RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/108
2 October 2001
(01-4687)
Dispute Settlement Body
23 August 2001
MINUTES OF MEETING
Held on the Centre William Rappard
on 23 August 2001
Chairman:  Mr. R. Farrell (New Zealand)
Subjects discussed: Page
1. United States – Countervailing measures concerning certain products from the
European Communities........................................................................................................... .2
(a) Request for the establishment of a panel by the Europe an Communities ..................................2
2. United States – Countervailing duties on certain corrosion-resistant carbon steel
flat products from Germany....................................................................................................3
(a) Request for the establishment of a panel by the Europe an Communities ..................................3
3. United States – Definitive safeguard measures on imports of steel wire rod and
circular welded quality line pipe .............................................................................................4
(a) Request for the establishment of a panel by the Europe an Communities ..................................4
4. United States –  Continued Dumping and Subsidy Offset Act of 2000 ................................5
(a) Request for the establishment of a panel by Australia, Brazil, Chile, the European
Communities, India, Indonesia, Japan, Korea a nd Thailand .....................................................5
(b) Request for the establishmen t of a panel by Canada .................................................................7
(c) Request for the establishmen t of a panel by  Mexico .................................................................7
5. United States – Section 129(c)(1) of the Uruguay Round Agreements Act..........................8
(a) Request for the establishmen t of a panel by Canada .................................................................8
6. United States – Measures treating exports restraints as subsidies.......................................9
(a) Report of the Pa nel ........................................................................................................ ............9
7. Brazil – Export financing programme for aircraft – Second recourse by Canada
to Article 21.5 of the DSU..................................................................................................... ..14
(a) Report of the Pa nel ........................................................................................................ ..........14
8. United States – Anti-dumping measures on certain hot-rolled steel products
from Japan..................................................................................................................... ..........17
(a) Report of the Appellate Body  and Report of the Panel ............................................................17WT/DSB/M/108
Page 2
9. European Communities – Anti-dumping duties on imports of cotton-type bed
linen from  India ............................................................................................................... .......22
(a) Statement by India .......................................................................................................... ..........22
1. United States – Countervailing measures concerning certain products from the
European Communities
(a) Request for the establishment of a panel by the European Communities (WT/DS212/4)
1. The Chairman drew attention to the communication from the European Communities
contained in document WT/DS212/4.
2. The representative of the European Communitie s said that the EC had tried, for several
months, to solve the disputes with the United Stat es with regard to a number of WTO-inconsistent
trade measures imposed on EC steel products.  Since no solution had been found, the EC had no
alternative but to bring the matter before the DSB.  The panel request under consideration related to
12 countervailing duty orders against pre-privatization subsidies.  Most of them had been imposed on
the basis of an old methodology, which the Appell ate Body in the case on "United States – Leaded
Bars"1 had found to be WTO-incompatible and had ruled against the US presumption that privatized
firms continued to benefit from subsidies obtained by the previous state-owned companies.
Following the Appellate Body's ruling, the United States had abandoned its previous methodology
and had developed a new one, which continued to be WTO-inconsistent and would lead, in most
cases, to higher duties.  The EC attached great importance to the removal of these measures, which
were the consequence of a methodology based on an erroneous interpretation of WTO rules.
3. The representative of the United States said that her country was not in a position to consent
to the establishment of a panel at the present meeting.  The United States had a few comments with
regard to the EC's request for a panel.  First, as  with most legal proceedings, the underlying facts
identified by the EC were complicated.  The United States was particularly concerned about the EC's
mischaracterization of how the United States had taken into account the privatizations in these cases.The EC's panel request incorrectly suggested that th e United States, in dealing with the privatization
of a government-owned company, had failed to take into account the Appellate Body's decision in the
case on "United States – Leaded Bars" and continued to allocate subsidies previously received by the
government-owned company to the successor privatiz ed company.  The United States believed that
this was not accurate because after the Appellate Body's decision in the case on "United States –
Leaded Bars", it had adopted a new change-in-ow nership methodology.  Under its new methodology,
the US Department of Commerce was required to undertake an inquiry when a question was raisedabout the continued existence of a benefit in view of  a change in ownership.  Thus, in the context of a
privatization, i.e. a government-to-private sale, the Department of Commerce began its inquiry by first
examining several criteria in order to determine whether the post-privatization entity was, for all
intents and purposes, the same as the pre-privatization entity that had received the subsidy.  If it was,
then all of the elements for a subsidy, i.e. fina ncial contribution, benefit and specificity, continued to
exist and the remaining portion of the unamortized subsidy continued to be countervailable.  If,
however, the first step of the inquiry was to reveal that the post-privatization entity was not the same
as the pre-privatization entity, then the US Department of Commerce would undertake a second
inquiry to determine whether the post-privatization en tity received a subsidy as a result of the change
in ownership.  The United States believed that this new methodology was consistent with the SCMAgreement, as interpreted by the Appellate Body in the case on "United States – Leaded Bars".
                                                     
1 United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon
Steel Products Originating in the United Kingdom (WT/DS138).WT/DSB/M/108
Page 3
Moreover, the United States applied this new methodology to any outstanding countervailing duty
order in which a review had been initiated.
4. In this regard, she wished to comment on how the EC dealt with privatizations.  In its recently
issued countervailing duty regulations, the EC did not include any regulation specifically addressing
privatizations, nor did the EC address privatization in any of its countervailing duty investigations.The EC did, however, address privatizations in th e guidelines for its State Aids Code, pursuant to
which it internally regulated member State subsidization.  The position taken in these guidelines was
contrary to the EC's position advocated in this di spute.  The EC's State Aid guidelines automatically
treated all of the prior subsidies as pa ssing though to the privatized company.
5. The United States noted that it was unable to discern from the EC's panel request the precise
identity of the measures it purported to be challe nging, and it wished to reserve its rights in this
regard.  More specifically, it was unclear whether the measures in question were the identifiedcountervailing duty proceedings and Section 771(5)(F) of the Tariff Act of 1930, or the US
Department of Commerce's methodology in the abstract.  While the United States recognized that the
EC had the right to request a panel, it was confident that should a panel be established, it would
conclude that the United States had not breached any WTO rules.
6. The DSB took note of the statements and agreed
 to revert to this matter.
2. United States – Countervailing duties on certain corrosion-resistant carbon steel flat
products from Germany
(a) Request for the establishment of a panel by the European Communities (WT/DS213/3)
7. The Chairman drew attention to the communication from the European Communities
contained in document WT/DS213/3.
8. The representative of the European Communities said that this case concerned a sunset review
of corrosion-resistant steel from Germany ( de minimis  case).  He recalled that following a sunset
review, the US Department of Commerce had recommended continuation of countervailing duty
measures in spite of the fact that the amount of 0.54 per cent of subsidies was below the current
de minimis  level.  The EC was concerned that the measures were maintained while subsidization was
below de minimis  levels in sunset reviews, and no evidence had been produced to show that it would
rise above that level.  The EC considered that the decision of the US Department of Commerce was
contrary to the US obligations under the WTO Agreement, and was therefore requesting the
establishment of a panel to examine this matter.
9. The representative of the United States said that her country could not agree to the
establishment of a panel at the present meeting.  She noted that the EC was challenging two
fundamental aspects of the US sunset regime:  (i) automatic self-initiation by the US Department of
Commerce of sunset reviews;  and (ii) the de minimis  standard applicable to sunset reviews.  With
respect to self-initiation, the United States disagreed with the EC that it had inappropriately shifted the
burden of proof to exporters and eliminated the requisite threshold for initiation in sunset reviews
required under Article 21.3 of the SCM Agreement.  That Article distinguished between self-initiated
reviews by authorities – in this case, the US Department of Commerce – and reviews initiated on thebasis of a duly substantiated request made by or on behalf of the domestic industry.  The EC was
attempting to make the requirements for an industry- based review apply to self-initiated reviews.  In
so doing, the EC was attempting to rewrite Article 21.3 of the SCM Agreement.
10. With respect to the de minimis  standard, the United States disagreed with the EC's contention
that the appropriate standard in a sunset review of a countervailing duty order was the 1 per centWT/DSB/M/108
Page 4
de minimis  threshold set forth in Article 11.9 of the SCM Agreement.  Article 21.3 of the SCM
Agreement, which explicitly addressed sunset reviews did not refer to a de minimis  threshold.
Moreover, the de minimis  standard in Article 11.9 of the SCM Agreement by its terms, applied solely
to investigations and thus, did not govern sunset reviews of countervailing duty orders.  Also in this
case, the EC was attempting to rewrite the SCM Agreement.  The United States believed that ingeneral, and as applied to the countervailing duty order in question on German steel, its sunset review
regime was in full conformity with US obligations under the SCM Agreement and the WTO
Agreement.  The United States was confident that should a panel be established, it would find this to
be so and urged the EC to reconsider its approach to this matter.
11. The DSB took note of the statements and agreed
 to revert to this matter.
3. United States – Definitive safeguard measures on imports of steel wire rod and circular
welded quality line pipe
(a) Request for the establishment of a panel by the European Communities (WT/DS214/4)
12. The Chairman drew attention to the communication from the European Communities
contained in document WT/DS214/4.
13. The representative of the European Communities said that on 1 March 2000, the United States
had introduced two safeguard measures in the form of a tariff quota:  one concerning welded line
pipe, which mainly affected German producers, a nd another concerning steel wire rod which affected
exports from Germany and Italy.  Both measures had been imposed for three years and one day.  The
EC considered that these measures violated several substantive requirements of the Agreement on
Safeguards, and Article XIX of GATT 1994.  Consultations on this matter had been held on
26 January 2001.  This case concerned the maintenance of measures which had been takeninconsistently with several of the standards laid down in the Agreement on Safeguards and
Article XIX of GATT 1994.  As a result of these manifold violations, the objective that safeguard
actions only addressed emergency situations was completely nullified.  Therefore, the EC was
requesting the establishment of a panel to examine this matter.
14. The representative of the United States expressed her country's disappointment that the EC
had chosen to request a panel to examine these measures.  After careful and exhaustive investigations
the US International Trade Commission had conclude d that imports of these products was causing or
threatening to cause serious injury to US industrie s.  In each case, the President had applied a remedy
only to the extent necessary to redress the injury or threat of injury posed by the imports, and to
facilitate the adjustment of the domestic industries. WTO rules specifically provided that governments
could impose temporary import restrictions to prevent or remedy serious injury to a domestic industry
due to increased imports and to facilitate industry adjustment.  She underlined that that was what theUnited States had done.
15. She noted that in the panel request the EC alleged that the safeguard measures were
inconsistent, "in particular, but not necessarily exclusively", with certain listed provisions of the
Agreement on Safeguards and the GATT 1994.  This phrase suggested that if a panel was established,
the EC might allege violations of additional legal provisions not identified in its request.  As theAppellate Body had noted, and as the EC had argued  in the past, identifying the treaty provisions
alleged to be violated was "always necessary" and constituted a "minimum prerequisite" to present the
legal basis of the complaint.  Accordingly, to th e extent that the EC intended to challenge the US
measures under legal provisions not identified in its panel request, its request was legally deficient as
a matter of law.  In any event, the United States wa s not prepared to consent to the establishment of a
panel at the present meeting.WT/DSB/M/108
Page 5
16. The DSB took note of the statements and agreed  to revert to this matter.
4. United States –  Continued Dumping and Subsidy Offset Act of 2000
(a) Request for the establishment of a panel by Australia, Brazil, Chile, the European
Communities, India, Indonesia, Japan, Korea and Thailand (WT/DS217/5)
(b) Request for the establishment of a panel by Canada (WT/DS234/12)
(c) Request for the establishment of a panel by Mexico (WT/DS234/13)17. The Chairman said that the three sub-items to which he had referred pertained to the same
matter.  He noted, however, that the first sub-item had already been considered by the DSB at its
meeting on 24 July 2001.  He therefore proposed that the DSB consider the first sub-item separatelyfrom the other two sub-items pertaining to the requests by Canada and Mexico, which would then be
taken up together.
(a) Request for the establishment of a panel by Australia, Brazil, Chile, the European
Communities, India, Indonesia, Japan, Korea and Thailand (WT/DS217/5)
18. The Chairman drew attention to the joint communication from Australia, Brazil, Chile, the
European Communities, India, Indonesia, Japan, Korea and Thailand contained in document
WT/DS217/5.
19. The representative of Japan said that as had been stated at the 24 July DSB meeting, her
country, together with other Members, considered that the Continued Dumping and Subsidy Offset
Act of 2000, the so-called Byrd Amendment, was not in  conformity with the US obligations under the
GATT 1994, the Anti-Dumping Agreement and the SCM Agreement.  Japan was disappointed that
since the 24 July DSB meeting little progress had been made towards resolving the dispute.  It was,
therefore, again requesting that a panel be established to examine the conformity of the Byrd
Amendment with the relevant provisions of the WTO Agreement.  She noted that the reasons for the
establishment of a panel, including references to the provisions of the WTO Agreement that theUnited States violated were contained in document WT/DS217/5.  Japan supported the requests by
Canada and Mexico, and said that it would not object to the establishment of a single panel pursuant
to Article 9.1 of the DSU, since these requests concerned the same legislation, i.e. the Byrd
Amendment.
20. The representative of Thailand reiterated his country's view that the Continued Dumping and
Subsidy Offset Act of 2000 was inconsistent with the US obligations under the WTO Agreement.  For
this reason, his country had joined the other eight Members in submitting, for the second time, arequest for the establishment of a panel to examine this matter.  Thailand welcomed the panel requests
submitted by Canada and Mexico at the present meeting.  Since these requests related to the same
matter, Thailand had no objection to the establishment of a single panel pursuant to Article 9.1 of the
DSU.
21. The representative of Brazil said that his delegation supported the statements made by
previous speakers.  Brazil believed that the Byrd Amendment was fundamentally flawed in terms of
its compatibility with the WTO Agreement and was contrary to the letter of the Agreement and the
spirit that had guided the drafters.  In view of serious systemic implications and the real threat of
losses to exporters to the US market, Brazil joined  other complainants in requesting a panel for the
second time.  Brazil had no objection to the establishment of a single panel to examine the requests byMexico and Canada on the same matter.WT/DSB/M/108
Page 6
22. The representative of Indonesia said that his country continued to be concerned that after the
first consideration of the panel request at the 24 July DSB meeting, there had been no indication that
the Byrd Amendment would be repealed.  The United  States believed that its new legislation was
WTO-consistent because WTO rules were silent on this issue.  The fact that nine countries had acted
together and that two more countries had decided to follow this action was an indication that many
Members, both developed and developing countries, were concerned about this matter, in particular
those who were subject to US anti-dumping actions.  Indonesia reiterated its concern about the
inconsistency of this new US legislation with the WTO rules.  In particular, Indonesia was concerned
that the Byrd Amendment would provide incentives  for the US domestic industry and other interested
parties to file new anti-dumping and countervailing duty petitions.  Since there was no indication on
the part of the United States that it would revoke its law, Indonesia was requesting for the second
time, the establishment of a panel to examine this mater.  Like other complainants in this case,
Indonesia supported the requests by Canada and Mexico for the establishment of a single panel
pursuant to Article 9.1 of the DSU.
23. The representative of India said that his country was also requesting the DSB to establish a
panel on the so-called Byrd Amendment.  India had made its position clear on this matter at the 24
July DSB meeting that the Byrd Amendment was inconsistent with the US obligations under theGATT 1994, the Anti-Dumping Agreement and the SCM Agreement.  Like other delegations, India
had no objection to the establishment of a single panel to examine the complaint by nine countries
together with the complaints by Canada and Mexico.
24. The representative of Chile said his country was concerned about this case since part of its
exports were affected by anti-dumping and other measures currently under investigation by the US
Department of Commerce.  In Chile's view the Byrd Amendment was an additional trade remedy on
top of anti-dumping duties, which was not provided for in either Article VI of GATT 1994 or the
Anti-Dumping Agreement.  Moreover, it served as an incentive to North American industries to file
anti-dumping cases, most of which were unjustifie d.  From a systemic point of view, the Amendment
was another example that some Members interpreted and applied the anti-dumping rules in such away that they became trade barriers.  For these reasons, Chile, together with eight other Members,
was requesting the establishment of a panel.  Chile had no objection to a single panel being
established to examine the complaint by nine countries together with the complaints by Canada and
Mexico, pursuant to Article 9.1 of the DSU.
25. The representative of Korea said that his country wished to join other co-complainants in
requesting, for the second time, the establishment of a panel to examine the US Continued Dumping
and Subsidy Offset Act of 2000.  The United States could not offset dumping and subsidization byredistributing duties to the petitioners.  This was not allowed under the WTO rules.  Furthermore,
Korea was concerned about the harmful effect that such a measure could have on the multilateral
trading system.  Korea hoped that the establishment of a panel at the present meeting would lead to a
timely ruling so that the security and predictability of the multilateral trading system would be
preserved.
26. The representative of the European Communities said that the EC together with a number of
other Members was requesting, for the second time, the establishment of a panel to examine the so-
called Byrd Amendment.  This joint action was unprecedented, and showed that this US legislation
raised systemic concerns all around the world in both developed and developing countries.  In the
EC's view, it was clear that under WTO rules the United States was not allowed to offset dumping andsubsidization by redistributing duties to the petitioners.  By doing so, the United States not only
offered double protection to its industry, but also provided a clear incentive for its domestic industry
to file cases against companies exporting to the Un ited States.  This law had the potential to deeply
affect all exports to the United States regardless of their origin.  This was "the United States – rest of
the world problem".  This law should be condemned as soon as possible to avoid prejudice to all USWT/DSB/M/108
Page 7
trading partners.  By filing their request for the establishment of a panel for the second time, the
co-complainants wished to send a clear signal to th e United States that there was the need to repeal
legislation that was contrary to the letter and the spirit of WTO law.  The EC welcomed the request by
Canada and Mexico that a single panel be established, since these panel requests were similar to those
of the EC and other co-complainants.  For these r easons and in view of the systemic nature of the
issues raised by this case, the EC could agree to the establishment of a single panel pursuant to
Article 9.1 of the DSU.
27. The representative of the United States said that, as had been stated previously, in her
country's view the Byrd Amendment was fully consistent with its international obligations under the
WTO and the United States intended to defend it vigorously before the panel.  This law did not alter
how the United States made anti-dumping or c ountervailing duty determinations, or the amount of
duties assessed on dumped or subsidized imports, which were issues covered by the WTO Agreement.She noted that the WTO Agreement did not address what a country might do with anti-dumping and
countervailing duties after they had been collected.
28. The DSB took note of the statements and agreed
 to establish a panel in accordance with the
provisions of Article 6 of the DSU with standard terms of reference.
29. The representatives of Israel, Mexico , Norway  and Hong Kong, China , reserved their
third-party rights to participate in the Panel's proceedings.
(b) Request for the establishment of a panel by Canada (WT/DS234/12)
(c) Request for the establishment of a panel by Mexico (WT/DS234/13)
30. The Chairman recalled that, as he had indicated in his introductory statement, these two
requests to which he had just referred would be considered together. First, he drew attention to the
communication from Canada contained in document WT/DS234/12.
31. The representative of Canada said that on 21 May 2001, her country, together with Mexico,
had requested consultations with the United States regarding the Continued Dumping and Subsidy
Offset Act of 2000, the so-called Byrd Amendment.  These consultations which had been held on
29 June 2001, had unfortunately failed to resolve this dispute.  On various occasions, Canada hadexpressed its concern with regard to the negative systemic implications of this legislation. It was clear
that WTO rules only permitted Members to take measures that offset dumping or subsidization.  They
did not allow Members to redistribute remedial duties in order to offer their industry double
protection.  Moreover, by creating a clear incentive for US industry to file and support cases against
companies exporting to the United States, this legislation also exposed foreign imports to the threat of
arbitrary dumping and countervailing investigations .  It was Canada's position, shared by 10 other
Members who were requesting a panel on the same matter that the Byrd Amendment violated the USobligations under the WTO Agreement.  Canada was therefore requesting the establishment of a panel
to resolve this dispute.  It expected that all comp laints relating to this matter would be examined by a
single panel, in accordance with Article 9 of the DSU.
32. The Chairman drew attention to the communication from Mexico contained in document
WT/DS234/13.
33. The representative of Mexico said that the US legislation known as the Byrd Amendment was
of concern to both developed and developing countries.  Mexico had raised its concern at a number of
fora, including during its joint consultations with Canada on 29 June 2001.  In particular, Mexico was
concerned about the negative impact of this legislation, which required all anti-dumping and
countervailing duties received to be reallocated to the "affected domestic producers".  The reallocationWT/DSB/M/108
Page 8
or "offsets" provided for under the Byrd Amendment constituted both an additional protection against
dumping and subsidization which was not envisa ged in either the GATT 1994, the Anti-Dumping
Agreement or the SCM Agreement, and a specific subsidy causing "adverse effects" to Mexican
interests.  The Byrd Amendment also provided a strong incentive to US domestic producers to file or
support petitions which resulted in the distorted and arbitrary application of the provisions of the Anti-Dumping Agreement and the SCM Agreement and obviated the possibility of securing price
undertakings.  Mexico shared the view of other Members that the Byrd Amendment was contrary to
the United States' WTO obligations.  For that reason, Mexico was requesting that a panel be
established to examine and condemn this legislation.  Mexico also hoped that, pursuant to Article 9 of
the DSU, all the complaints brought before the DSB on this matter would be examined by a single
panel.
34. The representative of the United States reiterated her country's view that the Byrd
Amendment did not breach any WTO obligations.  While recognizing that a panel had been
established to examine the complaint on this matter submitted by nine countries, the United States
could not agree at the present meeting to the establishment of a panel to examine the complaints by
Mexico and Canada.
35. The DSB took note of the statements and agreed  to revert to this matter.
5. United States – Section 129(c)(1) of the Uruguay Round Agreements Act
(a) Request for the establishment of a panel by Canada (WT/DS221/4)
36. The Chairman recalled that the DSB had considered this matter at its meeting on 24 July 2001
and agreed to revert to it. He drew attention to the communication from Canada contained in
document WT/DS221/4.
37. The representative of Canada said that her country was requesting the establishment of a
panel for the second time.  She recalled that the first request had been submitted at the 24 July DSB
meeting, but unfortunately the United States had not agreed to the establishment of a panel at that
meeting.  She noted that Canada's claims were contained in its request for the establishment of a
panel, which had been circulated on 13 July 2001 as document WT/DS221/4.  As previously stated, inCanada's view, the US measure was unjustified and inconsistent with the United States' WTO
obligations.  Consequently, in accordance with the relevant provisions of the DSU, the GATT 1994,
the SCM Agreement and the Anti-Dumping Agreement, Canada reaffirmed its request for the
establishment of a panel.
38. The representative of the United States said that her country was disappointed that Canada
had chosen to proceed with its panel request.  In particular, the United States was concerned that by
bringing this case, it appeared that Canada was seeking to alter well-established jurisprudence thatdecisions under the dispute settlement system applied only prospectively.  The United States believed
that Section 129(c)(1) was fully consistent with its obligations, and it would vigorously defend the
provision before the panel.
39. The DSB took note of the statements and agreed
 to establish a panel in accordance with the
provisions of Article 6 of the DSU with standard terms of reference.
40. The representatives of Chile, European Communities , India  and Japan  reserved their third-
party rights to participate in the Panel's proceedings.WT/DSB/M/108
Page 9
6. United States – Measures treating exports restraints as subsidies
(a) Report of the Panel (WT/DS194/R)
41. The Chairman recalled that at its meeting on 11 September 2000, the DSB had agreed to
establish a panel to examine the complaint by Canada.  The Report of the Panel contained in
document WT/DS194/R had been circulated on 29 June 2001.  In accordance with the Decision onProcedures for the Circulation and Derestriction of WTO Documents contained in WT/L/160/Rev.1,
the Panel Report had been circulated as an unrestricted document.  The Panel Report was before the
DSB for adoption at the request of Canada.  In accordance with Article 16.4 of the DSU, the adoption
procedure was without prejudice to the right of Members to express their views on the Panel Report.
42. The representative of Canada said that her country welcomed the Panel's finding that export
restraints did not constitute a financial contribution under the definition of "subsidy" in Article 1 of
the SCM Agreement and thus were not countervailable subsidies.  In Canada's view, the Report wasextremely helpful in clarifying and reaffirming key principles underlying the SCM Agreement.  In
particular, the Panel had correctly found that to meet the "entrusts or directs" requirement in sub-
paragraph (iv) of Article 1.1(a)(1) of the SCM Agreement, an explicit and affirmative action of
delegation or command on the part of a government had to be demonstrated.  The Panel's discussion
of the negotiating history was also informative, in particular its consideration of the purpose of the
financial contribution element of the definition of "subsidy".  The Panel had confirmed that this
definition was agreed to by all Members in order to ensure that not all government measures that
conferred benefits could be considered subsidies under the SCM Agreement.  In light of these and
other reasoned findings, Canada was pleased to join in a consensus to adopt the Panel Report.
43. The representative of the United States said that her country had decidedly mixed feelings
about the Panel Report. On the positive side, the portion of the Report that dealt with the actual
measures in question constituted a workmanlike application of the well-established
mandatory/discretionary doctrine, and a model for how to interpret US domestic law in the context of
a WTO dispute.  By rejecting Canada's persistent efforts to mischaracterize US law in general, and US
administrative law in particular, the Panel had properly found that none of the so-called measuresidentified by Canada required that US authorities treated export restraints as subsidies.  In particular,
the Panel had correctly recognized that under applicable US administrative law principles, agency
practice was not binding on the agency and, thus, could not be regarded as a mandatory measure for
purposes of the United States' WTO obligations.  Accordingly, the Panel had not made any
recommendations regarding the US measures before it.   While the United States was pleased with the
result, this outcome should not have come as a surprise.  On two prior occasions – the latest as recent
as in 1999 – Canada had officially expressed its position in writing to the US Department ofCommerce that the US countervailing duty law did not require commerce to treat export restraints as
subsidies.  If the Panel had limited its findings to the mandatory/discretionary issue and its
examination of the actual US legal provisions at issue, the United States could have said that this was
a solid Report, and would have had no qualms in supporting its adoption.  Unfortunately, in a step that
appeared to have no precedent in GATT or WTO jurisprudence, the Panel had not limited its analysisto the measures before it.  The United States believed that Members would find this other portion of
the Panel Report – and the remarkable judicial activism it represented – extremely disturbing.
44. Although the Panel's application of the mandatory/discretionary doctrine to the US legal
provisions was dispositive of Canada's claims, the Panel nonetheless had decided to pursue an
extraneous discussion on the issue of whether an export restraint could constitute a financialcontribution – and, thus, a subsidy – under the SC M Agreement.  In so doing, the Panel had made
findings not with respect to the measure at issue, but with respect to a purely hypothetical and abstract
category of measures not within the Panel's terms of reference.  It was important to recognize that,
notwithstanding the title of this dispute, this case involved neither an actual export restraint nor, as theWT/DSB/M/108
Page 10
Panel had correctly concluded, a measure which treated an export restraint as a subsidy.  In the
absence of such a measure, the Panel had been precluded by its terms of reference from offering
opinions on a hypothetical measure, which either treated an export restraint as a subsidy in a specific
instance, or required  this outcome.  Under Articles 6 and 7 of the DSU, a panel was authorized to
make legal findings only with respect to the actual measures before it.  In this dispute, the Panel haddisregarded this structure and had breached the fundamental constraint provided for in the DSU which
limited the subject of dispute settlement to actual disputes, and which precluded the issuance of
advisory opinions regarding measures that did not exist.
45. The Panel's justification for this extraordinary ex ercise was as follows.  First, the Panel had
stated that it was unaware of any GATT/WTO precedent requiring a panel to consider whether
legislation was mandatory or discretionary before examining the substance of the GATT or the WTO
provisions at issue (paragraph 8.11 of the Report).  Second, the Panel had cited three panel precedentsfor the proposition that any controversy as to the requirements of GATT/WTO obligations should be
determined first before applying the mandatory/discr etionary doctrine.  Finally, based on the prior two
considerations, the Panel had claimed that "… identifying and addressing the relevant WTO
obligations first will facilitate our assessment of  the manner in which the legislation addresses those
obligations, and whether any violation is involved" (paragraph 8.12 of the Report).  The United Statesbelieved that each element of the Panel's justification was severely flawed.  The Panel had simply
opined on an issue that was irrelevant to the reso lution of the matter before it, and that was not
implicated by the measure before it.  The Panel' s first rationale that there was no precedent that
required a panel to consider the mandatory/discretionary issue first was wrong for several reasons.  It
was true that there had not, heretofore, been an attempt to obtain an advisory opinion through the
mischaracterization of a measure as mandating an allegedly GATT/WTO-inconsistent outcome.
Therefore, it was natural that there had been no panel precedent on this point.  However, there had
been numerous disputes involving the limits of the dispute settlement system, an examination of
which indicated that the Panel had exceeded these limits.  For example, it was well established that
panels might not examine the measures that had not been the subject of consultations, or in theextreme case, not even in existence at the time of consultations.  This stricture would be easily
circumvented if panels were to follow the logic of the panel in this dispute, since it would only be
necessary that the complaining party alleged  the existence of a measure mandating a
WTO-inconsistent action. Under the Panel's logic, th e complaining party would then be entitled to a
substantive finding on the measure alleged, even if the panel ultimately concluded that the actual
measure did not  mandate the action in question.  In other words, the measure was mischaracterized.
46. In this regard, numerous panels had concluded that in order to determine whether a measure
was WTO-consistent, it was first necessary to determine what the actual measure provided for.  For
example, in the case on "Australia – Salmon"
2 the Appellate Body's first order of business was to
correct the panel's mischaracterization of the measure, only then it had proceeded with the substantive
analysis.  Also, the panel in the case on "United States – Certain Import Measures"3, had first
determined the actual characteristics of the measure – which, as in this case, had been very much indispute – since this would inevitably determine the na ture and results of its substantive analysis.  The
Panel in this case had chosen to put the analysis of what the measure actually provided last, after the
legal analysis had been completed, based on an inaccurate description of the measure and a
hypothetical fact pattern.  In addition, the Appellate Body had reinforced the fact that a measure might
be found inconsistent based only on its own characteristics.  In the case on "United States – CertainImport Measures", the Appellate Body had reversed a finding that the measure in question was
inconsistent because it related to a second measure, one not yet in existence at the time the first had
been taken (paragraph 104 of the AB Report).  Th e Appellate Body had earlier supported the Panel's
finding that the measure under examination did not mandate the second measure, and thus the latter
                                                     
2 Australia – Measures Affecting Importation of Salmon (WT/DS18).
3 United States – Import Measures on Certain Pr oducts from the European Communities (WT/DS165).WT/DSB/M/108
Page 11
was not within the terms of reference of the Appellate Body Report (paragraph 76 of the AB Report).
The Appellate Body had also overturned another fi nding relating to the second measure, stating that
because the terms of reference had covered the first measure only, "… the Panel should have limited
its reasoning to issues that were relevant and pertinent to [that measure].  By making statements on an
issue that is only relevant to [the second measure], the Panel failed to follow the logic of, and thus hadacted inconsistently with, its own finding on the measure at issue" (paragraph 89 of the AB Report).
The Appellate Body had, therefore, declared those statements to be of no legal effect.  The Panel's
statements in the case before the DSB regarding export restraints likewise did not relate to its finding
as to the actual measure at issue, and therefore had no legal effect.
47. Beyond this, there was ample precedent for the proposition that, "Given the explicit aim of
dispute settlement that permeates the DSU … Article 3.2 of the DSU is  [not] meant to encourage
either panels or the Appellate Body to 'make law' by clarifying existing provisions of the WTOAgreement  outside the context of resolving a particul ar dispute" (AB Report on "United States –
Wool Shirts", p.19 ).
4  In the context of discussions on judicial economy, the Appellate Body had
indicated that panels should address the minimum number of issues necessary to resolve a dispute.
For example, in the case on "European Communities – Poultry"5, the Appellate Body had made clear
that the concept of judicial economy applied to the consideration of arguments and not just claims.  Ifthe Panel in this case had followed this line of precedent, it would have limited itself to the
mandatory/discretionary issue, because the Panel's resolution of that issue was dispositive of the
dispute.  The dictate not to make law outside the context of resolving disputes was even more
compelling in this case since the Panel had effectively offered opinions not related to the actual
measure in question.  Thus, it was incumbent upon the Panel to resolve in a responsible way whatappeared to have been an issue of first impression.  In this regard, it should be recalled that Canada
had asked the Panel to declare as "mandatory" measures which it had previously conceded were
"discretionary".
48. With regard to the Panel's second rationale she drew attention to three GATT panel reports
which did not support the proposition for which the Panel had cited.  In the portions of the reportscited by the Panel, there was no controversy as to the requirements of the GATT obligations at issue,
and no analysis by the panels of the relevant GATT provisions.  With respect to the cases on
"Thailand – Cigarettes"
6 and "United States – Tobacco"7, the panels had not made determinations
regarding GATT obligations, but had merely summarized  what the relevant provisions stated, and had
then proceeded to apply the mandatory/discretionary  doctrine.  Also, in the third case on the "United
States – Superfund"8 there was no genuine controversy as to the precise nature of the obligation or the
measure at issue.  In two sentences, the Panel had drawn the unextraordinary conclusion that a penaltytax of 5 per cent, if added to a tax designed to be equivalent to a domestic tax, would exceed that
domestic tax.  Neither party had contested this conclusion, nor the existence of the 5 per cent tax.  The
only issue was whether the tax was mandatory.  The case before the DSB was not comparable.
Notwithstanding the fact that the term "export re straint" was not found in the SCM Agreement or in
the US countervailing duty statute and regulations in over 20 pages of text, the Panel had engaged inan entirely novel analysis of whether an export restraint would constitute a financial contribution,
based on a hypothetical definition of export restraint not found in the US statute or regulations, nor in
their preparatory materials.  Given that the US Statute and regulations, even when read in conjunction
with those preparatory materials, did not mandate  any particular treatment of such a hypothetical
export restraint, and given the extensive US opposition to Canada's position on the substantive issue
                                                     
4 United States – Restrictions Affecting the Imports of Woven Wool Shirts and Blouses (WT/DS33).
5 European Communities – Measures Affecting Importation of Certain Poultry Products (WT/DS69).
6 Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes (BISD 37S/200).
7 United States – Measures Affecting the Importation, Internal Sale and Use of Tobacco
(BISD 41S/131).
8 United States – Taxes on Petroleum and Certain Imported Substances (BISD 34S/136).WT/DSB/M/108
Page 12
and to the Panel even reaching the substantive issue, this case bore absolutely no resemblance to the
cases cited by the Panel.
49. She then referred to the Panel's final rationale that a discussion of the subsidy issue would
facilitate the Panel's assessment of the mandatory/dis cretionary issue.  If the purpose of dealing with
the subsidy issue was truly designed to facilitate the Panel's assessment of themandatory/discretionary issue one would expect that the portion of the Report dealing with the
mandatory/discretionary issue would be replete with  references to the portion of the Report dealing
with the subsidy issue.  However, that was not the case.  In the mandatory/discretionary portion of the
Report, i.e. the portion in which the actual measures before the Panel had been analyzed, there was
only a single reference to the other portion of the Report in paragraph 8.101 and even that single
reference was not necessary to the Panel's analysis.  The Panel could have disposed of this case
without addressing the subsidy issue, and the Panel's assertions to the contrary were simply incorrect.Therefore, at best, the Panel's extraneous discussion could only be characterized as obiter dicta .  The
critical aspect of the Report was that the Panel had not limited itself to the measure before it – the
identified provision of US law – but instead it had examined a hypothetical measure.  The Panel had
acted as if this were either a complaint brought by the United States against a hypothetical Canadian
export restraint, or a complaint by Canada against a hypothetical US countervailing duty proceedinginvolving a hypothetical product and a hypothetical export restraint.  The Panel had even had trouble
identifying what its hypothetical measure was.  Because there had been no actual export restraint
before it, it had had to construct one, and had chosen to identify its hypothetical export restraint by
relying on the definition of the export restraint used by Canada.  Thus, the Panel's explanation that it
had examined the US measures in a particular substantive context was groundless.  There was nothingsubstantive regarding the hypothetical situations about which the Panel had speculated.  Given
Canada's panel request, the Panel should have simp ly posed the following question:  "Assuming for
the purpose of argument that an export restraint can never be a subsidy, do the US measures require
the United States to treat an export restraint as a subsidy, however defined?"  That would have been a
substantive context.  Had the Panel taken this approach, there would have been no need to give anadvisory opinion on the status of a measure not in existence and not before the Panel.  If there were
any doubt as to the unprecedented nature of the Panel Report, the United States wished to call
Members' attention to the section of the Report containing conclusions and recommendations in
paragraph 9.1.  In that paragraph, the Panel had restated its conclusion that an export restraint, as
defined in this dispute, could not constitute a financial contribution under the SCM Agreement.  She
noted that the United States had examined the conclusions and recommendations of every panel
report, and in each case conclusions of panels had always been linked to one or more of the measuresbefore the panel.  This was the only report in which a panel had rendered a conclusion totally in the
abstract.  Thus, the Panel's protestations to the contrary notwithstanding, the Panel had not applied or
clarified the SCM Agreement.  Instead, it had prov ided an interpretation of the SCM Agreement, a
function which Article IX:2 of the WTO Agreement reserved for the Ministerial Conference and the
General Council.
50. The US concerns were not mere "legalisms".  The United States believed that all Members,
regardless of their views on the substantive subsidy issue, should be concerned about this Panel's
usurpation of an authority reserved to Members.  The dispute settlement system was generally
regarded as a success and some referred to it as "the jewel in the WTO's crown".  Indeed, since the
WTO had been established in 1995, the dispute settlement procedures had been invoked 235 times.However, this very success had brought strains in terms of the resource burdens imposed on
participants in the system.  Moreover, the very success of the system had led to pressures on Members
to explore the outermost boundaries of the system and the types of results that the system could
generate.  One such boundary had been crossed in this case, an extremely important one.  That
boundary was the well-established principle that the GATT, and now the WTO, dispute settlement
system was designed to resolve disputes, not to generate advisory opinions on abstract, theoretical
legal questions.  By requiring that actual measures be identified in panel requests, and that legalWT/DSB/M/108
Page 13
findings related to these actual measures, Articles 6 and 7 of the DSU prevented advisory opinions.  If
panels opined on the implications of measures merely described in a panel request, without regard to
the accuracy of that description or the actual existence of the measure described, then this
fundamental purpose of Articles 6 and 7 would be undermined, and the dispute settlement system
would then be open for business to provide advisory opinions.  Members disagreed on innumerablelegal questions as indicated in the minutes of various WTO Committees.  However, if every such
abstract disagreement were presented for resolution by panels and the Appellate Body, the system
would be overwhelmed.  In addition, such a system  would produce poor decisions.  The reluctance of
legal tribunals, both municipal and international, to  provide abstract advisory opinions was founded in
part on the handicaps that faced a jurist who tried to interpret and apply legal provisions based only on
hypothetical situations, and in the absence of actual facts.  Indeed, this might be why the Uruguay
Round drafters had created a separate mechanism in the SCM Agreement that would allow Membersto obtain a non-binding advisory opinion regarding the status of any measure as a subsidy.  One could
think that none of these dire scenarios could have ever come to pass because one would have to have a
bona fide measure before a dispute settlement case could be commenced.  Not so, it would have been
an easy task for a Member seeking an advisory opinion to label some document or statement by
another Member as a measure that it sought to challenge.
51. According to the Panel in this case, before a panel could provide that the purported measure
was not a measure at all within the meaning of the DSU, or that the measure did not mandate
behaviour alleged to be WTO-inconsistent, the panel first would have to opine on the relevant
substantive obligations in order to provide a so-called substantive context for its analysis.  One might
think that no Member would bring such a frivolous case.  Again, not so.  The case under considerationconstituted Exhibit 1 for the proposition that Members would seek to use the dispute settlement
process to obtain advisory opinions.  Again, on the very issue dealt with by this dispute, Canada had
taken the position in 1999 that US law was discretionary regarding the treatment of export restraints,
but only one year later had commenced a dispute under the WTO alleging that the same law had
somehow become a mandatory measure.  She reiterated that the United States had mixed viewsregarding the Report, even though the panel had found in favour of the United States, her country had
given serious consideration to appealing the Panel's decision to render an advisory opinion.  However,
the United States ultimately had declined to do so for several reasons.  First, the Panel's ruling on the
subsidy issue was clearly obiter dictum .  In other words, as previously noted, the Panel's consideration
of the subsidy issue was unnecessary to the decision in this case, because the outcome would have
been the same regardless of the status of export restraints under the SCM Agreement.  Furthermore,
the Panel had exceeded its mandate.  Thus it was of no legal effect.  In light of the fact that thisportion of the Panel Report was obiter dictum  and beyond the Panel's authority, the United States had
ultimately concluded that no useful purpose would be served by asking the Appellate Body to reiterate
what its jurisprudence to date had already established, namely, that the obiter dictum  of panels was
non-binding, without legal effect, and moot.  In addi tion, the Panel's dictum was very narrow dictum,
as the Panel had recognized that it was using a narrow definition of export restraint, and that itsconclusions would not necessarily apply to actual real-world measures that might be encompassed by
a different definition of the term (paragraphs 8.15-7.17;  8.76 of the Report).  Moreover, the parties,
including the EC as a third party, had agreed that this dispute concerned the issue of export restraints
operating independently of other government measures, and not in tandem with another government
measure.  Finally, the United States was confident that future panels would decline to emulate thisPanel's actions.  The Panel's justifications were manifestly transparent and wrong.  The United States
believed that future panels would abide by the Appellate Body's repeated admonition that the function
of panels in the dispute system was to resolve disputes, and not to make law.  In light of the fact that
the erroneous part of the Panel Report had no legal effect, the United States could support the
adoption of the Report.
52. The representative of Canada said that her country did not share the view of the United States
that the Panel's rulings on the subsidy issue had no legal effect.WT/DSB/M/108
Page 14
53. The representative of the European Communitie s said that the EC welcomed the Panel's
interpretation with regard to the notion of financial contribution.  In this regard, the Panel had usefully
clarified that an export restraint could not be considered as a financial contribution within the meaning
of Article 1.1(a)(1)(iv) of the Subsidies Agreement. The EC expected the United States to abide fully
by this interpretation in the future.
54. The representative of India said that his country had participated as a third party in this
dispute, and had argued before the Panel that the export restraint as defined in paragraph 8.17 of the
Panel Report, could not be considered as export subsidy within the meaning of Article1.1 of the SCM
Agreement.  India noted with satisfaction that the Panel, after examining the relevant provisions of the
SCM Agreement in the light of the customary rules of treaty interpretations as laid down by the
Vienna Convention on the Law of Treaties, had concluded in paragraph 8.75 of the Report that the
export restraint could not constitute government-entrusted or government-directed provision of goodsin the sense of subparagraph (iv) and hence did not constitute a financial contribution in the sense of
Article1.1(a) of SCM Agreement.  Thus the Panel ha d rejected the US argument.  India reserved its
position on all other issues, including the mandatory versus discretionary domestic law issue.
55. The DSB took note of the statements and adopted
 the Panel Report contained in
WT/DS194/R.
7. Brazil – Export financing programme for aircraft – Second recourse by Canada to
Article 21.5 of the DSU
(a) Report of the Panel (WT/DS46/RW/2)
56. The Chairman recalled that at its meeting on 16 February 2001, the DSB had decided, in
accordance with Article 21.5 of the DSU, to refer to the original Panel the matter raised by Canada
concerning Brazil's implementation of the DSB's r ecommendations in this case.  The Report of the
Panel contained in document WT/DS46/RW/2 had been circulated on 26 July 2001.  He reminded
delegations that in accordance with the Decision on Procedures for the Circulation and Derestriction
of WTO Documents contained in WT/L/160/Rev.1, the Panel Report was circulated as an unrestricted
document.  The Panel Report was now before the DSB for adoption at the request of Brazil.  Thisadoption procedure was without prejudice to the right of Members to express their views on the Panel
Report.
57. The representative of Brazil said that the sole question before the Panel in this case had been
whether the revised PROEX programme was consistent with Brazil's obligations under the SCM
Agreement.  Brazil welcomed the Panel's conclu sion that the PROEX programme was, in every
respect, consistent with its obligations.  This was an unequivocal result and Brazil hoped that this
would put an end to this long-standing dispute.  Unfortunately, in the matter of Canada's failure tocomply with the DSB's rulings and recommendations with regard to Canada Account there were no
satisfactory conclusions of the report circulated in May 2000.  Since this matter was before another
Panel, he did not wish to elaborate on it at the present meeting.  The aircraft cases related to the issue
of export credits.  Developing countries faced particular difficulties in providing permitted export
credits to their exporters.  This was because certain rules favoured developed countries.  Whether thiswas intentional was, for practical reasons, irrelevant, but the effect was real.  Brazil had already
brought this issue to the attention of the Subsidies Committee.  It had also submitted a paper on export
credits to the General Council in the context of the preparatory process for the next Ministerial
Conference.  Brazil was certain that, after the examination of these issues, Members would agree that
the rules on export credits would have to be revised.
58. He then turned to a specific issue of this  case which, although not affecting the general
conclusion of the compatibility of the revised vers ion of PROEX with the WTO rules, was of greatWT/DSB/M/108
Page 15
concern to Brazil.  According to the Panel, the WTO had completely delegated the authority to make
the export credit rules to the Organization for Ec onomic Cooperation and Development (OECD).  In
the proceedings, Brazil had argued that the version of the OECD Arrangement that provided the "safe
haven" was the version in effect in 1995 when the WTO Members had officially incorporated the
Arrangement into item (k) of Annex I of the SCM Agreement.  However, the Panel had concludederroneously that the latest version of the OECD Arrangement, whenever it was amended, applied to
all Members, even though they had had no voice in that amending process and had not even been
notified of the amendments.  Brazil did not agree with this reasoning and reserved its rights in this
regard.  This was not a hypothetical concern.  In 1998, three years after the WTO had incorporated the
Arrangement by reference, the OECD had amended it in ways that affected regional aircraft, the
product of immediate concern to Brazil.  Neither  Brazil or the WTO had been advised of those
changes.  Although the lack of notification underscored the absurdity of the result reached by thePanel, this was more than a transparency issue.  It was a matter of balance of rights and obligations
under the WTO Agreement as well as that of equity and fairness.  Brazil had not appealed this
conclusion because the Panel had found that it was in conformity with those rules, even as amended.
The Panel Report was about the compliance of PROEX with the Subsidies Agreement, and Brazil was
happy with the results in this regard.
59. However, Brazil was concerned about rules that would give to a small group of Members the
power to make rules for the entire WTO.  He noted that the Panel had expressed the same concern.
For example, in paragraph 5.86 of its Report, the Panel had stated the following:  "… under our
interpretation, the Participants to the OE CD Arrangement could modify the 1998 OECD
Arrangement, and thus effectively the scope of the safe haven in the second paragraph of item (k)without Members' consent."  In paragraph 5.87 of the Report, the Panel had further noted that "… the
Participants to the 1998 OECD Arrangement could conceivably abuse their de facto power to modify
the scope of the safe haven in a way which benefits them but does not equally benefit the rest of the
WTO membership."  Finally, in note 86 to paragraph 5.89, the Panel had stated that:  "If Participants
were to abuse their power to modify the scope of the safe haven, the recourse of other Memberswould be to renegotiate the second paragraph of item (k)."  These were remarkable statements for a
Panel to make about its own findings.  Brazil believed that the Panel had attempted to signal that, in
its view, the SCM Agreement contained a serious flaw when it appeared to grant amending power to
the OECD.  Brazil urged Members to take not e of these paragraphs.  Few developing-country
Members had the experience of competing against the export credit practices of developed countries
in the non-agricultural sector.  However, the rules of the game were tilted against them.  This was not
about special and differential treatment since, under the present situation, the current rules favouredMembers with low cost of capital and sovereign risk.  Whenever competition existed in areas where
the financing costs were a dealmaker, developing countries were at a disadvantage, even if their
product was better and cheaper.  This was contrary to the raison d'être  of this organization.
60. The representative of Canada said that her country was pleased with the compliance Panel
Report, which confirmed the position that Canada had taken since the beginning of this four-year
dispute, namely, that PROEX financing could only conform to WTO obligations if it met certain
minimum conditions.  During the compliance Panel's proceeding, Brazil had insisted that it could
conform to its WTO obligations simply by limiting PROEX interest-rate buy-downs to the OECD's
commercial interest reference rate (CIRR), and that it could offer up to 100 per cent financing
coverage for an indefinite term and still be in conformity.  The compliance Panel had found thatBrazil could not do this.  In order to comply, PROEX III financing would have to conform to all of
the interest rates provisions of the OECD arrangem ent, including a limit of 85 per cent coverage and a
10 year financing term.  According to the compliance Panel, the only other way for PROEX III not to
be illegal would be if it did not confer a benefit.  However, the Panel had also stated that the very
logic of PROEX III would be undermined if Brazil were to limit the provision of PROEX III to cases
where no benefit had been conferred, since the purpose of PROEX III was to offer better export credit
terms on transactions than would otherwise be available.  Canada considered that the Panel had erredWT/DSB/M/108
Page 16
in its application of the mandatory/discretionary distinction when it had found that PROEX III was
not per se  illegal.  Canada also considered that the Panel had erred in its interpretation and application
of Article 1.1(b) of the SCM Agreement regarding the conferral of a benefit.  However, that did not
matter in the result.  The practical result of the compliance Panel Report was that the only way for
Brazil to offer PROEX III financing to purchasers of its regional aircraft was if it did so in conformitywith all of the interest rates provisions of the OE CD Arrangement.  Canada expected Brazil to comply
fully with this Panel Report.  She noted that there were a number of recent Brazilian press articles
quoting senior Brazilian officials to the effect that Brazil would not follow conditions based on the
OECD Arrangement.  Brazil had accepted its WTO obligations in good faith and Canada expected
that Brazil would comply with them.  This Panel Report marked the fifth time that Brazil had been
asked to modify significantly its financing practices with respect to regional aircraft.  Canada
expected full and transparent compliance by Brazil.  In the event that Brazil did not adhere to the
conditions imposed on PROEX III, Cana da would not hesitate to take the required action, including, if
necessary, an additional compliance panel proceeding.  With respect to Brazil's statement on Canada
Account, she said that the rulings in that case had mainly dealt with TPC Programme which Canada
had fully revamped to the extent of withdrawing fu nds already promised.  In this respect, she noted
that Brazil had not withdrawn any of the subsidies it had been committed to prior to the19 November 1999.  With regard to Canada Account, the only financing that Canada had offered was
to match, as provided for in the SCM Agreement, Br azil's support that was not in compliance with the
SCM Agreement.
61. The representative of the United States said that her country had followed this case with
interest, and hoped that the decision would assist Canada and Brazil in finding ways to resolve their
difference.  At the present meeting, she wished to refer to two aspects of the Panel's decision relating
to export credit practices and item (k) of the SCM Agreement's Illustrative List of Export Subsidies.
First, in paragraph 5.61 of its Report, the Panel had stated that the ordinary meaning of the second
paragraph of item (k) suggested that export credit practices that conformed with the interest rate
provisions of the OECD Arrangement  were export subsidies, but were nevertheless not prohibited.
However, such practices were subsidies only if they conferred a benefit on the recipient.  Depending
on the terms available in the marketplace, that might not always be the case.  Second, on a more
substantive note, the Panel's conclusions on the interrelationship between item (k) and the matching
provisions of the OECD Arrangement caused the United States great systemic concern.  The Panel
had concluded that item (k) safe harbour was not available to parties who matched export financing
offers that derogated from the terms of the OECD Arrangement.   The Panel's interpretation threatened
to undercut the OECD Arrangement  and the SCM Agreement disciplines on export subsidies.  The
ability of Members to match non-conforming offers created an incentive for other Members not to
make non-conforming offers, lest they found themselves in a subsidy "race to the bottom".
Interpreting the second paragraph of item (k) in a way that prohibited Members who were concerned
about respecting their obligations under Article 3 of the SCM Agreement from matching
non-conforming offers removed any such incentiv e. Conversely, an interpretation of the second
paragraph of item (k) that would shield matching offers from the Article 3 prohibition, particularly
when the initial non-conforming offers were not themselves shielded, would provide an especially
strong incentive against making non-conforming offers in the first instance.  The Panel's interpretation
invited an increase in market distortive subsidy practices, an outcome which was directly contrary to
the entire premise of the SCM Agreement.
62. The representative of the European Communities said that the EC was concerned about the
interpretation given by the Panel in this case. The EC believed that laws that had specifically
envisaged the granting of export contingent subsidies and had given Members the discretion to award
them, were contrary to the SCM Agreement, since Article 3.2 explicitly prohibited the maintenance of
such subsidies.  Otherwise, the disciplines of the SCM Agreement could easily be circumvented, aresult which did not correspond to the intention of the drafters of the Agreement.WT/DSB/M/108
Page 17
63. The representative of Brazil said that he wished to respond to the statement made by Canada
that it was for the fifth time that the Panel Report had asked Brazil to significantly modify its
financing practices.  He underlined that the Panel Report had determined that the PROEX programme
was consistent with Brazil's obligations under the SCM Agreement.
64. The DSB took note of the statements and adopted  the Panel Report contained in
WT/DS46/RW/2.
8. United States – Anti-dumping measures on certain hot-rolled steel products from Japan
(a) Report of the Appellate Body (WT/DS184/AB/ R) and Report of the Panel (WT/DS184/R)
65. The Chairman drew attention to the communi cation from the Appellate Body contained in
document WT/DS184/7 transmitting the Appellate Body Report on "United States – Anti-Dumping
Measures on Certain Hot-Rolled Steel Products from Japan", which had been circulated in document
WT/DS184/AB/R in accordance with Article 17.5 of the DSU.  He reminded delegations that inaccordance with the Decision on Procedures for the Circulation and Derestriction of WTO Documents
contained in document WT/L/160/Rev.1, both Reports had been circulated as unrestricted documents.
He recalled that Article 17.14 of the DSU required that:  "An Appellate Body report shall be adopted
by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by
consensus not to adopt the Appellate Body repor t within 30 days following its circulation to
Members.  This adoption procedure is without prejudice to the right of Members to express their
views on an Appellate Body report."
66. The representative of Japan said that although a few claims made by his country had not
prevailed in the proceedings of the Appellate Body, Japan was, in general, pleased with the ruling in
this case.  The Panel and the Appellate Body had now  established a clear and significant precedent for
the interpretation of provisions in relation to the facts available, determination of the ordinary course
of trade, injury determination and the concept of domestic industry as a whole, as well as the "non-
attribution" standard.  In particular with regard to all the "all others" rate, the Appellate Body had
reaffirmed the inconsistency of the US law, both in general, and as applied in this case.  Japan hoped
that the United States would rectify the inconsistency of its law as soon as possible and would redressthe nullification and impairment of benefits resulting from the application of this law.  Japan
considered that the stringent standard recogniz ed by the Appellate Body for the use of "facts
available" data would serve as a significant reference point for the future administration of anti-
dumping duties.  With regard to causation, Japan welcomed the fact that the Appellate Body had
clearly shown that in the application of Section 771(7)(c)(iv) of the US Law pertaining to the so-
called captive production provision, the United States had to abide by the rules of balanced and
objective assessment when considering the industry as a whole.  Japan considered that the ruling on"non-attribution" was significant, in that the investigating authority could no longer simply choose to
ignore the factors to its liking, but would now be required to clearly account for them in its reports.
This established a significant precedent for the sta ndard against which "non-attribution" of factors was
to be conducted in future anti-dumping investigations.  Japan urged the United States to bring, without
delay, its measures, laws and regulations into conformity with the WTO Agreement.
67. The representative of the United States said that although her country was pleased that the
Panel and the Appellate Body had rejected many of Japan's challenges regarding WTO-consistency of
the US anti-dumping duty measures, this dispute nevertheless had given the United States reason for
serious concern.  With regard to matters specific to the dispute, she drew attention to the Panel's
rejection of Japan's claim that the investigation had been conducted in a biased and unreasonablemanner.  In addition, the Panel and the Appellate Body had upheld the provisions of US law
concerning the circumstances under which anti-dumping duties could be imposed at the preliminary
stage of the investigation and the analysis of "captive production" provision.  Her country wasWT/DSB/M/108
Page 18
satisfied with the Panel's determination that the causation analysis conducted by the United States
relating to injury from subject imports was consistent with the requirements of the Anti-Dumping
Agreement.  The Appellate Body had, however, declined to reach the latter issue while rejecting the
Panel's construction of the causation requirements under the Agreement.
68. In addressing its concerns, the United States first wished to raise its systemic concern.  While
the Appellate Body had properly rejected Japan's claim that the "captive production" provision of the
US anti-dumping duty statute was facially incons istent with the Anti-Dumping Agreement, the
Appellate Body had gone on, however, to address an issue that Japan had not appealed.  This issue
concerned the question as to whether the applicati on of the "captive production" provision in the hot-
rolled steel anti-dumping investigation was consis tent with the Anti-Dumping Agreement.  By taking
up an issue that no Member had brought to it for resolution, the Appellate Body had exceeded the
bounds of its authority.
69. The second area of concern was the Appellate Body's discussion of the standard of review set
out in Article 17.6 of the Anti-Dumping Agreement.  Article 17.6(i) provided that a panel should not
overturn the evaluation of a national authority, even though the panel itself might have reached a
different conclusion, if the panel determined that the authorities' establishment of the facts was proper
and its evaluation of those facts was unbiased and objective.  Similarly, Article 17.6(ii) required thatin instances in which  a panel found that a relevant provision of the Agreement admitted to more than
one permissible interpretation, the panel shall find the national authorities' measure to be in
conformity with the Agreement if it rested upon one of those permissible interpretations.  The United
States was concerned that the Appellate Body's discussion of Article 17.6 had given entirely
insufficient emphasis to the distinct nature of  the review provided for in the Anti-Dumping
Agreement.  While the Appellate Body acknowledged in paragraph 59 of its Report that the second
sentence of Article 17.6(ii) "presupposes"  that application of the customary  rules of treaty
interpretation embodied in Articles 31 and 32 of the Vienna Convention on the Law of Treaties could
give rise to at least two interpretations of some of the provisions of the Agreement, it then seemed to
diminish the importance of this text.  Furthermore, the Appellate Body had stated that Article 17.6only departed from the general review provided for in Article 11 of the DSU by allowing a panel to
find a measure in conformity when it rested upon one of the permissible interpretations.  This
distinction in the standard of review should not be minimized, and any suggestion that the rule
provided for in Article 17.6 was not materially different from that generally provided for in the DSU
ignored the identification of Article 17.6 as a "special or additional rule and procedure" in Article 1.2
of the DSU.
70. The specific and unique provisions in Article 17.6 had been deliberately included to provide a
special standard of review in anti-dumping investigations, intended to prevent panels from second-
guessing the factual and legal determinations made by national authorities, and were an important part
of the balance of rights and obligations assumed by the Members in agreeing to the Anti-Dumping
Agreement.  They could not be minimized or eliminated by dispute settlement reports.  In this
connection, the Appellate Body had aptly  observed in its report in the case on "Hormones"
9 that to
adopt a standard of review that was not clearly rooted in the text of a specific Agreement may well
amount to changing the finely drawn balance in the competencies conceded by Members and those
jurisdictional competencies retained by Members for themselves.  As stated by the Appellate Body,
neither a panel or the Appellate Body was authorized to do that.  Moreover, any such result, was
proscribed by Article 3.2 of the DSU which prov ided that "… recommendations and rulings of the
DSB cannot add to or diminish the rights and obligations provided in the covered agreements".
                                                     
9 European Communities – Measures Concerning Meat and Meat Products (Hormones);  WT/DS26;
WT/DS48.WT/DSB/M/108
Page 19
71. The third area of serious concern for the United States was the causation analysis in anti-
dumping investigations.  Specifically, the requirement that injury due to other causes should not be
improperly attributed to dumped imports.  The United States noted that the  Panel had found the
causation analysis of the United States in the hot-rolled steel investigation to be WTO-consistent.  It
further noted that the Appellate Body had declined to make findings on whether that analysis wasWTO-consistent, but not before rejecting the Panel's construction of Article 3.5 of the Agreement.
The United States did not believe that the Appellate Body should have reversed the Panel's findings
regarding the required showing of causation.  The Panel had appropriately concluded that there was
no requirement in the Agreement to isolate the injurious effects of factors other than dumped imports.
The only requirement was to ensure that any injurious effects resulting from other causes not be
attributed to dumped imports.  In this respect,  the Panel had appropriately followed the sound
reasoning of the GATT panel report in the case on "Atlantic Salmon"
10, which had been adopted
before the Anti-Dumping Agreement had come into force and therefore was part of the GATT acquis.
As such, a legitimate expectation among Members concerning the interpretation of the causation
requirement had been created, that this report reflected Members' understanding of that obligation at
the time the United States had agreed to the Anti-Dumping Agreement.
72. Further, the United States had presented a detailed analysis to the Appellate Body as to why
the causation analysis reflected in the "Wheat Gluten"11 and "Lamb"12 Appellate Body Reports
involving the Safeguards Agreement were different from that in the Anti-Dumping Agreement.  These
were two separate Agreements, with different objects and purposes and with wholly different texts
pertaining to the question of causation and the manner of establishment of a causal link between
imports and injury.  The Appellate Body had made no reference to these important differences andappeared to have disregarded the interpretative principle that the use of distinct language connoted an
intended difference in meaning.  Instead, the Appe llate Body's findings seemed to depend solely on
the similarity of the non-attribution texts in the two Agreements, failing both to acknowledge the
distinct context for that language and to ascribe any meaning or importance to the detailed direction
regarding causation found in the Anti-Dumping Agreement, but absent from the SafeguardsAgreement.  Considering the importance of this issue to Members' rights under the Anti- Dumping
Agreement, the Appellate Body should have explained why no consideration had been due to
paragraphs 3.2 and 3.4 of the Agreement in establishing the relevant causation analysis.  The
Appellate Body had seemingly construed the causation requirements of the Agreement to require what
would in many circumstances be virtually impossible despite rules of treaty interpretation that
instructed that treaty language should not be made a nullity.  Thus, while acknowledging the
difficulties of trying to separate and distinguish the injurious effects of different factors, which mightbe intertwined and produce a combined effect, the Appellate Body had then dispensed with such
concerns, by saying that "this is what is envisaged by the non-attribution language".  In the view of
the United States, whether a particular analysis was feasible or not was very  relevant to the manner in
which the Agreement should be construed, particularly where the text was susceptible to an
interpretation which made its provisions meaningful.
73. The fourth area of concern involved the US provision of law on the calculation of anti-
dumping duties applied to companies that were not investigated, referred to as the "all others"
provision.  The United States elucidated that it did not wish to re-argue the case other than to say that
the Anti-Dumping Agreement did not explicitly require that margins containing any amount of "facts
available" be excluded from the "all others" calculation: it was silent as to the amount of "facts
                                                     
10 United States – Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon
from Norway (BISD 41S/Vol. I/229).
11 United States – Definitive Safeguard Measures on Import of Wheat Gluten from the European
Communities (WT/DS166).
12 United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New
Zealand and Australia (WT/DS177; WT/DS/178).WT/DSB/M/108
Page 20
available" that triggered exclusion.  Given that  the Anti-Dumping Agreement was ambiguous on the
degree of "facts available" which required exclusion, Article 17.6 required that permissible
interpretations such as that of the United States be accepted.  Further, the Appellate Body had
resolved the ambiguity in a way that did not foster predictability in the calculation of the "all others"
rate and that did not fully take into account the practical side of calculating an "all others" rate.
74. Further, the Appellate Body had been right to find that the Anti-Dumping Agreement
permitted Members to base normal value on sales in the home market by the exporter's domestic
affiliates, and not just on direct sales by the exporter.  However, the United States believed that the
Appellate Body was mistaken in upholding the Panel' s findings with respect to various other aspects
of how the United States calculated anti-dumping duties, including the use of "facts available" in this
specific investigation, as well as the test applied to determine whether related party sales were at arm's
length.  The United States believed that the Panel and the Appellate Body were correct to reject thebroad challenge to investigations under the US anti-dumping duty law.  However, the United States
had serious concerns about some of the findings in this case.  The Anti-Dumping Agreement was a
critical part of the balance of rights and obligations assumed by Members, and it was critical that
dispute settlement findings maintain this balance.
75. The representative of the European Communities said that the EC welcomed the Appellate
Body Report and expected the United States to implement the recommendations in a speedy and
orderly manner.  The Report represented a significant contribution to the interpretation of the Anti-
Dumping Agreement, in particular with respect to the concept of "ordinary course of trade".
However, it also raised a number of concerns.  In particular, the EC expressed its concern about the
reasoning in both the Panel and the Appellate Body Reports underlying the interpretation ofArticle 9.4 of the Anti-Dumping Agreement.  As the EC had stated before the Appellate Body, such
rationale lost sight of the object and purpose of Article 9.4, and might lead to an unacceptable and
unreasonable result.  Since almost every dumping margin calculation included at least small elements
of non-adverse "facts available", the Appellate Body's interpretation of Article 9.4 could render that
provision virtually inapplicable.  An interpretation of Article 9.4 which had the consequence that itcould never be applied in practice could not have been intended by the drafters of the agreement and
was not desirable.  In the EC's view, Article 9.4, when read in light of its object and purpose, did not
prevent the inclusion in the "all others" rate of dumping margins based partially on "facts available",
provided that such facts were used simply to fill gaps in the information supplied by a cooperative
exporter, and the investigating authority had drawn no adverse inferences.
76. The representative of Hong Kong, China said that his delegation welcomed the findings of
both the Appellate Body and the Panel, that the US "arm's length" test, which excluded certain low-
priced home market sales from the calculation of normal value, was inconsistent with Article 2.1 of
the Anti-Dumping Agreement.  The Appellate Body had explicitly pointed out that while under
Article 2.2.1 of the Anti-Dumping Agreement Members had discretion to determine how to ensure
that normal value was not distorted through the inclusion of sales that were not "in the ordinary course
of trade", that discretion was not without limits.  In particular, the discretion might be exercised in aneven-handed  way that was fair to all parties affected by an anti-dumping investigation.  The Appellate
Body had found that the lack of even-handedness in the rules applied in this case to low-priced and
high-priced sales might in itself have created prejudice to exporters.  Hong Kong, China agreed with
the findings of the Appellate Body and Panel.  It hoped that investigating authorities would in the
future exercise a greater degree of even-handedness in carrying out their investigations to ensure fairtreatment to exporters.
77. With respect to Article 6.8 and Annex II of the Anti-Dumping Agreement – use of "facts
available" – the Appellate Body had upheld the Panel's ruling that the United States had acted
inconsistently with Article 6.8 and Annex II of the Anti-Dumping Agreement in applying facts
available in making its dumping margin determination in the subject case.  Hong Kong, ChinaWT/DSB/M/108
Page 21
considered that the application by the Appellate Body and the Panel of these provisions that the facts
of this case could be of interest in future cases.  In particular, Hong Kong, China welcomed the
findings that deadlines were not absolute and that investigating authorities should not be entitled to
reject information as untimely if the information had been submitted within a reasonable  period of
time.  Hong Kong, China noted that the Appellat e Body had set forth six non-exclusive factors that
investigating authorities should consider, in the context of a particular case, in assessing whether
information had been submitted within a reasonable period of time.  It hoped that these non-exclusive
factors could serve as constructive guidance in the future.
78. Hong Kong, China welcomed the Appellate Body's statement that investigating authorities
could not fault the interested parties concerned for a lack of cooperation if they had failed to take due
account of genuine difficulties experienced by interested parties, and had made them known to the
investigating authorities.  The Appellate Body had underscored that cooperation was a two-wayprocess involving joint effort of the investigating au thorities and interested parties.  This might have
indicated that sympathetic consideration should be given to anti-dumping respondents who were often
required to produce a substantial amount of complex information within a short period of time and to
exhaust tremendous resources in order to meet the investigating authorities' requests.
79. With respect to Articles 3.1 and 3.4 of the Anti-Dumping Agreement's:  i.e. the "captive
production" provision.  Although the Appellate Body had upheld the Panel's finding that the "captive
production" provision was not inconsistent with the Anti-Dumping Agreement, it had reversed the
Panel's findings and had concluded that the United States had acted inconsistently in its application of
this provision to the subject investigation.  In ma king its ruling, the Appellate Body had reaffirmed
that Article 3.1 did not entitle investigating authorities to conduct a selective examination of one partof a domestic industry in the absence of a satisfactory explanation.  Rather, where one part of an
industry was the subject of separate examination, the other parts should also be examined in a like
manner.  Hong Kong, China hoped that this ruling could provide Members with clearer guidance on
making an injury determination and establishing a causal relationship between dumped imports and
injury in all future cases.  With these observations, Hong Kong, China supported the adoption of theReports.
80. The representative of India said that his country had not participated in this dispute.
However, India observed with interest the outcome of this dispute and certain legal interpretations
developed by both the Panel and the Appellate Body.  In particular, India noted with appreciation the
legal reasoning and findings of the Appellate Body on the use of "facts available" in this dispute.
India agreed with the Appellate Body that the at titude and conduct of anti-dumping investigating
authorities should be both reasonable and cooperative.  The anti-dumping investigation was acooperative process, "whereby the parties worked together towards a common goal" of obtaining
necessary information.  Even if parties cooperated to a high degree, the requisite information might
not be obtained.  The Appellate Body recognized that "This is because the fact of 'cooperating' is in
itself not determinative of the end result of cooperation" (paragraph 99 of the AB Report).  Therefore,
if the exporters under investigation cooperated to the best of their ability and yet were unable tofurnish the requisite information, the Appellate Body had admonished that the investigating
authorities should not arrive at a "less favourable outcome".  Further, India agreed with paragraph 101
of the AB Report that paragraph 2 of Annex II of the Anti-Dumping Agreement "requires
investigating authorities to strike a balance between th e effort that they can expect interested parties to
make in responding to questionnaires, and the practical ability of those interested parties to complyfully with all demands made of them by the investiga ting authorities".  It was true that this provision,
as further stated by the Appellate Body, was "another detailed expression of the principle of good
faith, which was, at once, a general principle of law and a principle of general international law, that
informs the provisions of the Anti-Dumping Agreement, as well as the other covered agreements".
This organic principle restrained investigating authorities from imposing unreasonable burdens onexporters.WT/DSB/M/108
Page 22
81. As stated in the Appellate Body Report, invest igating authorities were expected to take into
account any genuine difficulties of the exporters in fu rnishing information.  If they failed to do so,
"they cannot fault … the interested parties concerned for a lack of cooperation" (paragraph 104 of the
AB Report).  India fully endorsed the Appellate Body's view in paragraphs 84 and 85 of the Report
that the word "reasonable" in Article 6.8 and Annex II of the Anti-Dumping Agreement "implies adegree of flexibility that involves consideration of all the circumstances of a particular case".
Accordingly, the expression "reasonable period" in these provisions should be "interpreted
consistently with notions of flexibility and balance that are inherent in the concept of 'reasonableness',
and in a manner that allowed for account to be taken of the particular circumstances of each case".  In
this connection, the Appellate Body had laid down six broad factors which the investigating
authorities should take into consideration.  These included the nature and quantity of the information,
difficulties encountered by the exporter in obtaining the information, and verifiability and usability ofthe information submitted by the exporters.  Over  a period of time the US Department of Commerce
had developed a practice on the use of "facts available" or "total facts available".  Such practice, in the
light of the Appellate Body rulings, was inconsistent with provisions of the Anti-Dumping
Agreement.  Therefore, India called upon the United States to amend its practice and give effect to the
rulings of the Appellate Body not only in this particular case, but also in respect of all other anti-dumping cases.
82. The representative of Chile said that his country had participated as a third party in this case
since it was concerned about the increasing use of anti-dumping action as disguised barriers to trade.
In this respect Chile shared the Panel's view that  an investigating authority which was objective and
impartial would have reached very different conclusions to those by the US Department of Commerceand the US International Trade Commission.  For exam ple, regarding the calculation of the so-called
"all others" rate, Chile agreed with the Panel's conclusions, endorsed by the Appellate Body, that all
the margins determined on the basis of known facts should be excluded in the determination of the
rates that applied to the others.  In this way, exporters who did not request to participate in the
investigation would be prejudiced due to any shortcomings or gaps in the information provided by theexporters under investigation.  Chile considered that the interpretation in arbitrary use of  the concept,
in the normal course of trade, could artificially increase the normal value as it had been done by the
US Department of Commerce in this case.
83. Chile drew attention to the conclusions reached by the Appellate Body regarding the real
meaning and scope of Article 3.5 of the Anti-Dumping Agreement.  This was an important precedent,
joining other determinations on safeguards, as stated by the Appellate Body in paragraph 228 of its
Report:  "If the injurious effects of the dumped imports and the other known factors remain lumpedtogether and indistinguishable, there is simply  no means of knowing whether injury ascribed to
dumped imports was, in reality, caused by other factors."  This conclusion was an important point of
reference for other dumping investigations because other factors, in addition to imports, should play
an important role in the investigation and determinat ion of injury which should not be imputed to the
imports.  These findings added new parameters that future investigations should follow as well as anymeasures that should be adopted in anti-dumping cases.
84. The DSB took note of the statements and adopted
 the Appellate Body Report in
WT/DS184/AB/R and the Panel Repo rt in WT/DS184/R, as modified by the Appellate Body Report.
9. European Communities – Anti-dumping duties on imports of cotton-type bed linen from
India
(a) Statement by India
85. The representative of India, speaking under "Other Business," recalled that on
12 March 2001, the DSB had adopted the Appellate Body Report and the Panel Report, as modifiedWT/DSB/M/108
Page 23
by the Appellate Body in the case on "European Communities – Anti-Dumping Duties on Imports of
Cotton-Type Bed Linen from India" (WT/DS141).  Pursuant to Article 21.3(b) of the DSU, on
26 April 2001, India and the EC had agreed that five months and two days should be a reasonable
period of time for compliance by the EC of the DSB's recommendations.  That period of time had
ended on 14 August 2001.  On the same day, the EC had brought into force its RegulationNo. 1644/2001 of 7 August 2001 in an effort to im plement the DSB's recommendations.  The EC had
proposed to reduce the anti-dumping duties and to suspend collection of those duties.  These measures
would be terminated automatically in six months ti me, provided that no interested party requested its
review.  However, his country was concerned that the EC had not fully implemented the DSB's
rulings.  First, India did not consider that the dumping margins had been reassessed in accordance
with the DSB's rulings and the provisions of the Anti-Dumping Agreement.  Second, the most
important finding of the Panel, which the EC had not appealed, was that the EC had not examined allthe injury factors listed in Article 3.4 of the Anti-Dumping Agreement.  The Panel had pointed out
that the data had not even been collected let alone evaluation of all these factors by the EC
investigating authority.  In India's view, the EC  had not collected any new information during its
recent review process.  Therefore, the reassessed injury had not met the requirements of the Panel's
findings and Articles 3.4 and 17.6(i) of the Anti-Dumping Agreement.  Third, the failure of the EC inthe original case to provide constructive remedies under Article 15 of the Anti-Dumping Agreement
constituted a fatal error, which could not be repaired retroactively.  Therefore, the reassessed duties
and the suspension of their collection was not an appropriate way of implementing the DSB's rulings.
In India's view, the only appropriate compliance in this case was to rescind the anti-dumping measure.
Moreover, as these measures were contingent upon the attitude of the interested domestic industry,they were uncertain.  This was an open-ended invitation to the EC domestic industry to request a
review.  It sent a wrong signal and undermined the security and predictability of the dispute settlement
system.  Therefore, India called upon the EC to re peal the anti-dumping measure and to comply with
the DSB's rulings and its obligations under the Anti-Dumping Agreement.  Consequently, India
reserved its rights under the DSU.
86. The representative of the European Communities confirmed that the EC had taken the
necessary steps to comply, with the DSB's recommendations and rulings, by the end of the reasonable
period of time.  The EC regretted that India did not share its view on the consistency of the measures
taken and hoped that it would be able to discuss this matter further with India.
87. The DSB took note of the statements.
__________