WORLD TRADE
ORGANIZATIONWT/DS179/R
22 December 2000
(00-5484)
Original:  English
UNITED STATES – ANTI-DUMPING MEASURES ON
STAINLESS STEEL PLATE IN  COILS AND STAINLESS
STEEL SHEET AND STRIP
FROM KOREA
Report of the Panel
The report of the Panel on United States - Anti-Dumping Measures on Stainless Steel Plate in Coils
and Stainless Steel Sheet and Strip from Korea is being circulated to all Members, pursuant to theDSU.  The report is being circulated as an unrestricted document from 22 December 2000 pursuant to
the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1).
Members are reminded that in accordance with the DSU only parties to the dispute may appeal a
panel report.  An appeal shall be limited to issues of law covered in the Panel report and legal
interpretations developed by the Panel.  There shall be no ex parte  communications with the Panel or
Appellate Body concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat:  This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60
days after the date of its circulation unless a party to the dispute decides to a ppeal or the DSB decides by
consensus not to adopt the report.  If the Panel Report is appealed to the Appellate Body, it shall not beconsidered for adoption by the DSB until after the completion of the appeal.  Information on the current statusof the Panel Report is available from the WTO Secretariat.WT/DS179/R
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TABLE OF CONTENTS
Page
I. INTRO DUCTION ................................................................................................................. ...1
II. FACTUAL ASPECT S ............................................................................................................ .2
A. P LATE ..............................................................................................................................2
B. S HEET ..............................................................................................................................3
III. PARTIES' REQUESTS FOR FINDINGS AND RECO MMENDATIONS ........................4
A. K OREA .............................................................................................................................4
B. U NITED STATES ...............................................................................................................5
IV. ARGUMENTS OF THE PART IES AND THIRD PARTIES ..............................................5
V. INTERIM REVI EW............................................................................................................... ..5
VI. FINDINGS.................................................................................................................... .............8
A. GENERAL RE MARKS .................................................................................................8
B. ALLEGED  "DOUBLE CONVERSION" OF CERTAIN HOME
MARKET SALES  PRICES ...........................................................................................9
1. Factual background ............................................................................................... 9
2. Claims under Article 2.4.1 of the AD Agreement  .................................................9
(a) Arguments of the parties ..................................................................................9
(b) Evaluation by the Panel...................................................................................10
(i) Does Article 2.4.1 prohibit unnecessary currency conversions? ...........10
(ii) Did the United States properly determine that the local sales
were made in won? .................................................................................11
(iii) Did the United States perform unnecessary currency conversions
in violation of Article 2.4.1 of the AD Agreement? ................................20
3. Claims under Article 2.4 of the AD Agreement  ("fair comparison") ..............21
(a) Arguments of the parties ................................................................................21
(b) Evaluation by  the Panel ..................................................................................21
4. Claims under Article X:3(a) of GATT 1994 and Article 12 of the AD
Agreement  ..............................................................................................................21
(a) Arguments of the parties ................................................................................21
(b) Evaluation by  the Panel ..................................................................................22
(i) The Plate in vestiga tion ...........................................................................22
(ii) The Sheet  in vestiga tion ..........................................................................24
C. TREATMENT OF UN PAID SALES .................................................................24
1. Factual background .............................................................................................24
2. Claims under Article 2.4 ("allowances") ............................................................24
(a) Arguments of the parties ................................................................................24WT/DS179/R
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(b) Evaluation by  the Panel ..................................................................................26
(i) Was the DOC's treatment of unpaid sales in respect of POSAM
part of the construction of  the export price? ..........................................26
(ii) Was the DOC's adjustment for unpaid sales in respect of sales
through unaffiliated importers a permissible allowance for a
difference affecting pr ice comparability? ...............................................28
(iii) Is Korea's claim regarding the DOC's adjustment for unpaid
sales in respect of sales through POSAM to construct an exportprice within the Panel's terms of refe rence? ..........................................31
(iv) Is the DOC's adjustment for unpaid sales in respect of sales
through POSAM to construct an export price consistent with
Article 2.4, fourth sentence, of the AD Agreement? ...............................33
3. Claims under Article 2.4 ("fair comparison")....................................................37
(a) Arguments of the parties ................................................................................37
(b) Evaluation by  the Panel ..................................................................................37
D. MULTIPLE AVE RAGING .................................................................................37
1. Factual background .............................................................................................37
2. Claim under Article 2.4.2 of the AD Agreement ...............................................38
(a) Arguments of the parties ................................................................................38
(b) Evaluation by  the Panel ..................................................................................39
(i) Does Article 2.4.2 prohibi t multiple a veraging? ....................................39
(ii) Was the use of multiple averaging permissible in these
investiga tions? ........................................................................................40
3. Claim under Article 2.4.1 .....................................................................................44
(a) Arguments of the parties ................................................................................44
(b) Evaluation by  the Panel ..................................................................................44
4. Claim under Article 2.4 (" fair comparison") ....................................................45
(a) Arguments of the parties ................................................................................45
(b) Evaluation by  the Panel ..................................................................................46
E. OTHER CLAIMS BY KOREA ..........................................................................46
1. Claims under Article X of GATT 1994 and Articles 6 and 12 of the
AD Agreement ......................................................................................................46
2. Claims under Article VI of GATT 1994 and Article 1 of the AD
Agreement .............................................................................................................47
VII. CONCLUSIONS AND RECOMMENDAT ION .................................................................47
A. CONCLUSIO NS ..................................................................................................47
B. RECOMMENDATION AND SUGGESTIO N ..................................................48WT/DS179/R
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ANNEX 1 SUBMISSIONS OF KOREA
Annex 1-1 First Submission of Korea............................................................................................5 0
Annex 1-2 Oral Statement of Korea at the First Meeting of the Panel ........................................101
Annex 1-3 Written Questions from Korea to the United States
at the First Meetin g of the Panel ................................................................................116
Annex 1-4 Responses of Korea to Questions Posed by the Panel and by the United States
at the First Meetin g of the Panel ................................................................................120
Annex 1-5 Second Submission of Korea .....................................................................................145
Annex 1-6 Oral Statement of Korea at the Second Meeting of the Panel....................................196
Annex 1-7 Responses of Korea to Questions Posed by the Panel at the
Second Meeting of the Panel......................................................................................214
ANNEX 2 SUBMISSIONS OF THE UNITED STATES
Annex 2-1 First Submission of the United States ........................................................................228
Annex 2-2 Oral Statement of the United Stat es at the First Mee ting of the Panel.......................275
Annex 2-3 Written Questions from the United States to Korea
at the First Meetin g of the Panel ................................................................................285
Annex 2-4 Responses of the United States to Questions Posed by the Panel
and by Korea at the First Meeting of the Panel..........................................................286
Annex 2-5 Second Submission of the United States....................................................................314
Annex 2-6 Oral Statement of the United States at the Second Meeting of the Panel ..................332
Annex 2-7 Responses of the United States to Questions Posed by the Panel at
the Second Meeting of the Panel................................................................................342
ANNEX 3 SUBMISSIONS OF THE THIRD PARTIES
Annex 3-1 First Submission of the European Communities........................................................355
Annex 3-2 First Submission of Japan ..........................................................................................360
Annex 3-3 Oral Statement of the European Communities at the First Meeting of the Panel ......369
Annex 3-4 Oral Statement of Japan at the First Meeting of the Panel.........................................372WT/DS179/R
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I. INTRODUCTION
1.1 On 30 July 1999, Korea requested consultations with the United States regarding the
preliminary and final determinations of the United States Department of Commerce ("DOC") on
imports of stainless steel plate in coils ("Plate") from Korea, dated 4 November 1998 and31 March 1999, respectively, and the preliminary and final determinations of the DOC on imports of
stainless steel sheet and strip in coils ("Sheet") from Korea, dated 4 January 1999 as amended
26 January 1999 and 8 June 1999, respectively.  Korea made its request pursuant to Article 4 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes (the "Dispute
Settlement Understanding" or "DSU"), Article XXIII:1 of the General Agreement on Tariffs andTrade 1994 ("GATT 1994"), and Article 17.3 of the Agreement on Implementation of Article VI of
GATT 1994 (the "Anti-Dumping Agreement" or "AD Agreement").
1 The United States and Korea
held consultations on 17 September 1999, but failed to reach a mutually satisfactory solution.
1.2 On 14 October 1999, Korea requested the establishment of a panel with the standard terms of
reference set out in Article 7 of the DSU.  Korea made its request pursuant to Article 6 of the DSU,Article XXIII:2 of GATT 1994 and Article 17.5 of the AD Agreement.
2 In that request, Korea
identified the United States measures at issue as the anti-dumping duty order on imports of Plate from
Korea, dated 21 May 1999, including actions by the DOC preceding this measure, such as the
preliminary and final determinations of the DOC dated 4 November 1998 and 31 March 1999,
respectively, and the anti-dumping duty order on im ports of Sheet from Korea, dated 27 July 1999,
including actions by the DOC preceding this measure, such as the preliminary and final
determinations of the DOC dated 4 January 1999 as amended 26 January 1999 and 8 June 1999,
respectively.
1.3 At its meeting on 19 November 1999, the Disput e Settlement Body ("DSB") established a
panel pursuant to the above request.3 At that meeting, the parties to the dispute agreed that the Panel
should have standard terms of reference.  The terms of reference were:
"To examine, in light of the relevant provisions of the covered agreements cited by
Korea in document WT/DS179/2, the matter referred to the DSB by Korea in that
document, and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements".
1.4 The European Communities and Japan reserved their rights as third parties to the dispute.
1.5 On 24 March 2000, the Panel was constituted as follows:
Chairman: Mr. José Antonio S. Buencamino
Members: Mr. G. Bruce Cullen
Ms. Enie Neri de Ross
1.6 The Panel met with the parties on 13-14 June 2000 and 12-13 July 2000.  It met with the third
parties on 14 June 2000.
1.7 The Panel submitted its interim report to the parties on 9 November 2000.  The Panel
submitted its final report to the parties on 14 December 2000.
                                                     
1 WT/DS179/1.
2 WT/DS179/2.
3 WT/DS179/3.WT/DS179/R
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II. FACTUAL ASPECTS
2.1 This dispute concerns the imposition of definitive anti-dumping duties by the DOC on
imports of Plate and Sheet from Korea.  The DOC imposed definitive duties on Plate and Sheetthrough separate proceedings.
A. P
LATE
2.2 On 31 March 1998, a number of U.S. steel companies and U.S. steel workers' associations
filed an anti-dumping application with the DOC alleging that imports of Plate from Korea and five
other countries were being exported to the United States at less than their fair value and that suchimports were materially injuring an industry in the United States.  The DOC received supplemental
information from the petitioners in April 1998.  On 27 April 1998, the DOC published a notice
announcing the initiation of an anti-dumping investigation on imports of Plate from Korea and the
five other countries concerned.
4 The period of investigation selected by the DOC for the purpose of
determining whether dumping had occurred we nt from 1 January 1997 through 31 December 1997.5
2.3 On May 27 1998, the DOC issued investigation questionnaires to two Korean companies,
including Pohang Iron and Steel Company ("POSCO").6 POSCO replied to Section A of the
investigation questionnaire on 1 July 1998 and to Sections B through D of that same questionnaire on
20 July 1998.  Additionally, in July, August, Sept ember and October 1998, POSCO submitted replies
to supplemental questionnaires.  In turn, the petitioners filed comments with respect to POSCO'ssubmissions in July, August and September 1998.
7 On 4 November 1998, the DOC published a
preliminary affirmative dumping determination, and instructed the U.S. Customs Service to require a
cash deposit or the posting of a bond on imports of Plate from Korea, equal to the calculated dumping
margins (2.77% for both POSCO and all the other Korean exporters).8
2.4 In November-December 1998, the DOC verified the sales data and the cost data submitted by
POSCO.  POSCO submitted revised sales data on 30 November 1998.  Additionally, both POSCO
and the petitioners filed case briefs on 26 January 1999, commenting on the preliminary
determination, and rebuttal briefs, commenting on the case briefs, on 2 February 1999.9 On
31 March 1999, the DOC published a final affirmative dumping determination, and instructed the
U.S. Customs Service to continue requiring a cash deposit or the posting of a bond on imports of Plate
from Korea, equal to the calculated dumping ma rgins (16.26% for both POSCO and all the other
Korean exporters). 10
2.5 On 4 May 1999, the United States International Trade Commission informed the DOC of its
final affirmative injury determination concerning imports of Plate from the six investigated countries,
                                                     
4 Initiation of Antidumping Duty Inves tigations: Stainless St eel Plate in Coils from Belgium, Canada,
Italy, Republic of South Africa, South Korea, and Taiwan , Federal Register Vol. 63, No. 80, at pages 20580-
20585. Korea Exhibit 3.
5 Notice of Preliminary Determination of Sales at Less than Fair Value: Stainless Steel Plate in Coils
from the Republic of Korea ("Preliminary Determination on Plate" ), Federal Register Vol. 63, No. 213, at page
59536. Korea Exhibit 4.
6 In what follows, we only make reference to POSCO's participation in the investigation since Korea is
not challenging the actions taken by the DOC with respect to the other Korean company.
7 Preliminary Determination on Plate , at page 59536. Korea Exhibit 4.
8 Preliminary Determination on Plate , at page 59539. Korea Exhibit 4.
9 Notice of Final Determination of Sales at Less than Fair Value: Stainless Steel Plate in Coils from the
Republic of Korea ("Final Determination on Plate") , Federal Register Vol. 64, No. 61, at page 15444. Korea
Exhibit 11.
10 Final Determination on Plate , at page 15456. Korea Exhibit 11WT/DS179/R
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including Korea.11 Following this notification, on 21 May 1999 the DOC published an anti-dumping
duty order with respect to imports of Plate from these countries, setting a cash deposit rate for imports
of Plate from Korea equal to the dumping margins arrived at by the DOC in its final determination
(16.26% for both POSCO and all the other Korean exporters).12
B. SHEET
2.6 On 10 June 1998, a number of U.S. steel companies and U.S. steel workers' associations filed
an anti-dumping application with the DOC alleging that imports of Sheet from Korea and seven other
countries were being exported to the United States at less than their fair value and that such imports
were materially injuring an industry in the United States.  The DOC received supplemental
information from the petitioners in June 1998.  On 13 July 1998, the DOC published a notice
announcing the initiation of an anti-dumping investigation on imports of Sheet from Korea and the
seven other countries concerned.13 The period of investigation selected by the DOC for the purpose of
determining whether dumping had occurred went from 1 April 1997 through 31 March 1998.14
2.7 On 3 August 1998, the DOC issued investigation questionnaires to five Korean companies:
POSCO, Inchon Iron and Steel Co., Ltd ("Inchon"), Ta ihan Electric Wire Co., Ltd. ("Taihan"), Sammi
Steel Co., Ltd., and Dai Yang Metal Co., Ltd.15 On 21 September 1998, the DOC selected three
mandatory respondents for the investigation, includi ng POSCO.  POSCO replied to Section A of the
investigation questionnaire on 8 September 1998 and Sections B through D of that same questionnaire
on 23 September 1998.  Additionally, POSCO submitted replies to supplemental questionnaires inNovember 1998.  In turn, the petitioners filed co mments with respect to POSCO's submissions in
October 1998.
16 On 4 January 1999, the DOC published a preliminary affirmative dumping
determination, and instructed the U.S. Customs Service to require a cash deposit or the posting of a
bond on imports of Sheet from Korea, equal to th e calculated dumping margins (12.35% for POSCO,
0% for Inchon, 58.79% for Taihan, and 12.35% for all the other Korean exporters).17
2.8 On 28 December 1998, POSCO filed a brief before the DOC alleging that the Department had
made "significant ministerial errors" in the calc ulation of POSCO's dumping margin for the purpose
of the preliminary determination (signed on 17 December 1998 and made available to parties
thereafter).  On 26 January 1999, after reviewing th ese allegations, the DOC published an amendment
to its preliminary determination, which revise d the cash deposit rate for POSCO to 3.92%.18
2.9 In December 1998 and February-March 1999, the DOC verified the cost data and the sales
data submitted by POSCO.  POSCO submitted revised sales data on 8 March 1999.  Additionally,
                                                     
11 Antidumping Duty Orders: Certain Stainless Steel Plate in Coils from Belgium, Canada, Italy, the
Republic of Korea, South Africa and Taiwan ("Anti-Dumping Duty Order on Plate") , Federal Register Vol. 64,
No. 98, at page 27756. Korea Exhibit 13.
12 Anti-Dumping Duty Order on Plate , at page 27757. Korea Exhibit 13.
13 Initiation of Antidumping Duty Investigations: Stainless Steel Sheet and Strip  in Coils from France,
Germany, Italy, Japan, Mexico, South Korea, Taiwan, and the United Kingdom , Federal Register Vol. 63,
No. 133, at pages 37521-37528. Korea Exhibit 15.
14 Notice of Preliminary Determination of Sales at Less than Fair Value: Stainless Steel Sheet and Strip
in Coils from South Korea ("Preliminary Determination on Sheet" ), Federal Register Vol. 64, No. 1, at page
139. Korea Exhibit 16.
15 In what follows, we only make reference to POSCO's participation in the investigation since Korea is
not challenging the actions taken by the DOC with respect to the other Korean companies.
16 Preliminary Determination on Sheet , at page 137, Korea Exhibit 16.
17 Preliminary Determination on Sheet , at page 147, Korea Exhibit 16.
18 Notice of Amended Preliminary Determination of Sales at Less than Fair Value: Stainless Steel Sheet
and Strip in Coils from Korea , Federal Register, Vol. 64, No. 16, at page. 3930. Korea Exhibit 18.WT/DS179/R
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both POSCO and the petitioners filed case briefs on 15 April 1999, commenting on the preliminary
determination, and rebuttal briefs, commenting on the case briefs, on 21 April 1999.  A public hearing
was held on 26 April 1999.19 On 8 June 1999, the DOC published a final affirmative dumping
determination, and instructed the U.S. Customs Service to continue requiring a cash deposit or theposting of a bond on imports of Sheet from Korea,  equal to the calculated dumping margins (12.12%
for POSCO, 0% for Inchon, 58.79% for Taihan, and 12.12% for all the other Korean exporters). 
20
2.10 On 19 July 1999, the United States International Trade Commission informed the DOC of its
final affirmative injury determination concerning imports of Sheet from three of the eight investigated
countries, including Korea.21 Following this notification, on 27 July 1999 the DOC published an anti-
dumping duty order with respect to imports of Sheet from these three countries, setting a cash deposit
rate for imports of Sheet from Korea equal to the dumping margins arrived at by the DOC in its final
determination (12.12% for POSCO, 0% for Inchon, 58.79% for Taihan, and 12.12% for all the other
Korean exporters).22
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. KOREA
3.1 Korea respectfully requests the Panel to find that the U.S. anti-dumping measures at issue,
including actions preceding those measures, are inconsistent with the following provisions of the
AD Agreement and GATT 1994:
• Article VI:1 of GATT 1994  and Article 2.4 of the AD Agreement , which permit adjustments to
be made only for differences that are demonstrated to affect price comparability;
• Article 2.4 of the AD Agreement , which also requires the investigating authorities to make a
fair comparison of the export price and the normal value;
• Article 2.4.1 of the AD Agreement , which permits alterations to the standard price comparison
methodology to account for currency movements only when the exporting country’s currency
is appreciating against the importing country’s currency;
• Article 2.4.1 of the AD Agreement , which also permits currency conversions only when such
conversions are required;
• Article 2.4.2 of the AD Agreement , which requires that the calculation of dumping margins be
based on a comparison of a single average normal value to a single average of prices of all
comparable export transactions;
• Articles 6.1, 6.2, and 6.9 of the AD Agreement , which require the investigating authorities to
give exporters notice of all essential facts in order to provide them with a full and ample
opportunity to defend their interests;
                                                     
19 Notice of Final Determination of Sales at Less than Fair Value: Stainless Steel Sheet and Strip in
Coils from the Republic of Korea ("Final Determination on Sheet") , Federal Register Vol. 64, No. 109, at page
30665. Korea Exhibit 24.
20 Final Determination on Sheet,  at page 30688. Korea Exhibit 24.
21 Notice of Antidumping Duty Order: Stainless Steel Sheet and Strip in Coils from the United
Kingdom, Taiwan and South Korea ("Anti-Dumping Duty Order on Sheet") , Federal Register Vol. 64, No. 143,
at page 40556. Korea Exhibit 26.
22 Anti-Dumping Duty Order on Sheet,  at pages 40556-40557. Korea Exhibit 26.WT/DS179/R
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• Article 12.2 of the AD Agreement , which requires the investigating authorities to provide a
full explanation of the reasons for their determinations;
• Article X:3(a) of GATT 1994 , which requires each WTO Member to administer its laws,
regulations, decisions, and rulings in a uniform, impartial, and reasonable manner; and
• Article VI of GATT 1994  and Article 1 of the AD Agreement , which only permit anti-dumping
measures to be imposed in the circumstances provided for in Article VI and pursuant toinvestigations conducted in accordance with the AD Agreement .
3.2 Therefore, Korea requests that the Panel find that: (i) the United States has nullified or
impaired a benefit accruing to Korea, directly or indirectly, under the WTO Agreements ; and (ii) the
United States is impeding the achievement of the objectives of the WTO Agreements .
3.3 Korea further requests that the Panel recommend that the United States bring its anti-dumping
measures against Plate and Sheet from Korea into conformity with the WTO AD Agreement  and
GATT 1994 .  Specifically, Korea requests that the Panel suggest that the United States revoke the anti-
dumping duty orders concerning Plate and Sheet from Korea.
B. U
NITED STATES
3.4 The United States respectfully requests the Panel to find that the actions of the United States
in conducting the investigations at issue were  in conformity with the requirements of the
AD Agreement  and GATT 1994 .
3.5 The United States further requests that, should the Panel agree with Korea on the merits of the
case, the Panel nonetheless should reject Korea’s request to revoke the anti-dumping duty orders
concerning Plate and Sheet from Korea, and make a general recommendation and suggestions for
implementation, consistent with the DSU and established GATT/WTO practice.
IV. ARGUMENTS OF THE PARTIES AND THIRD PARTIES
4.1 With the agreement of the parties, the Panel has decided that, in lieu of the traditional
descriptive part of the Panel report setting forth th e arguments of the parties, the parties' submissions
will be annexed in full to the Panel report.  Accordingly, the parties' first and second written
submissions and oral statements, along with their written responses to questions, are attached atAnnex 1  (Korea) and Annex 2  (the United States).  The written submissions and oral statements of
the third parties are attached at Annex 3 .
V. INTERIM REVIEW
5.1 The United States  did not make any comments on the interim report.  Korea  did however
offer a number of comments on the interim report, as discussed below.  Neither party requested aninterim review meeting.
5.2 Korea  considers that the Panel misread the discussion of ‘local sales’ in the Final
Determination in Plate.  The interim report assu mes that the DOC made a factual determination that
the ‘local sales’ were denominated in won rather than in dollars. The Final Determination however
does not address the issue of denomination at all.  Moreover, the interim report appears to read the
Plate Final Determination as if the DOC made a factual determination that ‘local sales’ were paid in
won using the exchange rate prevailing on the date  of invoice. Once again, no such determination was
made.  Although the DOC did say that the customer  pays in won, it did not say how many won wereWT/DS179/R
Page 6
paid or what exchange rate was used to calculate the amount of won paid.  This confusion may result
from a misunderstanding about the significance of a charge to the sales ledger.  There is no
connection between the exchange rate that applies to the sales ledger charge and the exchange rate
that applies to the payment. Korea considers th at this incorrect understanding of the factual
determinations made by the DOC led the Panel to a line of reasoning that is not relevant to the issues
presented.  Therefore, Korea requests that paragraphs 6.19 - 6.31 be revised to reflect the absence of a
factual determination that the exchange rate was fixed as of the time of invoice.  Korea considers that,
in the absence of such a factual determination, there is no basis for upholding the DOC’s double
conversion methodology in the Plate case.
5.3 The Panel recognizes that the Final Determination in Plate does not contain an unambiguous
determination that the amount of won paid was base d upon the dollar/won exchange prevailing at the
time of invoice.23 It is however clear from the Determination as a whole that the DOC believed that
the won amounts initially reported to the DOC – amounts which were equivalent to the dollar amount
invoiced converted to won at the exchange rate prevailing on the date of invoice – were the amountsactually paid.  Thus, the DOC summarized the argume nts of the parties as reflecting a choice between
calculating normal value "based upon the US dollar price at which the local sales were invoiced" or
using "the won prices the customers actually pa y".  In examining this question, the DOC compared
POSCO's internal exchange rate on the date of invoice  not only with the DOC's "market" exchange
rate on the date of invoice but also with DOC's market exchange rate on the date of payment , and
concluded that they were dissimilar.  The DOC no ted that this contrasted with the situation in Roses
from Colombia , where "the Department verified that the payment in pesos reflected the market
exchange rate at the date of payment " (emphasis added).
 24  Thus, both the issue posed and the manner
in which it was addressed indicate the DOC's belief that the won amount paid was calculated based
upon the exchange rate prevailing as of the date of invoice. Given POSCO's questionnaire responses –which initially reported a won invoiced amount  and never suggested that the won amount paid
differed from the amount invoiced – the DOC's belie f was in our view eminently reasonable.  Thus,
we have not – except in para. 6.9 – made the changes requested by Korea.
5.4 Korea  argues that, in Paragraph 6.29, the interim report notes an ‘admitted error’ by the DOC
in the Plate case, namely, the comparison of POSCO’s ‘internal exchange rate’ to the wrong U.S.
exchange rate.  Nevertheless, the interim report considers that this ‘admitted error’ does not give rise
to an inconsistency with the AD Agreement .  In so doing, the interim report overlooks the fact that this
‘admitted error’ vitiates one of the three reasons given in the Final Determination for the double
conversion, in fact, the reason identified by the United States as the ‘primary basis’ for the double
conversion.  Moreover, the interim report appears to accept, sub silentio, the notion of ‘harmless
error’, an approach inconsistent with that taken by another recent panel.
25
5.5 We disagree with Korea.  In our view, the factual error committed by the DOC does not
undermine the validity of the DOC's resolution of this issue. Nor do we see any inconsistency
between our ruling here and that in Guatemala – Cement II .  The issue in that dispute was whether
certain violations  of the AD Agreement  – failure to provide timely notice of initiation, to provide an
                                                     
23 The DOC statement that "it is more appropriate to  use the won price in which the customer actually
pays" is not entirely clear.  Similarly, the import of the statement that "the customer pays in won not US dollars,
and the sales value of the merchandise is charged to the sales ledger in won, based on the aforementionedexchange rate [i.e., the exchange rate on the date of invoice]", depends upon whether the final clause regardingexchange rates relates only to the sales ledger or also to the amounts paid.
24 See para 6.22, infra .
25 Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico ,
WT/DS156/R, para. 8.22, adopted 17 November 2000.WT/DS179/R
Page 7
appropriate public notice and to timely provide the text of the application – were harmless.  Here, the
question is rather whether certain factual errors  vitiate a determination, thus giving rise to a violation.
5.6 Korea  contends that the interim report is incorrect in treating as a question of fact the issue
whether the DOC adjusted for the unpaid sales as part of ‘constructing the export price’ or as anadjustment to the export price (paras. 6.62 to 6.70).  There is no dispute between the parties as to what
the DOC did:  The DOC calculated a ‘bad debt expense’ for the unpaid sales and made an adjustment
to all of POSCO’s export sales to account for that expense.  The only question is how to characterize
this adjustment.  That characterization is a question of law.  In order to preserve the current balance in
the WTO system between acceptance of factual determinations and review of legal conclusions,Korea submits that a panel should not unduly defer to the investigating authority’s own
characterization of its actions.  Rather, a panel should determine as a factual question what actually
happened and then should determine as a legal question, based on an objective, functional analysis,
which provisions of the AD Agreement  are most applicable to the factual situation.  Korea therefore
requests that we treat this as a legal question, with conforming changes to the ensuing analysis.
5.7 We do not agree with Korea.  Our task as a Panel is to review the determinations of the DOC
and to establish, as a matter of fact, the bases on which it acted.  As the determinations and underlying
analysis memoranda indicated that the actions in question were taken as part of the construction of the
export price, the consistency of those actions with the AD Agreement  must be assessed against the
provisions relating to such construction.
5.8 Korea argues that the interim report in para. 6.123 addresses issues not properly before the
Panel for decision.  Moreover, Korea does not consider that the reasoning in Paragraph 6.123 is
sufficient to justify an inference that multiple averaging is permitted by the AD Agreement  in the
circumstances suggested in that Paragraph and, particularly, in Footnote 123. Accordingly, Korea
suggests that the Panel delete all of paragraph 6.123, except for the first sentence.  Alternatively,Korea suggests that the Panel keep the first two sentences of Paragraph 6.123 and replace the rest of
the paragraph with the following:  ‘We express no opinion as to whether the Anti-Dumping
Agreement permits the use of multiple averaging in that factual circumstance.’
5.9 We decline to make the change requested by Korea.  Paragraph 6.123 is an essential part of
our findings and is necessary in order to make clear why the DOC's actions were inconsistent with the
AD Agreement  and to provide guidance in respect of implementation.
5.10 Korea  argues that the interim report generally follows the common practice of panels of
declining to decide issues that are considered ‘unnecessary’ to resolution of the dispute, typically
because a measure has been found inconsistent with one provision of a WTO Agreement and the
panel considers it unnecessary to analyse the measure’s consistency with a second provision.
However, the interim report inexplicably departs from this practice in two respects.  After finding that
the United States’ use of multiple averaging in th e Plate and Sheet investigations was inconsistent
with the requirement of Article 2.4.2, the interim report continues to analyse the consistency of
multiple averaging with Article 2.4.1 (in Paragraphs 6.128 - 6.131) and with the ‘fair comparison’
requirement of Article 2.4 (in Paragraphs 6.134 - 6.136).  In the interests of ‘judicial economy,’ and
judicial consistency, Korea requests that these paragraphs be replaced in their entirety by paragraphs
declining to address these ‘unnecessary’ issues.
5.11 We decline to make the changes suggested by Korea.  We recognize that we might well have
exercised judicial economy in respect of these claims.  Having addressed them in the interim report,
however, we do not see what interest would now be served by excising our conclusions from the final
report.  To the contrary, their inclusion could prove of some utility depending the course of any
possible appeal.WT/DS179/R
Page 8
5.12 In response to comments by Korea , we have also made certain minor changes to paragraphs
6.3, 6.22, 6.24, 6.27, 6.51, 6.66, 6.68, 6.111 and 6.120.  Additional typographical and other minor
changes were made to paragraphs 1.7, 6.33, 6.68, 6.69, 6.79, 6.84, 6.97, 6.105, 6.106, 6.119, 6.125
and 7.8.
VI. FINDINGS
A. GENERAL REMARKS
6.1. In reviewing the United States' final measures imposing the anti-dumping duties at issue in
this dispute, we keep in mind the applicable principles concerning the burden of proof and the
standard of review in disputes under the AD Agreement .
6.2. In WTO dispute settlement proceedings, the burden of proof with respect to a particular claim
or defense rests with the party that asserts such claim or defence.26  In the context of the present
dispute, this means that Korea is obliged to present a prima facie  case of violation of the relevant
Articles of the AD Agreement .  In this regard, the Appellate Body has stated that ". . .  a prima facie
case is one which, in the absence of effective refutation by the defending party, requires a panel, as amatter of law, to rule in favour of the complaining party presenting the prima facie  case".
27 Thus,
where Korea presents a prima facie case in respect of a claim, it is for the United States to provide an
"effective refutation" of Korea's evidence and arguments, by submitting its own evidence and
arguments in support of the assertion that it has complied with its obligations under the
AD Agreement .  Assuming evidence and arguments are presented on both sides, it is then our task to
weigh and assess that evidence and those arguments in order to determine whether Korea has
established that the United States acted inconsistently with its obligations under the AD Agreement .
6.3. Article 17.6 of the AD Agreement  sets out a special standard of review for disputes arising
under that Agreement.  With regard to factual issues, Article 17.6(i) provides:
"(i) in its assessment of the facts of the matter, the panel shall determine whether
the authorities' establishment of the facts was proper and whether their evaluation of
those facts was unbiased and objective.  If the establishment of the facts was proper
and the evaluation was unbiased and objective, even though the panel might have
reached a different conclusion, the evaluation shall not be overturned;"
Assuming that we conclude that the establishment of the facts with regard to a particular claim in this
case was proper, we then may consider whether, based on the evidence before the DOC at the time ofthe determination, an unbiased and objective inves tigating authority evaluating that evidence could
have reached the conclusions that the DOC reached on the matter in question.
28
                                                     
26 United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India
("United States – Shirts and Blouses") , Appellate Body Report, WT/DS33/AB/R, adopted 23 May 1997, p. 14.
27 European Communities – Measures C oncerning Meat and Meat Products ("EC – Hormones" ),
Appellate Body Report, WT/DS26/AB/R–WT/DS48/AB/R, adopted 13 February 1998, para. 104.
28 We note that this is the same standard as that applied by the Panel in Mexico – Anti-Dumping
Investigation of High Fructose Corn Syrup, Report of the Panel, WT/DS132/R, adopted 24 February 2000,
which, in considering whether the Mexican investigating authorities had acted consistently with Article 5.3 indetermining that there was sufficient evidence to justify initiation, stated (para. 7.95): "Our approach in thisdispute will … be to examine whether the evidence before SECOFI at the time it initiated the investigation wassuch that an unbiased and objective investigating authority evaluating that evidence could properly have
determined that sufficient evidence of dumping, injury and causal link existed to justify initiation."WT/DS179/R
Page 9
6.4. With respect to questions of the interpretation of the AD Agreement , Article 17.6(ii) provides:
"(ii) 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 onepermissible interpretation, the panel shall find the authorities' measure to be in
conformity with the Agreement if it rests upon one of those permissible
interpretations."
Thus, in considering those aspects of the United States' determinations which stand or fall depending
on the interpretation of the AD Agreement  itself rather than or in addition to the analysis of facts, we
first interpret the provisions the AD Agreement .  As the Appellate Body has repeatedly stated, panels
are to consider the interpretation of the WT O Agreements, including the AD Agreement, in
accordance with the principles set out in the Vienna Convention on the Law of Treaties  (Vienna
Convention ).  Thus, we look to the ordinary meaning of the provision in question, in its context, and
in light of its object and purpose.  Finally, we may consider the preparatory work (the negotiating
history) of the provision, should this be necessary  or appropriate in light of the conclusions we reach
based on the text of the provision.  We then evaluate whether the United States' interpretation is one
that is "permissible" in light of the customary rules of interpretation of international law.
B. ALLEGED  "DOUBLE CONVERSION" OF CERTAIN HOME MARKET SALES PRICES
1. Factual background
6.5. The claims addressed in this section of our report relate to the treatment by the DOC of
certain sales by POSCO in the Korean market in both the Plate  and Sheet  investigations.  These sales,
which we will refer to as "local sales", are ordered and invoiced in US dollars, but are paid in Korean
won.  Some shipping invoices and all tax invoices relating to these sales also reflect a won price,
using a calculation based upon the Korean Exchange Bank's exchange rate as of the date of invoice.
The won price is recorded in POSC O's accounting records.  As local sales are made pursuant to letters
of credit, payment is made some months after invoice date; the parties disagree as to what the record
in the two investigations shows with respect to the basis for the won amounts actually paid.
6.6. POSCO reported local sales in won in its initi al questionnaire responses (the questionnaire
response in the Sheet  investigation also reported dollar amounts "for ease of verification").  In
subsequent supplemental questionnaire responses , however, POSCO modified its home market sales
listings to report local sales in dollars.  In legal briefs submitted to the DOC in both investigations,
POSCO argued that the DOC should calculate normal value on the basis of the US dollar price at
which local sales were invoiced.
29  The petitioners disagreed.  In its final determinations in the Plate
and Sheet  investigations, the DOC used as the basis for its calculation of the normal value the won
prices recorded in POSCO's accounting records.  The DOC converted these won prices to US dollarsat the exchange rate prevailing on the date of certain US sales.
2. Claims under Article 2.4.1 of the AD Agreement
(a) Arguments of the parties
6.7. Korea considers that the DOC performed a "double conversion" of local sales by converting
the dollar amounts appearing in the invoices into won at one exchange rate and converting them backinto dollars at a different exchange rate.  In Korea's view, Article 2.4.1 of the AD Agreement  permits
                                                     
29 Korea Exhibit 7, pp.  3-6; Korea Exhibit 20, pp. 3-6.WT/DS179/R
Page 10
currency conversions only when such conversions are "required", i.e., when there is no other
reasonable alternative.  Korea considers that the "double conversion" by the DOC was unnecessary, as
it could simply have used the original dollar pric es in the invoices.  Accordingly, the DOC's "double
conversion" of local sales departed from the requirement of Article 2.4.1 that currency conversions beperformed only when required.
 30
6.8. The United States  argues that the phrase "[w]hen the comparison under paragraph 4 requires
a conversion of currencies" in Article 2.4.1 establishes the condition under which the rules that follow
will apply, but it cannot be read to require that currency conversions be avoided in any particular
circumstances, particularly where the transaction oc curs in a foreign currency.  In any event, the
United States considers that it made no "double conversion" of local sales in these investigations.
Rather, the DOC  made a proper factual determination that the local sales were won transactions as
reported by POSCO in its questionnaire respons es.  The DOC simply converted those won amounts
into dollars consistent with the methodology established in Article 2.4.1.
(b) Evaluation by the Panel(i) Does Article 2.4.1 prohibit unnecessary currency conversions?
6.9. Korea alleges that the DOC performed an unnecessary "double conversion" of certain home
market sales prices, in violation of Article 2.4.1, which in Korea's view permits the conversion of
currencies only when such conversions are "required".  As a threshold matter, therefore, we must
consider whether Article 2.4.1 permits the conversion of currencies only when required or, expressedanother way, whether Article 2.4.1 prohibits unnecessary currency conversions.
6.10. Our starting point in respect of this issue is of course the text of the relevant provisions of the
AD Agreement .  Article 2.4.1 provides that:
"When the comparison under paragraph 4 requires a conversion of currencies , such
conversion should be made using the rate of exchange on the date of sale
8, provided
that when a sale of foreign currency on forward markets is directly linked to the
export sale involved, the rate of exchan ge in the forward sale shall be used.
Fluctuations in exchange rates shall be ignor ed and in an investigation the authorities
shall allow exporters at least 60 days to have adjusted their export prices to reflect
sustained movements in exchange rates during the period of investigation.  (emphasis
added).
__________________________________________
8[Footnote omitted]
                                                     
30 Korea also claimed, in footnote 142 to its fi rst submission, that the United States breached
Article 2.4.1, which provides in its relevant part that currency conversions "should be made using the rate of
exchange on the date of sale", by using the exchange rate on the date of sale for export (US) sales, rather thanthe exchange rate on the date of sale of the local sales themselves, when converting the won prices of local salesto dollars.  (First Submission of Korea, para. 4.68, footnote 142, Annex 1-1).  In response to a question from thePanel regarding this argument, however, Korea indicated that it was not necessary for the Panel to address the
meaning of the word "should" in Article 2.4.1, because Korea was not arguing that the DOC was required to use
a particular exchange rate, but rather that the DOC performed currency conversions that were not required.(Responses of Korea to Questions posed by the Panel and the United States at the first meeting of the Panel,Annex 1-4, Question 12 on currency conversion).  Given this statement, and Korea's failure to pursue this issueelsewhere in its submissions, we conclude that Korea abandon ed this putative claim.  In any event, we note that
Korea's request for establishment of a panel focuses exclusively on the issue of an unnecessary double
conversion.  ( See WT/DS179/2).  Thus, we doubt that any such claim would be within our terms of reference.WT/DS179/R
Page 11
6.11. Article 2.4.1 sets forth rules with respect to the conversion of currencies to be applied "[w]hen
the comparison under paragraph 4 requires a conversion of currencies . . . ."  While Article 2.4.1 does
not spell out the precise circumstances under which currency conversions are to be avoided, we
consider that it does establish a general – and in our view, self-evident - principle that currencyconversions are permitted only where they are required in order to effect a comparison between the
export price and the normal value.  We note that a contrary interpretation would call into doubt the
utility of the introductory clause of Article 2.4.1.  If the drafters had not intended to establish a rule
that currency conversions be performed only when required, they could easily have drafted
Article 2.4.1 to provide that "Currency conversions should be made using the rate of exchange on thedate of sale …."  Further, such an interpretation could result in the unusual situation where currency
conversions that were required in order to perform a comparison under Article 2.4  would be subject to
the rules set forth in Article 2.4.1, but unnecessary currency conversions could be performed without
regard to the rules of Article 2.4.1.
6.12. We need not here arrive at any general understanding as to when currency conversions are or
are not required within the meaning of Article 2.4.1, nor do we express any view regarding Korea's
"reasonable alternative" test.  Rather, we consider it sufficient to conclude, for the purposes of this
dispute, that currency conversion is not "required", and would thus not be permissible under
Article 2.4.1, in instances where the prices being compared are already in the same currency.
6.13. We do not understand the United States to contest that it would be inconsistent with
Article 2.4.1 to perform a currency conversion in a case where the prices to be compared were already
in the same currency.  While the United States initially disputed that Article 2.4.1 prohibits
unnecessary currency conversions, it subsequently appears to have acknowledged that Article 2.4.1
would not permit currency conversions in a case where the sales to be compared were already in the
same currency.  Thus, the United States explained at the second meeting of the Panel that:
"A review of the submissions confirms that there is no real disagreement over the
meaning of the relevant provisions of Article 2.4.1.   Korea and the United States
agree that if the sales used to establish normal value are in a different currency than
the export price sales, conversion at the rate in effect on the date of sale was
appropriate, and if the sales are in the same currency, no conversion is necessary or
appropriate. " (emphasis added)
31
(ii) Did the United States properly determine that the local sales were made in won?
6.14. As discussed above, Korea claims that the DOC unnecessarily converted certain dollar-
denominated sales in the Korean market into won at one exchange rate and converted them back into
dollars in order to compare them to dollar-denominated export sales at a different exchange rate.  It
follows from our discussion in the previous section of this Report that such an unnecessary "doubleconversion" would be inconsistent with Article 2.4.1 of the AD Agreement .  The question remains
whether the DOC in fact made such an impermissible "double conversion".
6.15. The United States considers that the sales in question were properly found to have been made
in won, such that a conversion to dollars was necessary in order to compare those prices to dollar-
denominated export prices.  In other words, the United States denies that it performed a "doubleconversion" in respect of local sales.  This issue is a critical one to our inquiry, as the existence of a
"double conversion" is a necessary predicate to Korea's claim.  To the extent that Korea is correct, the
United States acted in a manner inconsistent with Article 2.4.1; to the extent that the United States is
                                                     
31 Oral Statement of the United States at the S econd Meeting of the Panel, para. 48, Annex 2-6.WT/DS179/R
Page 12
correct, then the factual predicate underlying Kor ea's claim is without basis and Korea's claim must
fail.
(i) standard of review
6.16. In examining this issue, we must first consider the issue of the proper standard of review to be
applied in reviewing the DOC's  determination.  The United States  considers that whether the sales in
question were in dollars or won is a question of fact.  Accordingly, the Panel should assess pursuant to
Article 17.6(i) whether the DOC's establishment of the facts was proper and whether its evaluation of
those facts was unbiased and objective.  Korea  by contrast argues that the determination in question
was not a factual determination, because there were no facts in dispute.
6.17. As noted in Section VI.A, above, Article 17.6 sets forth the standard of review to be applied
by a panel when examining a matter under the AD Agreement .  It is evident from the text of Article
17.6 that the standard of review to be applied by panels depends upon the nature of the question before
it.  The relevant standard to be applied when consid ering questions of law, i.e., the interpretation of the
AD Agreement , is set forth in Article 17.6(ii).  The standard to be applied in reviewing determinations of
an investigating authority in respect to questions of fact is set forth in Article 17.6(i).  Thus, the question
before us is whether that determination is one of fact  and thus subject to the standard of review set forth
in Article 17.6(i).
6.18. Korea's view appears to be that Article 17.6(i) applies only in respect of the establishment of
certain objectively-ascertainable underlying facts, e.g ., did the invoices express the sales values in terms
of dollars or won, in what currency payment was made , etc.  We consider that this interpretation does
not however coincide with the language of Artic le 17.6(i).  That Article speaks not only to the
establishment of the facts, but also to their eval uation.  Therefore, the Panel must check not merely
whether the national authorities have properly establis hed the relevant facts but also the value or weight
attached to those facts and whether this was done in  an unbiased and objective manner.  This concerns
the according of a certain weight to the facts in thei r relation to each other; it is not a legal evaluation.
6.19. In this case, it is generally true that the underlying facts on the basis of which the DOC
considered whether the sales in question were made in dollars or won are not disputed (although we will
see that there is substantial disagreement between the parties about one key underlying factual issue).
We consider, however, that the DOC's determination th at the sales in question were made in won was a
factual determination in as much as it represents a determination made on the basis of the evaluation of
certain facts and does not involve the interpretation of provisions of the AD Agreement .
6.20. In light of the above, we consider that the task  before us is to examine whether an unbiased and
objective investigating authority evaluatin g the evidence before the DOC in the Plate  and Sheet
investigations could properly have determined that the local sales in question were made in won rather
than in dollars.  Given the nature of the arguments be fore us, we recall that pursuant to Article 17.5(ii) of
the AD Agreement  we are to examine the matter based upon "the facts made available in conformity
with appropriate domestic procedures to the author ities of the importing Member".  Finally, we note that
this dispute relates to two separate investigations, a nd that the facts before the DOC differ.  Thus we will
review the determinations of the DOC in these two investigations separately.
(ii) The Plate  Investigation
6.21. In order to evaluate whether an unbiased and objective investigating authority could properly
have determined that the local sales in the Plate  investigation were made in won rather than dollars, we
must first  consider in detail the determination of  the DOC and the evidence that was before the DOC at
the time it made its determination.WT/DS179/R
Page 13
6.22. The arguments of the parties and conclusions of the DOC on the issue of local sales are
addressed in detail in the final determination in the Plate  investigation.  We will quote from this
determination at length:
"Comment 10 .  Local letter of credit sales.  . . . . [R]espondent maintains that
its calculation of normal value should be based on the US dollar price at which the
local sales were invoiced.  Respondent states that local customers pay POSCO in
Korean won based on the US dollar invoiced price.  Moreover, respondent notes that
it reported the US dollar price for local sales consistent with the Department's
requirement and practice.  Respondent explains that in Fresh Cut Roses from
Colombia , the respondent also invoiced home market sales in US dollars but like
POSCO, received payment from the customer in the home market currency, pesos in
that case. . . . . POSCO states that in this case, the Department accepted the US prices
for the calculation of the normal value . . . . Respondent contends that not using the
US dollar value in its calculation of normal value in this investigation could have apotentially significant distortive effect on the margin.
[Petitioners] object to POSCO's request  to use nominal dollar prices for home
market customers.  Instead, they recomme nd that the Department use the won prices
that the customers actually pay.  They argue that it would be bad policy to usenominal prices in the margin analysis.  Further, they continue that even if the
Department were to find that in some instances use of the nominal price is warranted,
the facts in this case do not support such a methodology.  Petitioners allege that the
Fresh Cut Roses from Colombia  case cited by POSCO differs from this case in
several important respects.  Specifically, in Fresh Cut Roses from Colombia : (a) the
effect of inflation in Colombia was being taken into account in the Department's cost
of production analysis and costs were being converted to dollars; (b) the Department
stated that it had verified that the payment in pesos had reflected the prevailing
dollar/peso exchange rate at the time of payment; and (c) all home market sales were
invoiced in dollars and paid in pesos . . . . In contrast, they note that the Department
did not verify whether the exchange rates used were proper.  Finally, they note that in
this case, home market sales were also quoted in won.  Therefore, because theDepartment has not accounted for inflation and did not verify the dollar won
exchange rates used, petitioners argue that POSCO's dollar prices are meaningless
because POSCO's customers pay in won.
Department's Position .  . . . [W]e disagree with Respondent that the
Department should use the US dollar invoiced price for the purposes of calculating
normal value.  Based upon the facts of the record, as discussed below, we find that it
is more appropriate to use the won price in which the customer pays.
For HM sale number 1, POSCO provided an internal document which
showed the exchange rates used by POSCO to convert US dollar prices into Korean
won prices for the month of November 1997. . . . . The record indicates that although
customers are invoiced in US dollars (for HM Channel 2 sales the shipping invoice
also shows the won price), the customer pa ys in won not US dollars, and the sales
value of the merchandise is charged to the sales ledger in won, based on theaforementioned exchange rate. . . . Moreover, a comparison of the internal exchange
rate used by POSCO to the market exchange  rate used by the Department shows that
the two exchange rates are quite dissimilar (See Analysis Memorandum ).  We note
that this is in contrast to Fresh Cut Roses from Colombia  in which the Department
verified that the payment in pesos reflecte d the market exchange rate at the date ofWT/DS179/R
Page 14
payment . . . . Therefore, for the final determination, we have used the won price for
home market sales.32
6.23. On the basis of this discussion, we can perceive the core issue faced by the DOC and the
manner in which it resolved it.  It will be recalled that POSCO initially reported local sales to be won
sales but subsequently reported them in dollars.  In  considering how to treat these sales, the DOC had
before it evidence that local sales were ordered and invoiced in dollars (and, on some invoices, also in
won) but paid in won.  The question it faced was whet her it should consider the sale to be a sale in
dollars in the amount shown on the invoice (such that  no currency conversion would be required) or a
sale in won based upon the amount charged to the sales ledger.  The DOC concluded that use of the
won amount was appropriate because the customers pa id in won, the merchandise was charged to the
sales ledger in won, and the exchange rate used by POSCO to calculate the won equivalent of the
dollar amount was dissimilar to the "market" exchange rate used by the DOC.
6.24. The heart of Korea's argument that these sales should have been treated as dollar rather than
won sales is clearly stated in its first submission:
"As discussed in the Statement of Facts, POSCO had a significant quantity of "local
sales" of both SSPC and SSSS during the investigation periods.  These "local sales"
were negotiated and invoiced in US dollars, but the payments were made in Korean
won.  Significantly, to ensure that payment accurately reflected the actual dollar value
of the sales, the amount of the Korean won payment for these "local sales" was not
fixed at the time of the sales negotiation or at the time of invoice.  Instead, the
payment in Korean won was determined by applying the market exchange rate (as
announced by the official Korean Exchange Bank) for the date of [payment]33 to the
US dollar amount shown on the invoice.  Thus, the economic reality is that the finalpayment for these sales is determined by the US dollar amount shown on the invoice,
and not by the Korean won amount recorded in POSCO's accounting records at the
time of invoice.  In economic terms these "local sales" are equivalent to sales that are
invoiced and paid in US dollars.[footnote omitted]
34
This argument – that the transactions in economic terms were dollar transactions because the amount
of Korean won actually paid was established by converting the dollar amount invoiced by theexchange rate at the time of payment, rather that at the time of invoice – is repeated frequently by
Korea in its submissions.
35
6.25. We consider that the reasoning advanced by Korea is compelling.  The issue in the Plate
investigation whether the local sales in question were dollar or won sales arose because the invoices
were expressed in dollars36 but the payments were made in won.  Thus, if the amount of won actually
paid was based on the dollar amount identified in the invoice at the market rate of exchange on the
date of payment  (which, because the local sales in question were letter of credit sales, came some
months after the date of invoice), then the cont rolling amount would be the dollar amount appearing
in the invoice.  This was in fact a key element in the reasoning of the DOC in Fresh Cut Roses from
                                                     
32 Final Determination on Plate , at pages 15455-15456, Korea Exhibit 11.   
33 The original Korean submission referred to "date of sale".  Korea however informed the Panel that
his was a typographical error and that the reference should be to the "date of payment".  Responses of Korea to
Questions Posed by the Panel and by the United States.  (Question 6 on currency conversion, Annex 1-4).
34 First submission of Korea, para. 4.64, Annex 1-1.
35 See First submission of Korea, paras. 3.51-3.53, Annex 1-1; Oral statement of Korea at the First
meeting of the Panel, paras. 60-61, Annex 1-2; Second  submission of Korea, paras. 128, 139-140, Annex 1-5;
Oral statement at the second meeting of the Panel, paras. 81-84, Annex 1-6.
36 And sometimes also in won.  See paragraph 6.5 , supra .WT/DS179/R
Page 15
Colombia37, an anti-dumping investigation cited by both the petitioners and respondents in the Plate
investigation and discussed by the DOC in its final determination, as quoted above.  In that case, the
DOC "established that respondent invoiced its home  market customers in US dollars and received the
equivalent value in pesos at the date of payment ".(emphasis added)  The DOC "found it appropriate
that respondent's home market sales were reported in dollar value since the dollar value was the
currency in which the sales transactions were made.  Furthermore, since home market sales were
transacted in dollars and the payments made, although in pesos, were based on constant dollar value,
there is no distortion."38
6.26. Korea's argument, however, is dependent upon a particular factual predicate: that the amount
of won actually paid in respect of local sales was determined by applying the market rate of exchange
at the time of payment  to the dollar amount stated in the invoice.  Korea asserts, and the United States
does not appear now to dispute, that the amounts paid were established based upon the application as
of the date of payment of exchange rates established by the Korean Exchange Bank.  The DOC was
not however aware at the time of its final determination in the Plate  investigation that this was the
case.  Rather, it is evident to us that the DOC consid ered at the time of its final determination that the
actual won amount paid was the amount charged to the sales ledger, which in turn was derived by
converting the dollar amount invoiced to won at the Korean Exchange Bank exchange rate prevailing
at the time of invoice , and that there was no evidence in the record suggesting to the contrary.
6.27. In response to a question from the Panel, Ko rea acknowledges that "it is unaware of any
evidence in the record of the Plate case that indi cates that POSCO specifically informed the DOC that
the amount paid in won differed from the c onverted won amounts shown in the invoice."39  I t
contends however that, once POSCO had informed the DOC that local sales were denominated in
dollars, the burden was on the DOC to ask for the ne cessary information.  We consider this argument
to be unpersuasive.  This is not a case where th e DOC did not know the actual won amounts paid and
did not bother to ask.  Rather, POSCO in its init ial questionnaire reported local sales in won, and the
amount reported was the invoiced amount rather than the – in most cases probably substantially
higher – amount actually paid.40  Even after POSCO reported dollar prices for the local sales and
argued that those dollar prices should be used in place of the won prices, it never corrected the initial
misimpression that the won amount reported was the amount actually paid.41  Finally, the DOC did
                                                     
37 60 Fed. Reg. 6980, 7006 (6 February 1995).  Korea Exhibit 52.
38 Ibid.
39 Responses of Korea to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question on currency conversion, Annex 1-6).
40 Ibid.  POSCO informed the DOC in its initial questionnaire response that it had "reported the actual
invoiced price per metric ton in Korean Won. In the home market, POSCO made local letter of credit sales
("local sales")[footnote omitted] and domestic sales. All sales were paid in Korean Won and have been recorded
in Korean Won on the database."  US Exhibit 21.
41 When submitting revised data in response to a supplemental questionnaire in August 1998, POSCO
noted that it had in addition made some "minor corrections", and had, inter alia , "added the US dollar sales price
for local sales, as reflected on the invoices, for reference purposes".  US Exhibit 38.  Subsequently, in a
supplemental questionnaire response on 16 October 1998, POSCO submitted a revised home market database tothe DOC.  It explained that "[t]he home market sales listing has also been modified to report local sales andrelated charges in the currency in which the sales and associated charges were incurred, i.e., US dollars,
consistent with the Department's long-standing practice. [footnote omitted].  In POSCO's prior submissions,
both the won and US dollar prices were reported for local sales."  US Exhibit 43.  In its case brief, POSCO
pursued its argument that the price of local sales was negotiated and invoiced in US dollars. POSCO pointed toan exhibit collected by the DOC during verification as  evidence that the order sheets for local sales reflected
only dollar prices.  POSCO further argued that "[l]o cal customers pay POSCO in Korean Won based on the US
dollar invoiced price." (POSCO's arguments in this brief are summarized in the portion of the FinalDetermination quoted above).  At no point in this brief, however, did POSCO indicate to the DOC that the won
amount it had reported to the DOC initially, which appeared in the tax invoices, and which was based upon theWT/DS179/R
Page 16
not become aware at verification that the won am ounts paid might be different from the won amounts
charged to the sales ledger because customers paid on a rolling basis such that verification of
payments on an individual basis was not possible.42
6.28. We now turn to a review of the DOC's determination on this issue in light of the facts as
understood by the DOC on the basis of the record before it.  As the DOC explained in its
determination, it had verified certain local sales.  For these sales, while the customers were invoiced
in dollars (and sometimes also in won), payment was made in won , and the value of the merchandise
was charged to the sales ledger in won, based upon the exchange rate prevailing on the date of
invoice .43  The Plate  final analysis memorandum that underlies the final determination indicates that
the date of payment  for these sales however was some months later.44  In other words, the record
before the DOC indicated that the won amount the customer would pay on a given date was fixed
some months earlier based upon the won/dollar exchange rate prevailing on the earlier date,
irrespective of subsequent changes in the dollar/won exchange rate.  The DOC's determination then
notes that the exchange rate used by POSCO on the earlier date did not correspond to the market
exchange rate used by the DOC.  Again, the Plate  final analysis memorandum  indicates that the DOC
was comparing POSCO's  exchange rate on the date of invoice both to the DOC's exchange rate on
that date and to its exchange rate on the date of  payment.45  The determination notes that "this is in
contrast to Fresh Cut Roses from Colombia  in which the Department verified that the payment in
pesos reflected the market exchange rate at the date of payment " (emphasis added).46  In short, the
DOC concluded that local sales were made in won because the amount to be paid was fixed in won on
the date of invoice irrespective of subsequent movements in the won/dollar exchange rate between the
date of invoice and the date of payment.
6.29. In challenging the DOC's determination, Ko rea emphasizes an admitted error by the DOC
regarding benchmark exchange rates.  Specifically , although the DOC stated that it was comparing
POSCO's internal exchange rates to US Federal Reserve exchange rates, it mistakenly compared
POSCO's internal exchange rates – which were in fact the Korean Exchange Bank's official rates – to
certain adjusted exchange rates prepared by the DOC on the basis of three-month rolling averages.
This error however does not detract from the essent ial fact – as perceived by the DOC at the time it
made its determination based upon the record before it – that the won price was determined as of the
date of invoice and remained fixed irrespective of any subsequent changes in the won/dollar exchange
rate between the date of invoice and the date of payment.
6.30. Korea also has emphasized that the order sheets for local sales, which were verified by the
DOC, reflect a dollar amount but no won amount.  Ko rea contends that this supports its view that
                                                                                                                                                                    
application of the exchange rate prevailing on the date of invoice , differed from the won amount actually paid.
Korea Exhibit 7, pp. 3-6. Nor does the petitioner's case brief indicate any awareness of this fact.  To thecontrary, the petitioner repeatedly asks the DOC to use "the won prices that POSCO's customers actually pay".Korea Exhibit 10, p. 1.
42 Responses of Korea and of the United States to Questions Posed by the Panel at the Second Meeting
of the Panel.  (Question 2 on currency conversion, Annexes 1-7 and 2-7).
43 It should be noted that, at the request of POSCO and over the opposition of the petitioners, the DOC
found that the date of sale was the date of invoice  and not the date of order .  The DOC so found because there
were changes in price for a significant proportion of shipments between the date of order and the date of
invoice.  Final Determination on Plate , p.15449, Korea Exhibit 11.
44 Memorandum to File re: Analysis for the final determination in the investigation of stainless steel
plate in coils from Korea – Pohang Iron and Steel Company, 19 March 1999 (" Plate  Final Analysis
Memorandum "), Korea Exhibit 12.  This Memorandum was placed in the public file and is referenced in the
Final Determination on Plate .   The precise dates specified in the Memorandum are confidential information.
45 Ibid.
46 Final Determination on Plate , p. 15456, Korea Exhibit 11.WT/DS179/R
Page 17
local sales were negotiated as well as invoiced in dollars.  While the fact that order sheets showed
sales in dollars and not in won might be a relevant consideration in other circumstances, the fact
remains that – based on the record as placed before the DOC – a won amount was fixed at the date of
invoice and this won amount was controlling as to the amount to be paid several months later.  Werecall in any event that in this investigation the DOC determined that the date of invoice rather than
the date of order confirmation was the "date of sale" because it was at the time of invoice that POSCO
established the material terms of sale.  In support  of this view, POSCO had argued that "all POSCO's
sales were subject to change between order and shipment". 
47  Thus, the fact that the orders for local
sales were expressed in dollars is in our view less than conclusive as to whether the sales were won ordollar sales.
6.31. For the foregoing reasons, we conclude that an unbiased and objective investigating authority
evaluating the evidence before the DOC in the Plate  investigation could properly have determined
that the local sales in question were made in won.
(iii) The Sheet  Investigation
6.32. We now consider whether an unbiased and objective investigating authority evaluating the
evidence before the DOC in the Sheet  investigation could properly have determined that the local
sales were made in won rather than dollars.
6.33. The arguments of the parties and the conclusions of the DOC are set forth in some detail in
the DOC's final determination:
"Respondent argues that the Department should calculate normal value for
"local" sales made in the home market based on the US dollar price at which those
sales were invoiced.  Local sales are sales of subject merchandise to home market
customers who will further process the merchandise into non-subject products for
export.  Respondent maintains that although POSCO is paid in Korean won, theamount of payment is based on the US dollar invoiced price.  Respondent contends
that because POSCO's local sales are denominated and invoiced in US dollars, the
invoiced prices do not require conversion to won for US comparison purposes, and
that the conversion of the US dollar price to won and then back to dollars is not only
unnecessary, but would significantly distort the margin.  Respondent cites to . . .
Roses from Columbia  [sic] . . ., noting that the Department agreed and accepted the
US prices for sales invoiced in US dollars, notwithstanding that the respondentreceived payment from the customer in the home market currency.  Respondent
argues that in the final determination in SSPC from Korea , the Department's concern
was that POSCO's customers paid for sale s in won, the sales amounts were recorded
in won in POSCO's accounting records, a nd that the exchange rates utilized by
POSCO to determine the won equivalents we re different from those exchange rates
used by the Department.  Respondent contends that the fact that payment is made in
won is irrelevant, since both the contract and the invoice reflect a US dollar price, and
that sales are converted to won for th e purposes of consistency with POSCO's
accounting records, which are maintained in won.
Petitioners claim that the use of the dollar value for local sales in the home
market would be inappropriate, given that POSCO receives payment in won.
Petitioners distinguish this case from Roses from Columbia  [sic] by noting that in that
case, the Department was factoring in the effects of inflation in the cost-of-production
                                                     
47 Final Determination on Plate , Korea Exhibit 11.WT/DS179/R
Page 18
analysis, costs were converted into dollars; the payments in local currencies had
reflected the prevailing exchange rate, and all home market sales had been invoiced
in dollars and paid in pesos.  Petitioners further contend that in Roses from Columbia
[sic], the decision to use US dollar-based prices was presumably made forconvenience and consistency, as costs were also dollar-denominated.  Petitioners
further note that the disparity between the exchange rates reflected in the price
conversion and the rates used by the Department is too great to reconcile, and is in
contrast to the situation in Roses from Columbia [sic].  Petitioners argue that the use
of a constant index such as the dollar is used by the Department in the face ofcurrency depreciation or significant deflation, and should not be applied selectively to
reduce a dumping margin.
Department's position .  We agree with petitioners.  First, we believe that
respondent's reliance on Roses from Columbia  [sic] is misplaced.  In that case, all
prices and costs, both in the home market and in the U.S., were dollar denominated,
and the exchange rates reflected in the dollar to peso conversion coincided with the
exchange rates used by the Department.  Given these facts, the use of dollar-
denominated prices provided consistency throughout the Department's analysis in that
case.  Neither of these facts are present in the instant case.  At verification, we found
that local sales are the only sales made in the home market that are expressly linked
to a dollar value, but that the sale is ultimately a won-denominated sale .
Additionally, the vast majority of the costs incurred for home market and US sales are
denominated and paid by POSCO in won. . . . Finally, as we note above, there is a
disparity between exchange rates reflecte d in POSCO's accounting records and those
used by the Department . . . . Although the sales are linked to a dollar value, there is
no question that the respondent pays in won, and therefore, the use of the dollar-
denominated gross unit price for local letter of credit sales in the home market is
unwarranted.  In addition, in recent cases involving POSCO ( e.g., SSPC from Korea
and Carbon Steel from Korea – 3
rd Review ), the Department has used the won-
denominated price for local letter of credit sales in the home market because we
found that, as in the instant case, the local sales were paid in won and recorded inPOSCO's accounting records in won, and th e exchange rates used by POSCO were
dissimilar from those used by the Department. . . (emphasis added).
48
6.34. On its face, the issue before the DOC in the Sheet  investigation was similar to that in the
Plate  investigation.  As in the Plate  investigation, the issue before the DOC in Sheet  was whether it
should use the dollar-invoiced price for local sales or whether it should use the won price which was
charged to the sales ledger and reflected in the tax and certain shipping invoices.
6.35. There was however in our view a significant factual difference between the two
investigations.  As previously discussed, the record in the Plate  investigation suggested that the won
prices initially reported by POSCO represented the won amounts actually paid.  In the Sheet
investigation, on the other hand, the DOC verified, and recorded in its Verification Report, that the
won amounts reported by POSCO were not in fact the amounts actually paid:
"Observation [xxxx](HM#1)
This observation represented a local sale from POSCO to [xxxxxx], which involved a
recognized loss on foreign currency exchan ge.  We tied the individual sale from
POSCO's order sheet to a cumulative shipping list/invoice and tax invoice.  As local
                                                     
48 Final Determination in Sheet , p. 30678, Korea Exhibit 24.WT/DS179/R
Page 19
sales are dollar-denominated, and paid in won equivalents, POSCO records the sale in
its won equivalent, reflected in the tax invoice to the customer.  On payment, the
exchange rate is determined based on the rates given to POSCO by Korean Exchange
Bank for Inward Remittance.  For this sale , POSCO recognized an exchange rate loss
of [xxxx].  This difference between the recorded sales amount and payment amount is
reflected in the "Foreign Exchange Currency Loss of Transaction for Local Sales"
account.  We examined all journal entries, ledgers, bank documents, and publicly
available information (re: Korea Exchange Bank, Foreign Exchange Rates), and
found no discrepancies."49
On the basis of this Verification Report, it seems clear to us that the DOC in the Sheet  investigation
was fully aware that the won amounts reported by POSCO in respect of local sales were in fact
different from the won amounts actually paid.
6.36. The United States argues that "the only suggestion that [the invoiced and paid] amounts
differed came late in the proceeding amid conflicting information".  It contends that POSCO only
reported the invoice price and neither informed the United States nor claimed that the amount paid
differed from the amount invoiced.50  We note however that, unlike in the Plate  investigation,
POSCO in the Sheet  investigation reported dollar amounts ("for ease of verification") in addition to
won amounts in its initial questionnaire response.51  This triggered a supplemental questionnaire from
the DOC in response to which POSCO provided info rmation suggesting that the won price paid was
not the same as that invoiced.52  More importantly, the sales verification report quoted above was
dated 6 April 1999 and related to a verification performed in February.  It thus predated the final
determination in the Sheet  investigation by several months.  Moreover, the Verification Report quoted
above does not suggest a hint of doubt about the manner in which local sales were handled.  A pageextracted from POSCO's accounts and attached to th e Verification Report listed dozens of exchange
rate losses related to local sales.
53  At this point, therefore, the record clearly showed that the amount
of won actually paid in the case of local sales differed from the amount initially reported by POSCO
and appearing on POSCO's tax invoices.54
6.37. In light of the foregoing, it is difficult to understand the basis for the DOC's statement, in its
final determination, that, "[a]t verification, we found that local sales are the only sales made in the
home market that are expressly linked to a dollar value, but that the sale is ultimately a won-denominated sale."  Leaving aside that we can locate no such "finding" in the Verification Report, we
are convinced that an unbiased and objective investigating authority could not so find on the basis of
the facts before it in the Sheet  case.  As we have seen, it was clear from the record in the Sheet
investigation that the won price which the DOC considered to be the price in which local sales were
denominated was in no sense controlling.  Rather, the won amount ultimately paid would bedetermined by converting the dollar amount appearin g on the invoice into won at the rate of exchange
prevailing on the date of payment.  Thus, the dollar amount appearing on the invoices was controlling,
                                                     
49 Sheet  Sales Verification Report, 6 April 1999, p. 14, Korea Exhibit 19.
50 Responses of the United States to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question 2 on currency conversion, Annex 2-7).
51 US Exhibit 41, pp. B-21, B-22.
52 POSCO stated that "[p]ayment is received on a letter of credit basis in dollars as well. Payment is
booked in won with the difference in the exchange rate on the date sale and the date of payment recorded as a
transaction gain or loss."  US Exhibit 42.  It is unclear why POSCO indicated that payment was received in
dollars.  However, the DOC determined, and POSCO did not subsequently dispute, that payment was in factmade in won.
53 Ibid.
54 We note that the local sales issue was briefed by the parties and decided by the DOC well after this
date.WT/DS179/R
Page 20
while the won equivalent appearing on the tax and certain shipping invoices and noted in POSCO's
accounts55 played no role in determining the amount the purchaser ultimately would pay.  As
explained above, we agree with Korea that there is no logical basis under these circumstances to
consider that the sales in question were denominated in won.
6.38. In its determination, and before this Panel, the United States has emphasized that there were
differences between the exchange rates used by POSCO and the market exchange rates relied upon by
the DOC.  We agree that the DOC might have been entitled to disregard the dollar prices stated in the
invoices if the won amounts actually paid had been based on fictitious or inaccurate exchange rates, as
this would have indicated that the economic value of  the transactions was not in fact determined in
dollars at all.56  In this case, however, the DOC verified, and the United States does not now dispute,
that the "internal exchange rates" used by POSCO were in fact the official exchange rates published
by the Korea Exchange Bank.57  Further, we consider that the differences between the Korea
Exchange Bank rates and the Federal Reserve rates cited in the Sheet  investigation58 are not the result
of fictitious or inaccurate exchange rates, but merely reflect the existence of a 14-hour time differencebetween New York and Seoul.
59
6.39. For the foregoing reasons, we conclude that an unbiased and objective investigating authority
evaluating the evidence before the DOC in the Sheet  investigation could not properly have determined
that the local sales in question were made in won.
(iii) Did the United States perform unnecessary cu rrency conversions in violation of Article 2.4.1
of the AD Agreement?
6.40. As discussed above, we have concluded that the DOC did not err in considering that the local
sales in question in the Plate  case were denominated in won rather than in dollars.  Therefore the
factual predicate underlying Korea's claim under Article 2.4.1 – that the DOC performed an
unnecessary "double conversion" in respect of those sales – is without foundation.  To the contrary,having properly treated the sales in question as having been made in won, the DOC made only a
single conversion, from won to dollars.  Accordingly, we conclude that, in the Plate  investigation, the
United States did not act inconsistently with Article 2.4.1.
6.41. With respect to the Sheet  investigation, we have concluded that the DOC's factual
determination that the local sales in question were won-denominated sales was in error.  In our view,
the DOC improperly treated sales that were denominat ed in dollars as won sales.  We have further
concluded that it would be inconsistent with Article 2.4.1 to undertake currency conversions in
                                                     
55 The fact that local sales were entered into POSCO's accounts in won is in and of itself of little
significance.  As Korea points out, all sales – including dollar-denominated US sales – are entered into Korea's
books in won, and it keeps all its accounts in that currency.
56 As the petitioners argued before the DOC, "a respon dent could quote understated dollar prices [in the
home market]and then use an artificially high exchange rate to collect the 'real' amount being charged in the
local currency".  (Korea Exhibit 23, p. 5).  Even in th is case, however, an investigating authority presumably
would use the actual won amounts paid where that amount differed from the nominal won amount appearing on
certain invoices.
57 Sheet  Final Analysis Memorandum , Korea Exhibit 25; Responses of the United States to Questions
Posed by the Panel the Second Meeting of the Panel, question 7 on currency conversion, Annex 2-7.
58 Sheet Final Analysis Memorandum , Korea Exhibit 25, p.3. The differences relied upon by the DOC
were of less than one percentage point.
59 As Korea points out, the Federal Reserve rates are based on rates prevailing in New York City at
12:00 p.m.  Given the 14-hour time difference, the Federal Reserve rates for a given day are not established untilnine hours after close-of-business (17:00) in Seoul.  Thus, some difference between the exchange rates is
inevitable.WT/DS179/R
Page 21
instances where the prices being compared were in the same currency.  It being undisputed that in this
case the export prices in question were also in dollars, we conclude that, in the Sheet  investigation, the
United States acted inconsistently with Article 2.4.1.
3. Claims under Article 2.4 of the AD Agreement  ("fair comparison")
(a) Arguments of the parties
6.42. Korea  asserts that the "double conversion" of local sales from dollars to won and back to
dollars was inconsistent with a "fair comparison" requirement in the chapeau of Article 2.4.  In
Korea's view, the conversion of these sales from dollars to won at the exchange rate prevailing as of
the date of the home market sale, and their re-conversion from won to dollars at a different exchangerate prevailing as of the date of a corresponding US sale, unfairly penalised POSCO for changes in the
exchange rate between these two dates that were bey ond its control.  Korea further contends that as a
result of this double conversion at different rates, the United States compared the export price to an
inflated normal value.
6.43. The United States  contends that it made a proper factual determination that the local sales
were made in won, and that it made a single conversion of those won sales to dollars.
(b) Evaluation by the Panel
6.44. Although Korea expresses its fair comparison claim in slightly different ways at different
points in its submissions, it is clear that this claim, like Korea's claim under Article 2.4.1, relies upon
the existence of a "double conversion" – i.e., the conversion of dollar-denominated prices into won atone exchange rate and the conversion back into dollars at a different exchange rate.  We have
concluded that, in the Plate  investigation, no such "double conversion" occurred, because the DOC
properly determined that the sales in question were denominated in won.  Accordingly, we find that
the United States did not act inconsistently with any "fair comparison" requirement under Article 2.4
in the Plate  investigation.
6.45. In respect of the Sheet  investigation, we note that this Panel "need only address those claims
which must be addressed in order to resolve the matter in issue in this dispute".
60  Having concluded
that the United States acted inconsistently with its specific obligations with respect to currency
conversion under Article 2.4.1 in the Sheet  investigation by performing unnecessary currency
conversions in respect of local sales, we do not consider it necessary to examine Korea's claim that
those double conversions breached a more general "fair comparison" requirement under Article 2.4 of
the AD Agreement .
4. Claims under Article X:3(a) of GATT 1994 and Article 12 of the AD Agreement
(a) Arguments of the parties
6.46. Korea contends that the double conversi on methodology employed by the DOC was
unreasonable and departs from established practice without adequate explanation, and is thus
inconsistent with the uniform and reasonable administration of the anti-dumping laws required byArticle X:3(a) of GATT 1994 .  Korea argues that the double conversion of local sales in these
investigations was an unprecedented departure from the established policy of the DOC – as reflected
in various investigations including Roses from Colombia  –  to accept charges in the currency in which
they are made.  In particular, the factual distinc tions made by the DOC between the investigations at
                                                     
60 United States – Shirts and Blouses , supra, p. 19.WT/DS179/R
Page 22
issue in this dispute and Roses  do not withstand scrutiny.  In addition, the United States acted
unreasonably by penalizing exporters for differences between official Korean and US exchange rates
that existed because of a time difference between Korea and New York.  Korea further argues that, by
providing incorrect and irrelevant arguments to justify its departure from the standard methodology,the United States failed to provide the statement of reasons required by Article 12.2 of the
AD Agreement .
61
6.47. In the view of the United States, Korea in effect argues that Article X provides for panel
review of the consistency of any action by a Member with its own domestic law, regulation or
practice.  However, the task of a panel under the DSU  is to review the consistency of a Member's
actions with a covered agreement.  Further, as observed by the Appellate Body in EC - Bananas ,
Article X:3 does not address the consistency of particular administrative rulings, but rather the
administration  of such rulings.  In this dispute, Korea's complaint focuses on the anti-dumping rulings
in the Plate  and Sheet  investigations themselves, and not on the administration of those rulings.  In
any event, the United States disputes that Roses from Colombia  reflects US practice.  Roses  was a
single case exception to US practice, not the rule.  The facts in these investigations differ significantly
from those in Roses , and no subsequent case has followed the position taken in Roses .
(b) Evaluation by the Panel
(i) The Plate investigation
6.48. Article X:3(a) of the GATT 1994 provides as follows:
"Each contracting party shall administer in a uniform, impartial and reasonable
manner all its laws, regulations, decisions and rulings of the kind described in
paragraph 1 of this Article."
6.49. In considering Korea's claim under Article X:3(a), we first note the contention of the
United States that Korea is challenging the DOC's anti-dumping rulings in these investigations while
Article X:3(a) permits challenges only to the administration of those rulings.  It is of course clear from
the text of Article X:3(a) that that provision relates to the administration  of laws, regulations,
decisions and rulings, and not to the laws, regulations, decisions and rulings themselves.  Korea's
claim however is not that the DOC's anti-dumping determinations were rulings which the
United States administered in a manner inconsistent with Article X:3(a), but rather that the
United States administered its anti-dumping laws and regulations in a manner inconsistent with thatArticle.
62  Thus, we must consider whether the alleged departure of the United States from alleged
established policy in these investigations represents a breach of the United States' obligation to
administer those laws and regulations in a uniform and reasonable manner.
                                                     
61 Korea also suggests in its first submission (par a. 4.70) that the United States acted inconsistently
with Articles 6.1, 6.2 and 6.9 of the AD Agreement in its treatment of local sales.  It does not however identify
any specific basis for these claims.  In its second submission, Korea indicates in general terms that theUnited States' alleged Article 6 violations in this dispute arise where the DOC agreed with respondents on key
issues in the preliminary determination but reversed position in the final determination.  In respect of the local
sales issue, however, this factual situation did not exist, as local sales were erroneously excluded from thepreliminary determination altogether.  Thus, we do not consider that Korea has made a prima facie  case of
violation of Article 6 in respect of local sales.
62 There can be no doubt that the US anti-dumping laws and regulations are "laws" and "regulations" of
general application "pertaining to . . . rates of duty, taxes or other charges, or to other requirements, restrictions
or other prohibitions on imports or exports" within the meaning of Article X:1 of GATT 1994 .WT/DS179/R
Page 23
6.50. We note at the outset of our examination that we have grave doubts as to whether
Article X:3(a) can or should be used in the manner advocated by Korea.  As the United States
correctly points out, the WTO dispute settlement system "serves to preserve the rights and obligations
of Members under the covered agreements, and to clarify the existing provisions of thoseagreements".
63  It was not in our view intended to function as a mechanism to test the consistency of a
Member's particular decisions or rulings with the Member's own domestic law and practice; that is a
function reserved for each Member's domestic judicial system,64 and a function WTO panels would be
particularly ill-suited to perform.  An incautious adoption of the approach advocated by Korea could
however effectively convert every claim that an action is inconsistent with domestic law or practiceinto a claim under the WTO Agreement .
6.51. In any event, we do not consider that the DOC in this investigation committed the
"unprecedented departure" from "established policy" alleged by Korea such that its behaviour was
either non-uniform or unreasonable.  In our view, the requirement of uniform administration of laws
and regulations must be understood to mean uniformity of treatment in respect of persons similarlysituated; it cannot be understood to require identical results where relevant facts differ.  Nor do we
consider that the requirement of reasonable administration of laws and regulations is violated merely
because, in the administration of those laws and regulations, different conclusions were reached based
upon differences in the relevant facts.
6.52. Applying these considerations to the case at hand, we recall that the core issue in the Plate
investigation was the factual question whether local sales were denominated in dollars or in won.  The
resolution of this issue obviously depended heavily on the facts as determined by the DOC.  Thus,
assuming that Roses from Colombia  reflected an "established policy" by the United States, we
consider that the United States properly distinguished the Plate  investigation from Roses  as a factual
matter.  Our reasons for this conclusion are stated in detail in paragraphs 6.21 - 6.31 of this Report.Finally, while we recognize that the exchange rates used by POSCO as of date of sale differed from
those used by the DOC for the date of sale both as a result of a difference in time zones and as a result
of errors in the selection of a comparable exchange rate by the DOC, the DOC understood on the basis
of the record before it that the amount of payment  was determined on the basis of the exchange rate on
the date of s ale.  This difference would have existed even if the DOC had used the same Korean
Exchange Bank rates as those relied upon by POSCO .
6.53. Finally, we note Korea's view that the United States failed to provide a statement of reasons
for its departure from Roses  as required by Article 12.2 of the AD Agreement .  We recall in this
respect that Article 12.2 requires a Member in its preliminary and final determinations to set forth "in
sufficient detail the findings and conclusions reached on all issues of fact and law considered material
by the investigating authorities" and to "refer to the matters of fact and law which have led to
arguments being accepted or rejected", including a "full explanation of the reasons for themethodology used in the establishment and comparison of the export price and the normal value under
Article 2."  In our view, Korea has not asserted or established that the United States failed to provide
the statement of reasons for its actions required by Article 12.2.  Rather, Korea challenges the
substantive adequacy of that statement of reasons.  We have however already addressed this
substantive issue at length above.
6.54. For the foregoing reasons, we conclude that the United States did not act inconsistently with
Article X:3(a) of GATT 1994  and Article 12.2 of the AD Agreement  in respect of its treatment of
"local sales".
                                                     
63 DSU  Article 3.2.
64 It is for this reason that both Article X:3(b) of GATT 1994  and Article 13 of the AD Agreement
require Members to maintain appropriate judicial, ar bitral or administrative tribunals or procedures.WT/DS179/R
Page 24
(ii) The Sheet  investigation
6.55. In respect of the Sheet  investigation, we note that this Panel "need only address those claims
which must be addressed in order to resolve the matter in issue in this dispute".65  Having concluded
that the United States acted inconsistently with its specific obligations with respect to currency
conversion under Article 2.4.1 in the Sheet  investigation by performing unnecessary currency
conversions in respect of local sales, we do not consider it necessary to examine Korea's claim that
those double conversions breached the requirements of Article X:3(a) of GATT 1994  and Article 12 of
the AD Agreement .
C. TREATMENT OF UNPAID SALES
1. Factual background
6.56. The claims addressed in this section of our report relate to the treatment by the DOC of sales
to a company that subsequently declared bankruptcy.  During the period of investigation in both the
Plate  and Sheet  investigations, POSCO made a significant number of sales to a US customer which,
for purposes of confidentiality, we will refer to as the ABC Company.  All such sales were made on
credit through Pohang Steel America Corporation ("POSAM"), a POSCO subsidiary located in the
United States.  The ABC Company subsequently declared bankruptcy, and did not pay for those sales.
POSAM issued negative invoices with respect to these sales, and reflected the non-payment in its
accounting records by showing a credit to accounts receivable and a debit to sales, thereby reversing
the entries that recorded the sales.  There wa s no evidence in the record that POSCO had any
knowledge at the time of sale that ABC Company was in a precarious financial situation.66
6.57. In the preliminary determination in the Plate  investigation, the DOC excluded these sales
from its margin analysis, because it determined that the sales were "atypical and not part of  POSCO's
normal business practice".67  In the final determinations in both investigations, however, the DOC
included the sales in question in its margin analysis and treated the unpaid amounts as "direct sellingexpenses".  The DOC allocated these direct selling expenses over all US sales.  In respect of sales
made directly to unaffiliated purchasers in the United States, the DOC added the allocated amount of
these direct selling expenses to the normal value.  In respect of US sales made through POSAM, the
DOC subtracted the allocated amount of these dire ct selling expenses from the price charged by
POSAM to unaffiliated customers in the United States.
2. Claims under Article 2.4 ("allowances")
(a) Arguments of the parties
6.58. Korea claims that the DOC's treatment of the amounts unpaid by ABC Company as "direct
selling expenses" is an adjustment not permitted by Article 2.4 of the AD Agreement .  In Korea's
view, Article 2.4 permits adjustments only to account for differences that affect prices.  The cost of
unpaid sales is not one of the five factors deemed by Article 2.4 to affect price comparability.  In
particular, the term "conditions and terms of sale" refers to the agreed-upon bundle of rights andobligations under a sales agreement, and failure to pay amounts due is not a "condition" or "term" of a
contract but is rather a breach  of a contract.  Nor do the unpaid amounts represent an "other difference
. . . demonstrated to affect price comparability" within the meaning of Article 2.4.  Because POSCO
                                                     
65 United States - Shirts and Blouses , supra , p. 19.
66 Responses of the United States to Questions Posed by the Panel at the First Meeting of the Panel,
question 2 on treatment of unpaid sales, Annex 2-4.
67 See Plate  Preliminary Analysis Memorandum, Korea Exhibit 5, p.3.WT/DS179/R
Page 25
did not know that a particular customer would fail to pay at the time it set its prices, the subsequent
failure to pay did not affect the prices that POSCO set.  In any event, the allocation by the DOC of the
cost of unpaid sales of ABC Company over all US sales to all customers is inconsistent with
Article 2.4 because the failure of one company to pay did not affect the price comparability of sales toother customers who did pay for their purchases.
6.59. The United States  considers that its treatment of the cost of unpaid sales  was consistent with
Article 2.4.  The United States first notes that certain US sales were made through the associated
importer POSAM.  For these sales it constructed an export price by deducting from the price charged
to the first independent buyer in the United Stat es the expenses and profits associated with the
transaction between that buyer and the associated importer, including an allocated portion of the bad
debt expense.  In respect of these sales, therefore, the bad debt expense was not an adjustment  to
export price under the "due allowance" provision of Article 2.4, but rather a deduction made to
construct  an export price under Article 2.3.  The United States maintains that, because Korea has
made no claim under Article 2.3, the methodology used by the DOC to construct an export price is notbefore the Panel.  In any event, the United States  acted consistently with Article 2.3 in deducting an
allocated portion of the bad debt expense when constructing the export price because the bad debt
expense was a "cost[] . . . incurred between importation and resale".
6.60. In respect of those sales for which it did make adjustments, the United States contends that
bad debt represents a "difference in conditions and terms of sale" for which due allowance shall bemade pursuant to Article 2.4.  In the United States' view, the term "differences in conditions and terms
of sale"  encompasses differences in costs associated with the terms of the sales contract and other
expenses that are directly related to the sale, i.e., but for the sale the expense would not be incurred.
The United States considers that whenever a seller sells on credit, it accepts a credit expense,
including any bad debt that may result from the sale.  As in the case of a warranty, the expense is partof the bargain and but for the sale the expense would not be incurred.  As for the amount of the bad
debt allowance, the United States considers that the only practicable method for making such
allowances is based on the exporter's actual expense during the period of investigation.  The
United States does not rely on the reference in Article 2.4 to "other differences" demonstrated to
affect price comparability as a basis for its adjustment, but neither does it concede that bad debt could
not be treated as such an "other difference".
6.61. Korea disputes the United States' view that, in respect of sales made through the associated
importer POSAM, the bad debt expense was not an adjustment to export price but was rather a
deduction made to construct an export price.  In  Korea's view, it is clear that the adjustment was not
made to construct the export price because the DOC made the same adjustment to all US sales,
whether or not they were made through an associated importer.  Further, the DOC's determinations
refer to the adjustment as one for "direct selling expenses", which under US law signifies that theDOC determined that a "circumstance of sale" adjustment – equivalent in US law to an adjustment
under Article 2.4 – was appropriate.  In any event, Korea considers that an adjustment for non-
payment is not a permissible adjustment for purposes of constructing an export price because it is not
a cost incurred "between importation and resale" and because an item may properly be included as an
adjustment for purposes of constructing an export price only if it is the type of item that mightreasonably be included in an unaffiliated importer's mark-up.WT/DS179/R
Page 26
(b) Evaluation by the Panel
(i) Was the DOC's treatment of unpaid sales in resp ect of POSAM part of the construction of the
export price?
6.62. As discussed above, Korea claims that the DOC 's treatment of unpaid sales was an adjustment
for differences affecting price comparability pursuant to the third sentence of Article 2.4 which was
inconsistent with the requirements of that provision.  The United States has responded that, in respect
of those sales made through POSAM , its treatment of unpaid sales did not represent an adjustment  to
export price pursuant to the third sentence of Article 2.4 but was rather one aspect of the construction
of an export price pursuant to Article 2.3.
6.63. This issue is important for two reasons.  First, if the United States' treatment of unpaid sales in
respect of POSAM was one aspect of the construction of the export price, we must consider whether
claims relating to construction of the export price are within the Panel's terms of reference.  Second, it
is clear that a Member's actions regarding the constr uction of an export price are subject to different
rules than a Member's actions with respect to the making of allowances for differences affecting pricecomparability.  Thus, we must as a threshold matter determine whether the DOC's treatment of unpaid
debt in respect of sales through POSAM was one aspect of the construction of the export price.
6.64. In addressing this issue, we must of course look to what the DOC actually did during these
investigations.  This is a factual issue that we must resolve on the basis of the DOC's final
determinations and on the publicly available final analysis memoranda which are cross-referenced inthose determinations.
6.65. Turning first to the Plate  investigation , the DOC stated the following in its Final
Determination:
"For US sales made through POSAM, we ca lculated CEP [constructed export price]
based on packed prices to unaffiliated customers in the United States . . . . Inaccordance with section 772(d)(1) of the Act, we deducted those selling expenses
associated with economic activity occurring in the United States, including direct
selling expenses  (credit costs, bank charges, and US commissions) and indirect
selling expenses.  Also, we made an adjustment for CEP profit in accordance with
section 772(d)(3) of the Act." (emphasis added).
68
Although the Final Determination does not specifically  mention the unpaid sales, it is clear from the
final analysis memorandum that the amount for unpaid sales was included in the "direct selling
expenses" which were deducted in order to calculate the constructed export price.69
6.66. The Final Determination in the Sheet  investigation is more explicit.  It states that:
"For US sales made through POSAM, we calculated CEP based on packed prices to
unaffiliated customers in the United States . . . . In accordance with section 772(d)(1)of the Act, we deducted those selling expenses associated with economic activity
occurring in the United States.  In addition, we deducted a per unit direct selling
                                                     
68 Final Determination on Plate , p. 15445, at Korea Exhibit 11.
69 Plate  Final Analysis Memorandum , pp. 8-9, Korea Exhibit 12.  The memorandum indicates that an
"amount associated with unpaid bankrupt sales" was included in the direct selling expenses ("DIREXPU").  Aformula under the title "Constructed Export Price ("CEP") Calculation" indicates that the amount for directselling expenses was deducted from the gross unit price ("GRSUPRU") in order to derive a net price
("NETPRIU").WT/DS179/R
Page 27
expense to account for bad debt losses in curred by POSAM for sales made to a
bankrupt customer.  . . . Also, we made an adjustment for CEP profit in accordance
with section 772(d)(3) of the Act.70
Once again, the final analysis memorandum confirms that the amount for unpaid sales was deductedfrom the price charged to the first unaffiliated purchaser as part of the construction of the export
price.
71
6.67. These determinations and underlying memoranda demonstrate that, in the case of sales
through POSAM, the DOC deducted an allocated porti on of the unpaid sales as part of its construction
of the export price.  We note in this respect that the provision of US law on the basis of which the
DOC made these deductions, section 772(d) of the Act,72 is entitled "Additional Adjustments to
Constructed Export Price", applies exclusively in the CEP context, and, as made clear by
implementing regulations, only for adjustments fo r expenses associated with commercial activities
occurring in the United States.73  By contrast, adjustments for differences between the normal value
and the export price or constructed export price in respect of, inter alia , taxation, physical
characteristics, quantities, level of trade and "other differences in the circumstances of sale" are made
to the normal value  pursuant to section 773 of the Act.74
6.68. Korea contends that the DOC's reference to "direct selling expenses" was a "signal" that the
DOC had decided to make a circumstances of sale adjustment, which Korea equates to an allowancefor differences affecting price comparability under the third sentence of Article 2.4.  We note however
that Section 772(d) of the Act identifies "expenses that result from, and bear a direct relationship to
the sale", i.e., direct selling expenses, as one category of expense for which adjustment shall be made
in the construction of an export price.
75  Thus, we cannot agree that the DOC's reference to "direct
selling expenses" means that the allowances for unpaid sales in respect of sales through POSAM mustbe deemed to be adjustments for circumstances of sale.
6.69. Our conclusion on this point is a limited one, relating to a specific factual question: was the
DOC's deduction of an amount for unpaid sales in respect of sales through POSAM performed as an
element in the construction of an export price?  Having answered this question in the affirmative, we
agree with the United States that the DOC's actions in respect of those sales must be measured against
the provisions of the AD Agreement  relating to the construction of the export price, or not at all.
76
6.70. The foregoing conclusion does not of course imply a view about whether the DOC's actions
were consistent  with the provisions of the AD Agreement  regarding construction of an export price.
That is an issue to be taken up only after a consideration as to whether such claims are within the
Panel's terms of reference.  Nor does it mean that the DOC's adjustments for unpaid sales in respect of
sales through unaffiliated  importers should be measured against the provisions relating to construction
                                                     
70 Final Determination on Sheet , p. 30668, Korea Exhibit 24 (emphasis added).
71 Sheet Final Analysis Memorandum , p. 9, Korea Exhibit 25.
72 Korea Exhibit 1, p. 469.
73 19 C.F.R. Section 351.402(b), Korea Exhibit 2.
74 Korea Exhibit 1, p. 470.
75 Compare  19 C.F.R. Section 351.410(c)(defining "direct selling expenses" for purposes of
circumstance of sale adjustments to mean "expenses that  result from, and bear a direct relationship to, the
particular sale in question").  Thus, wh ile the DOC made adjustments in identical amounts  for unpaid sales
when calculating the margin of dumping in respect of export price and constructed export price sales, this doesnot mean, as argued by Korea, that these adjustments had the same legal basis.
76 It is clear to us that, if the DOC's actions in constructing an export price were consistent with WTO
requirements regarding such construction, then the DOC's actions would be WTO-consistent whether or not
those actions could also have been justified as adjustments for differences affecting price comparability.WT/DS179/R
Page 28
of the export price.  As discussed below, the WTO-consistency of these adjustments must be
measured against the provisions of the AD Agreement  governing adjustments for differences affecting
price comparability.  It is to the latter issue that we now turn.
(ii) Was the DOC's adjustment for unpaid sales in respect of sales through unaffiliated importers
a permissible allowance for a difference affecting price comparability?
6.71. As we have seen, Korea claims that the AD Agreement  allows adjustments only for
"differences which are . . . demonstrated to affect price comparability" within the meaning of
Article 2.4, and that because the non-payment by ABC company of certain sales was not such a
difference, the adjustments made by the DOC were inconsistent with that Article.  Although the
United States contends, and we have found, that in its treatment of sales through affiliated importer
POSAM  the DOC was constructing an export price, the United States does not dispute that the WTO-
consistency of its adjustments with respect to sales to unaffiliated buyers  must be assessed by
reference to the "due allowance" provision cited by Korea. 77
6.72. In examining this claim, therefore, we firs t consider the relevant provisions of the
AD Agreement .  Article 2.4 of the AD Agreement provides as follows:
"A fair comparison shall be made between the export price and the normal value.
This comparison shall be made at the same level of trade, normally at the ex-factory
level, and in respect of sales made at as nearly as possible the same time .  Due
allowance shall be made in each case, on its merits, for differences which affect pricecomparability, including differences in c onditions and terms of sale, taxation, levels
of trade, quantities, physical characteristics, and any other differences which are also
demonstrated to affect price comparability.
7 In the cases referred to in paragraph 3,
allowances for costs, including duties and taxes, incurred between importation and
resale, and for profits accruing, should also be made.  If in these cases pricecomparability has been affected, the authorities shall establish the normal value at a
level of trade equivalent to the level of trade of the constructed export price, or shall
make due allowance as warranted under this paragraph.  The authorities shall indicate
to the parties in question what information is necessary to ensure a fair comparison
and shall not impose an unreasonable burden of proof on those parties." (emphasis
added)
_______________________
7 It is understood that some of the above factors may overlap, and authorities shall ensure that
they do not duplicate adjustments that have been already made under this provision.
6.73. The third sentence of Article 2.4 identifies five specific categories of "differences which
affect price comparability": differences in conditions and terms of sale, taxation, levels of trade,
quantities, and physical characteristics.  The United States does not assert that the cost of unpaid sales
represents a difference in taxation, levels of  trade, quantities or physical characteristics.
6.74. The United States  does contend, however, that the allowances it made here were for
"differences in conditions and terms of sale".  It c onsiders that a permissible interpretation of differences
in "conditions and terms of sale" encompasses differences  in costs associated with  the terms of the sales
contract and other expenses that are directly related to the sale, i.e., but for the sale the expense would
                                                     
77 First submission of the United States, para. 81, Annex 2-1 ("When comparing that export price [i.e.,
the price charged by POSCO to independent buyers] to normal value, the United States made an adjustment to
normal value to account for differences affecting price comparability that was consistent with Article 2.4.")WT/DS179/R
Page 29
not be incurred.  In the United States' view, bad debt is an expense directly related to the payment terms
of the contract, because whenever a seller sells on credit he accepts a credit expense, which includes any
bad debt that may result from the sale.  Korea  responds that "conditions and terms of sale" are the
agreed upon bundle of rights and obligations created  by the sales agreement, and that no contract
contains terms authorizing a customer to go bankrupt and refuse to pay.
6.75. We do not consider that the phrase "differences in conditions and terms of sale", interpreted in
accordance with customary rules of interpretation of public international law, can be understood to
encompass differences arising from the unforeseen bank ruptcy of a customer and consequent failure to
pay for certain sales.  In this respect, we note th at Article 2.4 refers to the "terms and conditions of sale ".
Although of course both words – "term" and "cond ition" – have many meanings, both are commonly
used in relation to contracts and agreements.  Thus, "term" is defined, inter alia , to mean "conditions
with regard to payment for goods or services",78 while "condition" is defined, inter alia , as "a provision
in a will, contract, etc., on which the force or effect of the document depends".79  Thus, we consider that,
read as a whole, the phrase "conditions and terms of sale" refers to the bundle of rights and obligationscreated by the sales agreement, and "differences in conditions and terms of sale" refers to differences in
that bundle of contractual rights and obligations.  Thus, to the extent that there are, for example,
differences in payment terms in the two markets, a di fference in the conditions and terms of sale exists.
The failure of a customer to pay is not a condition or term of sale in this sense, however.  Rather, non-
payment involves a situation where the purchaser has violated the "conditions and terms of sale" bybreaching its obligation to pay for the merchandise in question.
6.76. We perceive no textual basis for the United States' e ffort to characterize all differences in costs
associated with the terms of the contract and expenses directly related to the sale as "differences in terms
and conditions of sale".  The United States contends that "conditions" of sale can be read in this context
to mean the "mode or state of being" of sales, such  that "differences in conditions and terms of sale"
include the "mode or circumstances" under which sales are made.
80  Assuming this interpretation to be a
permissible one, it might allow for adjustments for "differences in conditions and terms of sale" in cases
where the contractual provisions governing sales in the two markets were identical but the seller was
aware from circumstances existing at the time of sale  that those provisions would likely entail different
costs.81  Thus to take an example often cited by the United States in this dispute, a seller might extend
identical warranties in different markets or to diff erent customers, knowing in advance that the costs
related to those warranties in one market would likely be higher than in the other.  Similarly, a seller
might extend sales on the same credit terms in two diffe rent markets or to two different customers in the
awareness that the risk of default – and thus the like ly costs associated with the extension of credit –
would be higher in one case than in the other.  Howe ver, we fail to see how the fact that a customer who
has purchased on credit subsequently went bankrupt a nd failed to pay for his purchases could be deemed
                                                     
78 New Shorter Oxford English Dictionary , Oxford University Press, 1993, p. 3253.  The United States
apparently agrees that "terms" in Article 2.4 refers to contractual terms, as it states that an ordinary meaning of"terms of sale" is "the situations and conditions that define the nature and extent of the sales contract ( e.g.,
quantity, delivery)".  First Submission of the United States, para. 83, Annex 2-1.
79 Id., p. 472.
80 First Submission of the United States, para. 83, Annex 2-1.  Like the dictionary relied on by the
United States, the Shorter Oxford English Dictionary  identifies "State, mode of being" as one broad definition
of the word "condition" (the other broad category being "A convention, proviso, etc.").  For example, one mayspeak of the "human condition", or note that a person is "in no condition" to do something.  Read in context,however, we doubt that this alternative meaning is applicable in the context of Article 2.4.
81 We note however that such a situation might more properly be considered to be an "other difference .
. . affecting price comparability".WT/DS179/R
Page 30
a "circumstance under which sales are made", at least in a case such as this one where the seller had no
knowledge of the precarious financial situation of the purchaser.82
6.77. We consider that an examination of the context in which the phrase "differences in conditions
and terms of sale" is used supports our understanding of the ordinary meaning of this phrase.  We recall
that Article 2.4 identifies "differences in conditions and terms of sale" as one of several "differences
which affect price comparability".83  Thus, the notion of price compar ability informs our interpretation
of "differences in conditions and terms of sale".  In our view, the requirement to make due allowance for
differences that affect price comparability is intende d to neutralise differences in a transaction that an
exporter could be expected to have reflected in his pricing.84  A difference that could not reasonably
have been anticipated and thus taken into account by the exporter when determining the price to be
charged for the product in different markets or to diff erent customers is not a difference that affects the
comparability of prices  within the meaning of Article 2.4.  This  reinforces our view that the phrase
"differences in conditions and terms of sale" ca nnot permissibly be interpreted to encompass an
unanticipated failure of a customer to pay for certain sales.
6.78. In the latter phases of the proceeding, and in response to a question from the Panel, the
United States contended that its methodology for the tr eatment of bad debt was simply a practical way to
address differing levels of risks between markets in cases where sales are made on credit.85 As our
previous discussion suggests, we agree with the Unite d States that a difference in risk of non-payment
between markets that was known at the time of sale might represent a difference for which dueallowance could properly be made under Article 2.4.  Nor do we preclude that actual bad debt
experience during the period of investigation might be  evidence relevant to establishing the existence of
such a difference.
86  The United States did not however treat actual experience with respect to levels of
unpaid sales as evidence  of different levels of risk in the two markets in these investigations.  Rather, it
stated that it was the DOC's practice to treat bad de bt as a direct selling expense when the expense was
incurred in respect of the subject merchandise.87  Thus, even assuming that the US methodology was
somehow intended to address differences in risk of non-payment, we do not accept the proposition that
                                                     
82 The United States concedes that there was no evidence in the record in either investigation that
POSCO had any knowledge at the time of sale that ABC company was in a precarious financial situation.
Responses of the United States to Questions posed by the Panel at the First Meeting of the Panel, (Question 2 ontreatment of unpaid sales at the first meeting of the Panel, Annex 2-4).
83 The parties disagree as to whether a "difference in conditions and terms of sale" is by definition a
difference affecting price comparability or whether, having  established that such a difference exists, it is still
necessary to determine that such a difference affects pr ice comparability in order to make an adjustment.  See
responses of Korea and the United States to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question 6 on treatment of unpaid sales, Annexes 1-7 and 2-7).  This is not however an issue we need resolve inthis dispute.
84 The United States appears to have a similar view.  Thus, it states that "[s]elling expenses such as
warranty costs and bad debt not only reflect conditions of sale in the market, they are also an element of
price .[footnote omitted].  Therefore, differences in such selling expenses affect price comparability".   First
Submission of the United States, para. 84, Annex 2-1.
85 The United States contended that the risk of non-payment "may differ between the two markets being
compared and thus have different effects on prices in the two markets.  Because it is the only practical means – anda method as reasonable as any other – of making a due allowance for any such difference, we base the allowanceon the company's actual bad debt experience in the two markets during the period of investigation.[footnote
omitted]  That is, we rely on the actual bad debt expenses the company recognizes with respect to each of the two
markets being compared."  Responses of the United States to Questions Posed by the Panel at the Second Meetingof the Panel. (Question 8 on bad debt, Annex 2-4).
86 Although in our view the existence of different levels of non-payment during prior periods would
appear to be much more relevant.
87 Final Determination on Plate , p. 15448, at Korea Exhibit 11; Final Determination on Sheet , p.
30674, Korea Exhibit 24.WT/DS179/R
Page 31
the existence of a higher level of non-payment in  one market than in another during the period of
investigation may be deemed  to demonstrate the existence of such differences in risk and thus represent
a permissible adjustment for "differences in conditions and terms of sale".88
6.79. We note that the United States does not appear to argue that the adjustment made by the DOC in
these investigations is justified on the basis that it represented an adjustment for "other differences
which are also demonstrated to affect price comparability."89  Nevertheless, taking into account the
ambiguity of the United States' position on this question, and in the interests of achieving a full
resolution of this dispute, we conclude that, for the reasons set forth in paragraph 6.77 above, the
adjustment in question in this dispute could not be  justified as an adjustment for "other differences
which are also demonstrated to affect price comparability".
6.80. For the foregoing reasons, we conclude that the DOC's adjustment for unpaid sales through
unaffiliated importers was not a permissible due allowance for differences affecting price comparability
and was thus inconsistent with the third sentence of Article 2.4 of the AD Agreement .90
(iii) Is Korea's claim regarding the DOC's adjustment for unpaid sales in respect of sales through
POSAM to construct an export price within the Panel's terms of reference?
6.81. In the preceding section, we concluded that the DOC's adjustment for unpaid sales in respect
of sales through unaffiliated purchasers was not a permissible due allowance for differences affecting
price comparability and was thus inconsistent with the third sentence of Article 2.4 of the
AD Agreement .  We also concluded, however, that the DOC's adjustment for unpaid sales in respect
of sales by POSCO through its affiliated US impor ter POSAM was not an adjustment for differences
affecting price comparability but was rather one aspect of the construction of an export price, the
WTO-consistency of which must therefore be measured against the provisions governing such
construction.  Before considering the substantive issue, however, we must first consider whether
claims regarding the construction of the export price are within this Panel's terms of reference.
6.82. The United States  contends that, because Korea has made no claim under Article 2.3 of the
AD Agreement , the DOC's decision to construct an export price and the methodology it employed to
do so are not issues before this Panel.91  The United States considers that, while the fourth sentence of
Article 2.4 provides guidance on how to construct the export price, it uses non-mandatory language.
                                                     
88 The United States contends that, "during the pe riod of investigation, POSCO actually recognized
greater bad debt expenses, as a proportion of sales, in th e US market than in the Korean market.  This evidence
would indicate that POSCO should be charging higher prices in the US market than in the Korean market."  Inthe absence of any evidence in the reco rd that the level of non-payment in the US market was foreseeable or that
the historical risk of non-payment was higher in the US than the Korean market, the conclusion that POSCO
should have been charging higher prices in the US than in the Korean market seems unwarranted.
89 In response to a question from the Panel, the United States stated that "Because bad debt falls within
the meaning of 'conditions and terms of sale', we have not relied on the reference in Article 2.4 to 'any otherdifferences' demonstrated to affect price comparability.  That does not constitute a concession that bad debt
could not fall within 'other differences'".  Responses of the United States to Questions Posed by the Panel at the
First Meeting of the Panel, (Question 5 regarding unpaid debt, Annex 2-4).
90 In light of our conclusion on this issue, we need not address Korea's additional argument that the
allocation by the DOC of the cost of unpaid sales of ABC Company over all US sales to all customers is
inconsistent with Article 2.4 because the failure of one company to pay did not affect the price comparability ofsales to other customers who did pay for their purchases.
91 Second Submission of the United States, para. 22, Annex 2-5.WT/DS179/R
Page 32
Thus, a claim that the construction of an export price is in violation of the AD Agreement  must be
based on Article 2.3.92
6.83. Korea , citing the Appellate Body report in Argentina - Footwear ,93 responds that the fact that
Article 2.4 specifically refers to Article 2.3 should be sufficient to bring Article 2.3 within the Panel'sterms of reference.  In any event, Korea asserts that it has not claimed that Article 2.3 establishes a
separate basis for a finding that the United States acted inconsistently with the AD Agreement .
Rather, Korea has addressed Article 2.3 merely to refute a defense offered by the United States.
Finally, Korea considers that the rules governing th e methodology used to construct an export price
are found in the fourth sentence of Article 2.4, not in Article 2.3.
94
6.84. In considering this issue, we note first that Korea's request for establishment of a panel, which
represents the basis for our terms of reference, contains no mention whatsoever of Article 2.3 of the
AD Agreement, nor of Article 2 generally.  Rather, it refers exclusively to Articles 2.1 and 2.4.95  It is
well established that a panel may not, consistent with Article 6.2 of the DSU , consider a claim of
violation of a treaty provision which has not been  identified in the request for establishment
underlying the panel's terms of reference.96  Nor do we consider that a claim of violation of Article 2.3
would be within this Panel's terms of reference merely because Article 2.4 makes a reference to
Article 2.3.97
6.85. We recall however Korea's statement that it has not claimed that Article 2.3 establishes a
separate basis for a finding that the United States acted inconsistently with the AD Agreement .  Thus,
the question before us is not whether a claim under Article 2.3  is within our terms of reference.  Nor
does the United States anywhere in its submissions suggest that a claim under Article 2.4  regarding
treatment of bad debt in respect of construction of the export price is not within the Panel's terms of
reference.  Rather, the issue as framed by the part ies relates to the nature of the obligations, if any,
imposed by Article 2.4 in respect of the construction of an export price.  This is an issue relating tothe substance  of Korea's claim, not to its admissibility .
                                                     
92 Responses of the United States to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question 2 on unpaid sales, Annex 2-7).
93 Argentina – Safeguard Measures on Imports of Footwear , Appellate Body Report,
WT/DS121/AB/R, adopted 1 January 2000, para. 74.
94 Responses of Korea to Questions Posed by the Panel at the Second Meeting of the Panel, (Question 2
on unpaid sales, Annex 1-7).
95 WT/DS179/2.
96 Article 6.2 of the DSU provides that the request for the establishment of a panel "shall provide a brief
summary of the legal basis of the complaint sufficient to present the problem clearly."  The Appellate Body hasobserved that:
"Identification of the treaty provisions claimed to have been violated by the respondent is
always necessary both for the purposes of defining the terms of reference of a panel and for
informing the respondent and the third parties of the claims made by the complainant; suchidentification is a minimum prerequisite if the legal basis of the complaint is to be presented atall."
Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products , Appellate Body Report,
WT/DS98/AB/R, adopted 12 January 2000, para. 124.
97 The issue identified by Korea in Argentina -  Footwear  related to Article 4.2(c) of the Agreement on
Safeguards , which requires a Member to publish certain in formation "in accordance with Article 3" of that
Agreement.   The Appellate Body concluded that, in considering a claim under Article 4.2(c), the Panel waspermitted, and in fact was obliged  by Article 4.2(c), to take into account the provisions of Article 3 of that
Agreement.  The Appellate Body did not conclude that a claim  under Article 3 was within the Panel's terms of
reference.WT/DS179/R
Page 33
(iv) Is the DOC's adjustment for unpaid sales in respect of sales through POSAM to construct an
export price consistent with Article 2.4, fourth sentence, of the AD Agreement?
6.86. As is evident from the preceding section, the parties to this dispute disagree as to what
obligations, if any, Article 2.4 imposes in respect of the construction of the export price.  Inconsidering this question, we must of course turn first to the relevant provisions of the AD Agreement .
6.87. Article 2.1 of the AD Agreement  provides as follows:
"For the purposes of this Agreement, a product is to be considered as being dumped,
i.e. introduced into the commerce of another country at less than its normal value, if
the export price of the product exported from one country to another is less than thecomparable price, in the ordinary course of trade, for the like product when destined
for consumption in the exporting country.
6.88. Article 2.3 of the AD Agreement  provides as follows:
"In cases where there is no export price or where it appears to the authorities
concerned that the export price is unreliable because of association or a compensatory
arrangement between the exporter and the importer or a third party, the export price
may be constructed on the basis of the price at which the imported products are first
resold to an independent buyer , or if the products are not resold to an independent
buyer, or not resold in the condition as imported, on such reasonable basis as theauthorities may determine." (emphasis added)
6.89. Article 2.4 of the AD Agreement  provides as follows:
"A fair comparison shall be made between the export price and the normal value.
This comparison shall be made at the same level of trade, normally at the ex-factorylevel, and in respect of sales made at as nearly as possible the same time.  Due
allowance shall be made in each case, on its merits, for  differences which affect price
comparability, including differences in conditions and terms of sale, taxation, levels
of trade, quantities, physical characteristics, and any other differences which are also
demonstrated to affect price comparability.
7  In the cases referred to in paragraph 3,
allowances for costs, including duties and taxes, incurred between importation and
resale, and for profits accruing, should also be made.  If in these cases price
comparability has been affected, the authorities shall establish the normal value at a
level of trade equivalent to the level of trade of the constructed export price, or shall
make due allowance as warranted under this paragraph.  The authorities shall indicate
to the parties in question what information is necessary to ensure a fair comparison
and shall not impose an unreasonable burden of proof on those parties." (emphasisadded).
_____________________
7 It is understood that some of the above factors may overlap, and authorities shall ensure that
they do not duplicate adjustments that have been already made under this provision.
6.90. In our view, both Article 2.3 and Ar ticle 2.4 play an important role in respect of the construction
of export prices.  When determining whether dumping exists, Article 2.1 usually requires a comparison
of the export price  with the comparable price, in the ordina ry course of trade, for the like product when
destined for consumption in the exporting country.  Article 2.3, however, authorizes a Member to
construct  the export price where, inter alia , the actual export price is unreliable because of associationWT/DS179/R
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between the exporter and the importer.  As discusse d in section VI.C.2.(b)(i), it was pursuant to this
authorization that the DOC disregarded the export pr ice charged by POSCO to its affiliated importer
POSAM in these investigations and instead constructed the export price.
6.91. Further, Article 2.3 specifies that the export price may be constructed on the basis of  the price at
which the imported products are first resold to an inde pendent buyer.  It is clear from this language that,
while the price charged to the first independent buyer is a starting-point for the construction of an export
price, it is not itself  the constructed export price.  Nor does Article 2.3 itself contain any guidance
regarding the methodology to be employed in order to  construct the export price. Rather, the only rules
governing the methodology for construction of an e xport price are set forth in Article 2.4 of the
AD Agreement , which provides that, "[i]n the cases referred to in paragraph 3, allowances for costs,
including duties and taxes, incurred between importati on and resale, and for profits accruing, should also
be made."  Although the United States repeatedly refers to these allowances as "Article 2.3
adjustments",98 the provision governing these allowances is found in Article 2.4 and it is therefore
evident to us that a claim regarding the appropriatene ss of allowances made to construct an export price
may be made pursuant to that Article.99
6.92. The United States contends that, because Article 2.4 provides that allowances for costs and
profits "should" be made in constructing an export pr ice, that provision is not mandatory, and that this
provision of Article 2.4 therefore does not provide a basis for claim of violation.100  We cannot agree.
6.93. The term "should" in its ordinary meaning generally is non-mandatory, i.e., its use in this
sentence indicates that a Member is not required  to make allowance for costs and profits when
constructing an export price.101  We believe that, because the failur e to make allowance for costs and
profits could only result in a higher export pr ice – and thus a lower dumping margin – the
AD Agreement  merely permits, but does not require, that such allowances be made.102
6.94. Korea does not however assert that the DOC failed to make allowance for all costs and profits.
Rather, as discussed below, Korea asserts that th e DOC made allowances in constructing the export
price which can not be justified as allowances "for  costs . . . incurred between importation and resale".
In our view, that the AD Agreement  does not require such allowances does not mean that a Member is
free to make any allowances it desires, including a llowances not specified in this provision.  To the
contrary, we view this sentence as providing an authorization  to make certain specific allowances.  We
therefore consider that allowances not within the scope of that authorization cannot be made.103  I f  a
                                                     
98 E.g.,  Oral statement of the United States at the S econd Meeting of the Panel, para. 19, Annex 2-6.
99 The United States' perception seems to be base d on the assumption that there is a watertight
separation between the provision relating to construction of the export price (Article 2.3) and that relating tocomparison between export price/constructed export price and normal value (Article 2.4).   It is evident from the
face of the text, however, that the rules regarding allo wances related to construction of the export price are
found in the paragraph relating to comparison.
100 Responses of the United States to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question 2 on unpaid sales, Annex 2-7).
101 But see  United States – Tax Treatment for Foreign Sales Corporations , Appellate Body Report,
WT/DS108/AB/R, adopted 20 March 2000, footnote 124.
102 It can be assumed that a Member will use this authorization where appropriate without being legally
constrained to do so.  By contrast, the AD Agreement  provides that due allowance "shall" be made for
differences affecting price comparability.  Mandatory lan guage is used here because the failure to make such
allowances could generate or inflate dumping margins to the detriment of the interests of other Members.
103 That the use of the non-mandatory phrase "should" does not support the conclusion advanced by the
United States can be confirmed by replacing "should" with another non-mandatory term, "may".  That aMember "may" make certain allowances would indicate that the Member was authorized but not required to
make those allowances.  It does not follow, however, that the Member was free also to make any otherWT/DS179/R
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Member were free to make any additional allowances it desired, there would be no effective disciplines
on the methodology for construction of an export pri ce and the provision in question would in our view
be reduced to inutility.104  Thus, we conclude that it would be  inconsistent with Article 2.4 of the
AD Agreement  to make allowances in the construction of the export price that are not within the scope
of the authorization found in that Article.
6.95. Our conclusion that Article 2.4 contains bind ing obligations regarding the scope of the
permissible allowances that can be made in constr ucting an export price does not mean that we equate
allowances for differences which affect price compar ability with allowances relating to the construction
of the export price.  Rather, the third sentence of  Article 2.4 requires due allowance to be made for
differences affecting price comparability, while the four th sentence provides that in the cases referred to
in paragraph 3 – i.e., when constructing an export price – allowance for certain costs and profits should
also be made.  Finally, the fifth sentence of Articl e 2.4 makes clear that allowances relating to the
construction of the export price could in fact reduce  price comparability, such that one of several
compensating steps should be taken.  For all these reasons , it is clear to us that allowances in respect of
construction of the export price are separate and distinct from allowances for differences which affect
price comparability and are governed by different substantive rules.
6.96. With the foregoing in mind, the question before us can be simply posed: was the deduction from
the price charged by POSAM to independent purchas ers of an allocated amount of the unpaid sales an
allowance for "costs, including duties and taxes, in curred between importation and resale" such that it
was authorized by the fourth sentence of Article 2.4?105
6.97. It seems reasonably clear, and the parties do not  dispute, that non-payment by ABC company
represents a "cost" within the meaning of Article 2.4.  They do not agree, however, as to whether that
cost was incurred between importation and resale .  In this respect, Korea  argues that non-payment does
not occur between  importation and resale but rather occurs only after resale.  The United States
responds that the reference to costs incurred "between importation and resale" cannot be a mere
temporal limitation as that would be inconsistent w ith the object and purpose of Article 2.3, which is to
construct  a reliable export price to the associated importer.  Rather, the United States considers that this
provision distinguishes between costs incurred in connection with the import transaction and those
incurred in connection with the resale.  It is the view of the United States that price is equal to cost plus
profit, therefore the deduction from the resale price of all costs and profits associated with the resale
leads to the effective price between the exporter and the associated importer for the transaction.
6.98. In considering this question, we note that Articl e 2.4 uses the word "between".  That term is
defined to mean, inter alia , "[i]n the interval separating two points of time, events, etc.".106  Thus, the
phrase costs "incurred between importation and resale" in  its ordinary meaning is most naturally read to
refer to costs that were incurred between the date of importation and the date of resale.  Under this
reading, it might be difficult to conclude that a cost  incurred after the date of resale was a cost incurred
"between importation and resale".
                                                                                                                                                                    
allowances not within the scope of the authorization.  Cf . United States – Anti-Dumping Act of 1916 , Appellate
Body Report, WT/DS136/AB/R-WT/DS162/AB/R, adopted 26 September 2000, paras. 112-117 (thatArticle VI:2 of GATT 1994 makes imposition of anti-dumping duties permissive does not mean that a Member
may impose measures other than anti-dumping duties to counteract dumping).
104 As the Appellate Boy stated in United States – Standards for Reformulated and Conventional
Gasoline , "[a]n interpreter is not free to adopt a reading that would result in reducing whole clauses or
paragraphs of a treaty to inutility."  Appellate Body Report, WT/DS2/AB/R, adopted 20 May 1996, p. 23.   
105 It is clear, and the United States does not dispute, that this deduction was not an allowance for
"profits accruing".
106 The New Shorter Oxford English Dictionary , Oxford University Press, 1993, p. 221.WT/DS179/R
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6.99. We are cognizant, however, that dictionary defini tions can only take the interpreter so far, and
that in interpreting a provision of a treaty we mu st take into account both context and object and
purpose.107 As discussed above, it is clear that the purpose of allowances to construct an export price is
not to insure price comparability per se .  Rather, an export price is constructed, and the appropriate
allowances made, because it appears to the investiga ting authorities that the export price is unreliable
because of association or a compensatory arrangem ent between the exporter and the importer or third
party.  By working backwards from the price at which the imported products are first resold to an
independent buyer, it is possible to remove the unrelia bility.  Thus, we agree with the United States that
the purpose of these allowances is to construct a reliable export price to use in lieu of the actual exportprice
108 or, as expressed by the EC as third party, to arri ve at the price that would have been paid by the
related importer had the sale been made on a commercial basis.109
6.100.  Read in light of this object and purpose, we reco gnize that costs related to the resale transaction
but not incurred in a temporal sense between the date  of importation and resale could as a general matter
be considered to be "incurred between importation a nd resale" and thus deducted in order to construct an
export price.  Nor do we preclude that an amount to cover the risk of non-payment might be considered
to be such a cost.  We do not believe, however, th at this interpretation of costs "incurred between
importation and resale" can be stretched to include costs that not only were not incurred in an accounting
sense until after the date of resale but which were entirely unforeseen at that time.  In this regard, we
observe that, while we agree with the United States that as a general principle a related importer may beexpected to establish price based on costs plus profit,  a price certainly cannot be expected to reflect an
amount for costs that were entirely unforeseen at th e time the price was set.  To deduct costs which not
only were incurred after the date of resale but which were entirely unforeseen at that time would not
result in a "reliable" export price in the sense of the price that would have been paid by the related
exporter had the sale been made on a commercial basis.
6.101.  Applying this principle to the case at hand, it is  clear that the costs arising from the failure of
ABC company were incurred in a temporal sense after the date of resale.  Further, the unpaid sales in
these investigations, which represented a substantial share
110 of total sales of subject merchandise in the
United States during the periods of investigation, aros e as a result of the unforeseen bankruptcy of a
single customer.111  We further note the admission of the United States that "[t]here was no evidence in
either case that POSCO had any knowledge at the time of sale that ABC company was in a precarious
financial situation".112  Thus, it is clear that these costs not only were incurred after the date of resale but
were entirely unforeseen as of that date.  Under th ese circumstances, we do not consider the amount for
unpaid sales deducted by the United States in constr ucting an export price was a cost "incurred between
importation and resale" within the meaning of Article 2.4 of the AD Agreement .
                                                     
107 As the Appellate Body has noted, "dictionary meanings leave many interpretive questions open."
Canada – Measures Affecting th e Export of Civilian Aircraft , Appellate Body Report, WT/DS70/AB/R, adopted
20 August 1999, para. 153.
108 Responses of the United States to Questions Posed by the Panel at the Second Meeting of the Panel,
(Question 5 on unpaid sales, para. 27).
109 Oral Statement of the EC at the First Meeting of the Panel, para. 9, Annex 3-3.
110 In order to protect information for which Korea requests confidential treatment, we do not here
identify the precise share of sales concerned.
111 The DOC found in both determinations that POSCO was not aware at the time of sale that the
customer would declare bankruptcy.  Final Determination on Plate , p. 15449, at Korea Exhibit 11; Final
Determination on Sheet , p. 30674, at Korea Exhibit 24.
112 Responses of the United States to Questions Posed by the Panel at the First Meeting of the Panel,
(Question 11 of the Panel on treatment of unpaid sales, Annex 2-4).WT/DS179/R
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3. Claims under Article 2.4 ("fair comparison")
(a) Arguments of the parties
6.102.  Korea also claims the DOC's actions in respect of unpaid sales were inconsistent with the
"fair comparison" requirement of Article 2.4.  In Korea's view, the adjustments made by the DOC inrespect of unpaid sales violated this requirement because non-payment is not a "difference affecting
price comparability" for which adjustment may be made under Article 2.4.  Korea further considers
the DOC's treatment of unpaid debt was inconsistent with the "fair comparison" requirement because
it is fundamentally unfair to penalize an exporter for an event that it could not have anticipated and
that was beyond its control.  In addition, Korea considers that the inclusion of the unpaid sales to theABC Company in the calculation of the export price was inconsistent with the "fair comparison"
requirement.  In this respect, Korea considers that  the unpaid sales in question were atypical, and that,
where the inclusion of atypical sales would distort the results, their inclusion is unfair.
6.103.  The United States  considers that whether a comparison is "fair" within the meaning of
Article 2.4 can only be judged in light of the explicit methodological requirements of that Article.The adjustment performed by the DOC was a perm issible Article 2.4 adjustment for differences in
terms and conditions of sale and was therefore fair.  As for Korea's view that the DOC was required to
exclude unpaid sales as "atypical", the United States considers that it is Article 2.1, not Article 2.4,
which addresses the question what sales are to be used to establish export price and normal value.
Thus, Article 2.4 does not require the exclusion of "atypical" sales when determining export price.
(b) Evaluation by the Panel
6.104.  In the previous section of this Report, we have found that the United States's treatment of bad
debt in the Plate  and Sheet  investigations was inconsistent with its obligations under the third
sentence of Article 2.4 (in respect of its allowances for differences affecting price comparability) and
under the fourth sentence of Article 2.4 (in respect of allowances to construct an export price).  Wenote that "a panel need only address those claims which must be addressed in order to resolve the
matter in issue in the dispute".
113  Having concluded that the United States acted inconsistently with
its specific obligations under the third and fourth sentences of Article 2.4 in respect of allowances, we
do not consider it necessary to examine Korea's claims that the United States' treatment of bad debt
breached a more general "fair comparison" requirement under Article 2.4 of the AD Agreement .
D. MULTIPLE AVERAGING
1. Factual background
6.105.  The claims addressed in this section of our report relate to the division of the POI for the
purpose of calculating the overall margin of dumping in the Plate  and Sheet  investigations into two
averaging periods to take into account a major devaluation of the Korean won in the period
November-December 1997.  In the preliminary determinations in both investigations, the DOC used a
single averaging period covering the whole POI to calculate the margin of dumping.  In the finaldeterminations, however, the DOC divided the POI into two sub-periods, corresponding to the pre-
and post-devaluation periods.  The DOC calculated a weighted average margin of dumping for each
sub-period.  When combining the margins of dumping calculated for the sub-periods to determine an
overall margin of dumping for the entire POI, the DOC treated sub-periods where the average export
price was higher than the average normal  value as sub-periods of zero dumping.
                                                     
113 United States – Shirts and Blouses , supra , p. 18.   WT/DS179/R
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2. Claim under Article 2.4.2 of the AD Agreement
(a) Arguments of the parties
6.106.  Korea  argues that Article 2.4.2 prohibits the comparison of multiple averages with multiple
averages.  Korea contends that Article 2.4.2 obligates a Member to either (i) compare a singleweighted average normal value with a single weighted average export price, or (ii) compare individual
home market transactions to individual export tran sactions.  Korea considers that this conclusion is
mandated by the reference in Article 2.4.2 to " a weighted average", i.e., one average, not two
averages.  It is confirmed by the reference to " all comparable export transactions" in Article 2.4.2, as
there can only be one average if it takes into account all data.  In these investigations the DOC actedinconsistently with Article 2.4.2 because it did not compare a single weighted-average normal value
with a single weighted average export price, but rather divided the POI into sub-periods and
calculated a separate dumping margin for each sub-period.
6.107.  The United States  responds that, while Article 2.4.2 provides that margins of dumping be
based upon a comparison of an average of normal value prices with an average of the prices for exporttransactions, the transactions included in these averages must be "comparable".  The reason for this
limitation is that the inclusion in the averages to be  compared of sales that are not comparable could
result in a dumping margin based upon factors not related to dumping.  The United States notes that
Article 2.4.2 is subject to the provisions of Article 2.4, which requires that normal value and export
price be compared "at the same level of trade . . . in respect of sales made at as nearly as possible thesame time" and that allowance be made for, inter alia , differences in physical characteristics.  Thus, a
Member may create multiple averages in order to ensure that comparisons are not distorted by
averaging of non-comparable transactions, such as transactions involving different models or at
different levels of trade.
6.108.  The United States considers that the DOC's conclusion that the collapse of the won rendered
transactions before and after the devaluation "not comparable" is a permissible interpretation of the
term as used in Article 2.4.2.  In stating that comparisons should be "in respect of sales made at as
nearly as possible the same time", Article 2.4 recognizes that time is a fundamental aspect of
comparability.  In fact, Article 2.4.2 could permissi bly be interpreted as expressing a preference for
daily averages, an approach that would be sim ilar to the transaction-by-transaction methodology
approved by Article 2.4.2.  In the absence of evidence to the contrary, the DOC presumes sales made
within a one-year period to be sufficiently close in time to satisfy the "same time" requirement ofArticle 2.4.  Where facts indicate that changes within the year have the potential to affect
comparability, however, the DOC will divide the POI into sub-periods.  As the dollar values of pre-
and post-devaluation home market sales were sharply different, the DOC permissibly determined that
sales before and after the devaluation were not comparable and that it was therefore appropriate to
divide the POI into sub-periods and calculate a margin of dumping for each such sub-period.
6.109.  Korea  disputes the United States' view that the depreciation of Korea's currency rendered
pre- and post-devaluation sales non-comparable such that the use of multiple averaging is appropriate.
Korea considers that substantive limitations in the AD Agreement  on the transactions that can be
compared define the transactions that are "comparable".  There are however no provisions of the
AD Agreement  that limit the transactions that may be included in comparisons due to movements in
exchange rates.  Article 2.4.1 addresses exchange rates, but does not establish a limit on which
exchange rates may be comparable.  Nor does the Article 2.4 requirement that comparisons be made
"in respect of sales made at as nearly as possible the same time" justify multiple averaging in the case
of  exchange rate movements.  Korea considers that, in the case of average to average comparisons,
this provision requires only that sales in each market should, on average , have been made at the same
time in order to be considered comparable.WT/DS179/R
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(b) Evaluation by the Panel
(i) Does Article 2.4.2 prohibit multiple averaging?
6.110.  Korea's first claim regarding the use by the DOC of multiple averaging is based upon
Article 2.4.2 of the AD Agreement .  Article 2.4.2 provides as follows:
"Subject to the provisions governing fair comparison in paragraph 4, the existence of
margins of dumping during the investigation phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal
value and export prices on a transaction-to-transaction basis.  A normal valueestablished on a weighted average basis may be compared to prices of individual
export transactions if the authorities find a pattern of export prices which differ
significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such  differences cannot be taken into account
appropriately by the use of a weighted average-to-weighted average ortransaction-to-transaction comparison."
6.111.  In considering this claim, we first make clear that we do not consider that Article 2.4.2
prohibits the use of multiple averaging per se , as Korea's first submission could be taken to suggest.
To the contrary, Article 2.4.2 provides that the existence of dumping shall normally be established "onthe basis of a comparison of a weighted average normal value with a weighted average of all
comparable  export transactions" (emphasis added).  The inclusion of the word "comparable" is in our
view highly significant, as in its ordinary meaning it indicates that a weighted average normal value is
not to be compared to a weighted average export price that includes non-comparable export
transactions.
114  It flows from this conclusion that a Member is not required to compare a single
weighted average normal value to a single weighted average export price in cases where certain
export transactions are not comparable to transactions  that represent the basis for the calculation of the
normal value.
6.112.  We recall Korea's view that the reference in the singular to "a weighted average normal value"
means that the use of multiple averages is prohib ited.  In our view, however, the reference in the
singular to "a weighted average normal value" m eans simply that there must be a single weighted
average normal value and export price in respect of co mparable transactions.  It does not mean that a
Member is required to compare a single weighted average normal value to a single weighted average
export price in cases where some of the export trans actions are not comparable to the transactions that
represent the basis for the normal value.
6.113.  An examination of the context of the provision in question and of its object and purpose in our
view provide further support for the above conclusion.  The chapeau of Article 2.4 states that "[a] fair
comparison shall be made between the export price a nd the normal value."  Whatever the relationship of
the fair comparison language of the chapeau to th e specific requirements of Article 2.4 – an issue of
dispute between the parties115 – it is evident to us that the provisions of Article 2.4.2 must be read
                                                     
114 We note that insertion of the word "comparable" into Article 2.4.2 represented the only modification
to that Article between the date of the Draft Final Act and the text as adopted. See Draft Final Act Embodying
the Results of the Uruguay Round of Multilateral Trade Negotiations , MTN.TNC/W/FA, 20 December 1991.
This suggests that its inclusion was not merely incidental but reflected careful consideration by the drafters.
115 Korea considers that the chapeau  to Article 2.4 creates a fair comparison requirement that is
independent of the other requirements of Article 2.4.  The United States contends that, while the first sentence ofArticle 2.4 establishes a requirement to make a "fair comparison", the remainder of Article 2.4 defines  how such
a comparison is made.WT/DS179/R
Page 40
against the background of this basic principle.  In f act, the provisions of Arti cle 2.4.2 itself are "subject
to the provisions governing fair comparison in paragraph 4." An interpretation of Article 2.4.2 that
required a Member to compare transactions that were  not comparable would run counter to this basic
principle.
6.114.  Accordingly, we conclude – and by the later phases of this dispute the parties agreed116 – that
Article 2.4.2 does not preclude the use of multiple averages per se .  Rather, Article 2.4.2 requires a
Member to compare a single weighted average normal value to a single weighted average export price in
respect of all comparable  transactions.  A Member may however use multiple averages in cases where it
has determined that non-comparable transactions are involved.
(ii) Was the use of multiple averaging permissible in these investigations?
6.115.  Having established that the use of multiple averages is permissible where transactions are not
"comparable", the question remains whether the DOC was justified in determining in these
investigations that multiple averaging was appropria te.  In considering this question, we must first
consider the explanation provided by the DOC in thes e two investigations for its decision to divide the
POI into two sub-periods.
6.116.  In the Plate  final determination, the DOC explained its  decision to divide the POI into two
periods as follows:
"[W]e agree with petitioners that separate averaging periods should be used.  Under
Section 777A(d)(1)(A) of the Act, the Depart ment has wide latitude in calculating the
average prices used to determine whether sales at less than fair value exist.  More
specifically, under 19 CFR 351.414(d)(3), the Department may use averaging periods
of less than the POI when normal value, export price, or constructed export price
varies significantly over the POI.  In the instant case, NV (in dollars) in the last two
months of the POI differs significantly from NV earlier in the POI due primarily to asignificant change in the underlying dollar value of the won.   In this case, the change
is evidenced by the precipitous drop in the won's value that began in November 1997
and continued through the end of the POI without a quick, significant rebound.  In the
span of two months, the won's value decreased  by more than 40 per cent in relation to
the dollar.  Consequently, it was appropriate to use two averaging periods to avoid the
possibility of a distortion in the dumping calculation.  Moreover, we disagree with
respondent's claim that the use of averaging periods is dependent upon a change in arespondent's selling practices.  In the final determination of certain preserved
mushrooms from Indonesia, the Department stated that, 'in addition to changes in
selling practices, we believe that we should also consider other factors, such as
prolonged large changes in exchange rates, in determining whether it is appropriate to
use more than one averaging period."  See Notice of Final Determination of Sales at
Less than Fair Value: Preserved Mushrooms from Indonesia,  63 FR 72268, 72272
(December 31, 1998).  Therefore, we have used two averaging periods for the final
determination: January through October and November through December, 1997."
117
(emphasis added).
                                                     
116 See Oral Statement of Korea at the Second Meeting of the Panel, para. 44, Annex 1-6 ("Article 2.4.2
does not require one average of every single home-market sale and another average of every single export sale.Rather, it requires a single average for all comparable tr ansactions."); Second Submission of the United States,
para. 43, Annex 2-5 ("Article 2.4.2 clearly permits creation of multiple averages where transactions are notcomparable.")
117 Final Determination on Plate , p. 15452, Korea Exhibit 11.WT/DS179/R
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6.117.  The Sheet final determination contains an explanati on for the DOC's determination that closely
parallels that in the Plate  final determination.  The DOC found that:
"Under section 777A(d)(1)(A) of the Act, the Department has broad authority to use a
number of methodologies in calculating the average prices used to determine whether
sales at less than fair value exist.  More specifically, under 19 CFR 351.414(d)(3), the
Department may use averaging periods of less than the POI when normal value,
export price, or constructed export price varies significantly over the POI.  In this
investigation, in the last five months of the POI,  NV (in dollars) differed significantly
from NV earlier in the POI , due primarily to a significant change in the underlying
dollar value of the won, evidenced by the precipitous drop in the won's value that
began in November 1997 and continued through December 1997.  In the span of two
months, the won's value decreased by more than 40 per cent in relation to the dollar.
Consequently, it is appropriate to use two averaging periods to avoid the possibilityof a distortion in the dumping calculation.  Moreover, we disagree with respondent's
claim that the use of averaging periods is dependent upon change in a respondent's
selling practices.  In the final determination of certain preserved mushrooms from
Indonesia, the Department stated that 'in addition to changes in selling practices, we
believe that we should also consider other factors, such as prolonged large changes inexchange rates, in determining whether it is appropriate to use more than one
averaging period."  See Notice of Final Determination of Sales at Less than Fair
Value: Preserved Mushrooms from Indonesia,  63 FR 72268, 72272
(December 31, 1998).  Therefore, for both POSCO and Inchon, we have used two
averaging periods for the final determination: January through October 1997 andNovember 1997 through March 1998."  (emphasis added).
118
6.118.  It is evident from the DOC's determinations in these investigations that the DOC's decision to
divide the POI into two sub-periods was based on th e authority granted it by regulation to use multiple
averaging periods in cases where "normal values, export prices or constructed export prices differ
significantly over the course of the period of investigation."119  It is further clear that the determination
to use sub-periods in these investigations was based exclusively upon the DOC's conclusion that the
normal value in the latter part of the POIs in these investigations, expressed in dollars, differed
significantly from the normal value in the earlier part  of the POIs.  Accordingly, the question before us
is whether the existence of  significant differences in  normal value over the course of an investigation,
by itself , is a sufficient basis to conclude that export a nd home market transactions at different points in
the POI are not comparable such that the use of multiple averages is permissible under Article 2.4.2 of
the AD Agreement .
6.119.  The United States does not of course assert that  differences in price between export transactions
and normal value are in and of themselves differences which would render such transactions non-
comparable within the meaning of Article 2.4.2.  Ob viously, the purpose of Article 2 as a whole is to
provide a methodology for determining whether a pr oduct is dumped, i.e., whether the export price is
less than the normal value.  Thus, to decline to compare transactions because they were made at
different prices would defeat the en tire purpose of the exercise.  Rather, the United States asserts that the
existence of differences in the timing of sales in the home market and the export market render
transactions non-comparable, at least in cases wher e there are significant differences in the normal
value, export price or constructed export pr ice over the course of the investigation.
                                                     
118 Final Determination on Sheet , p. 30676, Korea Exhibit 24.
119 19 CFR Section 351.414(d)(3).WT/DS179/R
Page 42
6.120.  In examining this question, we first note that the term "comparable" has been defined to mean
"able to be compared (with)".120  This definition however does not cast great light on the meaning of the
term as used in Article 2 of the AD Agreement .  Thus, we consider it useful to turn to the context in
which this term appears.  In this respect, we ag ree with the parties that the meaning of the term
"comparable" as used in Article 2.4.2 can best be es tablished by an examination of other provisions of
Article 2 of the AD Agreement  that address the issue of comparability.  We further note that the chapeau
to Article 2.4 provides that the comparison between the export price and the normal value shall be made
"in respect of sales made at as nearly as possible the same time".121  Thus, we consider it clear that the
timing of sales may have implications in respect of the comparability of export and home markettransactions.
122
6.121.  This does not mean, however, that where an average to average comparison methodology is
used, individual home market and export sales that are not made at the same time necessarily are not
comparable and thus cannot be included in the weighted averages.  To the contrary, it is in the very
nature of an average to average comparison that, for example, transactions made at the beginning of the
averaging period in the export market will be made at  a different moment in time than sales in the home
market made at the end of averaging period.  If the drafters had considered that this situation would
necessarily give rise to a problem of comparability, su rely they would not have explicitly authorized the
use of averaging in Article 2.4.2.  Thus we consider th at, in the context of weighted average to weighted
average comparisons, the requirement that a comparison be made between sales made at as nearly aspossible the same time requires as a general matter  that the periods on the basis of which the weighted
average normal value and the weighted average export price are calculated must be the same.
6.122.  The United States argues, in effect, that the "same time" requirement of Article 2.4 implies a
preference for shorter rather than longer averaging periods.
123  In our view, however, the US argument
proves too much.  If the requirement to compare sa les at "as nearly as possible the same time" means
that sales within an averaging period covering a POI are not comparable, then a Member presumably
would be obligated  to break a POI into as many sub-periods  as possible.  Yet to interpret the word
"comparable", when combined with the requirement that  sales be compared "at as nearly as possible the
same time", to obligate Members to perform numerous average to average comparisons based on the
shortest possible time periods would in effect read the Article 2.4.2 authorization to perform average to
average comparisons out of the AD Agreement, leaving Members with only the second option, the
comparison of normal values and export pric es on a transaction-by-transaction basis.124
                                                     
120 The New Shorter Oxford English Dictionary , Oxford University Press, p. 457.
121 We recall that Korea and the United States have identified other provisions of Article 2 that they
agree justify the use of multiple averaging based, for example, on differences in level of trade and differences inphysical characteristics.  The United States also argues th at it is appropriate to use multiple averaging in the case
of hyperinflationary economies.  These other forms of multiple averaging are not at issue in this dispute.
122 As an additional contextual argument, Korea argues that devaluation cannot be considered to affect
comparability because there is no provision in the AD Agreement  specifying that sales made at one exchange
rate cannot be compared with sales at another exchange rate.  Rather, the only provision of the AD Agreement
that addresses exchange rates is Article 2.4.1, which the United States concedes does not establish a limit onwhat sales may be considered comparable.  We do no t however place any weight on Korea's argument in this
respect.  In our view – and absent the unusual situation of multiple exchange rates – there will at any given
moment in time be only one exchange rate.  Thus, any problem of comparability does not relate to exchange
rates per se , but rather to differences in timing of sales.  Thus it is on this issue that we focus.
123 The United States goes so far as to suggest that the AD Agreement  could be interpreted as
expressing a preference for daily  averages.  Second Submission of the United States , para. 47, Annex 2-5.
124 The United States' argument seems to be posited on its view that the best comparison for measuring
dumping is a transaction-to-transaction comparison, and that average-to-average comparisons are a second-best
approach allowed because of practical problems with the transaction-to-transaction methodology.  See USWT/DS179/R
Page 43
6.123.  We do not preclude that there may be factual ci rcumstances where the use of multiple averaging
periods could be appropriate in order to insure that comparability is not affected by differences in the
timing of sales within the averag ing periods in the home and export markets.  We note that, where
changes in normal value, export price or construc ted export price during the course of the POI are
combined with differences in the relative weights by  volume within the POI of sales in the home market
as compared to the export market, the use of weight ed averages for the entire POI could indicate the
existence of a margin of dumping that did not refl ect the situation at any given moment within the
POI.125 In this situation a Member might in our view be justified in concluding that differences in timing
of sales in the home and export markets give rise to  a problem of comparability that could be addressed
through multiple averaging periods.126  We recall however that this situation only arises where two
elements – a change in prices and differences in the relative weights by volume within the POI of sales
in the home market as compared to the export market  – exist.  Thus, while a change in normal value,
export price or constructed export price may be a necessary  condition for the conclusion that the passage
of time affects comparability in the case of an aver age-to-average comparison, the existence of such a
change is not in itself a sufficient  condition to conclude that the export transactions are not comparable
to the normal value.127
6.124.  Turning to the case at hand, we recall that the DOC 's determination to use sub-periods in these
investigations was based exclusively upon its conclusi on that the normal value in the latter phase of the
POIs in these investigations, expressed in dollars, differed significantly from the normal value in the
earlier phase of the POIs.  There is no suggestion in the DOC's determinations or in the final analysis
memoranda underlying them that the reason for th e DOC's decision to divide up the POI was based
upon the existence of a difference in the relative weight s by volume of sales w ithin the POI between the
home and export markets.  In light of the foregoing di scussion, we do not consider that this represented a
permissible determination of non-comparability.
                                                                                                                                                                    
answer to question 2 from the Panel posed at the second meeting of the Panel with the parties.  We perceive no
valid textual basis for such a conclusion, however.  To the contrary, the AD Agreement  sets forth two options for
a comparison methodology – average-to-average and transaction-to transaction – and expresses no preferencebetween them.
125 A particularly dramatic example of this situatio n would arise where, during a substantial portion of
the POI, there were no sales in one of the two markets.
126 The combination of these two factors could even result in a situation where, although at any given
moment in time throughout the POI, the exporter was charging an identical price (after all appropriate allowanceshad been made), a margin of dumping could nevertheless be found to exist.  For example, imagine that there weretwo home market sales (HM-1 and HM-2) and two export sales (EX-1 and EX-2) during the POI.  HM-1 andEX-1 occurred on day 1 and were both at a price of $10.  HM-2 and EX-2 occurred on day 90 and were both at a
price of $15.  Thus, neither of the individual export transactions was dumped when compared to the
simultaneous home market transactions.  If all these sales were in the same volumes, then a weighted average toweighted average would also show no dumping.  Assume however that HM-1 and EX-2 involved a volume often units, while HM-2 and EX-1 involved a volume of twenty units.  In this case, the weighted average normalvalue would be (10 units x $10/unit) +  (20 units x $15/unit) = $400/30 units = $13.33/unit.  The weighted
average export price would be (20 units x $10/unit) + (10 units x $15/unit) = $350/30 units = $11.27/unit. Thus,
the weighted average margin of dumping would be 18 per cent.
127 As Korea explained, "[a]s long as the sales in both markets are spread in a similar manner
throughout the period, the averaging process will result in an average home-market sale and an average exportsale made, on average, at the same time.  Thus, the averaging process necessarily takes care of the timingrequirement of Article 2.4 (unless the sales in the two markets are weighted disproportionately in different parts
of the period)."  Oral Statement of Korea at the Second Meeting of the Panel, para. 58, Annex 1-6.WT/DS179/R
Page 44
6.125.  Accordingly, we conclude that the United Stat es' use of multiple averaging periods in these
investigations was inconsistent with the requirem ent of Article 2.4.2 to compare "a weighted average
normal value with a weighted average of  all comparable export transactions".128
3. Claim under Article 2.4.1
(a) Arguments of the parties
6.126.  Korea  observes that the DOC used multiple averaging periods to account for the depreciation of
the Korean won during the POI in these two investigations.  Korea contends however that Article 2.4.1
is the only provision of the AD Agreement  that addresses exchange rates or the permissible modification
to the dumping calculation methodology to account for exchange rate fluctuations.  Article 2.4.1 sets
forth special rules that apply to situations wh en the exporting country's currency has been  appreciating .
However, Article 2.4.1 does not permit any adjustment to the dumping calculations to account for a
depreciation  of the exporting country's currency.  Consequently, because the DOC adopted a multiple-
averaging methodology in these investigations to account for the depreciation of the Korean won, it was
inconsistent with the requirement of Article 2.4.1 that  the price comparisons not be modified to account
for depreciation in the exporting country's currency.
6.127.  The United States  responds that Article 2.4.1 provides guidance to Members in selecting the
exchange rates for use in anti-dumping investigations .  The issue raised by Korea, although precipitated
by a currency situation, relates to the DOC's construction of averages under Article 2.4.2, rather than its
selection of exchange rates under Article 2.4.1.  Thus, Article 2.4.1 does not address the currency
conversion problem faced by the United States in thes e investigations and is not relevant to the issue
raised by Korea.
(b) Evaluation by the Panel
6.128.  Article 2.4.1 of the AD Agreement  provides as follows:
"When the comparison under paragraph 4 requires a conversion of currencies, such
conversion should be made using the rate of exchange on the date of sale8, provided
that when a sale of foreign currency on forward markets is directly linked to the
export sale involved, the rate of exchan ge in the forward sale shall be used.
Fluctuations in exchange rates shall be ignor ed and in an investigation the authorities
shall allow exporters at least 60 days to have adjusted their export prices to reflect
sustained movements in exchange rates during the period of investigation.
____________________
8  Normally, the date of sale would be the date of contract, purchase order, order confirmation,
or invoice, whichever establishes the material terms of sale.
                                                     
128 During the course of this dispute, the methodology used by the United States to derive a single
dumping margin on the basis of the calculations for each  sub-period was also placed at issue by Korea.  In
Korea's view, "splitting the period, calculating separate averages for the sub-periods, 'zeroing out' the negativeaverages and recombining the separate averages into an overall dumping margin were all part of a single
methodology" described in Korea's request for establishment of a panel and thus within our terms of reference.
In the view of the United States, the methodology challenged by Korea was limited to the division of the POIinto two sub-periods and the calculation of separate weighted average normal values for each sub-period.  See
Responses of Korea and the United States to Questions Posed by the Panel at the Second Meeting of the Panel,question 1 on multiple averaging, Annexes 1-7 and 2-7.  Korea further indicated, however, that "[i]f the Panelfinds that it was improper for the United States to split the investigation periods . . . then zeroing simply
disappears from this case".  Ibid. Having so found, we need not further address this issue.WT/DS179/R
Page 45
6.129.  In our view, Article 2.4.1 relates to the selection of exchange rates to be used where currency
conversions are required.  It establishes a general rule – conversion should be made using the rate of
exchange on the date of sale – and an exception to this general rule for sales on forward markets.  It
also establishes special rules in the case of fluc tuations and sustained movements in exchange rates.
We note Korea's view that the requirements of the second sentence of Article 2.4.1 prescribe specific
results,  rather than describing a method for selectin g exchange rates.  It appears to us, however, that,
read in context, these special rules also relate to  the selection of exchange rates, and not to the
construction of averages.  Rather, the permissibility of the use of multiple averaging is an issue
addressed by Article 2.4.2.
6.130.  Even if Article 2.4.1 were not restricted to the issue of the selection of exchange rates, we
find nothing in that Article that would prohibit a Member from addressing, through multiple
averaging, a situation arising from a currency depreciation.  Korea contends, and the United States
does not dispute, that the provision of Article 2.4.1 requiring Members to allow exporters sixty days
to adjust their export prices to sustained movements in exchange rates applies only in the case ofcurrency appreciation, and not in the case of currency depreciation.  Assuming that the parties are
correct in this regard, the requirement that a Me mber take certain actions in the case of currency
appreciation does not in our view mean that Members are prohibited from taking any action to address
a situation arising from a currency depreciation.
129
6.131.  For the foregoing reasons, we conclude that the United States' use of multiple averaging
periods in these investigations was not inconsistent with Article 2.4.1 of the AD Agreement .
4. Claim under Article 2.4 ("fair comparison")
(a) Arguments of the parties
6.132.  Korea  contends that, in these investigations, US petitioners in essence claimed that anti-
dumping orders were needed to protect them from an increase in imports after the devaluation of theKorea won.  In these circumstances, a fair analys is of whether POSCO engaged in injurious dumping
must focus on – or at an absolute minimum, include – pricing data after the devaluation of the won.
Yet that pricing data was effectively excluded from the DOC's price comparisons by the multiple
averaging methodology.  In other words, the DOC's multiple averaging methodology resulted in a
finding of dumping based solely on pre-devaluation sales.  This methodology was however
inconsistent with the injury analysis, which found injury based primarily on post-devaluation imports.
The methodology was thus inconsistent with the fair comparison requirement of Article 2.4.
6.133.  The United States  considers that Korea's argument has no bearing on the question of whether
the United States properly constructed averages fo r comparison purposes under Article 2.4.2, or even
whether the United States made a fair comparison under Article 2.4.  Even if Korea's argument were
relevant to the issue of the consistency of the measures with Article 3 of the AD Agreement , Korea did
not raise a claim under Article 3 in its request for panel review.  Consequently, this issue is outside thePanel's terms of reference, and must be disregarded.
                                                     
129 The provision relied upon by Korea is the language in Article 2.4.1 stating that, "in an investigation
the authorities shall allow exporters at least 60 days to have adjusted their export prices to reflect sustainedmovements in exchange rates during the period of investigation".  Korea is in effect asking us to read thisprovision to further say that "in an investigation the authorities shall take no actions to address currency
depreciations".  We can perceive no textual basis to imply such an additional rule into Article 2.4.1.WT/DS179/R
Page 46
(b) Evaluation by the Panel
6.134.  Korea contends that the averaging methodology used in these investigations was inconsistent
with the United States' obligations to perform a "fair comparison" because  the allegations of injury by
petitioners, and the analysis of injury by the US International Trade Commission's, focused on post-devaluation imports.  We cannot agree.  In our view, the consistency of a determination of dumping
with Article 2, including with any "fair comparison" requirement under Article 2.4, cannot depend
upon how that determination is used in the context of  an analysis of injury pursuant to Article 3.  In
this respect, we note that the final determination of injury in these investigations, as in all US anti-
dumping proceedings, was not even made until well after the date of the final determination ofdumping.  Surely, a determination of dumping that was consistent with the provisions of Article 2
when it was made could not be rendered inconsistent by reason of the manner in which that
determination was used for purposes of a subsequent injury analysis.
6.135.  Korea's argument in effect is that the DOC's use of multiple averaging masked the fact that
there was no dumping after the devaluation, while the United States' injury determination was basedprecisely on injury suffered in the post-devaluation period.  We note however that such a situation
could easily arise whenever an investigating authority uses an average-to-average comparison
methodology, and irrespective of whether it uses multiple averaging, because an average-to-average
methodology informs only as to whether on average  during the POI there was dumping, not whether
there was dumping at any given moment in time within that POI.
130  Thus, the issue raised by Korea
relates not to the consistency of the calculation methodology with Article 2, but rather to whether a
Member is somehow required by Article 3.5 to take account of the circumstances underpinning the
final margin of dumping when considering whether "dumped imports are, through the effects of
dumping, as set forth in paragraphs 2 and 4, causing injury".131 Korea has not however asserted any
claim under Article 3.5 in its submissions, nor would such a claim be within our terms of reference.132
6.136.  For the foregoing reasons, we conclude that the United States' use of multiple averaging
periods in these investigations was not inconsistent with the first sentence of the chapeau of Article 2.4
of the AD Agreement  ("fair comparison").
E. OTHER CLAIMS BY KOREA
1. Claims under Article X of GATT 1994 and Articles 6 and 12 of the AD Agreement
6.137.  In addition to its claims under Article 2 of the AD Agreement , Korea has advanced a variety
of claims pursuant to Article X:3(a) of the GATT 1994 and Articles 6.1, 6.2, 6.9 and 12.2 of the
AD Agreement .  In section VI.A.4 of this Report, having found that the United States did not act
inconsistently with the relevant provisions of Article 2.4 in respect of the alleged "double conversion"
of certain home market sales in the Plate  investigation, we have proceeded to address Korea's claims
under the above provisions.  In respect of the other aspects the DOC's methodology in the Plate and
Sheet  investigations, however, we have found violations of Article 2 of the AD Agreement .  Under
                                                     
130 For that matter, even in cases where a transaction-to-transaction methodology is used, the final
margin of dumping for a given exporter will not inform as to whether sales at any given moment during the POIwere dumped.
131 We are not of course expressing any view here as to the proper interpretation of Article 3.5.  We
note in passing, however, that the use of multiple averaging periods in these investigations would havefacilitated, rather than impeded, any such analysis, by making available information regarding the existence ofdumping both pre- and post-devaluation.
132 Article 3 is nowhere mentioned in Korea's request for establishment of a Panel.  See WT/DS179/3.
It is well established that the identification of the re levant treaty provision is a "minimum prerequisite" under
Article 6.2 of the DSU .  See EC – Bananas , supra  at para. 6.84.WT/DS179/R
Page 47
these circumstances, we do not consider it necessary to address Korea's additional claims under the
above provisions.
2. Claims under Article VI of GATT 1994 and Article 1 of the AD Agreement
6.138.  Korea has also asserted that the United States has acted inconsistently with Article VI of the
GATT  1994  and Article 1 of the AD Agreement , "which only permit anti-dumping measures to be
imposed in the circumstances provided for in Arti cle VI and pursuant to investigations conducted in
accordance with the Anti-Dumping Agreement".133  We note that Korea's claims in respect of these
two articles are dependent claims, i.e., Korea argues that because  certain provisions of the AD
Agreement  have been violated, Article VI of the GATT 1994 and Article 1 of the AD Agreement  are
consequently violated.134  Because of their dependent nature, we can perceive of no useful purpose
that would be served by ruling on these claims.  Accordingly, we do not consider it necessary to
address them.
VII. CONCLUSIONS AND RECOMMENDATION
A. CONCLUSIONS
7.1 In light of the findings above, we conclude that, with respect to  "local sales" :
(a) the United States in the Plate  investigation did not act inconsistently with its obligations
under Article 2.4.1, Article 2.4 chapeau ("fair comparison"), and Article 12.2 of the
AD Agreement nor with its obligations unde r Article X:3(a) of GATT 1994;
(b) the United States in the Sheet  investigation acted inconsiste ntly with Article 2.4.1 of the
AD Agreement by performing a currency conversion that was not required.
7.2 We further conclude that, with respect to the treatment of unpaid sales , the United States:
(a) acted inconsistently with its obligations under Article 2.4 chapeau of the   AD Agreement
in both the Plate  and Sheet  investigations by making allowances in respect of sales
through unaffiliated importers which were no t permissible allowances for differences
affecting price comparability;
(b) acted inconsistently with its obligations under Article 2.4 chapeau of the   AD Agreement
in both the Plate and Sheet investigations by making allowances in respect of sales
through an affiliated importer which were not permissible allowances in the
construction of the export price for costs incurred between importation and resale.
7.3 With respect to multiple averaging , we conclude that:
(a) the United States' use of multiple averaging periods in the Plate  and Sheet
investigations was inconsistent with the requirement of Article 2.4.2 to compare "a
weighted average normal value with a weighted average of all comparable export
transactions";
                                                     
133 First Submission of Korea, para. 5.7, last tiret, Annex 1-1.
134 The only exception involves Korea's claim of a violation of Article VI:1 in respect of due
allowances for differences affecting price comparability.  Korea however identified no basis for concluding that
Article VI:1 imposes any obligation in this respect beyond that imposed by Article 2.4.1 of the AD Agreement .WT/DS179/R
Page 48
(b) The United States' use of multiple averaging periods in the Plate  and Sheet
investigations was not inconsistent with Article 2.4.1 of the  AD Agreement;
(c) The United States' use of multiple averaging periods in the Plate  and Sheet
investigations was not inconsistent with the first sentence of the chapeau of Article 2.4of the AD Agreement  ("fair comparison").
7.4 Under Article 3.8 of the DSU, in cases where th ere is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie  to constitute a case of nullification or
impairment of benefits under that agreement.  Accord ingly, we conclude that, to the extent that the
United States has acted inconsistently with the provisions of the AD Agreement , it has nullified or
impaired benefits accruing to Korea under that  Agreement .
B. RECOMMENDATION AND SUGGESTION
7.5 In accordance with Article 19.1 of the DSU , we therefore recommend that the Dispute
Settlement Body request that the United States brings its definitive anti-dumping duties on imports of
stainless steel plate and sheet from Korea into conformity with the  AD Agreement .
7.6 Korea  requests that the Panel suggest, pursuant to Article 19.1 of the DSU, that the
United States revoke its anti-dumping orders on stainl ess steel plate and sheet from Korea.  In support of
its request, Korea identifies prior panel reports under the WTO and Tokyo Round AD Agreements in
which panels have suggested revocation of an anti-dump ing order.  Korea considers that Article 1 of the
AD Agreement , which provides that "[a] anti-dumping measure shall be applied only under he
circumstances provided for in Article VI of GA TT 1994 and pursuant to investigations initiated and
conducted in accordance with the provisions of th is Agreement", precludes the possibility that the
United States could bring the anti-dumping m easures into conformity without revocation.
7.7 The United States  considers that Korea seeks to convert the Panel's discretionary mechanism
for suggesting ways that a Member could implemen t its recommendation into a device for obtaining a
specific remedy that is inconsistent with established GATT/WTO practice and the  DSU .  Further, it is
impossible for the Panel to know whether a dumping analysis that conformed to the Panel's decision
would result in a zero or de minimis  margin such that revocation woul d be necessary in order to bring
the measures into conformity.  Finally, the United St ates considers that Korea's broad interpretation of
Article 1 of the AD Agreement  to require revocation of an anti-dumping measure regardless of the nature
or magnitude of the violation would render m eaningless the provision of Article 19.1of the  DSU  that
the Member bring the measure  into conformity.
7.8 In considering Korea's request, we note first that Article 19.1 of the DSU  gives this Panel the
clear authority to "suggest ways in which the Member concerned could implement the
recommendations".  Thus, we do not accept the Un ited States' proposition that a suggestion that a
Member withdraw an anti-dumping meas ure would be inconsistent with the DSU .  Nor do we consider
that such a recommendation would be inconsistent – or  consistent – with "established practice", as only
a handful of WTO panels under the AD Agreement  have even addressed a request for a suggestion to
revoke.135 Rather, we consider that Article 19.1 of the DSU  allows but does not require a panel to make
                                                     
135 Compare Guatemala – Anti-Dumping Investigation Regarding Portland on Cement From Mexico,
Report of the Panel, WT/DS60/R, para. 8.6, reversed on other grounds , WT/DS60/AB/R  and Guatemala –
Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico , WT/DS156/R, para. 9.6, adopted on
17 November 2000 (Panels suggest revocation in the context of a WTO-inconsistent initiation) to United States –
Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMs) of One Megabit and Above
from Korea , WT/DS99/R, para. 7.4, adopted 19 March 1999 (requ est for a suggestion to revoke was denied "inWT/DS179/R
Page 49
a suggestion where it deems it appropriate to do so.
7.9 That we have the authority  under Article 19.1 of the DSU to suggest revocation of an anti-
dumping measure does not mean that we must or s hould do so in a given case.  To the contrary, the
AD Agreement  is comprised of eighteen separate articles  and innumerable obligations.  Thus, violations
of the AD Agreement  may take many different forms and have different implications for the anti-
dumping measure in question.  In our view, Korea's contention that Article 1 of the AD Agreement
dictates that any violation of the AD Agreement , irrespective of its nature and severity, requires the
revocation of the anti-dumping measure is unsusta inable.  Although we do not agree that such an
interpretation would render Article 19.1 of the DSU  a nullity in the strict legal sense,136 we do believe
that, had the drafters intended to deviate from the general rule of Article 19.1 and  require  revocation of
anti-dumping measures in all cases of a violation, th ey would have manifested that intention through a
special or additional dispute settlemen t provision in Article 17 of the  AD Agreement .
7.10 Turning to the case at hand, we recall that Kor ea's claims related to the determinations of the
DOC regarding the margin of dumping.  While we have found those determinations inconsistent withthe AD Agreement  in a number of respects, we cannot say that, had the DOC acted consistently with
the AD Agreement , it would not have found the existence of dumping.
137 Under these circumstances,
while there can be little doubt that revocation would be one way that the United States could
implement our recommendation, we are not prepared to conclude at this time that it is the  only way to
do so.  Accordingly, we decline Korea's request to suggest that the United States revoke the anti-dumping duties at issue in this dispute.
138
                                                                                                                                                                    
light of the range of possible ways in which we believe the [defendant] could appropriately implement" the
recommendation).
136 Because, inter alia , Article 19.1 would of course continue to operate in disputes relating to measures
other than anti-dumping measures.
137 Nor would it be appropriate for the Panel to try to recalculate the margin itself in light of its
conclusions.
138 Cf.  United States – Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic
Salmon from Norway , ADP/87, adopted 27 April 1994, para 596 (Panel under Tokyo Round AD Code  declined
to recommend revocation because "[I]t could not be  presumed that a methodology of calculating dumping
margins consistent with the Panel's findings on these aspects would necessarily result in a determination that no
dumping existed . . . .")