WORLD TRADE
ORGANIZATIONWT/DS138/AB/R
10 May 2000
(00-1896)
Original: English
UNITED STATES – IMPOSITION OF COUNTERVAILING DUTIES ON
CERTAIN HOT-ROLLED LEAD AND BISMUTH CARBON STEEL
PRODUCTS ORIGINATING IN THE UNITED KINGDOM
AB-2000-1
Report of the Appellate BodyWT/DS138/AB/R
Page i
I. Introduc tion................................................................................................................. ............1
II. Arguments of the Participan ts and Third Pa rticipan ts ............................................................4
A. Claims of Error by the United States – Appellant .....................................................4
1. Standard of Review.......................................................................................4
2. Articles 21 and 1.1(b) of the  SCM Agreement .............................................4
B. Arguments by the European Communities – Appellee ...............................................7
1. Standard of Review.......................................................................................7
2. Articles 21 and 1.1(b) of the  SCM Agreement .............................................8
C. Arguments by the Third Participants .......................................................................11
1. Brazil...........................................................................................................11
2. Mexico ........................................................................................................12
III. Preliminary Pr ocedural Matter.............................................................................................. 13
IV. Issues Raised in This Appeal ................................................................................................ 15
V. Standard of Review........................................................................................................... ....16
VI. Articles  21 and 1.1(b) of the  SCM Agreement ....................................................................18
VII. Findings and Conclusions................................................................................................... ..27WT/DS138/AB/R
Page 1
WORLD TRADE ORGANIZATION
APPELLATE BODY
United States – Imposition of Countervailing Duties
on Certain Hot-Rolled Lead and Bismuth Carbon
Steel Products Originating in the United Kingdom
United States,  Appellant
European Communities,  Appellee
Brazil,  Third Participant
Mexico,  Third ParticipantAB-2000-1
Present:
Matsushita,  Presiding Member
El-Naggar,  Member
Lacarte-Muró,  Member  *
I. Introduction
1. The United States appeals certain issues of law and legal interpretations in the Panel Report,
United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth CarbonSteel Products Originating in the United Kingdom  (the "Panel Report").
1  The Panel was established
to consider a complaint by the European Commun ities with respect to countervailing duties imposed
by the United States on certain hot-rolled lead and bismuth carbon steel products ("leaded bars")originating in the United Kingdom.
2. The alleged subsidies countervailed relate principally to equity infusions granted by the
British Government to a state-owned company, British Steel Corporation ("BSC"), between 1977and 1986.
2  In 1986, BSC and Guest, Keen and Nettlefolds ("GKN"), a privately-owned company,
created United Engineering Steels Limited ("UES") as a joint venture.  Both BSC and GKN providedassets to UES, in return for equal shares in the joint venture.  In particular, BSC spun-off its leadedbar-producing assets to UES.  Negotiations concer ning the spin-off were conducted at arm's length,
consistent with commercial considerations.  BSC ceased producing leaded bars after the spin-off of itsleaded bar-producing assets to UES.
3  In preparation for the privatization of BSC, British Steel plc
("BSplc") assumed, in September 1988, the property, rights and liabilities of BSC, including BSC's
                                                     
*Mr. Christopher Beeby, who was originally assigned to the Division hearing this appeal, passed away
on 19 March 2000.  Subsequently, Mr. Julio Lacarte-Muró was assigned to the Division.  See infra , para. 8.
1WT/DS138/R, 23 December 1999.
2Panel Report, para. 2.5.
3Ibid., para. 6.22.WT/DS138/AB/R
Page 2
holding in UES.  In December 1988, the British government completed the privatization through a
sale of BSplc shares on the stock market.4  The United States Department of Commerce ("USDOC")
found that the sale of BSplc shares was at arm's length, for fair market value and consistent withcommercial considerations.
5  On 20 March 1995, BSplc purchased GKN's holding in UES,
whereupon UES was renamed British Steel Engineering Steels ("BSES").6
3. Countervailing duties on imports of leaded bars were originally imposed in 1993.7  Since
then, the USDOC has undertaken a number of annual  reviews of the countervailing duties applied to
imports of leaded bars originating in the United Kingdom.  The European Communities' claims in this
case relate to the countervailing duties imposed fo llowing administrative reviews initiated in 1995,
1996 and 1997, which dealt with leaded bar imports in the calendar years 1994, 1995 and 1996,
respectively.8  In each of these reviews, the USDOC applied its allocation methodology for untied,
non-recurring subsidies to determine the amount of the benefit from the pre-1986 subsidies to BSCallocable to the relevant period of review.
9  The USDOC also applied its "change-in-ownership"
methodology to determine the extent to which the pre-1986 subsidies granted to BSC "travelled" toUES and/or BSplc/BSES.
10  The USDOC imposed countervailing duties on the basis that a certain
proportion of the subsidies granted to BSC had "passed through" to UES and BSplc/BSES.11  Th e
factual aspects of this dispute are set out in greater detail in paragraphs 2.1 to 2.9 and 6.22 to 6.30 ofthe Panel Report.
4. In its Report, circulated to Members of the World Trade Organization (the "WTO") on
23 December 1999, the Panel concluded that:
… by imposing countervailing duties on 1994, 1995 and 1996 imports
of leaded bars produced by UES and BSplc/BSES respectively, the
United States violated Article 10 of the SCM Agreement.
 12
                                                     
4Panel Report, para. 6.23.
5Ibid.
6Ibid.
7Ibid., para. 6.24.
8Ibid., paras. 2.6-2.9.
9Ibid., paras. 6.25-6.30.
10Ibid.
11Ibid., para. 2.5.
12Ibid., para. 7.1.WT/DS138/AB/R
Page 3
5. The Panel recommended that the United States bring its measures into conformity with the
Agreement on Subsidies and Countervailing Measures  (the " SCM Agreement ").  13  T h e  P a n e l
suggested "that the United States [take] all appropriate steps, including a revision of its administrativepractices, to prevent the aforementioned violation of Article 10 of the SCM Agreement from arisingin the future."
 14
6. On 27 January 2000, the United States notified the Dispute Settlement Body (the "DSB") of
its intention to appeal certain issues of law covered in the Panel Report and certain legalinterpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the  Understanding on
Rules and Procedures Governing the Settlement of Disputes  (the "DSU"), and filed a Notice of
Appeal pursuant to Rule 20 of the Working Procedures for Appellate Review  (the " Working
Procedures ").  On 7 February 2000, the United States filed its appellant's submission.
 15
On 21 February 2000, the European Communities filed its appellee's submission.  16  On the same day,
Brazil and Mexico each filed a third participant's submission.  17
7. The oral hearing in the appeal was held on 13 March 2000.  The participants and third
participants presented oral arguments and responded to questions put to them by the Members of theDivision hearing the appeal.
8. On 19 March 2000, Mr. Christopher Beeby, a Member of the Division hearing this appeal,
passed away.  On 20 March 2000, the Appellate Body, pursuant to Rule 13 of the  Working
Procedures , selected Mr. Julio Lacarte-Muró to replace Mr. Beeby.  In view of these extraordinary
circumstances, the newly-constituted Division decided, pursuant to Rule 16(1) of the  Working
Procedures , and in the interests of fairness and orderly procedure in the conduct of this appeal, to hold
another oral hearing on 4 April 2000.  On that date, the participants and third participants presentedoral arguments and responded to questions put to them by the Members of the newly-constitutedDivision.  Due to these same extraordinary circumstances, the participants in this appeal, theEuropean Communities and the United States, agreed to a two week extension of the 90-day timelimit for the consideration of this appeal, and thus agreed that this Report should be circulated no laterthan 10 May 2000.
18
                                                     
13Panel Report, para. 8.1.
14Ibid., para. 8.2.
15Pursuant to Rule 21 of the  Working Procedures .
16Pursuant to Rule 22 of the  Working Procedures .
17Pursuant to Rule 24 of the  Working Procedures .
18WT/DS138/7, 4 April 2000.WT/DS138/AB/R
Page 4
II. Arguments of the Participants and Third Participants
A. Claims of Error by the  United States – Appellant
1. Standard of Review
9. The United States argues that the standard of review set forth in Article 17.6 of the
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994   (the
"Anti-Dumping Agreement ") applies to panel review of WTO Members' countervailing duty
measures.  In the view of the United States, this standard of review applies by virtue of theDeclaration on   Dispute Settlement Pursuant to the Agreemen t on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994 or  Part V of the Agreement on Subsidies and
Countervailing Measures  (the " Declaration "), which refers to "the need for the consistent resolution of
disputes arising from anti-dumping and countervailing duty measures."
10. According to the United States, the Panel erred in finding that the  Declaration  does not have
"mandatory authority".  A Ministerial Declaration can and does create binding obligations, and thisDeclaration  demonstrates the clear intent of the Ministers to apply the standard of review contained
in Article 17.6 of the Anti-Dumping Agreement  to disputes involving countervailing duty measures
under the SCM Agreement .  The United States adds that, "under any standard of review", the
USDOC's approach for handling pre-privatization subsidies cannot be found to be inconsistent withthe United States' obligations under the  SCM Agreement   because that Agreement does not address
the issue of privatization.
2. Articles 21 and 1.1(b) of the  SCM Agreement
11. The United States appeals two principal findings made by the Panel.  First, the United States
argues that the Panel erred in finding that, in its review proceedings, the USDOC should haveexamined the continued existence of a benefit to UES and BSplc/BSES.  Second, the United Stateschallenges, on both substantive and procedural grounds, the Panel's finding that UES andBSplc/BSES received no benefit from the subsidies granted to BSC.
12. The United States argues that the ordinary meaning of Article 1.1 of the SCM Agreement ,
read in the light of its context and the object and purpose of the  SCM Agreement , confirms that the
benefit of a subsidy is determined as of the time of bestowal.  The requisite financial contribution and
benefit are described by Article 1.1 in the present tense.  Thus, the benefit is created by the terms onwhich the financial contribution is made, and arises at the same time the financial contribution ismade.  The United States argues that if WTO Members were required to conduct an "ongoingWT/DS138/AB/R
Page 5
demonstration" that the original benefit still cons titutes an advantage to the relevant company, it
would become "nearly impossible" to administer countervailing duty laws.  The United States also
asserts that the panel report in  Australia – Subsidies Provided to Producers and Exporters of
Automotive Leather ("Australia – Automotive Leather ")  19 supports the view that, due to a lack of
express guidelines in the SCM Agreement , subsidy benefits may be allocated over time without
revisiting the benefit issue.
13. According to the United States, the context provided by other provisions of the
SCM Agreement , in particular Articles 14 and 27.13, supports this interpretation.  Article 14, which
describes how an investigating authority should measure the benefit of subsidies, looks only to the
time of the subsidy bestowal, and not to any subsequent point in time.  The United States also argues
that the wording of Article 27.13 strongly implies a general rule that subsidies bestowed on agovernment-owned company prior to privatization  are  actionable after privatization.
14. In the view of the United States, the provisions relied on by the Panel as evidence that a
benefit must be demonstrated again after a change in ownership – Articles 10, 19.1, 19.4 and 21.1 ofthe  SCM Agreement   and Article VI:3 of the GATT 1994 – do not provide guidance on this issue.
Finally, the United States notes that the practice of investigating authorities in the EuropeanCommunities confirms that there is no need to re-evaluate a subsidy's benefit after it is bestowed.
15. With respect to the Panel's finding that UES and BSplc/BSES received no benefit, the
United States asserts that the Panel engaged in a flawed analysis that led directly to its erroneous
conclusion that pre-privatization subsidies are automatically "extinguished" when a subsidizedcompany is sold for fair market va lue.  According to the United St ates, the Panel first found that the
USDOC must establish that the company that produced  or exported the relevant products "personally
received" the benefit.  Then, the Panel decided th at the successor, privatized company was not the
same company as the predecessor, government -owned company because the two companies had
different owners.  The Panel then asked itself whether the privatization transaction itself conferred abenefit on the post-privatization company.  The United States argues that this analysis confuses oldsubsidies and new subsidies, and wrongly switches the focus from the company that received the
subsidy to its new owners.  According to the United States, whether a privatization transaction confers
a "new" subsidy is unrelated to whether the transaction eliminates the unamortized portion of "old"subsidies.
                                                     
19Panel Report, WT/DS126/RW, adopted 11 February 2000.WT/DS138/AB/R
Page 6
16. In the view of the United States, the  SCM Agreement   provides that subsidies are bestowed
upon  production .  Since a mere change in ownership does not have an automatic or immediate effect
upon production which has benefitted from subsidies, there is no basis in the Agreement for thePanel's conclusion that the purchase of a subsid ized company for fair market value automatically
extracts the benefit of that subsidy from the production of that company.  Rather, Article 10 of theSCM Agreement   and Article VI:3 of the GATT 1994 make clear that it is a company's
productive operations  that are relevant to the determination of whether a subsidy exists under
Article 1.1.  The United States adds that, to the extent that the  SCM  Agreement   requires a connection
between subsidies and producers, rather than between subsidies and production, legal successorship to
a subsidized company is sufficient.  Furthermore, the United States points out that, for both state aid
and countervailing duty purposes, the law of the Eu ropean Communities treats changes in ownership
as irrelevant to the question of whether prior subsidies are actionable.
17. The United States contends that the Panel's conclusions are contrary to the object and purpose
of the  SCM  Agreement .  As established in the panel report in  Canada – Measures Affecting the
Export of Civilian Aircraft  ("Canada – Aircraft ")
 20, the object and purpose of the  SCM Agreement   is
"to offset government subsidies that distort trade,  thereby causing injury to competing industries in
other countries."  21  Subsidies, particularly when they reach high levels, create and maintain injurious
production that would not otherwise have existed, and this defeats the essential purpose of the
SCM Agreement .  The United States stresses that the sale of a subsidized company at a fair market
price does not automatically undo these changes, or eliminate the subsidies' benefit to production.
18. The United States also makes two arguments of an essentially procedural nature with respect
to the Panel's finding that UES and BSplc/BSES received no benefit from the pre-privatizationsubsidies granted to BSC.  First, the United States argues that the Panel erred in making findings thatwere not necessary to resolve this dispute.  As it had already found that the USDOC erred in failing toestablish the continued existence of a benefit, and therefore resolved the dispute, the Panel had noauthority to make further rulings, as demonstrated by Articles 3.2, 3.4, 3.7, 3.9 and 11 of the DSU andArticle IX of the  WTO Agreement .  In the present case, the Panel "made law" by going on to rule that
no benefit from pre-privatization subsidies can be attributed to UES or BSplc/BSES.  During the
13 March oral hearing, the United States explained that this argument is based on the principle thatpanels may not render advisory opinions, which is found in Article IX of the  WTO Agreement   and
Article 3.9 of the DSU, as recognized by the Appellate Body in  United States – Measure Affecting
                                                     
20Panel Report, WT/DS70/R, adopted 20 August 1999, as upheld by the Appellate Body Report,
WT/DS70/AB/R.
21United States' appellant's submission, para. 46.WT/DS138/AB/R
Page 7
Imports of Woven Wool Shirts and Blouses from India  ("United States – Shirts and Blouses ").22  I n
this case, the United States contends, the Panel "exceeded its authority" by, in effect, dictating amethodology that a privatization at fair market value automatically precludes any benefit from pre-privatization subsidies from being attributed to the successor, privatized company.
19. Second, in its appellant's submission, the United States claims that the Panel "violated its
mandate" under Article  11 of the DSU in finding that, as a factual matter, fair market value was paid
for the productive assets, goodwill, etc., employ ed by UES and BSplc/BSES in the production of
leaded bars, and that these findings did not have support in the record.  In response to questioning atthe 13 March oral hearing, the United States acknowledged that it is not challenging these factual
findings in and of themselves.  Rather, the United States contends that these factual findings were
brought up in, and made in the context of, the Panel's finding that the companies concerned receivedno benefit.
B. Arguments by the European  Communities – Appellee
1. Standard of Review
20. The European Communities requests the Appellate Body to uphold the Panel's conclusion that
Article 11 of the DSU establishes the proper standard  of review.  The standard in Article 11 applies to
all disputes under the covered agreements unless otherwise expressly provided.  Moreover, in theview of the European Communities, Article 30 of the  SCM  Agreement  provides that the DSU shall
apply to all disputes arising under that Agreement, except as otherwise provided therein.
21. According to the European Communities, if WTO Members had wanted the standard
articulated in Article 17.6 of the  Anti-Dumping Agreement  to apply to countervailing duty disputes,
they would have written this standard into the  SCM  Agreement .  The  Declaration  accompanied the
Decision on Review of Article 17.6 of the Agreemen t on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994   (the " Decision ").  While the  Declaration   and the  Decision  
contain hortatory language expressing the desire of Members for consistency in the resolution ofdisputes arising from anti-dumping and countervailing duty measures, neither evidences agreementon any single standard of review to be applied in such cases.  The European Communities also points
out that the issue of the possible application of Article 17.6 of the  Anti-Dumping  Agreement   to other
covered agreements has been considered and rejected by the Appellate Body in both  EC Measures
                                                     
22Appellate Body Report, WT/DS33/AB/R, adopted 23 May 1997, pp. 19-20.WT/DS138/AB/R
Page 8
Concerning Meat and Meat Products (Hormones ) ("European Communities – Hormones ")  23 and
Argentina – Safeguard Measures on Imports of Footwear  ("Argentina – Footwear Safeguards ").24
2. Articles 21 and 1.1(b) of the  SCM Agreement
22. According to the European Communities, the Panel properly concluded that the United States'
practice of "irrebuttably" presuming the existence of a benefit during a period of review, withoutregard to changes in ownership at fair market value, violates the  SCM Agreement .  As the Appellate
Body Report in  Canada – Aircraft   demonstrates, the use of the present tense in Article 1.1 of the
SCM Agreement  does not indicate that the required determinations of financial contribution and
benefit should only be made as of the moment a financial contribution was made.
25  Rather, the use of
the word "thereby" in Article 1.1 shows that the financial contribution is the cause and the benefit is
the effect.  The European Communities also agrees with the Panel that Article 14 of theSCM Agreement   does not allow investigating authorities to ignore fundamental changes in
circumstances in determining whether a benefit and thereby a subsidy exists during a period ofinvestigation or review.  Similarly, Article 27.13 of the  SCM Agreement   does not support the
position of the United States.  Article 27.13 applies only to developing country Members and does notaddress the question of subsidies granted to a state-owned company prior to privatization andunconnected with the privatization.
23. The European Communities asserts that Articles 10, 19 and 21 of the  SCM  Agreement   and
Article VI:3 of the GATT 1994 are central to the issue of when benefit must be determined under the
SCM  Agreement .  Article 10 requires that "Members shall take all necessary steps to ensure" that their
imposition of countervailing duties is consistent with the provisions of Article VI of the GATT 1994and the terms of the  SCM Agreement .  The  SCM Agreement   prohibits the imposition of
countervailing duties where there is no subsidy or the subsidy has been withdrawn (Articles 19.1and 19.4), and requires that duties not be imposed in excess of the amount of any subsidy that doesexist (Article 19.4).  The obligation under Article 10 to "take all necessary steps" is continuous;countervailing duty measures may remain in effect "only as long as and to the extent necessary tocounteract subsidization which is causing injury" (Article 21.1).
24. The European Communities believes that the United States is not assisted by its references to
the allocation practices of WTO Members, the panel report in  Australia – Automotive Leather , or the
                                                     
23Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, para. 114,
footnote 79.
24Appellate Body Report, WT/DS121/AB/R, adopted 12 January 2000, para. 118.
25Appellate Body Report, WT/DS70/AB/R, adopted 20 August 1999.WT/DS138/AB/R
Page 9
European Communities' state aid and countervailing duty rules.  Even if it is true that WTO Members
allocate non-recurring subsidies over time "without annually revisiting the question of whether thecompany or its owners continued to enjoy that benefit"
 26, this begs the question whether there
continues to be a benefit, and, therefore, a subsidy, when a fundamental change in circumstances hasoccurred.  The case considered by the  Australia – Automotive Leather   panel did not involve a
countervailing duty investigation or a fundamental change in circumstances.  The EuropeanCommunities also considers that its state aid and countervailing duty rules have been mischaracterizedby the United States.  The European Communities emphasizes that under its countervailing duty law,the investigating authority must in all cases examine the existence of benefit during the period of
investigation, and cannot irrebuttably presume that a benefit conferred some time in the past
continues.
25. The European Communities argues that the Panel correctly determined that, in the
circumstances of this case, the United States is not excused from making a determination of benefitconsistent with Article 1.1 of the SCM Agreement.   Contrary to the United States' position that the
various companies involved were the same, UES, BSplc and BSC are in fact separate legal entities,with different economic interests, owners, constitutions, capital and objectives.  The EuropeanCommunities also points out that, in its reasoning, th e Panel did not rely solely on the fact that the
different companies have different owners, but instead focused on the full consideration paid  for
the assets.  The European Communities cautions that to endorse the United States' interpretation of the
relevant  SCM  Agreement  provisions would allow a Member to impose countervailing duties on a
producer if  any  nexus can be shown between that producer and a subsidy recipient.
26. The European Communities requests the Appellate Body to uphold the Panel's rejection of the
United States' argument that untied subsidies become "embedded" in a company and its production.As the Panel held, and consistent with the Appellate Body Report in  Canada – Aircraft
27, financial
contributions benefit the act of production, manufacture or export and provide an advantage tobusiness enterprises.  The European Communities thus submits that financial contributions arereceived and enjoyed by legal persons, not inanimate objects.
27. The European Communities also submits that th e Panel properly rejected the United States'
claim that countervailing duties may be imposed on the basis of market distortions.  This attempt tojustify the use of countervailing duties to correct alleged market distortions is contradicted by theprovisions of the USDOC's own General Issues Appendix, which the USDOC claims represents its
                                                     
26United States' appellant's submission, para. 56.
27Supra , footnote 25.WT/DS138/AB/R
Page 10
official policy on these matters.  Moreover, in the view of the European Communities, this "market
distortion" argument finds no support in the  SCM Agreement .
28. With respect to the procedural arguments raised by the United States, the European
Communities argues that the issue of whether the Panel exceeded its mandate under the DSU, bymaking factual findings not supported by the record, is not properly before the Appellate Body.  First,the Notice of Appeal did not state any claim that the Panel had made factual findings unsupported bythe record.  As the Appellate Body Reports in  European Communities – Regime for the Importation,
Sale and Distribution of Bananas
 28 and  United States – Import Prohibition of Certain Shrimp and
Shrimp Products ("United States – Shrimp ")  29 demonstrate, a failure to raise an issue in the Notice of
Appeal is contrary to Rule 20 of the  Working Procedures  and precludes consideration of that issue
by the Appellate Body.  Second, the European Communities submits that this claim – which by theUnited States' own admission is a "factual matter" – is outside the scope of appellate review.  Theclaim that the Panel erred in finding that fair market value was paid for the productive assets,goodwill, etc., employed by UES and BSplc/BSES in the production of leaded bars is, in the view ofthe European Communities, "shocking"
 30 given that the United States acknowledged to the Panel that
these were fair market value transactions and did not object to this finding at the interim review stage.
29. The European Communities also argues that, in finding that no benefit from the pre-
privatization subsidies was conferred on UES and BSplc, the Panel did not "exceed its mandate".
Instead, as requested by the European Communities, the Panel examined a challenged United States'
practice and deemed it inconsistent with United States' obligations under the  SCM Agreement.  The
Panel's determination will, if implemented, resolve this dispute.  The United States, however,misinterprets the Appellate Body Report in  United States – Shirts and Blouses   as establishing a
radical principle that a panel may only address claims that are "necessary", in a very narrow sense,to resolve the dispute.  This is a flawed notion of judicial economy.  In fact, the EuropeanCommunities asserts, a panel has a broad discretion to determine which claims, properly before it,need to be addressed in order to achieve appropriate resolution of a dispute.
                                                     
28Appellate Body Report, WT/DS27/AB/R, adopted 25 September 1997.
29Appellate Body Report, WT/DS58/AB/R, adopted 6 November 1998.
30European Communities' appellee's submission, para. 128.WT/DS138/AB/R
Page 11
C. Arguments by the Third Participants
1. Brazil
30. Brazil is of the view that the Panel applied the correct standard of review.  Since the
SCM Agreement   does not set out any specific standard of review, the standard contained in Article 11
of the DSU must apply.  Brazil contends, first, that the very existence of the  Declaration 
demonstrates the existence of a disparity between the standards of review contained in theSCM Agreement   and the  Anti-Dumping Agreement   and, second, that it does not follow from the
Declaration's  recognition of a need for consistent resolution of disputes that the Members have
accepted that the appropriate standard of review for the  SCM Agreement  is the one contained in
Article 17.6 of the  Anti-Dumping Agreement .
31. Brazil submits that the Panel correctly determined that the text of the  SCM Agreement , and,
in particular, Articles  1, 10, 19 and  21, requires a "current benefit determination", that is, a
determination that a benefit exists during the period of investigation or review.  The  SCM Agreement ,
like the  Anti-Dumping Agreement , has a "structural bias" against the application of presumptions over
time, and instead contemplates the consideration of all relevant and current information in makingfindings.  Brazil believes that this "bias" is evid enced by the requirement for regular reviews.  In this
context, the United States' insistence that it can determine the existence of a benefit at one point in
time, and then presume that nothing other than amortization can affect the benefit over a period of
fifteen to twenty years, is "unacceptable".  Brazil also doubts the relevance of Article 27.13 of the
SCM Agreement   to this issue, and adds that, to the extent that it is relevant, Article 27.13 does not
support the United States' position.
32. Brazil further contends that the Panel correctly rejected the United States' position that a
benefit determination can be made without regard to the identity of a company's owners.  As the Panelfound, any benefit analysis under the  SCM  Agreement  must consider whether there is a benefit to the
owners of a company, since the ultimate beneficiary of a countervailable subsidy is the owner of thecompany at the time the subsidy is conferred.  If a new owner has paid market value for an asset or anownership interest in the asset, then the benefit re mains with the original owner of the asset or the
ownership interest.  Thus, Brazil concludes, the Panel correctly rejected the position that the USDOC
is free to disregard the owners of a company and their relationship to the company's assets indetermining whether there is a countervailable benefit.  Finally, as regards the United States'arguments on market distortion, Brazil stresses that the  SCM  Agreement   does not broadly authorize
Members to redress any actions they might feel distort the market.  Rather, the  SCM AgreementWT/DS138/AB/R
Page 12
allows a Member to apply countervailing duties to the products of a particular company, during a
particular period, only after certain conditions are met.
33. Brazil disagrees with the United States' claim that the Panel "exceeded its mandate" by
considering what benefit, if any, could reasonably have accrued to the successor companies of BSC.Brazil stresses that no issue was more central to this dispute, or more thoroughly briefed, than thequestion whether subsidy benefits can be countervailed after an arm's length change in ownership.According to Brazil, the Panel's explanation of how the  SCM Agreement , properly interpreted,
applies to privatized companies, was indispensabl e to the issue before the Panel, and should be
upheld.
2. Mexico
34. Mexico agrees with the Panel that the standard of review set out in Article 11 of the DSU is
applicable in this case.  This conclusion is consistent with WTO dispute settlement provisions andwith the Appellate Body Report in  Guatemala – Anti-Dumping Inve stigation Regarding Portland
Cement from Mexico .
31  Mexico notes that, since the  Declaration  is not one of the "special or
additional rules and procedures" listed in Appendix 2 of the DSU, Article 1.1 of the DSU must apply.
35. Mexico requests the Appellate Body to confirm the Panel's finding of a requirement that the
benefit be calculated before and after a company has been privatised, as well as the finding that theUSDOC violated Article  10 of the  SCM Agreement  by not showing that a subsidy had been
bestowed on the imports for each year reviewed.  Mexico believes that the United States' arguments,
if accepted, would lead to an absurd result – that  a benefit follows the enterprise that received a
subsidy ad infinitum.  On such a view, countervailing duties could legitimately be applied to that
enterprise even after it had been privatized and all or most of its market value paid.  The United Statesrelies on the difficulty of quantifying a benefit and on its "perpetual benefit theory", but ignores thefact that an investigating authority is obliged, by the wording of Article  VI:3 of the GATT  1994, to
calculate the way in which the amount paid for a co mpany affects the benefit.  The United States is
also wrong to imply that Article  21.1 of the  SCM Agreement  merely suggests that the subsidy must
occur before the injury.  Rather, Mexico argues, Article  21 makes clear that an investigating authority,
in reviewing the need for the continued imposition of the duty, must terminate the duties when the
injury, or the subsidy causing the injury, disappears.
                                                     
31Appellate Body Report, WT/DS60/AB/R, adopted 25 November 1998, para. 64.WT/DS138/AB/R
Page 13
III. Preliminary Procedural Matter
36. On 7 February 2000, we received two documents, described in their respective covering
letters as " amicus curiae   briefs", from the American Iron and Steel Institute and the Specialty Steel
Industry of North America.  On 15 February 2000, the European Communities filed a letter arguingthat these  amicus curiae  briefs are "inadmissible" in appellate review proceedings, and stating that it
did not intend to respond to the content of the briefs.  According to the European Communities, thebasis for allowing  amicus curiae  briefs in  panel   proceedings is Article 13 of the DSU, as explained
in United States – Shrimp .  The European Communities notes that Article 13 of the DSU does not
apply to the Appellate Body and that, in any case, that provision is limited to  factual information and
technical advice , and would not include  legal arguments or legal interpretations   received from
non-Members.  Furthermore, the European Communities contends, neither the DSU nor the  Working
Procedures   allow  amicus curiae  briefs to be admitted in Appellate Body proceedings, given that
Article 17.4 of the DSU and Rules 21, 22 and 28.1 of the Working Procedures  confine participation
in an appeal to participants and third participants, and that Article 17.10 of the DSU provides for theconfidentiality of Appellate Body proceedings.
37. By letter dated 16 February 2000, we requested the United States, Brazil and Mexico to
comment on the arguments made by the European Communities.  Brazil, in its third participant'ssubmission, and Mexico, in a letter submitted to us on 23 February 2000, agree with the European
Communities that the Appellate Body does not have the authority to accept  amicus curiae   briefs.
Brazil and Mexico emphasize that neither the DSU nor the  Working Procedures   allow the Appellate
Body to receive factual information of the type contemplated by Article  13 of the DSU, much less
briefs from private entities containing legal arguments on the issues under appeal.  Mexico underlinesthat the DSU and the  Working Procedures  limit participation in appellate proceedings and require
those proceedings to be confidential.  Brazil adds that Members of the WTO and, in particular,parties and third parties to a dispute, are uniquely qualified to make legal arguments regarding panelreports and the parameters of WTO obligations.
38. In a letter submitted on 23 February 2000, the United States argues that  the Appellate Body
has the authority to accept  amicus curiae   briefs, and urges us to accept the briefs submitted by the
steel industry associations.  The United States notes that, in United States – Shrimp,  the Appellate
Body explained that the authority to accept unsolicited submissions is found in the DSU's grantto a panel of " ample and extensive authority to undertake and to control the process  by which it
informs itself both of the relevant facts of the dispute and of the legal norms and principles applicableWT/DS138/AB/R
Page 14
to such facts."32  To the United States, it is clear that the Appellate Body also has such authority,
given that Article 17.9 of the DSU authorizes th e Appellate Body to draw up its own working
procedures, and Rule  16(1) of the  Working Procedures  authorizes a division to create an appropriate
procedure when a question arises that is not covered by the  Working Procedures .  The United States
does not agree that acceptance of an unsolicited amicus curiae  brief would compromise the
confidentiality of the Appellate Body proceedings, or give greater rights to a non-WTO Member thanto WTO Members that are not participants or third participants in an appeal.
39. In considering this matter, we first note that nothing in the DSU or the  Working Procedures  
specifically provides that the Appellate Body may accept and consider submissions or briefs from
sources other than the participants and third participants in an appeal.  On the other hand, neither the
DSU nor the Working Procedures   explicitly prohibit acceptance or consideration of such briefs.
However, Article 17.9 of the DSU provides:
Working procedures shall be drawn up by the Appellate Body in
consultation with the Chairman of the DSB and the Director-General, and communicated to the Members for their information.
This provision makes clear that the Appellate Body has broad authority to adopt procedural rules
which do not conflict with any rules and procedures in the DSU or the covered agreements.
 33
Therefore, we are of the opinion that as long as we act consistently with the provisions of the DSUand the covered agreements, we have the legal authority to decide whether or not to accept andconsider any information that we believe is pertinent and useful in an appeal.
40. We wish to emphasize that in the dispute settlement system of the WTO, the DSU envisages
participation   in panel or Appellate Body proceedings, as a matter of legal right, only  by parties
and third parties to a dispute.  And, under the DSU, only  Members of the WTO have a legal right to
participate as parties or third parties in a particular dispute.  As we clearly stated in  United States –
Shrimp :
… access to the dispute settlement process of the WTO is limited to
Members of the WTO.  This access is not available, under the
WTO Agreement  and the covered agreements as they currently exist,
to individuals or international organizations, whether governmental ornon-governmental.
34
                                                     
32Appellate Body Report, supra , footnote 29, para. 106. (emphasis added by the United States)
33In addition, Rule 16(1) of the  Working Procedures   allows a division hearing an appeal to develop an
appropriate procedure in certain specified circumstances where a procedural question ar ises that is not covered
by the  Working Procedures .
34Appellate Body Report, supra , footnote 29, para. 101.WT/DS138/AB/R
Page 15
We also highlighted in  United States – Shrimp   that:
… under the DSU, only Members who are parties to a dispute, or who
have notified their interest in becoming third parties in such a dispute
to the DSB, have a legal right  to make submissions to, and have a
legal right  to have those submissions considered by, a panel.
Correlatively, a panel is obliged  in law to accept and give due
consideration only to submissions made by the parties and the thirdparties in a panel proceeding.
35
41. Individuals and organizations, which are not Members of the WTO, have no legal   right  to
make submissions to or to be heard by the Appellate Body.  The Appellate Body has no legal  duty  to
accept or consider unsolicited amicus curiae   briefs submitted by individuals or organizations, not
Members of the WTO.  The Appellate Body has a legal  duty  to accept and consider  only 
submissions from WTO Members which are parties or third parties in a particular dispute.36
42. We are of the opinion that we have the legal authority under the DSU to accept and consider
amicus curiae   briefs in an appeal in which we find it pertinent and useful to do so.  In this appeal, we
have not found it necessary to take the two  amicus curiae   briefs filed into account in rendering our
decision.
IV. Issues Raised in This Appeal
43. The following issues are raised in this appeal:
(a) whether the Panel erred in applying to this dispute the standard of review set forth in
Article 11 of the DSU, rather than the standard set forth in Article 17.6 of theAnti-Dumping Agreement ;
(b) whether the Panel erred in finding that, in the particular circumstances of this case,
the USDOC should have examined in its 1995, 1996 and 1997 administrativereviews whether a "benefit" accrued to UES and BSplc/BSES following the changes
in ownership;  and
(c) whether the Panel erred in finding that no "benefit" was conferred on UES or
BSplc/BSES as a result of the "financial contributions" made to BSC.
                                                     
35Appellate Body Report, supra , footnote 29, para. 101.
36Article 17.4 of the DSU and Rules 21 to 24 of the  Working Procedures .WT/DS138/AB/R
Page 16
V. Standard of Review
44. The United States argues that the Panel erred in applying the standard of review set forth in
Article 11 of the DSU, rather than the standard of review set forth in Article 17.6 of theAnti-Dumping Agreement .
45. To determine the standard of review that ap plies in disputes involving countervailing duty
measures under Part V of the  SCM Agreement , we begin with Article 1 of the DSU, which provides,
in relevant part:
1. The rules and procedures of this Understanding shall apply to
disputes brought pursuant to the consultation and dispute settlementprovisions of the agreements listed in Appendix 1 to this Understanding
(referred to in this Understanding as the "covered agreements").  …
2.  The rules and procedures of this Understanding shall apply
subject to such special or additional rules and procedures on dispute
settlement contained in the covered agreements as are identified in
Appendix 2 to this Understanding. …
We also note that Article 30 of the  SCM Agreement   specifies:
The provisions of Articles XXII and XXIII of GATT 1994 as
elaborated and applied by the Dis pute Settlement Understanding shall
apply to consultations and the settlement of disputes under this
Agreement, except as otherwise specifically provided herein.
We further note that the  SCM Agreement   does not contain any "special or additional rules" on the
standard of review to be applied by panels.
46. We recall that, in our Report in  European Communities – Hormones , which concerned a
dispute that arose under the  Agreement on the Application of Sanitary and Phytosanitary Measures , we
stated that Article 11 of the DSU:
… bears directly on [the] matter [of standard of review] and, in effect,
articulates with great succinctness but with sufficient clarity the
appropriate standard of review for panels in respect of both the
ascertainment of facts and the legal characterization of such facts under
the relevant agreements.
37
More recently, in our Report in  Argentina – Footwear Safeguards , which involved a dispute under
the  Agreement on Safeguards , we observed that:
                                                     
37Supra , footnote 23, para. 116.WT/DS138/AB/R
Page 17
We have stated, on more than one occasion, that, for all but one of the
covered agreements, Article 11 of the DSU sets forth the appropriate
standard of review for panels.38
47. Article 17.6 of the  Anti-Dumping Agreement   sets out a special standard of review for disputes
arising under that Agreement.  The  Declaration on   Dispute Settlement Pursuant to the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 or Part V of the
Agreement on Subsidies and Countervailing Measures  (the " Declaration ") provides as follows:
Ministers ,
Recognize , with respect to dispute settlement pursuant to the Agreement
on Implementation of Article VI of GATT 1994 or Part V of the
Agreement on Subsidies and Countervailing Measures, the need for the
consistent resolution of disputes arising from anti-dumping andcountervailing duty measures.
48. The United States argues that, by virtue of the Declaration , the standard of review specified
in Article  17.6 of the  Anti-Dumping Agreement  also applies to disputes involving countervailing duty
measures under Part V of the  SCM Agreement.   In the view of the United States, the Panel erred in
applying the standard of review set out in Article  11 of the DSU in this case.
49. We consider this argument to be without merit.  By its own terms, the  Declaration   does not
impose an obligation to apply the standard of review contained in Article 17.6 of the
Anti-Dumping Agreement   to disputes involving countervailing duty measures under Part V of the
SCM Agreement .  The  Declaration  is couched in hortatory language;  it uses the words "Ministers
recognize ".  Furthermore, the  Declaration  merely acknowledges "the need for the consistent
resolution of disputes arising from anti-dumping and countervailing duty measures."  It does notspecify any specific action to be taken.  In particular, it does not prescribe a standard of review to beapplied.
50. Furthermore, the  Decision on Review of Article 17.6 of the Agreement on Implementation of
Article VI of the General Agreement on Tariffs and Trade 1994   (the " Decision ") provides:
The standard of review in paragraph 6 of Article  17 of the Agreement
on Implementation of Article VI of GATT  1994 shall be reviewed
after a period of three years with a view to considering the question of
whether it is capable of general application.
                                                     
38Supra , footnote 24, para. 118.WT/DS138/AB/R
Page 18
This  Decision   provides for review of the standard of review in Article 17.6 of the  Anti-Dumping
Agreement   to determine if it is "capable of general application" to other covered agreements,
including the SCM Agreement .  By implication, this  Decision   supports our conclusion that the
Article 17.6 standard applies only to disputes arising under the  Anti-Dumping Agreement , and not to
disputes arising under other covered agreements, such as the  SCM Agreement .  To date, the DSB has
not conducted the review contemplated in this  Decision .
51. We, therefore, conclude that the Panel was correct in applying the standard of review set forth
in Article 11 of the DSU to this dispute arising under Part V of the  SCM Agreement .39
VI. Articles  21 and 1.1(b) of the  SCM Agreement
52. The principal question before the Panel in this case was whether the countervailing duties at
issue were inconsistent with the obligations of the United States under the  SCM Agreement.   T h e
Panel concluded:
… the countervailing duties imposed as a result of the USDOC's 1995,
1996 and 1997 administrative reviews are not in accordance with the
premise underlying Articles 19.1, 19.4 and 21.2 of the SCMAgreement, Article VI:3 of the GATT 1994, and the object and
purpose of countervailing duties as expressed in footnote 36 to
Article 10.  …  Accordingly, we conclude that the countervailing
duties imposed as a result of the USDOC's 1995, 1996 and 1997
administrative reviews are inconsistent with Article 10 of the SCMAgreement.
40
In reaching this conclusion, the Panel found:
… the USDOC should have examined the continued existence of
"benefit" already deemed to have been conferred by the pre-1985/86
"financial contributions" to BSC, and it should have done so from the
perspective of UES and BSplc/BSES respectively, and not BSC.41
…
                                                     
39We note the argument by the United States that "under any standard of review" the Panel could not
come to the conclusion that the United States has violated its obligations under the  SCM Agreement  because
that Agreement simply does not address the issues that were before the Panel.  This argument is dealt with in thefollowing section of our Report.
40Panel Report, para. 6.86.
41Ibid., para. 6.70.WT/DS138/AB/R
Page 19
… fair market value was paid for all productive assets, goodwill  etc.
employed by UES and BSplc/BSES in the production of leaded bars
imported into the United States in 1994, 1995 and 1996.  In these
circumstances, we fail to see how pre-1985/86 "financial
contributions" bestowed on BSC could subsequently be considered to
confer a "benefit" on UES and BSplc/BSES during the relevantperiods of review.
42
The United States appeals the above findings of the Panel.43
53. Before we begin our analysis, we note that the measures at issue in this case are the duties
imposed as a result of the 1995, 1996 and 1997  administrative reviews , not the duties imposed as a
result of the original 1993 final countervailing duty determination.  Nevertheless, the Panel based itsreasoning in part on Articles 19.1 and 19.4 of the  SCM Agreement , which are provisions dealing with
the imposition of countervailing duties as a result of a final determination.  We believe that
Articles 19.1 and 19.4 provide useful context in interpreting the obligations regarding administrative
reviews, but that the applicable provision covering administrative reviews is Article 21, whichprovides in paragraph 2:
The authorities shall review the need for the continued imposition of
the duty, where warranted, on their own initiative or, provided thata reasonable period of time has elapsed since the imposition of thedefinitive countervailing duty, upon request by any interested partywhich submits positive information substantiating the need for areview.  Interested parties shall have the right to request theauthorities to examine whether the continued imposition of the dutyis necessary to offset subsidization, whether the injury would belikely to continue or recur if the duty were removed or varied, orboth.  If, as a result of the review under this paragraph, theauthorities determine that the countervailing duty is no longerwarranted, it shall be terminated immediately.
Pursuant to this paragraph, the authorities of a Member applying a countervailing duty must, where
warranted, "review the need for the continued imposition of the duty".  In carrying out such a review,
the authorities must "examine whether the continued imposition of the duty is necessary to offsetsubsidization" and/or "whether the injury would be likely to continue or recur if the duty wereremoved or varied".  Article 21.2 provides a review mechanism to ensure that Members comply withthe rule set out in Article 21.1 of the  SCM Agreement , which stipulates:
                                                     
42Panel Report, para. 6.81.
43United States' appellant's submission, paras. 28-91.WT/DS138/AB/R
Page 20
A countervailing duty shall remain in force only as long as and to
the extent necessary to counteract subsidization which is causing
injury.
54. Setting aside the issue of injury, which does not arise in this case, we note that in order to
establish the continued need for countervailing duties,  an investigating authorit y will have to make a
finding on  subsidization , i.e., whether or not the subsidy continues to exist.  If there is no longer a
subsidy, there would no longer be any need for a countervailing duty.
55. Article 1.1 of the  SCM Agreement   defines a "subsidy" as follows:
For the purpose of this Agreement, a subsidy shall be deemed to exist
if:
(a)(1) there is a financial contribution by a government or any
public body within the territory of a Member …
and
(b) a benefit is thereby conferred.
The existence of a "financial contribution" is not at issue in this appeal.  The principal issue in this
appeal concerns the interpretation of the term "benefit" in Article 1.1 above.
56. The United States argues, on the basis of footnote 36 to Article 10 of the  SCM Agreement  
and Article VI:3 of the GATT 1994, that the relevant "benefit" is a benefit to a company's  productive
operations , rather than, as the Panel held, a benefit to  legal or natural persons .44  It is true, as the
United States emphasizes, that footnote 36 to Article 10 of the  SCM  Agreement   and Article VI:3 of
the GATT 1994 both refer to subsidies bestowed or granted directly or indirectly "upon themanufacture, production or export of any merchandise ".  In our view, however, it does not necessarily
follow from this wording that the "benefi t" referred to in Article 1.1(b) of the  SCM Agreement   is a
benefit to  productive operations .
57. In our Report in  Canada – Aircraft, we stated, with regard to the term "benefit" in
Article 1.1(b):
                                                     
44United States' appellant's submission, paras. 38-40.WT/DS138/AB/R
Page 21
A "benefit" does not exist in the abstract, but must be received and
enjoyed by a beneficiary or a recipient.  Logically, a "benefit" can be
said to arise only if a person, natural or legal, or a group of persons,
has in fact received something.  Th e term "benefit", therefore, implies
that there must be a recipient. …  45
We find support for this reading in Article 14 of the  SCM Agreement , which constitutes context for
the interpretation of "benefit" in Article 1.1(b).  Article 14 reads, in relevant part:
Calculation of the Amount of a Subsidy in Terms
of the Benefit to the Recipient
For the purpose of Part V, any method used by the investigating
authority to calculate the benefit to the recipient conferred pursuantto paragraph 1 of Article 1 shall be provided for in the nationallegislation or implementing regulations of the Member concernedand its application to each particular case shall be transparent andadequately explained. …
Article 14 refers to the calculation of the "benefit  to the recipient   conferred  pursuant to paragraph 1
of Article 1 " (emphasis added).  As we reasoned in our Report in  Canada – Aircraft :
This explicit textual reference to Article 1.1 in Article 14 indicates to
us that "benefit" is used in the same sense in Article 14 as it is inArticle 1.1. Therefore, the reference to "benefit  to the recipient " in
Article 14 also implies that the word "benefit",  as used in Article 1.1 ,
is concerned with the "benefit  to the recipient " ... 
46
58. We, therefore, agree with the Panel's findings that benefit as used in Article 1.1(b) is
concerned with the "benefit to the recipient", that such recipient must be a natural or legal person  47,
and that in the present case:
… in order to determine whether any subsidy was bestowed on the
production by UES and BSplc/BSES respectively of leaded bars
imported into the United States in 1994, 1995 and 1996, it is necessary
to determine whether there was any "benefit" to UES and BSplc
respectively ( i.e., the producers of the imported leaded bars at issue).  48
                                                     
45Supra , footnote 25, para. 154.  This statement was made in the context of our consideration in that
appeal of the issue of whether a "benefit" is measured by the cost to government or the advantage conferred onthe recipient.  However, this does not affect the relevance of this statement regarding the meaning of the term"benefit" in Article 1.1 (b) of the SCM Agreement .
46Ibid., para. 155.
47Panel Report, para. 6.66.
48Ibid., para. 6.69.WT/DS138/AB/R
Page 22
59. The United States also appeals the Panel's finding that the investigating authority must
demonstrate the existence, during the relevant period of investigation or review, of a continued"benefit" from a prior "financial contribution".
49  The United States argues that the use of the present
tense of the verb "is conferred" in Article 1.1 of the  SCM Agreement   shows that an investigating
authority must demonstrate the existence of "benefit" only at the time the "financial contribution" wasmade.  The United States also relies on the context of Article 1.1, in particular Articles 14 and 27.13of the  SCM Agreement , in support of this interpretation.
60. Article 1.1 sets out the definition of a subsidy for the purposes of the  SCM Agreement .
However, Article 1.1 does not address the  time  at which the "financial contribution" and/or the
"benefit" must be shown to exist.  We therefore consider that Article 1.1 does not provide a basis for
the argument made by the United States.  We also find nothing in Articles 14 or 27.13 of theSCM Agreement   that supports the United States' position.
61. We have already stated that in a case involving countervailing duties imposed as a result of an
administrative review, Articles 21.1 and 21.2 of the  SCM Agreement   are relevant.  As discussed
above, Article 21.1 allows Members to apply countervailing duties "only as long as and to the extentnecessary to counteract subsidization … ".  Article 21.2 sets out a review mechanism to ensure thatMembers comply with this rule.  In an admi nistrative review pursuant to Article 21.2, the
investigating authority may be presented with "posi tive information" that the "financial contribution"
has been repaid or withdrawn and/or that the "benefit" no longer accrues.  On the basis of its
assessment of the information presented to it by inte rested parties, as well as of other evidence before
it relating to the period of review, the investigat ing authority must determine whether there is a
continuing need for the application of countervailing duties.  The investigating authority is not free toignore such information.  If it were free to ig nore this information, the review mechanism under
Article 21.2 would have no purpose.
62. Therefore, we agree with the Panel that while an investigating authority may presume, in the
context of an administrative review under Article 21.2, that a "benefit" continues to flow from anuntied, non-recurring "financial contribution", this presumption can never be "irrebuttable".
 50  In this
case, given the changes in ownership leading to the creation of UES and BSplc/BSES, the USDOC
was required  under Article 21.2 to examine, on the basis of the information before it relating to these
changes, whether a  "benefit" accrued to UES and BSplc/BSES.  We thus agree with the Panel's
finding that:
                                                     
49United States' appellant's submission, paras. 52 ff.
50Panel Report, para. 6.71.WT/DS138/AB/R
Page 23
… the changes in ownership leading to the creation of UES and
BSplc/BSES should have caused the USDOC to examine whether the
production of leaded bars by UES and BSplc/BSES respectively, and
not BSC, was subsidized.  In particular, the USDOC should have
examined the continued existence of  "benefit" already deemed to have
been conferred by the pre-1985/86 "financial contributions" to BSC,and it should have done so from the perspective of UES and
BSplc/BSES respectively, and not BSC.
51
63. The Panel, however, also stated:
… when an investigation or review takes place, the investigating
authority must establish the existence of a "financial contribution" and"benefit" during the relevant period of investigation or review.  Only
then will that investigating authority be able to conclude, to the
satisfaction of Article 1.1 (and Article 21), that there is a "financial
contribution", and that a "benefit" is  thereby conferred.
 52
We do not agree with the Panel's implied view that, in the context of an administrative review under
Article 21.2, an investigating authority must  always  establish the existence of a "benefit"  during the
period of review   in the same way as   an investigating authority must establish a "benefit" in an
original investigation.  We believe that it is important to distinguish between the original investigation
leading to the imposition of countervailing duties and the administrative review.  In an originalinvestigation, the investigating authority must establish that  all  conditions set out in the
SCM Agreement   for the imposition of  countervailing duties are fulfilled.  In an administrative
review, however, the investigating authority must a ddress those issues which have been raised before
it by the interested parties or, in the case of an investigation conducted on its own initiative, thoseissues which warranted the examination.
64. Having found that, in the particular circumstances of this case, the USDOC, in its 1995, 1996
and 1997 administrative reviews, should have examin ed the continued existence of a "benefit" to UES
and BSplc/BSES, the Panel subsequently examined whether the "financial contributions" bestowed on
BSC between 1977 and 1986 could be considered to confer a "benefit" on UES and BSplc/BSES.The Panel found that:
                                                     
51Panel Report, para. 6.70.
52Ibid., para. 6.73.WT/DS138/AB/R
Page 24
… fair market value was paid for all productive assets, goodwill etc.
employed by UES and BSplc/BSES in the production of leaded bars
imported into the United States in 1994, 1995 and 1996.  In these
circumstances, we fail to see how pre-1985/86 "financial
contributions" bestowed on BSC could subsequently be considered to
confer a "benefit" on UES and BSplc/BSES during the relevantperiods of review.
53
The United States also appeals this finding.
65. In examining this issue, we note that, according to the Panel:
The United States has not denied that the BSC spin-off was negotiated
for fair market value.54
and that:
Both parties agree that the privatization of British Steel plc was "at
arm's length, for fair market value and consistent with commercial
considerations".55
However, the United States, in its appellant's submission, argued that the Panel engaged "in a
de novo  review"  and made factual findings "not adequately supported by the record" by finding "that
the purchase price in each of the two BSC privatization transactions was a 'fair market value' purchase
price".56
66. During the oral hearing of 13 March, the United States acknowledged that the Panel's findings
that fair market value was paid for all productive assets, were  factual   findings.  The United States
also acknowledged during the oral hearing that it does not challenge these  factual   findings.  In view
of the United States' acknowledgement, we consider that the issue raised in its appellant's submissionhas become moot.  For the same reason, the contention of the European Communities that the "claim"made by the United States with regard to these findings was not properly before the Appellate Bodybecause the United States failed to raise this issue in its Notice of Appeal, has also become moot.
67. Therefore, the issue before us is whether, given these factual findings, the Panel erred in
finding that the "financial contributions" bestow ed on BSC could not be considered to confer a
"benefit" on UES and BSplc/BSES.
57  We note that in our Report in  Canada – Aircraft , we stated:
                                                     
53Panel Report, para. 6.81.
54Ibid., para. 6.81.
55Ibid., para. 2.3.
56United States' apppellant's submission, paras. 88-91.
57Panel Report, para. 6.81.WT/DS138/AB/R
Page 25
… the word "benefit", as used in Article 1.1(b), implies some kind of
comparison.  This must be so, for there can be no "benefit" to the
recipient unless the "financial contribution" makes the recipient
"better off" than it would otherwise have been, absent that
contribution.  In our view, the marketplace provides an appropriate
basis for comparison in determining whether a "benefit" has been"conferred", because the trade-distorting potential of a "financial
contribution" can be identified by determining whether the recipient
has received a "financial contribution" on terms more favourable than
those available to the recipient in the market.
58
68. The question whether a "financial contribution" confers a "benefit" depends, therefore, on
whether the recipient has received a "financial contribution" on terms more favourable than thoseavailable to the recipient in the market.  In the present case, the Panel made factual findings that UESand BSplc/BSES paid fair market value for all th e productive assets, goodwill, etc., they acquired
from BSC and subsequently used in the production of leaded bars imported into the United States in
1994, 1995 and 1996.  We, therefore, see no error in the Panel's conclusion that, in the specificcircumstances of this case, the "financial co ntributions" bestowed on BSC between 1977 and 1986
could not be deemed to confer a "benefit" on UES and BSplc/BSES.
69. The United States further appeals the Panel's finding regarding the "benefit" conferred on
UES and BSplc/BSES on the additional ground that the Panel exceeded its mandate under the  WTO
Agreement   and the DSU.  The United States argues that the Panel had resolved the dispute between
the parties once it had established that in its 1995, 1996 and 1997 administrative reviews, the USDOCshould have examined the continued existence of a "benefit" to UES and BSplc/BSES.  According to
the United States, any additional finding by the Panel was beyond the Panel's mandate because
Article IX of the  WTO Agreement  and Article 3.9 of the DSU, as well as our Report in
United States – Shirts and Blouses , make clear that panels may not render advisory opinions.
70. In our Report in United States – Shirts and Blouses , we observed that, as affirmed in
Articles 3.4 and 3.7 of the DSU, the basic aim of WTO dispute settlement is the resolution ofdisputes.  We further stated:
Given the explicit aim of dispute settlement that permeates the  DSU
 ,
we do not consider that Article 3.2 of the  DSU   is meant to encourage
either panels or the Appellate Body to "make law" by clarifying
existing provisions of the WTO Agreement  outside the context of
resolving a particular dispute.  A panel need only address those claims
which must be addressed in order to  resolve the matter in issue in the
dispute.59
                                                     
58Supra , footnote 25, para. 157.
59Appellate Body Report, United States – Shirts and Blouses , supra , footnote 22, p. 19.WT/DS138/AB/R
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We added that :
… Article IX of the WTO Agreement  provides that the Ministerial
Conference and the General Council ha ve the "exclusive authority" to
adopt interpretations of the WTO Agreement  and the Multilateral Trade
Agreements.  This is explicitly recognized in Article 3.9 of the
DSU  … 60
71. The United States seems to consider that our Report in  United States – Shirts and Blouses   sets
forth a general principle that panels may not address any issues that need not be addressed in order to
resolve the dispute between the parties.  We do not agree with this characterization of our findings.  Inthat appeal, India had argued that it was entitled to a finding by the Panel on each of the legal claims
that it had made.  We, however, found that the principle of judicial economy allows a panel to decline
to rule on certain claims.
72. In this case, the European Communities'  claim   is that the countervailing duties imposed on
imports of leaded bars produced by UES a nd BSplc/BSES as a result of the 1995, 1996 and 1997
administrative reviews were inc onsistent with the obligations of the United States under the
SCM Agreement , and, in particular, with Articles 1.1(b), 10, 14 and 19.4 of that Agreement.
61  T h e
European Communities relied upon two principal  arguments   in support of that claim.  First, the
European Communities argued that the USDOC was, in the circumstances of this case, required to
examine whether there was any continuing "benefit " to UES and/or BSplc/BSES from the "financial
contribution" to BSC.  Second, the European Commun ities argued that, given that the USDOC had itself
found that the sale of assets to UES and the priva tization of BSC were arm's length transactions for
fair market value, no benefit could have accrued to UES or BSplc/BSES.
73. In order to resolve the claim of the European  Communities, the Panel deemed it necessary to
address the two principal arguments made in support of  this claim.  In doing so, the Panel acted within
the context of resolving this particular dispute and, therefore, within the scope of its mandate under the
DSU.
74. On the basis of the above reasoning, we uphol d the Panel's finding that, in the particular
circumstances of this case, the USDOC should have examined in its 1995, 1996 and 1997
administrative reviews whether a "benefit" accrued to UES and BSplc/BSES following the changes in
ownership;  as well as the Panel's finding that, on the facts of this case, no "benefit" was conferred onUES or BSplc/BSES as a result of the "financial contributions" made to BSC.
                                                     
60Appellate Body Report, United States – Shirts and Blouses , supra , footnote 22, pp. 19-20.
61See WT/DS138/4 on the terms of reference of the Panel, which refers to the request for the
establishment of a panel, WT/DS138/3 and WT/DS138/3/Corr.1.WT/DS138/AB/R
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VII. Findings and Conclusions
75. For the reasons set out in this Report, the Appellate Body:
(a) concludes that the Panel was correct in applying the standard of review set forth in
Article 11 of the DSU to this dispute arising under Part V of the  SCM Agreement ;
(b) upholds the Panel's finding that, in the particular circumstances of this case, the
USDOC should have examined in its 1995, 1996 and 1997 administrative reviewswhether a "benefit" accrued to UES and BSplc/BSES following the changes inownership;  and
(c) upholds the Panel's finding, that, on the facts of this case, no "benefit" was conferred
on UES or BSplc/BSES as a result of the "financial contributions" made to BSC.
76. The Appellate Body  recommends   that the DSB request the United States to bring its
measures found in the Panel Report, as upheld by this Report, to be inconsistent with its obligationsunder the  SCM Agreement , into conformity with its obligations under that Agreement.WT/DS138/AB/R
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Signed in the original at Geneva this 10th day of April 2000 by:
_________________________
Mitsuo Matsushita
Presiding Member
_________________________ _________________________
Said El-Naggar Julio Lacarte-Muró
Member Member