WT/DS184/R
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ANNEX B
Third Party Submissions
Contents Page
Annex B-1 Submission of Brazil as a Third Party 2
Annex B-2 Submission of Canada as a Third Party 17
Annex B-3 Submission of Chile as a Third Party 21
Annex B-4 Submission of Korea as a Third Party 26WT/DS184/R
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ANNEX B-1
Submission of Brazil as a Third Party
 (31 July 2000)
INTRODUCTION
1. Like Japan, many of Brazil’s exports to the United States have been subjected to US anti-
dumping measures.  Also like Japan, these measures have often been aimed at steel products as theUS steel industry has moved from grey measure protectionism in the form of trigger prices and
voluntary restraint agreements in the 1970s and 1980s to anti-dumping and countervailing duty
measures in the 1990s.
2. Brazil and its exporters have long argued that something should be done to curtail the abuses
of the US “unfair trade” laws.  Japan’s first submission before this Panel addresses some of the most
egregious of these abuses, as applied in the hot-rolled steel investigations.  Given Brazilian exporters’
first-hand knowledge of such abuses in this and other cases, Brazil joins Japan in its effort to bringthem to a halt.
3. The instant anti-dumping investigation was particularly troubling for Brazil given its small
participation in the US market.  At their peak in 1998, imports from Brazil accounted for only 0.6 per
cent of US consumption.  In the period examined, imports from Brazil increased less than
200,000 tons, while US consumption increased by nearly seven million tons, 35 times the size of theincrease in imports from Brazil.  Yet, imports from Brazil were nonetheless included along with those
of Japan and Russia in the US Government’s investigation of hot-rolled steel imports.
4. Despite its own involvement and knowledge of these investigations, Brazil does not intend to
focus in this third-country submission on the specific factual abuses raised by Japan.  Instead, we
intend to address US practices that raise broad, systemic concerns for Brazil and all other countriessubjected US anti-dumping measures.  These include:
• the US Department of Commerce’s (“US DOC”) established practice of applying
“adverse” facts available in a manner inconsistent with both the spirit and letter of the
Anti-Dumping Agreement (“AD Agreement”), and the inclusion of such facts
available margins in the calculation of the all others rate;
• USDOC’s established practice of applying the unfair 99.5 per cent “arm’s length” test
that not only inappropriately excludes bona fide home market sales from the
calculation of normal value, but also results in the burdensome requirement that the
resales made in the home market by affiliated customers be reported in order to
replace sales that fail the arm’s length test;
• USDOC’s new critical circumstances policy, which permits the application of
retroactive duties despite the absence of sufficient evidence of any of the factors
required under the AD Agreement, and chills trade regardless of whether the USITCultimately agrees to require importers to pay retroactive duties;WT/DS184/R
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• the captive production provision of US law that requires USITC, under certain factual
scenarios, to ignore the domestic industry’s internal transfers in its injury andcausation analysis; and
• the failure of the USITC to distinguish between injury caused by imports and injury
caused by other factors, in particular the increase in production by US minimillsduring the period of alleged injury.
In addition to the unfair dumping margins and affirmative injury determinations that result from these
abuses, the Panel should also bear in mind one other inevitable result:  companies are simply choosing
not to participate in USDOC anti-dumping investigations, hoping instead that the USITC will prove a
more reasonable forum in its injury investigation.  The Panel should curtail the application of anti-
dumping measures that lead to such results.
I. THE CONCEPT OF GOOD FAITH SHOULD GUIDE THE PANEL
5. Before turning to the specific abuses identified by Japan, Brazil wishes to elaborate on the
arguments concerning good faith that Japan addressed in its first submission.  Unlike most cases
brought before the Dispute Settlement Body (“DSB”), the political nature of the hot-rolled steel
investigations conducted by the United States raises serious questions of whether or not those
investigations were conducted in good faith.  As the Panel considers the substantive issues raised by
Japan, it should be mindful of the requirement placed on all Members to implement their obligationsunder the WTO Agreements -- including the applica tion of anti-dumping measures -- in good faith.
A. T
HE CONCEPT OF GOOD FAITH IS AN ELEMENTAL TOOL OF INTERPRETATION
6. The concept of good faith has become increasingly important as an interpretive tool for
defining the rights and obligations of WTO Members under various provisions of the WTO
Agreement.  Article 3.2 of the DSU directs that existing provisions are to be clarified “in accordancewith customary rules of interpretation of public international law.”  Perhaps the most important of
such “customary rules” is the concept of “good faith” as set forth in Article 26 of the Vienna
Convention.
1
7. The Appellate Body has recognized repeatedly the importance of the concept of good faith in
ensuring due process rights and fundamental fairness, when a Member provides its governmentofficials with discretion.
2  In general, the Appellate Body has instructed that the abusive  exercise of a
                                                     
1 Article 26 of the Vienna Convention mandates good faith implementation of all treaty obligations.
See Vienna Convention on the Law of Treaties, done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; (1969) 8
International Legal Materials  679 ("Vienna Convention").  Article 26 establishes the concept of pacta sunt
servanda  and is appropriately titled as such.  Id.  The provision states, “Every treaty in force is binding upon the
parties to it and must be performed by them in good faith,” and it appears in Part III of the Vienna Conventiontitled, “Observance, Application and Interpretation of Treaties.”  Id.
Article 26 is directly incorporated into Article 31 of the Vienna Convention through Article 31(3)(c),
which provides:  “There shall be taken into account, together with the context: . . . (c) any relevant rules ofinternational law applicable in the relations between the parties.”   Numerous scholars describe good faith as afundamental principle of international law.  See e.g., T.O. Elias, The Modern Law of Treaties  40 (1974); Virally,
M. “Review Essay: Good Faith in Public International Law,” 77 Am. J. Int'l L. 130, 130 (1983) (reviewing E.
Zoeller, La Bonne Foi en Droit International Public  (Paris Editions A. Pedone 1977)).
2 See e.g., United States—Import Prohibitions of Certain Shrimp and Shrimp Products , adopted on
6 Nov. 1998, WT/DS58/AB/R at para. 158 and n. 156 ( “US—Shrimp”); United States—Tax Treatment for
"Foreign Sales Corporations ," adopted on 20 Mar. 2000, WT/DS108/AB/R, at para. 166 ( “US—Foreign Sales
Corporations” ).WT/DS184/R
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treaty right results in a breach of the treaty rights of other Members.3  In this way, the Appellate Body
adopted the concept of good faith as a tool for interpreting WTO provisions so as to guarantee the due
process rights of WTO Members.  Specifically, good faith precludes unreasonable, abusive, or
discriminatory interpretation of WTO rights and obligations.
B. GOOD FAITH IS THE KEY TO A PROPER INTERPRETATION OF THE WTO AD A GREEMENT
8. The concept of good faith is particularly important when interpreting the WTO AD
Agreement.4  Anti-dumping procedures take the form of investigative and quasi-judicial procedures,
both of which impart a large amount of discretion to the administering authority.  In this way, anti-
dumping procedures are particularly susceptible to abuse.  Due process must, therefore, be a central
feature of any anti-dumping regime.
9. The concept of good faith and the importance of due process are prevalent throughout the text
of the AD Agreement.  As a threshold matter, the specific factual and legal standards of review set
forth in Article 17.6 are expressions of the obligation of good faith.  The standards of review provide:
in its assessment of the facts of the matter, the panel shall determine whether the
authorities’ establishment of the facts was proper and whether their evaluation of
those facts was unbiased and objective .  If the establishment of the facts was proper
and the evaluation was unbiased and objective, even though the panel might havereached a different conclusion, the evaluation shall not be overturned;
the panel shall interpret the relevant provisions of the Agreement in accordance with
customary rules of interpretation of public international law .  Where the panel finds
that a relevant provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the author ities’ measure to be in conformity with
the Agreement if it rests upon one of those permissible interpretations.
(Emphasis added.)  The terms used in the factual standard of review directly reflect the principles of
due process established by the Appellate Body in US – Shrimp :  “unbiased and objective.”
5  Similarly,
the legal standard of review directs the panel to interpret the provisions in accordance with the tools of
legal interpretation, which include good faith.  Indeed, good faith becomes all the more importantunder the “permissible” prong of the legal standard of review, given the usefulness of the tool in
defining legal limitations.
10. In this case, the US Government did not serve its supposedly neutral investigative and judicial
function in an unbiased manner; rather, the US Government unabashedly took the side of the US steel
industry.  For each issue raised by the Government of Japan, the text of the AD Agreement imposes
an obligation on the administering Member to implement the provisions in good faith .
                                                     
3 US —Shrimp at para. 158.
4 While the Government of Japan emphasized the importance of this concept of good faith in the
section of its brief dealing with Article X of the GATT 1994, we would also like to point out its relevance to thePanel’s interpretation of the AD Agreement.
5 See also, Mexico—Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United
States , adopted on 28 Jan. 2000, WT/DS132/R, at para. 7.94 (“ Mexico—High Fructose Corn Syrup ”) (citing
Guatemala--Antidumping Investigation Regarding Portland Cement from Mexico, adopted 19 Jun. 1998,
WT/DS60/R, at para. 7.57) (in determining whether sufficient evidence existed to initiate an investigation, the
Panel evaluates “whether an unbiased and objective in vestigating authority evaluating that evidence could
properly have determined that sufficient evidence of dumping, injury, and causal link existed to justify” itsdecision) (emphasis added).WT/DS184/R
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Facts Available• Factual Standard of Review
• Legal Standard of Review
• Article 6.8:  “reasonable period”
• Annex II, Paragraph 7:  “careful
circumspection”
All Other’s Rate • Legal Standard of Review
Arm’s Length Test• Factual Standard of Review
• Legal Standard of Review
• Article 2.4:  “fair comparison”
Critical Circumstances • Factual Standard of Review
• Legal Standard of Review
Injury• Factual Standard of Review
• Legal Standard of Review
• Article 3.1 “objective examination”
11. The Panel should adhere carefully to this overriding obligation of good faith.  As discussed in
greater detail below, the types of abuses perpetrated by the US Government in this case against Japanand our own exporters must be stopped.
II. THE US ABUSE OF FACTS AVAILABLE SHOULD NOT BE ALLOWED TO
CONTINUE
12. In accordance with the Article 6.8 and Annex II of the AD Agreement, the US statute
authorizes USDOC to apply “facts available” when an interested party or any other person(1) withholds information, (2) fails to provide such information by the deadlines for submission of the
information or in the form and manner requested, (3) significantly impedes a proceeding, or
(4) provides such information but the information cannot be verified.
6  However, the US statute goes
beyond the AD Agreement and authorizes the use of “adverse inferences” to punish participants that
“failed to cooperate by not acting to the best of its ability to comply with a request for information.”7
Although the US courts have constrained USDOC to so me extent in its application of this statutory
provision, current US practice continues to give USDOC considerable latitude.  Indeed, on its face the
established practice is punitive and, in turn, inconsistent with the AD Agreement..
A. FOR YEARS , USDOC H AS MAINTAINED AN UNFAIR , PUNITIVE APPROACH TO FACTS
AVAILABLE .
13. A review of prior anti-dumping investigations involving imports only from Brazil
demonstrates a consistent trend of applying facts available to Brazilian respondents’ margins. Of the43 final dumping decisions since 1990, USDOC applied adverse facts available (or best information
available under the old statute) in nearly half of the decisions (20 of 43).
8  Reasons varied, including
small deficiencies, failure to respond to USDOC’s requests for information, withdrawal from the
proceeding, deficiencies discovered during verification, and refusing verification.  The extent to
which USDOC used adverse facts available also varied, ranging from partial facts available forrelatively minor deficiencies to total adverse facts available.  Significantly, in twelve of these cases,
respondents either did not participate in the proceeding or withdrew their participation.  The burden
and bias of USDOC’s investigations have therefore discouraged foreign producers from participating
in the process.
                                                     
6 19 U.S.C. § 1677e(a).
7 19 U.S.C. § 1677e(b).
8 The 43 decisions include final determinations from original anti-dumping investigations and final
results of administrative reviews.  (A list of these decisions appears at the end of this submission.  Exhibit
Brazil-1 .)WT/DS184/R
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14. USDOC all too often resorts to what it calls adverse facts available, a practice under which
USDOC chooses nearly the most adverse facts available.  It does so in order to make an example of
the respondent against which such adverse information is applied:  the information must be adverse
enough, according to USDOC policy, so as to deter other respondents from not cooperating with the
investigation.  Notwithstanding the fact that this  practice is often misapplied -- meaning that the
deterrent is applied to respondents who do not deserve it, such as the Japanese respondents in this case
-- the policy itself violates the AD Agreement on its face.
B. THE US F ACTS AVAILABLE STATUTE AND PRACTICE , ON ITS FACE, VIOLATES ART. 6.8 O F
THE AD A GREEMENT
15. Article 6.8 of the AD Agreement and its related Annex II define specific circumstances in
which facts available may be applied.  The US, however, in its legislation and its practice fails to
adhere to these strict rules.
16. First, the text of Article 6.8 and its related Annex make clear that the resort to facts available
is intended to be a neutral  option for an administering authority.  The only mention of a use of facts
available that may be in any way unfavourable to the respondent’s position is the weakly phrased
second sentence of paragraph 7 of Annex II:
It is clear, however, that if an interested party does not cooperate and thus relevant
information is being withheld from the authorities, this situation could  lead to a result
which is less favourable to the party than if the party did cooperate . (Emphasis
added.)
The statement is written in the passive voice, emphasizing the lack of a control factor.  In other words,
the sentence does not provide an authority with a tool to choose  a less favourable source for facts
available, but simply recognizes that the lack of available information means that the choice may
ultimately  result  in a less favourable position for the interested party.
17. The US statute turns this neutral tool into an instrument of punishment when the US
authorities decide that a respondent is not “acting to the best of its ability.”  However, paragraph 7 inno way reflects a policy of deterrence or retribution by permitting the choice of a “sufficiently
adverse” fact available so as to affect future behaviour.  To the contrary, the first sentence of
paragraph 7 directs the authority to use “careful circumspection” when selecting a secondary source
as facts available, suggesting that an authority exercise caution, not aggressive behaviour. The US has
created a  policy of retribution and deterrence behind the facts available provision that does not exist,
and has thereby abused its rights under the AD Agreement.
18. In this respect, we note that Articles 3.2 and 19.2 of the DSU caution that DSB
recommendations and rulings “cannot add to or diminish the rights and obligations provided in the
covered agreements.”  The United States, through its leaps in logic and inference attempts to add to its
rights under the Anti-Dumping Agreement.  The United States adds the right to punish exporters and
the right to deter exporters from failing to cooperate.
19. However, nowhere in the Anti-Dumping Agreement does it say that countries may require
exporters to cooperate in anti-dumping proceedings or that anti-dumping authorities may use facts
available to try to encourage exporters to cooperate in proceedings.  Indeed, as discussed in more
detail below, because of the built-in biases with which USDOC operates, Brazilian exporters now
regularly choose not to participate in the investigations before USDOC  and instead focus on the
injury investigations conducted by the USITC.  Wh en an exporter refuses to cooperate, according to
the second sentence of paragraph 7 of Annex II, anti-dumping authorities are free to resort to facts
available which “could lead to a result which is less favourable to the party than if the party did
cooperate.”  Exporters choose not to proceed in these investigations at their own risk, recognizingWT/DS184/R
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that, if representative information is not available to the authority, then it will likely resort to
allegations in the petition.  Exporters should not, however, fear artificially inflated margins because
they chose not to devote the enormous resources necessary to defend against the built-in bias of the
USDOC.
20. Indeed, that same paragraph 7 admonishes the anti-dumping authorities to use “careful
circumspection” when resorting to secondary information such as the petition.  This cautionary
requirement contradicts any US claim that the text of the Anti-Dumping Agreement permits it to
affirmatively, punish or deter exporter behaviour by choosing facts available plugs that purposefully
inflate the respondents’ margins.  Facts available is not about taking aggressive action, it is about
acting with caution to fill-in holes in information.
21. The US statute and practice also violate the AD Agreement in other respects.  The US statute
and practice omits the requirement that the choice of facts available may render the respondent’sposition “less favourable” only when the documents are “withheld.”  Similarly, the US statute sets a
hard and fast presumption that a submission “deadline” should be equated with the “reasonable
period” mandated by Article 6.8.  The term “reasonable” however is an ambiguous term that can only
be decided on a case- and fact-specific basis.
22. The experience of the Japanese respondents amply demonstrates the abusive nature of the US
statute.  The facts surrounding the treatment of all three Japanese respondents – Kawasaki Steel
Corporation (“KSC”), NKK Corporation (“NKK”) , and Nippon Steel Corporation (“NSC”) are
remarkable.   KSC was punished with the use of “s ufficiently adverse” facts available so as to deter
similar “uncooperative” behaviour in the future, despite the fact that it was a petitioner, California
Steel Inc. (“CSI”) , that refused to cooperate with USDOC, not KSC.  KSC never had control overCSI’s information and it made the reasonable decision that it could not get that information using
what it considered appropriate means.  Similarly, in the context of this enormous, accelerated
investigation, NKK and NSC were punished not for withholding information, but for failing to meet
the strict USDOC deadlines with respect to informatio n that affected only a handful of sales, despite
their overall cooperative behaviour throughout the investigation.  The “punishment” simply does notfit the “crime”.
23. In its First Submission, the US repeats over and over what a complex and difficult case this
was, and what enormous companies the Japanese respondents were; yet, when it comes time to
determine what is a “reasonable period,” the US Government reacts angrily to any notion that it
should have acted flexibly toward what were, in the broad scheme of things, minor difficulties faced
by the exporters with respect to low priority issues.  Instead, the United States equates its statutory
benchmark of the submission deadline with a “reaso nable period” without any thought as to what is
meant by “reasonable” in the context of the specific documents that were submitted late and why.
The USDOC argues that a deadline is a deadline and agencies need to proceed with their
investigations.  This belies the flexibility and good faith responsibilities imposed on an anti-dumping
authority by the facts available provision in the Anti-Dumping Agreement.  Article 6.8, the governing
provision, does not use the word “deadline,” but rather “reasonable period.”  Therefore, in Annex II,whenever the word “timely” is used, it refers back to the governing language of Article 6.8,
“reasonable period”.
24. The harsh language contained in the US First Submission with respect to the three Japanese
exporters reflects the inflexible and bad faith position of the USDOC throughout the proceeding.  The
US First Submission tries to paint the respondents as “evasive” and in need of the most basichandholding.  But the Panel should always keep in mind the truly inordinate  amount of information
that these respondents did actually submit to the USDOC.  The mountain of information submitted
belies any notion that NKK or NSC  acting in an “evasive” manner or that KSC was not cooperating
to the “best of its ability”.  This attack on three private companies that submitted thousands of pagesWT/DS184/R
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of information and enormous sales databases does not belong in a dispute settlement proceeding
before an international tribunal.
25. These issues demonstrate the importance of the concept of good faith in carrying out the legal
standard of review under the AD Agreement.  While the US might try to argue that its interpretations
meet the outer limits of WTO AD Agreement provisions, the Panel should consider whether theseinflexible and punitive rules meet a test of good faith.
C. USDOC’
S TREATMENT OF BRAZILIAN RESPONDENTS IN THIS VERY CASE PROVIDES
FURTHER EVIDENCE NOT ONLY OF THE US A BUSES OF FACTS AVAILABLE , BUT OF THE
POLITICAL NATURE OF THIS CASE AND THE FAILURE OF THE UNITED STATES TO CONDUCT
ITS INVESTIGATIONS IN GOOD FAITH
26. In the hot-rolled steel investigation, USDOC seemed  to strain itself to find reasons to apply
adverse facts available to each respondent.  With respect to Companhia Siderurgica Nacional("CSN"), a significant issue was date of sale, which determines what set of sales are analyzed in the
dumping calculation.  USDOC rejected substantial evidence that the commercial invoice date was the
more appropriate date of sale for CSN’s US sales and instead used ex-factory shipment date.  CSN did
not submit data on a small number of sales with ex-factory shipment dates during but commercial
invoice dates after the period investigated.  USDOC determined that CSN had not cooperated to thebest of its ability and applied the highest margin to  the unreported sales.  USDOC determined further,
without any explanation or analysis, that “this margin is indicative of CSN's customary selling
practices and is rationally related to the transactions to which the adverse facts available are being
applied.”  The fact that the facts available margin was the highest margin and not the mean does not
support USDOC’s conclusion that the margin is “ind icative of CSN's customary selling practices” and
there is no evidence to support the finding that th e margin is “rationally related to the {affected}
transactions”.
9
27. USDOC applied adverse inferences with a vengeance in the margin calculation for Usinas
Siderurgicas de Minas Gerais and Companhia Siderurgica Paulista ("USIMINAS/COSIPA").10
USDOC applied adverse inferences to the following: (1) USIMINAS’ reported costs; (2) USIMINAS'
unreported US sales where the nota fiscal date--the date of sale--was within the period investigated
but the commercial invoice date fell outside the period; (3) downstream sales data; (4) USIMINAS'
home market inland freight; (5) USIMINAS' US inland freight; (6) USIMINAS' warranty expense; (7)
COSIPA's home market inland freight; (8) COSIPA 's brokerage and handling expenses; (9) COSIPA's
packing; and (10) USIMINAS' failure to report its affiliated supplier's actual cost of production.11
28. With respect to USIMINAS’ reported costs, USDOC gave USIMINAS insufficient notice of
any deficiencies.  USIMINAS relied successfully on the same cost allocation methodology in priorproceedings.  Yet, at no point in the hot-rolled steel investigation or the prior proceeding did USDOC
ask USIMINAS to resubmit its costs using its normal financial cost accounting system, which violates
the letter and the spirit of paragraph 6 of Annex II: “If evidence of information is not accepted, the
supplying party should be informed forthwith of the reasons therefore, and should have an opportunity
to provide further explanations within a re asonable period…”.  USIMINAS presumed USDOC’s
findings in the previous review were valid.  USIMINAS presumed USDOC was well aware that there
would be differences between the per-unit costs generated by each system.  USDOC nonetheless
                                                     
9 Notice of Final Determination of Sales at Less Than Fair Value; Certain Hot-Rolled Flat-Rolled
Carbon-Quality Steel Products From Brazil, 64 Fed. Reg. 38756, 38768 (19 July 1999) (“Brazil’s FinalDumping Determination”).
10 Due to the degree of affiliation between these two Brazilian steel producers, USDOC treated
USIMINAS and COSIPA as one entity (“collapsed” the two companies) for purposes of determining dumping.See Brazil’s Final Dumping Determination  at 38759.
11 Id. at 38758, 38774-84, 38786-90.WT/DS184/R
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found that USIMINAS’ costs were not representative of its normal business records and recalculated
USIMINAS’ costs using adverse facts available.
29. The main basis for USDOC’s use of adverse facts available for the other nine instances was
failure to verify information submitted by USIMINAS and COSIPA.  The sales verification reports
indicate, however, that USDOC did not follow proper ve rification policies.  In particular, the breadth
and depth of USDOC's verification agenda virtually  made certain that USDOC would be unable to
review all of the information in the verification ag endas.  In addition, USDOC insisted on verifying in
depth all items appearing on the verification agenda.  This is obvious not only from the length and
language of the verification reports themselves, but also from the extensive documentation compiled
by USDOC.  Indeed, more than 2,000 pages of exhibits were reviewed and collected by USDOC.
Thousands of other pages of documents were review ed and not taken.  And, thousands of other pages
of documents were prepared but not examined.12
30. Brazil would note that lack of time to verify information due to a self-imposed heavy agenda
is a far cry from the conditions set out in Article 6.8 and Annex II that would allow the use of facts
available.  The USDOC failure to verify information provided by respondents is in direct conflict with
the language of paragraph 3, Annex II: “All inform ation which is verifiable … should be taken into
account when determinations are made.”
31. In addition to the problems associated with the verification agenda, USIMINAS and COSIPA
noted other troubling aspects of the sales verification reports.  First, the reports contained numerous
inconsistencies and mistakes of fact.  These mistakes and inconsistencies undermined the credibility
and findings of the reports.  Second, significant portions of the reports contained characterizations of
facts that appeared to exhibit a bias against respondents.  Indeed, it often appeared that USDOCsought to portray mistakes or inconsistencies in the light most damaging to respondents, rather than
simply recording and articulating the facts observed in a neutral manner.
32. After rejecting USIMINAS/COSIPA’s protestations about the fairness of the proceeding,
USDOC applied adverse facts available.  In some cases, USDOC applied the highest dumping rate to
certain transactions, making the same unfounded conclusion that “this margin is indicative ofUSIMINAS/COSIPA's customary selling practices and is rationally related to the transactions to
which the adverse facts available are being applied.”
13  USDOC’s pervasive and groundless use of
adverse facts available can be described only as biased and unobjective.  USDOC’s final
determination expressed more concern for defending its flawed administrative proceeding than
conducting a fair investigation.
D. THE ABUSIVE USE OF FACTS AVAILABLE IS UNFAIRLY PREJUDICING UNINVESTIGATED
EXPORTERS
33. As with Japan, the application of partial adve rse facts available in USDOC’s hot-rolled steel
investigation of Brazil also drove up the all others rate:  the all others rate was calculated based on a
weighted average of the dumping margins of the mandatory respondents involved in the
investigations.  Yet the AD Agreement is very clear in its prohibition against the inclusion of facts
                                                     
12 Moreover, USDOC did not prioritize its review of verification subjects.  This is particularly true
regarding sales trace documentation and sales adjustments, where USDOC devoted substantial amounts of timeverifying expenses such as inland insurance and inventor y carrying costs at the neglect of more important topics,
such as sales prices, sales quantities, invoice dates and numbers, and product characteristics.  Even a cursoryreview of the verification exhibits demonstrates this fact .  Indeed, there were more than sixty-three exhibit pages
for inland insurance alone, which was one of the smallest expenses on the sales lists.  Similarly, USDOC took
more than one hundred exhibit pages for indirect sellin g expenses, a field that is not even used in USDOC's
margin calculations.
13 Brazil’s Final Dumping Determination  at 38779-80 (concerning downstream sales data and
unreported sales resulting from a change in the date of sale).WT/DS184/R
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available rates -- adverse or otherwise -- in the calculation of the all others rate.  As Japan explains in
its first submission, Article 9.4 of the AD Agreement st ates that the all others rate shall not exceed
“the weighted average margin of dumping established with respect to the selected exporters or
producers…provided that the authorities shall disregard…margins established under the
circumstances referred to in paragraph 8 of Article 6.”  Given that the other margins for both Japanand Brazil in this case were based on facts available that can only find their authority in Article 6.8
(though no authority exists for adverse  facts available), the all others rates calculated by USDOC
violated the AD Agreement.  This clear violati on of the AD Agreement should be halted, along with
the abusive use of adverse facts available.
34. The United States argues in its First Submission that the phrase “margins established under
the circumstances referred to in paragraph 8 of Article 6” in Article 9.4 must mean margins based
entirely  on facts available.  But, this is not what Article 9.4 says.  If the Members had meant this, they
would have used the phrase “margins established in their entirety  under the circumstances referred to
in paragraph 8 of Article 6” or something to that effect.  But this is not what the Members negotiated.
The word “entire” does not appear in Article 9.4.  Whether one agrees with the United States or not
that there are an infinite number of permissible inte rpretations of the Agreement, an interpretation that
writes into a provision a word that does not exist and substantively changes the meaning of theprovision is hardly a permissible interpretation.
III. USDOC'S TREATMENT OF AFFILIATED HOME MARKET CUSTOMERS --
INCLUDING THE USE OF THE SO-CALLED “ARM’S LENGTH” TEST AND THE
REQUIREMENT TO REPORT AFFILIATED CUSTOMERS’ RESALES -- IS
UNFAIR
35. Under the guise of price manipulation, USDOC treats sales to affiliated home market
customers with circumspection.  If USDOC determ ines that the respondent’s relationship to a
customer is close enough to be deemed “affiliated” under the US statute, USDOC applies a test that
excludes the sales to affiliated customers for whom average prices are lower than sales to unaffiliated
customers and not sales to affiliated customers for whom the average prices are higher.  It thenrequires the respondent to report the affiliates’ downstream sales.  The threshold of affiliation,
however, is unrealistically low, leading USDOC to re quire submission of sensitive, proprietary sales
information of the affiliated customer whether or not the respondent has effective  control over the
affiliate.  In Brazil, respondents’ shareholdings in affiliated customers are often relatively small and
do not necessarily give respondents the power to force the affiliate to provide the requested
information.
14  Similar to KSC’s experience with its US affiliate, gathering affiliated customers’ sales
data has proven extremely burdensome and sometimes impossible for Brazilian exporters.  As aresult, in addition to driving up margins, USDOC’s  policy on affiliated home market customers has
often forced the unfair application of adverse facts available, or discouraged participation all together
at USDOC.
A. US L
AW AND ADMINISTRATIVE PRACTICE
36. The US statute provides that “if the foreign like product is sold . . . through an affiliated party,
the prices at which the foreign like product is sold . . . by such affiliated party may be used in
determining normal value.”15  USDOC’s policy for determining whether downstream sales should be
used in the calculation normal value is:
                                                     
14 See, e.g., Certain Cut-to-Length Carbon Steel Plate from Brazil: Final Results of Antidumping Duty
Administrative Review , 62 Fed. Reg. 18486 (15 Apr. 1997) (affiliation found despite minority stake in customer,
among other practical limitations to respondent’s ability to control the customer).
15 19 U.S.C. § 1677b(a)(5).WT/DS184/R
Page B-11
If {USDOC} determines that an affiliate made downstream sales of a foreign like
product, {USDOC} usually will not require the reporting of both the sales to the
affiliate and the downstream sales by the affiliate.  We will examine the sales
between the affiliated parties under paragraph (c).  If sales to the affiliate fail the
arm's-length test, {USDOC} will require the respondent to report that affiliate'sdownstream sales.  If sales to the affiliate pass the arm's-length test, {USDOC}
normally will not require the respondent to report the affiliate's downstream sales and
will calculate normal value based on sales to the affiliate.
16
37. USDOC must first determine whether a customer is “affiliated.”  The US statute provides that
“the following persons shall be considered to be ‘affiliated’ or ‘affiliated persons’:
(A) Members of a family . . . .
(B) Any officer or director of an organization and such organization.(C) Partners.
(D) Employer and employee.
(E) Any person directly or indirectly owni ng, controlling, or holding with power
to vote, 5 per cent or more of the outstanding voting stock or shares of any
organization and such organization.
(F) Two or more persons directly or indirectly controlling, controlled by, or
under common control with, any person.
(G) Any person who controls any other person and such other person.
For purposes of this paragraph, a person shall be considered to control another person
if the person is legally or operationally in a position to exercise restraint or directionover the other person.
17
38. This definition casts a fairly broad net.  In Brazil, manufacturers often have relationships with
or own shares in other companies that resell th eir product.  As a result, USDOC often applies the
arm’s length test to sales to affiliated customers.  As explained by the Government of Japan, due to
the analytical shortcomings of USDOC’s arm’s length test, these sales to affiliated customers arecommonly deemed abnormal (i.e., outside the ordinary course of trade), requiring respondents to
report the affiliate’s resales for the calculation of normal value.
B. B
RAZILIAN EXPORTERS ’ EXPERIENCE IN THIS VERY CASE PROVES THE BURDENSOME
NATURE OF USDOC’ S TREATMENT OF AFFILIATED HOME MARKET CUSTOMERS
39. In the hot-rolled steel investigation, USDOC re quired USIMINAS and COSIPA to report the
resales of three affiliated customers -- Rio Negro Comercio e Industria de Aco S.A. (“Rio Negro”),
Fasal S.A. Comercio e Industria de Produtos Siderurgicos (“Fasal”), and Dufer SA.18  USIMINAS
                                                     
16 Antidumping Duties; Countervailing Duties: Final Rule , 62 Fed. Reg. 27296, 27356 (19 May 1997)
(emphasis added).  USDOC’s arm’s length test (or “99.5 per cent” test) is described and analyzed in detail in theGovernment of Japan’s First Submission.  The Government of Brazil supports that discussion and incorporatesit by reference here.
17 19 U.S.C. § 1677(33) (emphasis added).
18 CSN also sold subject merchandise to affiliated customers during the period investigated.  However,
CSN was not required to report these sales because they  represented a small share of CSN’s total home market
sales.  See CSN Section A questionnaire response, at 37.WT/DS184/R
Page B-12
owned virtually all of the voting capital (99.99 per cent) of Rio Negro Centro Participacoes Ltd., a
stockholding company for Rio Negro, a local distributor that purchased subject merchandise as well
as other flat-rolled steel products for resale.  USIMINAS owned 50 per cent of a holding company,
Siderholding Ltda., the sole purpose of which is to hold stock in Fasal, a distributor that inventories
and further processes steel products, including pl ate.  COSIPA owned 51 per cent of the stock of
Dufer, a distributor which resold the like product during the period investigated.19
40. USIMINAS/COSIPA laboured to collect and report these affiliates’ resale information.  The
resale information was then subject to verificati on as part of the large volume of information
submitted by USIMINAS/COSIPA.  As described above, verification was seriously complicated by
the involvement of these affiliates.  Due to the rela tively short time allowed and the inordinate volume
of information and issues to cover, USDOC did not fu lly review the affiliates’ sales data.  As a result,
USDOC “used the downstream data reported by USIMINAS and COSIPA for CONNUM matchingpurposes only.  In cases in which the best match is to a downstream home market sale, {USDOC}
applied as adverse facts available the highest calculated margin for any USIMINAS/COSIPA
CONNUM”.
20
41. Brazilian respondents were required to report affiliated customers’ home market resales in
many other previous cases.21  As with USDOC’s use of facts available, USDOC’s policy concerning
sales to affiliated parties has taken its toll on Brazilian respondents.  For example, in the recent
investigation of cold-rolled steel products from Brazil, CSN withdrew its participation in part because
of the difficulties it experienced with an affiliated reseller.  The burden of collecting and ensuring the
accuracy of the affiliate’s sales information forced CSN’s withdrawal and resulted in the application
of total adverse facts available.22  As USDOC continues to apply its policy concerning sales to
affiliated home market customers, respondents wi ll continue to face the dilemma of complying with
USDOC’s burdensome reporting requirements or declining to participate in the proceeding.  This is an
unfair choice to make, considering the lack of authority in the AD Agreement for USDOC’s policy
and practice.
C. THE AD A GREEMENT PROVIDES NO LEGAL BASIS TO DEEM AN AFFILIATED PARTY AS
OUTSIDE THE ORDINARY COURSE OF TRADE BASED ON FAILURE OF THE US A RM’S
LENGTH TEST
42. The Government of Japan correctly presents the WTO inconsistencies of USDOC’s “arm’s
length” test.  While Brazil believes there are instances when affiliated party sales may be deemed
outside the ordinary course of trade, the US practice goes way too far:
• the standard for affiliation is far too low;
                                                     
19 See USIMINAS/COSIPA Section A questionnaire response, at 3, 9-10, 48.
20 Brazil Final Dumping Determination , at 38779.
21 See, e.g., Certain Cut-to-Length Carbon Steel Plate from Brazil: Final Results of Antidumping Duty
Administrative Review , 62 Fed. Reg. 18486 (15 Apr. 1997) (sales to affiliated home-market customer failed
arm’s length test and disregarded); Notice of Final Determination of Sales at Less Than Fair Value: Small
Diameter Circular Seamless Carbon and Alloy Steel, Standard, Line and Pressure Pipe From Brazil , 60 Fed.
Reg. 31960 (19 Jun. 1995) (same); Notice of Preliminary Determination of Sales at Less Than Fair Value and
Postponement of Final Determination: Silicomanganese from Brazil , 59 Fed. Reg. 31195 (17 Jun. 1994) (same);
Notice of Preliminary Determinations of Sales at Less Than Fair Value and Postponement of FinalDeterminations: Certain Steel Flat Products , 58 Fed. Reg. 7080 (4 Feb. 1993) (same); Certain Iron
Construction Castings From Brazil; Final Results of Antidumping Administrative Review , 55 Fed. Reg. 26238
(27 Jun. 1990) (same).
22 Notice of Final Determination of Sales at Less Than Fair Value: Certain Cold-Rolled Flat-Rolled
Carbon-Quality Steel Products From Brazil , 65 Fed. Reg. 5554, 5554 (4 Feb. 2000).WT/DS184/R
Page B-13
• prices that are clearly “comparable” under any reasonable standard are being disregarded as
outside the ordinary course of trade because of an outrageously biased and nearly impossible 99.5per cent test;
• the averaging methodology used by USDOC not  only removes prices that might even be
higher than most sales to unaffiliated customers, but in doing so also removes products that might
prove to be a more appropriate match to export sales.
Under any definition of the concept of fair, this is simply not a fair test.  It violates Article 2.4 of the
AD Agreement.
43. Moreover, there is no textual basis for USDOC’s replacement of certain affiliated party sales
with the resale  prices of the downstream sale.  The AD Agreement, particularly Article 2, makes
absolutely no mention of using resale prices in the domestic market context.  This silence stands in
stark contrast to the specific rule set forth in Article. 2.3 with respect to the export market.  There, the
AD Agreement recognizes that sales to related importers can be manipulated to achieve specificresults in an anti-dumping investigation.  The underlying policy of Article 2.3 is logical given that the
objectives of the importer and exporting manufacturer are often aligned when anti-dumping measures
are imposed because both entities’ business is affected by anti-dumping measures.  On the other hand,
a similar assumption is illogical in the domestic market context because a manufacturer’s domestic
customers are economically ambivalent to any anti-dumping measures the manufacturer might befacing abroad.
44. The US First Submission suggests that Article 2.2 permits the use of downstream sales, but it
appears that the United States has misread this provision.  It states in Paragraph 234 of Part B that
“Article 2.2 plainly states that normal value may be based on third country sales prices or on
constructed value….”  In fact, Article 2.2 plainly uses the word “shall,” not “may.”  The Unites Statesis reading into the Agreement another permissive interpretation where the language is clearly
mandatory.
45. USDOC’s replacement of certain home market sales with downstream resales is also
inconsistent with Article 2.4 of the AD Agreement.  Article 2.4 requires that a “fair comparison” be
made between the export price and the normal value, at the same level of trade, normally at the ex-factory level.”  The substitution of higher downstream resale prices increases normal value so as to
vitiate any “fair comparison.”  Moreover, the use of resale prices results in a comparison of ex-factory
prices in one market to a comparison of a downstream resale price in another market.  This
asymmetry is inconsistent with the Article. 2.4 mandate of a “fair comparison” normally at the “ex-
factory price” level.  Finally, Article 2.4 states that on authority “shall not impose an unreasonableburden of proof” on parties whose sales are subject to investigation.  To the extent USDOC punishes
respondents who have difficulty obtaining the necessary data from their affiliates -- as it often does
with Brazilian respondents -- USDOC is violating this part of Article 2.4 as well.
46. The fact that USDOC disregards only the lower priced sales that fall outside the 99.5 per cent
test and replaces certain related-party sales with higher  downstream prices demonstrates the bad faith
manner in which the US Government has implemented the AD Agreement.  These skewed statistical
choices manipulate the dumping margin by inflating normal values.  These rules, therefore, are biasedagainst the foreign respondents, a sign that respondents’ due process rights are being denied.
IV. THE NEW US CRITICAL CIRCUMSTANCES POLICY UNFAIRLY CHILLS
TRADE AND VIOLATES THE AD AGREEMENT
47. Brazil also supports Japan’s challenge of the US Government’s new critical circumstances
policy.  As the Government of Japan aptly points out, USDOC’s policy was implemented in bad faith,
after it had already initiated the hot-rolled steel investigation , and it is inconsistent with WTO rules.WT/DS184/R
Page B-14
48. First, Article 10.6 of the AD Agreement governing critical circumstances does not allow for a
critical circumstances decision based on solely the threat of material injury -- the basis for the
USITC’s affirmative preliminary determination.  Unlike the other paragraphs of Article 10 that
specify when “threat” is relevant to the analysis, Article 10.6 specifies only current “injury.”  The
United States seems to suggest in its First Submission that USDOC can make its own injurydeterminations, regardless of what the USITC does.  Yet, Article X:3(a) of GATT 1994 clearly
requires that the decisions made by an authority be uniform.  In any event, to impute to importers
knowledge of something two US federal agenci es cannot even agree on clearly goes too far.
49. Moreover, the US reached its preliminary determination of critical circumstances on the basis
of only speculative evidence, in violation of both Article 10.6 and the “sufficient evidence” standards
set forth in Article 10.7.  Article 10.6 requires determinations of dumping and injury before
application of retroactive duties.  Yet, no such determinations were made at the time of thepreliminary critical circumstances finding in the hot-rolled steel investigation of Japan.   Even if one
accepts the US point that the USITC’s preliminary threat determination was sufficient to meet the
injury requirements for applying retroactive duties (which Brazil does not accept), there was still nodetermination of dumping at the time of the preliminary critical circumstances determination.  The
chapeau of Article 10.6 clearly requires such determination to have been made, given thatretroactivity is permitted only “when the authorities determine for the dumped product in question
that . . . .”  No such determination had been made; USDOC simply assumed dumping existed.  It
therefore violated Article 10.6.
50. Furthermore, there was far from sufficient evidence to support USDOC’s “findings.”   There
was no evidence of dumping -- only petitioner allegations.  There was no evidence  of injury -- only
unsubstantiated press reports.  And, there was no evidence of “massive dumped imports” -- only,
again, unsubstantiated press reports.  Allegations are never “sufficient evidence” under GATT andWTO legal interpretation.
23  The United States itself admits, in another context (Paragraph 72 of Part
B), that “information submitted in a request for initiation is likely to be adverse to the interests of the
responding party.”  In other words, petitioners include information in their petitions that is as adverseand one-sided as possible.  How this, without more, could meet the sufficient evidence standard is
unclear.
51. Beyond the failings inherent in relying on petitioner allegations, the United States also
violates the sufficient evidence standard when applying its arbitrary threshold for imputing knowledge
of dumping to importers.  Why a 25 per cent margin of dumping -- alleged or even determined --
means the importer knew or should have known the product it was buying was dumped is non-
sensical.  Importers rarely know the price of their suppliers’ product in the home market.
52. The failure of the US Government to comply with the WTO standards in the hot-rolled steel
investigation is explained in part by the fact that the US statute itself is inconsistent, on its face, with
the requirements of Articles 10.6 and 10.7.  First, the US law fails to require a finding that the massive
dumped imports are “likely to seriously undermine the remedial effect” of the duty, contrary to the
specific requirement in Art. 10.6(ii).  Second, far from requiring “sufficient evidence,” the US statuterequires only “a reasonable basis to believe or suspect,” a substantially lower threshold.  The common
                                                     
23 See United States—Measures Affecting Imports of Softwood Lumber from Canada , adopted
27 Oct. 1993, BISD 40S/358, at para. 332 ( “US—Softwood Lumber” ) (explaining that sufficient evidence
means “more than mere allegation or conjecture, and could not be taken to mean just ‘any evidence.’  In
particular, there had to be a factual basis to the decision of the national investigative authorities and this factual
basis had to be susceptible to review under the Agreement.”);  United States—Measure Affecting Imports of
Woven Wool Shirts and Blouses From India , adopted 25 Apr. 1997, WT/DS33/AB/R, at 15 (“ US—Wool
Shirts” ) (commenting that “we 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”).WT/DS184/R
Page B-15
meaning of the terms dictate that a “basis” that leads one to “suspect” a fact simply cannot meet the
degree of support necessary to provide “sufficient evidence” of a fact.
53. The Panel should not be constrained to rule on this issue by the fact that critical circumstances
were ultimately not applied in this case.  The policy on its face violates the AD Agreement.  Further,
the impact of the policy is felt not only when it is ultimately applied, but by its mere existence.
Exporters tend not to ship product when their importers face the possibility of paying retroactive
duties.  Such tendency is even greater when the USDOC policy is to make affirmative critical
circumstances determinations with only flimsy -- not “sufficient” -- evidence.
V. THE CAPTIVE PRODUCTION PROVISION IS A CLEAR VIOLATION OF THE AD
AGREEMENT’S REQUIREMENT THAT AN AUTHORITY ANALYZE THE
DOMESTIC INDUSTRY “AS A WHOLE”
54. While most of the US abuses of the AD Agreement occur at USDOC, one troubling aspect of
the USITC’s investigations is the statutory requir ement that -- when certain facts exist -- the USITC
must “focus primarily” on a domestic industry’s merchant market sales to the exclusion of their
captive sales (internal transfers).  This so-called captive production provision was passed by the US
Congress following the enormous political pressure brought to bear by the US steel industry when it
failed to convince the USITC that it was materially injured by reason of imports in the 1992-1993round of flat-rolled steel cases.  As Japan thoroughly documents in its first submission, there is now
ample WTO jurisprudence for the notion that Articles 3.4, 3.5 and 4.1 -- in conjunction with one
another -- require an authority to examine the domestic industry “as a whole,” not merely a part of it,
when determining injury and causation.
55. The exclusion of the captive portion of an industry can have a dramatic effect on an
authority’s analysis.  For instance, by focusing on the merchant market, the USITC can miss the fact
that an industry has chosen on its own to decrease its merchant market shipments in favour of captive
shipments to downstream production that reaps higher profits.   In this example, while the industry
might or might not appear more healthy with the internal transfers, the industry’s condition is
certainly explained at least in part by the production decisions made by the industry -- factor that mustbe considered as an alternative cause of the industry’s condition.  The fear in this case would be that
the USITC would attribute to imports the effects of ot her causes -- in this case the industry’s own self-
imposed causes.
56. Whatever the results, the bottom line is that consideration of only one segment of an industry
is simply not permitted under the AD Agreement.  Even if the US can argue that the captive portion of
the industry does not compete with the merchant market, this is irrelevant:  if there is one like product,
then there is one industry.  There is no reason such competitive conditions cannot be considered on acase-by-case basis, without tying the hands of the authority and requiring it to ignore the captive
portion of the market when certain statutory conditions are met, as the US captive production
provision does.
VI. USITC’S FAILURE TO DISTINGUISH BETWEEN INJURY CAUSED BY IMPORTS
VERSUS INJURY CAUSED BY OTHER FACTORS VIOLATES THE ADAGREEMENT
57.  Without addressing in detail Japan’s fact-specific claims with regard to the USITC’s
causation analysis as applied to the hot-rolled steel case, Brazil suggests that the Panel examine
whether US practice with respect to alternative causes is sufficiently rigorous.  As evidenced from this
as well as other cases, Brazil believes it is not.
58. Article 3.5 states, in pertinent part, that “The authorities shall also examine any known factors
other than the dumped imports which at the same time are injuring the domestic industry, and theWT/DS184/R
Page B-16
injuries caused by these other factors must not be attributed to the dumped imports.”  In other words,
imports must, in and of themselves, be a cause of material injury to the industry -- not a cause that,
when combined with other factors, results in material  injury.  This is the only logical interpretation of
Article 3.5.  Otherwise, the prohibition against attribution would be meaningless.
59.  As other Members have argued before the DSB (including in US -- Wheat Gluten
Safeguards ), ensuring that the effects of other factors are not attributed to imports requires a
sophisticated analysis that isolates the effects of each relevant factor.  The USITC has undertaken
such sophisticated analysis in other cases (i.e., the recent cold-rolled steel case24), but does so only
infrequently.
60. In the hot-rolled steel case, other factors were critical.  Though imports had admittedly
increased in volume, so had domestic mill capacity, particularly that of the minimills:  17 million tons
of new minimill capacity were commissioned during the period of investigation, much of which cameon line by 1998.  The increase alone represented 78 per cent of all domestic industry merchant market
shipments in 1998.
25  While the USITC discussed minimills -- as well as the General Motors strike,
another important factor in the market during 1998 -- absolutely no effort was made to isolate the
effects of these factors versus the effects of imports.  Therefore, the USITC did not ensure against the
attribution to imports of the effects of other factors.  The Panel should instruct the United States tochange this practice, not only in this case but in other cases as well.
CONCLUSION
61. The United States has made a valiant and lengthy effort to rebut the arguments set forth in
Japan’s First Submission.  Yet, Brazil is unconvinced that the abuses Japan has identified areunworthy of rectification.  The United States too often uses its anti-dumping and countervailing duty
laws as a tool to protect politically influential US industries from import competition.  If it did so in
accordance with the rules agreed to by the Members to the WTO, then no one could complain about
the political influence these industries maintain.  The problem is that the political influence is
infecting the proper adoption of international norms.  We hope the Panel will help bring it to an end.
                                                     
24 Certain Cold-Rolled Steel Products from Argentina, Brazil, Japan, Russia, South Africa, and
Thailand,  Inv. Nos. 701-TA-393 and 731-TA-829-830, 833-834, 836, and 838 (Final), USITC Pub. 3283
(Mar. 2000), at  18-24.
25 Certain Hot-Rolled Steel Products from Japan, Inv. No. 731-TA-807 (Final), USITC Pub. 3202 (Jun.
1999) at IV-12.WT/DS184/R
Page B-17
ANNEX B-2
Submission of Canada as a Third Party
 (31 July 2000)
I. INTRODUCTION
1. This dispute arises out of the anti-dumping measure(s) imposed by the United States effective
23 June 1999 on certain hot-rolled steel products from Japan.
2. This dispute was initiated by a request by Japan on 18 November 1999 for consultations with
the United States under Article 4 of the Understanding on the Rules and Procedures Governing the
Settlement of Disputes  (DSU), Article XXII:1 of GATT 1994 and Article 17.2 of the Agreement on
the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994  (the Anti-
Dumping Agreement).  The resulting consultations were held on 13 January 2000.
3. On 11 February 2000, Japan requested the establishment of a panel pursuant to Article 6.1 of
the DSU.  The Dispute Settlement Body (DSB) es tablished this panel on 20 March 2000.  Pursuant to
Article 10.3 of the DSU, Canada provided notice that it had a substantial interest in the matter andrequested the opportunity to participate as a third party to the dispute.
4. Canada welcomes this opportunity to participate as a third party in this proceeding and
provide its views on certain issues raised by Japan which are identified below.  Canada has a
substantial systemic interest in the proper in terpretation of the Anti-Dumping Agreement and in
particular, the issues which Canada’s submissions address.  The fact that Canada has not madesubmissions with respect to all matters raised before this Panel should not be understood to imply that
Canada either agrees with or objects to interpretations of the Anti-Dumping Agreement or practices of
investigating authorities raised by these issues.
5. Canada’s submissions will address the following issues: (i) the use of “adverse inferences” in
applying the “facts available” provisions of Article 6.8 and Annex II of the Anti-DumpingAgreement; and (ii) the US approach to “captive production” in injury investigations.
II. LEGAL ARGUMENT
A. A
PPLICABLE PRINCIPLES OF TREATY INTERPRETATION
6. Article 3.2 of the DSU requires that the covered agreements be interpreted in accordance with
“customary rules of interpretation of public international law.”
7. For purposes of the WTO Agreement, the Vienna Convention on the Law of Treaties  (Vienna
Convention)1 sets out applicable rules of international law.  The rights and obligations of WTO
                                                     
1 8 ILM 679 (1969).WT/DS184/R
Page B-18
Members under the Anti-Dumping Agreement must ther efore be interpreted in accordance with the
Vienna Convention, and in particular Article 31.2
8. According to Article 31 of the Vienna Convention, an international treaty must be interpreted
“in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in light of its object and purpose”.  According to Article 32, supplementary means of
interpretation may also be referred to, to confirm an interpretation of the agreement or to resolveambiguities in the text.
B. I
SSUES ADDRESSED BY CANADA
(i) “Facts Available”
9. Canada notes that the United States has challenged whether Japan’s claim concerning the US
general practice regarding “facts available” is properly before this Panel. Canada takes no position on
this jurisdictional question.  However, Canada makes the following submissions with respect to
Japan’s claim concerning the US general practice regarding “facts available” in the event that thePanel decides that it has jurisdiction over this claim.
10. In the investigation conducted by the United States Department of Commerce (DOC) in this
matter, the margin of dumping for certain respondents was based on the use of the “facts available”
provisions of US anti-dumping law.
11. Japan submits that the US “practice of applying adverse facts available to punish
respondents” is inconsistent with Article 6.8 and Annex II to the Ant-Dumping Agreement because
neither Article 6.8 nor Annex II use the word “adverse”.  Japan contends that neither Article 6.8 nor
Annex II contemplates the punitive use of “facts available” and that the purpose of any use of “facts
available” is to fill in gaps in information in a manner consistent with existing data.
12. Canada submits that the wording of Article 6.8 makes clear the circumstances under which an
investigating authority may have resort to the “facts available” provisions of the Anti-Dumping
Agreement.  This is possible where “any interested party refuses access to, or otherwise does not
provide necessary information within a reasonable period or significantly impedes the investigation”.
In construing the words “facts available” in their context, one must necessarily have regard to the
direct link between the factual circumstances of non-co-operation or impediment by the interestedparty and the use of “facts available”.  Canada submits that this means that the use of “facts available”
is, to a large degree, predicated on actions by interested parties that are intended to hamper or have the
effect of hampering an investigation by an investigating authority.  Thus, Japan’s interpretation of
Article 6.8, which encourages an interested party not to co-operate with investigating authorities, is
clearly at odds with the wording of Article 6.8.
13. Canada further submits that Article 9.3 of the Anti-Dumping Agreement provides that anti-
dumping duties may be imposed in an amount equal to the margin of dumping.  Where an
investigating authority has recourse to “facts availa ble” as a result of an interested party’s refusal to
co-operate or its efforts to impede the investigati on, the drawing of adverse inferences is appropriate
so as to ensure that the imposition of duties under Article 9.3 is not frustrated by the non-co-operating
party obtaining the benefit of a dumping margin that is lower than would otherwise have been the
case.
                                                     
2 see for instance, United States – Standards for Reformulated and Conventional Gasoline
WT/DS2/AB/R,  report of the Appellate Body issued 29 April 1996 at pp. 16-17; Japan  - Taxes on Alcoholic
Beverages , WT/DS8/DS10/DS11/AB/R issued on 4 October 1996 at  p. 10.WT/DS184/R
Page B-19
14. Canada submits that its view is reinforced by a number of provisions in Annex II to the Anti-
Dumping Agreement, including, in particular, paragraph 7 of Annex II. Paragraph 7 provides, in part,
that “[i]t is clear, however, that if an interested party does not co-operate and thus relevant
information is being withheld from the authorities, the situation could lead to a result which is less
favourable to the party than if that party did cooperate.”  In other words, non-co-operation can lead to
higher dumping margins.
15. Further, Canada submits that if in applying “facts available” an investigating authority is
precluded from drawing adverse inferences in the face of non-co-operation or efforts to impede an
investigation, then the result would be to frustrate the object and purpose of the Anti-Dumping
Agreement to the extent that the Agreement provid es that duties may be imposed as a result of an
investigation conducted in a manner consistent with the requirements of the Agreement.  If adverse
inferences could not be drawn, an interested party w ho refuses to co-operate or attempts to impede an
investigation would benefit from actions that the Anti-Dumping Agreement condemns.  Canadasubmits that an approach to “facts available” that would clearly encourage non-co-operation, as
opposed to co-operation, cannot be consistent with the Anti-Dumping Agreement.
(ii) Captive Production
16. As part of its final injury determination in this matter, the United States International Trade
Commission (ITC) took into account section 771(c)(iv) of the Tariff Act of 1930, as amended.  This
provision provides that in investigations involving domestic producers who internally transfer
significant production of like products, the ITC, when considering certain injury factors, will “focus
primarily” on the domestic merchant (i.e. commercial) market for the goods involved in such
investigations.
17. Japan submits that the use of the captive production provision in US law is inconsistent with
Articles 3 (Determination of Injury) and 4 (Definition of Domestic Injury) of the Anti-Dumping
Agreement because these provisions do not expressly allow for a “focus” on anything less that all
domestic production. Japan, although apparently recognizing the existence of different segments
within a domestic industry
3, submits that in particular, the definition of “domestic industry” in
Article 4.1 of the Anti-Dumping Agreement precludes segmentation of internal transfers from the“merchant market”.  Japan bases this position to a significant extent on the phrase “domestic
producers as a whole of the like products” in that definition.
4
18. Canada first notes that Canadian practice with respect to investigations involving domestic
producers who internally transfer significant production of like products is similar to that of the
United States. 5
19. In Canada’s view, the purpose of providing an in vestigating authority with the ability to focus
on sales to the merchant market in appropriate circumstances is because it is in the merchant market
that the dumped imports being investigated compete directly against domestically produced like
products.  For example, in the flat-rolled steel sector, domestically produced hot-rolled steel may be
sold and used as an end product or may be further processed into, for instance, cold-rolled or
corrosion-resistant steel. Imported hot-rolled steel does not compete with domestically produced hot-
rolled steel destined for further processing into, fo r example, cold-rolled steel or corrosion-resistant
steel.
                                                     
3 See, for instance, First Submission of Japan at paragraph 36.
4 See in particular First Submission of Japan at paragraphs 225 and 226.
5 While an analogous provision does not exist in Canada’s anti-dumping legislation (The Special
Import Measures Act (R.S.C. 1985, c. S-15, as amended) this practice has been   developed by the CanadianInternational Trade Tribunal, the investigating authority that deals with injury investigations in Canada.WT/DS184/R
Page B-20
20. Canada submits that the Anti-Dumping Agreement contains no express provision with respect
to how captive production or internal transfers should  be considered by investigating authorities.  That
being said, the fact that like product is internally transferred for further processing into different goods
for different end uses than like product sold into the merchant market is clearly a relevant economic
factor for purposes of Article 3.4 of the Anti-Dumping Agreement.
21. Canada also submits that the Japanese position blurs the distinction between the concepts of
“domestic industry” and  “domestic market(s)”.  This distinction is clearly recognized in Article 3.1 of
the Anti-Dumping Agreement that provides that a determination of injury shall include “…an
objective examination of…the effect of the dumped imports on prices in the domestic market for like
product….”
22. Thus, in the very first provision of Article 3 of the Anti-Dumping Agreement, investigating
authorities are expressly directed to examine the impact of dumped imports on sales of like products
“in the domestic market for like products”, i.e. the market in which dumped imports compete againstdomestic like product.  In circumstances involving internal transfers, this will be the merchant market.
23. Canada further submits that in addition to Articles 3.1 and 3.4 of the Anti-Dumping
Agreement, the price effects described in Article 3.2, which investigating authorities are required to
consider, again focus on competition between dumped imports and domestic like product.  In
circumstances involving internal transfers of domestic production, as well as sales of like product todomestic customers, consideration of the merchant market should be included in an injury analysis
because it is in the merchant market that the price effects of the dumped imports will be reflected.
24. Accordingly, for these reasons, failure to a llow investigating authorities to differentiate
between production that is internally transferred and production that is sold into the domestic market
in competition with dumped imports, in appropriate circumstances, would deprive Article 3 of theAnti-Dumping Agreement its proper application and result in investigating authorities being unable to
accurately determine whether a domestic industry had been injured, or threatened with injury.
III. CONCLUSION
25. For these reasons, Canada respectfully submits that, in appropriate circumstances, the
drawing of adverse inferences in dealing with “facts available” and the ability of investigatingauthorities to focus on the merchant market in injury  investigations, are both fully consistent with the
Anti-Dumping Agreement.WT/DS184/R
Page B-21
ANNEX B-3
Submission of Chile as a Third Party
(31 July 2000)
INTRODUCTION
1. Chile is exercising its right under Article 10 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU) in the belief that the issue before this Panel is important
for the proper functioning of the multilateral trading system.  The increasing use of anti-dumping
measures is a source of special concern to a country such as Chile whose economic development isbased on an export model.  Particularly worrisome is the way in which some countries are resorting to
such measures to keep out imports and protect uncompetitive industries.  These concerns are
confirmed by Japan's complaint concerning measures applied by the United States to certain hot-
rolled steel products and the latter country's long hi story of anti-dumping proceedings against the steel
industry of Japan and the world in general.
2. What is even more serious is that some national regulations are incompatible with the
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade (Anti-
Dumping Agreement).  In particular, the present case shows that certain provisions of the Tariff Act
of 1930 and its amendments, many of which were intended to "adapt" it to the WTO's Anti-Dumping
Agreement, are in fact inconsistent with the latter  and that the Panel should therefore recommend that
they be adapted as soon as possible.
3. After consultations between the parties had failed to resolve the dispute, on 11 February 2000
the Government of Japan requested the establishment of a panel pursuant to Article XXIII:1 of
GATT  94, Articles 4 and 6 of the DSU, and Article 17 of the Anti-Dumping Agreement.
4. At its meeting on 20 March 2000, the Dispute Settlement Body established a panel to
examine the dispute and Chile, along with other Member s, declared its interest in participating in the
dispute as a third party.  The panel was constituted on 24 May 2000, with the standard terms of
reference laid down in Article 7 of the DSU.
5. Moreover, under the general provisions of the DSU, Chile has an interest in transmitting its
Government's serious concern about the way in which some Members of the WTO, important trading
partners for Chile, interpret the fulfilment of their obligations within the context of the Organization
and, more especially, the way in which the United States interprets the fulfilment of its obligations
under the Anti-Dumping Agreement.
6. In this respect, Chile considers it essential that the WTO's Dispute Settlement Mechanism,
through its rulings, should confirm the principles of transparency and fairness on which the
Agreements are based.  The function of the Dispute Settlement Mechanism is to provide Members of
the WTO, especially the smaller economies, with a guarantee that the multilaterally agreed principles
and rules will be fully respected and, in particular, that the disciplines of the Anti-Dumping
Agreement will be strictly observed.  Moreover, in Chile's opinion, within the multilateral tradingsystem the application of Article VI of GATT 94 and the Anti-Dumping Agreement constitute an
exceptional trade protection instrument, to be used only under the conditions laid down in the
Agreement itself.WT/DS184/R
Page B-22
7. Anti-dumping duties may not be imposed until there has been an investigation to determine
the existence, degree and effects of the alleged dumping which, moreover, must be based on the
principles mentioned above.  The Government of  Chile is concerned about the way in which some
Members of the WTO habitually resort to such measures, even though all the circumstances envisaged
in Article VI of GATT 94 and the Agreement are not always present, thereby giving the impressionthat the intention is to protect a local industry rather than to remedy real and effective injury.
8. Consequently, Chile's participation in this dispute is an expression of a systemic interest,
under Article 10 of the DSU, and a result of the way in which in its legislation and practice the United
States interprets the provisions of Article VI of GATT 94 and the Anti-Dumping Agreement, which,
in Chile's opinion, deviates not only from their true meaning and scope but also from the letter and
spirit of the Agreement.
SUMMARY OF CHILE'S LEGAL ARGUMENTS
9. In its first written submission, in the opinion of the Chilean Government, Japan clearly
established how in this dispute the United States has violated:
(a) Articles 2, 6, 9 and 10 of the Anti-Dumping Agreement in conducting its USDOC
investigation;
(b) Articles 3 and 4 of the Anti-Dumping Agreement in conducting its injury
investigation;
(c) Article VI of GATT 94 in determining dumping, injury and causation;(d) Article X:3 of GATT 94 in not carrying out a complete investigation and not making
its determinations in a uniform, impartial and reasonable manner, as required by that
provision, and
(e) Article XVI:4 of the Agreement establishing the WTO and Article 18.4 of the Anti-
Dumping Agreement, by maintaining a law, regulations and administrativeprocedures that do not conform with its obligations under the WTO Agreements.
10. In this submission Chile wishes to concentrate its arguments on the following aspects which
merit closer consideration:
(a) The "captive production" provision was not considered in determining injury, in
accordance with Articles 3 and 4 of the Anti-Dumping Agreement.
(b) In its investigation USITC did not consider all the factors relating to the
determination of injury, in accordance with Article 3 of the Anti-Dumping
Agreement.
(c) In calculating the normal value, USDOC deliberately excluded certain home market
sales between related enterprises which were subsequently replaced by the higher
resale price made by affiliates for unaffiliated customers, in open contravention of
paragraphs 1, 2 and 4 of Article 2 of the Anti-Dumping Agreement.
(d) USDOC accused one of the enterprises in vestigated of not cooperating with the
investigation, applying duties higher than those which would have been appropriate.
This was questionable due to the fact that the information requested could not be
provided since the North American affiliate was one of the petitioners.  Thus,WT/DS184/R
Page B-23
USDOC failed to apply the provisions of Articles 6.13 and 2.3 of the Anti-Dumping
Agreement.
(e) A determination of "critical circumstances" based solely on the information supplied
by one of the petitioners cannot constitute sufficient evidence under Article 10.7 of
the Anti-Dumping Agreement.
"CAPTIVE PRODUCTION" PROVISION
11. Under Articles 3 and 4 of the Anti-Dumping Agreement, the determination of injury must
relate to the whole of domestic production, irrespective of whether it is sold on the domestic market or
used by the petitioner to produce a product with gr eater value added.  In determining injury to the
domestic industry, the United States considered only the production sold on the domestic market,excluding production for own consumption.  On the one hand, this approach infringes a basic
principle that follows from both Article VI of GATT 94 and the Anti-Dumping Agreement, according
to which in determining injury the entire domestic industry affected or threatened by increased
imports must be considered.  On the other hand, it necessarily leads to a finding of greater injury than
would have been the case if the whole of production had been considered.  Consequently, if captiveproduction had been included, the imports would have had less effect.
12. It is important to note the discretionary nature of the United States' analysis of the figures.
Thus, as Japan points out, if the import penetration figures and the operating margins for the years
1993 and 1999 are analysed, it becomes apparent that in 1993 the United States enterprises werereporting losses while import penetration was very similar (6 per cent and 9.3 per cent, respectively)
to the year 1999 when there were no operating losses.
1
USITC DID NOT CONSIDER ALL THE FACTORS RELEVANT TO THE DETERMINATION OF
INJURY
13. In focusing on only two years rather than three, USITC chose to ignore alternative injury-
causing factors such as non-subject imports, contradictions in demand and technological
developments.  This violated Articles 3.1, 3.4 and 3.5 of the Anti-Dumping Agreement.  Likewise, by
taking only one three-year period it disregarded many industry performance indices that had improvedand which might therefore have led to the conclusion that there had been no injury.  Thus, the
provisions of Article 3.1 were infringed by not basing the determination of injury on "positive
evidence" and not undertaking an "objective examination".
14. For example, the effect on prices of increa sed production from new-generation plants ("mini-
mills"), the General Motors strike and the recession in the pipe and tube industry caused by the
collapse in steel prices was not taken into account.
EXCLUSION OF CERTAIN HOME MARKET SALES AND THEIR REPLACEMENT BY SALES
TO UNAFFILIATED ENTERPRISES
15. Chile considers that in calculating the normal value USDOC excluded certain home market
sales between related enterprises.  Thus, those sales to affiliates whose weighted price was less than
99.5 per cent of the price for sales to unaffiliated customers were not considered.  These excluded
sales were replaced by the higher resale price made by affiliates for unaffiliated customers.  All of this
is inconsistent with Articles 2.4, 2.1 and 2.2 of the Anti-Dumping Agreement.
                                                     
1 "United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan"
(WT/DS/184).WT/DS184/R
Page B-24
16. On the one hand, the 99.5 per cent test used by the United States only treats low prices as
abnormal since high prices can be extremely high  and still be normal.  This test affects the
comparison between the normal value and the export price.  In this respect, a 0.5 percentage point
differential is too small for deciding whether sales to affiliates are or are not made in the ordinary
course of trade.
"ALL OTHERS" RATE
17. USDOC's treatment of investigated enterprises which, for legitimate reasons, could not
cooperate and which, as a result, had a much higher rate applied to them than would have been the
case if they had not been so treated clearly contravenes Article 6.13 of the Anti-Dumping Agreement,
according to which "the authorities shall take due account of any difficulties experienced by interested
parties…".  Likewise, Article 9.4 of the Agreement was violated by including in the calculation of themargin of dumping for all other exporters or producers the rate calculated with information that was
insufficient and "adverse" with respect to the enterprise accused.
DETERMINATION OF "CRITICAL CIRCUMSTANCES"
18. Chile considers that a determination of "critical circumstances" based solely on information
supplied by the complainant cannot constitute sufficient evidence under Article 10.7 of the Anti-
Dumping Agreement.  There was no preliminary determination of dumping by USDOC or
preliminary determination of injury by USITC whose action was based merely on the allegations
made by the United States petitioners.  Authorizing the retroactive imposition of provisional measuresprior to an affirmative preliminary determination of dumping and consequent injury was a violation of
Article 10.
CONCLUSIONS
19. In the light of the above, Chile requests that the Panel find that certain provisions of the
United States legislation conflict with WTO Agreements, in particular the Anti-Dumping Agreement,
and that their application is undermining the foundations of the multilateral trading system by creating
disguised restrictions on trade, and more especially that:
(a) The provisions of United States law a nd USDOC's administrative practices make it
possible to exclude "captive production" in determining injury, which affects the
impact of imports, in clear violation of Articles 3 and 4 of the Anti-Dumping
Agreement.
(b) In considering the injury to its industry, USITC focused on only two years instead of
three and ignored other injury-causing factors such as non-subject imports, inviolation of paragraphs 1, 4 and 5 of Article 3 of the Anti-Dumping Agreement.
(c) In calculating the normal value, USDOC deliberately excluded certain home market
sales between related enterprises which were subsequently replaced by the higher
resale price made by affiliates for unaffiliated customers, in open contravention ofparagraphs 1, 2 and 4 of Article 2 of the Anti-Dumping Agreement.
(d) In its investigation, USDOC accused one of the Japanese enterprises of not
cooperating in the investigation.  This was very questionable, especially as that
enterprise could not provide the price information requested concerning the affiliatein the United States because the latter was one of the petitioners and completely
outside the Japanese enterprise's control, and constituted an infringement of
Articles 6.13 and 2.3 of the Anti-Dumping Agreement.WT/DS184/R
Page B-25
(e) A determination of "critical circumstances" based solely on information supplied by
one of the petitioners cannot constitute sufficient evidence under Article 10.7 of the
Anti-Dumping Agreement.WT/DS184/R
Page B-26
ANNEX B-4
Submission of Korea as a Third Party
(31 July 2000)
TABLE OF CONTENTS
Page
I. INTRO DUCTION ................................................................................................................. .27
II. LEGAL ARGU MENTS..........................................................................................................27
A. S UMMARY OF LEGAL ARGUMENTS ...........................................................................................27
1. Fair Comparison.............................................................................................................. .......27
2. Critical Ci rcumstances ....................................................................................................... ....27
3. Injury to the Industry As a Whole ........................................................................................27
B. T HE ARTICLE 2.4 “F AIR COMPARISON ” REQUIREMENT IS A G ENERAL OVERARCHING
OBLIGATION GOVERNING ALL ASPECTS OF THE DETERMINATION OF DUMPING ...................27
C. T HE USE OF FACTS AVAILABLE AGAINST A R ESPONDENT EXPORTER , WHERE A US
PETITIONER COMPANY AFFILIATED WITH  THAT RESPONDENT EXPORTER REFUSED
TO COOPERATE WITH THE INVESTIGATION , VIOLATES THE ARTICLE 2.4
REQUIREMENT FOR A F AIR COMPARISON ................................................................................28
D. T HE US F AILURE TO USE REASONABLE AND AVAILABLE DATA FROM SECONDARY
SOURCES FOR SALES COMPARISONS VIOLATED THE OBLIGATION UNDER ARTICLE
2.4 T O MAKE A FAIR COMPARISON . ........................................................................................30
E. C OMMERCE ’S ARM’S-LENGTH TEST, AND THE APPLICATION OF THE TEST TO
DETERMINE THAT SALES TO AFFILIATED PARTIES ARE “OUTSIDE THE ORDINARY
COURSE OF TRADE ,” A RE INCONSISTENT WITH ARTICLE 2 OF THE ANTI-
DUMPING  AGREEMENT . .........................................................................................................31
F. C OMMERCE ’S FAILURE TO MAKE ADJUSTMENTS TO THE RESALE PRICE OF
AFFILIATED PARTY SALES VIOLATED THE FAIR COMPARISON REQUIREMENTS OF
ARTICLE 2.4 O F THE ANTI -DUMPING AGREEMENT . .................................................................33
G. T HE COMMERCE DEPARTMENT IMPROPERLY BASED A D ETERMINATION OF
CRITICAL CIRCUMSTANCES SOLELY ON A T HREAT OF INJURY DETERMINATION BY
THE ITC R ATHER THAN THE REQUIRED CURRENT INJURY DETERMINATION .........................33
H. A RTICLES 3 AND 4 OF THE ANTI -DUMPING AGREEMENT REQUIRE THAT INJURY AND
CAUSATION DETERMINATIONS BE BASED ON AN ANALYSIS OF THE INDUSTRY AS A
WHOLE ............................................................................................................................... .......35
III. CONCLUSION ................................................................................................................. ......35WT/DS184/R
Page B-27
I. INTRODUCTION
1. This submission is made by the Government of the Republic of Korea with respect to the
challenge by the Government of Japan to the US imposition of anti-dumping measures on Hot-Rolled
Flat-Rolled Carbon-Quality Steel Products (“hot-rolled steel”) from Japan.  In general, Korea supports
the views put forth by Japan in its submission dated 3 July 2001.1  The purpose of this submission is
to provide the Korean Government’s views with resp ect to certain select legal issues in the case as
summarized and discussed below.
II. LEGAL ARGUMENTS
A. SUMMARY OF LEGAL ARGUMENTS
1. Fair Comparison
2. Article 2.4 of the Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994 (“Anti-Dumping Agreement”) stipulates that “{a} fair comparison shall bemade between the export price and the normal value”.  The Anti-Dumping Agreement’s requirement
in Article 2.4 that dumping margins will be established based on a “fair comparison” has been
violated by the United States in the case with respect both to the Commerce Department’s application
of Facts Available and to Commerce’s use of the Arm’s Length Test to determine whether sales to
affiliated parties are “outside the ordinary course of trade”.  The Commerce Department also erred inexcluding affiliated party sales and using instead the sales by resellers to calculate normal value
without making appropriate cost and profit adjustments to those sales.
2. Critical Circumstances
3. The US improperly found critical circumstances to exist, in violation of Article 10.6 of the
Anti-Dumping Agreement.  Article 10.6, read together with Article 10.2, clearly limits retroactiveapplication of duties to circumstances where a determination of current injury, not just a threat of
injury, has been made.  Furthermore, the US finding of critical circumstances does not comport with
the limited purpose of the provision allowing for a retroactive effect.  In the case of threat of injury,
prospective final duties to prevent future injury are sufficient.
3. Injury to the Industry As a Whole
4. Articles 3.4, 3.5 and 4.1 of the Anti-Dumping Agreement require that the domestic industry
as a whole be analyzed for purposes of determining injury and causation from dumped imports.  This
analysis of injury and causation must be based on all relevant economic factors, including conditions
of competition in particular market segments, but always within the context of the industry as a
whole.
B. T
HE ARTICLE 2.4 “F AIR COMPARISON ” R EQUIREMENT IS A G ENERAL OVERARCHING
OBLIGATION GOVERNING ALL ASPECTS OF THE DETERMINATION OF DUMPING
5. The “fair comparison” requirement of Article 2.4 is a free-standing obligation that requires
that any comparison between export price and normal value be “fair”.  The fair comparison
requirement by its own terms is not conditioned on any other provision of the Anti-Dumping
Agreement; it is not limited to particular adjustments or specific situations.
                                                     
1 First Submission of the Government of Japan in United States - Anti-Dumping Measures on Certain
Hot-Rolled Steel Products from Japan, WT/DS184 (3 July 2000) (“Japan’s First Submission”).WT/DS184/R
Page B-28
6. The “fair comparison” requirement of Article 2.4 is set forth in a separate, mandatory
sentence.  This is in stark contrast to the more limited “fair comparison” language of the prior Tokyo
Round Anti-Dumping Code:
In order to effect a fair comparison . . . the two prices shall be compared at the same
level of trade . . . and in respect of sales made at as nearly as possible the same time.2
7. The language of the Tokyo Round Anti-Dumping Code thus arguably linked the “fair
comparison” requirement to the requirements that the comparison be made between sales at the same
level of trade and at the same time.  However, whether or not one could have argued before the
Uruguay Round that a comparison that simply complied with the level of trade and timing
requirements of the Anti-Dumping Code was “fair3, unquestionably that is no longer the case.
8. The “fair comparison” requirement is set forth independently of the other requirements of
Article 2.4 in the current Anti-Dumping Agreement and must be read this way in conformity with its
plain meaning, in light of its context.  Thus, the “fair comparison” requirement of the first sentence ofArticle 2.4 imposes a general obligation, in addition to the specific disciplines set forth in the
remaining provisions of Article 2 of the Anti-Dumping Agreement.  It interposes a general “fairness”
requirement in the administration of anti-dumping proceedings which is consistent with the overall
purpose of the Anti-Dumping Agreement to combat unfair trade.  It would be absurd to conclude
otherwise and permit signatories to knowingly en gage in “unfair” comparisons in anti-dumping
proceedings.
9. Finally, any interpretation that ignored this independent fair comparison requirement would
render the first sentence of Article 2.4 of the Anti-Dumping Agreement useless and superfluous,
which is contrary to Article 31 of the Vienna Convention on the Law of Treaties and previous
decisions of the Appellate Body.
4
C. THE USE OF FACTS AVAILABLE AGAINST A R ESPONDENT EXPORTER , W HERE A US
PETITIONER COMPANY AFFILIATED WITH  THAT RESPONDENT EXPORTER REFUSED TO
COOPERATE WITH THE INVESTIGATION , VIOLATES THE ARTICLE 2.4 R EQUIREMENT FOR A
FAIR COMPARISON
10. The Commerce Department applied Facts Available to Japanese Respondent Kawasaki Steel
Company (“KSC” ).  The details are described in paragraphs 61-89 of Japan’s First Submission, but
the essential elements for purposes of this discussion are the following:
-- KSC was a Japanese Respondent which exported a portion of its exports to the United
States to California Steel Industries (“ CSI”), a company which was 50- per cent
owned by KSC and 50- per cent owned by the Brazilian mining company CompanhiaVale de Rio Doce (“CVRD”).
-- CSI not only was affiliated with KSC, it was also a petitioner in the anti-dumping
case, and CSI testified against KSC and the other Respondents at the US International
Trade Commission’s Injury Hearing.
                                                     
2 Tokyo Round Anti-Dumping Code, Article 2:6.
3 See EC--Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil , Report of the
Panel, ADP/137, adopted on 30 Oct. 1995, para. 492 (“the wording of Article 2:6 [of the Tokyo Round Anti-
Dumping Code] ‘in order to effect a fair comparison’ made  clear that if the requirements of that Article were
met, any comparison thus undertaken was deemed to be ‘fair.’”).
4 See, e.g., US -- Standards for Reformulated and Conventional Gasoline  (20 May 1996),
WT/DS/AB/R at 23.WT/DS184/R
Page B-29
-- Because CSI is “affiliated” with KSC under Commerce Department rules governing
affiliation, Commerce required CSI to report its further manufacturing and re-sale
price data for hot-rolled coil imported from KSC.  This data was in the exclusive
possession of CSI -- KSC did not have access to it.
-- KSC not only made substantial efforts to obtain the data, it documented its efforts to
cooperate and CSI’s refusal to do so.  KSC also reported all cost and price data in its
possession, including its prices to CSI.
-- Commerce applied Facts Available against KSC for CSI’s failure to cooperate with
the investigation.  Commerce selected as Facts Available “the second-highest
margin” calculated from among KSC’s other US sales.
-- The resulting anti-dumping margin for KSC of 67.14  per cent was a single margin
composed of actual transaction-to-transaction comparisons and, for sales to CSI
(which composed a sizeable portion of al l of KSC’s US sales), KSC’s second-highest
margin from these price-to-price comparisons as Facts Available.
11. The US application of Facts Available in this situation in no way satisfies the fair comparison
requirement.  Article 6.8 provides that, in cases in which “any interested party refuses access to . . .
necessary information”, Facts Available may be used in conformity with Annex II.  The question in
this case goes to the heart of the issue of fairness -- which interested party “refused” access to data
and against which party were Facts Available applied.  CSI, who was the party who refused tocooperate, had no reason to cooperate with the Commerce Department.  As a Petitioner, it had an
interest in seeing the highest possible margin imposed on KSC.
12. The party who Commerce punished, of course, was KSC.  KSC was penalized by an anti-
dumping duty margin which was improperly inflated by the application of Facts Available to the CSI
sales, and then this inflated duty rate was applied to all of KSC’s imports.  KSC tried to cooperatewith the information request but could not do so du e to CSI’s refusal.  Thus, the “less favourable”
result was not applied against the party which did not cooperate in accordance with Annex II.7.
13. Moreover, Annex II.5 of the Anti-Dumping Agreement provides that “Even though the
information provided may not be ideal in all resp ects, this should not justify the authorities from
disregarding it provided the interested party has acted to the best of its ability.”  There were a numberof reasonable and fair alternatives available to Commerce that would have been consistent not only
with US law, but also with US obligations under the Anti-Dumping Agreement, including the
obligation to conduct a “fair comparison.”  For example, Commerce could have used KSC’s prices to
CSI.  Since it was clear from CSI’s actions in this matter that it acted independently from KSC, there
was no obvious reason to assume that KSC’s price to CSI was not at arm’s length.  Commerce also
could have used the weighted-average margin on the sales to unaffiliated parties as a surrogate margin
for the sales to CSI.  This was certainly a valid source of secondary information in accordance withAnnex II.7.
14. At a minimum, Commerce should have established two separate margins applicable to KSC:
(1) a margin for its sales to CSI, based on the application of Facts Available to CSI; and (2) a separate
margin for KSC applicable to its other US sales.  While this result would still have punished the
Respondent for the failure of a Petitioner to cooperate in the investigation, it at least would haveminimized the effect and focused the impact on the party that withheld information.
15. Unfortunately, the approach which the Commerce Department did select -- i.e., to punish a
respondent and reward a petitioner for that pe titioning company’s failure to cooperate in an
investigation of the respondent-- and then give maximum effect to that  “penalty” by applying it to all
sales, was not “fair” and violated the requirement of Article 2.4.  Commerce should have used one ofWT/DS184/R
Page B-30
the available reasonable approaches that fully complied with the US obligations under the Anti-
Dumping Agreement.
D. THE US F AILURE TO USE REASONABLE AND AVAILABLE DATA FROM SECONDARY SOURCES
FOR SALES COMPARISONS VIOLATED THE OBLIGATION UNDER ARTICLE 2.4 T O MAKE A
FAIR COMPARISON .
16. The Commerce Department also applied Facts Available to certain transactions by NKK
Corporation (“NKK”) and Nippon Stee l Corporation (“NSC”).  Commerce determined that a single
variable -- the factor to convert theoretical weight to actual weight for a small number of sales in the
home market to make them comparable to the US sales -- was deficient because the companies failed
to submit that conversion factor in what Commerce considered to be a timely manner.5   Commerce
decided not to obtain the specific missing data from a secondary source ( e.g., KSC provided a
conversion factor that Commerce verified and used.6) and then calculate margins based on a fair
comparison.  Rather, Commerce simply substituted the margin (a very high margin) calculated foranother sale by these companies as Facts Available for sales where the conversion factor was
required.
17. The Government of Japan addresses numerous errors committed by the US with respect to
this issue.  For example, Japan effectively demonstr ated that the necessary data was presented and in a
timely fashion.
7   The Government of Korea’s comments address only the US failure to conduct a fair
comparison of the sales in accordance with Article 2.4 of the Anti-Dumping Agreement and its failure
to comply with Annex II.
18. The US decision to rely on a high margin from another sale as Facts Available rather than
seeking a secondary source for the single factor needed to convert sales volumes to a common weight
measure does not meet the requirements of Article 2.4 or Annex II.
19. Most fundamentally, Commerce never offers any reason why secondary information, for what
was a very minor sales adjustment, could not have been used to obtain a conversion factor and
therefore make an actual sales comparison.  But even  apart from the fundamental error of not using as
Facts Available specific information available from a secondary source, the dumping margin
Commerce selected as the surrogate simply is not comparable.  It appears the US made no attempt todetermine whether the margin chosen was derived from a sale that was in any manner comparable to
the sales in question, nor was any such justification offered.
20. Article 2.4 requires a “fair comparison” between the export price and normal value in order to
calculate the margin of dumping.  Furthermore, Article 2.4 provides that “[d]ue allowance shall be
made in each case, on its merits, for differences which affect price comparability . . . .”  In this case,by not seeking a secondary source for the weight conversion factor and instead, resorting to a high
margin on sales that were not justified as comparable, Commerce failed to make a fair comparison
and failed to assure price comparability.
21. The Government of Korea does not dispute that, when a respondent fails to produce a piece of
information which is a necessary part of a proper price comparison for a certain sale or group of sales,
the authority may use surrogate information in the fo rm of Facts Available to fill the gap (Article 6.8
and Annex II).  Moreover, if the interested party does not cooperate and relevant information iswithheld, the authority may use surrogate data that “could lead” to a “less favourable” result for the
interested party (Annex II.7).  Howeve r, nothing in Annex II either implicitly or explicitly permits the
                                                     
5 Hot-Rolled Flat-Rolled Carbon-Qua lity Steel Products from Japan , 64 Fed. Reg. 24,329, 24,363
(Dep’t Commerce 6 May 1999) (final determination of sales at less than fair value).
6 Japan’s First Submission at paragraph 97.
7 See Japan’s First Submission at paragraphs 91-99, 105-108.WT/DS184/R
Page B-31
investigating authority to abandon its obligation to make a fair comparison between export prices and
normal value when it resorts to a secondary source of data.
22. To the contrary, Annex II, read as a whole, s upports the view that the authorities are to make
every effort to assure that the information relied  on results in a fair comparison.  For example,
Annex II.5 requires the use of less than ideal informa tion rather than Facts Available, if the interested
party has acted to the best of its ability.  Even if a resort to secondary sources is justified, the sourceselected must also be chosen with “special circumspection” and the secondary information should be
checked against independent sources (Annex II.7).
23. In the instant case, therefore, Commerce, in order to fulfill its obligations to conduct a fair
comparison, should have looked for data from a secondary source to replace the single variable which
was allegedly not timely provided -- the factor to convert theoretical weight to actual weight.  A
possible and obvious source for such data was the conversion factor provided by KSC in the
investigation.
8
24. Finally, the Commerce Department’s punitive purpose for not engaging in a transaction-by-
transaction comparison for those sales, and instead applying a margin from other sales is neither
recognized nor permitted by Annex II nor the Anti-Dumping Agreement as a whole.  Commerce did
not seek secondary information on a conversion factor in order to make a fair comparison because it
“sought a margin that is sufficiently adverse so as to effectuate the statutory purpose of the adversefacts available rule to induce respondents to provide the Department with complete and accurate
information".
9
25. As noted, the Anti-Dumping Agreement allows an authority to use secondary data to make a
fair comparison, even when the result may be less favourable to the party (Annex II.7).  However, the
distinction is that here the US sought unfavourable data for the sole objective of inflating the marginto serve some “ punitive” purpose.  Even when other secondary data which would have permitted a
fair comparison was available, the US did not use it in clear violation of the Anti-Dumping
Agreement.
E. C
OMMERCE ’S ARM’S-LENGTH TEST, AND THE APPLICATION OF THE TEST TO DETERMINE
THAT SALES TO AFFILIATED PARTIES ARE “OUTSIDE THE ORDINARY COURSE OF TRADE ,”
ARE INCONSISTENT WITH ARTICLE 2 OF THE ANTI-DUMPING  AGREEMENT .
26. The United States disregarded most home market sales of the Japanese Respondents to
affiliated parties after determining that those sales were “outside the ordinary course of trade".10  The
basis of this decision was the application of the so-called “Arm’s-Length Test” to home market sales.
This test requires that, in order for sales to an affiliated party to be used in the calculation of normalvalue, the weighted-average price for all sales to that affiliated party equal at least 99.5 per cent of the
weighted-average price of all sales to non-affiliated customers.  Since most sales to affiliated parties
did not meet this standard in this case, those affiliated party sales were not used.
27. The volume of affiliated party sales was significant for each Respondent, so Commerce used
instead the resale prices by those affiliated home market customers to unaffiliated customers as
normal value.  Under the Commerce Department’s methodology, no adjustments are made for
differences in price comparability due to the additional costs and profit for resellers.
                                                     
8 See discussion in Japan’s First  Submission at paragraph 97.
9 Hot-Rolled Flat-Rolled Carbon-Qua lity Steel Products from Japan , 64 Fed. Reg. 24,329, 24,369
(Dep’t Commerce 6 May 1999) (final determination of sales at less than fair value).
10 Japan’s First Submission at paragraph 154.WT/DS184/R
Page B-32
28. In this case, the United States violated the requirement of Article 2.4 of the Anti-Dumping
Agreement when it disregarded the home market sales to affiliated parties as outside the ordinary
course of trade on the arbitrary basis of the Arm’s-Length Test.
29. The Anti-Dumping Agreement only recognizes one basis for disregarding sales as “outside
the ordinary course of trade.”  Article 2.2.1 of the Anti-Dumping Agreement provides that sales at
prices below the cost of production, plus administrative, selling and general costs, “may be treated asnot being in the ordinary course of trade by reason of price and may be disregarded in determining
normal value,” but only under certain prescribed conditions.
30. The conditions that must be met under this Article for finding sales below cost to be outside
the ordinary course of trade are that:  (1) they are made within an extended period of time; (2) they are
in substantial quantities; and (3) they do not provide for the recovery of all costs within a reasonable
period of time.  In particular, the Anti-Dumping Agreement, at Footnote 5, provides that sales below
cost cannot be treated as outside the ordinary course of trade unless, by quantity, they represent atleast 20  per cent of the volume of sales under consideration.
31. It is significant that even below cost sales cannot be excluded under the Anti-Dumping
Agreement unless certain specified requirements are met.  (Of course, if there were below cost sales
to affiliated parties that met the requirements of Article 2.2.1, they would also be excluded.)
Logically, given this careful attention to the treatment of below cost sales and consistent with theoverall requirement that comparisons be “fair,” above cost sales cannot be excluded in an arbitrary
manner.
11
32. The application of the Arm’s-Length Test in this case was arbitrary.  Commerce’s Arm’s-
Length Test compared all sales to each affiliated party to the weighted-average price of all sales to
unaffiliated parties.  Thus, the Arm’s-Length Test indiscriminately mixed together all models ofsubject merchandise sold to affiliated and unaffiliated parties.  The US took no account of the
differences in prices and/or product that existed independent of the factor of affiliation which could
have caused the weighted-average prices between an affiliated party and unaffiliated parties to vary
more than 0.5  per cent.
33. In essence, the Arm’s-Length Test arbitrarily assumes that such a difference in the weighted-
average price is due solely to affiliation, and Commerce disregarded all sales to the affiliated party on
that basis.  Thus, the test is logically flawed and is not a fair ( “apples-to-apples”) comparison and
cannot be sustained.
34. Finally, the test has a bias because Commerce disregards only those affiliated party sales
which have weighted-average prices lower than the weighted-average price to unaffiliated customers.Affiliated party sales that equal or exceed 99.5  pe r cent of the weighted-average price to unaffiliated
parties are included in the database.  This guarantees that only higher-priced sales remain in the
database for the calculation of normal value, and margins of dumping are increased.
                                                     
11 The US theory is that all its interpretations are permissible as long as the Anti-Dumping Agreement
is silent with respect to a certain methodology ( See First Submission of the Government of the United
States of America in United States - Anti-Dumping Measures on Certain Hot-Rolled Steel Products from
Japan, WT/DS184 at A-29-31 (July 24, 2000) ).  Such a broad interpretation cannot be accepted since the
illogical result of such a theory would be that the more creatively arbitrary the methodology is, the less likely it
is to come within the specific terms of the Anti-Dumping Agreement and, therefore, would be a permissible
interpretation.  In any event, the free-standing requirement of Article 2.4 that a “fair comparison” must be madebetween export price and normal value also prevents such an absurd result.WT/DS184/R
Page B-33
F. COMMERCE ’S FAILURE TO MAKE ADJUSTMENTS TO THE RESALE PRICE OF AFFILIATED
PARTY SALES VIOLATED THE FAIR COMPARISON REQUIREMENTS OF ARTICLE 2.4 O F THE
ANTI -DUMPING AGREEMENT .
35. Another independent legal error with respect to th is issue of the treatment of affiliated party
sales is that when Commerce disregarded the sales to affiliated parties as outside the ordinary course
of trade and used the downstream sales of these affiliated parties to calculate normal value,Commerce did not make adjustments for differences in costs incurred for such sales for purposes of
price comparability.  Specifically, Commerce deducted neither the costs incurred by the affiliated
reseller in the resale of the merchandise, nor its profits.  Yet, both costs and profits directly affected
price comparability.  As a result, the normal value for these affiliated party resellers is arbitrarily
inflated.
36. It is noteworthy that Article 2.3 provides that an authority concerned that an affiliation
between the exporter and importer reduces the reliability of the export price to the affiliated importermay use the constructed export price (CEP) to the first unaffiliated buyer.  In addition, the fourth
sentence of Article 2.4 provides that when such sales are used, the authorities should make allowances
for costs incurred between importation and resale, and for profits accruing to the affiliated reseller.
37. Obviously, these provisions in the Anti-Dumping Agreement with respect to export sales are
not directly applicable to home market sales and the Anti-Dumping Agreement makes no provisionfor excluding affiliated party sales in calculating normal value.  Yet, if Commerce uses the resale
price for affiliated party sales in the home market, then it must recognize that the sales require cost
adjustments to make them comparable.  Article 2.4 of the Anti-Dumping Agreement explicitly
requires that due allowances be made “for differences that affect price comparability.”  Furthermore,
the failure to follow a complete and accurate met hodology for the treatment of these sales in the home
market, when such adjustments are explicitly provided for and made for constructed export price, falls
far short of a “fair” comparison.  By not making comparable adjustments for costs and profit on sales
by affiliated resellers in the domestic market as it does in the export market, Commerce ’s
methodology is in violation of Articl e 2.4 of the Anti-Dumping Agreement.
G. T
HE COMMERCE DEPARTMENT IMPROPERLY BASED A D ETERMINATION OF CRITICAL
CIRCUMSTANCES SOLELY ON A T HREAT OF INJURY DETERMINATION BY THE ITC R ATHER
THAN THE REQUIRED CURRENT INJURY DETERMINATION
38. On 23 November 1998, the Commerce Department announced its preliminary critical
circumstances finding pursuant to the Policy Bulletin that Commerce had issued on 8 October 1998,
which announced its new critical circumstances policy.  At the time of the preliminary criticalcircumstances determination, the only US injury finding that was in effect was an affirmative threat
determination -- the USITC did not find current injury in its preliminary determination.  Also, at the
time of the critical circumstances finding, Commerce had yet to issue a decision regarding the level of
dumping, if any -- Commerce’s critical circ umstances finding preceded its announcement of
preliminary dumping margins by almost three months.
39. For the Panel to sustain Commerce’s finding of critical circumstances, Article 10.7 requires
that the record must contain “sufficient evidence” to support a finding of injury.  In this case,Commerce’s preliminary announcement of critical circumstances violated the provisions of
Article 10.6 of the Anti-Dumping Agreement since the USITC made a negative preliminary
determination of current injury and an affirmative preliminary determination of threat of injury only.
12  
Therefore, this determination of critical circumstances was nothing more than an obvious and
                                                     
12 Certain Hot-Rolled Steel Products from Brazil, Japan and Russia , USITC Pub. 3142 (Nov. 1998)
(preliminary determination) at 1.WT/DS184/R
Page B-34
effective means of chilling imports even before  the preliminary determination of dumping and
violated the Agreement.
40. Article 10.6 of the Anti-Dumping Agreement, read together with Article 10.2, establishes the
limited conditions under which anti-dumping duties may be applied retroactively.  Article 10.2
provides the circumstances under which duties can be applied back to the provisional duty period.
Article 10.6 provides the additional circumstances und er which definitive duties can be applied during
the provisional duty period and 90 days prior to the provisional duty period.
41. Article 10.2, which provides authority for retroactive application during the provisional
period, explicitly states that it can only be applied in the case of a determination of injury; threat of
injury is not a sufficient basis.  Therefore, Article 10.6, which covers that same provisional period as
well as the 90 days that precede it, must be read in conjunction with Article 10.2, and thus, the
provision can only apply when a finding of current injury is made.  For retroactive application of
duties, present injury is required; threat of injury is insufficient.13
42. The plain language of Article 10.6 also supports this interpretation.  The grounds for critical
circumstances apply only where importers know both that dumping is occurring and that the dumping
would cause injury.  Thus, if dumping is occurring but no injury is being caused, then the Anti-
Dumping Agreement’s requirements for critical circumstances are not met.
43. This is not a new or unique interpretation of the requirement of Article 10.6.  To the contrary,
until late 1997, the Commerce Department endorsed it, stating:
When {USITC} has preliminarily found no reasonable indication that a US industry
is experiencing present material injury by reason of the dumped subject merchandise,
but only a threat of injury, {Commerce} has determined that it is not reasonable to
conclude that an importer knew or should have known that its imports would causematerial injury.
14
44. Finally, such an interpretation that only a present injury finding can support a critical
circumstances determination, also comports with the limited object and purpose of Article 10.6, which
is to assure that the remedial effects of final duties are not eviscerated.  If only threat of injury exists,
the remedial effect of the final dumping duty is not undermined since its prospective application willprevent injury from occurring (Article 10.6(ii)).  It  is only in the case of present injury that the
remedial effects of a final anti-dumping duty could be undermined.
45. Commerce’s invocation of critical circumstances in this case, therefore, did not serve its
stated purpose nor did not conform to the requirement of Article 10.6.  It pre-empted the normal
timing of the investigative process and resulted in an impermissible action intended solely to chill and
disrupt the flow of trade which should be beyond th e reach of anti-dumping measures.  That, in fact,
appears to have been the purpose both of Commerce’s announcement of the policy bulletin changing
Commerce’s practice concerning critical circumstances less than ten days following the filing of the
petition and of Commerce’s announcement of critical circumstances almost three months in advance
of the preliminary dumping determination and in the absence of a preliminary determination of
current injury or dumping margins.
                                                     
13 A limited exception provided in Article 10.2 allows retroactive duties to be levied after finding threat
of injury, but only if there would have been a final injury determination absent provisional measures.  There was
no finding in this case to support the application of this exception.
14 Brake Drums and Brake Rotors from the People’s Republic of China , 62 Fed. Reg. 9160, 9164
(28 Feb. 1997) (final determination of sales at less than fair value).WT/DS184/R
Page B-35
46. Thus, regardless of the Panel’s determination regarding the merits of the evidence of current
injury employed by Commerce in its determination of critical circumstances, the Panel should find
that, for a critical circumstances determination to be valid, there must be “sufficient evidence” of
current injury upon which the determination is based.
H. ARTICLES 3 AND 4 OF THE ANTI -DUMPING AGREEMENT REQUIRE THAT INJURY AND
CAUSATION DETERMINATIONS BE BASED ON AN ANALYSIS OF THE INDUSTRY AS A W HOLE
47. The Japanese Government asserts that the USITC’s injury analysis did not properly consider
injury to the “domestic producers as a whole of the like product” in accordance with Article 4.1 of the
Anti-Dumping Agreement.15  While the Korean Government does not comment generally regarding
the particular facts of the USITC’ s analysis in this case, it urges the Panel to carefully examine the
merits of Japan’s claims and the legal and factual support for the USITC’s injury finding.
48. We highlight Article 3.4 which requires an analysis of “all relevant economic factors and
indices bearing on the state of domestic industry,” i.e., the industry as a whole (Article 4.1).  Thus,
where there are divergent trends in different segments of the industry, an
49. Authority may not unduly emphasize a particular segment of the industry at the expense of
the industry as a whole while all relevant conditions of competition are considered.  In addition,
Article 3.5 states that “{t}he demonstration of a causal relationship between the dumped imports and
the injury to the domestic industry shall be based on an examination of all relevant evidence beforethe authorities”.  Article 3.6 clarifies that this determination must be made “in relation to the domestic
production of the like product” where, as in this case, such data was available.
III. CONCLUSION
50. The Government of the Republic of Korea respectfully requests the Panel’s careful
consideration of its comments.
_______________
                                                     
15 Japan’s First Submission at paragraphs 253-255.