USDOC) that what USDOC required was a better estimate
of weight, NKK corrected its prior submissions and supplied the information.  Similarly, NSC
discovered during verification preparation that its production facilities actually retained weight
information for the subject sales, a discovery that was not made earlier because the weight
information was maintained on a computer system that could not be accessed by the NSC sales
personnel responsible for preparing NSC’s questionnaire response.  NSC then corrected itself andsupplied the information.  The conversion factors were submitted before the regulatory deadline for
new factual information and therefore were submitted within in a reasonable time.
94. Moreover, USDOC accepted a large number of other corrections after  the applicable
questionnaire deadlines.
91  These additional corrections had a much larger impact on USDOC’s
dumping analysis than the weight conversion factor.  The long list of corrections submitted by eachcompany places the weight conversion factor into context, and highlights the arbitrary nature of
USDOC’s decision.  The US emphasis on the fact that NKK and NSC had 87 days in which to submit
the conversion factors is unconvincing considering the fact that the information on which many of the
other corrections were based was due in exactly the same amount of time.
92
                                                                                                                                                                    
stated that it would be "incongruous with the express intent of the statute to rely on data that are clearly
inaccurate by a respondent’s own admission.  Accordingly, it is the Department’s general practice to allowrespondents to revise their data upon identification of errors when such revisions are done in a timely manner.Timely revisions to respondents’ submissions are neither unusual nor inconsistent with the Department'sstandard practice."  Decision Memorandum , at cmt. 1  (internal footnotes omitted).
90 We note that the United States wants the Panel to believe that in good faith, USDOC made a mistake
in not correcting the clerical erro r in NKK’s preliminary dumping margin, which was not corrected until the
final determination.  See US Response to Japan’s Question 30, para. 44.  But, then USDOC was justified in
rejecting NKK’s and NSC’s inadvertent, good faith errors.  USDOC’s double-standard should not beoverlooked.
91 In the same 22 February 1999, submission that included the weight conversion factor, NKK
submitted seventeen other corrections along with new transaction-specific sales lists.  On the same day, but in a
separate submission, NKK submitted five other corrections to its cost of production and constructed value
databases.  Over a week later, on 4 March 1999, NKK submitted six more corrections and revised sales lists and
cost databases.  This is in addition to one correction presented on 8 March 1999, at the beginning of verification .
(See Exhibit JP-95  for a summary of these corrections.)  USDOC accepted and relied upon all of these
corrections, even those that affected a large percentage of sales.  This is in stark contrast to USDOC’s refusal to
accept NKK’s weight conversion factor, which affected only a small number of sales.  This is in addition tofifteen  corrections NKK submitted in its 25 January 1999, Supplemental Section B Questionnaire Response.
Similarly, on 22 February 1999, NSC submitted five corrections and additions to previously submitted
information, along with its weight conversion factor.  Then, at the beginning of each of USDOC’s verifications
of NSC and its US affiliate (conducted consecut ively from 22 February 1999 through 12 March 1999), NSC
presented a total of eleven  more corrections discovered during ve rification preparation.  Finally, in a
1 March 1999 submission to USDOC, NSC submitted three  additional corrections.  (See Exhibit JP-96  for a
summary of these corrections.)  In addition, on 1 March 1999, NSC submitted at USDOC’s direction, corrected
data, which affected every US and home market sale.  In contrast, the conversion factor submitted by NSC on
22 February 1999 affected only a tiny handful of US sales.
92 For example, USDOC repeatedly asked NKK for transaction-specific movement expenses – in the
original Section B questionnaire and in the same supplemental questionnaire that asked NKK to "clearly
describe the conversion factor {NKK} used."  NKK explained that such information was not available at thetime and instead provided estimated movement expenses that approximated actual expenses.  NKK corrected itscalculation of movement expenses in the 22 February 1999, submission that provided the conversion factor.WT/DS184/R
Page C-30
(ii) Paragraph 3 of Annex II requires authorities to take everything into account in determining
whether facts available are warranted
95. The United States argues that Paragraph 3 of Annex II requires authorities to consider only that
information that was " inter alia  timely."93  This argument stretches the meaning of timeliness and
ignores the other elements of this provision.  Paragraph 3 states that:
All information which is verifiable , which is appropriately submitted so that it can be
used in the investigation without undue difficulties , which is supplied in a timely
fashion , and, where applicable, which is supplied in a medium or computer language
requested by the authorities, should be taken into account when determinations are
made.  (Emphasis added.)
The United States makes an unjustified leap from "timely fashion" to "submitted within the
authority’s questionnaire deadlines."  With a flourish of Latin, the United States also completely
ignores other elements of this paragraph, which provide important rules for what information
authorities should take into account.
96. Paragraph 3 references "undue difficulties" to address the manageability of the anti-dumping
investigation from both perspectives:  placing the burden on respondents to provide useable
information and on authorities to take that useable information into account.  The facts of this case
show that USDOC could have used the conversion factors without undue difficulties.  The United
States mischaracterizes the impact of using the submitted factors as "entirely new databases."94  The
factors were actually just a couple of numbers that USDOC could have added to one line of itsdumping calculation program.  The sale-specific raw data did not change.  The United States therefore
has not demonstrated that it was prejudiced by NKK’s and NSC’s submission of the conversion
factors after questionnaire deadlines.  The fact that USDOC easily verified NKK’s factor
demonstrates this lack of prejudice.
97. The United States also ignores the requirement that authorities should take into account
"verifiable" information.  Importa ntly, USDOC actually verified NKK’s weight conversion factor.  In
NSC’s case, USDOC was prepared to, but then affirmatively refused to, verify NSC’s factor and the
evidence NSC had proposed for USDOC’s review.  NKK and NSC met their burden of providing
verifiable information in conformity with Paragraph 3.
98. Although timeliness is an important factor in Paragraph 3, these other considerations must be
weighed in determining whether submitted information will be used in the authority’s analysis.
Perhaps realizing this, the United States argues that the AD Agreement does not compel the authorityto accept late-provided information.
95  This is not Japan’s position.  Japan is simply arguing that
reasonableness is by definition contextual.  Other provisions demonstrate that the AD Agreement does
not contemplate the interpretation of "reasonable time" suggested by the United States:
• The reference in Article 6.13 requires authorities to be mindful of difficulties, and this will
impact the notion of "reasonable period."
• The "best of its ability" phrase in Paragraph 5, Annex II warns authorities to not act too rashly
in disregarding less than perfect information, requiring a more reasoned analysis of a party’sparticipation.
                                                     
93 US First Submission, para. B-137.
94 US Response to Japan’s Question 9, para. 14.  Again, we note that unlike the weight conversion
factor voluntarily submitted by NSC, the changes re quired by USDOC impacted every US and home market
sale reported by NSC.
95 US First Submission, paras. B-159 to B-160.WT/DS184/R
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• The "special circumspection" phrase in Paragraph 7, Annex II further obligates authorities to
take care in applying information from other sources.
99. Thus deadlines alone cannot determine whether information is timely.  In rejecting NKK’s and
NSC’s conversion factors, USDOC failed to consider the circumstances.  The factors were submittedin a timely fashion; therefore, the information "{should have been} taken into account when
determinations {were} made."
(c) The United States demanded an inappropriate standard of cooperation under Annex II
100. The United States claims that NKK and NSC failed to cooperate simply because the
submitted information was late.  The United States impermissibly blurs Paragraphs 5 and 7 of Annex
II.  Paragraph 5 governs when an authority must accept proffered information instead of resorting to
facts available.  Paragraph 7 concerns the separate decision of what information an authority can useonce it is authorized to use facts available.
(i) The United States ignored the requirements of Paragraph 7 in choosing adverse inferences
101. The United States asserts that Paragraph 7 of Annex II does not require a finding that the
party withheld necessary information.
96  Paragraph 7 states, "if an interested party does not cooperate
and thus relevant information is being withheld from authorities , this situation could lead to a result
which is less favourable to the party than if the party did cooperate."  (Emphasis added.)  Thus, the
possibility of "less favourable" results arises only in those "situations" where information " is being
withheld."
102. There was no withholding here.  The moment the companies determined they could provide
the requested information to USDOC, they did so.  This is far different than if USDOC were todiscover, for example, low-priced export sales during a verification that the company had
purposefully tried to conceal.  Rather, NKK and NSC provided the very information requested by
USDOC in sufficient time for verification and incorporation into USDOC’s dumping analysis.
Information was not withheld and NKK and NSC fully cooperated.
(ii) Paragraph 5 mandates acceptance of NKK’s and NSC’s corrections103. Citing Paragraph 5 of Annex II, the United States claims that NKK’s and NSC’s "reaction" to
the preliminary determination demonstrated that th e companies could have provided the information
at any time, but failed to cooperate to the best of their abilities by not providing the information
sooner.
97  This argument demonstrates the unfairness of the US position.  The United States is trying
to use NKK’s and NSC’s cooperation against them.  That is, according to US logic, NKK and NSC
somehow proved their lack of cooperation by cooperating.  The United States is also suggesting that
any reaction to a preliminary determination, legal or factual, is manipulative.  This position
undermines the main purpose of notice, which is to give parties a reasonable opportunity to respond.
104. The facts of this case show that NKK and NSC responded fully to USDOC’s extensive
informational demands and that USDOC’s decision to reject the conversion factors violated
Paragraph 5.  NKK and NSC provided the very information requested by USDOC and therefore the
information was "ideal in all respects."  NKK and NSC also acted to the best of their abilities.  TheUS position is contingent on the premise that the "b est of its ability" equates to meeting questionnaire
deadlines, just as "reasonable time" equates to questionnaire deadlines.  Rather, "ability" must be
                                                     
96 Id. para. B-162, n.237.
97 Id. paras. B-150 to B-152.WT/DS184/R
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assessed within the context of a variety of factors, including allowance for mistakes in an accelerated
investigation involving large volumes of information.
(iii) In both instances, USDOC ignored NKK’s and NSC’s additional cooperation during
verification
105. As further evidence of their cooperation, NKK and NSC were fully prepared to verify the
accuracy of corrections submitted before or during verification, including the conversion factors.
NKK and NSC reasonably believed that the conversion factors and all of the other corrections would
be verified and then used in USDOC’s final dumping calculation.  The United States now tries to
argue that the verification agenda did not create an expectation that USDOC would verify the weight
conversion factors.98  T h i s  a r g u m e n t  i g n o r e s  t h e  f a c t  t h a t  U S D O C  actually verified  NKK’s
information and until the last moment continued to assure NSC that it would verify its factor.
USDOC’s actions at the time do not support the US Government’s belated interpretation of itsverification agenda.  The United States also claims that the agendas show that USDOC intended to
verify NKK’s and NSC’s inability to provide the conversion factor.  This places NKK and NSC in an
impossible situation: face facts available for submitting the facts or face facts available for not
submitting the facts and failing verification.  This argument also shows the results-oriented nature ofUSDOC’s decision.
106. The US argument that there is no obligation in the Agreement to verify the conversion factors
is similarly unconvincing.  The US argument is valid only if it is successful in arguing that it was
justified in not accepting the conversion factors.  But, if the US argument is true, why did it verify
NKK’s factor?  Verification of NKK’s factor demonstrates that USDOC will in fact verify items that
are not ultimately part of their findings.  USDOC routinely verifies other issues, such as US indirectselling expenses, that are not always used in the dumping calculation.
2. The United States improperly dismisses the duties the AD Agreement places on
authorities to conduct a fair investigation
(a) NKK and NSC were entitled to reasonable guidance from USDOC under Article 6.13
107. The United States claims that USDOC’s requests for information were clear and in
accordance with Article 6.1.
99  The US position would make sense if USDOC had requested
information normally maintained by NKK or NSC, or something at least familiar to the companies.  It
is undisputed that steel companies commonly sell products based on actual weight and theoretical
weight.  The companies in this investigation, however, do not normally convert one type of weight to
the other.  Therefore, USDOC’s request effectively required the companies to develop a conversion
factor that: (1) neither company maintained in the normal course of business, (2) neither company had
ever used before, and (3) was entirely foreign to either company.  USDOC’s lack of clarity inrequesting this obscure conversion factor constitutes a failure to establish the facts properly.
108. The United States overlooks that this was, for all practical purposes, the only request for
information that was not routinely understood and accommodated by NKK and NSC.  The companies
provided volumes of other information.  When USDOC did not fully understand the information
provided or when it needed additional information, it issued supplemental questions to NKK and NSCto clarify their responses.  With respect to the c onversion factors, USDOC’s requests for information
from NKK were ambiguous and confusing.
109. This is demonstrated by the difficulties NKK and NSC had in obtaining the information.
NSC repeatedly informed USDOC it was impossible under any circumstances to obtain the
                                                     
98 Id. para. B-170.
99 Id. paras. B-165 to B-169.WT/DS184/R
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conversion factor because the weight data necessary to calculate it did not exist.100  Without any
guidance or assistance from USDOC, NSC itself discovered that actual weights were recorded at the
production facility and immediately informed USDOC.  Similarly, NKK did not receive sufficient
"notice of the information which the authorities require" because USDOC offered vague and even
contradictory instructions.  The supplemental que stionnaire to NKK shows that even USDOC did not
entirely understand what it was asking for in its initial questionnaire.  The supplemental questionnaire
actually presumed that NKK had submitted a factor, when in fact it had not.  NKK sought additional
guidance and was misled by USDOC officials, who told NKK’s US attorney that it should just
confirm its statement that a conversion factor was impossible.101  This cannot be what the AD
Agreement contemplates with respect to sufficient guidance that results in a proper establishment of
the facts.
110. The United States also questions why there is no record of the conversation between NKK’s
attorney and USDOC.  There are many elements to an investigation that investigators do not routinely
memorialize in the written record.  In fact, USDOC failed to put a variety of information on the record
in this very investigation.  This is just anothe r example of USDOC’s failure to establish the record
properly.
111. The United States also incorrectly limits Article 6.13 to small companies.102  The United
States effectively writes the phrase "in particular" out of the Agreement.  This is by no means limiting
language, but an acknowledgement that small companies are more likely to experience difficulties in
responding the information requests of authorities.  Although Article 6.13 emphasizes the needs of
small companies, it is not designed to protect small companies exclusively.  Rather, Article 6.13
embraces the general notion that the authorities should be sensitive to all forms of difficultiesexperienced by parties.  The fact that NKK and NSC were able to provide all other information
without difficulty, but obviously struggled with the conversion factor should have been a clear
indication to USDOC that this particular request prompted a difficulty.
112. The United States seems to take the position that large companies should be left to fend for
themselves and do not deserve USDOC’s assistance.  For example, the United States implies thatservice of KSC’s questionnaire responses placed NKK and NSC on notice of how to calculate a
weight conversion factor.  Armed with this knowledge, NKK and NSC therefore could have
submitted the factors within questionnaire deadlines without any assistance from USDOC.
103  T h i s
assumption is incorrect both factually and legally.  Like NSC, KSC told USDOC that it did not
calculate a conversion factor in its normal course of business.  Rather, for the purposes of this anti-
dumping investigation, KSC calculated a better estimate  of the weight of its theoretical weight
sales.104  NKK’s and NSC’s counsel could not predict whether this better estimate would satisfy
USDOC.  Instead, under Article 6.13 of the AD Ag reement, USDOC had the burden of informing
NKK and NSC of an acceptable methodology for calculating the factor, which it could have easily
done in its supplemental questionnaires.
113. Furthermore, USDOC’s vague instructions in the original and supplemental questionnaires do
not constitute "practicable" assistance.  The contradictory guidance given NKK is the antithesis ofassistance.  Practicable means assistance that the authority is capable of providing.  When it was
obvious that NKK misunderstood the request for a conversion factor, particularly in light of
                                                     
100 NSC Section B Questionnaire Response, at B-22 (Dec. 22, 1998) ( Exh. JP-29 ); NSC Supplemental
Section B Questionnaire Response, at Supp. B-24 (Jan. 26, 1999) ( Exh. JP-29 ).
101 The United States implies that the conversation between NKK’s US attorney and the relevant
USDOC official may not have occurred.  It is interesting that the United States did not submit an affidavit from
the officials in charge of denying this.
102 US First Submission, paras. B-171 to B-172.
103 US Response to Panel Question 24, para. 6.
104 See KSC Supplemental Questionnaire Response, at 19 (25 Jan. 1999) ( Exh. JP-49(f) ).WT/DS184/R
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USDOC’s contradictory and misleading oral guidance to NKK, USDOC was more than capable of
clarifying its request.  When NSC stated that it was impossible to provide the information requested
by the USDOC because the necessary underlying data did not exist, USDOC should have offered
"practicable" assistance in the form of suggestions about information that NSC could provide as a
substitute for the assertedly unavailable information.  Instead, USDOC gave no meaningful assistanceto either NKK or NSC with their difficulties in resp onding to this request.  The United States thereby
failed to meet its obligations under Article 6.13.
(b) The fair comparison requirements of Article 2.4 continue to apply to the calculation of NKK’s
and NSC’s margins
114. Article 2.4 requires authorities to make a "fair comparison . . . between the export price and
the normal value."  The United States claims that it complied with Article 2.4 in applying adverse
facts available to NKK’s and NSC’s margins.  However, the use of facts available in the ADAgreement presumes that the authority will apply facts available only where necessary.  Here, to the
extent facts available was necessary, it related to a conversion factor and the recalculation of US price
for NSC, or normal value for NKK.  The facts available mode does not suddenly excuse authorities of
all of their obligations.  It simply is a remedy for filling a void in the information needed to calculate
margins.  USDOC could have used some form of co nversion factor to generate surrogate US prices
for NSC and normal values for NKK.  This would have then allowed USDOC to calculate margins
using the remaining information for NKK and NSC.  Instead, USDOC made no "comparison"
between export price and normal value for the affected NSC sales, but simply applied an
unreasonably high margin.  For NKK, USDOC chose normal values without regard to how closely
those underlying sales related to the overall average normal value for the product categories thatincluded the theoretical weight sales at issue.  Such an approach is not a "fair comparison" as
contemplated by Article 2.4.
115. The United States wrongly interprets the facts available tool as something that, when used,
renders other provisions of the AD Agreement meaningless.  The US —Atlantic Salmon  decision
demonstrates this interpretation is not permissible.   That Panel admonished the United States for
acting inconsistently with Article 2.4 by failing to  consider the representativeness of the resulting
margin in deciding which facts available to use.
105  Unreasonably inflated margins are not
representative of the displaced price comparison if there is no demonstration that the facts available
were at all related to the underlying sales.  The US First Submission does not respond to Japan’s
claims that the facts available were not rationally related to the theoretical weight sales and therefore
offers no proof that the resulting margins were representative.  The United States did not meet its
burden of making a fair comparison in accordance with Article 2.4.
116. The United States also asserts that if it is required to only use facts available selectively, this
would nullify the authority in Paragraph 7 of Annex II to select facts that are less favourable.106
Paragraph 7 does not provide an affirmative allowance to use punitive facts available.107  In addition,
to the extent it does, the punitive facts available should be used selectively, and only with respect to
those facts not obtained.  Here, this meant certain US prices and home market prices for NKK andNSC.
                                                     
105 United States—Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic
Salmon from Norway, adopted 27 April 1994, 41S/229 BISD, para. 450 ("U.S.—Atlantic Salmon").
106 US First Submission, para. B-174.
107 On a related issue, the United States has argued that it does not select facts available that are
certainly adverse, but sufficiently adverse.  See US Response to Japan Questions 5 and 6, paras. 7-8.
Surprisingly, it is the US position that it did not know for sure that the facts available USDOC applied to NKK
and NSC were adverse because "it does not have the act ual information against which to compare its choice of
presumably adverse information."  Id.  This simply is not true.  USDOC had the actual weight conversion factor
for each company.  Therefore, not only did USDOC act im properly by rejecting the factors and resorting to facts
available, it knew the facts available it applied were adverse.WT/DS184/R
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IV. ALL-OTHERS RATE
117. Article 9.4 states that the all-others rate shall not be based on margins calculated using facts
available.  It does not distinguish between margins calculated using partial facts available versus those
using total facts available.
118. The United States thinks that this provision contains a word limiting its applicability to
margins based entirely on facts available, but no such limiting word exist.108  As Brazil points out,
"the word ‘entire’ does not appear in Article 9.4."109  Dumping margins calculated on the basis of
partial facts available are "margins established under the circumstances referred to in Paragraph 8 of
Article 6,"110 and therefore they are not permitted to be used in calculating the all-others rate.
119. The United States complains that it would be "impossible" for USDOC to calculate an all-
others rate if Article 9.4 forbids the use of margins based on partial facts available, because all three
individually-investigated respondents were assigned overall margins based on partial factsavailable.
111  Nothing in Article 9.4, however, prevents USDOC from using a composite of the
portions of the investigated companies’ margins not based on facts available.  In many cases, USDOC
will have determined a margin based on the company's information and then add a few distorting
adjustments to that margin based on adverse facts available -- indeed, that is precisely what USDOC
did to KSC, NSC, and NKK in this case.  Having  added the distorting adjustments, USDOC could just
as easily leave them out, and determine margins based solely on the companies' own information.
120. The United States also makes a series of policy arguments not grounded in the AD
Agreement.  First, the United States notes that calculating margins is a complicated endeavour, and
claims that authorities need discretion with the use of facts available to fill gaps in respondents’
information.112  Japan does not deny that anti-dumping duty calculations are complicated.  The issue
for purposes of Article 9.4, however, is to whom the facts available are applied when a gap appears in
the record.  If an authority legitimately determines  that a company it is investigating has withheld the
necessary information, that is a different issue from applying facts available in the calculation of the
all-others margin.  The companies that must live  with this rate have not even been given the
opportunity to provide any information.  The AD Agreement is clear that companies not individuallyinvestigated should not be affected by the behaviour of investigated companies.
121. Second, the United States claims that the result of using facts-available rates in the calculation
of the all-others rate is neutral, because nothing at all is known about the pricing of other companies.
The United States implies that companies in the all-others category could be dumping at a higher
margin than the individually-investigated respondents.
113  Japan believes that the important question
under the AD Agreement is the following:  why is nothing known about the company?  If nothing is
known because the company has not cooperated or has been unable to provide the information, then aresort to facts available may be appropriate.  But if nothing is known because USDOC decided not to
devote any time or resources to investigating that company, as is the case with the companies in the
                                                     
108 US First Submission, paras. B-180, B-183, B-189.
109 Brazil’s Third Party Submission, para. II.D.2.  The European Communities also appears to share
Japan’s interpretation of Article 9.4 that margins based even partially on facts available must be excluded fromthe margin calculation for companies that were not individually investigated.  See Oral Statement by the
European Communities, para. 8.
110 Article 9.4 of the AD Agreement.
111 US First Submission, para. B-194.
112 See US First Submission, paras. B-199 to B-200.
113 See US First Submission, para. B-198, n.262.WT/DS184/R
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all-others category, then it is not permissible —indeed, it is not fair —to calculate the all-others rate
with margins based on facts available.114
V. AFFILIATED SALES IN THE HOME MARKET
A. EXCLUSION OF SALES TO AFFILIATES
1. The 99.5 percent test neither determines whether a sale is in the ordinary course of
trade nor results in a fair comparison
122. Article 2.1 requires a determination of the dumping margin based on home-market sales "in
the ordinary course of trade," and Article 2.4 requires a "fair comparison" between the home market
and export prices.  USDOC’s 99.5 percent test -- which disregards sales to any affiliated customer
unless they are priced 99.5 percent or greater than the average price to unaffiliated customers --
accomplishes neither.  This test is too simple and mechanical to resolve whether the sales are within
the "ordinary course of trade" or not, and its systematic disregard of only low-priced sales prevents a"fair comparison."
115  When the United States attempts to rationalize the 99.5 percent test on the
merits, it simply underscores the inherent unfairness and unreasonableness of the test.  Not
surprisingly, not a single third party to this proceeding endorses the US practice at issue.
123. The United States asserts that since Article 2.1 of the AD Agreement does not specify how to
evaluate whether a sale is in the "ordinary course of trade," then any conceivable test is acceptable.116
The United States misinterprets the standard of review,117 and fails to reconcile its interpretation with
other provisions of the AD Agreement, such as Article 2.4.  The United States has essentially
admitted that it applies a double standard when it comes to determining whether sales to affiliates
shall be included in the normal value calculation:  low-priced sales are excluded if they are as little as
0.5 percent less than prices charged to non-affiliates,118 but high-priced sales are excluded only if they
are "aberrationally high."119  Nowhere does the United States articulate why home market prices that
                                                     
114 In response to Japan’s argument that the calculation of the all-others rate in this particular
investigation violated the AD Agreement, the United States notes that SMI did not make exactly the sameargument to USDOC that Japan now makes to the Panel.  See US First Submission, para. B-36, n.91.  SMI
focused on the use of adverse inferences against KSC and how that inflated the all-others rate.  See Sumitomo
Metal Indus., Ltd. Case Brief, at 4-5 (12 Apr. 1999) (Exh. JP-48).  SMI’s position in this investigation,
however, only underscores the flaws in the US statute and in particular its distinction between margins based
"entirely" and margins based only "partially" on facts available.  SMI’s lawyers made a strategic decision to try
to work within the US framework and minimize the inflation of the all-others rate by urging USDOC not topunish respondents for a petitioner’s refusal to cooperate.
115 The test also violates the spirit of Article 2.2, which sets forth the circumstances under which home-
market sales may be excluded as below cost or in insufficient quantities.  Article 2.2.1 illustrates how carefully
an authority must determine whether a sale should be ex cluded as outside the ordinary course of trade.  As
Korea notes, Article 2.2.1 specifies that below-cost sales "may" be disregarded only under very specificcircumstances.  The AD Agreement thus places very strict limits on an authority’s discretion to disregard evenbelow-cost sales; a fortiori , above-cost sales cannot be disregarded in an arbitrary manner.  See Korea’s Third
Party Submission, paras. II.E.5-7.
116 See US First Submission, paras. B-214, B-217.
117 See Section II.B.2 above.
118 The United States glosses over the important difference between the two-percent de minimis  test for
dumping margins and the severe 0.5-percent test for sales to affiliates.  See US First Submission, para. B-221,
n.308.  Yet the language cited by the United States makes Japan’s point even more compelling.  Decidingwhether an affiliation affects the pricing "may involve si tuations where the outcome is close and the exercise of
human judgment is unavoidable."  United States—Anti-Dumping Duty on Dynamic Random Access Memory
Semiconductors (DRAMS) of One Megabit or Above From Korea, adopted 19 Mar. 1999 , WT/DS99/R, at para.
4.661.  That is precisely the point.  The hair-trigger te st of 0.5 percent makes no sense given the complicated
nature of the analysis USDOC purports to undertake.
119 US First Submission, para. B-228.WT/DS184/R
Page C-37
are too low show that the relationship affected prices, but that home market prices that are too high
would not show the same thing.  This double standa rd reveals that the true purpose of the 99.5 percent
test is to inflate the magnitude of the dumping margin, which the United States essentially admits, 120
not to determine whether sales to affiliates are in the ordinary course of trade.  This is neither "fair"(Art. 2.4) nor does it indicate whether the sales are indeed "ordinary" (Art. 2.1).
124. Contrary to the US argument,
121 the 99.5 percent test does not focus on the relationship with
an affiliated company.  As Japan explained at the first meeting with the Panel, assume a parent
company is running a loss, but owns a subsidia ry whose profits are quite high.  Under such
circumstances, the parent company would have an incentive to sell to its subsidiary at higher prices
than it sells to other customers to reduce the profit of the subsidiary and consequently reduce its
taxable income.  Since the parent company is running a loss anyway, the parent’s additional revenue
would not increase its tax burden.  In other words, in such a situation the affiliation tends to result inhigh prices between the companies, not low prices.  The prices are distorted by the affiliation; they are
therefore not at arm’s length.  Yet, USDOC’s so-called "arm’s length test" would not exclude those
sales because its test addresses only whether the average price to affiliates is lower than the average
price to non-affiliates.
125. When asked by the Panel to comment on this hypothetical situation, the US response only
confirmed Japan’s concerns.  The United States allows only that it "might" disregard such high-priced
home-market sales, and only if a respondent affirmatively demonstrates that they are outside the
ordinary course of trade.
122  Yet the United States will always  automatically exclude all home-market
sales to affiliates below the rigid 99.5 percent test, and makes no further inquiry.  This is precisely
what Japan means by a double standard:  substantially equivalent or slightly lower prices never makeit into the normal value calculation, but high prices -- even up to "aberrationally high" levels -- are
presumed to be in the ordinary course of trade.  The United States digs an even deeper hole for itself
when it tries to portray this policy as favorable  to respondents.  The United States states that in
Japan’s hypothetical situation, assuming the high-priced sales pass the 99.5 percent test, respondents
would be "free" to distort normal value downw ard by reporting downstream resales that are below
cost.
123  This point, if true,124 simply demonstrates that USDOC is not trying to use the 99.5 percent
test to eliminate sales "outside the ordinary course of trade" at all.  What better example is there of
prices being influenced by the fact of affili ation, than the fact that the downstream reseller
systematically sells at a loss?  Yet the United States insists that such sales would be acceptable to
USDOC under the 99.5 percent test.
126. The United States argues the 99.5 percent test results in a "fair comparison" because
Article 2.4 is self-contained -- that is, a comparison is inherently "fair" if an attempt is made to adjustthe prices for differences such as taxes or the level of trade.
125  The first sentence of Article 2.4,
however, stands on its own as an independent requirement.  The requirement of a "fair comparison"
did not appear at all in the Tokyo Round Anti-Dumping Code, but was specifically added, as a
separate sentence, during the Uruguay Round.126  This addition of new language must serve some
purpose.  As Japan has demonstrated -- and as the European Communities, Brazil, Chile, and Korea
                                                     
120 See US Response to Panel Question 34, paras. 33-35 (focusing on the alleged importance of
excluding low-priced sales).
121 See US First Submission, paras. 211-213.
122 US Response to Panel Question 37, para. 41.
123 US Response to Panel Question 37, para. 43.  Even more absurd is the US claim that respondents
should be grateful that USDOC did not apply current US practice to exclude those higher priced sales and use
instead even higher priced downstream sales.
124 Japan frankly questions whether, in a real investigation, USDOC would accept such  below-cost
downstream resales as "in the ordinary course of trade."
125 See US First Submission, para. B-219.
126 Compare  Article 2:6 of the Tokyo Round Anti-Dumping Code with Article 2.4 of the Uruguay
Round Anti-Dumping Agreement.WT/DS184/R
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also have concluded -- the 99.5 percent test is unfair because it systematically inflates the dumping
margin without truly determining whether the sales it eliminates were outside the ordinary course of
trade or, conversely, whether the sales it retains were in the ordinary course of trade.
127. The United States argues that Japan is trying to impose its own concept of "unfairness," and
that the Panel cannot make such judgments.127   It is hard to imagine a clearer example of "unfair"
than a test that is one-sided:  it permits high er prices (and thus higher dumping margins), but
precludes lower prices (and thus lower dumping margins).  The test simply has no rational
relationship to reality, and reflects an outcome-determinative approach.
128. The United States also asserts that the 99.5 percent test "has no predictable or necessary effect
on the calculated dumping margin" because individual sales that might be below the 99.5 percent
threshold are included in normal value.128  This argument ignores the systemic unfairness that all the
sales to this customer are, on average, higher than the sales of similarly-situated customers whosepurchases do not pass the 99.5 percent test.  If sales to all affiliated parties are "inherently suspect,"
129
what is fair about retaining only high-priced sales?
129. The United States claims that NKK’s proposed standard deviation test errs on the side of
including affiliated-party transactions that might actually be affected by the relationship.130  Such a
test, by definition, eliminates low-priced sales as well as the "aberrationally high" prices identified inthe US submission.  Such a test is not one-sided, and is objectively reasonable.
131  Though the United
States may be correct that the margin calculation does not rely on standard-deviation analysis,132 the
arm’s-length test poses a different question.  Dumping margins simply measure differences in price.
The arm’s-length test is supposed to measure, solely on the basis of price, whether a sale to an
affiliate has been influenced by the relationship or is outside the ordinary course of trade -- a morecomplicated endeavour.
130. Japan does not posit that a standard deviation test is the only way to do this; Japan simply
wants the Panel to know that alternatives were  presented to USDOC in this investigation, that
standard deviation is a more reasonable way to determine whether a sale is in the ordinary course of
trade based solely on price, and that USDOC has no t shown any interest in seriously considering such
inherently fair alternatives.
2. The "everyone else does it" excuse is not only weak, but also wrong
131. Ultimately, we are left with what the United States apparently believes is its best defense of
its practice of excluding sales to affiliates:  "everyone else does it."  According to the United States,
other major users of the anti-dumping laws have similar rules for excluding home-market sales to
affiliates from the normal-value calculation.
133  This defense does not rise to the level of subsequent
practice,134 and is both irrelevant and wrong.  It is irrelevant because the other Members’ statutes and
practices have never been reviewed for WTO consistency by a panel.  It is wrong because the
                                                     
127 US First Submission, para. 219.
128 US Response to Panel Question 36, para. 37.
129 US Response to Panel Question 34, para. 33.
130 US First Submission, paras. B-223 to B-224.
131 Japan refers the Panel to the affidavit submitted from two statisticians, both of whom have held
professional positions in the US Government, concerning the inherent bias in the 99.5 percent test.  See Exhibit
JP-56 .
132 See US First Submission, para. B-225.
133 See US First Submission, paras. B-206 to B-207.
134 See Section II.B.2.b above.WT/DS184/R
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language from those statutes quoted by the United States indicates that the other countries have more
thoughtful and less mechanical approaches than the 99.5 percent test.135
132. The European Communities, Brazil and Korea, whose practices have been cited by the United
States, specifically support Japan on this question and agree that USDOC’s practice is unreasonably
biased and mechanical.136  There is no country other than the United States that rejects sales to
affiliates simply because they are sold at average prices less than 99.5 percent of the average price to
non-affiliates.
3. Article 2.2 makes clear that any test for finding sales to be outside the ordinary course of
trade must be more rigorous than USDOC’s 99.5 percent test
133. Article 2.2 sets forth the circumstances in which an authority may rely on something other
than a producer’s own sales in the home market to calculate normal value when there are no sales in
the ordinary course of trade.  The only outside-the-ordinary-course-of-trade sales identified in thisprovision are the below-cost sales discussed in Article 2.2.1.  This provision makes clear that
choosing to exclude sales as outside the ordinary course of trade is a rigorous undertaking.  Even
below-cost sales cannot be deemed outside the ordinary course of trade unless they are made (a)
within an extended period of time, (b) in substantial quantities, and (c) at prices which do not provide
for the recovery of all costs within a reasonable period of time.  The fact that the sales are below costis alone not sufficient to justify their exclusion.  Rather, each one of the specified conditions must be
met.
134. Similar rigor must apply if an authority is to exclude sales to affiliates.  It is not sufficient that
the relationship between the companies can be as low as a five percent shareholding and that the
average price between the companies is merely 0.5 percent lower than the average price charged tounaffiliated companies.
137  It strains common sense that such an easy test could be permitted given the
rigor with which authorities must analyze below-cost sales.
B. REPLACEMENT WITH DOWNSTREAM RESALES
135. Even assuming the sales to affiliates are deemed outside the ordinary course of trade, the AD
Agreement does not permit USDOC to replace sales to  affiliates with downstream resales, as the
United States does in "most" cases.138  USDOC may use other home-market sales, or, if there are no
home-market sales in the ordinary course of trade, Article 2.2 specifies that it must use only third-
country sales or constructed value.  Other than a desire to increase the burden on respondents, the
United States has not identified any rationale for its policy.                                                     
135 The EC excludes sales to affiliates unless it determines that the prices are "unaffected by the
relationship."  US First Submission, para. B-206, n.266.  So do Australia, New Zealand, Argentina and Korea, in
similar language.  Id. para. B-206, nn.268-70.  Brazil’s statute includes the precatory "may," and hinges
exclusion on a determination of whether "related prices  and costs are comparable to those of operations among
parties that are not so related."  Id. para. B-206, n.267.
136 See Brazil’s Third Party Submission, Part III.C; Brazil’s Response to the Questions to the Third
Parties, Question 48; Oral Statement by the Europ ean Communities, paras. 20-21; European Communities’
Response to the Questions to the Third Parties, Ques tion 48; Korea’s Third Party Submission, Part II.E, F;
Korea’s Response to the Questions to the Third Parties, Question 48; see also  Chile’s Third Party Submission,
8-9.
137 This applies with equal force to tests that do not even consider relative price levels.  The United
States claims in response to Panel Question 34 that USDOC "could reasonably have disregarded all … sales {toaffiliates} in the home market, regardless of price leve ls to affiliates, as Canada and Mexico do, and relied
solely on arm’s length sales to unaffiliated parties. "  US Response to Panel Question 34, para. 33.  Japan
disagrees.  The 99.5 percent test is unfair not merely becau se it excludes low-priced sales to affiliates, but also
because it assumes that such prices are low because of a ffiliation, regardless of the level of affiliation and even
when the affiliation is as low as five percent.
138 US Response to Panel Question 35, para. 36.WT/DS184/R
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1. Article 2.1 does not justify use of downstream sales in the home market
136. The United States claims that downstream sales "clearly come within" home market sales
under Article 2.1.  In doing so, however, the United States makes no effort to explain why.
137. The US position on this issue is indefensible.  Article 2.1 merely defines dumping.  Nowhere
does this provision discuss using downstream sales.  The United States is reading into the ADAgreement concepts that are not there.  The expansive reading the United States has adopted would
permit all sorts of alternatives to using a respondent’s  sales, as long as they are in the ordinary course
of trade and destined for consumption in the export ing country.  Such an expansive reading, however,
ignores clear preferences in the AD Agreement, su ch as determining dumping margins for individual
exporters and/or producers (Article 6.10).  This preference explains why constructed value is
calculated based on production costs (Article 2.2), not the costs of a reseller.  There is simply no
reason to interpret Article 2.1 to permit the US practice.
138. Article 2.3 specifically allows the use of downstream prices in the export context, but not in
the context of home-market sales.139  Article 2.3 exists because there is no alternative for export price
to a specific market other than some price at which sales are made in that specific export market.
Therefore, Article 2.3 creates a mechanism for constructing an export price for that market.  There is
no such need for this policy on the home market side, because there are other alternatives, includingother home market sales and, based on Article 2.2, constructed value or third country sales (if the
remaining sales are too few).  Nothing in the AD Agreement permits the use of resales in the home
market.
140
2. If there are no home-market sales in the ordinary course of trade, then Article 2.2
requires use of third-country sales or constructed value.
139. If USDOC does not believe sales to affiliates are in the ordinary course of trade, then it has
three choices.  The first choice is to use the respondent’s other home-market sales.141  When there are
no sales in the ordinary course of trade in the home market, or when such sales do not permit a proper
comparison then the second and third choices present themselves:  third-country sales or constructed
value.  Where downstream home-market sales in th e ordinary course of trade exist, however, the
United States thinks USDOC may not reasonably use other non-home market based alternatives.142  In
this sense, the United States claims that the particular provisions of Article 2.2 and 2.3, if read to
prohibit replacement of sales to affiliates with the downstream resales, lead to an "absurd result."
Japan disagrees.  When USDOC rejects home-market sales to an affiliate on the basis of the 99.5
percent test, USDOC is declaring that these sales are not in the ordinary course or do not permit a
proper comparison.  Assuming that judgment is correct -- a point Japan contests -- the question
                                                     
139 See Japan’s First Submission, paras. 162 to 164.
140 The United States responds to Japan’s analysis with an attack on the viability of the maxim
"expressio unius est exclusio alterius."  That is, the language must be viewed in context, and the United Statesthinks it is inappropriate to infer any substantive meaning from the specification of some concepts and theomission of others.  See US First Submission, paras. B-232, B-234 to B-235.  Attributing meaning to text is the
essence of treaty interpretation.  The textual approach of  Article 31 of the Vienna Convention rests on certain
"logical presumptions," including specifically the pr esumption that "express mention excludes other items
(expressio unius est exclusio alterius)."  In fact, the United States and the US steel industry recently embraced"expressio unius" as a tool for interpreting the Uruguay Round Agreements in the Panel proceedings in U.S.—
Leaded Bar.   See US First Submission, para. 154, Attachment 2.1 to the Panel Report, WT/DS138R (23 Dec.
1999) & Exhibit USA-25 (excerpts attached as Exh. JP-98 ).
141 The United States does not even acknowledge that the other home-market sales should be the
primary recourse, but identifies only the downstream resales as the "ordinary course" sales available for the
normal-value calculation.  See US Response to Panel Question 33, paras. 29-30.
142 See US First Submission, para. B-234.WT/DS184/R
Page C-41
becomes what alternative prices USDOC may use.  By specifying the alternatives, Article 2.2 does
not permit USDOC to use downstream resales.
140. The United States also suggests that Japan’s interpretation of the AD Agreement would allow
respondents to manipulate the normal-value calculation by structuring all home-market sales through
affiliated resellers, apparently with the expectat ion that USDOC would be left with no home-market
sales in the ordinary course of trade.143  First, Japan does not accept the premise that all sales to
affiliates will always be outside the ordinary course of trade.  Even if such a decision is made, then
indeed Article 2.2 requires the authorities to calculate normal value only on the basis of third-country
sales or constructed value.  In fact, in its offici al internal "Antidumping Manual," USDOC instructs its
staff to do exactly what the United States now claims is "absurd": use third-country sales or
constructed value where there are no home-market sales in the ordinary course of trade.144
3. The use of downstream resales also violates Article 2.4’s "fair comparison" requirement
141. USDOC’s use of downstream resales also violates the "fair comparison" requirement because
it results in an "apples to oranges" comparison.145  The United States insists this is not so, because
USDOC makes level of trade adjustments -- something the Japanese mills allegedly never requested
and Japan allegedly does not even acknowledge in its brief.146  The United States is mistaken on two
points.
142. First, USDOC’s level of trade adjustments, which focus on different selling functions, do not
address differences in price comparability due to the resellers’ costs and profit.  Without accounting
for such differences, USDOC does not reduce price to the ex-factory level – a task USDOC goes to
great lengths to accomplish on the export side when calculating constructed export price.147  Because
USDOC ensures that all constructed export prices are ex-factory prices, any use of downstream salesin the home market that does not incorporate deductions to reach an equivalent ex-factory price will
result in an "apples-to-oranges" comparison.
 148
143. Second, USDOC received a specific request for a level of trade adjustment to the downstream
resales USDOC used as a surrogate for NKK’s home market price.149  NKK noted the different selling
functions it performed for its direct customers as opposed to the customers of its affiliated reseller.150
USDOC did not grant the level of trade adjustment requested by NKK.151  So, USDOC did not even
apply its limited level of trade adjustment, thus making the "apples-to-oranges" comparison more
severe.
                                                     
143 See US First Submission, para. B-235.
144 Compare  Antidumping Manual, ch. 8, at 2-4, 56 (Dep’t Commerce 22 Jan. 1998)  (excerpts attached
as Exh. JP-99)  with US First Submission, para. B-235.
145 See Japan’s First Submission, para. 170.
146 US First Submission, para. B-236.
147 When the United States calculates constructed export price, it makes adjustments to the affiliate’s
resale prices to reduce it to an ex-factory equivalent.  19 U.S.C. § 1677a(c)-(d) (excerpts attached as Exh. JP-
90(c) ).  Specifically, subsection (d)(1) reduces the export pri ce to reflect all reseller costs, and subsection (d)(3)
reduces the export price to reflect the profit attributable to the reseller.  No such adjustment is made by the
United States on the home market side when using downstream sales, unless the respondent successfully meets
the high US standard for a level of trade adjustment.  19 U.S.C. § 1677b(a)(7) (excerpts attached as Exh. JP-
90(d) ).  Even then, however, the adjustment does not reduce the price to an ex-factory level.  Rather than
deducting all "expenses" as specified in Section 1677a(d)(1), Section 1677b(a)(7)(A) focuses on different"selling activities" that are "demonstrated to affect  price comparability."  Moreover, Section 1677b(a)(7)(A)
makes no provision for deductions for profit, nor does US practice.
148 See Korea’s Third Party Submission, paras. II.E.3, II.F.1-4.
149 See USDOC  Final Dumping Determination , 64 Fed. Reg. at 24339 ( Exh. JP-12 ).
150 Id. at 24339-40 (Exh. JP-12) .
151 Id. at 24340 (Exh. JP-12) .WT/DS184/R
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VI. CRITICAL CIRCUMSTANCES
144. The United States made early decisions on critical circumstances to chase Japanese imports
from the market, and thus to placate domestic political pressures.  Indeed, the new US policy was sold
to domestic constituencies based precisely on this chilling effect.  Given the normal operation of US
customs law, there was absolutely no need to ru sh anything to preserve the option to collect
retroactive duties, should they ultimately become necessary.152  The rush to judgment, long before the
authorities have any time to collect or analyze "sufficient evidence" to support such actions, violates
Article 10 of the AD Agreement.
145. Moreover, the new US policy that has made this rush to judgment a regular feature of US
anti-dumping cases must be addressed by this Panel.  The decisions at the end of an investigation
should not shield from review those violations of WTO obligations that occur earlier in the
investigation, particularly those violations that are likely to be repeated in future cases if notdisciplined.
A. T
HE AUTHORITIES CANNOT PREDICATE A F INDING OF CRITICAL CIRCUMSTANCES ON
"THREAT OF INJURY "
146. The United States misreads Article 10.6 to allow "threat" of injury to substitute for current
injury.  But the language of Article 10.6, the context of Article 10 more generally, and the overallpurpose of retroactive duties all contradict this US interpretation.
147. Article 10.6 means what its says:  "injury," and not threat of injury.  The United States uses
Footnote 9 of Article 3 to claim that an affirmative finding of threat of injury is an affirmative finding
of injury pursuant to which retroactive duties may be assessed.
153  As Japan explained in its First
Submission154 and in response to Panel Question 14, Footnote 9 cannot apply to "injury" as that term
is used in Article 10.6.  Footnote 9 sets a general rule "unless otherwise specified."  The language and
context of Article 10 generally and Article 10.6 specifically represent such an "otherwise specified."
148. Consider for a moment the illogic if Footnote 9 were deemed to apply to Article 10.6.  The
US reading of Article 10.6 would permit imposition of critical circumstances based on a finding a
threat of injury.  Yet this reading directly contradicts Article 10.4’s requirement that in cases of threat,duties can only be prospective.  In context, it makes no sense for Article 10.6 to authorize what
Article 10.4 does not permit.
149. Although the United States might turn to Article 10.2 as an exception to Article 10.4 allowing
some retroactive duties in cases of threat, this argument overlooks the situation of material retardation
-- which is also listed in Footnote 9.  The United States cannot use Footnote 9 to add "threat of injury"
to Article 10.6 without also adding "material reta rdation" to Article 10.6.  Yet under Article 10.4, a
finding of material retardation may never  justify retroactive duties -- not duties during the period of
provisional measures, and certainly not duties that go back 90 days prior to the start of provisional
measures.  The problem persists:  it makes no sense for Article 10.6 to be read as authorizing what
Article 10.4 does not permit.  Rather than this bizarre interpretation, the far more natural reading is
that Article 10.6 means what it says -- "injury" means current injury, not threat of injury and not
material retardation.
155
                                                     
152 See Japan’s Response to Panel Question 16, para. 56.
153 See US First Submission, para. B-256.
154 Japan’s First Submission, paras. 191-194.
155 Nor can the United States argue distinctions between preliminary and final determinations of critical
circumstances.  The language of Article 10.6 does not mean different things at the preliminary and final stage --the word "injury" does not change with the passage of few months.  The requirements of Article 10.6 applyWT/DS184/R
Page C-43
150. The United States also argues the phrase "would  cause injury" indicates that present injury is
not a requirement.156  As Japan explained in response to Panel Question 14, the US interpretation is
incorrect as a matter of language as well as logic.  As a matter of language, "would" is of course the
past tense of will and does not indicate future events.157  The US interpretation of "would cause
injury" to connote future events also would be inco nsistent with the context of Article 10, with its
overall retrospective purpose.  Article 10.6(i) simply cannot be read to describe future events, such as
the causation of injury, in light of the use of the pr esent tense in virtually all other verbs in Article 10
relevant to the factual predicate for what the United States terms "critical circumstances."158
151. Japan read the US response to Panel Question 30 with interest, since Japan also was curious
why USDOC felt the need for more information if USITC’s threat-of-injury determination was
sufficient to establish "injury" under Article 10.6(i).  The only reason the United States identifies,
however, is a concern that the injury "may be less apparent to the importers" in light of USITC’sfinding that there was not even a reasonable indication of present material injury.
159  Japan certainly
shares this concern, but this US response does not answer the Panel’s question.  Indeed, the US
response reinforces Japan’s point that USITC’s threat-of-injury  finding undermines the basis for
concluding that importers, in the "here and now,"  should have known about dumping and injury.
B. USDOC’ S EARLY PRELIMINARY DETERMINATION OF CRITICAL CIRCUMSTANCES IN THIS
INVESTIGATION VIOLATED THE AD A GREEMENT
152. Articles 10.6 and 10.7 establish important limits on the ability of a WTO Member to
determine, in US nomenclature, that "critical circumstances" exist and retroactive duties may be
imposed.  The United States has disregarded these limits, and rushed to judgment before it had
sufficient evidence to justify such an extreme act ion.  None of the elements of Article 10.6 was
established to the degree required by Article 10.7; any one of these legal errors would be sufficient for
the Panel to find a violation of the AD Agreement.  There was no finding that imports were
"dumped."  There was insufficient evidence that im porters knew or should have known of dumping
and injury, only vague newspaper articles.  There was no finding at all that imports were "likely to
seriously undermine the remedial effect" of the duties.  The evidence was not sufficient to support afinding of "massive imports4," since imports from Japan actually declined after the petition was filed.
Most troubling, the premature timing of the decision, mandated by USDOC’s new policy bulletin,
guaranteed that sufficient evidence of the elements of Articles 10.6 would not exist.
153. As explained in Japan’s Answers to Panel Questions 11 and 15, and in Japan’s First
Submission, the basic problem is that USDOC simply accepted everything in the petition as the truth.
The United States now attempts to distance itself from this fact, but USDOC’s contemporaneous
documentation proves Japan’s point.  The preliminary determination of critical circumstances was, inthe words of the internal USDOC decisional memo, "{b}ased on allegations contained in the
petitions," and on nothing more.
160
                                                                                                                                                                    
consistently at both stages.  The only difference is the degree of evidence one has of those requirements at each
stage.
156 See US First Submission, para. B-274.
157 See generally  New Shorter Oxford English Dictionary  at 3687-88, 3725; William Strunk, Jr. & E.B.
White, The Elements of Style  64-65 (3d ed. 1979) (attached as Exh. JP-100 ).
158 See Japan’s First Submission, paras. 190-196.
159 See US Response to Panel Question 30, para. 22.
160 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 1 (Exh. US/B-42)  (hereinafter "Spetrini
Memo").WT/DS184/R
Page C-44
1. There was no finding that imports were dumped
154. As a threshold matter, Article 10.6(ii), and the chapeau of Article 10.6,161 require that the
imports in question be "dumped" before the author ity can make a finding of critical circumstances.
There was no such finding at the time USDOC made its preliminary determination of critical
circumstances, and the United States does not even address this specific violation in its writtensubmission.
155. The preliminary determination of dumping was not made until three months later.  There was
not even any independent evidence of dumping -- apart from the self-serving allegations in the
petition -- when USDOC made its preliminary critical circumstances determination.  Evidence of
dumping might exist if there were an independent assessment, but on this point USDOC’s critical
circumstances analysis simply summarized the allegations in the petition.
162  "Alleged dumping" is
not sufficient to establish that the product was "dumped" for purposes of Article 10.6,163 as the United
States appears to acknowledge when arguing in the context of facts available that petitions are always
adverse.164
2. There was insufficient evidence of importer knowledge of dumping
156. There was insufficient evidence that importers should have been aware of dumping, a
requirement of Article 10.6(i).  USDOC’s total reliance on the petition is legally insufficient.USDOC specifically found "The most reasonable s ource of information concerning knowledge of
dumping is the petition itself."
165  The United States is conspicuously silent as to this rather
remarkable conclusion.  Why would an allegation in a lawsuit be the " most reasonable  source of
information" about what other parties knew or should have known?  How could any adjudication
system conclude that an allegation by one side, standing alone, is the "most reasonable" indicator ofthe truth?
166
157. Even the United States recognizes that the in formation in the petition at best tells only one
side of the story.167  The US attempt to rationalize this assertion in response to Panel Question 32
fails.  The United States notes that USDOC calculated a higher dumping margin for KSC than the
margins alleged in the petition.  But the petition did not even calculate a margin for KSC , only for
NKK and NSC.  Moreover, USDOC’s final determination for KSC was distorted by the use of facts
available.
158. Under its "25 percent test," USDOC concluded that importers should have been aware that
they were dealing in dumped merchandise -- during a period several months before the petition was
even filed -- solely because the petitioners subsequently alleged  that dumping margins for NKK and
NSC exceeded 25 percent.168  As explained in Japan’s answer to Panel Question 11, this alone cannot
                                                     
161 On this point, Japan concurs with the reasoning in Brazil’s Third Party Submission, para. IV.3.
162 See Spetrini Memo, at 2 ( Exh. US/B-42 ).
163 Compare  Article 5 ("Initiation and Subsequent Investigation") with Article 10.6.  As Japan
explained in response to Question 11 from the Panel, the evidentiary standard for initiating an investigation doesnot approach the evidentiary standard for substantive determinations.
164 US First Submission, para. B-72.
165 USDOC Preliminary Critical Circumstances Determination , 63 Fed. Reg. at 65750 (Exh. JP-9) .
See Spetrini Memo at 2 ("the Department has relied on margin information provided by petitioners in the
petition to impute knowledge of sales of subject merchandise at less than fair value") ( Exh. US/B-42 ).
166 See United States—Measure Affecting Imports of Woven Wool Shirts and Blouses From India ,
adopted 23 May 1997, WT/DS33/AB/R, at 14 ("{W}e find it difficult, indeed, to see how any system of judicial
settlement could work if it incorporated the proposition that the mere assertion of a claim might amount to
proof.").
167 See US First Submission, para. B-72.
168 See US First Submission, para. B-269.WT/DS184/R
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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.169  This deficiency in petitioners’ data is underscored by the ultimate dumping
determination with respect to NKK and NSC once their information was placed on the record and
evaluated by USDOC.  Ironically, USDOC then c oncluded that NKK and NSC -- the two companies
whose estimated margins formed the basis of the "25 percent test" -- specifically did not dump by
margins exceeding 25 percent.170  The United States has emphasized the quantity of petitioners’
allegations and newspaper articles, as if more  inconclusive newspaper articles or longer  allegations at
some point become proof.171  They do not, as the USDOC analysis eventually showed.172
159. As Brazil notes in its third party submission, even an affirmative finding of dumping above
25 percent would not be sufficient evidence that importers knew or should have known that fact,
because importers rarely if ever know the price at which their foreign suppliers sell in their homemarket (or whether such sales are above the cost of production).
173  The only response the United
States can muster is that the 25 percent test is a "permissible interpretation" of Article 10, because the
Agreement does not specify how authorities should determine importer knowledge of dumping.174
This begs the question; however the United States  might interpret the Agreement, it may not do so in
a manner that eviscerates the Article 10.7 requirement of "sufficient evidence."
3. There was insufficient evidence that impo rts had injured the domestic industry
160. As discussed above, critical circumstances may not be applied when only a threat of material
injury exists.  In this case, USITC preliminarily found only a threat of material injury.  USDOC,
therefore, had insufficient evidence on which to base a finding of material injury, as required by
Articles 10.6(ii).
4. There was insufficient evidence of  importer knowledge of injury
161. There also was insufficient evidence of importer knowledge that their purchases of the
dumped product would "cause injury" to the US industry as required by Article 10.6(i).  The
United States has attempted to bolster USDOC’s finding on this point with a detailed discussion of the
facts and the law, but the United  States is wrong on both.
162. On the facts, the United States insists importers  knew or should have known of injury based
on the allegations in the petition, including the vague newspaper articles submitted by petitioners.  As
discussed in Japan’s Answer to Panel Question 15, this argument is meritless based on the substance
and chronology of those articles.  Other "evidence" of importer knowledge of present material injury
included (1) the finding that there were "massive imports" during the earlier, arbitrary period
allegedly established by the newspaper articles, (2) the magnitude of the estimated dumping margins
alleged in the petition, and (3) "information regarding injury to the domestic industry in the petitionitself."
175  In other words, the decision was based on nothing at all  other than the petition and the
contrary conclusion by USITC that there was only a reasonable indication of threat of injury.  This
basis is inherently insufficient.
                                                     
169 Japan notes that USDOC’s initiation checklist simply summarized the allegations in the petition, see
Initiation Checklist,  at 62-63 ( Exh. US/B-18 ), as did its internal "analysis" of the critical circumstances
allegation, see Spetrini Memo, at 2 ( Exh. US/B-42 ).
170 USDOC Final Dumping Determination , 64 Fed. Reg. at 24370 (Exh. JP-12) .
171 See, e.g. , US First Submission, para. B-268 ("the approximately 700 pages of exhibits submitted
with the petition and the amendments thereto are not mere allegations -- they are evidence").
172 See Japan’s Response to Panel Question 15, para. 54.
173 See Brazil’s Third Party Submission, para. IV.6.
174 See US First Submission, para. B-271.
175 Spetrini Memo, at 3 ( Exh. US/B-42 ).WT/DS184/R
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163. Note that Article 10.6(i) is quite specific that dumping by the exporter  must be causing injury.
Vague stories about troubles being experienced by the domestic industry, or vague references to
imports in general does not provide a legally sufficient basis to find that importers should have known
specific exporters or specific countries were the cause of alleged injury.176
164. Moreover, the United States admits that petitio ner needed to wait for "sufficient evidence"
even to make an allegation.177  Yet the United States still argues that months before the petition the
importers should have known about the injury.  If petitioners, carefully studying the market to file a
case could not even credibly allege injury in early 1998, how could importers have been aware that
alleged dumping would cause injury?
5. There was no finding that imports were likely to seriously undermine the remedial effect
of any duty
165. Contrary to Article 10.6(ii), USDOC did not addr ess at all whether the imports were "likely to
seriously undermine the remedial effect of the definitive anti-dumping duty to be applied."  The
United States does not even attempt to justify this failure apart from a conclusory assertion, without
any citation to the record in this investigation, th at USDOC "plainly" considered this factor as an
"integral part" of its analysis.178  USDOC did not do so, quite simply because it is not required to do
so by the US statute or policy bulletin, as explained in subpart C below addressing how US law isinconsistent on its face with the Agreement.
179  By comparison, factors USITC typically considers in
determining whether the imports were "likely to seriously undermine the remedial effect" include
subject import volumes before and after the filing of the petition, trends in subject import pricing data,
and inventory levels.180  USDOC, however, considered none of these factors.181
166. The magnitude of this oversight emerges fr om the illogic of the USDOC position.  USDOC
identified a surge in imports from a much earlier  period of time to avoid the inconvenient fact that
imports at the time of the petition were falling.  USDOC then implicitly jumps to a future  period to
                                                     
176 Once one looks carefully behind the US allegations that hundreds of pages of evidence supported
the USDOC conclusions, it becomes apparent the US ar gument is an extreme exaggeration.  USDOC identified
24 media reports that ostensibly supported its preliminar y finding of critical circumstances.  Spetrini Memo, at
7-9 ( Exh. US/B42 ).  Of these 24, however, only 6 mention Japan at all; as the Spetrini Memo itself
acknowledges the remainder are either general comments about imports, or articles that discuss other import
sources.  Of these 6 articles mentioning Japan, only 3 articles appear to mention hot-rolled steel.  One of these
three, however, is inaccurately described in the Spetri ni Memo as having to do with hot-rolled steel -- the
interview of Hank Barnette on CNN did not mention hot-rolled steel at all, and discussed only general steeldevelopments.  Transcript #98073003FN-L02, of CNNFN:  Before Hours  (30 July 1998) (attached as Exh. JP-
91).  Moreover, of these 6 articles mentioning Japan, 2 of them came in late September just as the petition was
about to be filed.  The entire US case of "sufficient evidence" with respect to Japan thus collapses to two
isolated reports -- one from a British consulting firm CRU International, and another from an obscurepublication called the Tex Report, published in Japan in English.  In each case, the reference to hot-rolled steel
from Japan occupies one or two sentences in a multi-page report covering a variety of other topics.  The USargument is that a stray sentence or two in publications, no matter how obscure, represents sufficient evidencethat importers should have been aware that alleged dumping of hot-rolled steel was injuring the US industry.
This claim is absurd.
177 US First Submission, para. B-278.
178 Id. para. B-280.
179 See also  Spetrini Memo, at 1 (summarizing statutory factors USDOC was considering, and omitting
this one) ( Exh. US/B-42 ).
180 See, e.g., USITC Final Injury Determination , USITC Pub. 3202, at 21-23 ( Exh. JP-14 ).
181 See Spetrini Memo, at 2-4 ( Exh. US/B-42 ).  The Memo did cite "falling domestic prices resulting
from rising imports," but this was based on the select ed newspaper articles rather than USITC’s pricing data,
and it was during "early to mid-1998," not during a period in which imports could have seriously underminedthe effect of an eventual order.WT/DS184/R
Page C-47
allege without any analysis that imports will underm ine the remedial effect of the order.  The USDOC
cannot have it both ways.
6. Inappropriate measurement period for "massive imports"
167. The final factual predicate for a finding of critical circumstances is "massive imports of the
subject merchandise over a relatively short period,"182 which is how the US statute paraphrases
Article 10.6(ii).  Given the fact that imports from Japan actually declined after the petition was filed
and after initiation, which were the periods USDOC always examined until this investigation,183 there
was no sufficient evidence of this point.
168. The United States mischaracterizes Japan’s argument by claiming Japan does not actually
question the sufficiency of the evidence, but rather why the period was different from usual.184  There
should be no misunderstandings:  the use of an arbitrary measurement period undermines the
sufficiency of the evidence.  USDOC’s selection of  a measurement period that would best support its
preordained conclusion (i.e., that imports were massive in a short period of time) on the basis of
nothing but petitioners’ allegations and vague newspaper articles is an example of bias and
unreasonableness in the collection and evaluation of evidence.  The United States attempts to justify
the use of this earlier period by claiming that the petitioners’ decision to wait until they had sufficient
evidence before filing the petition should not deprive them of their remedy against a massive surge ofdumped imports.
185  But there must be a neutral, transparent period within which USDOC objectively
measures the growth in imports.  It cannot be whichever period best supports the petitioners’ case, as
USDOC did here.
169. The United States also overlooks the illogic of its position.  The purpose of the 90-day period
is to catch sudden surges triggered by the petition.  It makes no sense to look months before the
petition to find a surge, overlook a post petition decline, and then assert the need to invoke provisional
measures retroactively by 90 days to place duties on those already declining imports.
7. The timing of the decision guaranteed that sufficient evidence would not exist
170. As explained in Japan’s answers to Panel Ques tions, the major flaw in USDOC’s preliminary
determination of critical circumstances in this case is that the determination was made too early.USDOC traditionally waits until the preliminary determination of dumping to make its preliminary
critical circumstances determinations, but changed its practice during the investigation of hot-rolled
steel from Japan to provide that critical circumstances determinations should be made "as soon as
possible after initiation."
186  By requiring the decision to be made "as soon as possible," USDOC
systematically prevented its determination from being made on the basis of "sufficient evidence" as
required by Articles 10.6 and 10.7 of the AD Agreement.
171. The United States has attempted to justify its new policy requiring premature findings by
noting that Article 10.7 does not require USDOC to wait for the preliminary determination of
dumping.187  True; but that was never precisely Japan’s argument.  The AD Agreement requires
USDOC to make its determination of critical circumstances only on the basis of "sufficient evidence,"
and USDOC lacked the evidence in this investigation when it rendered its determination so soon after
initiation.  There may be instances in which USDOC could  make the decision early, but not without
                                                     
182 Section 733(e)(1)(B), 19 U.S.C. § 1673b(e)(1)(B) (Exh. JP-4(b)) .
183 See Japan’s First Submission, para. 204.
184 See US First Submission, para. B-275.
185 See US First Submission, para. B-278.
186 USDOC Critical Circumstances Policy Bulletin, 63 Fed. Reg. at 55364 (Exh. JP-3).
187 US First Submission, para. B-244.WT/DS184/R
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establishing, on the basis of sufficient evidence, all the elements required by Article 10.6.  The
petition alone is never "sufficient evidence."
172. The United States also makes the baffling claim that USDOC simply cannot wait to make its
preliminary critical circumstances finding until there is any evidence other than the petition because
the delay would jeopardize the remedial purpose.188  As Japan explained in response to Panel
Question 16, the US Customs Service does not finalize duty liability until approximately 314 days
after entry.189  There will be plenty of time — over ten months — to determine the final duty liability
of the affected entries without any risk that those entries will escape the liability.  But rather than
recognizing the ordinary operation of US customs law, the United States rushed to judgment.  If the
facts truly justified critical circumstance there would be plenty of time, but the United States could not
be bothered to wait for sufficient evidence.
C. THE US L AW, ON ITS FACE, VIOLATES THE AD A GREEMENT
1. The US distinction between "mandatory" and "discretionary" laws is contrived
173. Several of the problems with the specific application of "critical" circumstances in this case
reflect underlying defects in the US statute and how it has been interpreted by USDOC.  The United
States tries to avoid this problem by invoking the mandatory/discretionary distinctions explored by the
GATT Panel in U.S.—Tobacco .190  According to the United States, "{a} law is not, on its face,
inconsistent with a WTO Agreement unless it ma ndates actions that are inconsistent with that
Agreement."191  The United States has invoked U.S.—Tobacco  repeatedly in other WTO Panel
proceedings, and this attempt to misuse that decision must fail just as surely as the others did.
174. First and foremost, the US law and practice governing preliminary determinations of critical
circumstances is indeed mandatory.  Under Article 10, the United States must not find criticalcircumstances unless the elements established in that Article are met.  In Section 733(e),
192 however,
USDOC is directed to determine preliminarily (" shall promptly . . . determine") whether critical
circumstances exist under a much lower evidentiary standard and without finding certain essential
elements of Article 10.  In addition, the Policy Bulletin squarely states, "Commerce should issue its
preliminary finding on critical circumstances before the preliminary determination, and also as soonas possible after initiation."
193  The United States has confirmed to the Panel that the Policy Bulletin
establishes a practice "for all ongoing and future cases."194  This is a mandatory practice subject to a
prima  facie challenge under the AD Agreement.195
175. Second, the GATT Panel in U.S.—Tobacco  dealt with very different facts from those before
this Panel.  The text of the law in question in the U.S.—Tobacco  case was ambiguous, and it had not
yet even been applied.  These circumstances led the Panel to give the United States the benefit of the
doubt.196  In contrast, the US statute and USDOC Policy Bulletin pertaining to preliminary
                                                     
188 See US First Submission, para. B-266; see also  US Response to Panel Question 32, para. 27.
189 See 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 ( Exh. JP-80 ).
190 See US First Submission, paras. B-283 to B-284 (citing generally United States—Measures
Affecting the Importation, Internal Sale and Use of Tobacco , adopted 4 Oct. 1994, BISD 41S/131) (" U.S.—
Tobacco ").
191 US First Submission, para. B-283.
192 Codified at 19 U.S.C. § 1673b(e) (Exh. JP-4(b)) .
193 USDOC Critical Circumstances Policy Bulletin, 63 Fed. Reg. at 55364 ( Exh. JP-3 ).
194 US Response to Panel Question 26, para. 14.
195 Cf. United States—Sections 301-310 of the Trade Act of 1974, adopted 27 Jan. 2000, WT/DS152/R,
at para. 7.97 ("U.S.—Section 301").
196 U.S.—Tobacco , para. 123.WT/DS184/R
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determinations of critical circumstances have been applied repeatedly, including in this
investigation.197
176. These features bring this case closer to U.S.—Section 301  and U.S.— 1916 Act ,198 two recent
Panel decisions that squarely rejected US attempts to analogize U.S.—Tobacco .  The Panel in U.S.—
Section 301  persuasively explained why statutes must be read in light of their interpretation by
agencies:
Frequently the Legislator itself does not seek to control, through statute, all covered
conduct.  Instead it delegates to pre-existing or specially created administrative
agencies or other public authorities, regulatory and supervisory tasks which are to be
administered according to certain criteria and within discretionary limits set out by
the Legislator . . . .  The elements of this type of national law are . . . often
inseparable and should not be read independently from each other when evaluatingthe overall conformity of the law with WTO obligations.  For example, even though
the statutory language granting specific powers to a government agency may be
prima facie consistent with WTO rules, the agency responsible, within the discretion
given to it, may adopt internal criteria or administrative procedures inconsistent
with WTO obligations which would, as a result, render the overall law in violation . .. .
199
Therefore, the Policy Bulletin must form an essential part of the Panel’s review of Japan’s prima facie
challenge to the US practice.  Japan need only demonstrate the practice that has developed, and how it
is inconsistent with the Agreement, for the Panel to review the US practice for conformity with the
Agreement.200
177. Finally, the pre-Uruguay Round Panel reports, such as U.S.―Tobacco,  have limited relevance
in disputes concerning the conformity of a Me mber’s laws with GATT 1994 and the Uruguay Round
Agreements.  Article XVI:4 of the Agreement Establishing the World Trade Organization provides:"Each Member shall ensure the conformity of its laws, regulations and administrative procedures with
its obligations as provided in the annexed Agreements."  "Legislation may thus breach WTO
obligations."
201  Whether a particular piece of legislation is "mandatory" or "discretionary" is not the
principal issue in evaluating whether on its face it is consistent with the WTO Agreements.  Instead,
the approach is to "examine with care the nature of the WTO obligation at issue and to evaluate the
Measure in question in the light of such examination."202
2. The US law does not meet the requirements of Article 10
178. The deficiencies of Section 733(e) of the Tariff Act of 1930203 fall into two categories: (a)
elements of Article 10 that are totally absent, and (b) elements of Article 10 that are substantially
weakened in the US statute.  These defects are reinforced by the Policy Bulletin, which ensures that
preliminary determinations of critical circumstances will never be made on the basis of the
requirements of Articles 10.6 and 10.7.
                                                     
197 See US Response to Panel Question 26, paras. 14-15.
198 United States—Anti-Dumping Act of 1916 (Complaint by the European Communities) , Report of the
Panel, 31 Mar. 2000, WT/DS136/R, at para. 6.86-6.88, aff’d , Report of the Appellate Body, 28 Aug. 2000,
WT/DS136/AB/R & WT/DS162/AB/R, at para. 93 (" U.S.—1916 Act" ).
199 U.S.—Section 301 , paras. 7.25-7.27 (emphasis added).
200 U.S.—1916 Act , para. 6.88.
201 U.S.—Section 301, para. 7.42.
202 U.S.—Section 301 , para. 7.53.
203 Codified at 19 U.S.C. § 1673b(e) (Exh. JP-4(b)) .WT/DS184/R
Page C-50
(b) Absent findings
179. Article 10.6 requires a determination "for the dumped product in question" that "the injury {if
any} is caused by massive dumped imports."  Section 733(e)(1)(B), in contrast, requires only that
"there have been massive imports" and there is no requirement anywhere in the statute that the
imports be "dumped."  This prong of the US statute thus looks only to an increase in the volume of
imports.  Unlike the corresponding section of the AD Agreement, the US statute does not require that
the massive imports be determined to have been dumped or to have caused injury.  This defect is
reinforced by the Policy Bulletin, which directs USDOC to make its "preliminary finding on critical
circumstances before  the preliminary determination {of dumping}."204
180. Moreover, at the preliminary stage, US law provides for no finding at all that the massive
dumped imports are "likely to seriously undermine the remedial effect."  Article 10.6 requires
authorities to "determine for the dumped product in question that . . . the volume of the dumpedimports 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."
There is no corresponding requirement at all in Section 733(e).  At the preliminary stages, the US
statute does not even require a "reasonable basis to believe or suspect" this element.  Only in the
statute governing final determinations is there a re quirement that an authority make the determination
whether the imports "are likely to undermine seriously the remedial effect" of the duties.
205  ( T h i s
statute requires such determination to be made by the USITC, not USDOC.)
181. Notwithstanding the total absence of any finding that the "massive imports" were "dumped"
or that they are "likely to seriously undermine the remedial effect" of the duty, the United States
claims such findings are implicit in USDOC’s ul timate finding that critical circumstances exist.206
The United States does not respond at all to the point about the absence of any finding that the
"massive imports" were dumped, apart from claiming that its "25 percent test" demonstrates that the
imports were dumped.207  But this test asks a different question —whether the importers should have
known about dumping, rather than whether the massi ve imports injuring the US industry during the
short period were dumped.  More importantly, as illustrated by the investigation of hot-rolled steelfrom Japan, USDOC apparently considers mere allegations of dumping in excess of 25 percent to be
"evidence" of dumping; as demonstrated above and in Japan’s First Submission,
208 mere allegations
are not sufficient evidence of dumping.
182. As to the point about undermining the remedial effect, the United States claims that element
exists because that phrase appears once in a policy bulletin and because USDOC "specifically looks to
the timing and volume of the dumped  imports to determine whether critical circumstances exist."209
The United States is being glib:  the US statute does not require USDOC to determine that the imports
were dumped for purposes of the preliminary determination of critical circumstances, and merely
examining the timing and volume of the imports does not address whether the remedy is being
undermined seriously  by the dumped imports.  For example, if the US industry was not in fact injured
by the imports during the measurement period, then  a simple growth in imports would not undermine
seriously the duty.  Yet that growth alone is all the US statute requires.
                                                     
204 USDOC Critical Circumstances Policy Bulletin , 63 Fed. Reg. at 55364 ( Exh. JP-3 ) (emphasis
added).
205 Section 735(b)(4)(A) (19 U.S.C. § 1673d(b)(4)(A)) (Exh. JP-4(c)) .
206 See US First Submission, paras. B-281, B-287.
207 See US First Submission, para. B-285.
208 See Japan’s First Submission, paras. 197-207.
209 See US First Submission, para. B-281 (emphasis added).WT/DS184/R
Page C-51
(c) Insufficient findings
183. US law also contains an impermissibly weak standard of evidence.  Article 10.7 requires
"sufficient evidence" of the elements of Article 10.6.  The United States makes the astonishing
argument that its statute — requiring only a "reasonable basis to believe or suspect" — is equivalent
to Article 10.7’s requirement of sufficient evidence.210  The principal basis for this assertion is the use
of the phrase "sufficient evidence" in proximity to "reasonable basis to believe or suspect" in USDOC
critical circumstances determinations in just two anti-dumping investigations.211  It is clear, however,
that USDOC is asking itself a different question than Article 10.7 contemplates.  It is one thing to
have "sufficient evidence" that an element of Ar ticle 10.6 truly exists; it is quite another to have
"sufficient evidence" of only a "reasonable basis to believe or suspect" that an element of Article 10.6
exists.  This distinction appears to be totally lost on the United States, which has laden its response to
Panel Question 31 with quotations (from US court cases and countervailing-duty determinations)discussing this second, lower standard.
212
184. The differences are real, as illustrated by the ordinary meanings of the words used.  New
Shorter  Oxford  English  Dictionary  first defines "sufficient" as "legally satisfactory," citing its origin
in law.  "Evidence," in that dictionary, is broken into two categories: "general" and "legal."  The
general definition includes "{f}acts or testimony in support of a conclusion, statement, or belief. . . .Something serving as proof."  The legal definition of the word "evidence" is "{i}nformation . . .
tending or used to establish facts in a legal investigation."  In contrast, Section 733(e) requires only a
"reasonable basis to believe or suspect" certain elements.  "Reasonable" is defined in the New Shorter
Oxford English Dictionary  as "{w}ithin the limits of reason; not greatly less or more than might be
thought likely or appropriate, moderate."  To "believe" is defined as to "{h}ave confidence or faithin," to " trust," and to " hold an opinion, think ."  (Emphasis added.)  The verb to "suspect" means to
"{i}magine something evil, wrong, or undesirable in (a person or thing) on little or no evidence ;
believe to be guilty with insufficient proof or knowledge ."  (Emphasis added.)
185. Thus what is "reasonable" is not "sufficient."  "Sufficient" is a standard: whatever is enough
to satisfy a legal test.  "Reasonable" is a range, which can be "less or more than might be thoughtlikely or appropriate."  And what one "believes or suspects" is not necessarily "evidence."  "Evidence"
is proof.  "Believe or suspect" describes a range much less than proof.  "Suspect" is in fact flatly
incompatible with evidence; it is instructive that the definition of "suspect" includes "{i}magine
something evil, wrong, or undesirable . . . on little or no evidence; believe to be guilty with
insufficient proof or knowledge."  "Believe" is me re trust or confidence.  That does not reflect the
factual inquiry required to establish "proof."  USDOC is essentially directed by the statute to decide
that critical circumstances exist on mere suspicion or belief, without any real evidence.
VII. CAPTIVE PRODUCTION
186. The United States attempts to rewrite the captive production provision, but ultimately cannot
paper over the fundamental violations of the AD Agreement engendered by both the provision on its
face and its application in this case.  When applicable, the statute on its face compels the USITC to
focus its analysis primarily on market share and financial performance in the merchant marketsegment without relating its findings to the domestic industry as a whole.  Articles 3 and 4, as
interpreted by numerous panel reports, permits authorities to conduct a segmented analysis only when
                                                     
210 See US First Submission , paras. B-288 to B-290.  Indeed, the United States goes so far as to claim
that the two standards can be correctly used "interchan geably."  US Response to Panel Question 31, para. 23.
211 See US First Submission, para. B-290, US/B-46 & US/B-47 ; US Response to Panel Question 31,
para. 24 n.6.
212 This lower standard is not acceptable simply becau se it applies to preliminary determinations.  As
the United States acknowledges in Paragraph 18 of its Response to Panel Question 28, the "sufficient evidence"standard applies equally to preliminary and final critical-circumstances determinations.WT/DS184/R
Page C-52
it is explicitly related back to the industry as a whole.  The captive production provision requires no
such relating back, and in fact encourages USITC impermissibly to accentuate merchant market data
in its determinations.  The United States cannot finesse this issue by referencing additional statutory
provisions or emphasizing that the captive pro duction provision does not force USITC to exclude
captive production entirely.
187. Moreover, the USITC’s application of the captive production provision in this case violated
the AD Agreement by forcing it to ignore the shielding effect of captive production.  USITC not only
omitted this key finding from its analysis of conditions of competition – upon which the 1993 hot-
rolled steel case hinged -- but also highlighted merchant market conditions throughout its
determination, without relating its relevance to the industry as a whole.
A. THE CAPTIVE PRODUCTION PROVISION VIOLATES THE AD A GREEMENT ON ITS FACE
3. The plain text of the captive production provision impermissibly focuses USITC’s
analysis on an industry segment
188. The United States asserts that Japan "fundamentally misinterprets" the "plain meaning" of the
captive production provision,213 but spends much of its "plain meaning" argument by running away
from the provision’s explicit text and underlying logi c.  The logical fallacy of the US interpretation
can be seen in Paragraph C-5 of the US First Submission.  To say that imports might be having animpact in the merchant market certainly justifies considering the merchant market.  The United States
then takes the completely unjustified step of saying the merchant market "should be a focus of the
injury analysis," to allow "a more complete pictur e of the competitive impact of imports."  This US
claim has two fundamental flaws.
189. First, the United States understates the effect of  the captive production provision.  The
provision does not require that USITC merely consider the merchant market, or make the merchant
market merely a part of the analysis.  Rather, the provision requires the USITC to "focus primarily"
on the merchant market.  Not surprisingly, the United States tries to hide from this inconvenient
language with several rhetorical devices:
• The statute does not require an exclusive  focus on the merchant market.  The United
States uses this device repeatedly,214 but Japan has never made this argument.  The
statute need not require an exclusive focus on the merchant market to violate the AD
Agreement.  If the statute skews the analysis, and precludes a balanced assessment of
the impact of imports on the domestic industry as a whole, it violates Articles 3 and
4.
• The statute only requires consideration or examination  of the merchant market.
Although the United States might wish the statute used this phrase, it does not.
Repeating this phrase in the US First Submission215 cannot change the actual
wording of the statute.  Perhaps the most eg regious use of this concept occurs in the
US Answer to Panel Question 45.  The United States innocently explains that certain
factors "are considered as they relate to the merchant market as well as to the
industry as whole."216  This statement reflects the extent to which the USITC tries to
hide from the explicit statutory requirement to "focus primarily" on one segment,necessarily at the expense of the other segment and the domestic industry as a whole.
                                                     
213 US First Submission, paras. C-8, C-20.
214 Id. paras. C-6, C-13 to C-15, C-31, C-38.
215 Id. paras. C-22 to C-24, C-31, C-38.
216 US Response to Panel Question 45, para. 56.WT/DS184/R
Page C-53
• Japan would require the USITC to ignore  the merchant market.  This repeated
statement217 distorts the Japanese position.  Japan has never argued that the
authorities cannot consider the merchant market at all.  Rather, Japan has argued that
any such consideration must be balanced.  The merchant segment and the captive
segment must both be considered, and that consideration must then be related back to
an analysis of the industry as a whole.
190. Second, the United States forgets that ultimately the task is to assess the impact of subject
imports on the domestic industry as a whole.  The purpose is not to study the "competitive impact of
imports" in isolation, or on one segment of the domestic industry, but to consider the impact of
imports on the domestic industry as a whole .  To focus primarily on that part of the domestic industry
where imports compete most directly, and then to downplay the market share and financial
performance of the domestic industry as a whole, fundamentally skews the analysis.
(a) The captive production provision does not add another factor to USITC’s analysis of the
domestic industry as a whole
191. Seeking to moderate the captive production provision, the United States highlights an entirely
different provision of the anti-dumping statute that enumerates factors USITC must consider —
including market share and financial performance — with respect to the domestic industry as awhole.
218  According to the United States, the captive production provision merely adds an additional
factor to this list, without detracting from the required overall industry analysis.
192. The captive production provision cannot be understood merely to bring an additional relevant
factor to USITC’s attention.  Indeed, such a re vision would have been unnecessary, because USITC
already long considered merchant market performance to be a relevant economic factor, sometimes atthe urging of petitioners.
219  For example, USITC considered merchant market data in the 1993 Flat-
Rolled Steel Case  as a relevant economic factor, but refused to predicate its determination on the
merchant market segment, as argued by petitioners.220
193. Rather, the provision privileges  merchant market data over overall industry data when
applicable.  It is an accepted canon of statutory construction that if two provisions are in conflict, themore specific and more recent provision takes precedent over the more general and older provision.
221
When applicable, the captive production provision’s primary focus on the merchant market segmentunquestionably conflicts with the 19 U.S.C. §1677(7)(C) requirement to focus on the domestic
industry as a whole.  As between subsection (iii ) and subsection (iv) of Section 1677(7)(C), the
                                                     
217 US First Submission, paras. C-6 to C-7, C- 9, C-33.
218 Id. paras. C-19, C-22.
219 1993 Flat-Rolled Steel Case, USITC Pub. 2664, at 17-18 (excerpts in Exh. JP-59 ) ("{W}e have in
previous cases recognized that imports may not aff ect the merchant market production and captive market
production in the same way.  In such instances, we have  given separate consideration to the effect of subject
imports on the merchant market segment of the industry as part of our analysis in determination whether theimports are materially injuring the total domestic industry, including captive production.") (citing Industrial
Phosphoric Acid from Belgium and Israel , USITC Pub. 2000; Titanium Sponge from Japan and the United
Kingdom , Invs. Nos. 731-TA-161 and 162 (Final), USITC Pub. 1600 (Nov. 1984); Electrolytic Manganese
Dioxide from Greece and Japan,  Inv. Nos. 731-TA-406 and 408 (Final), USITC Pub. 2177 (April 1989)).
220 Id. (Exh. JP-59 ) ("We followed this approach in the preliminary investigations of these industries,
and adopt this analysis, when appropriate, in these final determinations.").
221 See 2B Sutherland Stat Constr § 51.02 (5th Ed. 1992) ("{T}he more recent enactment prevails");
Watt v. Alaska , 451 US 259, 266, 68 L. Ed. 80, 88 (1981) (acknowledging the general rule that "the more recent
of two irreconcilably conflicting statutes governs"); see also  Sutherland Stat Constr § 51.05 ("{I}f there is any
conflict, the {more specific provision} will prevail."); Busic v. United States , 446 US 398, 406, 65 L. Ed. 2d
381, 389 (1980) (stating that a "more specific statute will be given precedence over a general one . . .").Excerpts are attached as Exh. JP-101 .WT/DS184/R
Page C-54
captive production provision in subsection (iv) is the more specific provision.  Therefore, the captive
production provision supersedes Section 1677(7)(C)(iii), and when applicable, USITC is to "focus
primarily" on the merchant market segment in its analysis of market share and financial performance,
and de-emphasize its consideration of these same factors for the domestic industry as a whole under
Section 1677(7)(C).
194. The flaw in the US argument is that the USITC cannot fairly consider the market share and
financial performance of the domestic industry as a whole under subsection (iii) while at the same
time "focusing primarily" on the market share and financial performance of the merchant market only
under subsection (iv).  To emphasize one necessarily means to de-emphasize the other.  Articles 3 and
4 require that the evaluation of the market share and financial performance be more than just an
afterthought or a loose end to wrap up after focusing primarily on one segment at the expense of the
other segments.
195. In what may be the single most surprising statement in this dispute, the United States brazenly
claims that the captive production provision "does not in any way place emphasis on the merchant
market segment over the entire industry."222  This statement simply cannot be reconciled with the
explicit command of the statute to "focus primarily" on the merchant market for market share and
financial performance.  It is hard to imagine how anyone could construe "focus primarily" as notplacing "emphasis" on the merchant market segment.
196. The United States seems to think that 19 U.S.C. § 1677(7)(E)(ii) somehow offsets the
distorting effects of the captive production provision.
223  This provision, clarifying that no single
factor can "necessarily give decisive guidance," however, speaks to a different issue.  Japan has never
argued that the captive production provision results in giving merchant market data decisive guidance.Rather, Japan has argued that the captive production provision improperly focuses on the merchant
market segment at the expense of a proper analysis of the captive segment and, in turn, the industry as
a whole.  The residual left after focusing primarily on one segment at the expense of the other
segment simply does not meet the standards of the AD Agreement.
(b) The captive production provision leaves USITC with no discretion to weigh overall industry
data as it sees fit
197. Considering the language of the captive production provision itself, the United States also
contends that the words "primarily focus" imply more  than one focus, and that nothing in the captive
production provision precludes USITC from focusing on any and all evidence, giving weight to
factors as it sees fit.
224  Boiled down to its essentials, the United States argues that because the captive
production provision does not require USITC to focus exclusively  on the merchant market, but only
primarily , it is consistent with the Agreement.225
198. The US interpretation of "primarily" simply repeats the error of the US argument about
"exclusive."  The United States seems to believe because the word primarily does not affirmatively
exclude all consideration of the captive segment, that  the analytic approach is consistent with the AD
Agreement.226  But the United States never addresses Japan’s real argument:  that "primarily"
modifies "focus," and that the phrase "primarily focus" read together so narrows the authority’sdiscretion that this analytic approach violates the requirement of Articles 3 and 4 to consider the
                                                     
222 US Response to Japan’s Question 22, para. 30.
223 Id. at Question 23, para. 32.
224 US First Submission, para. C-22.
225 Id. paras. C-6, C-21 to C-22, C-32.
226 Id. para. C-13.WT/DS184/R
Page C-55
domestic industry as a whole.  The United States seems to believe that whatever limited consideration
is left over after primarily focusing on the merchant market is enough.227  It is not.
199. Moreover, the US interpretation of the word "primarily" (that USITC is free to weigh
merchant market data and overall industry data as it sees fit) would completely nullify the captive
production provision, given that USITC possessed, and indeed used, such discretion prior to thecaptive production provision’s enactment.  It is an accepted canon of statutory construction that
statutes are to be read so as to give meaning to their provisions.
228  Accordingly, the captive
production provision cannot be read as simply restating the discretion USITC already possessed to
weigh market share and financial performance data as it deems appropriate.229  When the captive
production provision applies, USITC cannot choose to accord the market share and financial
performance of the domestic industry as a whole decisive weight or even balanced weight in its
analysis and still "focus primarily" on the merchant market for these factors.230  The captive
production provision makes market share in the merchant market and financial performance more
than just additional relevant economic factors — they become the dominant  economic factors.
200. If USITC were genuinely to exercise its discretion to weigh market segment data and overall
industry data as it sees fit, it would probably not choose to "focus primarily" on merchant market data,
given past practice.  In the 1993 Flat-Rolled Steel Case , petitioners argued that USITC should limit its
analysis to the merchant market, excluding captive production as "work in progress."231  U S I T C
rejected the petitioners’ argument, finding "the practical  effect would be to skew our analysis," but did
separately consider the effect of imports on the merchant market segment, as it had in previous
cases.232  The low weight USITC chose to ascribe to this  particular factor is evident from the fact that
merchant market segment data is mentioned nowhere in the determination.233  By contrast, USITC
highlighted merchant market data throughout its determination in this case, when the captive
production provision applied.234  The captive production provision overrides USITC’s discretion,
compelling it to emphasize factors that accentuate injury by reason of subject imports, and preventing
it from performing the "objective analysis" required by Article 3.1 of the AD Agreement.235
(c) The purported logic behind the captive production provision only underscores its
inconsistency with the AD Agreement
201. Additional arguments proffered by the United States concerning the logic behind the captive
production provision only underscore the impermissible distortions it wreaks on USITC’s analysis.
The United States asserts that because the captive production provision only applies when an industry
sells significant production into the merchant market, the impact of imports on the merchant market is
likely also to impact the industry as a whole when the captive production provision is applicable.236
Yet USITC’s determination that merchant market sales are "significant" in no way guarantees that
                                                     
227 US Response to Japan’s Question 22, para. 31.
228 2A Sutherland Stat Constr  § 46.06 (6th Ed. 2000) (excerpts attached as Exh. JP-101 ) ("It is an
elementary rule of construction that effect must be give n, if possible, to every word, clause, and sentence, of a
statute.").
229 See 1993 Flat-Rolled Steel Case , USITC Pub. 2664, at 17-18 (excerpts in Exh. JP-59 ).
230 If the USITC were to ignore the statute and make a balanced judgment for the domestic industry as
a whole, and find no injury, the disgruntled domestic petitioner would have an excellent legal basis under US
law to challenge that USITC determination.
231 1993 Flat-Rolled Steel Case , USITC Pub. 2664, at 15 (excerpts in Exh. JP-59 ).
232 Id. at 17 (excerpts in  Exh. JP-59 ).
233 Id. at 44-54 (excerpts in Exh. JP-59 ) (excluding pricing product data, which is necessarily from the
merchant market).
234 USITC Final Injury Determination , USITC Pub. 3202 at 10-21 ( Exh. JP-14 ).
235 Article 3.1 provides, in relevant part: "A determination of injury for purposes of Article VI of
GATT 1994 shall be based on positive evidence and involve an objective examination. . . ."
236 US First Submission, para. C-11.WT/DS184/R
Page C-56
material injury in the merchant market segment has in  fact resulted in material injury to the industry
as a whole.  Such a conclusion can only be reached through a careful and balanced examination of
overall industry data.237
202. The United States further argues that the captive production provision properly recognizes
that the ill-effect of imports are most evident in the merchant market, and that by limiting its analysis
to overall industry data, USITC risks obscuring the impact of flagging merchant market segment
performance on the domestic industry as a whole.238  Japan thoroughly agrees with both observations,
but these observations miss the point.  The captiv e production provision violates the AD Agreement
precisely because it prevents  the robust performance of the domestic industry as a whole from
minimizing material injury in the merchant market segment.  In the 1993 Flat-Rolled Steel case ,
USITC found that "any impact {LTFV imports} may have had on {the merchant market segment} is
not significant when evaluated in terms of their effect on the domestic industry as a whole."239  If the
merchant market segment is materially injured by reason of imports but the domestic industry as a
whole are not, the AD Agreement permits only one result: a negative determination.  Under the same
circumstances, the captive production provision practically guarantees an affirmative determination.
203. Consider this simple example.  In the merchant market segment, the domestic industry earns
an operating profit only of 0.5 percent.  Yet in th e captive segment, the domestic industry is earning a
much stronger operating profit of 3.5 percent.  Because the captive segment is larger, overall the
domestic industry as a whole is earning an operating profit of 2.5 percent.240 The authorities might
well decide that an operating margin of 2.5 percent does not reflect material injury, particularly if that
operating margin is higher than earlier years in the period being investigated.  Yet the captive
production provision forces the authorities to "focus primarily" on the 0.5 percent, to ignore the 3.5percent operating margin in the captive-only segment, and to give only residual consideration to the
2.5 percent operating margin in the domestic market overall.  Such an analytic approach does not
allow for a balanced assessment.  Instead, the ap proach focuses on the most adverse segment, and
then elevates that segment at the expense of other segments and the industry as a whole.
(d) The US Congress’ rejection of a more draconian captive production provision does not imply
that the steel industry did not get what it wanted
204. The United States speculates that the US Congress intended USITC to examine the impact of
dumped imports on the merchant market segment, and assess how that competition impacts the
domestic industry as a whole, in the manner contemplated by the panel report in Mexico—High
Fructose Corn Syrup .
241
205. The legislative history of the captive production provision contradicts this benign
interpretation.  Japan agrees that Congress may not have intended to exclude captive productionentirely, but this is irrelevant.  After losing the 1993 hot-rolled steel case, the domestic steel industry
lobbied hard for a new statute to force USITC to concentrate on the merchant market segment, where
import competition is most pronounced.
242  The draconian language of early drafts of the captive
production provision only illuminates the intentions of the industry advocates.  Although the captive
production provision as enacted was moderated in expectation of a WTO challenge, it is animated bythe same spirit.  When the captive production provision applies, and USITC must focus primarily on
                                                     
237 In particular, the Article 4.1 definition of domestic industry, which is cited throughout Article 3,
provides: "the term ‘domestic industry’ shall be interpreted as referring to the domestic producers as a whole ofhe like products."
238 US First Submission, para. C-23.
239 1993 Flat-Rolled Steel Case,  USITC Pub. 2664, at 53 (excerpts in Exh. JP-59 ).
240 Note these stylised facts are actually quite close to the facts of this case.
241 US First Submission, para. C-6, C-24.
242 Japan’s First Submission, para. 219.WT/DS184/R
Page C-57
merchant market data, import penetration is exaggerated and financial performance is understated,
making an affirmative determination more likely.  The industry received most of what it wanted.
206. Nor does the text of the captive production provision support the US contention that Congress
somehow intended USITC to relate its merchant market segment findings back to the domestic
industry as a whole.243  Such an intention appears nowhere in the statute or the Statement of
Administrative Action; indeed, and no such analysis was conducted in the hot-rolled steel case by
those Commissioners applying the captive production provision.244
4. The captive production provision on its face violates Article 3 of the AD Agreement
(a) Article 3.2
207. The United States argues that the captive production provision does not alter the requirement
that USITC examine a host of factors with respect to domestic industry as a whole, including market
share, in keeping with Article 3.2.245  This argument forgets that the captive production provision --
subsection (iv) -- supersedes subsection (iii), as the more recent and specific provision.  When the
captive production provision applies, USITC must "focus primarily" on merchant market import
penetration, which will by definition always be higher than overall import penetration.246  T h i s
primary focus precludes USITC from granting overall import penetration the balanced weight
Article 3.2 demands.  One cannot primarily focu s on the merchant market without necessarily
downplaying and according much less attention to the domestic industry as a whole.
(b) Article 3.4
208. Article 3.4 explicitly stipulates that all relevant economic factors are to be considered with
respect to the domestic  industry , defined by Article 4.1 as domestic producers as a whole.247  The US
argument that nothing in Article 3.4 prevents USITC from considering merchant market data as arelevant economic factor either primarily or secondarily is misplaced.
248  The captive production
provision was not enacted because USITC was overlooking the merchant market segment as a
relevant economic factor; USITC had long recognized it as such.249  Rather, the captive production
provision, when applicable, emphasizes market share and financial performance for the merchant
market over that for the domestic industry as a whole — the merchant market becomes USITC’s"primary focus" for these factors.
                                                     
243 US First Submission, para. C-24.
244 See USITC Final Injury Determination , USITC Pub. 3202, at 12-13, 18 ( Exh. JP-14 ) (noting
merchant market data is followed by industry as a whole data, but making no attempt to relate the former to the
latter).
245 US First Submission, para. C-22 (citing 19 U.S.C. § 1677(7)(C)).
246 See Japan’s First Submission, para. 230.
247 Article 3.4 provides, in relevant part: "The examination of the impact of the dumped imports on the
domestic industry concerned shall include an evaluation of all relevant economic factors and indices having abearing on the state of the industry . . . ."  Article 4.1 defines domestic industry as "domestic producers as a
whole."
248 US First Submission, para. C-22.  The United States  asserts that Article 3.4’s enumeration of "sales"
as a relevant factor sanctions an authority to focus pr imarily on the merchant market segment, because sales
only occur in the merchant market.  See Oral Statement of the United States, para. 36.  The captive production
provision, however, does not mention sales.  When applicable, the provision compels USITC to focus primarilyon merchant market import penetration and financial performance.  Article 3.4 does not enumerate merchant
market import penetration and financial performance as relevant economic factors, but directs authorities to
evaluate both factors with respect to the domestic industry as a whole.
249 See 1993 Flat-Rolled Steel Case , USITC Pub. 2664, at 17-18 (excerpts in Exh. JP-59 ); Japan’s First
Submission, paras. 219, 237.WT/DS184/R
Page C-58
209. The United States conveniently overlooks the historical context of the captive production
provision.  Congress did not change the law as a technical correction to fix an oversight.  Rather,
Congress sought to change the way the USITC had been making its decisions.  Congress succeeded,
as the contrast between the 1993 decision on hot-rolled steel and the 1999 decision in this case makes
clear.
210. In Mexico—High Fructose Corn Syrup , the Panel clarified that this requirement is
undiminished by an authority’s decision also to examine industry segment data.  Specifically, when an
authority examines data for an industry segment, it must specifically relate its findings back to the
domestic industry as a whole, and predicate its determination on a consideration of the domestic
industry as a whole.250  The captive production provision does not require USITC to relate its
merchant market findings to the domestic industry as a whole, but instead invites USITC to ground
affirmative determinations in the higher import penetration and lower profits inevitably displayed byan industry’s merchant market segment.
(c) Article 3.5
211. The United States argues that the captive production provision is consistent with Article 3.5
because it does not prevent USITC from recognizing the shielding effect of captive production, and
because merchant market data is relevant to USITC’s consideration of causation.
251  Article 3.5 and
Footnote 9 unquestionably require USITC to demonstrate that subject imports are causing injury to
the domestic industry as a whole, not just the merchant market segment.252  By privileging injury in
the merchant market over injury to the domestic industry as a whole, the captive production provision
allows USITC to violate Article 3.5 by establishing  causation with respect to  injury to an industry
segment, in whole or in large part.
212. More importantly, the captive production provision does prevent USITC from recognizing the
shielding effect of captive production.  It would be logically inconsistent for USITC both to find 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.
Recognizing this inconsistency, USITC omitted any mention of the shielding effect of captiveproduction in this case,
253 which is otherwise a time-honoured fixture of its anti-dumping
determinations.254  By contrast, Commissioner Askey, who did not apply the captive production
provision and dissented on the issue of current injury, expressly noted that substantial captive
production attenuated subject import competition.255  USITC also recognized the shielding effect of
                                                     
250 Mexico—Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) From the United States,
adopted 24 Feb. 2000, WT/DS132/R, at  para. 7.155 n.625 (authorities must relate a segmented analysis to
producers as a whole), at para. 7.160 (conduct of a segmented analysis does not excuse authorities from
rendering a determination based on producers as a whole) (" Mexico—High Fructose Corn Syrup ").
251 US First Submission, paras. C-32 to C-33.
252 Article 3.5 provides, in relevant part: "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."Footnote 9 defines injury as "material injury to a domestic industry, threat of material injury to a domesticindustry or material retardation of the establishment of such an industry."
253 USITC Final Injury Determination , USITC Pub. 3202, at 9-21 ( Exh. JP-14 ).
254 See, e.g ., 1993 Flat-Rolled Steel Case , USITC Pub. 2664, at 22 (excerpts in Exh. JP-59 ); Fresh
Garlic From the People’s Republic of China,  Inv. No. 731-TA-683 (Final), USITC Pub. 2825, at I-14 n. 67
(Nov. 1994) (excerpts in Exh. JP-62 );  Stainless Steel Wire Rod From Brazil and France, Inv. Nos. 731-TA-
636 and 637 (Final), USITC Pub. 2721, at I-10 to I-11 (Jan. 1994) (excerpts in Exh. JP-62) ; Stainless Steel Wire
Rod From India, Inv. No. 731-TA-338 (Final), USITC Pub. 2704, at I-10 to I-11 (Nov. 1993) (excerpts in Exh.
JP-62) ; DRAMs of One Megabyte and Above From the Republic of Korea, Inv. No. 731-TA-472 (Final), USITC
Pub. 2629, at 29-30 n.109 (Jun. 1991) (excerpts in Exh. JP-62) ; Silicon Metal From the People’s Republic of
China,  Inv. No. 731-TA-556 (Final), USITC Pub. 2385, at 10-11 (May 1993) (excerpts in  Exh. JP-62 ).
255 USITC Final Injury Determination, at 51 ( Exh. JP-14 ).WT/DS184/R
Page C-59
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.256  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.  By precluding such a
finding, the captive production provision prevents USITC from complying with Article 3.5.
213. The United States deceptively argues that Japan’s insistence that captive production mitigates
import competition is no less of a segmented approach than that required by the captive production
provision, because it privileges the captive segment — reflected only in output — over the merchant
market segment — reflected only in sales.257  Japan argues nothing of the sort.  The AD Agreement
unambiguously favours overall  industry data over segmented  industry data, through the Article 4.1
definition of the industry as "domestic producers as a whole."  To analyze the industry as a whole,
USITC must examine the impact of subject imports on both the merchant market and captivesegments.  In this regard, USITC cannot examine captive production without recognizing that it
shields domestic producers from import competition.  It therefore does not reflect an impermissible
segmented approach, but is integral to USITC’s analysis of the domestic industry as a whole.  To find
that imports have more effect on the merchant segment requires the recognition that imports have less
effect on the captive segment.  By suppressing this powerful insight, the captive production provisionsabotages a balanced analysis of causation in violation of Article 3.5.
214. This US argument thus ignores the relationship of the merchant market to the industry as a
whole.  As aforementioned, the panel in Mexico—High Fructose Corn Syrup  held that a segmented
analysis must be related to an industry as a whole for a determination to be predicated on an industry
as a whole.
258  Yet the USITC cannot relate its analysis of the merchant market segment to the
industry as a whole without also analyzing th e captive segment; the whole cannot be understood
without an understanding of both parts.  The USITC could not possibly shed any light on the
condition of an industry as a whole through an analysis of the segment most impacted by imports
alone, without also performing and relating a separate analysis of the captive segment, which is
shielded from import competition.
215. Nor does Japan’s argument that USITC inadequately analyzed mini-mills as an alternative
cause of injury represent a segmented approach analogous to the segmented approach required by the
captive production provision.259  Japan does not argue that USITC should primarily focus its analysis
and base its determination on the market share and financial performance of the mini-mill segment,
without analyzing the segment’s impact on the domestic industry as a whole, which would clearly
violate the AD Agreement.260  Rather, Japan only maintains that USITC abrogated its responsibility
under Article 3.5 by failing to isolate the injury caused by alternative factors — including mini-mills— and implicitly attributing this injury to subject imports.
261  USITC does not adopt impermissibly a
segmented approach to causation by merely analyzing the impact of a new, low cost industry segment
on the domestic industry as a whole.262  On the other hand, USITC does impermissibly base its
determination on an industry segment when the captive production provision applies, and it must
focus its consideration of market share and financial performance primarily on the merchant marketsegment, without having to relate its findings back to the domestic industry as a whole.
                                                     
256 Cold-Rolled Steel Case , USITC Pub. 3283, at 19 (excerpts in Exh. JP-86 ) ("{T}he extent of
competition between domestic production and subject imports is somewhat limited, given the domesticproducers’ large volume of internal transfers and contractual sales.").
257 US First Submission, paras. C-29 to C-30.
258 Mexico—High Fructose Corn Syrup , para. 7.155, n.625.
259 US First Submission, para. C-26.
260 See Japan First Submission, paras. 271-275.
261 Id. para. 271.
262 Significantly, the United States does not argue that Japan’s arguments concerning the General
Motors strike or non-subject imports represent segmented approaches.WT/DS184/R
Page C-60
216. In fact, this aspect of the captive production provision — a segmented analysis that need not
be related back to the domestic industry as a whole — distinguishes it from the type of segmented
analysis traditionally conducted by USITC.  For example, in Disposable Lighters From Thailand ,
USITC found that the disposable lighter market was divided into two distinct segments: high end and
low end.263  Because domestic production was concentrated in the high end, and subject imports in the
low end, USITC determined that the volume and price impact of subject imports on the domestic
industry as a whole was limited, with subject imports increasing primarily at the expense of non-
subject imports.264  Hence, USITC analyzed the high and low end industry segments in a balanced
way, but then extended its findings to the domestic industry as a whole.  The captive production
provision requires no such analysis.  The provision does not allow the USITC to give balanced
consideration to the captive segment.
(d) Article 3.6
217. The United States disingenuously argues that the captive production provision is consistent
with Article 3.6, by asserting that import effects on output and sales — only evident in the merchant
market — are equally important measures of import effects on "production."265  First and foremost,
the word "production" unambiguously refers to output, and cannot be understood to mean sales,
which excludes "production" for internal consumption.  Article 3.6 mentions sales only as a means ofidentifying production.
266
218. Second, the United States draws a false distin ction between production and sales.  Captive
production is transformed into downstream products that are ultimately sold at a higher profit than the
upstream product.  Firms choose to consume merchandise captively, rather than sell it on the
merchant market, precisely because it is more profitable to do so.  It is not accidental that Article 3.6stipulates that authorities analyze the effects of im ports on production, and not sales.  Production as a
whole yields a far more complete picture of an industry’s performance than sales, because it reflects
the economic benefits from both merchant market sales and transfers for downstream sales.
Consequently, Article 3.6 does not treat output and sales equally, but privileges output.  The captive
production provision violates Article 3.6 insofar as it directs USITC to focus primarily on sales to thedetriment of output.
5. Panel reports do not support the captive production provision
219. The United States seeks to justify the captive production provision by claiming that the Panel
report in Mexico—High Fructose Corn Syrup  only holds that the exclusion of an entire industry
segment violates the AD Agreement, while the analys is of industry segments is both permissible and
useful.
267  The difference between Mexico’s practice in Mexico—High Fructose Corn Syrup  and the
captive production provision, however, is not a matter of kind but of degree.  The Panel held that asegmented analysis is consistent with the AD Agreement so long as an authority’s ultimate
determination is based on its analysis of the domestic industry as a whole:
{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
                                                     
263 Disposable Lighters From Thailand , Inv. No. 731-TA-701 (Final), USITC Pub. 2876, at I-9 (Apr.
1995), at I-9 (excerpts attached as Exh. JP-102(a) ).
264 Id. at I-15 (excerpts attached as Exh. JP-102(a) ) (volume), I-16 (price), I-19 (non-subject imports).
265 US First Submission, paras. C-30, C-34 to C-35.
266 Article 3.6 provides, in relevant part: "The effect of the dumped imports shall be assessed in relation
to the domestic production of the like product when available data permit the separate identification of that
production. . . ."
267 US First Submission, paras. C-36 to C-38.WT/DS184/R
Page C-61
making the determination required by that Agreement — whether dumped imports
injure of threaten injury to the domestic industry as a whole.268
220. Although the captive production provision does not force USITC to exclude captive
production from its analysis, as the Mexican authority excluded the household industry segment, the
provision does force USITC to emphasize merchant market data in its analysis of market share andfinancial performance, necessarily marginalizing its consideration of overall industry data.  USITC
cannot render a determination "based on its analysis of the domestic industry as a whole" after the
captive production provision has focused a vital portion of its analysis on the merchant market
segment, and ignored any separate consideration of the captive segment.
221. In its analysis of Mexico—High Fructose Corn Syrup , the United States conveniently
sidesteps Korea—Dairy and Argentina—Footwear, both of which are impossible to reconcile with the
captive production provision.  The Mexico—High Fructose Corn Syrup Panel itself commented on the
applicability of these panel reports to the anti-d umping context: "Both Panels concluded that the
failure of the investigating authorities to either consider all sectors, or to relate their conclusions
concerning specific sectors to the industry as a whole, resulted in injury determinations that were not
based on injury to the industry ‘as a whole’, inconsistent with the requirements of the Safeguards
Agreement."
269  The captive production provision is inconsistent with these panel reports in directing
USITC to focus primarily on the merchant market segment for certain factors without requiring
USITC to relate its conclusions back to the industry as a whole in its determination.
222. Nowhere does the statute require or even allow the relating back of both industry segments to
the industry as a whole.  USITC considers the i ndustry as a whole for some facts, but under the
captive production provision USITC elevates the importance of the market share and financialperformance of one segment.  USITC does not relate the merchant market segment to the captive
segment.  Moreover, USITC never relates its findings in either  segment to the domestic industry as a
whole.  The USITC seems to think that by merely me ntioning the results of the domestic industry as a
whole, it can make up for the fact that the statute required primary focus on one segment at the
expense of the other segment.
223. In addition, the captive production provision is inconsistent on its face with the recent panel
report in U.S.—Wheat Gluten .  That panel held that in the safeguards context, authorities must
subtract injury caused by alternative factors to ensure that the injury caused by subject imports alone
rises to the level of serious injury.
270  By extension, authorities must also subtract injury caused by
alternative factors in the anti-dumping context to determine whether injury caused by subject imports
alone rises to the level of "material injury."  The captive production provision seriously distorts this
analysis by amplifying the injury caused by subject imports in the merchant market segment, asrevealed in market share and financial performance data.  When the captive production provision
applies, USITC cannot simply conclude that injury caused by subject imports to the domestic industry
as a whole is immaterial without focusing primarily on injury caused by subject imports to the
merchant market segment, which is far more likely to be material.
                                                     
268 Mexico—High Fructose Corn Syrup , para. 7.160.
269 Id. para. 7.155, n.625 (emphasis added).
270 United States—Definitive Safeguard Measures on Imports of Wheat Gluten from the European
Communities , unadopted 31 July 2000, WT/DS166/R, at para 8.138 ("There may be multiple factors present in a
situation of serious injury to a domestic industry.  However, the increased imports must be sufficient, in and ofthemselves, to cause injury which achieves the threshold of ‘serious’ as defined in the Agreement.") (" U.S.—
Wheat Gluten ").WT/DS184/R
Page C-62
6. Canadian and European Communities’ practices do not support the Agreement-
consistency of the captive production provision
224. The United States justifies the captive production provision by arguing that both Canada and
the European Communities ("EC") take similar approaches to anti-dumping investigations; Canada
has analyzed the merchant market separately in at least three recent cases and EC appears to excludecaptive production from its analysis entirely.
271  Although the practice of other Members may be
useful for interpreting ambiguous provisions of the WTO agreement, it is not particularly relevant to
the Panel’s consideration of the US captive production provision’s adherence to the AD Agreement’s
unambiguous definition of domestic industry.  Moreover, neither practice cited by the United States
suggests that the captive production provision complies with the Agreement.  Indeed, Canada’s
practice is different in one critical respect:  the Canadian International Trade Tribunal merely
exercises its discretion to analyze merchant market data, as USITC did prior to the captive productionprovision’s enactment, and is not compelled by any statutory mandate to accentuate merchant market
data under any circumstances.272
D. THE CAPTIVE PRODUCTION PROVISION VIOLATES THE AD A GREEMENT AS APPLIED IN THIS
CASE
1. USITC might have reached a different conclu sion had the captive production provision
not been applied
225. The United States disingenuously asserts that Japan’s as-applied challenge must fail because
the three Commissioners not applying the captive production provision voted in the affirmative,
meaning that the Commission would have reached an  affirmative determination regardless of the
captive production provision’s application.273  Two vital facts are ignored.  First, Commissioner
Askey’s dissenting opinion demonstrates that an affirmative material injury determination is by no
means assured without the application of the captive production provision.274  Accordingly, the three
Commissioners writing the majority opinion might not have voted affirmative on material injury had
their analysis not been tainted by the captive production provision.  Second, because Chairman Bragg
joined the majority opinion, though she did not apply the captive production provision, her analysis isno less tainted and her affirmative material injury finding no less subject to revision.
275  These four
votes could conceivably have been different in the absence of the distortions wrought by the captive
production provision’s application, making Japan’s as-applied challenge far from academic.
226. The United States further argues that Chairman Bragg’s vote would have remained
affirmative in the absence of the captive production provision’s application because she did not apply
the captive production provision and yet agreed with the majority’s reasoning in its entirety.276  I n
other words, these four Commissioners shared the exact same views.  But it is precisely for this reasonthat Chairman Bragg’s views could change.  By passively endorsing the majority’s views, Chairman
Bragg adopted findings and conclusions distorted by the application of the captive production
                                                     
271 US First Submission, paras. C-44 to C-47.  As the EC points out in its answers to Panel Questions,
its law is not subject to this proceeding.  The EC ther efore declined to clarify the US misstatements about its
practice.  European Communities’ Response to the Questions to the Third Parties, at Question 51.
272 Canada’s Third Party Submission, at 5 n.5 ("While an analogous provision does not exist in
Canada’s anti-dumping legislation. . .this practice has been developed by the Canadian International TradeTribunal").
273 US First Submission, para. C-72.
274 See Japan’s First Submission, paras. 251-252.
275 USITC Final Injury Determination , USITC Pub. 3202, at 29-30 n.24 ( Exh. JP-14 ) ("Much of the
Commission’s views focuses first on merchant market data and secondly on total market data.  Although this
order of discussion does not reflect the sequence of Chairman Bragg’s analysis, she joins in the discussion ofvolume, price, and impact, except as otherwise noted.")
276 US First Submission, para. C-83.WT/DS184/R
Page C-63
provision.  In particular, Chairman Bragg adopted the majority’s failure to relate its analysis of the
merchant market segment to the domestic industry as a whole, as required under Articles 3 and 4.277
There is simply no telling how Chairman Bragg’s views would have changed had the majority not
focused primarily on the merchant market in analyzing market share and financial performance.
227. The United States uses the affirmative determinations of Commissioners Crawford and Askey
to argue that the majority might have reached an affirmative determination even if it had recognized
the shielding effect of captive production.278  Besides admitting that the majority did not consider the
shielding effect of captive production, the United States mischaracterizes these two votes.  The
question is only whether the three Commissioners who applied the captive production provision, and
the one who adopted their reasoning without applying the captive production provision, might have
changed their affirmative material injury votes in the absence of the captive production provision’s
distortions.  Commissioner Askey’s dissenting views, and negative material injury determination,suggests that these votes might indeed have been different had the captive production provision not
been applied.  It is immaterial whether these four votes would have become negative determinations
or affirmative threat determinations.  The very fact that these Commissioners might have voted
differently is sufficient to warrant reconsideration.
279
228. The Panel should also understand that Commissioner Crawford’s idiosyncratic mode of anti-
dumping analysis differs from that of all other Commissioners, and consequently is a poor predictor
of how other Commissioners might have voted had they not applied the captive production provision.
Under her unique approach, Commissioner Crawford  first gauges the substitutability of subject
imports for the domestic like product, and then assesses whether subject imports caused material
injury by considering the extent to which domestic producers could have increased their sales volumeand profits had subject imports not been sold at dumped or subsidized prices.
280  By contrast, every
other Commissioner methodically analyzes the statutory factors of import volume, price effects, and
impact on industry performance.281  As the more mechanical approach, Commissioner Crawford’s
analysis tends to de-emphasize conditions of comp etition such as captive production.  For example, in
her concurring views, she finds that captive production reduced the substitutability between subjectimports and the domestic like product, rather than shielding domestic producers from import
competition.
282  Thus, Commissioner Crawford’s analysis affords little guidance whatsoever on how
other Commissioners might have voted had they not applied the captive production provision, and
recognized the shielding effect of captive production.
2. USITC did not properly recognize the shielding effect of captive production
229. Reaching the merits, the United States disingenuously argues that Japan is wrong on the facts,
asserting that USITC did consider that the hot-rolled steel industry captively consumes over 60
percent of its production and that this production is relatively shielded from import competition.283
The United States is manipulating the record.  In actuality, USITC only noted the 60 percent figure inconjunction with its captive production provision analysis, and not with respect to its analysis of
                                                     
277 See Mexico—High Fructose Corn Syrup , para. 7.155, n.625 (providing that authorities must relate a
segmented analysis to producers as a whole), para. 7.160 (conducting a segmented analysis does not excuse
authorities from rendering a determination based on producers as a whole).
278 US First Submission, paras. C-85 to C-86.
279 Nor is the distinction between current injury and threat of future injury merely academic.  Under US
law and the AD Agreement, duties may only be assessed prospectively in cases of threat of injury.  The USdetermination to subject imports after the USDOC preliminary determination to duties would be legally void ifUSITC switched its decision from current injury to threat of injury.  The distinction matters a great deal.
280 USITC Final Injury Determination , USITC Pub. 3202, at 40-41 ( Exh. JP-14 ).
281 Compare id.  at 12-21 ( Exh. JP-14 ).
282 Id. at 44 ( Exh. JP-14 ).
283 US First Submission, para. C-57.WT/DS184/R
Page C-64
conditions of competition, causation, or injury.284  Nor does USITC recognize that the hot-rolled steel
industry’s substantial captive production is sheltered from import competition.  The United States
refers to a passage in which USITC only notes that mini-mills face more import competition than
integrated mills due to their greater dependence on the merchant market.285  U S I T C  m a d e  t h i s
observation to dismiss mini-mills as an alternative cause of injury, not to recognize the shieldingeffect of captive production.
230. The glaring omission of this key condition of competition from USITC’s hot-rolled steel
determination in this case stands in stark contrast with its subsequent cold-rolled steel determination,
in which the captive production provision was not applied.  There, USITC expressly found that the
high level of captive production attenuated import competition, though the percentage of captive
production was no higher than in this case.
286  In every case in which the captive production provision
has not applied, and there has been substantial captive production, USITC has recognized that captiveproduction attenuates import competition.  The omission of this finding from this case is not a fluke,
but confirmation that this finding is logically incompatible with the captive production provision’s
directive to "primarily focus" on the merchant market segment.
231. The United States further argues that the three Commissioners applying the captive
production provision fulfilled their obligation to render a determination based upon the domesticindustry as a whole by following merchant market  segment data with corresponding overall industry
data throughout their views.
287  Though USITC may mention both merchant market data and overall
industry data, this in no way diminishes USITC’s impermissible emphasis on merchant market data,
reflected by pervasive citations.  USITC would not have addressed merchant market data prior to
overall industry data throughout its determination had merchant market segment performance beenmerely another relevant factor among many going into a determination otherwise predicated on the
domestic industry as a whole.
288  Without these constant citations to the much higher import
penetration and much lower profitability of the merchant market segment, USITC would have been
hard pressed to justify an affirmative material injury determination, as demonstrated by Commissioner
Askey’s dissent.  Merely citing overall industry data is not enough.  Articles 3 and 4 explicitly requireUSITC to base its determination on the domestic industry as a whole.
232. Under a balanced analysis, USITC would have considered both the merchant and captive
segments.  This would be the only way USITC could relate its segmented approach to an industry as a
whole, as required.  Yet one searches in vain for any discussion in USITC determination of the
captive segment alone.  Rather, USITC discusses the merchant market and the overall market
separately, with no explanation of how the two relate to each other.
233. This analytic oversight is particularly acute when considering financial performance.  To note
that overall domestic industry operating profits in 1998 were only 2.6 percent of sales masks the fact
that captive segment profits were 3.6 percent of sales.
289  The USITC dutifully followed the captive
production provision and stressed the merchant mark et segment performance of only 0.6 percent, but
ignored the counterpart performance of 3.6 percent.  Such analysis simply fails the test of objectivity.
                                                     
284 USITC Final  Injury  Determination , USITC Pub. 3202, at 9 ( Exh. JP-14 ).
285 Id. at 11, 19 ( Exh. JP-14 ).
286 Id. at 10 ( Exh. JP-14 ) (56.0 percent of hot-rolled steel production was captively consumed in 1998);
Cold -Rolled Steel Case , USITC Pub. 3283, at 19 (excerpts in Exh. JP-86 ) ("{T}he majority of all domestic
production of certain cold-rolled steel is destined for further downstream processing by the producers.").
287 US First Submission, paras. C-74 to C-82.
288 USITC Final Injury Determination,  USITC Pub. 3202, at 10 ( Exh. JP-14 ) (merchant market
apparent consumption is mentioned after overall apparent consumption), 12 (market share, shipments), 18
(operating income), 19 (mini-mill operating income, sales), and 20 (apparent consumption).
289 See id. at VI-2, IV-6 ( Exh. JP-14) ).  (Total profit - $560.5 million - minus merchant market profit -
$43.3 million - divided by captive segment revenue - $14.4 billion - equals 3.6 percent).WT/DS184/R
Page C-65
3. The negative determination in the 1993 hot-roll ed steel case resulted directly from the
shielding effect of captive consumption and demonstrates the decisive impact of the
captive production provision in this case
234. The United States argues that USITC’s negative determination in the 1993 hot-rolled steel
case had nothing to do with captive production, asserting that it is mentioned only as an afterthought,but instead was predicated on slab sales, mixed underselling, low subject import market share, and the
recession.
290  The United States is simply wrong on the facts — captive production was central to
USITC’s determination in the 1993 case.
235. USITC begins its 1993 determination with a four-page section devoted to considering and
rejecting the petitioners’ request that captive production be excluded from the Commission’s
analysis.291  The conditions of competition section contains an entire Paragraph devoted to the
shielding  effect of captive production, observing that "petitioners themselves strongly argued that
competition between captive production. . .and merchant market supply is virtually non-existent" and
"two-third of the production in this industry is shielded to a large extent from any potential adverse
effects of subsidized and LTFV imports."292  These findings are all made well in advance of USITC’s
discussion of causation.
236. In the heart of its discussion of causation, namely the "impact" section, USITC again devotes
an entire Paragraph to the shielding effect of captive production.293  Specifically, USITC found that
the negative impact of subject imports on the merchant market segment was "not significant when
evaluated in terms of their effect on the domestic industry as a whole."294  USITC did not consider
captive production as an afterthought, as the United States contends, and it is by no means clear that
USITC would have rendered a negative determination in the absence of these key findings.
237. The United States further argues that the greater injury suffered by the domestic industry in
1993 than 1998 is immaterial because USITC’s nega tive determination in 1993 was based on the lack
of causation, while its affirmative determination in 1998 was based on its finding that import volume
and underselling prevented the domestic industry from benefiting from record hot-rolled steel
demand.295  While certain causation factors might have been weaker on an overall industry basis in the
1993 case, petitioners then clearly believed that these same factors supported an affirmative
determination if viewed on a merchant market only basis.  Petitioners argued vociferously for USITC
to focus on the merchant market, 296 and USITC acknowledged that petitioners’ causation case was
stronger in the merchant market, though still insufficient when viewed against the industry as a
whole.297  Had USITC been compelled by the captive production provision to focus primarily on the
merchant market in the 1993 case — as petitioners’ urged — it might have reached a different result,
especially given the much greater injury suffered by the hot-rolled steel industry in the 1993 case, ascompared to the 1999 case.
VII. CAUSATION DETERMINATION
238. The USITC’s consideration of causation in the hot-rolled steel case ignored the requirement
in Article 3.1 to make an "objective examination."  The USITC’s use of a two year period of
investigation to analyze the impact of subject imports on the domestic industry is unprecedented, andUS assertions to the contrary are clearly calculated to bolster its affirmative determination.  The
                                                     
290 US First Submission, para. C-90.
291 1993 Flat-Rolled Steel Case , USITC Pub. 2664, at 15-18 (excerpts in Exh. JP-59 ).
292 Id. at 21 (excerpts in Exh. JP-59 ).
293 Id. at 53 (excerpts in Exh. JP-59 ).
294 Id. (excerpts in Exh. JP-59 ).
295 US First Submission, para. C-97.
296 1993 Flat-Rolled Steel Case,  USITC Pub. 2664, at 15 (excerpts in Exh. JP-59 ).
297 Id. at 53 (excerpts in Exh. JP-59 ).WT/DS184/R
Page C-66
USITC’s selective and nebulous analysis of alternative causes of injury would not have permitted it to
determine whether injury caused by subject imports alone was "material," as the AD Agreement
requires.  Though the United States reviews the USITC’s analysis of alternative causes in detail, it is
what this analysis omits that constitutes a violation of the AD Agreement.
A. USITC  FAILED TO RENDER AN OBJECTIVE DETERMINATION BY MANIPULATING ITS PERIOD
OF INVESTIGATION TO JUSTIFY AN AFFIRMATIVE DETERMINATION
2. USITC selectively considered different periods to rationalize an outcome
239. The United States denies that USITC impermissibly limited its analysis to 1997 and 1998,
arguing that in fact, USITC examined a wide range of factors over the entire three-year period
investigated, including subject import volume, market share, and price trends.298  Conspicuously
absent from this expansive list of factors USITC considered over the three-year period, however, are
shipments and financial performance, both of which improved  between 1996 and 1998.  Nowhere in
its discussion of impact does USITC even mention that shipments and profits increased between 1996
and 1998.299  USITC examined certain factors over three years, and others over two years, depending
on which trends best supported an affirmative material injury determination.  It is immaterial that the
omitted data appears in an appendix to the determina tion, as USITC declined to factor them into its
analysis or even mention them.
240. Moreover, USITC’s selective use of two-year trends for some factors and three-year trends
for others only undermines its own rationalization for the two-year approach.  If 1997 and 1998 were
genuinely the most appropriate years for analysis, then USITC should have analyzed all trends over
these two years.  Just because certain factors declined between 1996 and 1998, does not meant that
they did not improve between 1997 and 1998, yet USITC did not even contemplate this possibility inits determination, confining its two-year analysis to shipments and profits.
300
241. The United States claims that even if 1997 had been a peak year, it would not have distorted
USITC’s analysis, because USITC expressly found th at declining costs and increasing demand should
have made 1998 an even better one.301  USITC’s logic, however, ignores the 12 million tons of new
mini-mill capacity commissioned in 1996 and 1997, but only fully ramped up in 1998.302  Although
increasing demand and declining costs — due to the new low-cost mini-mills — might suggest that
1998 shipments and profits should have surpassed 1997, mini-mills expanded effective capacity, and
depressed prices, in 1998.303  To have objectively distinguished the impact of mini-mills from the
                                                     
298 US First Submission, paras. C-101 to C-102.  The United States notes that Table C-1, in the
appendix to USITC’s staff report, reports all relevant data over the entire period investigated.  Id. at para. C-99.
299 USITC Final Injury Determination,  USITC Pub. 3202, at 16-21 ( Exh. JP-14 ).  USITC
determinations typically discuss volume, price, and impact.  The Section on "impact" is where the USITC
relates the volume and price trends to the alleged adverse effect on the domestic industry, particularly the
domestic industry financial performance.
300 Id. (Exh. JP-14 ).
301 US First Submission, para. C-105.
302 USITC did not agree with respondents that mini-mill capacity commissioned in 1996 and 1997 was
not fully ramped up until 1998, instead arguing that the new mini-mill capacity commissioned by 1997 could
not have materially contributed to injury occurring in 1998.  This finding, however, could not excuse USITC
from analyzing the relative impact of mini-mills and subject imports over the entire three-year period ofinvestigation.  Compare  USITC Final Injury Determination , USITC Pub. 3202, at 19 ( Exh. JP-14 ); with
Respondents’ USITC Prehearing Brief (29 Apr.  1999) at 81 (additional excerpts attached as Exh. JP-103 )  (12
million tons of new mini-mill hot-rolled steel capacity between 1996 and 1998), and 96-97 (excerpts in Exh.
JP-30 ) (new mini-mills take two years to fully ramp up and produce at full rated capacity).
303 See Respondents’ USITC Prehearing Brief, at 89-91 (29 Apr. 1999) (additional excerpts attached as
Exh. JP-103 ) (new mini-mills used lower costs to increasingly undersell integrated mills); Respondents’ USITC
Posthearing Brief, Answers to Questions From Commi ssioners, at 10-11 (additional excerpts attached as Exh.
JP-104 ) (mini-mills undersold integrated mills on an average unit value and pricing product basis).WT/DS184/R
Page C-67
impact of subject imports in 1998, USITC would have had to examine industry performance trends
over the three-year period, which it did not.  Thus, USITC’s very justification for using 1997 in fact
highlights its failure to consider the interplay of alternative causes of injury, shipments, and financial
performance over the three-year period, compounding its violation of Article 3.5.304
242. The US assertion that Japan is impermissibly attacking USITC’s discretion to weigh trends as
it deems fit under Article 3.4 is similarly unfounded.305  USITC could not have objectively assessed
the industry’s increased shipments and profitability over the three-year period when it did not even
mention these trends in its consideration of impact.  In Mexico—High Fructose Corn Syrup , the Panel
held that an authority must consider each Article 3.4 factor, and make its consideration apparent in the
final determination, even if a factor is held to be not probative.306  In Argentina—Footwear , the Panel
held that trends only can be discerned if viewed over the entire period investigated, and not simply
two years.307  If USITC genuinely made a conscious decision to discount certain trends over the three-
year period, in favor of other trends between 1997 and 1998, it had an affirmative obligation under the
AD Agreement to discuss both the excluded trends and its reasoning.  It did neither.
243. The United States directly admits that USITC made no effort to reconcile the conflicting
trends between 1996 and 1998, and 1997 and 1998, but maintains that it "only had an obligation to
consider all relevant economic factors bearing on the state of the industry."308  Its assertion that "the
USITC considered the operating profits for the 1996 to 1998 period for the merchant market and the
entire industry"309 is completely groundless -- the two footnotes cited concern only the cost of goods
sold and the decline in operating profit betw een 1997 and 1998, not operating profits between 1996
and 1998.310  The United States is left to speculate as to why USITC might have deemed the increase
in operating profits between 1996 and 1998 irrelevant: "It is possible (although USITC made nofindings to this fact) that USITC would have found the domestic industry performing poorly in 1996
and 1998."
311  This post hoc rationalization cannot substitute for USITC’s obligation under Article 3.4
to consider "all relevant economic factors and indices having a bearing on the industry" including
"sales" and "profits," and explain why it might consider otherwise relevant factors to not be
probative.312  Profit and sales trends over the three year period of investigation are clearly relevant
economic factors, and the USITC violated Article 3.4 by omitting them from its analysis of impact.
3. USITC has always considered the entire inve stigation period in analyzing causation
244. The United States claims that USITC has often focused on the year or years of the
investigation period it deems most probative, as when there is a dramatic change in industry trends,
citing four cases in which USITC focused on either the beginning or the end of a investigation
period.313  Yet, the United States mischaracterizes prior USITC decisions, and selectively identifies
trends to justify its conclusion rather than assessin g all trends to make an "objective examination" as
required by Article 3.1.
                                                     
304 Article 3.5 provides, in relevant part: "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 relevantevidence before the authorities."
305 US First Submission, para. C-106.
306 Mexico—High Fructose Corn Syrup , at 7.128.
307 Argentina—Safeguard Measures on Imports of Footwear , adopted 12 Jan. 2000, WT/DS121/R, at
para. 8.230 ("Argentina—Footwear").
308 US Response to Japan’s Questions, para. 36.
309 Id.
310 Id. para. 36 n.7 (citing Final Injury Determination , USITC Pub. 3202, at 16, n.88, 18, n.99).
311 Id. para. 38 (emphasis in original).
312 Mexico—High Fructose Corn Syrup , at 7.128.
313 US First Submission, paras. C-107 to C-108.WT/DS184/R
Page C-68
245. Although USITC may sometimes consider the end of a period most probative, especially for
assessing present material injury, it has never before ignored the first year of the period in assessing
shipment or financial performance trends.  In fact, USITC at least considered  these factors over the
entire period in each of the cases cited by the United States, despite its particular emphasis on certain
years.314  Thus, USITC tacitly recognizes in these cases that trends can only be assessed when viewed
over at least three years.  Indeed, Fresh Atlantic Salmon from Chile  undermines the US contention
that USITC regularly ignores the early years of an investigation period.  There, USITC actually had to
resort to an even longer, four-year period "to obtain a more precise understanding of the growth in
demand. . .and the manner in which subject imports are competing within the market."315
246. As for dramatic changes in the market wa rranting USITC’s focus on 1997 and 1998, dramatic
trends occurred throughout the period, from the commissioning of new mini-mills between 1996 and
1997, to the doubling of subject import volume between 1996 and 1997, and again between 1997 and1998.
316  To have accurately assessed the causation between mini-mills or subject imports and
industry performance, however, USITC would had to have analyzed industry performance over the
entire period.  An objective examination requires c onsidering all changes, not just those changes that
justify a particular conclusion.
4. USITC has expressly refused to predicate pa st determinations on a two-year analysis
247. The United States also grossly mischaracterizes the three past cases in which USITC refused
to draw any conclusions based on comparisons with an anomalous peak year — a convention ignored
in this case, when 1997 was used as a baseline despite being a peak year.  The United States claims
that these three cases "do not have any bearing on the issue at hand,"317 but in fact they demonstrate
that USITC had to have recognized that an emphasis on 1997 and 1998 would distort its analysis.
248. With respect to Elastic Rubber Tape From India , the United States claims that USITC only
ignored the last two years of the investigation period because it was distorted by an "anomalous
event," and not because 1997 was a peak year.318  In actuality, the same "anomalous event" took place
in both the rubber tape and the hot-rolled steel cases: unusually strong demand in 1997 distorting
industry trends between 1997 and 1998.319  USITC’s response to this anomaly, however, could not
have been more different in the two cases.  In Elastic Rubber Tape From India , USITC expressly
discounted 1997-1998 trends as uninformative, stating:  "{u}nder the circumstances, we find the more
informative comparison to be that of the overall period of investigation from 1996 to 1998."320  By
contrast, in the hot-rolled steel case, USITC focused exclusively on 1997-1998 trends for key factors,
ignoring trends over the full three-year investigation period.
                                                     
314 Fresh Atlantic Salmon From Chile , Inv. No. 731-TA-768 (Final), USITC Pub. 3116, at 22 (Jul.
1998); Fresh Garlic From the People’s Republic of China , Inv. No. 731-TA-683 (Final), USITC Pub. 2825, at
I-21-22 (Nov. 1994); Certain Emulsion Styrene-Butadiene Rubber From Brazil, Korea, and Mexico , Inv. Nos.
731-TA-794 through 796 (Final), USITC Pub. 3190, at 19, n. 144, n. 145, 20, n. 147 (May 1999); Nitrocellulose
From France , Inv. No. 701-TA-190 (Preliminary), USITC Pub. 1304, at 5-6 (Oct. 1982).  Excerpts from these
determinations are attached as Exh. JP-102 .
315 Fresh Atlantic Salmon From Chile , USITC Pub. 3116, at 14 (excerpts attached as Exh. JP-102(b) ).
316 USITC Final Injury Determination , USITC Pub. 3202, at 11 ( Exh. JP-14 ) (mini-mills), 12 (subject
imports doubled every two years over the period investigated).
317 US First Submission, para. C-109.
318 Id.
319 Elastic Rubber Tape From India , Inv. No. 731-TA-805 (Final), USITC Pub. 3200, at 14 (June 1999)
(excerpts attached as Exh. JP-102(f) ) ("the record indicates that the upward spike in apparent consumption in
1997 was an anomaly caused by an unanticipated high volume of orders at the end of 1997 and a correspondingdrop in 1998").
320 Id. at 14 (excerpts attached as Exh. JP-102(f) ).WT/DS184/R
Page C-69
249. With respect to Stainless Steel Round Wire From Canada, India, Japan, Korea, Spain, and
Taiwan , the United States contends that USITC actually did focus on 1997 and 1998, voting negative
because industry performance improved between those two years.321  The United States has the facts
wrong.  USITC found that industry performance declined  between 1997 and 1998, including
production, shipments, and profits, 322 but that these same measures improved between 1996 and
1998.323  USITC made a negative determination because "this fairly steady level of performance
occurred at the same time that subject imports increased 34 percent and their average values decreased
by 16.8 percent."324  In this case, USITC ignored similar trends over the investigation period —
industry performance improved between 1996 and 1998 as imports increased — and focused on 1997
and 1998 to justify an affirmative determination.
250. With respect to Certain Carbon Steel Plate From China, Russia, South Africa, and Ukraine ,
the United States cryptically notes that USITC rendered a negative determination not because oftrends in the latter part of its investigation period, but because it found that the adverse impact was not
of sufficient magnitude.
325  The United States is correct that USITC declined to predicate its
determination on the industry’s declining performance between 1995 and 1996, but obfuscates its
reasoning.  In explaining its negative material injury determination, USITC placed particular
emphasis on the fact that "many important indicators of the industry’s condition improved overall"from 1994 to 1996, though some declined between 1995 and 1996.
326  It concluded that the decline
between 1995 and 1996 was not of sufficient magn itude to outweigh the improvement between 1994
and 1996.327  In this case, USITC did not even bother to compare the industry’s improved
performance between 1996 and 1998 with its performance declines between 1997 and 1998,
preferring to accentuate the latter to justify its affirmative determination.
B. USITC  INADEQUATELY ANALYZED ALTERNATIVE CAUSES OF INJURY
251. The United States claims that USITC’s cursory treatment of alternative causes of injury
complies with the AD Agreement because Article 3.5  only requires an authority to demonstrate a
causal link between subject imports and injury, not a demonstration concerning other known
factors.328  The United States depends upon an outdated, strictly advisory GATT panel report,329 that
                                                     
321 US First Submission, para. C-109.
322 Stainless Steel Round Wire From Canada, India, Japan, Korea, Spain, and Taiwan, Inv. Nos. 731-
TA-781-786 (Final), USITC Pub. 3194, at 16 (May 1999) (excerpts attached as Exh. JP-102(g) ) (Between 1997
and 1998, production declined from 163 million pounds to 159 million pounds, shipments declined from 155
million pounds to 152 million pounds, and operating income declined from $12 million, or 3.4 percent of sales,
to $8.3 million, or 2.4 percent of sales.).
323 Id. at 16 (excerpts attached as Exh. JP-102(g) ) (Between 1996 and 1998, production increased from
153 million pounds to 159 million pounds, and shipments increased from 148 million pounds to 152 millionpounds.), 17 (Gross profits increased between 1996 and 1998.).
324 Id. at 17 (excerpts attached as Exh. JP-102(g) ).
325 US First Submission, para. C-109.
326 Certain Carbon Steel Plate from China, Russia, South Africa, and Ukraine , Inv. No. 731-TA-753-
756 (Final), USITC Pub. 3076, at 22 (Dec. 1997) (excerpts attached as Exh. JP-102(h) ) ("Many important
indicators of the domestic industry’s condition improved overall during the first three years of the investigativeperiod....However, several important financial indicators. . .began to decline in 1996 from 1995 levels.").
327 Id. (excerpts attached as Exh. JP-102(h) ) ("Taking all factors into account, we do not believe that
the adverse impact of the subject imports on the domestic industry is sufficient in magnitude to conclude that thedomestic industry is currently materially injured by reason of subject imports.  As noted, the deterioration in thedomestic industry’s condition is reflected primarily in the interim 1997 data.").
328 US First Submission, para. C-112, C-114.
329 Addressing U.S.—Atlantic Salmon , the panel in U.S.—Wheat Gluten  agreed generally with its
finding that "{a} Member is not necessarily required to quantify, on an individual basis, the precise extent of
‘injury’ caused by each other possible factor" but adds that "a Member must conduct an examination thatensures that any injury caused by such other fact ors is not attributed to increased imports."  U.S.—Wheat Gluten,
para. 8.142.  The Panel Report goes on to suggest that a certain degree of quantification is required, howeverWT/DS184/R
Page C-70
has been superceded by more recent panel reports interpreting the post-Uruguay Round Safeguards
Agreement: U.S.—Wheat Gluten  and Argentina—Footwear .  Both panel reports ( Argentina—
Footwear  upheld by the Appellate Body) hold 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."
1. Recent panel reports make clear that author ities must isolate the injury caused by
alternative factors so as to not attr ibute this injury to subject imports
252. The panel in U.S.—Wheat Gluten  considered whether USITC’s consideration of each
alternative cause of injury satisfied Article 4.2(b), which, like Article 3.5 of the Agreement, "prohibits
the attribution to increased imports of injury caused by other factors."330  It found that 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 didnot."
331  After dismissing all other alternative causes, USITC only presumed that the injury caused by
imports alone remained "serious."332  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.333
In other words, authorities must ensure that when injury caused by other factors is subtracted, theremaining injury caused by subject imports rises to the level of "serious injury."  This echoes and
elaborates upon the Panel Report in Argentina—Footwear , which holds that authorities must perform
an analysis separating the effects of alternative causes of injury from the effects of subject imports.
334
253. By extension, the anti-dumping authority must ensure that when injury caused by alternative
factors is subtracted, the remaining injury rises to the level of "material injury."  But to the extent
USITC considered alternative causes of injury at all, it held that each only "partly explained" the
industry’s declining performance in 1998, concluding that subject imports "materially contributed" to
the industry’s declining performance.335  A finding that subject imports "materially contributed" to
injury, however, is not the same as a finding that the injury caused  by subject imports is "material."
As it had in U.S.—Wheat Gluten with respect to the serious injury standard, USITC only found
subject imports to be a more important cause of injury than any other, without considering whetherthe injury caused by subject imports alone was material, as required by Article 3.5.
                                                                                                                                                                    
imprecise: "We consider that the USITC’s causation analys is 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 notattributed to imports."  Id. para. 8.152.
330 Id. para. 8.151.
331 Id. para. 8.146.
332 Id. para. 8.151.
333 Id. para. 8.152.
334 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 and
properly attributed.").
335 USITC Final Injury Determination,  USITC Pub. 3202, at 20-21  ( Exh. JP-14 ) ("Having taken these
{other economic factors} into account, however, we fi nd that the substantially increased volume of subject
imports at declining prices has materially contri buted to the industry’s declining performance….").WT/DS184/R
Page C-71
254. The Panel should reject the US argument that US —Wheat Gluten  is irrelevant for interpreting
the AD Agreement.336  First, panels regularly interpret the AD Agreement by utilizing panel reports
interpreting similar provisions of the Safeguards Agreement.  For example, the panel in Mexico—
High Fructose Corn Syrup  cites two Safeguards panel reports in analyzing the permissibility of a
segmented analysis under the AD Agreement, noting that the applicable standards are "almostidentical."
337  Second, the United States argues that Article 3.5 of the AD Agreement mirrors
Article 3:4 of the Tokyo Round Code (interpreted in U.S.—Atlantic Salmon ) "virtually verbatim,"338
but ignores the fact that Article 3.5 mirrors Article 4.2(b) of the Safeguards Agreement just as
closely.339  Finally, the United States selectively quotes from the U.S.—Wheat Gluten  panel report to
imply that the panel found US —Atlantic Salmon  irrelevant to its analysis, as not concerning the
Safeguards Agreement.340  In actuality, the panel expressly held that "to the extent it is relevant to our
examination in this dispute, we believe that. . .the United States—Salmon  panel report provides
guidance," and devoted an entire Paragraph to explaining its relevance.341  The U.S.—Wheat Gluten
panel report is no less relevant to this Panel’s examination of Article 3.5 of the AD Agreement.
255. The United States seems to forget the that Uruguay Round negotiations changed the Tokyo
Round legal texts.  It makes no sense to analogize to GATT panel decisions interpreting old language
rather than WTO panel decisions interpreting the new language and context of the WTO Agreements.Japan explained in its First Submission how Article 3.5 of the AD Agreement changed and
strengthened the old Tokyo Round Code language.
342  The addition of the phrase "authorities shall
also examine " (emphasis added) changed the old Tokyo Round language.  Yet the key phrase  "must
not be attributed" in Article 3.5 of the AD Agreement almost perfectly mirrors the phrase "shall not be
attributed" of Article 4.2(b) of the Safeguards Agreement.
256. Moreover, the U.S.—Atlantic Salmon  decision explicitly rested on what Article 3:4 of the
Tokyo Round Anti-Dumping Code did not require:  an examination of the causes of injury other than
subject imports.343  Article 3.5 of the Uruguay Round AD Agreement now explicitly requires
authorities to "examine" these other known factors.   This significant substantive change in the
underlying treaty text renders U.S.—Atlantic Salmon  totally inapposite.  Indeed, the new word
"examine" arguably seeks to address precisely what the U.S.—Atlantic Salmon  panel found to be
missing in the old Article 3:4 from the Tokyo Round Code.  In light of this background, we believe
the U.S.—Wheat Gluten  panel more persuasively interprets the word and concept "attribute" in the
WTO context than the U.S.—Atlantic Salmon  panel.
                                                     
336 US Response to Panel Question 46, paras. 58 to 69.
337 Mexico—High Fructose Corn Syrup , at para. 7.155, n.625 ("Article 4.1(c) of the Safeguards
Agreement defines the domestic industry in terms almost identical to those of the AD Agreement. . .).  The
United States itself cites Argentina—Footwear  to bolster an argument in its First Submission.  US First
Submission, para. 102, n.218 (Arguing that "{t}he USITC may reasonably find that the overall picture showsmaterial injury even when some of the indicators are not declining.").
338 US Response to Panel Question 46, para. 66.
339 See Japan Response to Panel Question 46, para. 105, n.59.
340 US Response to Panel Question 46, para. 60.
341 U.S.—Wheat Gluten , para. 8.142.
342 Japan’s First Submission, para. 260, n. 242.
343 See U.S.—Atlantic Salmon, paras. 549 ("The basic question of interpretation before the Panel was
whether … the investigating authorities were required to carry out a thorough examination of all possible causesof injury and ‘isolate’ or ‘exclude’ injury caused by such other factors from the effects of the imports subject toinvestigation."), para. 552 (holding that "the text of Article 3:4 did not support the view that this provision
required a thorough examination of all possible causes of injury"); see also id.  para. 546 (summarizing US
arguments, including the following:  "Nor did this provision {i.e., Article 3:4} require investigating authoritiesto carry out a thorough examination of all possible causes of  injury in order to exclude injury caused by factors
other than imports under investigation").WT/DS184/R
Page C-72
2. USITC’s examination of each alternative cause of injury was inadequate
257. The United States attempts to explain away USITC’s perfunctory treatment of each
alternative cause of injury, without performing the in depth analysis the panels in U.S.—Wheat Gluten
and Argentina—Footwear  found necessary.  Yet, USITC’s omission of both key alternative causes of
injury, and key facts concerning the alternative causes  of injury it did address, cannot comply with the
Article 3.5 requirement that all such factors be thoroughly considered, and any injury therefrom not
attributed to subject imports.  The manner is which the USITC addressed the facts before it show the
absence of the "objective examination" required by Article 3.1.
(a) Mini-mills
258. Although the United States asserts that USITC extensively analyzed the contribution of mini-
mills to injury, and concluded that they were only partly responsible for the injury suffered by hot-
rolled steel producers,344 in actuality, USITC’s analysis of mini-mills could charitably be called
selective.  Consider the following summary of what the USITC said compared to what it ignored:
                                                     
344 US First Submission, paras. C-121 to C-127.WT/DS184/R
Page C-73
USITC Finding
(Exh. JP-14 )Record Facts Ignored
Minimills might have lower costs and higher
productivity, but both minimill and integrated mill prices
declined over the period, including those of established
minimill Nucor.  Therefore, factors other than increaseddomestic competition had to have contributed to pricedeclines towards the end of the period.
345Fierce discounting by new minimills to attract warycustomers hurt the profits of minimills and integrated
mills alike, including established minimills like
Nucor.
346
Seven months after the case had forced subject importsfrom the market, hot-rolled steel prices remaineddepressed.
347
Most minimill capacity was commissioned between
1996 and 1997, yet the domestic industry performed
well in 1997.348New minimills take two years to fully ramp up, and
produce at rated capacity.  Minimills commissioned in
1996 would not have fully impacted the market until1998.
349
Minimills actually fared worse than integrated millsbetween 1997 and 1998, suffering a steeper drop inoperating profits.  This reflects their greater dependenceon the merchant market, where imports are
concentrated.
350Minimills suffered no less than integrated mills from the
new minimills’ steep discounting.New minimills commissioned by Northstar BHP, BetaSteel, and IPSCO suffered from costly start-up
problems, inflating start-up costs, and hammering
profitability.
351
Even the established minimill leader Nucor showeddeclining results in line with other minimills between1997 and 1998.
352Similarly well established minimill Steel Dynamics Inc.was highly profitable in 1998.
353
259. The United States asserts that respondents claimed mini-mill shipments peaked in 1998, when
they in fact declined.354  Respondents made no such claim in any of their submissions.  Rather,
                                                     
345 Final Injury Determination , USITC Pub. 3202, at 15.
346 Respondents’ USITC Prehearing Brief, at 89 (additional excerpts attached as Exh. JP-103 ) (citing
Charles Bradford, "U.S.: Strong Do llar, Capacity Main Issues," AMMOnline  (29 May 1997) (Charles Bradford
of Smith Barney observed, "We have never seen a situation where a large amount of new capacity has enteredthe market without an offer of reduced prices to be t new product out the door, at least initially."); George
Cheverley, "A year of reckoning for sheet?" AMMOnline  (29 May 1997) (Predicts discounting from new
minimills will depress hot-rolled steel prices); Scott Robertson, "Caronb Steel Flying High into New Year,"
American Metal Market  (8 Jan. 1998) (service centers report steep discounts from new minimills "to get their
foot in the door".)).
347 Respondents’ USITC Posthearing Brief, at 28 (additional excerpts attached as Exh. JP-104 ) (citing
Hearing Transcript at 195 (Testimony of Stephen A. Szymanski, manager of sales, US Steel Group, that heexpected only half of the recently announced  $40 hot-rolled steel price hike to stick.)).
348 Final Injury Determination , USITC Pub. 3202, at 19.
349 Respondents’ USITC Prehearing Brief, at 96-97 (excerpts in Exh. JP-30 ) (citing Bradford, supra. ;
Kenneth Iverson, Chairman, Nucor Corp., prepared remarks presented 18 June 1996 at Steel Survival  StrategiesXI).
350 Final Injury Determination , USITC Pub. 3202, at 19.
351 Respondent’s USITC Prehearing Brief, at 97, 105 (excerpts in Exh. JP-30 ) (citing "Co-Steel Earns
$2.7 Million," New Steel  (29 Apr. 1997); SBC Warburg, Steel Industry Report, TFN Investext 1893253 (4 Apr.
1997));  Respondents’ USITC Posthearing Brief, Answers to Questions From Commissioners, at 32-33(additional excerpts attached as Exh. JP-104 ).
352 Final Injury Determination , USITC Pub. 3202, at 19, n. 107.
353 Respondents’ USITC Posthearing Brief, Answers to Questions From Commissioners, 31 (additional
excerpts attached as Exh. JP-104 ).  Petitioner SDI’s questionnaire response is summarized in Table VI-6, on
page VI-7 of the Staff Report, and is confidential.  SDI’s 1999 Annual Report, however, reveals that its
operating profits increased from $65.154 million in 1997 to $65.171 million in 1998.  SDI’s 1999 Annual
Report, at 2.
354 US First Submission, para. C-126.WT/DS184/R
Page C-74
respondents argued that mini-mill market share increased substantially between 1996 and 1998.355
This observation was confirmed in USITC’s own staff report:
If BOF and EAF-based shipments are separated. . .a striking difference becomes
apparent.  As BOF mill's total US shipments have declined in each year and by 3.2
percent during the period of investigation, EAF mills have increased their shipmentsby 31.5 percent from 1996 to 1998 . . . .
356
Despite this overwhelming evidence, USITC makes no mention of increasing mini-mill market share
and widening underselling between 1996 and 1998 in its analysis of impact, instead minimizing these
trends by focusing on 1997 and 1998.  It made no effort to isolate the injury caused by mini-mills, and
not attribute it to subject imports, other than by  noting that "we recognize increased competition
within the domestic industry has contributed to the domestic industry’s poorer performance in1998."
357  Hence, USITC’s analysis of mini-mills violated Article 3.5.
260. One of the most reliable signs of an objective analysis is the willingness to acknowledge and
address contrary facts.  Yet in this case, USITC conveniently ignored contrary facts rather than
confront them.  This approach does not constitute  an "objective examination" within the meaning of
Article 3.1.
(b) The General Motors strike
261. The United States maintains that USITC’s anal ysis of the General Motors strike complied
with the AD Agreement, because its assessment that the strike caused some but not all of the
industry’s declining performance was supported by the fact that the strike impacted only 685,000 tons
of flat-rolled steel compared with the 75 million ton hot-rolled steel market.358  Japan could not have
better highlighted the two facets of USITC’s analysis that run afoul of Article 3.5.  First, USITC’s
finding that the General Motors strike is "at most, a partial explanation for the industry’s declining
performance in 1998" makes no attempt to identify this contribution and not attribute it to subject
imports.359  USITC had sufficient information on the record, including the quantity of hot-rolled steel
production foregone by the strike, and hot-rolled steel prices during the strike, to have conducted such
an analysis.  USITC ignored the facts that:
• Integrated steel mills sold hot-rolled steel on the merchant market that would otherwise have
been processed into cold-rolled and galvanized steel for General Motors, as demand for hot-rolled steel was least effected by the strike, and stopping and restarting steelmaking operations
would have been prohibitively expensive.
360
• Orphaned hot-rolled steel unloaded on the merchant market had to meet or beat extremely
competitive minimill pricing.361
                                                     
355 See Respondents’ USITC Prehearing Brief, at 90-91 (additional excerpts attached as Exh. JP-103 );
Respondents’ USITC Posthearing Brief, at 21 (additional excerpts attached as Exh. JP-104 ); Respondents
USITC Posthearing Brief, Answers to Questions From Commissioners, at 7-8 (additional excerpts attached as
Exh. JP-104 ).
356 USITC Final Injury Determination , USITC Pub. 3202, at III-5 ( Exh. JP-14 ).
357 Id. at 19 ( Exh. JP-14 ).
358 US First Submission, paras. C-117 to C-120.
359 USITC Final Injury Determination , USITC Pub. 3202, at 16 ( Exh. JP-14 ).
360 Respondents’ USITC Prehearing Brief, at 122 (additional excerpts attached as Exh. JP-103 ).  The
argument itself can be seen clearly in the public version, although the underlying documentation cites
confidential information.
361 Id. at 124 (additional excerpts attached as Exh. JP-103 ) (citing discussion of lower minimill
pricing.).WT/DS184/R
Page C-75
• At least ten purchaser questionnaire responses confirmed that the General Motors strike had
depressed hot-rolled steel prices, as did public pronouncements of John Correnti, President ofNucor.
362
• Though the strike ended on July 28, General Motors’s production did not return to normal
until two weeks after the strike had ended.363  Steelmakers did not resume normal production
and delivery schedules until the fourth quarter.364
262. Second, USITC minimizes the importance of the General Motors strike by placing it in the
wrong context.  The 685,000 tons of flat-rolled steel orphaned by the strike should not be compared to
total apparent consumption, but to merchant market consumption during the strike.  In this context,
the tonnage displaced by the General Motors strike represented fully 13.7 percent of the total
domestic merchant market hot-rolled steel supply during the strike, which record evidence indicates
had been aggressively sold off.365  Such a sudden spike in supply would clearly have had a dramatic
impact on hot-rolled steel prices, and industry performance, and USITC completely ignored extensive
purchaser confirmation of the General Motors strike’s price depressing effect in the second half of
1998.366  Hence, USITC failed to meet its obligation under Article 3.5 to identify the extent of the
injury caused by the General Motors strike, and not attribute it to subject imports.
(c) Non-subject imports and the pipe and tube recession
263. It is instructive that the thorough US exposition of the hot-rolled steel determination
summarizes USITC’s analysis of mini-mills and the General Motors strike, but entirely omits
USITC’s analysis of non-subject imports and the pipe and tube recession.367  The United States cannot
summarize what does not exist.
264. Concerning non-subject imports, the United States only argues that USITC found their market
share stable over the period investigated, and that subject import volume injured the domestic industry
as much as underselling.368  In other words, the United States admits that USITC failed to analyze
non-subject import price  effects, but argues that such an analysis was unnecessary.  Yet, USITC made
no effort to analyze non-subject import prices in the aggregate, much less on a disaggregated basis,
which might have revealed surging volume from the lowest cost sources.  Accordingly, USITC’sanalysis of non-subject imports was inadequate, and an insufficient basis for ensuring that injury
caused by non-subject imports was not attributed to subject imports, as required by Article 3.5.
265. The United States argues that USITC was not obligated to analyze the price effects of non-
subject imports because if non-subject imports showed price effects, "it would be expected" that their
volume and market share would have increased.
369  This post hoc rationalization, however, appears
nowhere in USITC’s final injury determination.  It is also incorrect:  non-subject imports can maintain
a constant market share and still injure domestic producers through declining prices alone.  Lower-
priced non-subject imports can gain market share at the expense of higher-priced non-subject imports,
leaving overall non-subject import penetration unchanged.  In other words, non-subject import price
                                                     
362 Id. at 121-123 (additional excerpts attached as Exh. JP-103 ) (These responses are summarized in
ten bullet points, though the specifics are confidential).
363 Id. at 118 (additional excerpts attached as Exh. JP-103 ) (citing AMMOnline , Industry News (13
Aug. 1998)).
364 Id. at 119 (additional excerpts attached as Exh. JP-103 ) (citing AMMOnline , Industry News (13
Aug. 1998)).
365 Id. at 120-123 (additional excerpts attached as Exh. JP-103 ).
366 Id. at 120-122 (additional excerpts attached as Exh. JP-103 ) (providing ten bullet point summaries
of purchaser questionnaire responses detailing impact of General Motors strike on hot-rolled steel prices).
367 US First Submission, paras. C-67 to C-71.
368 Id. paras. C-128 to C-131.
369 US Response to Japan’s Questions, para. 42.WT/DS184/R
Page C-76
effects are a factual matter.370  Article 3.5 expressly enumerates "the volume and prices  of imports not
sold at dumped prices (emphasis added)" as a factor which "may be relevant" to an authority’s
analysis of alternative causes of injury thus recognizing the importance of both volume and price to an
analysis of non-subject imports.  USITC recognized non-subject imports to be a relevant factor, yet
performed only half of the analysis envisaged by Article 3.5.  Consequently, it could not have ensuredthat injury caused by non-subject imports was not attributed to subject imports.
266. Japan is not asking the Panel to reweigh evidence, but the Panel must evaluate whether
USITC objectively, completely, and reasonably evaluated all the economic factors.  A self-serving
recitation of selected facts, with no explanation of why contrary facts are being ignored, does not
satisfy the obligations in the AD Agreement.  Moreover, a complete failure to collect data on or
analysis on economic factors explicitly enumerated in Article 3.5 -- the price of non-subject imports --
also represents a clear violation of the AD Agreement.
267. The United States has a harder time explaini ng USITC’s complete omission of the pipe and
tube recession.  It speculates that USITC dismissed this alternative cause of injury as immaterial
because overall apparent consumption increased over the period investigated to a record high in
1998
371, but this explanation is nowhere found in the determination itself.  Moreover, even though
overall apparent consumption increased between 1997 and 1998, the pipe and tube recession wouldhave disproportionately depressed the profits of fi rms most exposed to the pipe and tube market, such
as Lone Star Steel and Newport Steel,
372 causing injury unrelated to subject imports.  As USITC made
no attempt whatsoever to identity such injury, it had to have been attributed to subject imports, in
violation of Article 3.5.
VIII.  ARTICLE X CLAIM
A. THE US A DMINISTRATION OF ITS ANTI-DUMPING LAWS, RULES , REGULATIONS , A ND
PRACTICES WAS NOT "UNIFORM , IMPARTIAL , AND REASONABLE "
268. The United States misunderstands Japan’s claim with respect to GATT 1994 Article X:3.
Japan has not brought this claim in the alternative.  Rather, Japan has brought its Article X:3 claim in
conjunction  with its claims under the AD Agreement.  Both sets of claims deserve equal consideration
by the Panel.  The United States violated both agreements in distinct manners.
B. THERE IS NO DOUBT THAT ARTICLE  X A PPLIES TO A MEMBER ’S ANTI-DUMPING ACTIONS
269. The principles embodied in Article X represent a cornerstone of the WTO system that cannot
be set aside in the anti-dumping context.  In its First Submission, the United States does not question
the overarching importance of the Article X protections, nor their embodiment of the obligation of
good faith.  Rather, the United States questions only the application of these protections to anti-
dumping measures.
270. The Appellate Body has recognized the importance and overriding application of Article X to
all "laws, regulations, judicial decisions and administrative rulings."  In U.S.—Shrimp , the Appellate
Body stated:
                                                     
370 The United States disingenuously implies that USITC cannot easily analyze non-subject import
price effect on a disaggregated basis; the Department of Commerce, Bureau of Census, maintains the requisitestatistics.  US Response to Japan’s Questions, para. 43.
371 US First Submission, paras. C-132 to C-135.
372 See <<www.newportsteel.com/about.html>> ("NS Group, Inc. is a leading producer of tubular
products serving the energy industry."); <<www.lonestarsteel.com>> ("Lone Star Steel Company is amanufacturer and distributor of quality tubular products for energy, industrial, and automotive applicationsthroughout the world.") The information from these web pages are attached as Exh. JP-105 .WT/DS184/R
Page C-77
Inasmuch as there are due process requirements generally for measures that are
otherwise imposed in compliance with WTO obligations , it is only reasonable that
rigorous compliance with the fundamental requirements of due process should be
required in the application and administration of a measure which purports to be an
exception to the treaty obligations of the Member imposing the measure and whicheffectively results in a suspension pro hac vice  treaty rights of other Members.
373
It is clear that Article X protections apply to all measures, even those that "are otherwise in
compliance with WTO obligations."
271. In its unsuccessful effort to negate the application of this essential WTO provision to anti-
dumping measures, the United States claims there is a conflict between Article X and Article 1 of the
AD Agreement.  Article 1, however, simply ensure s that Members’ anti-dumping actions conform to
both sets of rules governing anti-dumping set forth in the WTO Agreement – the AD Agreement and
Article VI of GATT 1994.  Article 1 does not limit the application of other general WTO provisions.
Indeed, Article 1 of the AD Agreement recognizes that anti-dumping measures cannot escape the
disciplines of Article VI of the GATT 1994.
272. Underlying the US claim of conflict is an assumption that since the AD Agreement
establishes a quasi-judicial system encompassing such procedural requirements as notice and the
opportunity to be heard, no other due process concerns are recognizable.  This assertion threatens the
foundation of fairness and due process upon which the WTO system is built.  Article X:3(a) goes
beyond the structural elements of due process established in the AD Agreement, to examine the
administration  of those structures.  Article X:3(a) is a comparative provision that, inter alia , seeks to
ensure that certain parties are not afforded less due process opportunities than others.374  When parties
are treated differently in different cases or within one investigation, based simply upon differences in
administration  of anti-dumping rules (rules that may or may not be consistent with the AD
Agreement), these fundamental principles are violated.
C. THE UNITED STATES VIOLATED ARTICLE  X:3( A) IN ITS INVESTIGATION OF HOT-ROLLED
STEEL FROM JAPAN
273. In this case, even if the Panel were to decide that the United States did not violate any
provisions of the AD Agreement (which is not the case), the Panel should still decide that the United
States administered its rules in a manner so as to violate Article X:3(a) of GATT 1994:
• The United States consistently penalized foreign exporters at every
opportunity with adverse facts available, but then chose not to pe nalize domestic petitioners
for arguably worse behaviour.  USDOC cannot administer these punishments in such an
impartial or disproportionate manner.
• The United States adopted a regulatory practice of correcting significant
ministerial errors, applied it consistently in other cases, but then refused to apply it for a
Japanese respondent in this case, claiming oversight.
                                                     
373 United States—Import Prohibition of Certain Shrimp and Shrimp Products , adopted 6 Nov. 1998,
WT/DS58/AB/R, at para. 182  (" U.S.—Shrimp ") (emphasis added).  Anti-dumping measures result in the
suspension of treaty rights by allowing a Member to impose duties above their bound GATT rates.
374 A primary example would be the following:  The United States cannot afford respondents with the
minimum notice and opportunity to be heard under the AD Agreement, but then favor domestic parties by
providing them with more  notice or more  opportunities to be heard.  In other words, while the notice and
hearing rules themselves may not violate the AD, the discriminatory administration of the rules violatesArticle X:3(a).WT/DS184/R
Page C-78
• The United States unreasonably accelerated the investigation and thereby
prejudiced the position of the foreign respondents, simply because domestic petitionersdemanded quick results.
• The United States adopted a new critical circumstances policy at the specific
request of the domestic industry and applied it retroactively  to the already initiated hot-rolled
steel investigation.
• The United States ignored its general practice to consider a three-year period
of investigation in this case, in an effort to justify an affirmative injury determination in a
politically charged case.
1. USDOC improperly administered rules governing the use of facts available
(b) Inconsistent treatment accorded to the individual respondents
274. USDOC treated each individual respondent in a manner inconsistent with Article X:3(a) of
GATT 1994 in its administration of its facts available rules.  With respect to KSC, USDOC
administered the rules so as to assist a petitioner (CSI) and harm a respondent, despite the fact that it
was the petitioner that was withholding the requisite information.  Moreover, despite the defiance of
the petitioner, USDOC chose the harshest penalty it could justify under its law.  This punishment was
disproportionate in respect of KSC’s actions such that it was "unreasonable" under Article X:3(a).
275. Similarly, USDOC afforded a disproportionate and therefore "unreasonable" punishment
under Article X:3(a) to NKK and NSC.  Despite their good faith actions to provide minor information
as soon as practicable and in time for verification, USDOC aggressively utilized the harshest penalty
possible under its facts available rules.  As Brazil noted in its Third Party Submission, the punishment
"does not fit the crime."
375
276. Under the AD Agreement, Japan challenged the US overall use of punitive facts available as
violating Article 6.8 and its related provisions.  These claims, therefore, attack the structural
foundation of the US practice on facts available under the AD Agreement.  Japan’s Article X:3(a)
claim, on the other hand, goes to the administration  of the rules relating to the use of adverse
inferences in the hot-rolled steel investigation.  From the perspective of administration , the concept of
"reasonable" becomes a test of proportionality or moderation.  In applying its law, did the authority
administer its discretion "reasonably?"  The differ ence is subtle, but essential to maintaining the
integrity of Article X:3(a) in serving as a check on the administration by Members of rules of general
application.
(c) USDOC’s non-uniform, partial, and unreasonable administration of facts available rules as
compared to USITC
277. USDOC’s harsh treatment of the Japanese res pondents compared to the lenient treatment
USITC granted domestic petitioners is a further violation of Article X:3(a).376  The US response to
Panel Question 44 confirms the differential treatment in this case in terms of the administration of
"facts available."  The Panel asked the parties whether information was submitted and accepted by the
USITC "after applicable deadlines."  Yet, rather th an explain to the Panel when petitioner’s initial
questionnaire response was due, and when the actual information was finally provided, the USITCcites a general date representing the absolute last day on which, under its regulations, the USITC was
                                                     
375 Brazil Third Party Submission, para. 22.
376 Japan is not challenging USITC’s failure to address petitioners’ inaction per se , but rather the
disparate treatment accorded petitioners versus respondents by the US Government as a whole.  See US First
Submission, para. D-16.WT/DS184/R
Page C-79
willing to accept certain information.377  This date is not a "deadline" for the information requested,
but rather a final date for closing the record.
278. The asymmetry here is incredible.378  This provision is analogous to a similar regulation
maintained by USDOC establishing a final date for the submission of factual information:  seven days
prior to the verification.379  Ironically, while the United States claims that the more general USDOC
regulation has nothing to do with NKK and NSC’s late corrections of their weight conversion
factors,380 the United States also claims that petitioners’ information was timely  because it met the
requirements of this analogous USITC regulation.  The US Government cannot have it both ways.
Petitioners cannot have until the final deadline for new factual information to provide information that
they failed to provide by questionnaire deadlines, while respondents must meet the actual submission
deadlines for information that they, in good faith, were unable to correct until later.
279. The United States would have this Panel believe that important domestic producer
information provided 34 days before the final opportunity to comment was "timely," yet trivial
foreign producer information provided at least a full 42 days before the final opportunity to comment
was "untimely."381  Moreover, the information sought from foreign respondents by USDOC was 28
days late,382 while the information sought from the domestic producers by USITC was at least 42 days
late,383 yet the United States now argues that the situations cannot be compared.  The foreign
respondent information was not as late, and arrived with more time before final comments.  This US
position defies belief.
280. The United States claims that this disparate treatment is permissible because it was
perpetrated by two separate agencies carrying out two separate fact-finding tasks.  In particular, the
United States implies that disparate treatment is justifiable because USITC must engage in asubjective analysis that bases its conclusions on the totality of the circumstances, while USDOC does
not engage in meaningful analysis, but simply plugs numbers into a formula.
384
281. This defense fails.  Regardless of which US agen cy carried out the statute, the fact remains
that the US Government as a whole treated respondents and petitioners in a non-uniform, partial, and
unreasonable manner in contravention of Article X:3(a).  The US attempt to distinguish between theactivities of the two agencies is nonsensical.  Both agencies adhere to the identical statute governing
                                                     
377 US Response to Panel Question 44, para. 55, n.14 (citing 19 C.F.R. § 207.30).
378 Moreover, the new factual information submitted by petitioners can hardly be described as
"comments."
379 See 19 C.F.R. § 351.301(b)(1) ( Exh. JP-5(e) ).  The regulations are analogous because of their
general application.  Questionnaires from the agencies always come with stated deadlines, but each agency also
has a regulation governing the date on which the record closes and no further factual information of any sort willbe accepted.
380 See US Response to Japan’s Questions, para. 13.
381 The number of days identified in this Paragraph have been calculated as follows.  The public
administrative record does not reveal the exact date petitioners finally provided complete questionnaireresponses to USITC, but it was no earlier than the May 4
th hearing at which the Commissioners complained
about the missing data, and the last day to comment on new information was 7 June, see US Response to Panel
Question 44, para. 55, leaving a difference of 10 days.  NKK submitted its conversion factors to USDOC on 23
February 1999, see Japan’s First Submission, para. 97 & n.89, NSC submitted its conversion factors on 22
February, see id ., para. 98 & n.92, and NSC submitted additional backup data 1 March, see id ., para. 98 & n.93.
The latest  of these three dates is 1 March.  The last day to comment on factual information before USDOC is the
date of the initial case briefs, 12 April.  See USDOC Final Dumping Determination , 64 Fed. Reg. at 24330
(Exh. JP-12 ) (noting that case briefs were filed 12 April).  There were 42 days between 1 March and 12 April.
382 The US producers responses were due on 22 March, see Exh. JP-66 , but the data requested did not
arrive until after the USITC hearing on 4 May, see Exh. JP-73.
383 See US First Submission, para. B-27 (due date of supplemental questionnaire was 25 January), para.
B-29 (requested information submitted on 22 February).
384 See US First Submission, para. D-22.WT/DS184/R
Page C-80
the application of facts available by the US anti-dumping authority.  Moreover, both agencies engage
in different types of decision-making – one that involves simply plugging data into a mechanical
formula or spreadsheet, and a second that involves reaching a more subjective conclusion based on a
consideration of various facts.
282. The truth is that both agencies engage in a certain degree of substantive analysis and a certain
degree of simple mechanical calculations. 385  There is no meaningful difference in their tasks,
therefore, upon which to justify blatantly disparate treatment under the same general facts available
rules.  Indeed, the only meaningful difference between the agencies’ analyses is that USITC focuses
on the domestic industry, while USDOC focuses on the foreign respondents.  A non-uniform
application of the facts available rules, therefore, not surprisingly, biases the system against the
foreign respondents.  Article X:3(a) prohibits this type of discriminatory administration.
283. In its First Submission, the United States implies that because under Article 3.4 of the AD
Agreement, USITC was obligated to consider all relevant factors, it had to accept the untimely
submissions.  But, USDOC is also obligated to  make a "fair comparison" under Article 2.4 and to
render the specific calculation set forth in Article 2.3.  Yet, USDOC chose non-representative
substitutes for its data, despite reasonable and non-prejudicial alternatives available to it.  This
discriminatory treatment is inconsistent with the requirements of Article X:3(a).
2. USDOC failed to correct ministerial errors
284. NKK specifically requested in writing a correction of a ministerial error that had inflated its
preliminary margin by twelve percentage points.  Now, in a post hoc rationalization, the United States
claims that this failure was a simple "oversight" and not an act of bad faith or "bias."  This US plea for
the Panel to assume that its untimely response was a good faith "oversight" contrasts directly withUSDOC’s refusal to assume good faith with respect to NKK and NSC’s "untimely" yet non-
prejudicial corrections of their weight conversion factors during the investigation.
285. The irony of USDOC’s position is clear.  At the same time that USDOC was conveniently
"forgetting" about NKK’s written request for the correction of a significant ministerial error, USDOC
was instructing NKK to expunge from the record  accurate information regarding the weight
conversion factor that USDOC had verified in Japa n.  Similar to what USDOC now claims about its
own mistake, NKK’s untimeliness was the result of a simple misunderstanding -- a misunderstanding
that NKK in fact tried to clarify with USDOC, but was misled with curt and unresponsive instructions
from USDOC staff. According to the US view, therefor e, it is reasonable for the US authority to make
mistakes and correct them in an untimely manner, but not for the Japanese exporters.
286. Given that NKK made its request for the correction in writing  and pursuant to the USDOC’s
own regulations , this USDOC claim of "oversight" is hard to believe. Importantly, this failure
contributed directly to USDOC’s ratification of its earlier critical circumstances finding against NKK,
a finding which USDOC later reversed based on NKK’s corrected margin.  The circumstances of bias
and clear indications of non-uniformity in administration here are overwhelming.
287. In answer to Question 30 from Japan, the United States cites to two other examples of such
"oversight."  But these two examples just underscore  the unique situation with respect to NKK.  In
both of these other cases, there were substantial issues about whether there was in fact a clerical
                                                     
385 The US reference to its Statement of Administrative Action in Paragraph D-23 of its First
Submission is inapposite.  The information kept from USITC officials by petitioners was company-specific
information of the type that USDOC also collects fr om respondents.  The United States cannot rely on
theoretical situations to defend concrete disparate step s taken by its agencies under the same rules in the same
investigation.WT/DS184/R
Page C-81
error386 or how to correct the admitted clerical error.387   In the NKK case, however, there was no
disagreement about the clerical error or confusion about how to correct the error.  The need to wait to
sort out substantial disagreements or to understand the precise error at issue cannot justify the alleged
"oversight" in this case.
3. This case was unfairly accelerated
288. The United States fails to recognize the comparative nature of an Article X:3(a) analysis.  The
aberrant and prejudicial acceleration of this case as compared to the uniform standard by which the
United States carries out nearly all of its other cases does matter under Article X:3(a).
289. The United States has essentially admitted the acceleration in this case deviated from its
standard practice. 388  Contrary to the US assertion, for purposes of Article X:3(a), it does matter what
the United States did in 70 out of 76 cases when administering the identical anti-dumping rules,389
because Article X:3(a) looks at the uniformity of a Member’s administration of a rule.  Moreover, this
acceleration was implemented in an impartial manner, as the result of a promise made by the
Secretary of Commerce to the members of the Congressional Steel Caucus.  Finally, this acceleration
was unreasonable as it decreased respondents’ time to prepare responses in the investigation and led
to multiple ministerial errors on the part of USDOC officials.
4. The new critical circumstances policy applied retroactively to the Japanese respondents
290. The United States refused to address Japan’s Article X:3(a) claims regarding critical
circumstances in its brief, and, thus, has failed to meet its burden to overcome Japan’s prima facie
case under Article X:3(a).  Japan’s argument is clear:  the United States changed its general critical
circumstances policy one week after initiation of the hot-rolled steel case in response to a specific
request by petitioners .  This behaviour represents exactly the type of non-uniform, partial, and
unreasonable behaviour that Article X:3(a) seeks to preclude.  The question here is not whether this
new policy is consistent with the requirements set forth in Article 10 of the AD Agreement, but
whether the administration  of US anti-dumping rules supposedly attempting to implement Article 10
meets with the fundamental fairness requirements found in Article X:3(a).  The sudden and retroactive
change in policy directed at the Japanese respondents in the hot-rolled steel case pursuant to specificdemands made by the domestic industry is a prime example of biased behaviour.
291. Similarly, USDOC’s administration of its new critical circumstances policy failed to meet the
"uniform" and "impartial" requirements of Article X:3(a).  USDOC administered the new standard so
as to rely only upon allegations in the petition, thereby favoring one side in an impartial manner.
390
Similarly, USDOC ignored USITC’s preliminary finding of no current injury, thereby leading to non-uniform determinations within the US Government.
                                                     
386 Issues and Decision Memorandum for the Final Determination in the Antidumping Duty
Investigation of Ammonium Nitrate from the Russian Federation, 65 Fed. Reg. 42669, at cmt. 2 (11 Jul. 2000),<http://ia.ita.doc.gov./frn/summary/russia/00-17514-1.txt> (noting that petitioners disagreed with respect to
whether certain allegations in fact represented clerical errors.).
387 Certain Stainless Steel Wire Rods From France:  Amended Final Results of Antidumping Duty
Administrative Review , 64 Fed. Reg. 47169, 47169 (30 Aug. 1999) ("Pe titioners acknowledge that they did not
provide exact programming language nor locate the exact cause  of the alleged clerical error at the time of their
original clerical errors comments were filed.…").
388 USDOC just recently adopted a new policy on expedited investigations.  See Import Administration
Policy Bulletin No. 00.1 on Expediting Antidumping Duty Investigations (8 June 2000) ( Exh. JP-81 ).
389 See US First Submission, para. D-13.
390 US First Submission, para. B-62 ("{I}t is generally understood that applicants will document the
highest degree of dumping {in the petition} that the available evidence will support . . . .  {I}t generally ispresumed to be adverse.").WT/DS184/R
Page C-82
5. USITC deviated from prior injury practice
292. Until this case, USITC maintained a 10-year-old standard practice of examining a three-year
period of investigation.  In the hot-rolled steel investigation, USITC acted in a non-uniform manner
and based its determination on an unreasonable comparison of only two years.  Again, the key issue
here is the uniformity with which the United States  conducts its injury analysis.  It cannot alter its
rules in certain investigations to ensure an affirmative injury finding.
IX. CONCLUSION
293. Japan reiterates that the Panel findings in this case should be quite specific and concrete.  The
Panel should not make general findings, noting violations without specifying precisely what the US
authorities did incorrectly, and then leave it to the US authorities to decide what to do.  The Panel
findings, when considered and implemented in good faith by the US authorities,391 should lead to
lower dumping margins by the USDOC and to a revised determination by USITC.  The Panel’s dutyis to provide a very clear and detailed roadmap for how the US authorities can fulfill their
international obligations in this case.
294. That roadmap should include findings about th e specific US actions in the hot-rolled steel
case under the AD Agreement, and findings about the generally applicable policies and statutes that
lead to those actions under the AD Agreement.  It should also include the judgment by the Panel onwhether the US interpretations of the provisions of AD Agreement are permissible in the context and
in the light of the object and purpose of the AD Agreement.  In addition, the roadmap should describe
the ways in which the United States violated Article X of GATT 1994, a claim separate from and
independent of Japan’s claims under the AD Agreement.  Where necessary, the United States should
be requested to change its laws and policies to comply with the US obligations under the ADAgreement, and under Article XVI of the WTO Agreement and Article 18.4 of the AD Agreement.
                                                     
391 Japan wishes to clarify that is it not requesting specific remedies in this case.  Japan did not mean to
imply in Paragraph 325 of its First Submission that the Panel itself must re-determine either the dumping
margins in the case, or whether there was injury by reason of imports.  Those tasks clearly belong to the USauthorities.WT/DS184/R
Page C-83
ANNEX C-2
Second Submission of the United States
 (13 September 2000)
TABLE OF CONTENTS
Page
PART 1: THE ANTI-DUMPING DUTY MARGINS AND CRITICAL
CIRCUMSTANCE S ...............................................................................................................85
I. AN INVESTIGATING AUTHORITY MAY MAKE ADVERSE INFERENCES
ABOUT INFORMATION THAT A RESPONDENT IN AN ANTI-DUMPING
INVESTIGATION HAS FAIL ED TO PROVIDE ..............................................................85
II. THE DEPARTMENT’S APPLICATION OF FACTS AVAILABLE TO KSC
WAS CONSISTENT WITH THE ST ANDARDS OF THE AD AGREEMENT..............88
III. THE DEPARTMENT’S APPLICATIO N OF FACTS AVAILABLE TO NSC
AND NKK WAS CONSISTENT WITH THE STANDARDS OF THE AD
AGREEM ENT ...................................................................................................................... ..89
IV. THE DEPARTMENT’S APPLICAT ION OF ITS “99.5 PER CENT” ARM’S
LENGTH TEST, TO DETERMINE THAT SOME EXPORTERS’ HOMEMARKET SALES TO AFFILIATES WERE NOT MADE IN THE ORDINARY
COURSE OF TRADE, AND ITS SUBSEQUENT USE OF HOME MARKET
DOWNSTREAM SALES TO CALCULATE THE NORMAL VALUE FOR
SUCH SALES, WERE CONSISTENT WITH THE STANDARDS OF THE AD
AGREEM ENT ...................................................................................................................... ..91
V. THE DEPARTMENT’S INTERPRETATION WITH RESPECT TO THE
CALCULATION OF THE ALL OTHERS RATE, AS EMBODIED IN
SECTION 735(C)(5)(A) OF THE TARI FF ACT OF 1930, IS CONSISTENT
WITH THE STANDARDS OF THE AD AGRE EMENT...................................................93
VI. JAPAN IS ATTEMPTING TO WR ITE ARTICLE 10.7 OUT OF THE AD
AGREEM ENT ...................................................................................................................... ..95
A. ARTICLE 10.7 EXPRESSLY AUTHORIZES CRITICAL CIRCUMSTANCES
FINDINGS PRIOR
 TO THE PRELIMINARY DETE RMINATION OF DUMPING.............95
B. “SUFFICIENT” EVIDENCE DOES NOT  MEAN ALL POTENT IAL EVIDENCE .............95
PART 2:  INJURY ................................................................................................................ ...............98
I. THE CAPTIVE PRODUCTION PROVISION, ON ITS FACE AND AS
APPLIED IN THIS CASE, IS CONSISTENT WITH THE OBLIGATIONS IN
THE ANTI-DUMPING AGREEMEN T ...............................................................................98
A. THE DIRECTION IN THE CAPTIVE PRODUCTION PROVISION TO “FOCUS
PRIMARILY” ON THE MERCHANT MARKET PERMITS AN OBJECTIVEWT/DS184/R
Page C-84
ANALYSIS OF RELEVANT ECONOMIC FACTORS CONSISTENT WITH
ARTICLES 3.4 AND 3.5 OF THE ANTI-DUMPING AGR EEMENT...................................98
1. “Focus primarily” on the merchant market speaks to a segmented market
analysis, but not to one where the USITC focuses exclusively on a particular
market segment................................................................................................................. ....100
2. “Focus primarily” does not dictate that any particular weight be given to the
merchant market in the USITC ’s evaluation of the relevant factors..............................102
II. THE USITC’S ANALYSIS IN THIS CASE WAS IN ACCORDANCE WITH
THE ANTI-DUMPING AGREEMEN T .............................................................................103
A. THE USITC PERFORMED AN OBJECTIVE EVALUATION OF ALL THE
RELEVANT ECONOMIC FACTORS OVER THE ENTIRE PERIOD OF
INVESTI GATION.................................................................................................................. 103
B. THE USITC PROPERLY DETERMINED THAT DUMPED IMPORTS WERE
CAUSING MATERIAL INJURY TO  THE DOMESTIC INDUSTRY ................................105
1. The USITC demonstrated a causal relationship between dumped imports and
aterial injury................................................................................................................. .........105
(a) The USITC properly found a correlation between the dumped imports and the
price declines .........................................................................................................................105
(b) The USITC determined that the dumped imports were causing material injury
in accordance with Article 3.5 of the Anti-dumping Agreement. .....................................106
III. THE USITC CONDUCTED THE PROCEEDINGS IN THIS INVESTIGATION
IN AN UNBIASED AND FAIR MANNER ........................................................................107
CONCLUSION ..................................................................................................................... .............109WT/DS184/R
Page C-85
1. The United States hereby submits its second written submission in this proceeding.  This
submission is divided into two parts.  First, the United States demonstrates that the US laws and
practices concerning the calculation of the anti-dumping duty margins and critical circumstances are
consistent with the United States’ WTO obligations, and that their application in this investigationwas in accordance with these obligations.  Second, the United States demonstrates that the US laws
pertaining to injury determinations, and their app lication in this investigation, are in accordance with
WTO rules.  As indicated in the discussions below, the United States will not here address all
arguments that Japan has raised, but rather will address most particularly new positions that Japan has
taken in its statements and submissions since the parties’ first written submissions.
PART 1: THE ANTI-DUMPING DUTY MARGINS AND CRITICAL CIRCUMSTANCES
I. AN INVESTIGATING AUTHORITY MAY MAKE ADVERSE INFERENCES
ABOUT INFORMATION THAT A RESPONDENT IN AN ANTI-DUMPING
INVESTIGATION HAS FAILED TO PROVIDE
2. Japan’s written answer to the United States’ third question indicates that Japan has not
moderated its extreme position that, in selecting from the facts available, an investigating authoritymay never intentionally make an adverse inference about information that a respondent has failed to
provide, no matter how blatant the respondent’s failure to cooperate.
1   Japan has not offered a single
instance in which an adverse instance would be permitted - - not even the case in which  its own
anti-dumping authorities  made an adverse inference concerning uncooperative respondents.2
Evidently, Japan has put its doubts aside and decided to stick with its original goal of persuading this
Panel to strip from the AD Agreement the incentive it now provides for respondents to cooperate in
anti-dumping investigations.3  We explained in our first written submission how this argument runs
contrary to many specific provisions in Article 6.8 and Annex II, and is, in fact, designed to defeat the
purpose of those provisions.4
3. Japan’s final answer is that its position is not really extreme.5  As supporting evidence, it
repeats its argument that “less favourable” outcomes are permitted, provided that they are
“coincidental,"6 but that less favourable outcomes that result from deliberately adverse inferences are
punishments not authorized by the Agreement.7  We explained in our first written submission that this
nominal concession is, in fact, no concession at al l, and would leave respondents with virtually no
incentive to participate in anti-dumping proceedings.8
4. Like its token concession about coincidentally adverse results, most of Japan’s answersattempt to obfuscate the real implications of its current position.  We respond to Japan’s specific
points below.
5. First, Japan notes that Article 6.8 does not “directly address the level of cooperation provided
by a party . . . but merely gives the authority for resorting to facts available, assuming the
                                                     
1 First Submission of Japan at para. 58.
2 First Submission of the United States at Part B, para. 72, n. 147.  In its investigation of Cotton Yarn
from Pakistan, the Japanese anti-dumping authorities calculated the dumping margin for non-cooperativePakistani companies by deducting the lowest export price among the cooperating suppliers found to be dumping
from the weighted average normal value of the cooperating suppliers.
3 First Submission of Japan at para. 59.
4 First Submission of the United States at Part B, paras. 58 - 71.
5 Japan’s Answer to US Question 3 at para.4.
6 First Submission of Japan at para. 58.
7 Japan’s Answer to US Question 3 at 5.
8 First Submission of the United States at Part B, paras. 73 - 76.WT/DS184/R
Page C-86
circumstances identified in Article 6.8 exist."9   This is highly misleading.  Pretending that Article 6.8
does not concern the level of cooperation of the respondent ignores the fact that Article 6.8 addresses
“refus[ing] access to information,” “not provid[ing] information,” and “significantly impeding”
anti-dumping proceedings.  The United States’ collective characterization of these actions as “failing
to cooperate” is fair, to say the least.  Thus, when Paragraph 7 of Annex II states that non cooperationmay result in a less favourable outcome for the respondent, it is referring to the types of behaviour
described in Article 6.8.
6. Second, Japan asserts that “Paragraph 7 of Annex II requires investigating authorities, in
selecting the facts available, “to find information that most closely approximates reality."
10  By this,
Japan means that adverse inferences are not permitted, because, presumably , they do not closely
approximate reality.  Japan’s answer ignores a fundamental point - - the only way for the Departmentto know what information “most closely approximates reality” is to obtain the real information.
Where a respondent has failed to provide the real information, an investigating authority has no
choice  but to make inferences about that information.
11  And, when the reason  that the respondent has
failed to provide the real information is that it simply has not cooperated in the investigation, the most
reasonable inference about the missing information is  that it is adverse to the respondent.  This
inference is not punitive - - it is the most reasonable assumption about the nature of the missing
information under the circumstances.
7. Third, Japan argues that the requirement that investigating authorities use “special
circumspection” in selecting information from secondary sources indicates that the use of adverseinferences is precluded.  The opposite is true.  Special circumspection is required precisely because
the secondary information (such as information from th e petition) is generally presumed to be adverse
to the respondent (although an investigating au thority can never know for certain whether it is
adverse, because it does not have access to the real information).
8. Fourth, Japan misreads the requirement that investigating authorities “should, where
practicable, check the information from other independent sources.”  This does not mean that the
information selected may not be adverse.  It means that the inference upon which the selection is
based should be reasonable in light of other information on the record.  A reasonable adverse
inference is one at the adverse end of the range of possibilities, to the extent that range is
ascertainable.
9. Fifth, Japan argues that Paragraph 7 of Annex II justifies “not rewarding” a respondent for
failing to cooperate, but does not justify making an adverse inference about the data not provided.
There are two flaws in this argument.  First, a result “less favourable” to a non-cooperating party is
not merely the absence of a more favourable result (or reward).  Cooperative parties are not
“rewarded” with automatically low dumping margins.  They receive margins calculated neutrally  on
the basis of the data provided.  Therefore, a “less favourable” result than if the party had cooperated is
a result that is less favourable than a neutral result - - an adverse result.  Second, Japan’s argument
ignores the obvious point that, if the worst that can happen to a respondent for failing to provide
information is the application of neutral gap-filler, no respondent in its right mind would ever submit
adverse information to an investigating authority.
10. Sixth, Japan suggests that, where a respondent has been generally cooperative, an
investigating authority may not make an adverse infe rence regarding a specific matter with respect to
                                                     
9 Japan’s Answer to Panel Question 4 at para. 15.
10 Japan’s Answer to Panel Question 4 at para. 15.
11 Japan will respond that, in the case of the weight conversion factors, the Department actually had the
relevant information in its possession.  As we have explained, this ignores the Department’s clear authority
under the Agreement to impose reasonable deadlines.WT/DS184/R
Page C-87
which that respondent has not supplied necessary information.  Neither Article 6.8 nor Annex II
provides any basis for this limitation.  Article 6.8 refers to parties that do not provide necessary
information.  It does not suggest that some necessa ry information may be withheld, if most necessary
information is provided.  Similarly, Paragraph 7 of Annex II states that a less favourable result may be
obtained where “relevant information is being withheld.”  It does not imply that some relevantinformation may be withheld if most relevant information is provided.  Acceptance of Japan’s
argument would license every respondent in ever y dumping proceeding to withhold the single most
damaging category of information from the investigating authority.
11. Seventh, Japan charges that the Department reads the sentence in Paragraph 7 of Annex II
authorizing a less favourable result for uncooperative parties “as giving it carte blanche to use any
facts available it chooses."
12  Japan evidently believes that the Department would feel free to fill in
gaps in its administrative record with the team batting average of the Tokyo Giants13, as long as that
would be adverse to the respondents.  Of course, any such notion is frivolous.  The Department tries
to select facts available that are at the adverse end of the likely range, not arbitrary numbers.  The
object is not to punish parties that fail to prov ide information, but to attempt to ensure that such
parties do not profit from their non-cooperation.  As we have explained in detail in our firstsubmission, the Department was extremely circumspect  in using   adverse inferences to select from
the facts available and carefully limited the results of  those selections to the scope of the information
not provided, or not timely provided.
14
12. Eighth, Japan implies that failing to supply necessary information within a reasonable perioddoes not “significantly impede” an investigation.
15  This cannot be true, unless the information
withheld is insignificant.  If the information is si gnificant, then withholding that information must be
significant.
13. Finally, Japan argues that information from “secondary sources” is not information from
sources other than the respondent, but information from sources other than the questionnaire response
(or, possibly, information other than the actual data specifically requested in the questionnaire).16
This is neither the plain meaning of “secondary sources” nor logical.  The most obvious meaning ofthe “primary source” is the respondent.  Therefore, the most obvious meaning of “secondary sources”
is “sources other than the respondent.”   This interpretation is supported by the term “other
independent sources” in the second sentence of Paragraph 7, which indicates that secondary sources
are independent from the primary source.  This makes sense if secondary sources are independentfrom the respondent .  But it would be a strained use of the language to describe information from a
respondent as “independent from” other information from that same respondent.
14. If accepted, Japan’s definition of “secondary sources” would mean that other information
from a respondent, even if verified , would constitute secondary info rmation that would need to be
corroborated from other sources.  Japan does not explain why it would be necessary, or how it would
be possible, to corroborate such verified information.  There is no evident explanation.
15. Japan is also incorrect in asserting that, if  “information from secondary sources” in
Paragraph 7 means information from sources other than the respondent, then the “less favourable”language does not support the use of adverse inferences.
17  Because the logic, if any, of this argument
                                                     
12 Japan’s Answer to Panel Question 6 at para. 26.
13 More precisely, the Yomiuri Giants.
14 First Submission of the United States, Part B, at paras. 109 - 112 and 163.
15 Japan’s answer to Panel Question 7 at para. 28.
16 Japan ’s answer to Panel Question 8 at para. 30.
17 Japan’s Answer to Panel Question 8 at para. 32.WT/DS184/R
Page C-88
has eluded the United States, it seems best to res pond by explaining our reading of Paragraph 7 as a
whole.
16. Paragraph 7 contains three sentences.  The first provides that, where investigating authorities
base their findings on information from secondary sources (from sources other than the respondent),they should use special circumspection.  The second sentence, which begins “[i]n such cases . . .”
plainly applies to the use of information from secondary sources, and requires that such information
be checked against other independent sources.  The third sentence does not provide more procedural
safeguards for the selection of information from the secondary sources.  Having a different function
than the second sentence, it logically is not limited by the opening clause of that sentence.  Rather, the
third sentence provides a general counterweight to all of the limitations in Annex II on the application
of facts available and, more specifically, makes clear that the special circumspection andcorroboration requirements do not preclude “less favourable results than if the party did cooperate."
18
II. THE DEPARTMENT’S APPLICATION OF FACTS AVAILABLE TO KSC WAS
CONSISTENT WITH THE STANDARDS OF THE AD AGREEMENT
17. The Department’s application of facts available to KSC because of its failure to act to the best
of its ability to report the necessary sales and further manufacturing cost data for its sales through its
US affiliate, CSI, was based upon an unbiased and objective establishment of the facts and a
permissible interpretation of the Agreement.  We will not burden the Panel with a repetition of the
facts establishing KSC’s failure to use its full authority, as a fifty-per cent owner of CSI, to attempt to
obtain that information.  Instead, we take this opportunity to show how the arguments that Japan
continues to assert on this issue lack any basis in the facts or under the AD Agreement.
18. First, we draw the Panel’s attention to Japan’s response to the Panel’s fifth question,
regarding KSC’s alleged requests to the Department for assistance concerning this issue.19  W h i l e
claiming that there “are many examples of KSC’s request for assistance,"20 Japan cites only three
record documents, none of which support its claim.  The first letter which Japan cites21 nowhere
requests the Department’s assistance.  Instead, it repeatedly requests that Commerce excuse KSC
from answering Section E of the questionnaire, with respect to the sales through its affiliated further
manufacturer, CSI.  Japan cites two other letters by KSC to the Department22 which likewise reiterate
KSC’s request to be excused from reporting the CSI information.23  Moreover, these are not the only
documents in which KSC requested to be excused from reporting the CSI information: on
21 December 1998, KSC informed Commerce that KSC would not be reporting the CSIinformation;
24  on 19 January 1999, KSC again informed Commerce that it would not provide the
                                                     
18 See First Submission of the United States at Part B, paras. 152 and 161.
19 Japan’s Answer to Panel Question 5 at para. 19.
20 Id.
21 KSC’s letter to Commerce of November 10, 1998 ( Exh. JP-42(i) ).
22 KSC letter of December 3, 1998, ( Exh. JP-78 ), and KSC letter of December 18, 1998, ( Exh.
JP-42(n) ).
23 Japan claims that the phrase “[w]e have received no information, guidance, or response from the
Department,” in KSC’s letter of 18 December 1998, constitutes a “specific” request for assistance.  Japan’sAnswer to Panel Question 5 at . para. 20.  However, a more reasonable interpretation of that phrase is that KSC
wanted confirmation from the Department that it would excuse KSC from providing the CSI information.  The
meaning is evident from the fact that , in the preceding (and first) paragrap h of that letter, KSC informed the
Department that, at its recent meeting with Commerce officials, “we asked that KSC be excused from reportingCSI’s sales of subject merchandise and of further manufact ured subject merchandise because of ... its conflict of
interest as a petitioner.”  ( Exh. JP-42(n) ) (business confidential information omitted).  Furthermore, on each of
the following two pages of that letter, KSC renewed its request that it be excused from reporting the CSIinformation.  Id.
24 KSC response to section C of the Department’s questionnaire, ( Exh. JP-42(p) ).WT/DS184/R
Page C-89
information;25  and, on 25 January 1999, KSC reiterated the same position.26  In none of these letters
did KSC request assistance regarding this issue.  Thus, the Department’s establishment of the facts on
this matter is fully supported by record evidence, whereas Japan’s factual claim is supported by none.
19. In addition, the Department’s interpretation of Articles 2.3, 6.8, and Annex II with regard to
the selection of facts available for KSC’s sales through CSI is a permissible one.  Once Commerce
established that it would apply facts available to KSC with regard to the CSI sales, and that it would
take an adverse inference with respect to KSC for its failure to act to the best of its ability, it
reasonably turned to KSC’s calculated dumping margins for actual, verified sales to the United States
as a source of facts otherwise available.  The reasonableness of this choice is shown by one of Japan’
s own affidavits.27  At paragraph 32 of this affidavit, KSC calculated the dumping margin for the
non-CSI portion of its US sales.  This calculation, representing the non-adverse facts available rateapplicable to Kawasaki, shows dumping.
28  The increase resulting from the Department’s choice of
facts available represents the logical inference that the information not provided was probably adverse
to KSC.-- i.e., that the dumping margins on the unreported sales were generally greater than the
margins on the reported sales.  Commerce chose a margin from those sales that were reported, and
thus based on KSC’s own selling practices, and applied it only in proportion to the unreported sales.This was a measured approach and reflected an appropriate adverse inference.  Japan, however, would
interpret the Agreement to reward respondents with  a “neutral” choice of facts available, thereby
giving them license to play a shell game by hiding dumped sales through their affiliates and directing
non-dumped sales, or sales with lower dumping margins, to their non-affiliated importers.
29  Neither
Article 2.3 of the Agreement, nor the facts available provisions of Article 6.8 and Annex II, should beinterpreted to require such a result.
20. Finally, we draw the Panel’s attention to Japan’s persistent claim that it supplied the
Department with reliable transfer price data  between KSC and CSI that Commerce should have
used.
30  Japan has ignored, or chosen not to rebut, the fact that KSC did not supply these data, as we
have pointed out.31  More important, however, is the fact that, if Commerce accepted such data as
facts otherwise available, it would give respondents carte blanche  to set those prices to their affiliates
at whatever level they deemed convenient to shelter dumping.  Thus, the Department’s choice of
facts available with respect to the affected sales represented a permissible interpretation of the
Agreement.
III. THE DEPARTMENT’S APPLICATIO N OF FACTS AVAILABLE TO NSC AND
NKK WAS CONSISTENT WITH THE STANDARDS OF THE AD AGREEMENT
21. The Department’s application of the facts available to NSC and NKK’s theoretical weight
sales for which they did not timely provide a theore tical-to-actual weight conversion factor was fully
in accordance with the Agreement.  Japan’s positio n, that the Department should be compelled either
to ignore altogether the sales affected by the missing factors or to accept the factors which NSC andNKK could have timely provided, but did not provide until well after the reasonable deadlines
                                                     
25 KSC response to the first section A supplemental questionnaire, ( Exh. JP-42(u) ).
26 KSC response to sections B and C of the Department’s supplemental request for information ( Exh.
JP-42(v) ).
27 Affidavit of Robert H. Huey, Counsel to KSC, ( Exh. JP-44  ).  The United States has asked the Panel
to disregard Japan’s affidavits because they are extra-record  evidence.  Thus, we cite to this affidavit only in the
event that the Panel does examine it.
28 The exact level is business confidential information.  See id ., paragraphs 32 and 33.
29 Japan’s Answer to Panel Question 42 at para. 93.  Japan also expresses the startling view that
anti-dumping investigations are usually a “surprise.”  Id.  That certainly was not the case in this instance, as the
Department’s critical circumstances determination shows.
30 Id. at paras. 93 and 18.
31 See First Submission of United States at Part B, para. 123.WT/DS184/R
Page C-90
established for this purpose in the questionnaires, would write out of the Agreement an administering
authority’s ability to establish and enforce reason able deadlines for the submission of information.
This right is guaranteed by Articles 6.1, 6.8, and An nex II at paragraphs 1 and 6.  Likewise, for the
reasons discussed above, the Department’s use of an adverse inference in selecting from the facts
available with respect to the affected sales, was authorized under Article 6.8 and Annex II,paragraph 7.
22. We will not burden the Panel with a repetition of all of the facts regarding the conversion
factor issue.  The following pertinent points have been demonstrated in our First Submission and in
our responses to the questions posed by the Panel and Japan:  (1)  The conversion factors were
presented well after questionnaire deadlines that were twice extended and provided more than ample
opportunity to respond.   (2) Despite the fact that NSC and NKK both argued that such factors wereunnecessary and impossible to provide, they proved to be necessary and possible to provide for both
companies.  (3) Despite claiming that a factor was impossible to provide, NKK’s counsel received
KSC’s submission demonstrating how they calculated the factor when KSC filed and served its
questionnaire response on December 21, 1998.  (4) When finally provided by NSC and NKK, the
factors were not timely because the so-called “seven day rule” (19 CFR § 351.301(b)((1)),  uponwhich Japan relies, expressly does not apply to deadlines for responses to questionnaires,  which are
governed by 19 CFR § 351.301(c)(2).  (5) The Department’s practice of accepting minor corrections
to timely presented data also does not constitute a blanket loophole covering data respondents have
declined to submit (at all) in response to questionnaires.  (6)  The facts available the Department
selected with respect to this issue were based on NSC and NKK’s own data and were reasonablyrelated to the affected sales.  In sum, NSC’s and NKK’s theoretical weight factor submissions were
rejected because they were untimely, and Article 6.8 and Annex II expressly permit the Department to
enforce reasonable deadlines by use of facts available.  Accordingly, the Department’s application of
facts available to NSC and NKK was consistent with the Agreement.
23. Finally, because this question is so clearly one of deadline enforcement, rather than of bias,
the Department objects to Japan’s characterization of the Department’s treatment of the conversion
factor issue as the result of an “effort to apply adverse facts available."
32  Had the Department been
making an “effort” to apply adverse facts available,  rather than conducting this investigation strictly
on the merits of the case, a much better target existed.  The most hotly contested substantive issue at
the administrative level of this case before the Department of Commerce was the question of whether
invoice/shipment date or date of order confirmation should be used as the date of sale for reportingUS and home market databases.
33  Despite being asked by the Department to report separate US and
home market sales databases using the date of order confirmation, as well as the date of
invoice/shipment it had originally used to report its sales, NKK declined to report its sales databases
using order confirmation date.34  Had the Department been acting in a biased manner, motivated only
by an “effort to apply adverse facts available,” it could have determined that the order confirmationdate was the proper date of sale, and could have applied facts available much more extensively to
NKK.  Instead, the Department made the date of sale determination, as it made all of its
determinations, on the merits, and used the invoice/shipment date as the date of sale.
                                                     
32 Japan’s Answer to Panel Question 1 at para. 4.
33 See  Final Determination , 64 Fed. Reg. at 243331-24335 (Comment 1)( Exh. JP-12 ).
34 See Preliminary Determination , 64 Fed. Reg. at 8294 ( Exh. JP-11 ).WT/DS184/R
Page C-91
IV. THE DEPARTMENT’S APPLICATION OF ITS “99.5 PER CENT” ARM’S LENGTH
TEST, TO DETERMINE THAT SOME EXPORTERS’ HOME MARKET SALES TO
AFFILIATES WERE NOT MADE IN THE ORDINARY COURSE OF TRADE, AND
ITS SUBSEQUENT USE OF HOME MARKET DOWNSTREAM SALES TO
CALCULATE THE NORMAL VALUE FOR SUCH SALES, WERE CONSISTENTWITH THE STANDARDS OF THE AD AGREEMENT
24. The Department’s application of its 99.5 per cent test to determine which home market sales
to affiliates could be used in the normal value calculation embodies a permissible interpretation of the
Agreement, as does its use of downstream sales.   Although Japan has criticized the specifics of the
99.5 per cent test, it is clear from Japan’s response to Panel Question 17 that Japan’s primary goal
with respect to the arm’s length test is not to require the Department to improve it.  Instead, Japan
urges upon the Panel an interpretation that would write out of the Agreement any interpretation of“ordinary course of trade” that would permit any scrutiny of prices to affiliates.  Because Japan has
not demonstrated that the Agreement compels such an interpretation, the standard of review requires
that the Panel find that the Department permissibly interprets the Agreement to allow it to assume that
sales to affiliates are not made in the ordinary course of trade absent a showing that sales to the
affiliate are made at not less than average market prices despite the affiliation.  Furthermore, becauseJapan has not demonstrated that the Department’s 99.5 per cent test is biased against respondents or
otherwise fails to achieve this reasonable goal, it should likewise uphold the Department’s use of this
test.
25. As the Panel has recognized, Japan seems to accept, in principle, that sales to affiliated
purchasers may not be in the ordinary course of trade.
35   What Japan does not appear to accept is that
a Member may permissibly consider that sales to an affiliated customer may be  outside the ordinary
course of trade precisely because  the affiliation may cause the pricing relationship to be “unreliable
because of association.”  In its response to Panel Question 17, Japan appears to argue that the
Agreement requires the Department to use “all these ordinary course sales – including sales tocompanies that did not survive the 99.5 per cent test.”  Although this states Japan’s preferred
outcome, it also begs the question of whether all of its sales to affiliates are sales in the ordinary
course of trade.  Japan seeks to compel an interpretation that they are, absent some reason notnecessarily related to affiliation, such as having been made at below-cost prices.  Because the
Department’s interpretation that sales to affiliates are inherently “unreliable because of association,”
and may be deemed outside the ordinary course of trade unless  it is demonstrated that the affiliation
has not resulted in favourable pricing, is a permissible one, it must be upheld.  To do otherwise wouldcompel authorities to base normal value on sales to affiliates, regardless of whether these are real
market prices or not, and despite the considerable potential for a manufacturer to manipulate the
results of an anti-dumping proceeding by selling to  affiliates at low-margin-generating prices before
re-selling the merchandise into the open marketplace.  Such an interpretation would seriously interfere
with the administration of the Agreement.
26. The 99.5 per cent test is a perfectly reasonable methodology by which to determine whether
affiliated party sales can be considered equivalent to arm’s-length sales, as demonstrated by the fact
that it is virtually the same as the margin calculation – itself prescribed by the Agreement.  Indeed, the
test’s methodology, which involves ex-factory price comparisons of a producer’s salesweight-averaged by product, is nearly identical to the margin calculation.  This is because the margin
calculation and the arm’s length test have parallel objectives: the former discerns whether there has
been significant price discrimination between home market and target-country export sales; the latter
discerns whether there has been significant “price discrimination” between affiliated and unaffiliated
home market customer sales.
                                                     
35 See Panel Question 17 to Japan.WT/DS184/R
Page C-92
27. Japan claims that the 99.5 per cent test is a “results-oriented approach” because it excludes
only lower-priced sales as outside the ordinary course of trade.36  But this simply is not the case.
When an affiliated customer passes the 99.5 per cent test, all of the sales to that customer are retained,
including those for products sold at prices below the average price to the unaffiliated customers.
Conversely, when an affiliated customer fails the 9 9.5 per cent test, all of the sales to that customer
are rejected, including those for products sold at a bove average prices that would otherwise have been
used to calculate normal value.  Thus, application of the 99.5 per cent test may increase or decrease
normal value.
28. Furthermore, as Japan readily acknowledges, “[p]rices of downstream sales can only be
higher than the prices of a producer’s direct sales, in order to cover the additional transaction costs
and profit."37  In most situations, therefore, the fact that the test does not “fail” affiliates based on
high-priced sales and results in the use of those sales in lieu of the downstream sales may have the
effect of reducing margins, compared to the margins that would have resulted from normal values
based on even higher priced downstream sales.
29. Although Japan attacks the 99.5 per cent test on the basis that it imposes a floor, but not a
ceiling, on prices treated as being in the ordinary course of trade, the Agreement does not require such
symmetry.  One of the reasons that prices involved in affiliated party transactions are inherently
suspect is that they may be manipulated so as to reduce normal value (and hence reduce dumping
margins).  This concern is simply not implicated where such prices are higher than average prices tounaffiliated customers.  There is, therefore, no basis for Japan’s contention that the 99.5 per cent testis “biased."
38
30. Nor is there any merit to Japan’s contention that the Agreement precludes the use of
downstream home market sales where an affiliated reseller fails the 99.5 per cent test.39  Japan’ s
argument hinges solely on the fact that Article 2.3 expressly permits the use of downstream sales from
affiliated importers in the export market, while Article 2.2 is silent with respect to the use of such
sales in the home market.40  Japan fails to realize, however, that Article 2.1 already authorizes the use
of downstream home market sales.  That provision defines normal value simply 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 for consumption in Japan were made in
the ordinary course of trade and clearly come within this definition.
31. Article 2.2 plainly states that normal value may be based on third-country sales price or on
constructed value only “when there are no sales of the like product in the ordinary course of trade in
the domestic market of the exporting country.”  Moreover, in response to Panel Question 17,  Japanconcurs that the Article 2.2 alternatives to a normal value based on home market prices become
relevant only if the administering agency “concludes there are no sales in the home market in the
ordinary course of trade.”  In other words,  Japan does not propose to substitute either constructedvalue or third country sales for sales to affiliates that are outside the ordinary course of trade whenother valid home market sales (which would include downstream sales made by affiliates) remain.
Instead, Japan claims, in essence, that the Agreement requires that an authority must simply ignore
any sales to customers failing the arm’s length test, and base the margin solely on “the respondent’s
home market sales to other customers."
41   The result of such a general policy, however, would be that
a producer could shield a large percentage of its home market sales from scrutiny simply by passing
                                                     
36 Japan’s Opening Statement at para. 38.
37 Japan’s First Submission at para. 170.
38 Japan’s Opening Statement at para 36.
39 Japan’s Opening Statement at para. 41-43.
40 Id.
41 See Japan’s Answer to Panel Question 17 at para. 59.WT/DS184/R
Page C-93
them through an affiliate at below-average prices be fore selling them to unaffiliated customers in the
home country.  Indeed, under Japan’s preferred approach, producers could make all of their home
market sales through affiliated resellers, forcing investigating authorities to use third-country sales orconstructed value – a result plainly not intended by the Agreement.
32. Finally, we note that the treatment of sales to and through affiliated parties is an area in which
different Member States have evolved different interpretations and practices to deal with this general
concern.  The approaches of the three third part y interveners who provided responses to Panel
Question 48 on this topic are at once diverse (demonstrating that the Agreement lends itself to
multiple permissible interpretations in this respect) and much less concrete than the Department’s
arm’s-length test.  The EC, for example, apparently  uses the remaining sales unless it determines that
they are not “sufficiently representative” and Brazil has used sales to non-affiliated parties when theywere “representative.”  If Korea determines that the affiliated party sales are “inappropriate” it
considers “constructed export price or third country sales price.”  The United States is of the belief
that its own practice, which is more transparent and concrete, not only embodies a permissible
interpretation, but is better suited for its own administration of the dumping law.   Even should the
Panel find the approach of another Member State to  be more in harmony with its own views on this
issue, however, the Panel may not impose that approach upon the United States unless Japan has
demonstrated that the Department’s practice in this respect is contrary to the Agreement.  Japan has
not done so.
V. THE DEPARTMENT’S INTERPRETATION WITH RESPECT TO THE
CALCULATION OF THE ALL OTHERS RATE, AS EMBODIED IN
SECTION 735(C)(5)(A) OF  THE TARIFF ACT OF 1930, IS CONSISTENT WITH
THE STANDARDS OF THE AD AGREEMENT
33. The Department’s calculation of the all othe rs rate using a methodology which excluded from
the calculation all margins which were, overall,  zero, de minimis  or based on the facts available,
embodies a permissible interpretation of the Agreement.  Article 9.4 of the Agreement makes no
provision for eliminating the “portions of margins, ” affected by facts available while retaining all
other “portions” of the margins, as Japan suggests in its response to Panel Question 10.   Indeed,
Japan has argued in its response to that question only that “its suggested approach better reflects
Article 9.4."42   Under Article  17.6(ii) of the Agreement, the question is not whether Japan’s
suggested approach “better reflects”  Article 9.4 than the US interpretation, but whether the US
interpretation is a permissible one.
34. Apart from the obvious fact that Article 9.4 says nothing about and therefore cannot compel
such a reading43, Japan’s approach is seriously flawed in other ways.  First, were the presumption
underlying the approach described in Japan’s reply to Panel Question 10 to be adopted as a general
rule, the all-others rate would have to be calculated based solely on whatever more favourable datarespondents chose to report – whether or not such data are representative of the overall extent to
which the respondents are dumping, and thus whether or not they are representative of the overall
level of dumping in the industry.  This means, for example, that the same high-margin-generating data
Japan seeks to remove from scrutiny through the stratagems described above would also not be
reflected in the margins for the non-examined members of the industry.
                                                     
42 Japan’s Answer to Panel Questio n 10 at para 36 (emphasis added).
43 For the same reason, the EC’s suggestion that they might use one interpretation of Article 9.4 when
portions of margins were “significant” and “adverse” (but presumably a different one when the facts availableportions were less significant and non-adverse), is not compelled by the plain language of that Article, whichdoes not distinguish between “significant”  and non-significant or adverse and non-adverse use of facts
available.WT/DS184/R
Page C-94
35. Second, Japan’s ad hoc  approach to this case is not workable as a general rule.  As the EC,
another frequent user of the dumping law, has observed in its response to Panel Question 50, most
dumping calculations include small elements of facts available.  Furthermore, these are not always
sale-specific.  Even small elements of facts available can affect large numbers of sales, especially
when facts available affects cost databases that are used in calculating constructed value, which maybe used for comparison to a wide range of export sales.  Thus, even if it were desirable to do so, it is
in many cases simply not possible to remove all “affected” sales from the margin calculation to create
the “expunged” margins Japan would have authorities use to calculate all others rates.
36. Third,  Japan’s preferred solution can seriously underestimate the average dumping level of
the mandatory respondents when, as in this case, the percentage of export sales affected by facts
available varies greatly among such respondents.  This is not merely a function of the fact that itdisregards the high level of dumping that may have been masked by data withheld from the
Department.  It is true even if it is accepted, as Japan argues it should be, that the margins used in the
weighted average calculation should be margins purged of any facts available and should reflect the
level of dumping only on those sales for which the respondent was willing to provide full data.   Japan
argues that, in weight-averaging the purged margins, authorities should assume that the mandatoryrespondents exported only the volume of product associated with sales that were not affected by facts
available.  This means that the sales volume of the least-cooperative respondents (those most likely tobe willing to dump at the highest rates) will be under-represented in the numerator of all others
weighted average.  It also means that the tota l amount of sales forming the denominator of the
weighted-average calculation will be reduced to the same degree, thus over-representing the salesvolume associated with the margin levels of the more cooperative mandatory respondents.
44   I n
addition, Japan’s preferred solution underestimates the average dumping level of the mandatory
respondents by purging their margins of individual sales affected by facts available, but not of
individual sales that are not dumped.  However a Member may interpret the reference to margins
established based on the facts available,  Article 9.4 clearly accords the same treatment to “zero and
de minimis  margins.”   The solution Japan proposes, in short, does not even come close to being the
sole permissible interpretation of Article 9.4.
37. Finally, the United States notes that the document contained at Exh. JP-79  and discussed in
Japan’s response to Panel Question 9, in no way suggests that the interpretation of the United States is
an impermissible one.  It merely shows that the United States was unsuccessful in seeking to add the
word “solely” to the text and that Japan was similarly unsuccessful in seeking to add the word“primarily.”  This suggests only that the inte nt of the Members was that the language remain
sufficiently ambiguous to allow for multiple interp retations.  Indeed, the most important statement in
that document is the final sentence:  “No conclusion was reached owing to the conflict of opinions.”
If no conclusion was reached, the drafters clearly did not conclude that the interpretation suggested by
the United States was impermissible.
45  Moreover, the fact that other parties did not agree to the
insertion of the word “solely” before the word “established” could also simply mean that those parties
believed that the word was unnecessary because the existing language in the provision already
sufficiently established that point.
                                                     
44 Should the Panel determine to use the attorney affidavits (the United States maintains the Panel
should not do so), it may wish to compare the “non-CSI portion” of KSC’s margin in  Exh. JP-44 , at para. 32
with the average margins for NSC and NKK given in the Final Determination , 64 Fed. Reg. at 34780, Exh.
JP-12 .
45 This is similar to the drafters’ decision not to adopt  an illustrative list of the types of sales that could
be considered outside the or dinary course of trade.  See First Submission of the United States at para. 216 and
fn. 297.WT/DS184/R
Page C-95
VI. JAPAN IS ATTEMPTING TO WRITE ARTICLE 10.7 OUT OF THE AD
AGREEMENT
38. Japan suggests that, “as a practical matter,” a critical circumstances finding (as referenced in
Article 10.7) cannot be made prior to the preliminary determination of dumping.  This position
ignores the existence of, and writes out of the Agreement, Article 10.7.  Article 10.7 is distinct fromother provisions in the Agreement in two fundamental respects.  First,  it does not require
administering authorities to await the preliminar y determination of dumping prior to making a
determination to withhold appraisement or assessment.  In every other instance, the Agreement
expressly provides that provisional measures may not be taken until after the preliminary
determination of dumping.  Second,  Article 10.7 is unique in its directive that there be “sufficient
evidence” to support the finding.  The requirement for “ sufficient evidence” arises in two places in
the Agreement: Article 5 (relating to initiations) and Article 10.7 (early determinations to withholdappraisement or assessment under critical circumstances).  The presence of this standard in these
provisions suggests a threshold - a quantum and quality of evidence that must be present despite the
fact that the record is incomplete.
A. ARTICLE 10.7 EXPRESSLY AUTHORIZES CRITICAL CIRCUMSTANCES FINDINGS
PRIOR
 TO THE PRELIMINARY DETERMINATION OF DUMPING
39. Japan argues that, “as a practical matter,” the “sufficient evidence” standard cannot be met
prior to the preliminary determination of dumping (as set forth in Article 7.1).  This argument ignores
the plain language and intent of Article 10.7.  Although Article 10.1 of the Agreement generally
requires, with respect to the application of provisional measures, that there first be a preliminarydetermination of dumping, injury, and causation.
46 Article 10.7 provides the express exception  to this
rule.  Specifically, Article 10.7 provides that investigative authorities may make critical circumstancesfindings and withhold appraisement or assessment at any time “after initiating and investigation.”
Thus, Japan’s claim that the “sufficient evidence” requirement in Article 10.7 mandates a delay until
the preliminary finding of dumping is untenable.
47
B. “SUFFICIENT” EVIDENCE DOES NOT MEAN ALL POTENTIAL EVIDENCE
40. The drafters of the Agreement expressly provided that certain decisions may be made on the
basis of “sufficient evidence.”  These express statements are found in Article 5 (relating to initiations)
and Article 10.7 (early determinations to withhold appraisement or assessment under critical
circumstances).  Thus, the members of the Agreement have specifically denoted two instances in
which there must be a certain quantum and quality of evidence - despite the fact that the record may
be incomplete.
41. Japan contends that the evidentiary standard applied in preliminary dumping determinations
(as provided for in Article 7.1) is the same as that to be applied in determinations made under
Article 10.7.  This argument is incorrect.  Normally, provisional measures may not be applied until
                                                     
46 See Article 10.1 (“Provisional measures shall only be applied to products which enter for
consumption after the time when the decision taken under paragraph 1 of Article 7 {preliminary determinationof dumping and injury} ... enters into force, subject to the exceptions set out in this Article. ”) (emphasis added);
and Article 7.2 (“Withholding of appraisement is an  appropriate provisional measure, ... as long as the
withholding of appraisement is subject to the same conditions as other provisional measures.”).
47 Japan implies, with the use of the word “generally” that it is not taking an absolute position (which
would be clearly contrary to the Agreement).  See Japan’s Answer to Panel Question 11 at para. 37.  However,
Japan does not provide any example of a situation in which an administering authority would have more
evidence prior to the preliminary determination of dumping than was on the record for this case.  In fact, the
Department in this case not only relied on the overwhelming evidence in the petition, but conducted external
research, corroborated the data in the petition, and relied upon the USITC preliminary finding of threat of injury.WT/DS184/R
Page C-96
parties have had the opportunity to submit evidence and comments, and the administering authority
has made a preliminary determination of dumping and injury.48  An exception to this rule, however, is
found in Article 10.7, which provides simply that withholding of appraisement or other necessary
measures may be taken “after initiating an investigation” as soon as there is “sufficient evidence.”  It
does not state that the measures must await a preliminary determination of dumping, nor does it
require that the decision occur after the receipt of information from respondents.  Rather, in order to
preserve the ultimate remedy, it simply states that the measures may be taken “after initiation” if there
is sufficient evidence.
42. The US agrees that the evidence necessary to sustain a preliminary critical circumstances
finding may be, and indeed often will be, different than that required for initiation of an investigation,
even though the standards are the same.  The inquiries involved are different, and as such, theevidence that is sufficient for each determination will depend on the factors being considered and the
context of the inquiry.
49  As explained above, it is especially notable that the Agreement provides that
the evidence simply be “sufficient” in two instances which occur early in the investigative
proceedings.
43. Japan suggests that a petition, along with the Department’s independent research and analysis,
can never serve as a basis for a preliminary determina tion of critical circumstances, regardless of the
strength and quality of the evidence on the record.  Japan bases this conclusion on three arguments.
First, Japan argues that the reference to “dumped imports” in Article 10.6 requires a preliminary
dumping finding as described in Article 7.1.  Se cond, Japan argues that an administering authority
cannot possibly make a critical circumstances finding prior to the Article 7.1 finding, because it has
not conducted any investigation whatsoever.  Finally, Japan argues that the evidence cannot be
sufficient prior to an Article 7.1 finding, because the margins are based solely on “self-serving
estimates made without the benefit of the respondent’s internal sales data or any external analysis by
the authorities.”  These arguments are without merit.
44. As explained above, Japan’s first argument, that  a preliminary finding of dumping is required,
is contrary to the Agreement because it ignores the existence of Article 10.7, which expressly
contemplates that measures may be taken at any time after initiation.  Japan’s second claim, that the
Department has conducted no investigation when making its early critical circumstances finding, is
flatly incorrect.  The Department indeed investigat ed the allegations, reviewed the evidence contained
in the petition for adequacy and accuracy, supplemented that information with additional relevant dataand analyzed and relied upon the USITC’s preliminary determination of threat to the domestic
industry.  Furthermore, Japan implies that the evidence necessary for a preliminary dumping
determination is the same evidence that is necessary for an early critical circumstances determination.
This position, however, confuses the findings being made.  Each determination is based upon distinct
factors, and thus, at least in part, involves collection and analysis of different evidence.  Finally,Japan’s argument that the margins utilized are based solely on “self-serving estimates made without
the benefit of the respondent’s internal sales data or any external analysis by the authorities,” is
disingenuous.  Japan does not contest that the margins are based upon comparisons of actual sales
                                                     
48  See Article 7.1 (provisional measures may only be taken after “parties have been given adequate
opportunities to submit information and make comments” and “a preliminary affirmative determination has been
made of dumping....”) and 10.1 (provisional measures are to be applied in accordance with Article 7.1 subject to
the exceptions set forth in Article 10 ).
49 This distinction was recognized by the Panel in HFCS.   In that case, the panel explained that “the
quantum and quality of evidence required at the time of ini tiation is less than that required for a preliminary, or
final, determination of dumping, injury, and causation, made after investigation.” Panel Report onMexico-Anti-Dumping Investigation of High Fructose Corn Syrup From (HFCS) the United States, adopted on
24 Feb. 2000, WT/DS132/R, at para. 7.94.WT/DS184/R
Page C-97
offers by NKK and NSC to US customers and actual transactions in the home market.50  Indeed, Japan
has not rebutted the legitimacy of any of the specific evidence contained in the petition.  Rather, Japan
simply argues that, because it is contained in the petition, it is meaningless.  This absolute argument
should be rejected by the Panel.
45. In fact, the evidence supporting each element of the preliminary critical circumstances
determination in this case was sufficient, and indeed, substantial.  Japan repeatedly claims that, “the
only evidence USDOC had was the petition."51  However, while much of the evidence was taken from
the petition (after being corroborated and reviewed for accuracy), the determination did not restentirely on the petition data.  Japan cannot contest that the Department not only corroborated the
petition evidence with external research sources (Internet trade publications and general news articles,
US Customs Service data, and American Iron and Steel Institute data),
52 but also relied significantly
on the USITC preliminary determination of threat to the US industry.  Furthermore, Japan does not
suggest that the plethora of newspaper articles, consultant reports, and industry publications attached
to the petition are unreliable or otherwise unrepresentative.  Again, Japan simply states that, because
they were contained in the petition, they are “mere allegations.”
46. Although Japan repeatedly argues that the findings made were not based upon “sufficient
evidence,” Japan has never addressed the specific information that was on the record to support the
critical circumstances finding.  For example, with respect to importer knowledge of dumping andconsequent injury, as discussed above, the record contained actual  evidence of significantly high
margins, and widespread, publicly distributed, media, consultant, and industry reports detailing the
massive dumping and the negative impacts on the domestic industry.53  Japan cannot possibly claim
                                                     
50 See Initiation Checklist, at 7 ( US/B-18) .  Furthermore, the calculation of the dumping margins that
were based upon constructed value were calculated using NSC’s and NKK’s own fi nancial statements.  Id.
51 See, e.g.,  Japan’s Answer to Panel Question 13 at para. 37 (emphasis added).
52 See Initiation Checklist at 70-71 (Exh. US/B-18) .
53 See Exh. US/B-40(b) and (c) . The Wall Street Journal, “Steel Imports to US Set Record in July;
Japan Claims Its Shipments Are Slowing,”  (“In the latest month, imports took 34 per cent of the domestic
market for steel ....  That lost market share has hit US steelmakers hard, particularly in the last three months as
the US industry pricing power has collapsed.  As a result, some steelmakers have cut their production, andanalysts are chopping their earning estimates for the third and fourth quarters. .... ‘Japanese steel is justmurdering’ the US steelmakers.”); Metal Bulletin (24 Sept.  1998) (“ The July figure fully supports ourindustry’s contention that massive levels of steel are being dumped.”); Metal Bulletin (7 Sept. 1998) (“Nucorhas cut production ... in response to low market prices ... because of market turmoil in the wake of a flood of
cheap imports.”); PaineWebber: Metal Stock Strategies (16 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 presentand planned steelmaking capacity, is in full force....  The collapse in steel prices on the world steel market thisyear has been almost unprecedented.”); Japan Economic Newswire (19 Sept. 1998) (“officials of major USsteelmakers ... made an appeal for the US government to take measures against what they view as unfair steelshipments from Japan ....”); Morgan Stanley, Dean Witter - Industry Report (21 July 1998) (“hot-rolled imports
are coming in at ... 15-20 per cent below the domestic price, and we believe that domestic pricing on these
products will break down in late September or  early October.”); The Wall Street Journal, “Rising Imports
Distress US Steelmakers,”  (8 Sept. 1998) (“And while it took months for major effects of inflows from overseas
to show up in the US, industry analysts and executives now say they definitely have.  ‘The pricing has justcollapsed....’”); American Metal Market (11 Sept. 1998) (“ For the second time in less than two months, Nucor
Corp., ... is lowering prices on hot-rolled and cold-rolle d sheet in the face of rising imports.”); PaineWebber:
Metal Stock Strategies (16 Sept. 1998) (“We expect the US flat-rolled steel pricing outlook to continue todeteriorate for the remainder of 1998.”); Wall Street Transcript Corporation - Industry Report (20 July 1998)(“Imports were simply so large, and prices at which the entered markets so low, that steel pricing wascompromised”); CRU Steel Monitor (April 1998) (“This d ecline in corporate profitability is being exacerbated
by the Asian financial crisis.”).WT/DS184/R
Page C-98
that the importers (many of which are sophisticated, large corporations) were not aware, or should not
have been aware of the information reported in the Wall Street Journal, the PaineWebber reports and
the other steel industry publications.54  What is more, with respect to knowledge of injury, the
Department also looked to the injury information in the petition (charts and industry data
demonstrating drastic decreases in prices and resulting declines in profitability), the 101 per centincrease in imports during the surge period, and the USITC’s preliminary determination of threat.  As
such, Japan’s claims that the determination was based solely upon allegations from the petition are
unfounded.
47. In sum, an administering authority is not merely capable of making an early critical
circumstances determination based upon “sufficient evidence,” like that presented here, but such an
action is expressly authorized under the Agreem ent.  The Panel should uphold the Department’s
preliminary critical circumstances determination in this case and the US statute upon which it is
based.
PART 2:  INJURY
I. THE CAPTIVE PRODUCTION PROVISION, ON ITS FACE AND AS APPLIED IN
THIS CASE, IS CONSISTENT WITH THE OBLIGATIONS IN THE ANTI-
DUMPING AGREEMENT
A. THE DIRECTION IN THE CAPTIVE PRODUCTION PROVISION TO “FOCUS
PRIMARILY” ON THE MERCHANT MARKET PERMITS AN OBJECTIVE ANALYSIS
OF RELEVANT ECONOMIC FACTORS CONSISTENT WITH ARTICLES 3.4 AND 3.5
OF THE ANTI-DUMPING AGREEMENT
48. In arguing that the captive production provision of the United States’ anti-dumping and
countervailing duty statute on its face violates the Anti-dumping Agreement, Japan faces a high
burden which its submissions fail entirely to meet.  As GATT and WTO panels have repeatedly
stated, only legislation that requires WTO-inconsistent action can itself be WTO-inconsistent.
55
                                                                                                                                                                    
Japan also argues in its answer to Panel question 15, para. 9, that many of the newspaper articles do not
establish knowledge of dumping and injury because they were published just weeks before the petition wasfiled.  According to Japan, this was long after the date that USDOC concluded that importers knew or shouldhave known of the dumping and consequent injury.  If, however, the importers had knowledge at an earlier date,
this only supports Commerce’s finding of knowledge of dumping and injury for purposes of the critical
circumstances determination.  The Agreement does not specify when the importers had to be aware of dumping
practices.  Rather, it merely inquires as to whether dumping practices “exist,” and whether importers should beaware that such dumping would cause injury.  The newspaper articles and press releases demonstrate thatdumping had been widespread for months and that the effects on the industry were widely apparent.  This typeof evidence (including both the early and later articles)  certainly satisfies the question under Article 10.6(i).
(Note, It also appears that Japan’s reference the US First Submission Paragraph B-273, footnote 288, is
incorrect.  This cite should reference Paragraph B-476, footnote 388).
54 Japan argues that knowledge of dumping cannot be determined without a preliminary dumping
finding.  Article 10.6 directs the administering authority to determine whether importer should have known that
dumping was occurring and that such dumping would cause injury.   The Agreement does not specify how to
determine such awareness.  Although Japan would prefer a requirement that there be a concise, determineddumping margin, this is simply not necessary under the Agreement.  If the Department’s method fordetermining importer knowledge is a permissible interpretation of the Agreement, and if it rests upon sufficientevidence, it must be upheld.
55 Panel Report on Canada - Measures Affecting the Export of Civilian Aircraft, adopted on
14 April 1999, WT/DS70/R, para. 9.124 (“Canada – Aircraft"), citing the Panel Report on United States -WT/DS184/R
Page C-99
Panels have found that even legislation explicitly directing action inconsistent with GATT 1947
principles does not mandate inconsistent action so long as it provides the possibility for authorities to
avoid such action.56  Indeed, these principles apply even where a Member has in fact used the
provision to take action inconsistent with its obligations.57
49. Here, Japan seeks to have this Panel declare the United States’ captive production provisionunlawful on its face, even if the Panel should find that the determination by those Commissioners who
applied the provision in this case is permissible.  However, Japan’s challenge must fail if the
United States establishes, as it believes it has, that those three Commissioners who invoked the
provision in the underlying investigation applied the provision in a way consistent with the
Anti-dumping Agreement.  If their findings here ar e consistent with the Agreement, the Panel should
find that the provision that they applied is consistent as well.
50. Indeed, Japan’s arguments in this proceeding appear to rest on the premise that the Panel
should impose its own interpretation of US law in order to find the captive production provision
contrary to the United States’ obligations.  This, however, is not the Panel’s task.  When examination
of a law is solely for the purpose of determining whether a member meets its WTO obligations, thepanel does not interpret the party’s law "as such", the way it would, for instance, interpret provisions
of the covered agreements.
58  Rather, a panel is called upon to establish the meaning of the provision
as a factual element and to determine whether the factual element constitutes conduct contrary to
WTO obligations.59  When an interpretation of municipal law is at issue, a panel cannot assume that
municipal authorities will choose an interpretation which is inconsistent with their internationalobligations.
60  This principle should apply all the more forcefully in the interpretation of an
agreement, like the Anti-dumping Agreement, which specifically requires that independent judicial
review of administrative decisions be available61, an avenue that Japanese producers have declined to
take in this case, and explicitly recognizes that  Members may interpret the Agreement differently.62
Thus, even if the application of the provision in this case were not consistent with the Anti-dumping
Agreement, Japan must establish that a United States court could not interpret the provision in a
manner consistent with the Agreement.
51. The captive production provision of United States law is entirely consistent with the Anti-
dumping Agreement.  The provision provides th at, when certain prerequisites are met, the
Commission shall “focus primarily” on the merchant market in its consideration of market share and
financial indicators.63  Japan ascribes two meanings to the “focus primarily” language that conflict
                                                                                                                                                                    
Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted on 4 October 1994, BISD
41S/131, para 118 ("United States – Tobacco").
56 Panel Report on United States - Taxes on Petroleum and Certain Imported Substances, adopted on
17 June 1987, BISD 34S/136, 138 ("US – Superfund").
57 Panel Report on EEC - Regulation on Imports of Parts and Components, adopted on 16 May 1990,
BISD 37S/132 ("EEC – Parts and Components"), at paras. 5.9, 5.21, 5.25-5.26.
58 Report of the Appellate Body, India – Patent Protection for Pharmaceutical and Agricultural
Chemical Products (“India – Patent s”), WT/DS50/AB/R (19 December 1997)  at para. 65, quoting Certain
German Interests in Polish Upper Silesia, 1926, PCIJ Rep., Series A, No. 7, p. 19.
59 India-Patents  at para. 65.
60 Under the municipal law of the United States, if a statute that an authority is charged with
administering permits multiple interpretations, a court will uphold an authority’s construction of the statute if
that construction is reasonable; the interpretation’s conf ormity with international obligations is a basis for
finding the authority’s action to be reasonable.  See, e.g.,  Chaparral Steel Corp. v. United States , 901 F.2d 1097,
1101, 1103 n.5 (Fed. Cir. 1990) ( Exh. US/C 24 ).
61 Anti-dumping Agreement, Article 13.
62 Anti-dumping Agreement, Article 17.6.
63 Sec. 771(7)(C)(iv) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677(7)(C)(iv). ( Exh.
Jp-4(e) ).WT/DS184/R
Page C-100
with the plain reading of the statute and that are not meanings the USITC has ascribed in applying the
provision.  In so doing, Japan is attempting to mischaracterize and reshape United States law in order
to make it fit Japan’s idea of a violation of the Anti-dumping Agreement.  Japan cannot make out its
case in this manner.
1. “Focus primarily” on the merchant market speaks to a segmented market analysis, but
not to one where the USITC focuses exclus ively on a particular market segment
52. The statutory provision at issue requires the USITC to focus primarily  on the merchant
market in evaluating certain factors.  By definition, therefore, there is some other  focus that the
USITC should have as well.  That is, under the statute’s plain meaning, the inquiry does not end with
examination of the merchant market.  The statutory mandate that the impact upon the industry as a
whole be assessed continues to be the overarching concern in the analysis.
53. Perhaps recognizing the flaw in its early readin g of the statute, Japan retreats from its initial
position that the statute mandates a focus exclusively on the merchant market.  It now argues, instead,
that, when the USITC focuses upon the merchant market, it improperly uses the entire industry as the
other point of focus.  According to Japan, an ap propriate segmented analysis would look at the
merchant market and the captive market separately.64  Whether or not Japan’s proposed alternative
analysis would be consistent with the Agreemen t is not at issue here.  “Conformity [with WTO
obligations] can be assured in different ways in different legal systems.  It is the end result that counts,
not the manner in which it is achieved."65
54. By advancing its alternative, Japan implicitly acknowledges that there are various ways toconsider the fact that the performance of each segment of an industry may influence the performance
of the whole industry differently.  Japan has not articulated any basis for concluding that looking at
the merchant market as a step in considering the market as a whole is less in accord with the
Anti-dumping Agreement than the separate merchant/captive market analysis Japan suggests as analternative.  Indeed, Japan seems to concede that  the US statute’s initial focus on the segment in
which imports primarily compete with domestic product is, as the High Fructose Corn Syrup  panel
suggested, calculated to allow the authority “to gain a better understanding of the actual functioning
of the domestic industry and its specific markets and thus of the impact of imports on the industry."
66
Japan’s approach might also serve the same end; this would not mean, however, that its approachwould be required.
55. Moreover, Japan does not show that the alternative approach it would prefer would be
precluded by the United States statute, a burden that it must carry if it is to establish that the law is
impermissible on its face.  As the United States has previously indicated, a requirement to “focus
primarily” on a certain segment does not prohibit other focuses, including on other segments.
Moreover, under the United States statute, in ev aluating the impact of dumped imports, the USITC is
required to “evaluate all relevant economic factors which have a bearing on the state of the industry in
the United States”.
67  In short, the form of segmented analysis preferred by Japan is neither required
by the Agreement nor precluded by the United States statute.
56. As the United States has previously discussed, what the United States statute does require is a
focus on the entire domestic industry after the merchant market is examined.  This approach is clearly
                                                     
64 Japan’s Answer to Panel Question 19 at para. 70.
65 Panel Report on United States–Sections 301-310 of the Trade Act of 1974 , adopted on
27 January 2000, WT/DS152/R, at para. 7.24.
66 See Panel Report on Mexico – Anti-dumping Investigation of High Fructose Corn Syrup (“HFCS”)
from the United States, adopted on 24 Feb. 2000, WT/DS132/R, at para. 7.154.
67 19 U.S.C. § 1677(7)(C)(iii).WT/DS184/R
Page C-101
consistent with the principle that the “determination of injury” under Article 3 concerns effects of
dumped imports on the industry as a whole.  In any event, consideration of the captive market data is
inherent in such an analysis.  Because the data for the entire industry incorporated data for the captive
market, the side-by-side discussion of the merchant market and the entire industry inescapably
reflected any similarities or differences between the merchant market and the captive market.
57. Contrary to Japan’s claim that the USITC does not “relate its merchant market findings to
producers as a whole"68, the determination here shows how a primary focus on the merchant market
for certain factors is consistent with such an analys is of the industry as a whole.  In examining the
volume of imports, the USITC set forth data and made parallel findings regarding the merchant
market and the entire industry, finding on the basis of both that the volume of and increase in dumped
imports was significant.69  The USITC’s  findings as to the impact of dumped imports begin with an
analysis that does not focus on the merchant market per se .  Rather, the USITC found that the
increased volume and market share of dumped imports led to the US industry’s increased capacity
becoming excess capacity almost immediately.70  By these findings, the USITC’s impact analysis tied
its findings on market share, to which the captive production provision applies, to a key indicator of
the performance of the industry as a whole -- capacity utilization -- to which the provision does notapply.
58. In analyzing financial performance, the USIT C again made parallel findings, which showed
that declines in the industry’s performance on merchant market sales were mirrored by overall
declines.  Japan’s claim
71, that the USITC discussed the data for the entire market only in its staff
report, not in its determination, thus is belied by  the face of the determination itself.  The USITC
found these trends not to be consistent with the industry’s improvement in productivity and the rise in
apparent consumption in the United States, both of which are overall measures not particular to the
merchant market.72   The USITC amply tied its findings concerning the merchant market segment to
the industry as a whole.
59. The USITC’s analysis, moreover, assured that the causal relationship that it saw between
developments in the merchant market and the condition of the industry as a whole were not in fact due
to developments in the captive sector of the industr y.  It compared the performance in the merchant
market with overall performance of those domestic producers (integrated producers) most shielded
from import competition.  It found their operating inco me to be falling both for merchant market sales
and overall.73  The USITC then compared the operating results of integrated producers to those of
minimills.  The USITC recognized that the minimills had “greater dependence on the merchant
market, where imports are concentrated."74  If this comparison had shown that minimills were
performing as well or better overall as integrated producers, or that minimills were not similarly
declining in performance, it might have indicated that the decline in the industry operating figures was
not due in particular to the effects of imports.  However, the USITC found minimills to beexperiencing a “worse financial performance”, evidently due to their greater exposure to import
competition.
75  In short, contrary to Japan’s contention, the USITC explicitly took into account that
captive production is relatively shielded from the effects of imports.  It nevertheless found that the
record evidence supported the conclusion that the effects of imports in the merchant market adversely
affected the industry as a whole.
                                                     
68 Japan’s Answer to Panel Question 19 at para. 66.
69 USITC Views at 12-13 ( Exh. US/C-1 ).
70 USITC Views at 17.
71 Japan’s Opening Statement at para. 21.
72 USITC Views at 18.
73 USITC Views at 19.
74 USITC Views at 19.
75 USITC Views at 19.WT/DS184/R
Page C-102
60. As the USITC’s determination shows, the captiv e production provision is entirely consistent
with the Agreement.  As the USITC’s determinati on further shows, it examined the relevant economic
factors and, on an objective basis, found a causal relationship between developments in the merchant
market segment and the injury suffered by the industry as a whole.
2. “Focus primarily” does not dictate that any particular weight be given to the merchant
market in the USITC ’s evaluation of the relevant factors
61. Japan now states that it takes issue only with the particular analysis that it views as required
by the captive production provision, not that an analysis of the merchant market violates the
Agreement.  In this regard, Japan acknowledges that it is permissible to consider “as a condition of
competition, the merchant versus captive portions of the [market]."76  It frames its challenge,
therefore, in terms of the “weights” it believes the statute requires to be given to “factors.”
62. It is unclear, however, whether Japan is arguing that the captive production provision requires
the USITC to give weight to one factor over another or to give inappropriate weight to the merchant
market segment.  In either case, Japan misreads the captive production provision and misunderstandsthe USITC’s application of the provision in this investigation.
63. To the extent that Japan claims the captive production provision requires greater weight to be
given to some delineated factors over others, there is no basis for the claim.  The “focus primarily”
language does not require that emphasis be placed on any factor.  The captive production provisiongives direction to the USITC “ in determining  market share and the factors affecting financial
performance"
77 (emphasis added).  It therefore only implicates the evaluation of those factors  and not
the evaluation of how those factors  relate to any of the other factors that the USITC must consider.
The provisions of the Anti-dumping Agreement78 and the US statute79 that permit the USITC to give
the weight it deems appropriate to any relevant factor is not affected by the terms of the captiveproduction provision.  As has been seen, in this case, the USITC gave emphasis to the effect of
dumped imports on capacity utilization, a factor not implicated by the provision, in establishing the
impact of dumped imports on the domestic industry.  Japan’s allegation that the captive production
provision impermissibly constrains the USITC’s ability to objectively assess all the relevant economic
factors is belied both by the face of the statute and the determination at issue here.
64. To the extent that Japan is arguing that, in evaluating certain factors, the captive production
provision requires that undue weight be given to the merchant market, this argument too should not
hold sway.  The USITC has not given any indication that the captive production provision requires it
to place more weight on the merchant market data for any factor than on the data for the industry as a
whole.  As is reflected in the USITC’s determinatio n here, the requirement to “focus primarily” on the
merchant market in establishing certain factors does not necessarily mean more than to collect andmake specific findings based on merchant market data that, which always possible, might not
otherwise be required.  It does not mean that, having examined that data, the USITC is required to
give weight to that data over what other evidence might show.  And, indeed, on each relevant factor
concerning market share and financial indicators, the USITC assured that it examined and gave
weight to data for the industry as a whole.
65. Such a requirement is neither, as Japan asserts, meaningless, nor a violation of the Anti-
dumping Agreement.  The captive production provision requires the gathering and analysis of
                                                     
76 Japan’s Opening Statement at para. 23.
77 § 771(7)(C)(iv) of the Act, 19 U.S.C. § 1677(7)(C)(iv).
78 Article 3.4 of the Anti-dumping Agreement.
79 § 771(7)(E)(ii) of the Act, 19 U.S.C. § 1677(7)(E)(ii) ( Exh. Jpn-4(e) ).WT/DS184/R
Page C-103
evidence that the statute might not otherwise require of the USITC.  The provision may be said to
require, as a matter of municipal law, a form of segmented analysis such as that which the HFCS
panel indicated was permitted under the Anti-dumping Agreement.  This does not mean that, even as
to the factors to which the provision applies, the USITC must give the merchant market segment data
weight over contrary evidence on which it otherwise may also focus.  The provision does not preventan objective examination of all the information collected.
66. Japan’s distrust of special examination of merchant market trends is based on the false
premise that such an examination will necessarily skew data concerning the domestic industry’s
performance unfavourably to foreign producers.
80   This is not the case.  First, as has been seen, the
USITC nevertheless collects and assesses the data concerning the entire industry.  Second, an
examination of data particular to the segment where competition primarily occurs may disclose thattrends concerning the industry as a whole, which might otherwise appear to disclose a connection
between imports and injury, are misleading.  Japan’s allegation assumes that the domestic industry
will always fare worse in the merchant market than it does in the captive market.  The industry,
however, could be performing worse in the captive market than in the merchant market.  In that
scenario, a failure to look at the merchant market may exaggerate the effects of dumped imports.
67. The captive production provision in no way mandates action in conflict with the Agreement.
It does not preclude an objective evaluation consistent with the requirement of the Agreement, as well
as US law, that the assessment be made, to the extent possible, in relation to the dumped imports’
impact on domestic producers of the like product “as a whole”.   The law on its face does notconstitute conduct by the United States contrary to its WTO obligations.
II. THE USITC’S ANALYSIS IN THIS CASE WAS IN ACCORDANCE WITH THE
ANTI-DUMPING AGREEMENT
A. THE USITC
 PERFORMED AN OBJECTIVE EVALUATION OF ALL THE RELEVANT
ECONOMIC FACTORS OVER THE ENTIRE PERIOD OF INVESTIGATION
68. Despite the fact that the USITC’s determination clearly contains an analysis of data over the
three year period of investigation, Japan continues to  claim that the USITC did not evaluate data about
the impact factors over the entire period.81  By simply reading the USITC’s determination, this panel
can see that Japan’s claim is patently false.  With respect to the impact factors in particular, despite
Japan’s allegations to the contrary, the USITC explicitly evaluated capacity, capacity utilization,
productivity, unit costs of goods sold, unit values, employment, wages, and capital expenditures from
1996 to 1998.82  The USITC plainly examined trends over the full period investigated.
69. Japan then narrows its objection even further.  From focusing on the impact factors, it turns to
arguing that the USITC did not discuss the fact that the financial performance of the industry as a
whole purportedly improved over the three year period of investigation.83  Once again, this claim is
specious.  The USITC discussed three year trends of financial indicators, expressly noting that the
cost of goods sold declined by more than the unit values over the entire period of investigation.84  The
USITC also found that the domestic indus try “maintained an operating profit."85  As the USITC
explained, however, other evidence made this profitability less important to its determination.
                                                     
80 Japan’s Opening Statement at para. 21.
81 Japan’s Answer to Panel Question 18 at para. 60.
82 USITC Views at 17-18 nn.100-101.
83 Japan’s Answer to Panel Question 18 at para. 65.
84 USITC Views at 18 n.100.
85 USITC Views at 18.WT/DS184/R
Page C-104
70. The fact that the USITC also examined the data from 1997 to 1998 does not detract from this
full-period analysis.  Japan attempts to characterize the decision of the USITC to consider the 1997 to
1998 data as a decision to reject an analysis of trends over the entire period.  Japan’s account does not
comport, however, with what the USITC did.  Cons istent with Article 12.2 of the Agreement, the
USITC provided its “reasons for the acceptance or rejection of relevant arguments or claims made bythe exporters and importers.”  In particular, importers and exporters before the USITC, like Japan
here, contended that the USITC should rely on 1996-98 performance data to find the domestic
industry not to be injured, rather than on the 1997-98 trends.
86
71. The USITC’s explanation of why it chose to rely on 1997-98 data rather than on the 1996-
1998 data evidences the USITC’s consideration of the 1996-98 data.  Article 3.4 does not require that
an authority’s determination restate every index having a bearing on the state of the industry.  Rather,
Article 3.4 states that the examination of the impact of dumped imports shall include an “evaluation”
of all relevant indices.  The USITC’s statement of its reasons for rejecting respondents’ argumentsconcerning the 1996-98 data demonstrates its evaluation of that index.
72. Japan’s argument confuses the USITC’s justification for comparing the data from1997 to
1998 with an expression of its intention not to examine data over the 1996 to 1998 period.  To the
contrary, the USITC’s justification for making a comparison between the 1997 and 1998 datareflected its evaluation of the probative value of the 1996-98 data in view of the changes in demand in
the market that had occurred since 1996.  Indeed, the USITC based the decision to rely on 1997 to
1998 data on the fact that “US apparent consumption increased throughout the period of investigation,
both from 1996 to 1997  and from 1997 to 1998, reaching record levels."
87  The USITC’s
determination shows that it evaluated “trends between  the first and third years of a period that conflict
with trends between the second and third years of a period,” which Japan claims are “especially
relevant."88  What Japan couches as an argument that  the USITC did not examine 1996-98 data is no
more than a challenge to the weight that the USITC gave to 1997-98 data;89 the weight of evidence,
however, is for the authority to decide.
73. Japan cites Argentina - Footwear90 as support for its position that the USITC improperly
evaluated the data from 1997 to 1998 instead of comparing 1996 to 1998.91  In fact, this decision
shows the flaws in the Japanese position.  Argentina - Footwear  expressly rejects the notion that an
authority should simply make a comparison of the data between the beginning and endpoints of the
period of investigation.  It states that trends within the period are an important part of any decision.92
Thus, Argentina - Footwear  in fact supports the USITC’s determination.
                                                     
86 USITC Views at 18.
87 USITC Views at 18.
88 Japan’s Answers to Panel Question 18 at para. 60.
89 Cf. United States -- Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic
Salmon from Norway, Report of the Panel adopted by the Committee on Anti-Dumping Practices on
27 April 1994 (ADP/87) (“Atlantic Salmon”), at ¶ 539.(“Having found that the statements made by the USITCon the financial performance of the industry were supported by the facts on record, the Panel considered that thearguments presented by Norway on the USITC’s conclusi ons regarding the negative impact of the imports on
the industry pertained to the weighing of the evidence before the USITC.  However, it followed from the last
sentence of Article 3:3 [now Article 3.4] that the positive developments reflected in the indicators referred to by
Norway could not per se have precluded the USITC from finding that the domestic Atlantic salmon industry was
experiencing material injury.”) (emphasis in original).
90 Report of the Appellate Body,  Argentina -Safeguard Measures on Imports of Footwear  (“Argentina
-- Footwear ”), adopted on 12 January 2000, WT/DS121/AB/R.
91 Japan's Answer to Panel Question 18 at paras. 62-63
92 Argentina - Footwear  at para. 129.WT/DS184/R
Page C-105
74. Further, this panel should note that Japan makes inconsistent arguments about the appropriate
time frame in an analysis of injury.  With regard to the financial indicators, it is claiming that the
USITC erred because it considered intervening trends, but when it discusses alternative causes of
injury, it is alleging that the USITC erred because it did not consider trends within the period.93  In the
latter context, it argues that the USITC improperly did not compare data for the first half of 1998 withdata from the second half of 1998 in order to fully appreciate the effect of the General Motors strike
on the domestic industry.
94  Not only is Japan incorrect in stating that the USITC did not consider this
time frame, but, in making this argument, it is conceding that an evaluation of trends within the period
may, under certain circumstances, be more probative.
B. THE USITC  PROPERLY DETERMINED THAT DUMPED IMPORTS WERE CAUSING
MATERIAL INJURY TO THE DOMESTIC INDUSTRY
1. The USITC demonstrated a causal relationship between dumped imports and material
injury
75. Contrary to  Japan’s argument, which it raised for the first time in its opening statement at the
first panel meeting, the USITC amply established the causal relationship between dumped imports
and the injury to the domestic industry.  As has been seen, the USITC found that the increaseddumped imports led the domestic industry to have excess capacity.  Further, for example, it found that
“at the same time as subject import volumes and market share increased dramatically, the domestic
industry’s market share declined;"
95  “domestic producers were prevented from participating in the
increasing demand as subject imports increased their market share",96 “declines [in prices] were most
precipitous in the third and fourth quarters of 1998, at a time when the volume of subject imports waspeaking;"
97 and  “unit values fell significantly in 1998 as subject imports increased in volume and
market share."98  Such findings demonstrate “a causal relationship between the dumped imports and
the injury to the domestic industry” as required by Article 3.5.
(a) The USITC properly found a correlation between the dumped imports and the price
declines
76. Japan points to a three-month lag time between orders for Japanese product and its
importation.99  The existence of this lag time does not, however, defeat the USITC’s conclusion that
the increase in imports when price underselling increased supported the causal relationship between
dumped imports and injury.  First, this nexus was not established solely on the basis of a relationship
between imports and prices in a particular quarter.  Rather, the USITC found the instances of
underselling to have increased in 1997 and 1998 as opposed to 1996, concurrently with a rise inimport volume and market share and a decline in industry annual performance indicators.
100  As the
USITC concluded, full year data was sufficient to support its affirmative determination.101
77. Moreover, evidence concerning the nature of pricing in the market supported the USITC’s
reliance on the fact that price declines were most precipitous in the third and fourth quarters of 1998,when import volumes peaked.  The fact that some imports in those quarters were made pursuant to
earlier contracts does not mean that the prices of those imports were not set when the importations
                                                     
93 First Submission of Japan at para. 275.
94 First Submission of Japan at para. 277.
95 USITC Views at 12.
96 USITC Views at 12.
97 USITC Views at 14.
98 USITC Views at 18.
99 Japan’s Answer to Panel Question 47 at para. 107.
100 USITC Views at 14-15.
101 USITC Views at 20.WT/DS184/R
Page C-106
were made.  To the contrary, during the hearing, respondents’ witnesses testified that, in many cases,
purchasers demanded lower prices after a contract had been negotiated, threatening to cancel the order
if the prices did not come down.102  In fact, Japanese respondents testified that, if prices in the market
fell between the time of an order and the time scheduled for delivery, the prices were renegotiated.103
This evidence shows that the lag time for orders does not translate into a lag time for price effects of
imports.   Therefore, consistent with the Japanese parties’ own witnesses, the correlations that the
USITC drew between the time of entry of the imports and the declining prices for hot rolled steel in
the United States are not affected by the lag time between date of order and date of delivery.
(b) The USITC determined that the dumped imports were causing material injury in
accordance with Article 3.5 of the Anti-dumping Agreement.
78. As the United States has discussed in its answer to the Panel’s questions104, the phrase
“imports are causing material injury” had been interpreted under the Tokyo Round Anti-dumping
Code not to require that an authority isolate the particular quantum of injury due to imports from the
injuries due to other causes and determine that quantum of injury to be “material”.  In adopting that
phrase in Article 3.5, the negotiators of the Anti- dumping Agreement reflected that they would not
change that conclusion.  Rather, adopting also the phrase “a causal relationship”, they indicated that ademonstration of causation must show a connection between the effects of imports and material
injury, not that dumped imports are the only factor so connected.  Such a demonstration, consistent
with the requirement not to attribute to dumped imports the effects of other causes, must not
mistakenly rely on indicators of such a relationship that are in fact due to other causes of injury.
79. Japan nevertheless argues that the USITC violated the Agreement by stating that “the
substantially increased volume of subject imports at declining prices has materially contributed to the
industry’s deteriorating performance."
105  The USITC’s legal conclusion was that the domestic
industry “is materially injured by reason of LTFV [ i.e., dumped] imports of hot rolled steel from
Japan."106  Japan does not contend that this conclusion differs from the conclusion that dumped
imports are causing material injury.
80. The USITC’s use of the phrase “materially contributed” in effect recognizes that, although in
using the phrase “a causal relationship”  Article 3.4 does not establish a precise degree of relationship
that must be demonstrated between the effects of imports and injury, that relationship must not be
trivial.  Use of the phrase “materially contributed” is entirely in accord with the ordinary meaning of
the term “cause.” Webster’s Third New International Dictionary (Unabridged)  at 356 (1981) defines
the verb ‘cause’ as follows:  “to serve as cause or occasion of.”  Webster’ s  makes clear that ‘cause’
(in noun form) need not be the sole determinant of an outcome:
CAUSE indicates a condition or circumstance or combination of
conditions and circumstances that effectively and inevitably callsforth an issue, effect or result or that materially aids in that calling
forth.  (emphasis added.)
107
In short, the phrasing of which Japan complains is simply one way of restating the term “cause.”
                                                     
102 Transcript of 4 May 1999, Hearing at 242 (testimony of Mr. Curtis) ( Exh. US/C 25 ).
103 Transcript at 246-47 (testimony of Mr. Stapp).
104 US Answer to Panel Question 46.
105 USITC Views at 20-21.
106 USITC Views at 23.
107 Webster’s Third New International Dictionary (Unabridged) at 356 (1981) ( Exh. US/C 26 ).WT/DS184/R
Page C-107
81. In considering the adequacy of the USITC’s demonstration of this causal relationship, it is
instructive to compare the findings that it made here to those upheld by the panel in Atlantic Salmon ,
whose analysis was before the negotiators of the Anti-dumping Agreement.  In Atlantic Salmon , the
panel found that the “USITC had not failed to cons ider whether there had been a significant increase
in the volume of subject imports."108  The USITC’s decision that the panel upheld discussed the
existence of a surge in imports from Norway, but also found that market penetration of these dumped
imports declined.109  In the current case, not only did dumped imports double in volume; they doubled
their market shares as well.110
82. As to price effects, the Atlantic Salmon  panel found that, “on its face, the text of the USITC
determination demonstrated that the USITC had not failed to consider the price effects of the imports
of Atlantic salmon from Norway."111  As part of its analysis in that case, the USITC concluded that,
“[a]lthough other factors may have contributed, the decline in US prices for Atlantic salmon in 1988
and 1989 was due in large part to oversupply in the US market.  Imports from Norway accounted for alarge portion of the increased imports in 1989.  This suggests that Norwegian Atlantic salmon played
a role in the price decline."
112  The Atlantic Salmon  panel reached this conclusion notwithstanding the
fact that in that case the dumped imports persistently oversold the domestic product.113  In the current
case, the USITC found that imports that increased by 10 million tons over 1997 and 1998, including 7
million tons in 1998, and increasingly undersold the US product in that period, had significant priceeffects.  Japan’s argument that a strike at General Motors that affected no more than 685,000 tons of
product over a period of five weeks had significant price effects only reinforces the USITC’s
conclusions about the price effects of the massively increased imports.
83. The panel in Atlantic Salmon  also upheld the USITC’s determination about the negative
financial performance of the US industry
114 when the USITC found, “After posting a large operating
loss in 1987, the domestic industry recorded an overall operating profit in 1988.  However, the
financial state of the US Atlantic salmon industry declined precipitously in 1989."115  T h e  U S I T C
found a similar end-of-period trend in operating income in this case.
84. In short, the United States submits that, in order to establish that the USITC’s demonstration
of a causal relationship between dumped imports and material injury in this case violates the
Anti-dumping Agreement, Japan must establish that the Anti-dumping Agreement requires an
analysis significantly different from that upheld under the Tokyo Round Code.  Japan has not
attempted such a showing, and cannot make it.
III. THE USITC CONDUCTED THE PROCEEDINGS IN THIS INVESTIGATION IN AN
UNBIASED AND FAIR MANNER
85. The United States has previously addressed Japan’s argument that the USITC Commissioners
should not have requested at the USITC’s hearing that domestic producers provide information that
they had not previously provided.  The United States will not here reiterate its points on the matter.
Japan now, however, takes issue with the USITC’s ac ceptance of that submission because, it claims,
“respondents literally had less than a week to comment on the corrected figures, and then only briefly,
                                                     
108 Atlantic Salmon  at para. 501.
109 Atlantic Salmon  at para 499.
110 USITC Views at 12.
111 Atlantic Salmon  at para. 514.
112 Atlantic Salmon  at para. 514.
113 Atlantic Salmon  at para. 518.
114 Atlantic Salmon  at para. 538.
115 Atlantic Salmon  at para. 535.WT/DS184/R
Page C-108
as final comments are strictly limited to fifteen pages in length per respondent country."116  T h i s
contention fails to make out a claim under the Agreement.
86. As reflected in the final USITC’s staff report, US producers submitted the requested data
before the report issued, and that information was incorporated into the report.117   The staff report
was issued to the parties on 27 May 1999.  In fact, the US producers had submitted to the USITC and
served on the other parties the final piece of inform ation on this point several weeks prior to issuance
of the final report.  Parties submitted their final comments on the information obtained in the
investigation to the USITC on 7 June 1999.  Thus, respondents had several weeks to prepare their
comments on this information, not the seven days that Japan claims.
87. Further, respondents were not limited to a fifteen page submission.  On 2 June 1999,
respondents requested to file more than fifteen pages for their final comments.  They made this
request, not because of an issue with the information in the record, but because of the fact that one
counsel was representing producers from several different countries.118  In fact, respondents’ final
comments were 29 pages long.119
88. In any event, Japan’s argument does not establish that the USITC in any way violated the
applicable provision concerning parties’ opportunity to comment on information.  The relevantprovision is Article 6.9, which provides that authorities, before a final determination is made, shall
inform all interested parties of the essential facts under consideration.  Article 6.9 further provides,
“Such disclosure should take place in sufficient time for the parties to defend their interests.”
89. Notably, Article 6.9 does not define what constitutes a “sufficient time” nor does it require
authorities to afford parties unlimited numbers of pages in which to present their arguments.  In the
current case, respondent interested parties in fact commented on the US producers’ data in final
submissions.  None complained that either the time or pages that they were afforded for comment was
insufficient.  None complained that, with more time or space, they would have had more to say.  None
requested that, as its rules allow, the USITC make  an exception to the limitations set forth in its
normal procedures.
120  They only requested clarification of the rule on comments, and they never
made reference to the domestic industry’s data in that request.  In short, the Japanese respondents
having failed in the administrative proceedings to object to the time and space they were given,
Japan’s argument at best consists of the contention that a week for response and a limitation of the
number of pages in which to make that response is per se  insufficient.  Nothing in the Agreement
supports such a contention.
90. Indeed, Japan should be barred from making such a contention.  In arguing the USITC failed
to afford parties sufficient time to defend their inte rests, that contention is beyond this Panel’s terms
of reference.  Japan’s panel request does not state any claim arising under Article 6.9 or mention that
Article at all.  Thus, unable to make a substantive claim under Article 6.9, Japan should not be
permitted to substantiate this claim through vague and unsupported allegations of bias.
                                                     
116 Japan’s Answer to Question 44 at para. 98.
117 USITC Views at VI-1.
118 2 June 1999 letter to Chairman Bragg ( Exh. US/C-27 ).
119 Selected pages from Respondents’ Comments ( Exh. US/C-28 ).
120 See 19 C.F.R. §§ 201.4(b) & 201.14(b)(2) ( Exh. US/C-29 ).WT/DS184/R
Page C-109
CONCLUSION
91. For the foregoing reasons, the United States requests that the Panel reject Japan’s claims in
their entirety.WT/DS184/R
Page C-110
ANNEX C-3
Letter from the United States to the Chairman of the Panel
(21 September 2000)
The United States has raised a preliminary objection to Japan’s submission to the Panel of
factual information not made available to the US authorities during the antidumping duty
investigation, i.e., extra-record evidence.  In its questions to the United States, the Panel asked the
United States to list the exhibits that should not be considered by the Panel because they are
extra-record evidence.  The United States responded on 6 September.  Since the time of that response,
the United States notes that Japan has put before this Panel, in its second submission of 13 September,
two additional pieces of extra-record evidence that should not be considered by the Panel.
First, at note 353, Japan cites profit figures from an annual report of a US producer.  Japan
apparently admits that the annual report was not submitted to the US International Trade Commission
(“USITC”), but states that purportedly similar information was given to the USITC.  As theUnited States has previously made clear, we have no objection to Japan’s use of any information
presented to the USITC, with respect to “injury” issues, but ask that the Panel disregard this new,
extra-record evidence.
Second, Japan’s exhibit JP-105 contains information from two web sites, described at
note 372 of Japan’s second submission.  Neither these web sites nor their content were presented to
the USITC during the course of the antidumping investigation.  In addition, Japan retrieved these web
sites on 5 September 2000, as the date on the pages demonstrates.  Therefore, the information
contained in those documents may not even be relevant to the time period under investigation, and
may not even have existed at the time of the investigation.
We ask that the panel disregard the above extra-record evidence contained in Japan’s second
submission.
The United States is providing a copy of this submission directly to the Government of Japan.WT/DS184/R
Page C-111
ANNEX C-4
Letter from Japan to Ch airman of the Panel
(25 September 2000)
On 21 September 2000, the United States filed a letter with your office registering its
objection to certain evidence referenced in Japan's Second Submission.  Japan believes that the items
to which the United States now objects are proper ly before the Panel, for the following reasons:
The information contained in footnote 353 of Japan's Second Submission is from the 1999
annual report of Steel Dynamics Inc. ("SDI").  During the course of its investigations, USITC requests
the annual reports of domestic producers in their que stionnaires.  Specifica lly, Question III-4 of the
domestic producer questionnaire issued in the hot-rolled steel case requested the producers to submittheir annual reports if they were not available on the internet.
1  (While the staff report does not state
which domestic producers submitted completed questionnaires, it can be assumed that SDI did so
given that it was named as a petitioner.2)  Therefore, although USITC's confidential record has not
been made available to the Panel, it is safe to assume that the information cited in footnote 353 - SDI's
operating profits for 1997 and 1998 - was contained in the annual report(s) accompanying SDI's
questionnaire response.  Given that this 1997 and 1998 data is the only information referenced in
footnote 353, it is irrelevant whether the 1999 annual report itself was on the record (Japan did notprovide the entirety of the 1999 annual report as an exhibit to its Second Submission).
The documents in Exhibit JP-105 merely show that Lone Star Steel and Newport Steel
specialize in supplying hot-rolled steel sheet for pipe and tube production.  Question II-23 of USITC's
domestic producers' questionnaire asked each company to report the percentage of its shipmentsdevoted to pipe and tube products.
3  Japan admits that, unless Lone Star and Newport submitted
questionnaire responses, USITC might not have had record information before it to suggest that they
specialized in hot-rolled steel for pipe and tube production.
Neither producer was a petitioner, and the public staff report gives no indication that either
firm returned a questionnaire response to the staff.  The staff report does, however, identify both
companies as hot-rolled steel producers4, and it is a matter of public record that both companies
specialize in pipe and tube production, as demonstrated by their websites.  Further, Japan only offers
Lone Star Steel and Newport Steel as examples of companies dependant on the pipe and tube market
that would have been hard hit by the pipe and tube recession.  Even without these examples, Japan'slogic is irrefutable:  Even though overall apparent consumption reached a record  high in 1998,
companies dependant on the pipe and tube market would have nevertheless lost money for reasons
unrelated to subject imports.  Nonetheless, USITC completely ignored this alternative cause in its
determination.
__________
                                                     
1 Exh. JP-106 (attached).
2 USITC Final Injury Determination , USITC Pub. 3202 at III-3 ( Exh. JP-14 ).
3 Exh. JP-106  (attached).
4 USITC Final Injury Determination , USITC Pub.3202 at III-2 ( Exh. JP-14 ).WT/DS184/R
Page C-112
ANNEX C-2
Second Submission of the United States
 (13 September 2000)
TABLE OF CONTENTS
Page
PART 1: THE ANTI-DUMPING DUTY MARGINS AND CRITICAL
CIRCUMSTANCE S ...............................................................................................................85
I. AN INVESTIGATING AUTHORITY MAY MAKE ADVERSE INFERENCES
ABOUT INFORMATION THAT A RESPONDENT IN AN ANTI-DUMPING
INVESTIGATION HAS FAIL ED TO PROVIDE ..............................................................85
II. THE DEPARTMENT’S APPLICATION OF FACTS AVAILABLE TO KSC
WAS CONSISTENT WITH THE ST ANDARDS OF THE AD AGREEMENT..............88
III. THE DEPARTMENT’S APPLICATIO N OF FACTS AVAILABLE TO NSC
AND NKK WAS CONSISTENT WITH THE STANDARDS OF THE AD
AGREEM ENT ...................................................................................................................... ..89
IV. THE DEPARTMENT’S APPLICAT ION OF ITS “99.5 PER CENT” ARM’S
LENGTH TEST, TO DETERMINE THAT SOME EXPORTERS’ HOMEMARKET SALES TO AFFILIATES WERE NOT MADE IN THE ORDINARY
COURSE OF TRADE, AND ITS SUBSEQUENT USE OF HOME MARKET
DOWNSTREAM SALES TO CALCULATE THE NORMAL VALUE FOR
SUCH SALES, WERE CONSISTENT WITH THE STANDARDS OF THE AD
AGREEM ENT ...................................................................................................................... ..91
V. THE DEPARTMENT’S INTERPRETATION WITH RESPECT TO THE
CALCULATION OF THE ALL OTHERS RATE, AS EMBODIED IN
SECTION 735(C)(5)(A) OF THE TARI FF ACT OF 1930, IS CONSISTENT
WITH THE STANDARDS OF THE AD AGRE EMENT...................................................93
VI. JAPAN IS ATTEMPTING TO WR ITE ARTICLE 10.7 OUT OF THE AD
AGREEM ENT ...................................................................................................................... ..95
A. ARTICLE 10.7 EXPRESSLY AUTHORIZES CRITICAL CIRCUMSTANCES
FINDINGS PRIOR
 TO THE PRELIMINARY DETE RMINATION OF DUMPING.............95
B. “SUFFICIENT” EVIDENCE DOES NOT  MEAN ALL POTENT IAL EVIDENCE .............95
PART 2:  INJURY ................................................................................................................ ...............98
I. THE CAPTIVE PRODUCTION PROVISION, ON ITS FACE AND AS
APPLIED IN THIS CASE, IS CONSISTENT WITH THE OBLIGATIONS IN
THE ANTI-DUMPING AGREEMEN T ...............................................................................98
A. THE DIRECTION IN THE CAPTIVE PRODUCTION PROVISION TO “FOCUS
PRIMARILY” ON THE MERCHANT MARKET PERMITS AN OBJECTIVEWT/DS184/R
Page C-113
ANALYSIS OF RELEVANT ECONOMIC FACTORS CONSISTENT WITH
ARTICLES 3.4 AND 3.5 OF THE ANTI-DUMPING AGR EEMENT...................................98
1. “Focus primarily” on the merchant market speaks to a segmented market
analysis, but not to one where the USITC focuses exclusively on a particular
market segment................................................................................................................. ....100
2. “Focus primarily” does not dictate that any particular weight be given to the
merchant market in the USITC ’s evaluation of the relevant factors..............................102
II. THE USITC’S ANALYSIS IN THIS CASE WAS IN ACCORDANCE WITH
THE ANTI-DUMPING AGREEMEN T .............................................................................103
A. THE USITC PERFORMED AN OBJECTIVE EVALUATION OF ALL THE
RELEVANT ECONOMIC FACTORS OVER THE ENTIRE PERIOD OF
INVESTI GATION.................................................................................................................. 103
B. THE USITC PROPERLY DETERMINED THAT DUMPED IMPORTS WERE
CAUSING MATERIAL INJURY TO  THE DOMESTIC INDUSTRY ................................105
1. The USITC demonstrated a causal relationship between dumped imports and
aterial injury................................................................................................................. .........105
(a) The USITC properly found a correlation between the dumped imports and the
price declines .........................................................................................................................105
(b) The USITC determined that the dumped imports were causing material injury
in accordance with Article 3.5 of the Anti-dumping Agreement. .....................................106
III. THE USITC CONDUCTED THE PROCEEDINGS IN THIS INVESTIGATION
IN AN UNBIASED AND FAIR MANNER ........................................................................107
CONCLUSION ..................................................................................................................... .............109WT/DS184/R
Page C-114
1. The United States hereby submits its second written submission in this proceeding.  This
submission is divided into two parts.  First, the United States demonstrates that the US laws and
practices concerning the calculation of the anti-dumping duty margins and critical circumstances are
consistent with the United States’ WTO obligations, and that their application in this investigationwas in accordance with these obligations.  Second, the United States demonstrates that the US laws
pertaining to injury determinations, and their app lication in this investigation, are in accordance with
WTO rules.  As indicated in the discussions below, the United States will not here address all
arguments that Japan has raised, but rather will address most particularly new positions that Japan has
taken in its statements and submissions since the parties’ first written submissions.
PART 1: THE ANTI-DUMPING DUTY MARGINS AND CRITICAL CIRCUMSTANCES
I. AN INVESTIGATING AUTHORITY MAY MAKE ADVERSE INFERENCES
ABOUT INFORMATION THAT A RESPONDENT IN AN ANTI-DUMPING
INVESTIGATION HAS FAILED TO PROVIDE
2. Japan’s written answer to the United States’ third question indicates that Japan has not
moderated its extreme position that, in selecting from the facts available, an investigating authoritymay never intentionally make an adverse inference about information that a respondent has failed to
provide, no matter how blatant the respondent’s failure to cooperate.
1   Japan has not offered a single
instance in which an adverse instance would be permitted - - not even the case in which  its own
anti-dumping authorities  made an adverse inference concerning uncooperative respondents.2
Evidently, Japan has put its doubts aside and decided to stick with its original goal of persuading this
Panel to strip from the AD Agreement the incentive it now provides for respondents to cooperate in
anti-dumping investigations.3  We explained in our first written submission how this argument runs
contrary to many specific provisions in Article 6.8 and Annex II, and is, in fact, designed to defeat the
purpose of those provisions.4
3. Japan’s final answer is that its position is not really extreme.5  As supporting evidence, it
repeats its argument that “less favourable” outcomes are permitted, provided that they are
“coincidental,"6 but that less favourable outcomes that result from deliberately adverse inferences are
punishments not authorized by the Agreement.7  We explained in our first written submission that this
nominal concession is, in fact, no concession at al l, and would leave respondents with virtually no
incentive to participate in anti-dumping proceedings.8
4. Like its token concession about coincidentally adverse results, most of Japan’s answersattempt to obfuscate the real implications of its current position.  We respond to Japan’s specific
points below.
5. First, Japan notes that Article 6.8 does not “directly address the level of cooperation provided
by a party . . . but merely gives the authority for resorting to facts available, assuming the
                                                     
1 First Submission of Japan at para. 58.
2 First Submission of the United States at Part B, para. 72, n. 147.  In its investigation of Cotton Yarn
from Pakistan, the Japanese anti-dumping authorities calculated the dumping margin for non-cooperativePakistani companies by deducting the lowest export price among the cooperating suppliers found to be dumping
from the weighted average normal value of the cooperating suppliers.
3 First Submission of Japan at para. 59.
4 First Submission of the United States at Part B, paras. 58 - 71.
5 Japan’s Answer to US Question 3 at para.4.
6 First Submission of Japan at para. 58.
7 Japan’s Answer to US Question 3 at 5.
8 First Submission of the United States at Part B, paras. 73 - 76.WT/DS184/R
Page C-115
circumstances identified in Article 6.8 exist."9   This is highly misleading.  Pretending that Article 6.8
does not concern the level of cooperation of the respondent ignores the fact that Article 6.8 addresses
“refus[ing] access to information,” “not provid[ing] information,” and “significantly impeding”
anti-dumping proceedings.  The United States’ collective characterization of these actions as “failing
to cooperate” is fair, to say the least.  Thus, when Paragraph 7 of Annex II states that non cooperationmay result in a less favourable outcome for the respondent, it is referring to the types of behaviour
described in Article 6.8.
6. Second, Japan asserts that “Paragraph 7 of Annex II requires investigating authorities, in
selecting the facts available, “to find information that most closely approximates reality."
10  By this,
Japan means that adverse inferences are not permitted, because, presumably , they do not closely
approximate reality.  Japan’s answer ignores a fundamental point - - the only way for the Departmentto know what information “most closely approximates reality” is to obtain the real information.
Where a respondent has failed to provide the real information, an investigating authority has no
choice  but to make inferences about that information.
11  And, when the reason  that the respondent has
failed to provide the real information is that it simply has not cooperated in the investigation, the most
reasonable inference about the missing information is  that it is adverse to the respondent.  This
inference is not punitive - - it is the most reasonable assumption about the nature of the missing
information under the circumstances.
7. Third, Japan argues that the requirement that investigating authorities use “special
circumspection” in selecting information from secondary sources indicates that the use of adverseinferences is precluded.  The opposite is true.  Special circumspection is required precisely because
the secondary information (such as information from th e petition) is generally presumed to be adverse
to the respondent (although an investigating au thority can never know for certain whether it is
adverse, because it does not have access to the real information).
8. Fourth, Japan misreads the requirement that investigating authorities “should, where
practicable, check the information from other independent sources.”  This does not mean that the
information selected may not be adverse.  It means that the inference upon which the selection is
based should be reasonable in light of other information on the record.  A reasonable adverse
inference is one at the adverse end of the range of possibilities, to the extent that range is
ascertainable.
9. Fifth, Japan argues that Paragraph 7 of Annex II justifies “not rewarding” a respondent for
failing to cooperate, but does not justify making an adverse inference about the data not provided.
There are two flaws in this argument.  First, a result “less favourable” to a non-cooperating party is
not merely the absence of a more favourable result (or reward).  Cooperative parties are not
“rewarded” with automatically low dumping margins.  They receive margins calculated neutrally  on
the basis of the data provided.  Therefore, a “less favourable” result than if the party had cooperated is
a result that is less favourable than a neutral result - - an adverse result.  Second, Japan’s argument
ignores the obvious point that, if the worst that can happen to a respondent for failing to provide
information is the application of neutral gap-filler, no respondent in its right mind would ever submit
adverse information to an investigating authority.
10. Sixth, Japan suggests that, where a respondent has been generally cooperative, an
investigating authority may not make an adverse infe rence regarding a specific matter with respect to
                                                     
9 Japan’s Answer to Panel Question 4 at para. 15.
10 Japan’s Answer to Panel Question 4 at para. 15.
11 Japan will respond that, in the case of the weight conversion factors, the Department actually had the
relevant information in its possession.  As we have explained, this ignores the Department’s clear authority
under the Agreement to impose reasonable deadlines.WT/DS184/R
Page C-116
which that respondent has not supplied necessary information.  Neither Article 6.8 nor Annex II
provides any basis for this limitation.  Article 6.8 refers to parties that do not provide necessary
information.  It does not suggest that some necessary  information may be withheld, if most necessary
information is provided.  Similarly, Paragraph 7 of Annex II states that a less favourable result may be
obtained where “relevant information is being withheld.”  It does not imply that some relevantinformation may be withheld if most relevant information is provided.  Acceptance of Japan’s
argument would license every respondent in ever y dumping proceeding to withhold the single most
damaging category of information from the investigating authority.
11. Seventh, Japan charges that the Department reads the sentence in Paragraph 7 of Annex II
authorizing a less favourable result for uncooperative parties “as giving it carte blanche to use any
facts available it chooses."
12  Japan evidently believes that the Department would feel free to fill in
gaps in its administrative record with th e team batting average of the Tokyo Giants13, as long as that
would be adverse to the respondents.  Of course, any such notion is frivolous.  The Department tries
to select facts available that are at the adverse end of the likely range, not arbitrary numbers.  The
object is not to punish parties that fail to prov ide information, but to attempt to ensure that such
parties do not profit from their non-cooperation.  As we have explained in detail in our firstsubmission, the Department was extremely circumspect  in using   adverse inferences to select from
the facts available and carefully limited the results of  those selections to the scope of the information
not provided, or not timely provided.
14
12. Eighth, Japan implies that failing to supply necessary information within a reasonable perioddoes not “significantly impede” an investigation.
15  This cannot be true, unless the information
withheld is insignificant.  If the information is si gnificant, then withholding that information must be
significant.
13. Finally, Japan argues that information from “secondary sources” is not information from
sources other than the respondent, but information from sources other than the questionnaire response
(or, possibly, information other than the actual data specifically requested in the questionnaire).16
This is neither the plain meaning of “secondary sources” nor logical.  The most obvious meaning ofthe “primary source” is the respondent.  Therefore, the most obvious meaning of “secondary sources”
is “sources other than the respondent.”   This interpretation is supported by the term “other
independent sources” in the second sentence of Paragraph 7, which indicates that secondary sources
are independent from the primary source.  This makes sense if secondary sources are independentfrom the respondent .  But it would be a strained use of the language to describe information from a
respondent as “independent from” other information from that same respondent.
14. If accepted, Japan’s definition of “secondary sources” would mean that other information
from a respondent, even if verified , would constitute secondary info rmation that would need to be
corroborated from other sources.  Japan does not explain why it would be necessary, or how it would
be possible, to corroborate such verified information.  There is no evident explanation.
15. Japan is also incorrect in asserting that, if  “information from secondary sources” in
Paragraph 7 means information from sources other than the respondent, then the “less favourable”language does not support the use of adverse inferences.
17  Because the logic, if any, of this argument
                                                     
12 Japan’s Answer to Panel Question 6 at para. 26.
13 More precisely, the Yomiuri Giants.
14 First Submission of the United States, Part B, at paras. 109 - 112 and 163.
15 Japan’s answer to Panel Question 7 at para. 28.
16 Japan ’s answer to Panel Question 8 at para. 30.
17 Japan’s Answer to Panel Question 8 at para. 32.WT/DS184/R
Page C-117
has eluded the United States, it seems best to res pond by explaining our reading of Paragraph 7 as a
whole.
16. Paragraph 7 contains three sentences.  The first provides that, where investigating authorities
base their findings on information from secondary sources (from sources other than the respondent),they should use special circumspection.  The second sentence, which begins “[i]n such cases . . .”
plainly applies to the use of information from secondary sources, and requires that such information
be checked against other independent sources.  The third sentence does not provide more procedural
safeguards for the selection of information from the secondary sources.  Having a different function
than the second sentence, it logically is not limited by the opening clause of that sentence.  Rather, the
third sentence provides a general counterweight to all of the limitations in Annex II on the application
of facts available and, more specifically, makes clear that the special circumspection andcorroboration requirements do not preclude “less favourable results than if the party did cooperate."
18
II. THE DEPARTMENT’S APPLICATION OF FACTS AVAILABLE TO KSC WAS
CONSISTENT WITH THE STANDARDS OF THE AD AGREEMENT
17. The Department’s application of facts available to KSC because of its failure to act to the best
of its ability to report the necessary sales and further manufacturing cost data for its sales through its
US affiliate, CSI, was based upon an unbiased and objective establishment of the facts and a
permissible interpretation of the Agreement.  We will not burden the Panel with a repetition of the
facts establishing KSC’s failure to use its full authority, as a fifty-per cent owner of CSI, to attempt to
obtain that information.  Instead, we take this opportunity to show how the arguments that Japan
continues to assert on this issue lack any basis in the facts or under the AD Agreement.
18. First, we draw the Panel’s attention to Japan’s response to the Panel’s fifth question,
regarding KSC’s alleged requests to the Department for assistance concerning this issue.19  W h i l e
claiming that there “are many examples of KSC’s request for assistance,"20 Japan cites only three
record documents, none of which support its claim.  The first letter which Japan cites21 nowhere
requests the Department’s assistance.  Instead, it repeatedly requests that Commerce excuse KSC
from answering Section E of the questionnaire, with respect to the sales through its affiliated further
manufacturer, CSI.  Japan cites two other letters by KSC to the Department22 which likewise reiterate
KSC’s request to be excused from reporting the CSI information.23  Moreover, these are not the only
documents in which KSC requested to be excused from reporting the CSI information: on
21 December 1998, KSC informed Commerce that KSC would not be reporting the CSIinformation;
24  on 19 January 1999, KSC again informed Commerce that it would not provide the
                                                     
18 See First Submission of the United States at Part B, paras. 152 and 161.
19 Japan’s Answer to Panel Question 5 at para. 19.
20 Id.
21 KSC’s letter to Commerce of November 10, 1998 ( Exh. JP-42(i) ).
22 KSC letter of December 3, 1998, ( Exh. JP-78 ), and KSC letter of December 18, 1998, ( Exh.
JP-42(n) ).
23 Japan claims that the phrase “[w]e have received no information, guidance, or response from the
Department,” in KSC’s letter of 18 December 1998, constitutes a “specific” request for assistance.  Japan’sAnswer to Panel Question 5 at . para. 20.  However, a more reasonable interpretation of that phrase is that KSC
wanted confirmation from the Department that it would excuse KSC from providing the CSI information.  The
meaning is evident from the fact that , in the preceding (and first) paragraph of that letter, KSC informed the
Department that, at its recent meeting with Commerce officials, “we asked that KSC be excused from reportingCSI’s sales of subject merchandise and of further manufact ured subject merchandise because of ... its conflict of
interest as a petitioner.”  ( Exh. JP-42(n) ) (business confidential information omitted).  Furthermore, on each of
the following two pages of that letter, KSC renewed its request that it be excused from reporting the CSIinformation.  Id.
24 KSC response to section C of the Department’s questionnaire, ( Exh. JP-42(p) ).WT/DS184/R
Page C-118
information;25  and, on 25 January 1999, KSC reiterated the same position.26  In none of these letters
did KSC request assistance regarding this issue.  Thus, the Department’s establishment of the facts on
this matter is fully supported by record evidence, whereas Japan’s factual claim is supported by none.
19. In addition, the Department’s interpretation of Articles 2.3, 6.8, and Annex II with regard to
the selection of facts available for KSC’s sales through CSI is a permissible one.  Once Commerce
established that it would apply facts available to KSC with regard to the CSI sales, and that it would
take an adverse inference with respect to KSC for its failure to act to the best of its ability, it
reasonably turned to KSC’s calculated dumping margins for actual, verified sales to the United States
as a source of facts otherwise available.  The reasonableness of this choice is shown by one of Japan’
s own affidavits.27  At paragraph 32 of this affidavit, KSC calculated the dumping margin for the
non-CSI portion of its US sales.  This calculation, representing the non-adverse facts available rateapplicable to Kawasaki, shows dumping.
28  The increase resulting from the Department’s choice of
facts available represents the logical inference that the information not provided was probably adverse
to KSC.-- i.e., that the dumping margins on the unreported sales were generally greater than the
margins on the reported sales.  Commerce chose a margin from those sales that were reported, and
thus based on KSC’s own selling practices, and applied it only in proportion to the unreported sales.This was a measured approach and reflected an appropriate adverse inference.  Japan, however, would
interpret the Agreement to reward respondents with a “neutral” choice of facts available, thereby
giving them license to play a shell game by hiding dumped sales through their affiliates and directing
non-dumped sales, or sales with lower dumping margins, to their non-affiliated importers.
29  Neither
Article 2.3 of the Agreement, nor the facts available provisions of Article 6.8 and Annex II, should beinterpreted to require such a result.
20. Finally, we draw the Panel’s attention to Japan’s persistent claim that it supplied the
Department with reliable transfer price data  between KSC and CSI that Commerce should have
used.
30  Japan has ignored, or chosen not to rebut, the fact that KSC did not supply these data, as we
have pointed out.31  More important, however, is the fact that, if Commerce accepted such data as
facts otherwise available, it would give respondents carte blanche  to set those prices to their affiliates
at whatever level they deemed convenient to shelter dumping.  Thus, the Department’s choice of
facts available with respect to the affected sales represented a permissible interpretation of the
Agreement.
III. THE DEPARTMENT’S APPLICATIO N OF FACTS AVAILABLE TO NSC AND
NKK WAS CONSISTENT WITH THE STANDARDS OF THE AD AGREEMENT
21. The Department’s application of the facts available to NSC and NKK’s theoretical weight
sales for which they did not timely provide a theore tical-to-actual weight conversion factor was fully
in accordance with the Agreement.  Japan’s positio n, that the Department should be compelled either
to ignore altogether the sales affected by the missing factors or to accept the factors which NSC andNKK could have timely provided, but did not provide until well after the reasonable deadlines
                                                     
25 KSC response to the first section A supplemental questionnaire, ( Exh. JP-42(u) ).
26 KSC response to sections B and C of the Department’s supplemental request for information ( Exh.
JP-42(v) ).
27 Affidavit of Robert H. Huey, Counsel to KSC, ( Exh. JP-44  ).  The United States has asked the Panel
to disregard Japan’s affidavits because they are extra-record  evidence.  Thus, we cite to this affidavit only in the
event that the Panel does examine it.
28 The exact level is business confidential information.  See id ., paragraphs 32 and 33.
29 Japan’s Answer to Panel Question 42 at para. 93.  Japan also expresses the startling view that
anti-dumping investigations are usually a “surprise.”  Id.  That certainly was not the case in this instance, as the
Department’s critical circumstances determination shows.
30 Id. at paras. 93 and 18.
31 See First Submission of United States at Part B, para. 123.WT/DS184/R
Page C-119
established for this purpose in the questionnaires, would write out of the Agreement an administering
authority’s ability to establish and enforce reason able deadlines for the submission of information.
This right is guaranteed by Articles 6.1, 6.8, and An nex II at paragraphs 1 and 6.  Likewise, for the
reasons discussed above, the Department’s use of an adverse inference in selecting from the facts
available with respect to the affected sales, was authorized under Article 6.8 and Annex II,paragraph 7.
22. We will not burden the Panel with a repetition of all of the facts regarding the conversion
factor issue.  The following pertinent points have been demonstrated in our First Submission and in
our responses to the questions posed by the Panel and Japan:  (1)  The conversion factors were
presented well after questionnaire deadlines that were twice extended and provided more than ample
opportunity to respond.   (2) Despite the fact that NSC and NKK both argued that such factors wereunnecessary and impossible to provide, they proved to be necessary and possible to provide for both
companies.  (3) Despite claiming that a factor was impossible to provide, NKK’s counsel received
KSC’s submission demonstrating how they calculated the factor when KSC filed and served its
questionnaire response on December 21, 1998.  (4) When finally provided by NSC and NKK, the
factors were not timely because the so-called “seven day rule” (19 CFR § 351.301(b)((1)),  uponwhich Japan relies, expressly does not apply to deadlines for responses to questionnaires,  which are
governed by 19 CFR § 351.301(c)(2).  (5) The Department’s practice of accepting minor corrections
to timely presented data also does not constitute a blanket loophole covering data respondents have
declined to submit (at all) in response to questionnaires.  (6)  The facts available the Department
selected with respect to this issue were based on NSC and NKK’s own data and were reasonablyrelated to the affected sales.  In sum, NSC’s and NKK’s theoretical weight factor submissions were
rejected because they were untimely, and Article 6.8 and Annex II expressly permit the Department to
enforce reasonable deadlines by use of facts available.  Accordingly, the Department’s application of
facts available to NSC and NKK was consistent with the Agreement.
23. Finally, because this question is so clearly one of deadline enforcement, rather than of bias,
the Department objects to Japan’s characterization of the Department’s treatment of the conversion
factor issue as the result of an “effort to apply adverse facts available."
32  Had the Department been
making an “effort” to apply adverse facts available,  rather than conducting this investigation strictly
on the merits of the case, a much better target existed.  The most hotly contested substantive issue at
the administrative level of this case before the Department of Commerce was the question of whether
invoice/shipment date or date of order confirmation should be used as the date of sale for reportingUS and home market databases.
33  Despite being asked by the Department to report separate US and
home market sales databases using the date of order confirmation, as well as the date of
invoice/shipment it had originally used to report its sales, NKK declined to report its sales databases
using order confirmation date.34  Had the Department been acting in a biased manner, motivated only
by an “effort to apply adverse facts available,” it could have determined that the order confirmationdate was the proper date of sale, and could have applied facts available much more extensively to
NKK.  Instead, the Department made the date of sale determination, as it made all of its
determinations, on the merits, and used the invoice/shipment date as the date of sale.
                                                     
32 Japan’s Answer to Panel Question 1 at para. 4.
33 See  Final Determination , 64 Fed. Reg. at 243331-24335 (Comment 1)( Exh. JP-12 ).
34 See Preliminary Determination , 64 Fed. Reg. at 8294 ( Exh. JP-11 ).WT/DS184/R
Page C-120
IV. THE DEPARTMENT’S APPLICATION OF ITS “99.5 PER CENT” ARM’S LENGTH
TEST, TO DETERMINE THAT SOME EXPORTERS’ HOME MARKET SALES TO
AFFILIATES WERE NOT MADE IN THE ORDINARY COURSE OF TRADE, AND
ITS SUBSEQUENT USE OF HOME MARKET DOWNSTREAM SALES TO
CALCULATE THE NORMAL VALUE FOR SUCH SALES, WERE CONSISTENTWITH THE STANDARDS OF THE AD AGREEMENT
24. The Department’s application of its 99.5 per cent test to determine which home market sales
to affiliates could be used in the normal value calculation embodies a permissible interpretation of the
Agreement, as does its use of downstream sales.   Although Japan has criticized the specifics of the
99.5 per cent test, it is clear from Japan’s response to Panel Question 17 that Japan’s primary goal
with respect to the arm’s length test is not to require the Department to improve it.  Instead, Japan
urges upon the Panel an interpretation that would write out of the Agreement any interpretation of“ordinary course of trade” that would permit any scrutiny of prices to affiliates.  Because Japan has
not demonstrated that the Agreement compels such an interpretation, the standard of review requires
that the Panel find that the Department permissibly interprets the Agreement to allow it to assume that
sales to affiliates are not made in the ordinary course of trade absent a showing that sales to the
affiliate are made at not less than average market prices despite the affiliation.  Furthermore, becauseJapan has not demonstrated that the Department’s 99.5 per cent test is biased against respondents or
otherwise fails to achieve this reasonable goal, it should likewise uphold the Department’s use of this
test.
25. As the Panel has recognized, Japan seems to accept, in principle, that sales to affiliated
purchasers may not be in the ordinary course of trade.
35   What Japan does not appear to accept is that
a Member may permissibly consider that sales to an affiliated customer may be  outside the ordinary
course of trade precisely because  the affiliation may cause the pricing relationship to be “unreliable
because of association.”  In its response to Panel Question 17, Japan appears to argue that the
Agreement requires the Department to use “all these ordinary course sales – including sales tocompanies that did not survive the 99.5 per cent test.”  Although this states Japan’s preferred
outcome, it also begs the question of whether all of its sales to affiliates are sales in the ordinary
course of trade.  Japan seeks to compel an interpretation that they are, absent some reason notnecessarily related to affiliation, such as having been made at below-cost prices.  Because the
Department’s interpretation that sales to affiliates are inherently “unreliable because of association,”
and may be deemed outside the ordinary course of trade unless  it is demonstrated that the affiliation
has not resulted in favourable pricing, is a permissible one, it must be upheld.  To do otherwise wouldcompel authorities to base normal value on sales to affiliates, regardless of whether these are real
market prices or not, and despite the considerable potential for a manufacturer to manipulate the
results of an anti-dumping proceeding by selling to  affiliates at low-margin-generating prices before
re-selling the merchandise into the open marketplace.  Such an interpretation would seriously interfere
with the administration of the Agreement.
26. The 99.5 per cent test is a perfectly reasonable methodology by which to determine whether
affiliated party sales can be considered equivalent to arm’s-length sales, as demonstrated by the fact
that it is virtually the same as the margin calculation – itself prescribed by the Agreement.  Indeed, the
test’s methodology, which involves ex-factory price comparisons of a producer’s salesweight-averaged by product, is nearly identical to the margin calculation.  This is because the margin
calculation and the arm’s length test have parallel objectives: the former discerns whether there has
been significant price discrimination between home market and target-country export sales; the latter
discerns whether there has been significant “price discrimination” between affiliated and unaffiliated
home market customer sales.
                                                     
35 See Panel Question 17 to Japan.WT/DS184/R
Page C-121
27. Japan claims that the 99.5 per cent test is a “results-oriented approach” because it excludes
only lower-priced sales as outside the ordinary course of trade.36  But this simply is not the case.
When an affiliated customer passes the 99.5 per cent test, all of the sales to that customer are retained,
including those for products sold at prices below the average price to the unaffiliated customers.
Conversely, when an affiliated customer fails the 9 9.5 per cent test, all of the sales to that customer
are rejected, including those for products sold at a bove average prices that would otherwise have been
used to calculate normal value.  Thus, application of the 99.5 per cent test may increase or decrease
normal value.
28. Furthermore, as Japan readily acknowledges, “[p]rices of downstream sales can only be
higher than the prices of a producer’s direct sales, in order to cover the additional transaction costs
and profit."37  In most situations, therefore, the fact that the test does not “fail” affiliates based on
high-priced sales and results in the use of those sales in lieu of the downstream sales may have the
effect of reducing margins, compared to the margins that would have resulted from normal values
based on even higher priced downstream sales.
29. Although Japan attacks the 99.5 per cent test on the basis that it imposes a floor, but not a
ceiling, on prices treated as being in the ordinary course of trade, the Agreement does not require such
symmetry.  One of the reasons that prices involved in affiliated party transactions are inherently
suspect is that they may be manipulated so as to reduce normal value (and hence reduce dumping
margins).  This concern is simply not implicated where such prices are higher than average prices tounaffiliated customers.  There is, therefore, no basis for Japan’s contention that the 99.5 per cent testis “biased."
38
30. Nor is there any merit to Japan’s contention that the Agreement precludes the use of
downstream home market sales where an affiliated reseller fails the 99.5 per cent test.39  Japan’ s
argument hinges solely on the fact that Article 2.3 expressly permits the use of downstream sales from
affiliated importers in the export market, while Article 2.2 is silent with respect to the use of such
sales in the home market.40  Japan fails to realize, however, that Article 2.1 already authorizes the use
of downstream home market sales.  That provision defines normal value simply 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 for consumption in Japan were made in
the ordinary course of trade and clearly come within this definition.
31. Article 2.2 plainly states that normal value may be based on third-country sales price or on
constructed value only “when there are no sales of the like product in the ordinary course of trade in
the domestic market of the exporting country.”  Moreover, in response to Panel Question 17,  Japanconcurs that the Article 2.2 alternatives to a normal value based on home market prices become
relevant only if the administering agency “concludes there are no sales in the home market in the
ordinary course of trade.”  In other words,  Japan does not propose to substitute either constructedvalue or third country sales for sales to affiliates that are outside the ordinary course of trade whenother valid home market sales (which would include downstream sales made by affiliates) remain.
Instead, Japan claims, in essence, that the Agreement requires that an authority must simply ignore
any sales to customers failing the arm’s length test, and base the margin solely on “the respondent’s
home market sales to other customers."
41   The result of such a general policy, however, would be that
a producer could shield a large percentage of its home market sales from scrutiny simply by passing
                                                     
36 Japan’s Opening Statement at para. 38.
37 Japan’s First Submission at para. 170.
38 Japan’s Opening Statement at para 36.
39 Japan’s Opening Statement at para. 41-43.
40 Id.
41 See Japan’s Answer to Panel Question 17 at para. 59.WT/DS184/R
Page C-122
them through an affiliate at below-average prices be fore selling them to unaffiliated customers in the
home country.  Indeed, under Japan’s preferred approach, producers could make all of their home
market sales through affiliated resellers, forcing investigating authorities to use third-country sales orconstructed value – a result plainly not intended by the Agreement.
32. Finally, we note that the treatment of sales to and through affiliated parties is an area in which
different Member States have evolved different interpretations and practices to deal with this general
concern.  The approaches of the three third part y interveners who provided responses to Panel
Question 48 on this topic are at once diverse (demonstrating that the Agreement lends itself to
multiple permissible interpretations in this respect) and much less concrete than the Department’s
arm’s-length test.  The EC, for example, apparently  uses the remaining sales unless it determines that
they are not “sufficiently representative” and Brazil has used sales to non-affiliated parties when theywere “representative.”  If Korea determines that the affiliated party sales are “inappropriate” it
considers “constructed export price or third country sales price.”  The United States is of the belief
that its own practice, which is more transparent and concrete, not only embodies a permissible
interpretation, but is better suited for its own administration of the dumping law.   Even should the
Panel find the approach of another Member State to  be more in harmony with its own views on this
issue, however, the Panel may not impose that approach upon the United States unless Japan has
demonstrated that the Department’s practice in this respect is contrary to the Agreement.  Japan has
not done so.
V. THE DEPARTMENT’S INTERPRETATION WITH RESPECT TO THE
CALCULATION OF THE ALL OTHERS RATE, AS EMBODIED IN
SECTION 735(C)(5)(A) OF  THE TARIFF ACT OF 1930, IS CONSISTENT WITH
THE STANDARDS OF THE AD AGREEMENT
33. The Department’s calculation of the all othe rs rate using a methodology which excluded from
the calculation all margins which were, overall,  zero, de minimis  or based on the facts available,
embodies a permissible interpretation of the Agreement.  Article 9.4 of the Agreement makes no
provision for eliminating the “portions of margins, ” affected by facts available while retaining all
other “portions” of the margins, as Japan suggests in its response to Panel Question 10.   Indeed,
Japan has argued in its response to that question only that “its suggested approach better reflects
Article 9.4."42   Under Article  17.6(ii) of the Agreement, the question is not whether Japan’s
suggested approach “better reflects”  Article 9.4 than the US interpretation, but whether the US
interpretation is a permissible one.
34. Apart from the obvious fact that Article 9.4 says nothing about and therefore cannot compel
such a reading43, Japan’s approach is seriously flawed in other ways.  First, were the presumption
underlying the approach described in Japan’s reply to Panel Question 10 to be adopted as a general
rule, the all-others rate would have to be calculated based solely on whatever more favourable datarespondents chose to report – whether or not such data are representative of the overall extent to
which the respondents are dumping, and thus whether or not they are representative of the overall
level of dumping in the industry.  This means, for example, that the same high-margin-generating data
Japan seeks to remove from scrutiny through the stratagems described above would also not be
reflected in the margins for the non-examined members of the industry.
                                                     
42 Japan’s Answer to Panel Questio n 10 at para 36 (emphasis added).
43 For the same reason, the EC’s suggestion that they might use one interpretation of Article 9.4 when
portions of margins were “significant” and “adverse” (but presumably a different one when the facts availableportions were less significant and non-adverse), is not compelled by the plain language of that Article, whichdoes not distinguish between “significant”  and non-significant or adverse and non-adverse use of facts
available.WT/DS184/R
Page C-123
35. Second, Japan’s ad hoc  approach to this case is not workable as a general rule.  As the EC,
another frequent user of the dumping law, has observed in its response to Panel Question 50, most
dumping calculations include small elements of facts available.  Furthermore, these are not always
sale-specific.  Even small elements of facts available can affect large numbers of sales, especially
when facts available affects cost databases that are used in calculating constructed value, which maybe used for comparison to a wide range of export sales.  Thus, even if it were desirable to do so, it is
in many cases simply not possible to remove all “affected” sales from the margin calculation to create
the “expunged” margins Japan would have authorities use to calculate all others rates.
36. Third,  Japan’s preferred solution can seriously underestimate the average dumping level of
the mandatory respondents when, as in this case, the percentage of export sales affected by facts
available varies greatly among such respondents.  This is not merely a function of the fact that itdisregards the high level of dumping that may have been masked by data withheld from the
Department.  It is true even if it is accepted, as Japan argues it should be, that the margins used in the
weighted average calculation should be margins purged of any facts available and should reflect the
level of dumping only on those sales for which the respondent was willing to provide full data.   Japan
argues that, in weight-averaging the purged margins, authorities should assume that the mandatoryrespondents exported only the volume of product associated with sales that were not affected by facts
available.  This means that the sales volume of the least-cooperative respondents (those most likely tobe willing to dump at the highest rates) will be under-represented in the numerator of all others
weighted average.  It also means that the tota l amount of sales forming the denominator of the
weighted-average calculation will be reduced to the same degree, thus over-representing the salesvolume associated with the margin levels of the more cooperative mandatory respondents.
44   I n
addition, Japan’s preferred solution underestimates the average dumping level of the mandatory
respondents by purging their margins of individual sales affected by facts available, but not of
individual sales that are not dumped.  However a Member may interpret the reference to margins
established based on the facts available,  Article 9.4 clearly accords the same treatment to “zero and
de minimis  margins.”   The solution Japan proposes, in short, does not even come close to being the
sole permissible interpretation of Article 9.4.
37. Finally, the United States notes that the document contained at Exh. JP-79  and discussed in
Japan’s response to Panel Question 9, in no way suggests that the interpretation of the United States is
an impermissible one.  It merely shows that the United States was unsuccessful in seeking to add the
word “solely” to the text and that Japan was similarly unsuccessful in seeking to add the word“primarily.”  This suggests only that the inte nt of the Members was that the language remain
sufficiently ambiguous to allow for multiple interp retations.  Indeed, the most important statement in
that document is the final sentence:  “No conclusion was reached owing to the conflict of opinions.”
If no conclusion was reached, the drafters clearly did not conclude that the interpretation suggested by
the United States was impermissible.
45  Moreover, the fact that other parties did not agree to the
insertion of the word “solely” before the word “established” could also simply mean that those parties
believed that the word was unnecessary because the existing language in the provision already
sufficiently established that point.
                                                     
44 Should the Panel determine to use the attorney affidavits (the United States maintains the Panel
should not do so), it may wish to compare the “non-CSI portion” of KSC’s margin in  Exh. JP-44 , at para. 32
with the average margins for NSC and NKK given in the Final Determination , 64 Fed. Reg. at 34780, Exh.
JP-12 .
45 This is similar to the drafters’ decision not to adopt  an illustrative list of the types of sales that could
be considered outside the or dinary course of trade.  See First Submission of the United States at para. 216 and
fn. 297.WT/DS184/R
Page C-124
VI. JAPAN IS ATTEMPTING TO WRITE ARTICLE 10.7 OUT OF THE AD
AGREEMENT
38. Japan suggests that, “as a practical matter,” a critical circumstances finding (as referenced in
Article 10.7) cannot be made prior to the preliminary determination of dumping.  This position
ignores the existence of, and writes out of the Agreement, Article 10.7.  Article 10.7 is distinct fromother provisions in the Agreement in two fundamental respects.  First,  it does not require
administering authorities to await the preliminar y determination of dumping prior to making a
determination to withhold appraisement or assessment.  In every other instance, the Agreement
expressly provides that provisional measures may not be taken until after the preliminary
determination of dumping.  Second,  Article 10.7 is unique in its directive that there be “sufficient
evidence” to support the finding.  The requirement for “ sufficient evidence” arises in two places in
the Agreement: Article 5 (relating to initiations) and Article 10.7 (early determinations to withholdappraisement or assessment under critical circumstances).  The presence of this standard in these
provisions suggests a threshold - a quantum and quality of evidence that must be present despite the
fact that the record is incomplete.
A. ARTICLE 10.7 EXPRESSLY AUTHORIZES CRITICAL CIRCUMSTANCES FINDINGS
PRIOR
 TO THE PRELIMINARY DETERMINATION OF DUMPING
39. Japan argues that, “as a practical matter,” the “sufficient evidence” standard cannot be met
prior to the preliminary determination of dumping (as set forth in Article 7.1).  This argument ignores
the plain language and intent of Article 10.7.  Although Article 10.1 of the Agreement generally
requires, with respect to the application of provisional measures, that there first be a preliminarydetermination of dumping, injury, and causation.
46 Article 10.7 provides the express exception  to this
rule.  Specifically, Article 10.7 provides that investigative authorities may make critical circumstancesfindings and withhold appraisement or assessment at any time “after initiating and investigation.”
Thus, Japan’s claim that the “sufficient evidence” requirement in Article 10.7 mandates a delay until
the preliminary finding of dumping is untenable.
47
B. “SUFFICIENT” EVIDENCE DOES NOT MEAN ALL POTENTIAL EVIDENCE
40. The drafters of the Agreement expressly provided that certain decisions may be made on the
basis of “sufficient evidence.”  These express statements are found in Article 5 (relating to initiations)
and Article 10.7 (early determinations to withhold appraisement or assessment under critical
circumstances).  Thus, the members of the Agreement have specifically denoted two instances in
which there must be a certain quantum and quality of evidence - despite the fact that the record may
be incomplete.
41. Japan contends that the evidentiary standard applied in preliminary dumping determinations
(as provided for in Article 7.1) is the same as that to be applied in determinations made under
Article 10.7.  This argument is incorrect.  Normally, provisional measures may not be applied until
                                                     
46 See Article 10.1 (“Provisional measures shall only be applied to products which enter for
consumption after the time when the decision taken under paragraph 1 of Article 7 {preliminary determinationof dumping and injury} ... enters into force, subject to the exceptions set out in this Article. ”) (emphasis added);
and Article 7.2 (“Withholding of appraisement is an  appropriate provisional measure, ... as long as the
withholding of appraisement is subject to the same conditions as other provisional measures.”).
47 Japan implies, with the use of the word “generally” that it is not taking an absolute position (which
would be clearly contrary to the Agreement).  See Japan’s Answer to Panel Question 11 at para. 37.  However,
Japan does not provide any example of a situation in which an administering authority would have more
evidence prior to the preliminary determination of dumping than was on the record for this case.  In fact, the
Department in this case not only relied on the overwhelming evidence in the petition, but conducted external
research, corroborated the data in the petition, and relied upon the USITC preliminary finding of threat of injury.WT/DS184/R
Page C-125
parties have had the opportunity to submit evidence and comments, and the administering authority
has made a preliminary determination of dumping and injury.48  An exception to this rule, however, is
found in Article 10.7, which provides simply that withholding of appraisement or other necessary
measures may be taken “after initiating an investigation” as soon as there is “sufficient evidence.”  It
does not state that the measures must await a preliminary determination of dumping, nor does it
require that the decision occur after the receipt of information from respondents.  Rather, in order to
preserve the ultimate remedy, it simply states that the measures may be taken “after initiation” if there
is sufficient evidence.
42. The US agrees that the evidence necessary to sustain a preliminary critical circumstances
finding may be, and indeed often will be, different than that required for initiation of an investigation,
even though the standards are the same.  The inquiries involved are different, and as such, theevidence that is sufficient for each determination will depend on the factors being considered and the
context of the inquiry.
49  As explained above, it is especially notable that the Agreement provides that
the evidence simply be “sufficient” in two instances which occur early in the investigative
proceedings.
43. Japan suggests that a petition, along with the Department’s independent research and analysis,
can never serve as a basis for a preliminary determina tion of critical circumstances, regardless of the
strength and quality of the evidence on the record.  Japan bases this conclusion on three arguments.
First, Japan argues that the reference to “dumped imports” in Article 10.6 requires a preliminary
dumping finding as described in Article 7.1.  Se cond, Japan argues that an administering authority
cannot possibly make a critical circumstances finding prior to the Article 7.1 finding, because it has
not conducted any investigation whatsoever.  Finally, Japan argues that the evidence cannot be
sufficient prior to an Article 7.1 finding, because the margins are based solely on “self-serving
estimates made without the benefit of the respondent’s internal sales data or any external analysis by
the authorities.”  These arguments are without merit.
44. As explained above, Japan’s first argument, that  a preliminary finding of dumping is required,
is contrary to the Agreement because it ignores the existence of Article 10.7, which expressly
contemplates that measures may be taken at any time after initiation.  Japan’s second claim, that the
Department has conducted no investigation when making its early critical circumstances finding, is
flatly incorrect.  The Department indeed investigat ed the allegations, reviewed the evidence contained
in the petition for adequacy and accuracy, supplemented that information with additional relevant dataand analyzed and relied upon the USITC’s preliminary determination of threat to the domestic
industry.  Furthermore, Japan implies that the evidence necessary for a preliminary dumping
determination is the same evidence that is necessary for an early critical circumstances determination.
This position, however, confuses the findings being made.  Each determination is based upon distinct
factors, and thus, at least in part, involves collection and analysis of different evidence.  Finally,Japan’s argument that the margins utilized are based solely on “self-serving estimates made without
the benefit of the respondent’s internal sales data or any external analysis by the authorities,” is
disingenuous.  Japan does not contest that the margins are based upon comparisons of actual sales
                                                     
48  See Article 7.1 (provisional measures may only be taken after “parties have been given adequate
opportunities to submit information and make comments” and “a preliminary affirmative determination has been
made of dumping....”) and 10.1 (provisional measures are to be applied in accordance with Article 7.1 subject to
the exceptions set forth in Article 10 ).
49 This distinction was recognized by the Panel in HFCS.   In that case, the panel explained that “the
quantum and quality of evidence required at the time of ini tiation is less than that required for a preliminary, or
final, determination of dumping, injury, and causation, made after investigation.” Panel Report onMexico-Anti-Dumping Investigation of High Fructose Corn Syrup From (HFCS) the United States, adopted on
24 Feb. 2000, WT/DS132/R, at para. 7.94.WT/DS184/R
Page C-126
offers by NKK and NSC to US customers and actual transactions in the home market.50  Indeed, Japan
has not rebutted the legitimacy of any of the specific evidence contained in the petition.  Rather, Japan
simply argues that, because it is contained in the petition, it is meaningless.  This absolute argument
should be rejected by the Panel.
45. In fact, the evidence supporting each element of the preliminary critical circumstances
determination in this case was sufficient, and indeed, substantial.  Japan repeatedly claims that, “the
only evidence USDOC had was the petition."51  However, while much of the evidence was taken from
the petition (after being corroborated and reviewed for accuracy), the determination did not restentirely on the petition data.  Japan cannot contest that the Department not only corroborated the
petition evidence with external research sources (Internet trade publications and general news articles,
US Customs Service data, and American Iron and Steel Institute data),
52 but also relied significantly
on the USITC preliminary determination of threat to the US industry.  Furthermore, Japan does not
suggest that the plethora of newspaper articles, consultant reports, and industry publications attached
to the petition are unreliable or otherwise unrepresentative.  Again, Japan simply states that, because
they were contained in the petition, they are “mere allegations.”
46. Although Japan repeatedly argues that the findings made were not based upon “sufficient
evidence,” Japan has never addressed the specific information that was on the record to support the
critical circumstances finding.  For example, with respect to importer knowledge of dumping andconsequent injury, as discussed above, the record contained actual  evidence of significantly high
margins, and widespread, publicly distributed, media, consultant, and industry reports detailing the
massive dumping and the negative impacts on the domestic industry.53  Japan cannot possibly claim
                                                     
50 See Initiation Checklist, at 7 ( US/B-18) .  Furthermore, the calculation of the dumping margins that
were based upon constructed value were calculated using NSC’s and NKK’s own fi nancial statements.  Id.
51 See, e.g.,  Japan’s Answer to Panel Question 13 at para. 37 (emphasis added).
52 See Initiation Checklist at 70-71 (Exh. US/B-18) .
53 See Exh. US/B-40(b) and (c) . The Wall Street Journal, “Steel Imports to US Set Record in July;
Japan Claims Its Shipments Are Slowing,”  (“In the latest month, imports took 34 per cent of the domestic
market for steel ....  That lost market share has hit US steelmakers hard, particularly in the last three months as
the US industry pricing power has collapsed.  As a result, some steelmakers have cut their production, andanalysts are chopping their earning estimates for the third and fourth quarters. .... ‘Japanese steel is justmurdering’ the US steelmakers.”); Metal Bulletin (24 Sept.  1998) (“ The July figure fully supports ourindustry’s contention that massive levels of steel are being dumped.”); Metal Bulletin (7 Sept. 1998) (“Nucorhas cut production ... in response to low market prices ... because of market turmoil in the wake of a flood of
cheap imports.”); PaineWebber: Metal Stock Strategies (16 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 presentand planned steelmaking capacity, is in full force....  The collapse in steel prices on the world steel market thisyear has been almost unprecedented.”); Japan Economic Newswire (19 Sept. 1998) (“officials of major USsteelmakers ... made an appeal for the US government to take measures against what they view as unfair steelshipments from Japan ....”); Morgan Stanley, Dean Witter - Industry Report (21 July 1998) (“hot-rolled imports
are coming in at ... 15-20 per cent below the domestic price, and we believe that domestic pricing on these
products will break down in late September or  early October.”); The Wall Street Journal, “Rising Imports
Distress US Steelmakers,”  (8 Sept. 1998) (“And while it took months for major effects of inflows from overseas
to show up in the US, industry analysts and executives now say they definitely have.  ‘The pricing has justcollapsed....’”); American Metal Market (11 Sept. 1998) (“ For the second time in less than two months, Nucor
Corp., ... is lowering prices on hot-rolled and cold-rolle d sheet in the face of rising imports.”); PaineWebber:
Metal Stock Strategies (16 Sept. 1998) (“We expect the US flat-rolled steel pricing outlook to continue todeteriorate for the remainder of 1998.”); Wall Street Transcript Corporation - Industry Report (20 July 1998)(“Imports were simply so large, and prices at which the entered markets so low, that steel pricing wascompromised”); CRU Steel Monitor (April 1998) (“This d ecline in corporate profitability is being exacerbated
by the Asian financial crisis.”).WT/DS184/R
Page C-127
that the importers (many of which are sophisticated, large corporations) were not aware, or should not
have been aware of the information reported in the Wall Street Journal, the PaineWebber reports and
the other steel industry publications.54  What is more, with respect to knowledge of injury, the
Department also looked to the injury information in the petition (charts and industry data
demonstrating drastic decreases in prices and resulting declines in profitability), the 101 per centincrease in imports during the surge period, and the USITC’s preliminary determination of threat.  As
such, Japan’s claims that the determination was based solely upon allegations from the petition are
unfounded.
47. In sum, an administering authority is not merely capable of making an early critical
circumstances determination based upon “sufficient evidence,” like that presented here, but such an
action is expressly authorized under the Agreem ent.  The Panel should uphold the Department’s
preliminary critical circumstances determination in this case and the US statute upon which it is
based.
PART 2:  INJURY
I. THE CAPTIVE PRODUCTION PROVISION, ON ITS FACE AND AS APPLIED IN
THIS CASE, IS CONSISTENT WITH THE OBLIGATIONS IN THE ANTI-
DUMPING AGREEMENT
A. THE DIRECTION IN THE CAPTIVE PRODUCTION PROVISION TO “FOCUS
PRIMARILY” ON THE MERCHANT MARKET PERMITS AN OBJECTIVE ANALYSIS
OF RELEVANT ECONOMIC FACTORS CONSISTENT WITH ARTICLES 3.4 AND 3.5
OF THE ANTI-DUMPING AGREEMENT
48. In arguing that the captive production provision of the United States’ anti-dumping and
countervailing duty statute on its face violates the Anti-dumping Agreement, Japan faces a high
burden which its submissions fail entirely to meet.  As GATT and WTO panels have repeatedly
stated, only legislation that requires WTO-inconsistent action can itself be WTO-inconsistent.
55
                                                                                                                                                                    
Japan also argues in its answer to Panel question 15, para. 9, that many of the newspaper articles do not
establish knowledge of dumping and injury because they were published just weeks before the petition wasfiled.  According to Japan, this was long after the date that USDOC concluded that importers knew or shouldhave known of the dumping and consequent injury.  If, however, the importers had knowledge at an earlier date,
this only supports Commerce’s finding of knowledge of dumping and injury for purposes of the critical
circumstances determination.  The Agreement does not specify when the importers had to be aware of dumping
practices.  Rather, it merely inquires as to whether dumping practices “exist,” and whether importers should beaware that such dumping would cause injury.  The newspaper articles and press releases demonstrate thatdumping had been widespread for months and that the effects on the industry were widely apparent.  This typeof evidence (including both the early and later articles)  certainly satisfies the question under Article 10.6(i).
(Note, It also appears that Japan’s reference the US First Submission Paragraph B-273, footnote 288, is
incorrect.  This cite should reference Paragraph B-476, footnote 388).
54 Japan argues that knowledge of dumping cannot be determined without a preliminary dumping
finding.  Article 10.6 directs the administering authority to determine whether importer should have known that
dumping was occurring and that such dumping would cause injury.   The Agreement does not specify how to
determine such awareness.  Although Japan would prefer a requirement that there be a concise, determineddumping margin, this is simply not necessary under the Agreement.  If the Department’s method fordetermining importer knowledge is a permissible interpretation of the Agreement, and if it rests upon sufficientevidence, it must be upheld.
55 Panel Report on Canada - Measures Affecting the Export of Civilian Aircraft, adopted on
14 April 1999, WT/DS70/R, para. 9.124 (“Canada – Aircraft"), citing the Panel Report on United States -WT/DS184/R
Page C-128
Panels have found that even legislation explicitly directing action inconsistent with GATT 1947
principles does not mandate inconsistent action so long as it provides the possibility for authorities to
avoid such action.56  Indeed, these principles apply even where a Member has in fact used the
provision to take action inconsistent with its obligations.57
49. Here, Japan seeks to have this Panel declare the United States’ captive production provisionunlawful on its face, even if the Panel should find that the determination by those Commissioners who
applied the provision in this case is permissible.  However, Japan’s challenge must fail if the
United States establishes, as it believes it has, that those three Commissioners who invoked the
provision in the underlying investigation applied the provision in a way consistent with the
Anti-dumping Agreement.  If their findings here are consistent with the Agreement, the Panel should
find that the provision that they applied is consistent as well.
50. Indeed, Japan’s arguments in this proceeding appear to rest on the premise that the Panel
should impose its own interpretation of US law in order to find the captive production provision
contrary to the United States’ obligations.  This, however, is not the Panel’s task.  When examination
of a law is solely for the purpose of determining whether a member meets its WTO obligations, thepanel does not interpret the party’s law "as such", the way it would, for instance, interpret provisions
of the covered agreements.
58  Rather, a panel is called upon to establish the meaning of the provision
as a factual element and to determine whether the factual element constitutes conduct contrary to
WTO obligations.59  When an interpretation of municipal law is at issue, a panel cannot assume that
municipal authorities will choose an interpretation which is inconsistent with their internationalobligations.
60  This principle should apply all the more forcefully in the interpretation of an
agreement, like the Anti-dumping Agreement, which specifically requires that independent judicial
review of administrative decisions be available61, an avenue that Japanese producers have declined to
take in this case, and explicitly recognizes that  Members may interpret the Agreement differently.62
Thus, even if the application of the provision in this case were not consistent with the Anti-dumping
Agreement, Japan must establish that a United States court could not interpret the provision in a
manner consistent with the Agreement.
51. The captive production provision of United States law is entirely consistent with the Anti-
dumping Agreement.  The provision provides th at, when certain prerequisites are met, the
Commission shall “focus primarily” on the merchant market in its consideration of market share and
financial indicators.63  Japan ascribes two meanings to the “focus primarily” language that conflict
                                                                                                                                                                    
Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted on 4 October 1994, BISD
41S/131, para 118 ("United States – Tobacco").
56 Panel Report on United States - Taxes on Petroleum and Certain Imported Substances, adopted on
17 June 1987, BISD 34S/136, 138 ("US – Superfund").
57 Panel Report on EEC - Regulation on Imports of Parts and Components, adopted on 16 May 1990,
BISD 37S/132 ("EEC – Parts and Components"), at paras. 5.9, 5.21, 5.25-5.26.
58 Report of the Appellate Body, India – Patent Protection for Pharmaceutical and Agricultural
Chemical Products (“India – Patent s”), WT/DS50/AB/R (19 December 1997)  at para. 65, quoting Certain
German Interests in Polish Upper Silesia, 1926, PCIJ Rep., Series A, No. 7, p. 19.
59 India-Patents  at para. 65.
60 Under the municipal law of the United States, if a statute that an authority is charged with
administering permits multiple interpretations, a court will uphold an authority’s construction of the statute if
that construction is reasonable; the interpretation’s conf ormity with international obligations is a basis for
finding the authority’s action to be reasonable.  See, e.g.,  Chaparral Steel Corp. v. United States , 901 F.2d 1097,
1101, 1103 n.5 (Fed. Cir. 1990) ( Exh. US/C 24 ).
61 Anti-dumping Agreement, Article 13.
62 Anti-dumping Agreement, Article 17.6.
63 Sec. 771(7)(C)(iv) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677(7)(C)(iv). ( Exh.
Jp-4(e) ).WT/DS184/R
Page C-129
with the plain reading of the statute and that are not meanings the USITC has ascribed in applying the
provision.  In so doing, Japan is attempting to mischaracterize and reshape United States law in order
to make it fit Japan’s idea of a violation of the Anti-dumping Agreement.  Japan cannot make out its
case in this manner.
1. “Focus primarily” on the merchant market speaks to a segmented market analysis, but
not to one where the USITC focuses exclus ively on a particular market segment
52. The statutory provision at issue requires the USITC to focus primarily  on the merchant
market in evaluating certain factors.  By definition, therefore, there is some other  focus that the
USITC should have as well.  That is, under the statute’s plain meaning, the inquiry does not end with
examination of the merchant market.  The statutory mandate that the impact upon the industry as a
whole be assessed continues to be the overarching concern in the analysis.
53. Perhaps recognizing the flaw in its early reading of the statute, Japan retreats from its initial
position that the statute mandates a focus exclusively on the merchant market.  It now argues, instead,
that, when the USITC focuses upon the merchant market, it improperly uses the entire industry as the
other point of focus.  According to Japan, an ap propriate segmented analysis would look at the
merchant market and the captive market separately.64  Whether or not Japan’s proposed alternative
analysis would be consistent with the Agreemen t is not at issue here.  “Conformity [with WTO
obligations] can be assured in different ways in different legal systems.  It is the end result that counts,
not the manner in which it is achieved."65
54. By advancing its alternative, Japan implicitly acknowledges that there are various ways toconsider the fact that the performance of each segment of an industry may influence the performance
of the whole industry differently.  Japan has not articulated any basis for concluding that looking at
the merchant market as a step in considering the market as a whole is less in accord with the
Anti-dumping Agreement than the separate merchant/captive market analysis Japan suggests as analternative.  Indeed, Japan seems to concede that  the US statute’s initial focus on the segment in
which imports primarily compete with domestic product is, as the High Fructose Corn Syrup  panel
suggested, calculated to allow the authority “to gain a better understanding of the actual functioning
of the domestic industry and its specific markets and thus of the impact of imports on the industry."
66
Japan’s approach might also serve the same end; this would not mean, however, that its approachwould be required.
55. Moreover, Japan does not show that the alternative approach it would prefer would be
precluded by the United States statute, a burden that it must carry if it is to establish that the law is
impermissible on its face.  As the United States has previously indicated, a requirement to “focus
primarily” on a certain segment does not prohibit other focuses, including on other segments.
Moreover, under the United States statute, in ev aluating the impact of dumped imports, the USITC is
required to “evaluate all relevant economic factors which have a bearing on the state of the industry in
the United States”.
67  In short, the form of segmented analysis preferred by Japan is neither required
by the Agreement nor precluded by the United States statute.
56. As the United States has previously discussed, what the United States statute does require is a
focus on the entire domestic industry after the merchant market is examined.  This approach is clearly
                                                     
64 Japan’s Answer to Panel Question 19 at para. 70.
65 Panel Report on United States–Sections 301-310 of the Trade Act of 1974 , adopted on
27 January 2000, WT/DS152/R, at para. 7.24.
66 See Panel Report on Mexico – Anti-dumping Investigation of High Fructose Corn Syrup (“HFCS”)
from the United States, adopted on 24 Feb. 2000, WT/DS132/R, at para. 7.154.
67 19 U.S.C. § 1677(7)(C)(iii).WT/DS184/R
Page C-130
consistent with the principle that the “determination of injury” under Article 3 concerns effects of
dumped imports on the industry as a whole.  In any event, consideration of the captive market data is
inherent in such an analysis.  Because the data for the entire industry incorporated data for the captive
market, the side-by-side discussion of the merchant market and the entire industry inescapably
reflected any similarities or differences between the merchant market and the captive market.
57. Contrary to Japan’s claim that the USITC does not “relate its merchant market findings to
producers as a whole"68, the determination here shows how a primary focus on the merchant market
for certain factors is consistent with such an analys is of the industry as a whole.  In examining the
volume of imports, the USITC set forth data and made parallel findings regarding the merchant
market and the entire industry, finding on the basis of both that the volume of and increase in dumped
imports was significant.69  The USITC’s  findings as to the impact of dumped imports begin with an
analysis that does not focus on the merchant market per se .  Rather, the USITC found that the
increased volume and market share of dumped imports led to the US industry’s increased capacity
becoming excess capacity almost immediately.70  By these findings, the USITC’s impact analysis tied
its findings on market share, to which the captive production provision applies, to a key indicator of
the performance of the industry as a whole -- capacity utilization -- to which the provision does notapply.
58. In analyzing financial performance, the USIT C again made parallel findings, which showed
that declines in the industry’s performance on merchant market sales were mirrored by overall
declines.  Japan’s claim
71, that the USITC discussed the data for the entire market only in its staff
report, not in its determination, thus is belied by  the face of the determination itself.  The USITC
found these trends not to be consistent with the industry’s improvement in productivity and the rise in
apparent consumption in the United States, both of which are overall measures not particular to the
merchant market.72   The USITC amply tied its findings concerning the merchant market segment to
the industry as a whole.
59. The USITC’s analysis, moreover, assured that the causal relationship that it saw between
developments in the merchant market and the condition of the industry as a whole were not in fact due
to developments in the captive sector of the industr y.  It compared the performance in the merchant
market with overall performance of those domestic producers (integrated producers) most shielded
from import competition.  It found their operating inco me to be falling both for merchant market sales
and overall.73  The USITC then compared the operating results of integrated producers to those of
minimills.  The USITC recognized that the minimills had “greater dependence on the merchant
market, where imports are concentrated."74  If this comparison had shown that minimills were
performing as well or better overall as integrated producers, or that minimills were not similarly
declining in performance, it might have indicated that the decline in the industry operating figures was
not due in particular to the effects of imports.  However, the USITC found minimills to beexperiencing a “worse financial performance”, evidently due to their greater exposure to import
competition.
75  In short, contrary to Japan’s contention, the USITC explicitly took into account that
captive production is relatively shielded from the effects of imports.  It nevertheless found that the
record evidence supported the conclusion that the effects of imports in the merchant market adversely
affected the industry as a whole.
                                                     
68 Japan’s Answer to Panel Question 19 at para. 66.
69 USITC Views at 12-13 ( Exh. US/C-1 ).
70 USITC Views at 17.
71 Japan’s Opening Statement at para. 21.
72 USITC Views at 18.
73 USITC Views at 19.
74 USITC Views at 19.
75 USITC Views at 19.WT/DS184/R
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60. As the USITC’s determination shows, the captiv e production provision is entirely consistent
with the Agreement.  As the USITC’s determinati on further shows, it examined the relevant economic
factors and, on an objective basis, found a causal relationship between developments in the merchant
market segment and the injury suffered by the industry as a whole.
2. “Focus primarily” does not dictate that any particular weight be given to the merchant
market in the USITC ’s evaluation of the relevant factors
61. Japan now states that it takes issue only with the particular analysis that it views as required
by the captive production provision, not that an analysis of the merchant market violates the
Agreement.  In this regard, Japan acknowledges that it is permissible to consider “as a condition of
competition, the merchant versus captive portions of the [market]."76  It frames its challenge,
therefore, in terms of the “weights” it believes the statute requires to be given to “factors.”
62. It is unclear, however, whether Japan is arguing that the captive production provision requires
the USITC to give weight to one factor over another or to give inappropriate weight to the merchant
market segment.  In either case, Japan misreads the captive production provision and misunderstandsthe USITC’s application of the provision in this investigation.
63. To the extent that Japan claims the captive production provision requires greater weight to be
given to some delineated factors over others, there is no basis for the claim.  The “focus primarily”
language does not require that emphasis be placed on any factor.  The captive production provisiongives direction to the USITC “ in determining  market share and the factors affecting financial
performance"
77 (emphasis added).  It therefore only implicates the evaluation of those factors  and not
the evaluation of how those factors  relate to any of the other factors that the USITC must consider.
The provisions of the Anti-dumping Agreement78 and the US statute79 that permit the USITC to give
the weight it deems appropriate to any relevant factor is not affected by the terms of the captiveproduction provision.  As has been seen, in this case, the USITC gave emphasis to the effect of
dumped imports on capacity utilization, a factor not implicated by the provision, in establishing the
impact of dumped imports on the domestic industry.  Japan’s allegation that the captive production
provision impermissibly constrains the USITC’s ability to objectively assess all the relevant economic
factors is belied both by the face of the statute and the determination at issue here.
64. To the extent that Japan is arguing that, in evaluating certain factors, the captive production
provision requires that undue weight be given to the merchant market, this argument too should not
hold sway.  The USITC has not given any indication that the captive production provision requires it
to place more weight on the merchant market data for any factor than on the data for the industry as a
whole.  As is reflected in the USITC’s determinatio n here, the requirement to “focus primarily” on the
merchant market in establishing certain factors does not necessarily mean more than to collect andmake specific findings based on merchant market data that, which always possible, might not
otherwise be required.  It does not mean that, having examined that data, the USITC is required to
give weight to that data over what other evidence might show.  And, indeed, on each relevant factor
concerning market share and financial indicators, the USITC assured that it examined and gave
weight to data for the industry as a whole.
65. Such a requirement is neither, as Japan asserts, meaningless, nor a violation of the Anti-
dumping Agreement.  The captive production provision requires the gathering and analysis of
                                                     
76 Japan’s Opening Statement at para. 23.
77 § 771(7)(C)(iv) of the Act, 19 U.S.C. § 1677(7)(C)(iv).
78 Article 3.4 of the Anti-dumping Agreement.
79 § 771(7)(E)(ii) of the Act, 19 U.S.C. § 1677(7)(E)(ii) ( Exh. Jpn-4(e) ).WT/DS184/R
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evidence that the statute might not otherwise require of the USITC.  The provision may be said to
require, as a matter of municipal law, a form of segmented analysis such as that which the HFCS
panel indicated was permitted under the Anti-dumping Agreement.  This does not mean that, even as
to the factors to which the provision applies, the USITC must give the merchant market segment data
weight over contrary evidence on which it otherwise may also focus.  The provision does not preventan objective examination of all the information collected.
66. Japan’s distrust of special examination of merchant market trends is based on the false
premise that such an examination will necessarily skew data concerning the domestic industry’s
performance unfavourably to foreign producers.
80   This is not the case.  First, as has been seen, the
USITC nevertheless collects and assesses the data concerning the entire industry.  Second, an
examination of data particular to the segment where competition primarily occurs may disclose thattrends concerning the industry as a whole, which might otherwise appear to disclose a connection
between imports and injury, are misleading.  Japan’s allegation assumes that the domestic industry
will always fare worse in the merchant market than it does in the captive market.  The industry,
however, could be performing worse in the captive market than in the merchant market.  In that
scenario, a failure to look at the merchant market may exaggerate the effects of dumped imports.
67. The captive production provision in no way mandates action in conflict with the Agreement.
It does not preclude an objective evaluation consistent with the requirement of the Agreement, as well
as US law, that the assessment be made, to the extent possible, in relation to the dumped imports’
impact on domestic producers of the like product “as a whole”.   The law on its face does notconstitute conduct by the United States contrary to its WTO obligations.
II. THE USITC’S ANALYSIS IN THIS CASE WAS IN ACCORDANCE WITH THE
ANTI-DUMPING AGREEMENT
A. THE USITC PERFORMED AN OBJECTIVE EVALUATION OF ALL THE RELEVANT
ECONOMIC FACTORS OVER THE ENTIRE PERIOD OF INVESTIGATION
68. Despite the fact that the USITC’s determination clearly contains an analysis of data over the
three year period of investigation, Japan continues to  claim that the USITC did not evaluate data about
the impact factors over the entire period.
81  By simply reading the USITC’s determination, this panel
can see that Japan’s claim is patently false.  With respect to the impact factors in particular, despite
Japan’s allegations to the contrary, the USITC explicitly evaluated capacity, capacity utilization,
productivity, unit costs of goods sold, unit values, employment, wages, and capital expenditures from
1996 to 1998.82  The USITC plainly examined trends over the full period investigated.
69. Japan then narrows its objection even further.  From focusing on the impact factors, it turns to
arguing that the USITC did not discuss the fact that the financial performance of the industry as a
whole purportedly improved over the three year period of investigation.83  Once again, this claim is
specious.  The USITC discussed three year trends of financial indicators, expressly noting that the
cost of goods sold declined by more than the unit values over the entire period of investigation.84  The
USITC also found that the domestic indus try “maintained an operating profit."85  As the USITC
explained, however, other evidence made this profitability less important to its determination.
                                                     
80 Japan’s Opening Statement at para. 21.
81 Japan’s Answer to Panel Question 18 at para. 60.
82 USITC Views at 17-18 nn.100-101.
83 Japan’s Answer to Panel Question 18 at para. 65.
84 USITC Views at 18 n.100.
85 USITC Views at 18.WT/DS184/R
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70. The fact that the USITC also examined the data from 1997 to 1998 does not detract from this
full-period analysis.  Japan attempts to characterize the decision of the USITC to consider the 1997 to
1998 data as a decision to reject an analysis of trends over the entire period.  Japan’s account does not
comport, however, with what the USITC did.  Cons istent with Article 12.2 of the Agreement, the
USITC provided its “reasons for the acceptance or rejection of relevant arguments or claims made bythe exporters and importers.”  In particular, importers and exporters before the USITC, like Japan
here, contended that the USITC should rely on 1996-98 performance data to find the domestic
industry not to be injured, rather than on the 1997-98 trends.
86
71. The USITC’s explanation of why it chose to rely on 1997-98 data rather than on the 1996-
1998 data evidences the USITC’s consideration of the 1996-98 data.  Article 3.4 does not require that
an authority’s determination restate every index having a bearing on the state of the industry.  Rather,
Article 3.4 states that the examination of the impact of dumped imports shall include an “evaluation”
of all relevant indices.  The USITC’s statement of its reasons for rejecting respondents’ argumentsconcerning the 1996-98 data demonstrates its evaluation of that index.
72. Japan’s argument confuses the USITC’s justification for comparing the data from1997 to
1998 with an expression of its intention not to examine data over the 1996 to 1998 period.  To the
contrary, the USITC’s justification for making a comparison between the 1997 and 1998 datareflected its evaluation of the probative value of the 1996-98 data in view of the changes in demand in
the market that had occurred since 1996.  Indeed, the USITC based the decision to rely on 1997 to
1998 data on the fact that “US apparent consumption increased throughout the period of investigation,
both from 1996 to 1997  and from 1997 to 1998, reaching record levels."
87  The USITC’s
determination shows that it evaluated “trends between  the first and third years of a period that conflict
with trends between the second and third years of a period,” which Japan claims are “especially
relevant."88  What Japan couches as an argument that  the USITC did not examine 1996-98 data is no
more than a challenge to the weight that the USITC gave to 1997-98 data;89 the weight of evidence,
however, is for the authority to decide.
73. Japan cites Argentina - Footwear90 as support for its position that the USITC improperly
evaluated the data from 1997 to 1998 instead of comparing 1996 to 1998.91  In fact, this decision
shows the flaws in the Japanese position.  Argentina - Footwear  expressly rejects the notion that an
authority should simply make a comparison of the data between the beginning and endpoints of the
period of investigation.  It states that trends within the period are an important part of any decision.92
Thus, Argentina - Footwear  in fact supports the USITC’s determination.
                                                     
86 USITC Views at 18.
87 USITC Views at 18.
88 Japan’s Answers to Panel Question 18 at para. 60.
89 Cf. United States -- Imposition of Anti-dumping Duties on Imports of Fresh and Chilled Atlantic
Salmon from Norway, Report of the Panel adopted by the Committee on Anti-Dumping Practices on
27 April 1994 (ADP/87) (“Atlantic Salmon”), at ¶ 539.(“Having found that the statements made by the USITCon the financial performance of the industry were supported by the facts on record, the Panel considered that thearguments presented by Norway on the USITC’s conclu sions regarding the negative impact of the imports on
the industry pertained to the weighing of the evidence before the USITC.  However, it followed from the last
sentence of Article 3:3 [now Article 3.4] that the positive developments reflected in the indicators referred to by
Norway could not per se have precluded the USITC from finding that the domestic Atlantic salmon industry was
experiencing material injury.”) (emphasis in original).
90 Report of the Appellate Body,  Argentina -Safeguard Measures on Imports of Footwear  (“Argentina
-- Footwear ”), adopted on 12 January 2000, WT/DS121/AB/R.
91 Japan's Answer to Panel Question 18 at paras. 62-63
92 Argentina - Footwear  at para. 129.WT/DS184/R
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74. Further, this panel should note that Japan makes inconsistent arguments about the appropriate
time frame in an analysis of injury.  With regard to the financial indicators, it is claiming that the
USITC erred because it considered intervening trends, but when it discusses alternative causes of
injury, it is alleging that the USITC erred because it did not consider trends within the period.93  In the
latter context, it argues that the USITC improperly did not compare data for the first half of 1998 withdata from the second half of 1998 in order to fully appreciate the effect of the General Motors strike
on the domestic industry.
94  Not only is Japan incorrect in stating that the USITC did not consider this
time frame, but, in making this argument, it is conceding that an evaluation of trends within the period
may, under certain circumstances, be more probative.
B. THE USITC PROPERLY DETERMINED THAT DUMPED IMPORTS WERE CAUSING
MATERIAL INJURY TO THE DOMESTIC INDUSTRY
1. The USITC demonstrated a causal relationship between dumped imports and material
injury
75. Contrary to  Japan’s argument, which it raised for the first time in its opening statement at the
first panel meeting, the USITC amply established the causal relationship between dumped imports
and the injury to the domestic industry.  As has been seen, the USITC found that the increaseddumped imports led the domestic industry to have excess capacity.  Further, for example, it found that
“at the same time as subject import volumes and market share increased dramatically, the domestic
industry’s market share declined;"
95  “domestic producers were prevented from participating in the
increasing demand as subject imports increased their market share",96 “declines [in prices] were most
precipitous in the third and fourth quarters of 1998, at a time when the volume of subject imports waspeaking;"
97 and  “unit values fell significantly in 1998 as subject imports increased in volume and
market share."98  Such findings demonstrate “a causal relationship between the dumped imports and
the injury to the domestic industry” as required by Article 3.5.
(a) The USITC properly found a correlation between the dumped imports and the price
declines
76. Japan points to a three-month lag time between orders for Japanese product and its
importation.99  The existence of this lag time does not, however, defeat the USITC’s conclusion that
the increase in imports when price underselling increased supported the causal relationship between
dumped imports and injury.  First, this nexus was not established solely on the basis of a relationship
between imports and prices in a particular quarter.  Rather, the USITC found the instances of
underselling to have increased in 1997 and 1998 as opposed to 1996, concurrently with a rise inimport volume and market share and a decline in industry annual performance indicators.
100  As the
USITC concluded, full year data was sufficient to support its affirmative determination.101
77. Moreover, evidence concerning the nature of pricing in the market supported the USITC’s
reliance on the fact that price declines were most precipitous in the third and fourth quarters of 1998,when import volumes peaked.  The fact that some imports in those quarters were made pursuant to
earlier contracts does not mean that the prices of those imports were not set when the importations
                                                     
93 First Submission of Japan at para. 275.
94 First Submission of Japan at para. 277.
95 USITC Views at 12.
96 USITC Views at 12.
97 USITC Views at 14.
98 USITC Views at 18.
99 Japan’s Answer to Panel Question 47 at para. 107.
100 USITC Views at 14-15.
101 USITC Views at 20.WT/DS184/R
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were made.  To the contrary, during the hearing, respondents’ witnesses testified that, in many cases,
purchasers demanded lower prices after a contract had been negotiated, threatening to cancel the order
if the prices did not come down.102  In fact, Japanese respondents testified that, if prices in the market
fell between the time of an order and the time scheduled for delivery, the prices were renegotiated.103
This evidence shows that the lag time for orders does not translate into a lag time for price effects of
imports.   Therefore, consistent with the Japanese parties’ own witnesses, the correlations that the
USITC drew between the time of entry of the imports and the declining prices for hot rolled steel in
the United States are not affected by the lag time between date of order and date of delivery.
(b) The USITC determined that  the dumped imports were causing material injury in
accordance with Article 3.5 of the Anti-dumping Agreement.
78. As the United States has discussed in its answer to the Panel’s questions104, the phrase
“imports are causing material injury” had been interpreted under the Tokyo Round Anti-dumping
Code not to require that an authority isolate the particular quantum of injury due to imports from the
injuries due to other causes and determine that quantum of injury to be “material”.  In adopting that
phrase in Article 3.5, the negotiators of the Anti- dumping Agreement reflected that they would not
change that conclusion.  Rather, adopting also the phrase “a causal relationship”, they indicated that ademonstration of causation must show a connection between the effects of imports and material
injury, not that dumped imports are the only factor so connected.  Such a demonstration, consistent
with the requirement not to attribute to dumped imports the effects of other causes, must not
mistakenly rely on indicators of such a relationship that are in fact due to other causes of injury.
79. Japan nevertheless argues that the USITC violated the Agreement by stating that “the
substantially increased volume of subject imports at declining prices has materially contributed to the
industry’s deteriorating performance."
105  The USITC’s legal conclusion was that the domestic
industry “is materially injured by reason of LTFV [ i.e., dumped] imports of hot rolled steel from
Japan."106  Japan does not contend that this conclusion differs from the conclusion that dumped
imports are causing material injury.
80. The USITC’s use of the phrase “materially contributed” in effect recognizes that, although in
using the phrase “a causal relationship”  Article 3.4 does not establish a precise degree of relationship
that must be demonstrated between the effects of imports and injury, that relationship must not be
trivial.  Use of the phrase “materially contributed” is entirely in accord with the ordinary meaning of
the term “cause.” Webster’s Third New International Dictionary (Unabridged)  at 356 (1981) defines
the verb ‘cause’ as follows:  “to serve as cause or occasion of.”  Webster’ s  makes clear that ‘cause’
(in noun form) need not be the sole determinant of an outcome:
CAUSE indicates a condition or circumstance or combination of
conditions and circumstances that effectively and inevitably callsforth an issue, effect or result or that materially aids in that calling
forth.  (emphasis added.)
107
In short, the phrasing of which Japan complains is simply one way of restating the term “cause.”
                                                     
102 Transcript of 4 May 1999, Hearing at 242 (testimony of Mr. Curtis) ( Exh. US/C 25 ).
103 Transcript at 246-47 (testimony of Mr. Stapp).
104 US Answer to Panel Question 46.
105 USITC Views at 20-21.
106 USITC Views at 23.
107 Webster’s Third New International Dictionary (Unabridged) at 356 (1981) ( Exh. US/C 26 ).WT/DS184/R
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81. In considering the adequacy of the USITC’s demonstration of this causal relationship, it is
instructive to compare the findings that it made here to those upheld by the panel in Atlantic Salmon ,
whose analysis was before the negotiators of the Anti-dumping Agreement.  In Atlantic Salmon , the
panel found that the “USITC had not failed to cons ider whether there had been a significant increase
in the volume of subject imports."108  The USITC’s decision that the panel upheld discussed the
existence of a surge in imports from Norway, but also found that market penetration of these dumped
imports declined.109  In the current case, not only did dumped imports double in volume; they doubled
their market shares as well.110
82. As to price effects, the Atlantic Salmon  panel found that, “on its face, the text of the USITC
determination demonstrated that the USITC had not failed to consider the price effects of the imports
of Atlantic salmon from Norway."111  As part of its analysis in that case, the USITC concluded that,
“[a]lthough other factors may have contributed, the decline in US prices for Atlantic salmon in 1988
and 1989 was due in large part to oversupply in the US market.  Imports from Norway accounted for alarge portion of the increased imports in 1989.  This suggests that Norwegian Atlantic salmon played
a role in the price decline."
112  The Atlantic Salmon  panel reached this conclusion notwithstanding the
fact that in that case the dumped imports persistently oversold the domestic product.113  In the current
case, the USITC found that imports that increased by 10 million tons over 1997 and 1998, including 7
million tons in 1998, and increasingly undersold the US product in that period, had significant priceeffects.  Japan’s argument that a strike at General Motors that affected no more than 685,000 tons of
product over a period of five weeks had significant price effects only reinforces the USITC’s
conclusions about the price effects of the massively increased imports.
83. The panel in Atlantic Salmon  also upheld the USITC’s determination about the negative
financial performance of the US industry
114 when the USITC found, “After posting a large operating
loss in 1987, the domestic industry recorded an overall operating profit in 1988.  However, the
financial state of the US Atlantic salmon industry declined precipitously in 1989."115  T h e  U S I T C
found a similar end-of-period trend in operating income in this case.
84. In short, the United States submits that, in order to establish that the USITC’s demonstration
of a causal relationship between dumped imports and material injury in this case violates the
Anti-dumping Agreement, Japan must establish that the Anti-dumping Agreement requires an
analysis significantly different from that upheld under the Tokyo Round Code.  Japan has not
attempted such a showing, and cannot make it.
III. THE USITC CONDUCTED THE PROCEEDINGS IN THIS INVESTIGATION IN AN
UNBIASED AND FAIR MANNER
85. The United States has previously addressed Japan’s argument that the USITC Commissioners
should not have requested at the USITC’s hearing that domestic producers provide information that
they had not previously provided.  The United States will not here reiterate its points on the matter.
Japan now, however, takes issue with the USITC’s ac ceptance of that submission because, it claims,
“respondents literally had less than a week to comment on the corrected figures, and then only briefly,
                                                     
108 Atlantic Salmon  at para. 501.
109 Atlantic Salmon  at para 499.
110 USITC Views at 12.
111 Atlantic Salmon  at para. 514.
112 Atlantic Salmon  at para. 514.
113 Atlantic Salmon  at para. 518.
114 Atlantic Salmon  at para. 538.
115 Atlantic Salmon  at para. 535.WT/DS184/R
Page C-137
as final comments are strictly limited to fifteen pages in length per respondent country."116  T h i s
contention fails to make out a claim under the Agreement.
86. As reflected in the final USITC’s staff report, US producers submitted the requested data
before the report issued, and that information was incorporated into the report.117   The staff report
was issued to the parties on 27 May 1999.  In fact, the US producers had submitted to the USITC and
served on the other parties the final piece of inform ation on this point several weeks prior to issuance
of the final report.  Parties submitted their final comments on the information obtained in the
investigation to the USITC on 7 June 1999.  Thus, respondents had several weeks to prepare their
comments on this information, not the seven days that Japan claims.
87. Further, respondents were not limited to a fifteen page submission.  On 2 June 1999,
respondents requested to file more than fifteen pages for their final comments.  They made this
request, not because of an issue with the information in the record, but because of the fact that one
counsel was representing producers from several different countries.118  In fact, respondents’ final
comments were 29 pages long.119
88. In any event, Japan’s argument does not establish that the USITC in any way violated the
applicable provision concerning parties’ opportunity to comment on information.  The relevantprovision is Article 6.9, which provides that authorities, before a final determination is made, shall
inform all interested parties of the essential facts under consideration.  Article 6.9 further provides,
“Such disclosure should take place in sufficient time for the parties to defend their interests.”
89. Notably, Article 6.9 does not define what constitutes a “sufficient time” nor does it require
authorities to afford parties unlimited numbers of pages in which to present their arguments.  In the
current case, respondent interested parties in fact commented on the US producers’ data in final
submissions.  None complained that either the time or pages that they were afforded for comment was
insufficient.  None complained that, with more time or space, they would have had more to say.  None
requested that, as its rules allow, the USITC make  an exception to the limitations set forth in its
normal procedures.
120  They only requested clarification of the rule on comments, and they never
made reference to the domestic industry’s data in that request.  In short, the Japanese respondents
having failed in the administrative proceedings to object to the time and space they were given,
Japan’s argument at best consists of the contention that a week for response and a limitation of the
number of pages in which to make that response is per se  insufficient.  Nothing in the Agreement
supports such a contention.
90. Indeed, Japan should be barred from making such a contention.  In arguing the USITC failed
to afford parties sufficient time to defend their inte rests, that contention is beyond this Panel’s terms
of reference.  Japan’s panel request does not state any claim arising under Article 6.9 or mention that
Article at all.  Thus, unable to make a substantive claim under Article 6.9, Japan should not be
permitted to substantiate this claim through vague and unsupported allegations of bias.
                                                     
116 Japan’s Answer to Question 44 at para. 98.
117 USITC Views at VI-1.
118 2 June 1999 letter to Chairman Bragg ( Exh. US/C-27 ).
119 Selected pages from Respondents’ Comments ( Exh. US/C-28 ).
120 See 19 C.F.R. §§ 201.4(b) & 201.14(b)(2) ( Exh. US/C-29 ).WT/DS184/R
Page C-138
CONCLUSION
91. For the foregoing reasons, the United States requests that the Panel reject Japan’s claims in
their entirety.WT/DS184/R
Page C-139
ANNEX C-3
Letter from the United States to the Chairman of the Panel
(21 September 2000)
The United States has raised a preliminary objection to Japan’s submission to the Panel of
factual information not made available to the US authorities during the antidumping duty
investigation, i.e., extra-record evidence.  In its questions to the United States, the Panel asked the
United States to list the exhibits that should not be considered by the Panel because they are
extra-record evidence.  The United States responded on 6 September.  Since the time of that response,
the United States notes that Japan has put before this Panel, in its second submission of 13 September,
two additional pieces of extra-record evidence that should not be considered by the Panel.
First, at note 353, Japan cites profit figures from an annual report of a US producer.  Japan
apparently admits that the annual report was not submitted to the US International Trade Commission
(“USITC”), but states that purportedly similar information was given to the USITC.  As theUnited States has previously made clear, we have no objection to Japan’s use of any information
presented to the USITC, with respect to “injury” issues, but ask that the Panel disregard this new,
extra-record evidence.
Second, Japan’s exhibit JP-105 contains information from two web sites, described at
note 372 of Japan’s second submission.  Neither these web sites nor their content were presented to
the USITC during the course of the antidumping investigation.  In addition, Japan retrieved these web
sites on 5 September 2000, as the date on the pages demonstrates.  Therefore, the information
contained in those documents may not even be relevant to the time period under investigation, and
may not even have existed at the time of the investigation.
We ask that the panel disregard the above extra-record evidence contained in Japan’s second
submission.
The United States is providing a copy of this submission directly to the Government of Japan.WT/DS184/R
Page C-140
ANNEX C-4
Letter from Japan to Ch airman of the Panel
(25 September 2000)
On 21 September 2000, the United States filed a letter with your office registering its
objection to certain evidence referenced in Japan's Second Submission.  Japan believes that the items
to which the United States now objects are proper ly before the Panel, for the following reasons:
The information contained in footnote 353 of Japan's Second Submission is from the 1999
annual report of Steel Dynamics Inc. ("SDI").  During the course of its investigations, USITC requests
the annual reports of domestic producers in their que stionnaires.  Specifica lly, Question III-4 of the
domestic producer questionnaire issued in the hot-rolled steel case requested the producers to submittheir annual reports if they were not available on the internet.
1  (While the staff report does not state
which domestic producers submitted completed questionnaires, it can be assumed that SDI did so
given that it was named as a petitioner.2)  Therefore, although USITC's confidential record has not
been made available to the Panel, it is safe to assume that the information cited in footnote 353 - SDI's
operating profits for 1997 and 1998 - was contained in the annual report(s) accompanying SDI's
questionnaire response.  Given that this 1997 and 1998 data is the only information referenced in
footnote 353, it is irrelevant whether the 1999 annual report itself was on the record (Japan did notprovide the entirety of the 1999 annual report as an exhibit to its Second Submission).
The documents in Exhibit JP-105 merely show that Lone Star Steel and Newport Steel
specialize in supplying hot-rolled steel sheet for pipe and tube production.  Question II-23 of USITC's
domestic producers' questionnaire asked each company to report the percentage of its shipmentsdevoted to pipe and tube products.
3  Japan admits that, unless Lone Star and Newport submitted
questionnaire responses, USITC might not have had record information before it to suggest that they
specialized in hot-rolled steel for pipe and tube production.
Neither producer was a petitioner, and the public staff report gives no indication that either
firm returned a questionnaire response to the staff.  The staff report does, however, identify both
companies as hot-rolled steel producers4, and it is a matter of public record that both companies
specialize in pipe and tube production, as demonstrated by their websites.  Further, Japan only offers
Lone Star Steel and Newport Steel as examples of companies dependant on the pipe and tube market
that would have been hard hit by the pipe and tube recession.  Even without these examples, Japan'slogic is irrefutable:  Even though overall apparent consumption reached a record  high in 1998,
companies dependant on the pipe and tube market would have nevertheless lost money for reasons
unrelated to subject imports.  Nonetheless, USITC completely ignored this alternative cause in its
determination.
_______________
                                                     
1 Exh. JP-106 (attached).
2 USITC Final Injury Determination , USITC Pub. 3202 at III-3 ( Exh. JP-14 ).
3 Exh. JP-106  (attached).
4 USITC Final Injury Determination , USITC Pub.3202 at III-2 ( Exh. JP-14 ).