WT/DS184/R
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ANNEX D
Oral Statements, First and Second Meetings
Contents Page
Annex D-1 Opening Statement of Japan 2
Annex D-2 Closing Statement of Japan 13
Annex D-3 Opening Statement of the United States 15
Annex D-4 Closing Statement of the United States 24
Annex D-5 Oral Statement of Canada as a Third Party 27
Annex D-6 Oral Statement of Chile as a Third Party 30
Annex D-7 Oral Statement of the European Communities as a Third Party 33
Annex D-8 Oral Statement of Korea as a Third Party 37
Annex D-9 Opening Statement of Japan at the Second Meeting of the Panel 40
Annex D-10 Closing Statement of Japan at  the Second Meeting of the Panel 48
Annex D-11 Opening Statement of the United States at the Second Meeting of
the Panel50
Annex D-12 Closing Statement of the Un ited States at the Second Meeting of 
the Panel61WT/DS184/R
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ANNEX D-1
Opening Statement of Japan
(22-23 August 2000)
INTRODUCTION
1. Mr. Chairman, members of the Panel and members of the delegation of the United States, it is
a great honour for me to represent the Government of Japan before this distinguished Panel of the
WTO Dispute Settlement Body.  On behalf of the Government of Japan and the Japanese delegation, Iwish to express our appreciation to the members of the Panel for accepting the weighty responsibility
of serving on this Panel.
I. STANDARD OF REVIEW AND AMERICAN POLITICS
2. At the core of this dispute lies a simple but fundamental question: will there be meaningful
WTO review of antidumping measures?  Or instead will the WTO review be so narrow, so
constrained, with so much deference to Members implementing AD measures so as to render WTO
oversight essentially meaningless except in the most egregious cases?  As a number of antidumping
measures proliferate, and increasingly replace other types of trade restrictions, the need formeaningful discipline becomes more and more important.
3. Before moving onto the specific issues in this case, I would first like to address two broader
issues that are crucial to this Panel’s work.  The first is the issue of “permissible interpretations” under
the standards of review.  The second is the political context from which the United States seeks to
divert the Panel’s attention.
4. The United States tries to cloak its various abuses in this case behind the standards of review
found in Article 17.6 of the Anti-Dumping Agreement.  But, in doing so, it mischaracterizes the
standards and seeks to have narrow exceptions swallow the basic rules.
5. With regard to Article 17.6(ii), it is well settled that interpretations of any given treaty
provision should not be arbitrary.  International agreements lose their raison d'être if signatories have
unlimited liberty to craft their own arbitrary inte rpretations at will.  Article 31.1 of the Vienna
Convention requires a treaty to be interpreted in good faith in the light of its object and purpose, so as
to avoid any situation in which the parties craft a plethora of self-serving interpretations.  The
United States argues that interpretation of any treaty should be done to ensure the maximumflexibility to do as it pleases, provided one of its lawyers can think of a clever interpretation to justify
it.  The US contention that ambiguity found in the Anti-Dumping Agreement and varying practices of
other Members automatically serve as a basis for “multiple permissible interpretations” is based on
self-serving interpretation of the Vienna Convention and runs counter to its basic tenet.
6. Even if more than one interpretation did apply in this case (which is not the case), this would
not give carte blanche legitimacy for any interpretation.  “Permissible interpretation” under
Article 17.6(ii) does not mean any interpretation.   The panel must closely scrutinize these alternative
interpretations to determine whether they rise to th e level of “permissible” in the context of the Anti-
Dumping Agreement.  The panel must also ensu re that the alternative interpretations do notWT/DS184/R
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compromise the proper establishment and unbiased and objective evaluation of the facts, all of which
are crucial to proper implementation of the Agreement.
7. The United States similarly mischaracterizes the Panel’s obligation when assessing the facts
of any case.  To protect the factual conclusions in its hot-rolled steel determinations, the United Statesclaims that Japan is asking for de novo  review, even though we clearly indicated that we are not doing
so.  The United States creates this straw man to sidestep the clear requirement of Article 17.6(i) that
the Panel must evaluate whether the facts were established properly and evaluated in an unbiased and
objective manner.  As the panel decision in the US-Wheat Gluten  case clearly recognized in paragraph
8.5, DSU Article 11 imposes a similar obligation on panels in all disputes. This requirement provides
a solid basis for Japan’s attack on factual conclusions made by the United States.  Japan believes that
the facts were established improperly, were evaluated in a biased and non-objective manner, and wereinappropriate and insufficient to justify the conclusions being reached.  Once these flaws in the
establishment and evaluation of the facts are fixed, Japan believes a different conclusion is then
warranted.
8. The second broad issue is the political context, which is indispensable to assess whether the
United States conducted an unbiased and objective investigation.  Japan opened its first submission
with a discussion of, among other things, the Stand Up For Steel campaign; the multiple meetings
held between US government officials and the US steel industry and unions; the various expressions
of support and promises granted by USDOC Secretary Daley before and during the investigation; and
the ultimately favourable determinations issued for the domestic industry.  The United States calls ourdiscussion of this political manoeuvring "extraordinary."  We agree -- but only because the US
conduct in this particular antidumping investigation was extraordinary and inconsistent with US WTO
obligations.
9. In setting forth the political context of these investigations, Japan is not alleging a conspiracy.
Rather, we are arguing that the United States buckled under intense and continuous political pressure
from its steel industry and, as a result, improperly established and evaluated the facts.  The
United States would have the Panel put on blinders  and merely examine without any proper context
the pieces of paper on a cold administrative record.  The Panel must not do so.  This applies in
particular to Japan's claims under Article X.  How could the Panel appropriately address the question
of whether the United States administered its laws uniformly, impartially and reasonably without
examining the political pressures that prompted the novel, biased, and unfair administration of thoselaws in this case?
10. Consider first the change in legislation fo llowing the 1993 anti-dumping rulings concerning
various flat-rolled steel imports.  Because it lost many of these cases at the USITC, the US steel
industry lobbied Congress strenuously for passage of the captive production provision.  The industryknew that if it did not obtain legislation tying the hands of the USITC in its analysis of the merchant
market, it would be more difficult to convince the Commissioners to make an affirmative
determination in future cases. The industry’s lobbying effort was successful; the provision became
law in 1995.
11. Consider also the new policy on early critical circumstances determinations.  In a clear effort
to respond to the Stand Up For Steel campaign, USDOC issued a new policy, at odds with previous
practice, and applied it in this case.  No matter that no evidence existed to support the decision. The
steel industry asked for it; the industry got it.
12. Consider too the refusal to correct the clerical error for NKK. The decision had real
consequences: the correction would have brought NKK’s margin below the 25 per cent threshold for
applying critical circumstances.  The United States tries to shift the focus by arguing that other
countries do not have such procedures.  But that is not the point.  The point is that the US actions wereWT/DS184/R
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so pre-ordained and biased in favour of the US industry that the United States ignored its own
regulations for correcting clerical errors.
13. Finally, consider the double standard for applying "facts available" to foreign and domestic
companies.  For NSC and NKK, the United States ap plied a strict and unforgiving rule -- essentially
“zero tolerance” for errors, misunderstandings, and oversights.  It did not matter that the information
at stake constituted a simple conversion factor among thousands of pages of documents cooperatively
submitted by the Japanese companies.  It did not matter that the Japanese companies in fact, supplied
the information once they independently discovered  their mistake.  It did not matter that the
information arrived within regulatory deadlines.  The United States simply refused to accept the
information and applied punitive "facts available."  Yet for domestic companies, the United States
switched to a policy of "anything goes" -- even though the information being withheld by the
domestic steel mills went to the very heart of the in vestigation; even though the information had to be
extracted from the domestic mills under threats; even though the information arrived well after all
applicable deadlines.  Such a double standard can only be explained by a bias in anti-dumping
decision making in the United States that favours domestic over foreign companies.
14. These examples show that the politics involved in this case forced decisions that otherwise
would not have been made.  The resulting bias infected the entire analysis performed by authorities,
thus explaining many of the violations.
II. SPECIFIC ANTI-DUMPING AGREEMENT CLAIMS
15. We now address the specific violations that occurred in this case.  Under an appropriately
understood standard of review for claims under the Anti-Dumping Agreement, we believe the Panel
should do something about the US violations in this case.
A. USITC CLAIMS
1. Captive Production Provision On Its Face
16. We begin with injury, and specifically the captive production provision.  This provision
violates the Agreement’s requirement that in examining injury and causation, an authority must
analyze the industry as a whole, not just a part of it.  The US position, essentially, is that the provisionis meaningless because the USITC is still required to consider the industry as a whole.
17. If the provision were truly meaningless, however, why have it at all?  If it were truly
meaningless, why did the steel industry fight so hard for its passage? If it were truly meaningless, why
does the US steel industry fight so consistently and vociferously for its application?
18. The reason is that the provision is not at all meaningless.  It has a clear impact -- one that
makes affirmative injury determinations more likely.  It distorts the USITC’s analysis because it
requires the Commissioners, if they find certain facts to exist, to focus on one segment of the industry,
not on the industry as a whole, when examining financial performance and import penetration -- twoof the most important factors in an authority’s injury analysis.  When doing so, the industry’s
performance looks worse than it really is; and the apparent effects of imports on the industry are
exaggerated because import penetration is inevitably inflated.  The provision therefore prevents the
USITC from finding, as it did in the 1993 case against hot-rolled steel imports, that (and I quote) “anyimpact imports may have had on the merchant market segment is not significant when evaluated interms of their effect on the domestic industry as a whole.”   In other words, prior to the passage of the
captive production provision, a domestic industry could be insulated from the effects of imports by its
sizeable captive consumption.  Now, the assessment of this insulating effect is distorted by the
mandatory focus on the merchant market.WT/DS184/R
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19. The captive market provision constitutes an explicit instruction to an independent agency,
which is then statutorily required to decide exclusively on the basis of that instruction notwithstanding
US international obligations.  The question is therefore not whether the captive production provision
could possibly be stretched to yield a result consistent with the Anti-Dumping Agreement, but
whether the agency can be expected to act consiste ntly with the Anti-Dumping Agreement in light of
that statutory instruction.
20. The United States wants the panel to think that merely emphasizing the merchant market does
not preclude an analysis of the industry as a whole.  Indeed, they argue that the statute and USITC
practice requires an analysis of the industry as a whole.  But, the United States underestimates the
impact of emphasis.  The United States never explains – and cannot explain – how emphasis on the
merchant market helps one understand better the domestic market as a whole.  In a causation context,emphasis on the merchant market highlights imports as a cause over other causes.
21. This is no different from what the Panel condemned the United States for in the Wheat Gluten
safeguards  dispute.  That dispute involved the Safeguards Agreement, but the reasoning applies
equally to material injury under the Anti-Dumping Agreement.  The problem, the Panel found, wasthat by focusing on the question of whether imports were a more important cause of injury than other
causes, the United States failed to discern whether imports themselves were a cause of serious injury
to the domestic industry.  The same is true here: when the captive production provision applies, it
distorts the relative effects of various causes by elevating one cause -- imports -- over all others.  To
borrow a term from the Panel in High Fructose Corn Syrup,  the mere “recitation of data” concerning
other causes does not satisfy WTO obligation.  The mere existence of data for the industry as a whole
in the USITC’s staff report is not enough; merely saying that it considered the industry as a whole is
not enough.
22. The distortive effect of emphasizing only one part of an industry must not be underestimated.
To do so is to open a wide loophole in the requirement of Anti-Dumping Agreement Articles 3 and 4
to analyze the domestic industry as a whole.  Indeed, it potentially turns the rule completely on its
head, particularly when the authority fails to explain how the segment analysis helps understand the
industry as a whole.
23. As Brazil has stated in its third country submission, nothing stops the United States from
considering as a condition of competition the merchant versus captive portions of an industry.  But tomandate an approach under the statute does not permit the authority to do what  the Anti-Dumping
Agreement requires:  to consider equally and obje ctively all of the evidence as it relates to the
performance of domestic producers as a whole.
2. Injury and Causation In The Hot-Rolled Steel Case
24. In addition to our “on-its-face” claim with respect to the captive production provision, Japan
has also made several case-specific arguments regarding the USITC’s injury and causation
determinations in the hot-rolled steel case.
25. The first is that a majority of the Commissioners improperly established and evaluated the
facts by focusing their attention on the merchant market.  Three Commissioners specifically applied
the captive production provision; Chairman Bragg, though stating that she was not applying the
provision, also focused on the merchant market.  She indicated in separate remarks that she would
switch the order of analysis, starting first with the industry as a whole, but she still joined that part ofthe majority decision that was distorted by application of the provision.  There is no telling how her
views would have changed had the other Commissioners not focused primarily on the merchant
market in analyzing market share and financial performance.  Had merchant market data been simply
another economic factor, neither Chairman Bragg nor the rest of the majority would have addressed
this part of the industry nearly as much as it did.  USITC’s examination of the volume, price, andWT/DS184/R
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impact of imports was therefore not objective as required by Article 3.1, nor did it meet the standards
of Articles 3.4 and 3.5 to evaluate all economic factors having a bearing on the state of the industry.
26. USITC’s hot-rolled steel determination suffered from several other flaws as well.  First,
USITC focused on the final two years of financial performance rather than the full three years of theinvestigation period. This approach violated the Anti-Dumping Agreement’s requirements that an
authority’s analysis be objective and that all factors be thoroughly considered.  Focusing on the last
two years of the period meant that USITC focused on a decline in domestic industry performance in
1998 from 1997 -- one of the best performance years th e industry has ever had.  Under a normal three-
year analysis, the picture was much different:  rather than declining, the financial performance of the
domestic industry as whole improved -- in the face of increasing imports.  Such a picture shows the
clear disconnect between industry performance and imports.  While Commissioner Askey centered onthis fact in finding no current injury to  the industry as a whole, the majority did not even discuss it .
The two-year analysis was therefore not objective, as required by Article 3.1.  It also prohibited a
proper analysis of the relationship between trends in imports and the trends in injury factors, as
required by Article 3.5.
27. Beyond its focus on the final two years, however , the USITC failed to discern the impact of
other causes and ensure that it was not attributing to imports the effects of those other causes.  Mini-
mill capacity, the General Motors strike, and declining demand in the pipe and tube industry were all
alternative reasons for the domestic industry’s declining performance, but USITC did no more than
pay lip service to these causes, if it addressed them at all.  To the extent USITC considered alternativecauses of injury, it held that each only partly explained the industry’s problems in 1998, concluding
that subject imports “materially contributed” to industry’s injury.  A finding that subject imports
materially contribute to injury, however, is not the same as finding that subject imports caused present
material injury.  And indeed, USITC did not consider whether the injury caused by subject imports
alone was material, as required by Article 3.5 of the Agreement.
28. The Panel in the Wheat Gluten dispute recently held that a similar USITC practice in the
realm of the Safeguards Agreement was impermissi ble.  According to that panel, a finding that
imports caused more injury than any single alte rnative factor cannot substitute for a finding that
imports themselves caused serious injury.   In other words, an authority must isolate causes, not only
to ensure that imports are in fact causing injury, but that the more serious impact of other factors is
not mistakenly attributed to imports.
29. The language in the US First Submission itself proves our point.  In justifying its treatment of
the General Motors strike, the United States  no where assesses the relative impact of the General
Motors strike.  Rather, its analysis is circular and conclusory:  the General Motors strike was not
important because it was subject imports that caused injury.  This result-oriented approach to thecausation analysis does not reflect the rigorous analysis clearly required by the Agreement.  This
cannot possibly be deemed to be a proper establishment and objective assessment of the facts within
the meaning of Article 17:6 (i).
B.
USDOC
30. Moving now to the findings of the US Department of Commerce, Japan has made claims
against various decisions and policies that show th e bias apparent in this case.  USDOC refused to
correct the error in NKK’s margin calculation. USDOC adopted a new policy on retroactive duties
(known as critical circumstances in the United States) to restrict trade earlier.  USDOC applied itsbiased approach to affiliated party sales in the home market.  USDOC used adverse “facts available”
to punish respondents.  Each of these actions violated the Anti-Dumping Agreement.WT/DS184/R
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1. Critical Circumstances
31. Concerning critical circumstances, Japan has identified an abundance of violations, not only
with the way in which the US policy was applied in this case, but with the statute itself.
32. The primary problem with the new policy adopted by the United States is that it permits
affirmative findings far too early. Any decision to apply retroactive duties must rest on the “sufficient
evidence” to justify such a decision.  This did not happen in the hot-rolled steel case, and will almost
never occur if the United States continues with its early critical circumstances determinations.
Articles 10.6 and 10.7 together require that:
• First, the product must already be found to be dumped – the provision specifically refers to
“the dumped product in question".
• Second, the importer must have reason to know that the product was dumped.
• Third, importer must have reason to know that its purchase of the imported product would
injure the domestic industry.
• Fourth, the massive imports must have actually caused injury.
• Fifth, the injury caused by the massive imports must be likely to undermine the remedial
effect of any import relief granted.
33. None of these elements was met in the hot-rolled steel case, nor does the statute or USDOC’s
new policy bulletin require that any of these be met:
• There was no finding that the products were dumped; USDOC would not even
preliminarily determine whether there was dumping until 11 weeks later.  Not only
was there no finding of dumping, but the only “evidence” to support the existence of
dumping was the petition.  To suggest that this evidence alone constituted sufficient
evidence is simply unsupportable.  The United States itself admits in paragraph 72 of
its First Submission that, and I quote, “it is recognized that information submitted in a
request for initiation is likely to be advers e to the interests of the responding party”.
The one-sided evidence in a petition can never be “sufficient” for a determination of
critical circumstances.
• There was also no evidence that importers had any knowledge that imports were dumped.
Petitioners’ mere allegation of dumping margins above 25 per cent cannot constitute
sufficient evidence of importer knowledg e of dumping; indeed, the two respondent
companies on which petitioners based its dumping margin allegation -- NKK and
NSC -- ultimately received margins of less than 25 per cent in USDOC’s final
determination.
• There was also no evidence that importers knew their imports were injuring the domestic
industry.  The USDOC cited a collection of newspaper articles as showing current
injury, but then essentially ignored the USITC’s analysis of actual facts showing only
a threat of future injury.  The Agreement does not allow retroactive duties when only
a threat of injury exists.  Threat indicates a potential problem in the future; retroactive
duties are meant to address something that happened in the past.  The two concepts
simply cannot be reconciled.WT/DS184/R
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• Finally, USDOC did not even address whether imports would undermine the remedial
effect of import relief that might be granted in the future.
34. The United States wants the Panel to conclude that because retroactive duties were never
actually collected in this case, the United States shou ld be permitted to continue to make early critical
circumstances determinations.  The Panel must reject this position.  To adopt it would be to permit thecontinued abuse of the anti-dumping laws to improperly chill trade.  An authority could accept a
petition that just barely passes the test for initia tion, knowing full well that the support for a current
injury determination by USITC and a dumping determination by USDOC were weak at best.  But,
with low standards for both initiation and
 preliminary critical circumstances determinations, the
authority can effectively block imports well before the truth comes out. The Agreement is clear:sufficient evidence must exist before an authority can  shut down trade with the threat of retroactively
imposed dumping duties.  There is no permissible interpretation of the Agreement that can help theUnited States skirt around this obligation.
2. Affiliated Sales In The Home Market
35. As for affiliated party sales, the United States spends a great deal of time defending its right
to exclude affiliated party sales in the home market as outside the ordinary course of trade.  But, Japan
has not challenged whether individual sales in this particular case can be considered outside the
ordinary course of trade.  What Japan has argued is that the manner in which the United States decides
that such sales are outside the ordinary course of trade is not permitted by Article 2 of the Agreement.Japan has further argued that there is no author ity in the Agreement permitting the replacement of
such sales with an affiliates’ resales.
(a) Arm’s Length Test For Excluding Affiliated Party Sales36. The United States applies what it calls the “99.5 per cent arm’s length” test to determine
whether sales to an affiliate are outside the ordinary course of trade.  Under this test, if sales to any
affiliated customer are priced just 0.5 per cent less than the average price to unaffiliated customers,
then all the sales to that customer are disregarded. This test is biased.  It is not truly aimed at
determining whether a sale is ordinary or not, but whether it is priced lower
 than other sales.  Time
after time, the United States refuses to admit this obvious flaw in its approach.
37. An example should make this crystal clear for the Panel.  Assume a company is running
losses, but has affiliates whose profits are quite hi gh.  Under such circumstances, the company would
have the obvious incentive to sell to its affiliates at higher prices to reduce the profits of the affiliates
and consequently reduce domestic tax liability.  In other words, the existence of the affiliation in this
situation tends to increase prices between the companies rather than lower them.  The prices are
distorted and are therefore not at arm’s length.  Yet, the United States never takes this situation intoconsideration in applying its so-called arm’s length test.  That is because its test addresses only the
question of whether the average price to affiliates is simply lower than the average price to non-
affiliates.
38. The United States claims in its First Submission that if the Japanese respondents had made the
argument that high priced sales should be exclud ed as well, then USDOC would have also considered
whether they were inside or outside the ordinary course of trade.  But, this is plainly disingenuous.
First, the alternative test proposed by NKK did in fact suggest that high priced sales should likewise
be excluded.  Second, the United States has explicitly admitted in its First Submission to maintaining
a double standard for excluding low-priced versus high-priced sales: low-priced sales are excludedautomatically under the 99.5 per cent test merely if they are priced lower than sales to non-affiliates;
high-priced sales, on the other hand, would only be excluded if respondents ask that they be excluded
-- and then only if they are, in the words of the US First Submission, “aberrationally high".WT/DS184/R
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39. Why doesn’t the US apply an “aberrationally low” test to low-priced sales to affiliates?  The
answer is that this would mean permitting low pr iced home market sales to stay in the database,
thereby lowering normal value and, in turn, decreasing the dumping margin.  This results-oriented
approach to calculating dumping margins violates Ar ticle 2.1 because it is mechanical and does not
truly determine whether a sale is outside the ordinary course of trade; it violates Article 2.4 because itis so unfair; and it violates the spirit of Articles 2.2 and 2.2.1 which set forth very carefully the
circumstances in which home market sales may be excluded when they are below cost or of
insufficient quantities.  Perhaps most importantly, it also violates the principle that Members are
supposed to adopt and apply their anti-dumping laws in good faith.  The United States would have the
Panel excuse this action under an extremely permissive interpretation of the Agreement. Yet doing so
in the face of such result-oriented motivations cannot be tolerated under any reasonable interpretation
of the Vienna Convention and the good faith obligations owed to Japan and other Members by theUnited States.
40. Once the prejudicial nature of the US arm’s length test is laid bare, the US defence  falls flat.
Reliance on other countries’ practices with regard to affiliated party sales is simply irrelevant.  While
other countries may have policies for excluding sales to affiliated parties, none of them has a test asmechanically unfair as the United States; Brazil and Korea -- two of the countries cited by the
United States -- prove this point in their third country submissions supporting Japan’s argument on
this issue.  In any event, other countries’ laws on this  topic are not at issue.  They are irrelevant to this
Panel’s review of the US law and practice.
(b)  Replacement With Affiliated Party Resales
41. As for the US practice of replacing excluded sales to affiliates with resales by
 the affiliates,
Japan’s position is clear:  nothing in the Agreement authorizes it.  What’s more, the Agreement’s
silence -- when read in light of the specific language in Article 2.3 permitting use of affiliated
importer resales when calculating export price -- must be interpreted to prohibit the practice on the
home market side.
42. The US first responds to this argument by saying that Article 2.2 of the Agreement contains a
non-exhaustive list of alternatives that may be used when sales are outside the ordinary course of
trade.  However, the US has created permissive language where it does not exist.  Article 2.2, in fact,
contains mandatory language.  It reads that when there are no home market sales in the ordinarycourse of trade, “…the margin of dumping shall be determined  by comparison with” third country
sales or constructed value.  In other words, the list of alternatives -- third country sales or constructed
value -- is not a non-exhaustive list.  With the use of the term shall, it is decidedly exhaustive.
Therefore, nothing can be read to permit another alternative, such as downstream sales.
43. In addition to its mistakenly permissive reading of Article 2.2, the US also defends its practice
largely by reference to the authority granted in Article 2.3 to calculate constructed export price.  The
argument goes like this:  if it’s permitted on the export side, it must be permitted on the home marketside as well.  Yet, the US reliance on Article 2.3 simply highlights why its treatment of home market
sales to affiliates is unfair.  When constructing export price due to an affiliation between the exporterand importer, the United States conducts an elaborate calculation to ensure that that constructed price
is as close to an ex-factory price as possible.  In doing so, the US deducts profit from the affiliate’s
sale price.  However, the US does not do this when using affiliated party resales in the home market.
Why the difference?  Because deducting profits on the export side increases the dumping margin;deducting profit on the home market side decrease s the dumping margin.  This not only violates
Article 2.4’s requirement for a fair comparison; it ag ain shows the lack of good faith exhibited in the
adoption of US anti-dumping laws and measures.
44. The reason Article 2.3 exists is because there is no alternative for export price but some price
at which sales are made in the export market.  Hence the authority to construct an export price.  ThereWT/DS184/R
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is no such need for this policy on the home market side because there are plenty of other alternatives.
If sales are made to affiliates at prices that are not reliable, then just exclude them and use other home
market sales.  Alternatively, use constructed value or third country sales if the remaining ordinary
sales are too few due to the exclusion.  But nothing permits the use of resales in the home market --
particularly when the method for doing so is inconsistent with the method used on the export priceside.
3. Facts Available
45. Japan has made four arguments regarding facts available.  First, that USDOC’s established
practice of applying adverse facts available as a means of punishing respondents violates the
Agreement.  Second, that the application of that practice against Kawasaki with respect to its US saleswas also not permitted under the Agreement.  Third, that the application of that practice against NSC
and NKK with respect to each company’s actual-to-theoretical weight conversion factor violated the
Agreement.  And fourth, that the inclusion of margins for which facts available were used in the
calculation of the all others rate is also impermissible.
(a)  Established Practice
46. With respect to our claim against USDOC’s established practice of applying adverse facts
available, the US thinks Japan has gone too far.  They have even found it important enough to bring a
preliminary objection against the Panel’s consideration of the claim.  Yet, two of the third countriesinvolved in this case agree with Japan that it is the US policy with respect to adverse facts available
goes too far, not Japan’s claim.
47. The United States seriously exaggerates what would happen if it was not permitted to use
adverse “facts available” to induce cooperation.  The extreme US example -- a respondent refusing tocooperate and providing only information that result ed in a favourable dumping margin -- completely
ignores the context of the overall process.  After all, through its investigation and verification, the
authority would discover whether the respondent w ithheld any necessary or relevant information. It
would be perfectly acceptable under such circumstances to use information available from other
sources, including that supplied in the petition.
48. Fundamentally, the United States fails to  acknowledge the difference between using
information that is as representative as possible under the circumstances, even though it might be less
favourable to a respondent, compared to using information that is as unrepresentative as possible to
punish a respondent.  The purpose of the “facts available” provisions of Anti-Dumping Agreement is
to allow authorities to calculate dumping margins us ing alternative information when the party refuses
to cooperate, not to allow authorities to use distorted and extreme facts as a punitive club to scarerespondents into providing information.
(b)  This Case49. Apart from our argument that “facts available” should reflect market realities and not be used
to punish uncooperative companies, Japan also believes that the US contention that Japanese
respondents in this case were uncooperative is totally unfounded.  The United States uses an
indefensibly low standard to trigger the need for punitive “facts available”.   Rather, the US argument
reflects its result-oriented approach to these invest igations where the US Government caved in to the
political pressures of the US steel industry.  Such practice not only violates the Anti-DumpingAgreement, but GATT Article X:3 as well.
50. In stark contrast to the hypothetical uncooperative respondent in the extreme US example,
each of the respondents in this case showed an abundance of cooperation.  Consider the extensive
amount of information provided by each one.  Thousands upon thousands of pages of information;WT/DS184/R
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thousands upon thousands of hours of work; weeks and weeks of on-site verifications.  These were
companies that invested significant resources to  comply with each and every one of the requests
issued by the Department. In the few instances in which they had difficulties with a request, they
explained themselves and asked for guidance.  They did not submit false information; they did not
purposefully withhold unfavourable information.  They were in constant communication withUSDOC regarding their progress in obtaining the in formation.  But rather than consider the overall
level of cooperation supplied by the respondents, instead of reacting to the respondents’ requests for
guidance, instead of applying what Annex II calls “special circumspection”, each one of the
respondents was punished.
(i)  KSC
51. This is particularly true for KSC.  The evidence shows that KSC sent repeated letters to
petitioner CSI to obtain its assistance; it sent repe ated letters to USDOC explaining that CSI would
not cooperate.  Implicit in all of its letters to USDOC was a request that USDOC provide some
guidance as to what it should do.  USDOC said nothing until it issued its determination, at which
point, without warning, it decided to punish KSC and apply adverse facts available.
52. The US approach of surprising and punishing respondents in this manner is the problem here,
and it should be stopped.  As Japan has detailed in its submission, there are several provisions of the
Agreement that give the Panel a method for doing so.
(ii)  NSC/NKK
53. With respect to NSC and NKK, we recognize that the impact of the use of adverse facts
available here was small.  But it is the principle that matters: USDOC should not be permitted to
apply adverse facts available to punish respondents.  Punish is never appropriate, but particularlythose respondents who are not worthy of punish ment.  The fact is that NKK misunderstood what
exactly USDOC was asking for; further, once NK K asked USDOC for guidance, the agency misled
NKK.  NSC had an internal misunderstanding between company departments that can only be
described as an honest mistake.  Despite these minor misunderstandings, the companies worked to
ensure that USDOC had the information before the regulatory deadline for new facts and in plenty of
time for verification.  Nonetheless, USDOC refu sed the information and applied adverse facts
available.
54. To be consistent with its WTO obligations, the United States must distinguish between
respondents who are truly recalcitrant and those who merely make a mistake but fix it in time for
verification (like NSC and NKK), or who try very hard but still cannot provide the information (like
KSC).  The zero tolerance applied in cases such as these must not be permitted.  The language ofAnnex II  does not permit such an extreme and punitive approach.
(c)  All Others Rate55. Finally, we want to address just one minor point regarding the all others rate.  Japan’s point
on this topic is rather simple:  dumping margins calculated based on partial facts available are, in the
words of Article 9.4, “margins established under the circumstances referred to in paragraph 8 of
Article 6.”  They are therefore not permitted to be used in calculating the all others rate.  The US
believes that this phrase in Article 9.4 can only mean margins based entirely on facts available, but
Japan respectfully disagrees.  The word entirely does not appear in Article 9.4.  A plain reading of the
phrase is that a margin established using facts available, whether partially or entirely, cannot be used
to calculate the all others rate.WT/DS184/R
Page D-12
III. GATT ARTICLE X:3
56. Last but not least, I would like to draw the Panel’s attention to our claim under Article X:3 of
GATT 1994.  As we have stated in our First Submission, our claim under Article X is independent of
other substantive claims; it is not a subsidiary claim.    In its EC Bananas  and EC Poultry decisions,
the Appellate Body has recognized that while other WTO provisions apply to the substantive content
of a Member’s laws, regulations, and administrative rulings, Article X:3(a) relates to the
administration of those laws – whether they are applied in an uniform, impartial, and reasonable
manner.  Thus, complaining parties, including the United States, have lodged claims specifically
under GATT Article X, as was the case the Japan - Leather  dispute -- when they perceived a breach
of the fundamental international law principle of due process stipulated in the provision.  Yet here,
when it is being used against them, the United States tries to dismiss this claim in a backhanded waywith the conclusory assertion that if the Antidumping Agreement claims fail, then the Article X
claims must also fail.
57. This is incorrect.  Article X requires a Member to apply its laws, regulations, decisions, and
rulings in an uniform, impartial, and reasonable manner.  A domestic law may very well be consistentwith the Anti-Dumping Agreement but then be administ ered inconsistently with Article X.  Article X
is not mooted or rendered irrelevant by the Anti-Dumping Agreement.  The US practices that Japan
challenges in this dispute are exactly the kind of practices governed by this provision.  Nothing in any
WTO Agreement either asserts or implies that the di sciplines of Article X are inapplicable to anti-
dumping proceedings.  Furthermore, nothing about Article X is in conflict with anything in the Anti-Dumping Agreement.  Rather, for anti-dumping as with all other substantive WTO provisions,
Article X serves to ensure that a Member administers its anti-dumping laws, regulations, and
administrative decisions in good faith assuring fundamental fairness and avoiding what in
international law is called “abus de droit”  .
58. The Panel has an important, independent obligation to evaluate the procedural actions of the
United States in this case.  The WTO does not permit the non-uniform application of critical
circumstances.  It does not permit a double standard for administering "facts available".  It does not
permit a country to ignore its own regulations for correcting clerical errors.  The standards of
uniformity, impartiality, and reasonableness enshrined in Article X of the GATT do not permit a
country to do so.  With Article X, Japan establishes yet another violation that the Panel should
consider separately from Japan’s claims under the Anti-Dumping Agreement.
59. Japan’s Article X claim is important for another reason.  The United States often justifies its
actions with the "it didn't matter" defence.  It says:  “We eventually got around to correcting the NKK
clerical error”.  “We eventually decided not to impose retroactive duties”.  “We could have used some
other legal theory to find injury anyway.”  Whatever the Panel decides under the Anti-DumpingAgreement, the Panel must also evaluate these actions under Article X.  The administration of the US
dumping law that allows such underlying actions to occur -- regardless of the eventual outcome --
must be disciplined under Article X.  Otherwise, the abuses will continue.  And if antidumping
measures like those imposed on hot rolled steel are allowed to stand without any meaningful
discipline, then it is hard to imagine what level of conduct would be egregious enough to triggerArticle X.
CONCLUSION AND REMEDY
The United States actions in this case re veal several serious problems with the US
antidumping law and practice.  Japan strongly believes that this case provides a compelling set of
circumstances – both factually and legally -- for the panel to act to discipline abuses of anti-dumping
measures.  Whatever remedy the panel ultimately adopts, the panel should bear in mind the need to
make the disciplines of the Anti-dumping Agreement real and meaningful.WT/DS184/R
Page D-13
ANNEX D-2
Closing Statement of Japan
(23 August 2000)
In its comments and questions yesterday and today, the United States tried to shift the focus
of this dispute.  This dispute is not about the existence of alleged Japanese dumping; rather, this
dispute is about the manner  in which the USDOC set the anti-dumping duties.  This dispute is not
about the alleged injury being experienced by the US steel industry; rather, this dispute is about theanalytic basis  for the USITC conclusion of material injury by reason of Japanese imports.  Most
fundamentally, this dispute is not about the commercial practices of Japanese companies; rather, this
dispute is about the anti-dumping measures adopted by the United States Government .  We urge the
Panel to bear this important point in mind, as it considers this case.
We will respond in detail to the various US arguments in our Second Submission.  Here, we
simply want to stress for the Panel some very important basic principles that should guide the Panel inits deliberations.
First, we note that the United States repeated ly argues that as long as it can think of some
interpretation of the Anti-Dumping Agreement that would permit its actions, then those actions are
permitted.  But the United States fundamentally confuses the distinction between possible
interpretations and permissible interpretations.  This Panel has the duty to interpret the Anti-Dumping
Agreement properly, and decide whether the US interpretation is permissible and consistent with thetext, the context, the purposes of the agreement, and with simple common sense.  Contrary to the US
argument, there are indeed limits to the permissible interpretations.  As the Panel considers the
permissible interpretations of the Anti-Dumping Agreement, the Panel should also consider whetherthe United States has been interpreting its obligations in good faith.  Japan believes the concept of
good faith plays a crucial role in interpreting legal obligations.  So do some of the third countries to
this dispute.  We believe complying with intern ational obligations means more than just clever
lawyering to find loopholes.
Second, the Panel must not forget that Japan has claims under both the Anti-Dumping
Agreement and GATT Article X.  Japan did not take this step lightly.  It is never easy to accuse
another country of acting in a biased manner.  Unfortunately, in this case the United States went too
far.  Its actions failed to meet the Article X obligat ion to administer laws in a uniform, impartial, and
reasonable manner.  These obligations are crucial to the sound functioning of the entire multilateraltrading system. Contrary to the US argument, this case was not “business as usual”.  This case
involved a number of extraordinary steps by the US Government to placate its domestic steel industry.
These actions must be scrutinized closely and carefully.
We find it quite ironic that the United States accuses Japan of seeking de novo  review.
Japan’s position is that the Panel should simply test the US actions against US international
obligations, and is not at all calling for de novo  review.  The Panel has a clear obligation to evaluate
whether the US actions were biased or not consiste nt with the Anti-Dumping Agreement.  Rather it is
the United States that keeps trying to shift the focus away from its actions to the underlying facts.
The US argues the finding of critical circumstance s was justified; don’t look at the rush to judgment
and cursory review of the evidence, look instead at the surge in imports.  The US argues the decisionWT/DS184/R
Page D-14
to punish NSC and NKK was justified; don’t look at the rigid policy of zero tolerance for any mistake
or innocent oversight or the USDOC refusal to correct acknowledged clerical errors, look instead at
those sneaky Japanese companies and their efforts to trick the authorities.  The US argues the finding
of material injury was justified; don’t look at the statutory language that explicitly and significantly
skews the analysis of the impact of imports on the domestic industry; look instead at the fact that allsix Commissioners made affirmative determinations.  It is the United States that wants the Panel to
engage in de novo  review, and have the Panel pretend that it is itself the anti-dumping enforcers.
This case is an enforcement action, but not of the sort the United State images.  This case is
not about policing dumping; it is about policing anti-dumping measures.  Are there no limits on what
authorities may do?  Or are the disciplines in the Anti-Dumping Agreement empty words that
authorities may ignore at will, particularly when  politically powerful domestic industries demand
relief?  This Panel will decide whether these disciplines have meaning.WT/DS184/R
Page D-15
ANNEX D-3
Opening Statement of the United States
(22 August 2000)
1. Mr. Hirsh.  Thank you, Mr. Chairman and members of the Panel.  The United States
appreciates this opportunity to present its views rega rding the issues in this dispute.  Again for the
record, my name is Bruce Hirsh.  I am a Legal Advisor with the Office of the US Trade
Representative in Geneva.  With me from my office in Washington is Associate General CounselDan Mullaney, who will begin our presentation toda y with a discussion of three procedural issues.
John McInerney, Acting Chief Counsel for Impor t Administration at the US Department of
Commerce, will then present the issues concerning the anti-dumping calculations and critical
circumstances.  Finally, Tina Kimble, Attorney-Advisor in the Office of the General Counsel of the
US International Trade Commission, will present the issues concerning injury.
2. Mr. Mullaney.   Thank you, Mr. Chairman, and members of the Panel.  First, Japan has based
part of its argument on evidence that was not presented to the national investigating authorities and is
not part of their administrative records.  The Japanese producers had ample opportunity to present this
evidence to the Commerce Department and the USITC during the course of their investigations, but
chose, instead, to wait until this Panel proceeding. (1st US sub., ¶ 56 - ¶ 68.)
3. The submission of new material in this proceeding is inconsistent with Article 17.5(ii) of the
Agreement, which requires that the Panel’s examination of the matter before it be based upon the facts
made available to the authorities of the importing Member.  Consideration of this new material would
deny parties to the anti-dumping investigation, including the US domestic industry, the protection of
Article 6.2 of the Agreement, which guarantees them “a full opportunity for the defence of theirinterests.”  Such interested parties cannot have a full opportunity to defend their interests if the
responding exporter/manufacturers can withhold relevant evidence until a WTO panel proceeding in
which the other interested parties may not participate.  This is not a case about whether the US
authorities improperly excluded information from their administrative records.  This is a case about
information that could have and should have been submitted on the record by the Japaneserespondents, but was not.
4. Second, Japan has raised an issue that is outside this Panel’s terms of reference.  In its panel
request, Japan stated plainly that it was challenging the Department’s  application  of facts available to
the Japanese respondent companies in this particular investigation.  In its first written submission,however, Japan has argued that the Department’s entire practice  of making adverse inferences in
selecting the facts available to be applied to uncooperative respondents is inconsistent with Article 6.8
and Annex II of the Agreement. (Japan’s 1st sub., ¶ 57 - ¶ 60.)  It is untrue that Japan’s panel request
properly set out this claim by referring generally to “conformity” of US laws.  The statement of a
proper claim requires that the particular law or practice be identified.  Japan’s panel request does not
do this.
5. Allowing Japan to introduce this new claim would be contrary to Article 6.2 of the Dispute
Settlement Understanding, which requires the requesting parties to “identify the specific measures at
issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem
clearly.”  Japan’s request failed altogether to disclose this new claim or its legal basis, therebyWT/DS184/R
Page D-16
depriving other Members of information necessary to  determine whether or not to intervene in the
proceeding.  (1st US sub., ¶ 69 - ¶ 76.)  It also prej udiced the United States in the preparation of its
first submission, because of the limited time available after Japan’s first submission.
6.   Third, I would like to emphasize that this Panel’s mandate under Article 17.6 of the
Agreement permits the Panel to find that the US determinations are inconsistent with the Agreement
only to the extent that the Panel finds either that the United States’ establishment of the facts was not
proper, unbiased, and objective, or that a determination was not based on a permissible interpretation
of the AD Agreement.  This means two things.
7. First, this Panel is not a fact-finding body.  Unless it finds that the authorities’ establishment
of the facts was improper or that their evaluation of those facts was biased and unobjective, theevaluation should not be overturned, even if the Panel would have reached a different determination
had the same facts been before it in the first instance .   (1st US sub., ¶ 77 - 82.)
8. Second, the Panel must uphold the US authorities’ interpretations of the Agreement if those
interpretations are permissible .  Where there are several permissible interpretations of an Agreement
provision, a panel must not impose its preferred interpretation on the Member concerned.  To do so
would be to add impermissibly to the obligations to which the WTO Members have agreed.  (1st US
sub., ¶ 83 - ¶ 87.)
9. I will now turn to my colleague, Mr. McInerney, of the Commerce Department, to present the
anti-dumping and critical circumstances issues.
10. Mr. McInerney.   Thank you Mr. Chairman.  Japan’s challenge to the Department’s
determination involves four broad issues, which I will briefly address in turn.
11. The first issue is the Department’s Resort to, and Selection of, Facts Available .  Japan
begins by asking the Panel to rule that investigat ing authorities, in selecting facts available to be
applied to uncooperative respondents, may never make the logical inference that the respondent
withheld that information because it was adverse to the respondent.  (Japan’s 1st sub., ¶ 57 - ¶ 60.)
Instead, Japan argues that investigating authorities must always  fill any gaps in their information - -
no matter how large, and no matter how blatantly the respondent refused to cooperate - - with neutral
information.
12. The Panel should be very clear about Japan’s position.  Japan is not arguing that the
Agreement carefully circumscribes the circumstances in which adverse inferences may be used, or
that the Agreement limits the extent to which inferences may be adverse.  Japan is not arguing that
adverse inferences must be reasonable, fair, or corroborated.  Instead, Japan is arguing that adverseinferences are never permitted - - to any degree or under any circumstances.  Mr. Chairman, let me
depart for a moment from the prepared text.  In its oral statement Japan appears to have retreated from
this position.  However, they have not really departed from their earlier position, but only make it
appear that they are taking a slightly more reasonable position.  We will prepare questions for Japan
that I believe will show Japan has in fact not retreated from this extreme position.
13. Japan has been surprisingly clear about its motive for pressing this new argument.  It has
candidly acknowledged that it would like the Panel to remove the incentive that the facts available
rule has traditionally provided for respondents to cooperate in investigations. (Japan’s 1st sub., ¶ 59.)
Because investigating authorities have no legal means to force foreign respondents to provide
information, acceptance of Japan’s argument would force investigating authorities to rely on such
information as those respondents unilaterally el ect to provide.  That would turn antidumping
investigations into pointless charades, a result which the Members cannot have intended.WT/DS184/R
Page D-17
14. A comprehensive review of Article 6.8 and Annex II of the Agreement demonstrates that they
are designed precisely  to provide uncooperative respondents with an incentive to participate in
antidumping investigations.  In our written submission, we have identified numerous passages in
Article 6.8 and Annex II with which Japan’s position cannot be reconciled.  (1st US sub., ¶ 54 - ¶ 68.)
15. With regard to the two specific applications of facts available at issue here, I will simply
make a few brief observations.  First, Japan asserts that KSC cooperated in the investigation, as
required by Paragraph 7 of Annex II.  (Japan’s 1st sub., ¶ 61 - ¶  77.)  The facts on the record do not
support Japan’s assertion.  KSC never even discussed  with its Brazilian joint venture partner the need
to provide the CSI data, and never made any serious effort to obtain information from CSI.  Instead,
KSC was quite content with making pro-forma requests for the information.  When those requests
were declined, KSC did not even attempt  to use any of its manifold powers under the joint venture
shareholders’ agreement to persuade CSI to supply the necessary information.  These desultory
gestures cannot possibly be construed as mean ingful cooperation.  (1st US sub., ¶ 82 - ¶ 98.)
16. Second, Japan implies that NKK and NSC submitted within a reasonable period of time the
conversion factors to enable the Department to convert sales based on theoretical weights into actualweights. (Japan’s 1st sub., ¶ 105 - ¶ 108.)  This is not a plausible claim.  Each company was given 87
days to submit this information.  This is ample time by any standard, and nearly triple the 30 days
required by Article 6.1.1.  The ease with which NKK and NSC eventually provided the information,
once they had decided to do so, belies Japan’s claim that they met the Agreement’s standard for
cooperation.  (1st US sub., ¶ 128 - ¶ 142.)  Japan’ s ar gument also ignores the fact that Article 6.8 and
Annex II repeatedly emphasize the importance of submitting information in a timely manner, as we
have described in detail in our written submission.  (US sub., ¶ 143 - ¶ 149.)
17. The second issue is Commerce’s Determination of the “All-Others” Rate .  Japan argues
that, in determining the estimated duty rate for comp anies that were not themselves investigated (or
the “all others” rate), Article 9.4 requires investigating authorities to disregard any portion of a margin
based in even the slightest degree on  the facts available.  (Japan’s 1st sub., ¶ 136 - ¶ 139.)  Japan’s
argument is based on the statement in Article 9.4 that, in calculating all-others rates, investigating
authorities shall disregard any margins “established under the circumstances referred to in paragraph 8
of Article 6,” which is the facts-available provision.
18. Japan’s interpretation of Article 9.4 is an absurdly broad and unworkable reading of that
provision.  A dumping margin is not “established under the circumstances ” of the facts available rule
merely because a component of that margin may be based on the facts available.  Accordingly,
Article 9.4 does not provide that “portions of margins established under the facts available rule” must
be excluded.  When Article 9.4 refers to “margins” that are “established under the circumstances” of
the facts-available rule, it means entire margins  that are based on the facts available.  (1st US sub.,
¶ 176 - ¶  191.)
19. The context of the Agreement supports this reading.  Article 6.10 directs investigating
authorities to determine “an individual margin of  dumping for each known exporter or producer,
where this is practicable.”  A margin that is subs tantially based on the data for a specific company is
still very much an “individual margin” for that producer, even if it contains some components of facts
available.  It therefore is entirely appropriate for use in determining the rate for producers not
investigated.  On the other hand, it is reasonable to treat margins based entirely  on facts available as
not “individual margin[s]” for the producers in question, because they are based on secondary
information, such as data from the petition.  Thus, Article 6.10 provides a basis for distinguishingbetween margins based partially and entirely on the facts available.   (1st US sub., ¶ 180 - ¶ 184.)
20. Japan’s absurdly broad reading of Article 9.4 would produce untenable results.  While most
foreign respondents who cooperate in antidumping  investigations receive margins based very
substantially upon their own data, the use of facts av ailable to fill gaps is quite common.  NKK andWT/DS184/R
Page D-18
NSC provide perfect examples of companies that received margins based overwhelmingly upon their
own data, but with a small element of facts available.  Nothing in the Agreement requires that these
margins be disregarded in determining the all-others rate, or that the margins be recalculated so that
they somehow exclude facts available.
21. The third issue is the Department’s Treatment of Home Market Sales Through  Related
Parties.   Here Japan makes two arguments: first, that the Department must not reject home market
sales to related parties on the basis of its 99.5 per cent test (Japan’s 1st sub., ¶159); and second, that,
even if the Department could  reject home market sales to related parties, it could  not replace them
with the downstream home market sales by those related parties, but must substitute sales to third
countries or constructed value (Japan’s 1st sub., ¶ 162 - ¶164).  Neither argument is sound.
22. First, Commerce’s rejection of certain sales to related parties in Japan  was consistent
with the Agreement.  The Department rejects sales to related parties as not in the ordinary course of
trade because the prices between affiliated parties are inherently suspect.  Article 2.1 of the
Agreement provides that home market sales must be in the “ordinary course of trade,” but does not
define that term.  Logically, however, sales in the “ordinary course of trade” are normal commercialsales, and a normal commercial sale is, first and foremost, a sale with a price negotiated at arm’s
length.  Otherwise, affiliated entities could manipulate dumping margins by manipulating prices
between them.  Therefore, sales to related parties, for which the prices are not negotiated at arm’s
length, may be presumed to be outside the ordinary course of trade.
23. Commerce’s 99.5 per cent test simply provides that the Department will make an exception to
the normal rule of exclusion for non-arm’s-length sales, where a producer’s prices to a related party
are, on average, virtually as high as the prices of sales to unrelated parties.  If the related party passes
the test, the Department uses all of that producer’s sales to that related party, both above and below
the 99.5 per cent threshold, in determining normal value.  Overall, the effect of this rule is to increase
the instances in which the Department bases normal value on home market sales, and to decrease the
instances in which the Department must rely on downstream sales by related distributors.
24. If the Japanese producers thought that the sales that passed the 99.5 per cent test would distort
the dumping margins because they had higher than normal prices, there was nothing to prevent them
from arguing that they were outside the ordinary course of trade for some other reason.  In fact, the
Japanese producers never argued that their sales to related parties in the home market were outside theordinary course of trade.  Had they done so, the Department would have considered the argument, and
there would have been a determination on the issue for this panel to review.
25. Second, Commerce’s use of downstream sales by related distributors,  in instances where
sales to related distributors fail the 99.5 per cent test, is consistent with the Agreement.  Article 2.1defines normal value as “the comparable price, in the ordinary course of trade, for the like product
when destined for consumption in the exporting country.”  Downstream sales of the like product to
the first unrelated buyer for consumption in the home ma rket  plainly come within this definition.  It is
irrelevant that the Agreement explicitly refers to downstream sales in discussing export price, but does
not explicitly mention them in discussing normal value.  (1st US sub., ¶ 230 - ¶ 236.)
26. The fourth issue is Commerce’s Early Determination of Critical Circumstances .  In its
investigation, the Department found critical circumstances for one out of three of the mandatory
Japanese respondents.  The US International Trade Commission, however, made a negative
determination on the issue in its final determination of injury.  Accordingly, no duties ever were, orwill be, assessed on subject merchandise entered before the Department’s  preliminary dumping
determination. (1st US sub., ¶ 239).  Although Japan does not contest the Department’s discretion to
make an early determination of critical circumstances, per se , it nevertheless argues that the early
determination violated the Agreement in three respects.WT/DS184/R
Page D-19
27. First, Japan argues that the Department violated Article 10.6 by basing its preliminary
determination of critical circumstances on the preliminary determination of the US International
Trade Commission that the imports posed a threat of injury (1st Japan sub., ¶ 201).  Article 10.6,
however, authorizes a finding of critical circumstances where an investigating authority finds that “. . .
the importer should have been aware that the exporter practices dumping and that such dumpingwould cause injury .”  Article 3, footnote 9, states that “unless otherwise specified” the term “injury”
includes “threat of material injury.” Therefore, because Article 10.6 does not otherwise exclude
“threat of material injury,” its reference to “injury” includes threat of injury.
28. Second, Japan argues that the Department violated Article 10.7 of the Agreement because it
did not have sufficient evidence that the conditions of Article 10.6 were satisfied (1st Japan sub.,
¶ 201).  Because “sufficient” is not defined, the term must be understood in context, and the contexthere is that of a preliminary determination of critical circumstances.  Article 10.7 permits an
administering authority, at any time after the initiation of an investigation, to take measures necessary
to collect final duties retroactively.  This indicates that “sufficient evidence” is sufficient for that time,
not the same degree of evidence that would be sufficient for a final determination.
29. The Department had “sufficient evidence” of all three conditions specified in Article 10.6, at
the time of its preliminary determination of critical circumstances.  As we have explained in full in
our written submission, the petition in this investigation contained far more than the “mere
allegations” that Japan has described.  The 700 pages of exhibits in the petition contain very
substantial information on all of the relevant points.
30. Finally, Japan argues that the US statute is inconsistent with Articles 10.6 and 10.7 because it
does not require explicit findings on every element specified in those articles for a finding of critical
circumstances.  (1st Japan sub., ¶ 208).  This argument is invalid.  A law is not inconsistent with a
WTO Agreement merely because it does not explicitly repeat those obligations in domestic law.  Inorder to be inconsistent with an inte rnational agreement, a domestic law must require  actions that are
inconsistent with the Agreement.  (1st US sub. at ¶ 282).   In any event, the Department made a
finding on every element specified in Articles 10.6 and 10.7 in making its early critical circumstances
finding in this case.
31. Thank you, Mr. Chairman and members of the Panel.  Mr. Chairman, if I may depart from the
prepared text once more.  I did not intend to take the Panel’s time today to address Japan’s allegationsof bias.  However, in light of Japan’s opening statement, I would like to make a few observations on
this point.  Of the four main issues regarding the Department of Commerce in this case, Japan has
virtually admitted that three of these issues have  nothing to do with the alleged bias.  First, with
respect to the facts available claim, the Department has applied facts available in literally hundreds of
cases.  Japan has provided no evidence that the application of facts available in this case was unusualor was related to the “Stand up for Steel” campaign.  Notably, Japan has not alleged that the
acceleration of this case prevented them from responding to the Department’s questionnaires in any
but a fully adequate manner.  Second, regarding the all-others rate issue, there is nothing to
differentiate this case from the multitude of other cases in which the Department has applied its
all-others methodology.  This methodology is standa rd procedure.  Third, regarding the “99.5 percent"
arms-length test, once again, this methodology involv ed nothing more than the Department’s standard
procedure.  In fact, the only new aspects of this case were, first, its acceleration by twenty days, and
second, the issuance of an early preliminary critical circumstances determination.  The Department’s
decisions with regard to these two aspects of the case were well within the Agreement’s provisions
and the Department’s discretion, given the context of the unprecedented import surge.  In sum, we canonly conclude that Japan feels that this is not a strong case and thus it needs to “juice it up” with the
bias claims.  If bias is to have an effect, the Pane l should be able to put its finger on it, such as on a
line of the computer program.  I would like to urge the Panel to review the Department’s exact
calculations and methodology to find any so-called bias.  Thank you, I will now turn over the openingWT/DS184/R
Page D-20
statement to Ms. Kimble, who will present the injury issues regarding the US International Trade
Commission.
32. Ms. Kimble.   Thank you, Mr. Chairman, and members of the Panel.  I will now address
Japan’s allegations concerning the captive production provision of the US antidumping statute and theUnited States International Trade Commission’s determination finding material injury due to dumped
hot rolled steel.  I will first discuss why Japan’s contentions regarding the captive production
provision misread the US statute and ignore provisi ons of the Antidumping Agreement.  Then, I will
show why Japan’s arguments about the USITC’s partic ular findings only reinforce the fact that the US
authority conducted a thorough and objective evaluation of all relevant factors in keeping with the
Agreement.
33. The captive production provision is consistent with the Anti-dumping Agreement.   B o t h
Japan and the United States agree on one important point -- a determination of injury that is consistent
with the Antidumping Agreement must assess injury  to the industry as a whole.  The US statute
directs the USITC to assess injury to the domestic industry, and defines the domestic industry as
“producers as a whole of a domestic like product.”  The captive production provision is consistentwith this statutory requirement and merely supplements it with an additional layer of analysis --
telling the USITC to focus primarily on the merchant market for particular factors when the USITC
determines that certain threshold requirements are satisfied.
34. Congress expressly recognized in adopting the captive production provision that “focus
primarily” on the merchant market did not mean to focus  exclusively .  The captive production
provision instead contemplates a two-step approach -- first the USITC is to look at the data for the
merchant market in particular as to certain factors, then it is to examine the data for the entire industry
as to all factors.
35. Moreover, the threshold requirements for application of the captive production provision are
designed to ensure that such a focus on the merchant  market would be helpful to an appraisal of injury
to the industry as a whole.  The USITC first must determine that there is a significant amount of
captive production  and  a significant amount of sales on the merchant market of the domestic like
product.  The statute thus limits application of the provision only to those circumstances where the
merchant market is not inconsequential and an analysis of the merchant market, separate from total
consumption, would be valuable to a consideration of injury to the domestic industry as a whole.
36. When there is a significant amount of captive production and significant sales on the
merchant market, an analysis of the merchant market in particular is likely to shed light on certain
factors listed in Article 3.4 of the Antidumping Agreem ent.  In contrast, Japan’s view that an authority
may not focus either primarily or secondarily on the merchant market would militate against anadequate assessment of these factors.  Most obviously affected are the Article 3.4 factors of output
and sales.  Sales only occur in the merchant market.  Prohibiting an analysis which takes into account
the merchant market, then, would have the effect of writing the requirement to examine sales out of
the Agreement.  Authorities only would be able to assess the impact of dumped imports on output.
The US statute assures an adequate consideration of both output and sales while Japan’s position,contrary to Article 3.4, would systematically require output to be decisive over sales when there is
significant captive production.
37. Indeed, some factors in Article 3.4, such as capacity utilization and productivity, pertain only
to output.  As to those factors, the captive production provision does not apply at all.  As to the factors
where the captive production provision does apply, the statute explicitly requires that the analysis
continue beyond an assessment of the merchant market to an assessment of the effects on the industry
as a whole.WT/DS184/R
Page D-21
38. The two-step, segmented analysis called for by the captive production provision is similar to
the type of analysis that a panel recently found consistent with the Antidumping Agreement.  In
Mexico -- Antidumping Investigation of High Fructose Corn Syrup from the United States , the panel
determined that a finding of injury resting exclus ively on an examination of only one segment of the
market violates the Agreement.  The decision stressed, however, that an examination of one, relevantsegment of the market to determine the effect of subject imports on the industry as a whole may be a
useful exercise in keeping with the Agreement.  The captive production provision does not require an
examination of one segment exclusively, the analysis criticized in HFCS , but requires the USITC to
look primarily at the segment of the market most relevant to any consideration of the effects of
dumped imports on the domestic industry as a whole -- the segment where competition with dumped
imports occurs.  The statute does not instruct the US ITC to limit its analysis to that segment, however,
and requires the USITC to make a material injury determination as to the industry as a whole.  Suchan approach is entirely in accord with Article 3.
39. The USITC’s determination was based on objective evidence showing injury.   In this case,
the captive production provision was not outcome determinative.  First, a dispositive majority of three
Commissioners rendered a binding affirmative determination under US law without applying theprovision.  Second, even those Commissioners that a pplied the provision found that both trends in the
merchant market and the overall industry trends showed that dumped imports were causing material
injury.  Therefore, even without applying the captive production provision, those Commissioners
would have reached the same conclusion.
40. In keeping with Article 3.1, the USITC considered the volume, price, and impact of dumped
imports on the domestic industry as a whole.  In keeping with Article 3.2, the USITC found that the
volume and share of consumption of dumped imports more than doubled in each year of the period of
investigation while the domestic industry’s market share declined significantly in both the merchant
market and for the industry as a whole.
41. The USITC objectively considered all the required factors listed in Article 3 for both the
merchant market and the entire industry in reaching its affirmative injury determination.  The
objective findings made by the USITC provide more than adequate support for an affirmative
determination and address Japan’s unfounded concerns with the decision rendered.
42. As to price effects, the USITC concluded that prices for both dumped imports and the
domestic like product showed mixed trends until mid-1997, after which point they dropped steadily
for the remainder of the period of investigation.  The USITC found that prices declined much more
than domestic producers’ costs and that at the same time consumption increased.  It identified no
change that could explain this new price pattern other than the fact that beginning in 1997, the
frequency of underselling by dumped imports also increased as their volumes surged.  The USITCfound that these trends established a causal relationship between the increasing dumped imports and
the significant depression of US prices.
43. Finally, the USITC’s analysis complied with Article 3.4 in its assessment of the negative
impact that dumped imports were having on the domestic industry.  Domestic producers ’ marketshare declined at a time of growing consumption because dumped imports captured all the growth in
the market in 1998.  As a result, the domestic industry’s appropriate capacity increases were
immediately transformed into excess capacity.  As the USITC found, these effects were reflected in
significant deterioration of the domestic industry’s financial performance.
44. Japan falsely portrays the USITC as using comparisons based only on two year changes in
data.  The USITC both analyzed trends over the entire three year period of investigation and
performed an analysis based on the most recent period.  The USITC has used this approach in many
prior cases where it found that the most recent period was highly probative of the current state of the
industry because of recent changes in the market conditions affecting the industry.  As we noted inWT/DS184/R
Page D-22
our brief, this analytical approach has led the USITC to reach both affirmative and negative
determinations in the past, and thus reflects neither a bias or a departure from past practice.
45. Further, analyzing trends within the period of investigation is entirely in keeping with the
Antidumping Agreement.  Trends for the latter part of the period of investigation obviously areparticularly revealing about the current  injury faced by the domestic industry -- the question that the
USITC was charged with addressing.  Examining data for the more recent years is in keeping with the
direction in Articles 3.4 and 3.5 to examine all relevant economic factors and all relevant evidence
before the authorities when conditions affecting the state of the industry changed over the course of
the period of investigation.
46. Here, the behaviour of dumped imports and the domestic industry underwent great change in
the last two years investigated.  Although Japan claims that 1997 was a banner year, demand did not
reach a record high until 1998.  Yet, in spite of this record demand, US shipments and market share
were at their lowest points in 1998.  Accordingly, in keeping with Article 3.4, the USITC sought to
explain why the domestic industry’s performance declined in 1997 to 1998 when it should have
improved and found that trends in dumped imports provided the answer.  The USITC found, forexample, evidence of increased underselling by dumped imports in the last period.  The USITC had to
consider this last two-year period in order to understand the nature of the important, and somewhat
contradictory, economic trends borne out by the data for these last two years.
47. Contrary to Japan’s argument, the USITC followed the requirement that it not attribute to
dumped imports the effects of other causes.  The GATT panel in Norwegian Salmon held it was not
necessary to quantify other causes and the effects of other causes need not be isolated in order to
satisfy that legal requirement.  Rather, that panel held it sufficient that other factors did not entirely
explain the evidence of injury found by the authority.  Here, the USITC clearly examined other
factors and found that they did not explain the indicators of injury which the evidence otherwiselinked to dumped imports.  The USITC properly did not attribute to dumped imports injury due to
other factors, in keeping with Article 3.5.
48. The USITC identified the strike at General Motors as having an influence on domestic prices
for hot rolled steel.  However, it found that the strike could only partially explain the price declines
that occurred in 1998 because, despite the strike, apparent consumption in the United States rose to
record heights rather than falling.  The USITC concluded that only the increased volume of dumpedimports and an increase in underselling of those imports could explain this paradoxical trend.
49. Similarly, the decrease in demand for pipe and tube cannot establish that the USITC attributed
to dumped imports the effects of other causes.  Despite that decrease in one source of demand, overall
demand rose in 1998.  An increased volume of undersold dumped imports provides an explanation ofwhy prices declined in the face of increasing demand.  The fall in demand for one particular type of
product which did not reduce overall demand does not.
50. The USITC recognized the effect on the domestic industry of intra-industry competition
between integrated producers and minimills.  It found, however, that dumped imports drew downprices for both integrated producers and minimills.  The USITC found that more of minimills’ output
is devoted to sales in the merchant market than the output of integrated producers.  Thus, the USITC
also found that the minimills had a worse financial performance than integrated producers during the
latter part of the period of investigation -- the time when dumped import volumes were the greatest.
Analyzing the performance of an established and efficient minimill that was identified as a priceleader, the USITC found that it  experienced significant price declines while dumped import volumes
were increasing and only stopped this trend when dumped imports exited the US market.
51. Finally, the USITC properly rejected attempts to blame nonsubject imports for the injury to
the industry producing hot rolled steel in the United  States.  Nonsubject imports maintained a stableWT/DS184/R
Page D-23
presence in the US market while dumped imports more than doubled their market share in both the
merchant market and the market as whole.  There is no basis to conclude that the USITC incorrectly
attributed to subject imports effects that were really due to the steady volume of nonsubject imports.
52. The captive production provision and the determination by the USITC are in keeping with the
Antidumping Agreement.  In fact, the captive pr oduction provision assures a full evaluation of the
factors listed in the Agreement.  The USITC’s de termination in this case objectively assessed the
effects of dumped imports on the state of the domestic industry as a whole in finding that they caused
material injury.
53. Mr. Hirsh.   Mr. Chairman and members of the Panel, we have devoted our efforts today to
demonstrating how each agency’s actions, in the context of the facts of each specific issue, areconsistent with the pertinent provisions of the Anti-dumping Agreement.  It is on that basis – and not
on the basis of vague allegations of conspiracy – that this Panel must judge the issues in this case.  At
this point, we would be pleased to entertain the questions of the Panel, as well as the questions of
Japan.  In turn, we look forward to posing questions to Japan.  Thank you, Mr. Chairman and
members of the Panel.WT/DS184/R
Page D-24
ANNEX D-4
Closing Statement of the United States
(23 August 2000)
Thank you Mr. Chairman.  This is Mr. Mc Inerney from the Department of Commerce.
I would note at the outset that, in its closing statement, Japan has chosen not to address any of
the specific substantive issues in this case, but instead has returned to its efforts to persuade the Panelthat all of the Department’s actions should be viewed as part of a conspiracy to treat Japan unfairly.
Japan wants this Panel to regard the United States’ repeated resort to its legitimate remedies under the
WTO Agreement to redress repeated dumping by Japa n as an abuse of antidumping measures.  But it
is no abuse to resort repeatedly to antidumping remedies in the face of repeated dumping.  Every time
that  Japan has trouble in its own market, it seeks to export the problem to the United States.Repeated resort to WTO remedies in the face of such repeated dumping is perfectly legitimate and
exactly what the Agreement provides for.  This case does not involve a conspiracy.  As Japan has
acknowledged, it involves substantial dumping in massive quantities.
The AD Agreement is a set of agreed limitations on the exercise of AD remedies.  The
question before this Panel is whether any of the Department’s specific methodologies or applications
of which Japan complains in fact exceed those agreed limitations.   I will now briefly turn to those
specific issues.
First, with regard to facts available, we will await further submissions from Japan  to see
whether they have revised their absolute position on this issue,  taken in their first  written submission,
that adverse inferences are never permitted.  This interpretation would encourage exporters NOT tocooperate in AD investigations, rather than to cooperate, as so plainly intended by Article 6.8 and
Annex II.
I would also encourage the Panel to recall that the Department’s approach to applying facts
available proceeds through three distinct steps: whether a resort to facts available is necessary,whether the selection of adverse facts available is justified, and, finally, if an adverse inference is to
be employed, the selection of the specific adverse facts available.  Japan has repeatedly collapsed
these three steps, so as to imply that, if the last step -- selection of the specific adverse facts available
--  was impermissible, the entire decision to resort to facts available was also impermissible.  This is
incorrect.  I hope that the Panel will keep these distinctions in mind in considering this issue.
With regard to both the joint venture (CSI) and the two companies that did not submit
conversion factors in a timely manner, there is a common thread - - passive resistance, rather than
cooperation.   These two concepts are worth pausing to consider.   First, what is cooperation?  The
Oxford English Dictionary says (approximately) th at cooperation is  “acting together for a common
purpose.”  How does this differ from passive resistance?   I think the most obvious example with
which we are all familiar is the difference between a good secretary and a bad secretary.  A good
secretary works with you to accomplish the same purpose, without having to be told in detail how
each step in this process is to be accomplished.  It is only necessary to tell her where you are going,
and she helps you get there.  A bad secretary does not outright refuse to cooperate.  She does not want
to get fired, just as an uncooperative respondent does not want to have facts available applied to it.
Instead a bad secretary drags her  feet - - needing to be prodded at each step, and requiring extremelyWT/DS184/R
Page D-25
specific instructions.  Occasionally, she will offer excuses along the line of “you didn’t tell me you
wanted a stamp on the envelope.”
This is a subjective line, but I think we all know from our everyday experience what I am
talking about.  And the behaviour of the Japanese co mpanies in this case with regard to the issues in
dispute falls into the category of passive resistance, not cooperation.  This is an especially effective
strategy for them because they control all of the in formation necessary to conduct the investigations.
Their approach was to limply go through the motions, with the Department of Commerce supposedly
obliged to tell them at every stage not only what was required, but how to get it.   The Panel is
supposed to believe that KSC cannot make greater efforts to secure the cooperation of a JV of which
it controls 50 per cent, and that NKK and NSC cannot calculate the weight of the steel they produce.
Half-heartedly going through the motions to generate a few pieces of paper for the file is NOTcooperation.  We all know the difference.
Finally, the Department’s selection of facts available is not punitive.  It is based on the
reasonable inference that the information withheld is less favorable to the respondent than other
information on the record.   The Department’s practice is only designed to give the respondent theincentive to cooperate, by placing it in a position where it will obtain a better result by cooperating.
Even adverse facts available are only presumptively adverse.  The Department cannot know whether
the facts selected are actually adverse, because it does not know the true facts.
With regard to “all others rates,” again, we are not entirely clear on Japan’s position.  Japan
originally seemed to be saying that all portions of facts available must be removed from margins used
to calculate the all-others rate.   This position is untenable because it reads “margins” in Article 9.4 as
“parts of margins.”  On the other hand, if Japan means that all margins that contain even a slight
component of facts available must be excluded, then there very often will be  NO all-others  rate. This
result is unacceptable.
The EC seemed to be searching for some middle ground, without any success.  This is
because Article 9.4 provides no such middle ground.  In any event, the EC’s  99 per cent facts
available hypothetical  is unrealistic.  When a company’s submission is mostly flawed, the
Department  throws out the whole response and resorts  to full facts available.   Such margins are not
used to calculate the all-others rate.
A final element in some of the arguments we heard today was that companies that did not
participate in the investigation should not be punished for the non-cooperation of the participants.  We
have two objections to this argument.  First, as I have noted, we cannot be sure that the
non-participants are really being punished, because we cannot know that the facts available selected
are actually adverse.  Second, to exclude all margins that are nominally based on facts available fromall-others rates would reward non-participants for the non-cooperation of participants.
With regard to the 99.5 per cent test, I would first note that there is every reason to regard
sales to related parties as presumptively outside the ordinary course of trade.  This is a very fair
reading of the Agreement and certainly cannot be considered to be inconsistent with the Agreement.  Iwould also like to emphasize again that, if a reseller passes the 99.5 per cent test, all of that resellers’
sales - - both above and below its average selling price  - - are used.
Japan has attacked the Department’s exception to that rule, on the basis that it imposes a
floor, but not a ceiling on prices treated as being in the ordinary course of trade.  But this is just whatthe cost-of-production test does - - it treats sales below  COP as being outside the ordinary course of
trade, but sales above  COP as usable sales for the purpose of calculating normal value.   This is
consistent with the whole logic of dumping.  Where dumping is occurring, it is precisely becauseWT/DS184/R
Page D-26
high-priced sales in the home market are, in fact, ordinary.  Discarding such sales as aberrations
would mask dumping.
The simple fact is that Japan does not want the United States to use its home-market sales,
presumably because it has a protected home market that ensures high-prices in that market.  This iswhat is behind Japan’s desperate attempt to argue that related-party resales in the home market do not
fall within Article 2.1's requirement for  “the comparable price, in the ordinary course of trade, for the
like product when destined for consumption in the exporting country.”   Japan would like to have all
of its dumping margins in the United States calculated by comparing its export prices to the
United States to its export prices to Canada - - an approach calculated to find no dumping.
Acceptance of Japan’s argument that related-party resales in the home market may not be
used to determine normal value would encourage foreign producers to manipulate normal value by
making all their home-market sales through related parties.  This would be easy to arrange, and would
force investigating authorities to use third-country sales or constructed value in every case - - a result
plainly not intended by the Agreement.
So, in reviewing this issue, I would urge th e Panel to keep in mind not only the individual
pieces of Japan’s argument, but the overall design of  that argument - - to force the Department to base
normal value on prices to third countries or on constructed value, rather than on prices in Japan.
Finally, with regard to critical circumstances, I would like to point out that, during the course
of this hearing, we seem to have heard in great depth and detail about every provision in Article 10
except  Article 10.7, which is the provision pursuant to which the Department acted in making its
preliminary determination of critical circumstances.  This case is not about whether the United States
could have collected final duties retroactively, for the simple reason that the United States did not
collect such duties, and agrees that it cannot do so.  It is about what effectively were preliminarymeasures taken to preserve the  option  of collecting such retroactive duties, if all of the conditions of
Article 10.6 were met in the final determination.
I would like to thank the Panel again for its consideration.  My colleague from the US
International Trade Commission will now present the closing statement for the United States on the
issues relating to injury.
I will now pick up on Mr. McInerney’s issue-by-issue approach.  I will look at two issues:
whether the captive production provision is consis tent with the Antidumping Agreement and whether
the  USITC’s determination in this case was based on objective evidence.
The captive production provision permits a better understanding of the effects of dumped
imports on the domestic industry because it directs the USITC to primarily focus on the merchant
market, where competition occurs.  This provision, de spite Japan’s argument to the contrary, requires
the USITC to consider both the merchant market and the entire industry when making this
assessment.
In this case, the captive production provision was not outcome-determinative because there
was a 3-3 split among the Commissioners as to whether the provision applied, but all the
Commissioners made an affirmative determination.  In any event, those Commissioners that applied
the provision properly analyzed the merchant market data because they looked at it in addition to the
data for the industry as a whole.  Looking at the market in this way, the USITC objectively consideredthe volume, price, and impact of those imports on the domestic industry over the period of
investigation, ensuring not to attribute injury from other causes to those imports.WT/DS184/R
Page D-27
ANNEX D-5
Oral Statement of Canada as a Third Party
 (23 August 2000)
I. INTRODUCTION
1 The Government of Canada appreciates this opportunity to provide its views to the panel on
certain issues in this dispute.  Canada reserved its right to participate as a third party in this
proceeding because of our substantial systemic interest in the proper interpretation of the Anti-
Dumping Agreement.  In this regard, Canada will confine its submissions to two issues:  (i) thedrawing of "adverse inferences " when recourse is had to the "facts available" provisions of Article 6.8
and Annex II of the Anti-Dumping Agreement;  and (ii ) the appropriate treatment to be accorded
captive production in injury investigations.
II. LEGAL ARGUMENT:  ISSUES ADDRESSED BY CANADA
(i) "Facts Available "
2. Turning to the issue of the United States' general practice regarding "facts available ", Canada
first wishes to clarify that it takes no position on the jurisdictional question of whether the Japanese
claim is properly before this Panel.  Canada’s  submissions are made in the event that the Paneldecides that it does have jurisdiction over the claim.
3. As set out clearly in our written submission, Canada cannot support Japan 's claim that the US
"practice of applying adverse facts available in certain situations to punish respondents" isinconsistent with Article 6.8 and Annex II to the Anti-Dumping Agreement because neither
Article 6.8 nor Annex II use the word "adverse ".
4. In Canada 's view,  the wording of Article 6.8 makes clear that an investigating authority may
have resort to the "facts available" provisions of the Anti-Dumping Agreement in circumstances
where "any interested party refuses access to, or otherwise does not provide necessary information
within a reasonable period or significantly impedes the investigation".  There is a direct link betweenthe factual circumstances of non-co-operation or impediment by the interested party and the use of
"facts available ".  This direct link, Canada submits, means that the use of "facts available " is, to a large
degree, predicated on actions by interested parties that are intended to hamper or have the effect of
hampering an investigation by an investigating authority.  Thus, Japan 's interpretation of Article 6.8,
which would encourage an interested party not to co- operate with investigating authorities, is clearly
at odds with the wording of Article 6.8.
5. Canada further submits that Article 9.3 of the Anti-Dumping Agreement provides that anti-
dumping duties may be imposed in an amount equal to the margin of dumping.  Where an
investigating authority has recourse to "facts available " as a result of an interested party 's refusal to
co-operate or its efforts to impede the investigati on, the drawing of adverse inferences is appropriate
so as to ensure that the imposition of duties under Article 9.3 is not frustrated by the non-co-operating
party obtaining the benefit of a dumping margin that is lower than would otherwise have been the casehad they cooperated or not sought to impede the investigation.WT/DS184/R
Page D-28
6. Canada submits that its view is reinforced by  a number of provisions in Annex II to the Anti-
Dumping Agreement, including, in particular, paragraph 7 of Annex II.  As the Panel knows,
paragraph 7 provides, in part, that "[i]t is clear, however, that if an interested party does not co-
operate and thus relevant information is being withheld from the authorities, the situation could lead
to a result which is less favourable to the party than if that party did cooperate".  In other words, non-co-operation can lead to higher dumping margins.
7. Further, Canada submits that if an investigating authority is precluded from drawing adverse
inferences when applying "facts available" in the face of non-co-operation or efforts to impede an
investigation, the object and purpose of the Anti-Dumping Agreement would be frustrated to the
extent that the Agreement provides that duties may be imposed as a result of an investigation
conducted in a manner consistent with the requirements of the Agreement.  If adverse inferences
could not be drawn, an interested party who refuses to co-operate or attempts to impede aninvestigation would benefit from actions that the Anti-Dumping Agreement seeks to remedy.  Canadasubmits that an approach to "facts available" that would clearly encourage non-cooperation, as
opposed to cooperation, cannot be consistent with the Anti-Dumping Agreement.
(ii) Captive Production
8. Turning to the issue of captive production, Canada notes that as part of its final injury
determination in this matter, the United States International Trade Commission (ITC) took into
account section 771(c)(iv) of the Tariff Act of 1930, as amended.  As the panel is aware, this provision
provides that in investigations involving domestic producers who internally transfer significant
production of like products, the ITC, when considering certain injury factors, will "focus primarily"
on the domestic merchant (i.e. commercial) market for the goods involved in such investigations.
9. Japan submits that the use of the captive production provision in US law is inconsistent with
Articles 3 and 4 of the Anti-Dumping Agreement because these provisions do not expressly allow for
a "focus " on anything less that all domestic production. Japan, although apparently recognizing the
existence of different segments within a domestic industry
1, submits that in particular, the definition
of "domestic industry " in Article 4.1 of the Anti-Dumping Agreement precludes segmentation of
internal transfers from the "merchant market".  Canada cannot support the Japanese claim of
inconsistency regarding the US captive production provision.
10. Canada first notes that Canadian practice with respect to investigations involving domestic
producers who internally transfer significant production of like products is similar to that of theUnited States.
 2
11. In Canada’s view, the purpose of providing an investigating authority w ith the ability to focus
on sales to the merchant market in appropriate circumstances is because it is in the merchant market
that the dumped imports being investigated compete directly against domestically produced like
products.  For example, in the flat-rolled steel sector, domestically produced hot-rolled steel may besold and used as an end product or may be further processed into, for instance, cold-rolled or
corrosion-resistant steel. Imported hot-rolled steel does not compete with domestically produced hot-
rolled steel destined for further processing into, fo r example, cold-rolled steel or corrosion-resistant
steel.
12. Canada submits that the Anti-Dumping Agreement contains no express provision with respect
to how captive production or internal transfers should  be considered by investigating authorities.  That
being said, the fact that like product is internally transferred for further processing into different goods
                                                     
1 See, for instance, First Submission of Japan at paragraph 36.
2 While an analogous provision does not exist in Canada 's anti-dumping legislation (The Special Import
Measures Act (R.S.C. 1985, c. S-15, as amended) this practice has been   developed by the CanadianInternational Trade Tribunal, the investigating authority that deals with injury investigations in Canada.WT/DS184/R
Page D-29
for different end uses than like product sold into the merchant market is clearly a relevant economic
factor for purposes of Article 3.4 of the Anti-Dumping Agreement.
13. Canada also submits that the Japanese position blurs the distinction between the concepts of
"domestic industry " and  "domestic market(s) ".  This distinction is clearly recognized in Article 3.1 of
the Anti-Dumping Agreement that provides that  a determination of injury shall include "… an
objective examination of  the effect of the dumped imports on prices in the domestic market for like
product  …".
14. Thus, in the very first provision of Article 3 of the Anti-Dumping Agreement, investigating
authorities are expressly directed to examine the impact of dumped imports on sales of like products"in the domestic market for like products", i.e. the market in which dumped imports compete against
domestic like product.  In circumstances involving internal transfers, such as with hot-rolled steel, this
will be the merchant market.
15. Canada further submits that in addition to Articles 3.1 and 3.4 of the Anti-Dumping
Agreement, the price effects described in Article 3.2, which investigating authorities are required to
consider, again necessarily focus on competition between dumped imports and domestic like product.
In circumstances involving internal transfers of domestic production, as well as sales of like productto domestic customers, consideration of the merchant market should be included in an injury analysis
because it is in the merchant market that the price effects of the dumped imports will be reflected.
16. Accordingly, for these reasons, failure to a llow investigating authorities to differentiate
between production that is internally transferred and production that is sold into the domestic market
in competition with dumped imports, in appropriate circumstances, would deprive Article 3 of the
Anti-Dumping Agreement its proper application and result in investigating authorities being unable toaccurately determine whether a domestic industry had been injured, or threatened with injury.
III. CONCLUSION
17. For these reasons, Canada respectfully submits that, in appropriate circumstances, the
drawing of adverse inferences in dealing with "facts available " and the ability of investigating
authorities to focus on the merchant market in injury  investigations, are both fully consistent with the
Anti-Dumping Agreement.WT/DS184/R
Page D-30
ANNEX D-6
Oral Statement of Chile as a Third Party
(23 August 2000)
Chile is taking part in this case because, like many other countries, it is concerned by the
United States' regulations and practices with respect to investigations and the application of anti-
dumping measures.  What Japan has experienced in this case is a source of constant concern and
constitutes a threat to Chilean exporters.
Chile is a country which depends primarily on its exports, and in spite of the diversity of
destinations, the United States continues to be a very important market for Chilean exports,
accounting for some 20 per cent of total export revenue in 1999.  Because of the way in which the
United States applies these measures, a considerable share of the burden of proof during the
investigation process falls on the exporters, and in spite of the efforts and the resources invested in
their defence, experience has shown that the system ultimately makes it very difficult to avoid beingaccused of dumping.
This Panel is a case in point.  I shall focus my submission on the subjects we consider the
most important, without necessarily following the same order as the other parties.
Captive production
The captive production provision in United States law is, in our view, entirely contrary to the
provisions of the Anti-Dumping Agreement, which require that the determination of injury should be
made on the basis of "total" domestic production, whatever its destination.
Irrespective of whether the application of the United States' domestic provision on captive
production leads to an affirmative or negative determination of injury, what counts is that the relevant
WTO provisions require the investigating authority to analyse injury with respect to total domestic
production covering all of the domestic producers of like products, whether that production is sold or
used for own consumption.  In our view, Articl es 3 and 4 of the Anti-Dumping Agreement, in
particular Article 4, in no way permit that under certain conditions, the determination of injury shouldfocus primarily on sales in the domestic market.  The Agreement is very clear in this respect:  it
requires an examination of the domestic producers as a whole of like products.
To exclude captive production is to disregard an essential element:  the rationality and
behaviour of an industry in deciding to produce greater or lesser quantities for domestic sale or toproduce goods with a higher value added, depending on market conditions.  Failing to consider this
element is tantamount to ignoring the effect of factors other than dumped imports on production
decisions.
In our view, to give greater priority to production sold on the domestic market is contrary to
Articles 3 and 4 of the Anti-Dumping Agreement.WT/DS184/R
Page D-31
Use of adverse facts available
In Chile's view, both the legislation and the practice of the United States with respect to the
use of adverse facts available fall within the terms of reference of the Panel.
A first issue requiring clarification is whether or not there was any cooperation on the part of
the respondent exporting enterprises, and more specifically, whether in this specific case there could
truly have been cooperation, given the particular circumstance that there were two related enterprises
which were opposed to each other (petitioner and respondent).
Irrespective of a company's percentage share in, or level of control over another company
(Kawasaki had a 50 per cent stake in the affiliate), if one is the petitioner and the other is therespondent, there is a clear conflict of interest, and just because one company controls the other does
not mean it can require it to supply information.  As a matter of principle, companies with a conflict
of interests can hardly be expected to cooperate.  Thus, one cannot, in an investigation, accuse the
respondent enterprise of failing to cooperate.
The analysis memorandum submitted by the United States as exhibit US/B-22 recognizes the
conflict of interest between the two related companies (Kawasaki Steel Corporation and California
Steel Industries), and points out that the way to avoid a conflict of interest between petitioners and
respondents that are related would be for the related producer not to join the petition.  However, in the
case at issue this was not possible.  The situation already existed, and the conflict of interest was nolonger avoidable.  Nor does it seem appropriate that the DOC should prescribe, as the only viable
solution in such cases, something so drastic as th e non-participation of the related petitioner in the
petition.
Having recognized the conflict of interest, one would have hoped that the DOC's approach
would have been to refrain from penalizing the exporting enterprise which, for such understandable
reasons was unable to supply information.  Accordingly, we consider the position adopted to be
contrary to Article 6.13 and 6.8 and Annex II.
The second issue is that notwithstanding these considerations, once it is decided to use the
facts available, it is wrong from every point of view to apply the most adverse facts.  This United
States legislation and practice violates Article 6.8 and Annex II of the Anti-Dumping Agreementwhich, while they permit an investigating authority to use other sources of information if there are
parties which do not cooperate, nowhere specify that this must be the most adverse facts.  The spirit of
the provision is to enable the investigating authoritie s to fill in any gaps in their information, but in no
case to "penalize" enterprises which do not supply information.  We must bear in mind that anti-
dumping measures are exceptional, and must not go beyond what is permitted under the relevantprovisions or still less change the meaning and purpose of those provisions.
"All others" rate
Article 9.4 of the Anti-Dumping Agreement is quite clear as to how the margin of dumping
should be calculated for exporters not included in the investigation:  it clearly stipulates that  de
minimis  and zero margins and margins from exporters who do not cooperate should be excluded from
the weighted average.  And yet the DOC, in its inve stigation, included in its calculation the margins of
dumping of companies accused of not cooperating, thus violating the said provision of the Anti-
Dumping Agreement.WT/DS184/R
Page D-32
Determination of critical circumstances
Regardless of the fact that the early determination of special circumstances by the DOC may
not have affected Japan's exports, a view which Chile does not share since any determination,
including an initiation determination, negatively affects exports, what is important is to determinewhether the DOC properly considered the existence of dumping causing injury to the domestic
industry, in conformity with the WTO.  In this connection, we continue to believe that the DOC did
not have sufficient evidence under Article 10.6 and 10.7 of the Anti-Dumping Agreement.  The
information from the petitioner or from press clip pings does not, in our view, meet the standards
established by the Agreement for reaching a conclusion that there was damage caused by dumping,
since such information can hardly be considered as "positive evidence" or as representing an
"objective examination" under Article 3.1 of the Anti-Dumping Agreement.WT/DS184/R
Page D-33
ANNEX D-7
Oral Statement of the European  Communities as a Third Party
(23 August 2000)
1. On behalf of the EC, let me express first our appreciation for the opportunity to submit our
views in this dispute.
2. In our Oral Statement, we will address four issues of legal interpretation raised by this dispute
which, for systemic reasons,  are of particular interest to the EC:
• first, the use of “adverse” inferences in applying the “facts available” provisions of Article
6.8 and Annex II;
• second, the consistency with Article 9.4 of the US practice to include only those dumping
margins which are “entirely” based on “facts available” when calculating thedumping margin for non-investigated exporters;
• third, the consistency with Article 2 of the “99.5 per cent test” applied by the US authorities
in order to determine whether domestic sales between related parties are “in theordinary course of trade”; and
• finally, the treatment of “captive production” in injury determinations.
A. Choice of “facts available”
3. Japan contends that, when resorting to “facts available” in accordance with Article 6.8, the
investigative authorities may not draw “adverse inferences”.
1  According to Japan, “facts available”
may  be used only as “neutral gap fillers”.2
4. The EC disagrees.  Japan’s contention has no basis on the Anti-dumping Agreement and, ifupheld, would encourage systematic non-cooperation and, ultimately, render impossible the conduct
of anti-dumping investigations.
5. Usually, when resorting to Article 6.8,  investigative authorities are required to make a choice
between different sets of “facts available”. In doing so, they have a  large measure of discretion.  Of
course, the facts must be pertinent and, to the extent possible, verified.
3  There is, however, no
requirement in the Anti-dumping Agreement to the effect that the investigative authorities must
choose always “facts available” which yield a “neutral” result,  let alone those facts which lead to the
lowest dumping margin.
6. To the contrary, Paragraph 7 of Annex II contemplates expressly that the use of “facts
available” may lead to “a less favourable result”.  Furthermore, as demonstrated by the detailed
                                                     
1 Japan’s First Written Submission,  para. 57.
2 Ibid., para. 58.
3 Cf. Annex II, paragraph 7, second sentence.WT/DS184/R
Page D-34
textual analysis of Annex II made in the US submission4, many of  the other provisions in that Annex
are premised on the notion that “facts available” may be “adverse”  to the party concerned.
7. When selecting “facts available”  the investigative authorities may take into account, among
other circumstances, the degree of cooperation of the party concerned.  If an exporter refuses toprovide certain information,  it is reasonable to infer that it does so because that information is less
favourable than the information contained in the co mplaint or than the information provided by other
exporters.  Such inferences are not “punitive”.
5  Indeed, strictly speaking, they are not even “adverse”.
They are just logical inferences, based on the assumed rationality of the exporter’s behaviour: a
rational exporter would cooperate, if it could expect to obtain a better result by doing so than on the
basis of “facts available”.
B. Use of dumping margins based “partially” on facts available in the “all- others” rate
8. Article 9.4 prohibits the use of any dumping margin “established under the circumstances
referred to in paragraph 8 of Article 6”, whether “entirely” or “partially”.  Thus, the EC agrees with
Japan that, by excluding from the “all-others rate” only those dumping margins which are based“entirely” on facts available, US law is inconsistent with Article 9.4.
9. The US attempts to justify its practice by arguing that facts available “plugs” with a negligible
impact on the dumping margin are used in many investigations.
6  The US definition of what
constitutes a margin “partially” based on facts available, however, is by no means confined to suchcases.  The measures at issue show that the US authorities do not hesitate to include in the “all-others
rate” margins which are based to a significant extent on facts available.  Indeed, it seems that, under
US law, a dumping margin which was 99 per cent based on facts available would still have to be
included in the “all-others rate”.  In the EC’s vi ew, that would be clearly prohibited by Article 9.4.
10. The EC would agree, nevertheless, that Article 9.4 does not require to disregard the dumping
margin in every instance where facts available have been used.  Such a formalistic interpretation of
Article 9.4 would often lead to a situation where no margins can be used in order to calculate the “all-
others rate” in accordance with the method set out in that provision  That result would be detrimental
to the non-investigated exporters and contrary to the objective sought by Article 9.4.
11. The purpose of excluding the margins based on facts available is to avoid that non-
investigated exporters may be affected adversely by the lack of cooperation of those exporters which
have been given the opportunity to be investigated.  That rationale, however, does not apply in those
cases where, to borrow US terminology, the investigative authority limits itself to use a non-adverse
“plug” in order to fill a gap in the information pr ovided by a cooperative exporter.  The EC, therefore,
considers that Article 9.4, when read in light of its object and purpose, does not prevent the inclusionin the “all-others rate” of margins based on facts available, where resort to such facts is limited and no
adverse inferences have been drawn.
12. While the EC is of the view that US law is inconsistent with Article 9.4,  it concurs with the
US that in Article 9.4 the term “margin” refers to each exporter’s overall dumping margin, and not tothe margins for individual transactions, models or sales channels.
7  Therefore, Japan’s claim that the
US authorities should have excluded from the “all-others rate” only those “portions” of each
                                                     
4 US First Written Submission, paras. 60-68.
5 Japan’s First Written Submission,  paras. 58-59.
6 US First Written Submission, para. 200.
7 US First Written Submission, para. 191.WT/DS184/R
Page D-35
exporter’s margin based on facts available8 is clearly unfounded and should be rejected by the Panel.
As argued by the US, that piecemeal approach  would be unworkable and open to manipulation.9
C. The “99.5  per cent” test
13. Japan does not seem to dispute that sales between related parties may be disregarded as not
being “in the ordinary course of trade” where they  are not made at arm’s length.  Instead,  Japan’s
complaint is directed against the “99.5 per cent” test applied by the US authorities in order to
determine whether sales are at arm’s length
14. In contrast, Korea has put forward the view that the Anti-dumping Agreement “only
recognises one basis for disregarding sales as outside the ordinary course of trade”10, that is, where the
sales are made below cost.  Korea’s position is surprising as it appears to contradict its own anti-
dumping law.11  It is also incorrect.
15. The ordinary meaning of the expression sales not  “in the ordinary course of trade” is by no
means confined to sales below cost.  It may encompass as well other categories of sales, including inparticular sales between related parties where the price is affected by the relationship.
16. Article 2.3 acknowledges that, where the importer and the exporter are associated, the export
price may be “unreliable”.  By the same token, domestic prices may be “unreliable” and, therefore,
not “in the ordinary course of trade”, where the seller is related to the buyer.
17. The terms “sale in the ordinary course of trade” are used also in Article VII.2 b) of GATT.
The explanatory Note Ad paragraph 2 of Article VII confirms that the phrase “in the ordinary course
of trade” may be construed as “excluding any transaction wherein the buyer and seller are not
independent of each other and price is not the sole consideration”.
12
18. Japan  claims that the 99.5 per cent test violates both Article 2.1 and Article 2.4.  The ECconsiders, nevertheless, that the issue raised by Japan is not addressed by Article 2.4.  That Article
governs exclusively the comparison between normal value and export price.  The 99.5 per cent test is
not applied at that stage, but instead at the previous stage of calculating the normal value.
19. Contrary  to Korea’s assertions, the first sentence of Article 2.4 does not impose “a general
fairness requirement in the administration of antidumping proceedings”.
13  By its own terms, that
sentence applies only with respect to the “comparis on” between the export price and the normal value.
The calculation of the normal value precedes that comparison and is not subject to any general
“fairness” requirement.
20. Therefore, the only issue before the Panel is whether the 99.5 per cent test applied by the US
authorities may be considered as a “permissible” interpretation of the terms “in the ordinary course of
trade” in Article 2.1.
21. In the EC’s view,  it is not.   Of course,  if the prices charged to related customers are lower
than those charged to unrelated customers, that is an  indication that the former may be affected by the
                                                     
8 Japan’s First Written Submission, para. 140.
9 US First Written Submission, paras. 201-202.
10 Korea’s Submission, para. 29.
11 US First Written Submission, para. 206.
12 See also Article   1.2   of the Agreement on Implementation of Article VII of the GATT 1994, which
allows to disregard the transaction value of sales between related parties under certain circumstances.
13 Korea’s Submission, para. 8.WT/DS184/R
Page D-36
relationship.14  But a mere 0.5 percentage point average price differential is simply too small to reach
any definitive conclusion.  The EC considers that it is unreasonable, and contrary to Article 2.1, for
the US authorities to treat in all instances such a sm all differential as irrefutable evidence that sales
are not made in the ordinary course of trade.  This does not rule out the possibility, however, that in
the case at hand the price differentials between related and unrelated customers may be large enoughto justify the conclusion that sales to unrelated customers were not “in the ordinary course of trade” .
D. Treatment of Captive Production
22. We will conclude our Oral Statement by addressing briefly Japan’s claim against the captive
production provision in US law.  In answering this claim, the US has provided a description of the EC
practice.
15  That description is not entirely accurate.  The EC, therefore, would request the Panel to
disregard it.
23. The EC agrees with the US that, where a significant portion of domestic output of the like
product is for captive use, it is not inconsistent with the Anti-dumping Agreement to focus the injury
analysis on the “merchant” or “free” market.  To the contrary,  that focus is needed in order to avoidthat the effects of dumped imports become obscured through the use of aggregate data.  Captive
production does not compete directly with dumped imports.  Therefore, the immediate injurious
effects of dumped imports take place in the free market and must be observed and assessed primarily
in that market.
24. Japan’s submission places considerable reliance on Mexico – HFCS
16. That case, however,
was concerned with a very different factual situation.  In Mexico - HFCS , the same product was sold
in two different markets: the industrial market and the household market. The Panel condemned
Mexico for looking into the effects of dumped imports exclusively in one of those two markets.  By
contrast, in the case at hand, there is but one market: the “merchant” market. Therefore, the effects ofdumped imports can be observed only in that market.
25. As a final comment, the EC would note that both Japan and the US appear to assume, on the
basis of Article 4.1, that the existence of injury must be established always with respect to the whole
of the domestic production.  The EC would recall that Article 4.1 allows to consider as the “domestic
industry” those producers who account for a “major proportion” of the total domestic production.  The
US, nevertheless, has not argued in this case that the domestic production for the “merchant market”constitutes a “major proportion” of its domestic production.
                                                     
14 Cf. Article 1.2(b) of the Agreement on Implementation of Article VII of the GATT 1994.
15 US First Written Submission, paras. 44-47.
16 Panel report on Mexico – Anti-dumping Investigation of High Fructose Corn Syrup from the
United States, adopted on 28 January 2000, WT/DS132/R.WT/DS184/R
Page D-37
ANNEX D-8
Oral Statement of Korea as a Third Party
(23 August 2000)
On behalf of the Republic of Korea, I would like to thank the panel for this opportunity to
make an oral statement.  As a third party to this case, we would like to briefly address certain issuesbefore the panel, which supplements the written submission made by Korea on 31 July 2000.
(Fair Comparison)
We would like to begin by drawing the panel's attention to the issue of the fair comparison
requirement in the Anti-Dumping Agreement.  As a preliminary matter, Korea wishes to respond to a
point made by the EC in its oral statement at the first substantive meeting.  EC referred to Korea’s
written submission and argued that the first sentence of Article 2.4 does not impose a general fairness
requirement, since that sentence applies only with respect to the comparison between the export price
and the normal value.  Korea is of the view that fairness is a general principle of law, and the firstsentence of Article 2.4 is a reflection of such a general principle.  In this connection, Japan argued in
its first written submission that administerin g authority should implement the Anti-Dumping
Agreement in good faith, which is again a general principle of law as embodied in Article X.3 of the
GATT of 1994.
Thus, Korea believes that fair comparison is an overarching, free-standing obligation which
must be met and which governs all aspects of the determination of dumping.  Article 2.4 of the Anti-
Dumping Agreement states that "a fair comparison shall be made between the export price and the
normal value."  The requirement is unconditional,  not limited to certain circumstances, and is
fundamental to the Anti-Dumping Agreement.   Any methodology for anti-dumping calculations and
comparisons must respect this fundamental principle which has been set out as an independent, free-
standing requirement of the Anti-Dumping Agreement.  The question is whether the methodologyemployed by the US meets this test of "fairness".
Unfortunately, the US actions in this case did not meet the "fairness" requirement in  many
important instances on top of the fact that they were inconsistent with various articles in the Anti-
Dumping Agreement, including Articles 2, 6 and 9 as well as Annex II.  Korea wishes to elaboratethis point through several specific examples.
First, the Commerce Department applied "facts available" against certain US sales made by
Kawasaki Steel Company ("KSC") even though the information which was allegedly not provided to
the Commerce Department could not be obtained by KSC because it related to transactions with CSI,one of the petitioners.
Let’s be perfectly clear here -- it was CSI which withheld the necessary information.  CSI’s
interests as a petitioner were antithetical to the interests of KSC, as CSI made clear by bringing and
pursuing the petition and refusing to cooperate with KSC and the Commerce Department.  KSC, on
its part, made repeated efforts to obtain the necessary information.  All these efforts were wellWT/DS184/R
Page D-38
documented and reported  to the Commerce Department.  Given the situation, it was not “fair” to
penalize KSC, while it was CSI which withheld the necessary information.
In this context, Korea wishes to refer to a point made by both Canada and the EC through
their oral statements.  Canada and the EC argued that Japan is wrong in interpreting Article 6.8 thatthe investigative authorities may not draw adverse inferences.  Korea wishes to put aside for a
moment the question of interpretation of Article 6.8.  The more immediate question is the factual
circumstance in which the DOC applied ‘facts available’ rule to the KSC’s sales to the CSI.  It was
CSI, and not KSC, that withheld necessary information.  Given such a factual circumstance, it was not
fair to impose punitive dumping margin on KSC.  This point is not affected by any difference in
interpretation of Article 6.8.  Korea wishes to make the same point for the following example as well,
which is DOC’s application of ‘facts available’ rule to the conversion factor.
The Commerce Department also applied adverse "facts available" to certain transactions by
NKK Corporation and Nippon Steel Corporation on the ground that information on a minor
adjustment factor was not provided.  That minor deficiency, which was later corrected in time, was
the basis for applying a very high margin from anot her sale by these companies to the sales with the
alleged deficiency.  The Commerce Department is very clear about the reason that it selected this
margin.  It had nothing to do with the comparability of these sales nor with any other efforts to assure
a "fair comparison."  The Commerce Department selected that margin to obtain a punitive result.
The Commerce Department’s actions were particularly unfair in view of the fact that both
NKK and NSC submitted necessary information on the conversion factor after the Commerce
Department’s preliminary decision but well within the specified period before verification.  The
Commerce Department simply refused to verify the additional information.   Instead, it imposed
punitive margins on relevant sales by NKK and NSC by unfairly applying  “facts available”.  Given
the situation, it was not fair to penalize NKK and NSC irrespective of their best efforts.
Furthermore, the US "arm’s-length test," which it used for sales to affiliated parties, is
fundamentally unfair.  It is biased , because it includes only higher priced sales in the domestic
market.  According to the particular methodology employed by the US, the Commerce Department
includes only the sales to an affiliated party if their weighted-average price is equal to 99.5 per cent or
greater than the weighted-average price of sales to non-affiliated customers.  The gap between the
minimum price included and the weighted-average price of sales to non-affiliated customers is only0.5 per cent.  This level is below the de minimis  level established to determine whether dumping is
occurring.  On the other hand, there is no maxi mum price over which transactions would not be
included in the calculation of margin.  This means that only higher priced sales, which are more likely
to result in dumping margins, are included for compar ison purposes.  Thus, the US arm’s-length test is
arbitrary, biased and cannot be sustained as a "fair comparison".
(New US policy on critical circumstances)
Apart from Korea’s general concern about “fairness” as a fundamental element of anti-
dumping measures, there is one methodology employed  by the US about which Korea is particularly
concerned.  That is with respect to the US decision on critical circumstances.  The US improperly
based a critical circumstances finding in this case on a mere threat of injury finding despite the fact
that present injury is required by Article 10.
The Anti-Dumping Agreement provides for very limited circumstances under which duties
can be applied retroactively.  Article 10.2 and Article 10.6 provide those limited circumstances.  In
the case of Article 10.2, duties can be applied only back to the provisional duty period if a present
injury determination has been made.  In case of determination of threat to injury, duty can be imposed
only from the date of the threat of injury as provided in Article 10.4.  Article 10.6 allows the duties toWT/DS184/R
Page D-39
be applied during the provisional period and 90 days prior to that period in certain limited
circumstances as defined in Article 10.6.  In other words, the Article  10.6 remedy is additional to the
provisional remedy as defined in Article 10.2.  Thus, Article 10.2 and Article 10.6 must be read
together in context to require that there must be an affirmative determination of actual present injury
in order to make a critical circumstances finding.
The plain language of Article 10.6 also leads to such an interpretation.  The only way for an
importer to "know" that dumping is occurring and that  it would cause injury is for injury to actually
exist.  This is not only what Korea believes but also  used to be the view of the ITC of the US as well.
Furthermore, the requirement for present injury is  the only interpretation which comports with the
limited object and purpose of additional retroactive duties as defined by Article 10.6 -- i.e., to assure
that the remedial effect of the final dumping duty is not undermined.  When there is only a threat of
injury, there is no question that final dumping duties alone will suffice to provide a remedial effect to
prevent injury.  The need for additional remedy as defined in Article 10.6  arises only in a present
injury context when the final duties may be too late to serve their full remedial purpose.
From the above, it is clear that the Commerce Department issued critical circumstances
determination in gross violation of the Anti-Dumping Agreement.  The Commerce Department
determination was also at variance with the International Trade Commission’s decision, which found
only threat of injury in the instant case.  Furthermore, Commerce’s action had the very real and
intended effect of chilling trade, as was well described in the first submission of Japan.
The US Government recently announced, as part of its Steel Action Plan, that it intends to
continue its new critical circumstances policy -- at least insofar as steel cases are concerned.  Such a
policy, if not properly sanctioned, would have a serious chilling effect upon the proper functioning of
the rule-based multilateral trading system.  The pur pose of the Anti-Dumping Agreement is not to halt
trade -- it is to investigate whether trade in question has been fair or not.  For this reason, the problems
raised by the critical circumstances decision of the US should be fully addressed by this Panel.
Thank you.WT/DS184/R
Page D-40
ANNEX D-9
Opening Statement of Japan at the Second Meeting of the Panel
(27 September 2000)
INTRODUCTION
1. The right to impose anti-dumping measures is limited and does not allow a Member to run
roughshod over its international obligations.  The United States asks the Panel to convert the A-D
Agreement from a set of international rules restricting imposition of anti-dumping measures into a
weapon with which Authorities can penalize respondent s.  But, the Agreement is not a weapon to be
wielded by Members.  Rather, it is a carefully worded set of restrictions aimed at curbing domesticlaw abuses to the international trade system.
2. Here, the Panel first must ask whether the United States has respected the restrictions set forth in
the treaty text.  Second, the Panel must ask whether the United States has respected its obligation to
interpret the treaty text in good faith.  Analyzed appropriately, it is clear to us that United States has
not respected its obligations.
I. SPECIFIC ANTI-DUMPING AGREEMENT CLAIMS
A. USDOC
1. Facts Available
3. Japan’s claims against USDOC’s use of adverse facts available involve not only the general
practice itself, but also the manner in which that practice was applied in this case.
(b) USDOC Practice
4. I would like to clarify our position on the use of facts available.  We have not asserted, as the
United States claims, that the application of facts available can never turn out to be less favourable.
Our claim is nothing more and nothing less than what a careful reading of Article 6.8, together with
Annex II, yields.
5. What we have said is that facts available must be logical and reasonable.  The most logical or
reasonable facts available, in certain instances, may turn out to be adverse to a respondent.  But, it is
critically important to understand that Paragraph 7 of Annex II does not give the United States a
license to punish.  The goal of Paragraph 7 of Annex II is to find information that most closely
approximates the truth to calculate the most accurate dumping margin given the information available.
The many other detailed provisions in Annex II confirm this objective.
6. The United States tries to make its policy sound benign by suggesting that the adverse inferences
they draw are always reasonable.  Wishing to hide from the Panel the punitive nature of a policy
whose stated purpose is to “provide an incentive to cooperate,” the United States argues that it is
always logical to speculate that any missing information is adverse to the respondent.  We disagree.WT/DS184/R
Page D-41
The US practice has no textual basis and must stop.  The United States improperly interprets
Article 6.8 and Annex II, particularly Paragraph 7 of Annex II, to allow an authority to create
incentives—quite strong incentives, in fact—to force a respondent to do exactly what the authority
tells it to do, just like a bad boss commanding a faithful secretary.  But, Paragraph 7 significantly
restricts an authority’s use of secondary data.  Although the third sentence of Paragraph 7, in and ofitself, may result in an incentive, it does not permit an  authority to create its own incentives to force a
respondent to comply with its instructions.
7. The Agreement contemplates that an authority w ill tailor its choice of facts available to the
specific circumstances surrounding the missing information.  USDOC makes no effort whatsoever to
do this.  Instead, USDOC purposefully homes in on an extremely high margin as the gap filler; the
United States admits that USDOC does so to give respondents an incentive to cooperate.
8. In addition, Paragraph 7 does not permit an authority to punish a respondent with adverse facts
available even to achieve a goal that is not related to the investigation.  The US has confessed that it
punished KSC, NSC and NKK with adverse facts available to create an incentive for future
respondents to comply with US demands. Japan recognizes the difficulties faced by authorities in
administering anti-dumping investigations, but Article 6.8 and Annex II do not permit the
United States to sacrifice accurate margins, a basic goal of the A-D Agreement, by ignoring recordevidence and drawing unreasonable inferences merely  to send a warning to future respondents.  In
short, the US interpretation is impermissible; it is not supported by the text, object and context of the
A-D Agreement.
(c) KSC
9. KSC’s experience is a classic example of a facts available policy gone bad.  First, USDOC did not
demonstrate that the data it requested was necessary, as required by Article 6.8.  CSI’s resale data
would have been necessary only if USDOC used constructed export price.  But Article 2.3 does not
require authorities to construct an export price; it only allows them to do so if the export price is
“unreliable because of association or a compensatory arrangement.”  USDOC did not check the
reliability of this sales data -- which is demonstrated by the fact that USDOC was unaware that KSChad provided the KSC-to-CSI sales data with its Section A response.
10. Second, USDOC did not establish that KSC withheld the requested data.  USDOC ignored the
fact that the company whose information USDOC demanded was a petitioner.  As we explained in our
second submission, USDOC has taken such peculiar facts into consideration in previous cases, but
chose not to do so here.  USDOC blindly treated KS C and CSI as a single company -- despite the two
companies’ obvious conflict of interest given that  one was suing the other under the US anti-dumping
law.  The decision to apply an adverse inference is all the more inappropriate, as USDOC did notprovide assistance to KSC in spite of the requirement of Article 6.13.
11. Third, even if USDOC had provided the requested guidance and still ultimately deemed KSC’s
situation to require the use of facts available, the selection of the second-highest dumping margin was
neither reasonable nor logical.  Such an adverse inference would assume that KSC was aware that
CSI’s resales would have led to a dumping margin as high as the one used by USDOC.  This wasclearly not the case, because KSC lacked access to CSI’s data.
(d) NSC and NKK
12. USDOC’s approach to NSC and NKK is just as troubling.  First, it was clearly unnecessary to use
facts available, because the data requested had already been provided for USDOC to verify.  Second,
the mistakes by the companies were unintentional.  They did not malevolently withholdWT/DS184/R
Page D-42
disadvantageous data as the United States suggests.  Rather, USDOC did not satisfy the Article 6.13
requirement to provide assistance.
13. Third, the selection of facts available was neither reasonable nor logical.  The only interest for
USDOC was to select a margin “that is sufficiently adverse so as to effectuate the statutory purposes
of the facts available rule, which is to induce respondents to provide the Department with completeand accurate information in a timely manner”.  In spite of the requirement of special circumspection
stipulated in Paragraph 7 of Annex II, USDOC de monstrated no concern for using an estimate as
close to reality as possible.
14. It is true that USDOC also mentioned in its final determination that it sought a margin “that is
indicative of NSC’s customary selling practices and is rationally related to the transactions to which
the adverse facts available are being applied.”  But this case shows how meaningless and hollow this
standard formula is.  In this case, USDOC had only to look at the data submitted by the companies toget the real dumping margin.
15. Indeed, NSC and NKK’s situation is perhaps the best example of how USDOC’s approach to
adverse facts available is punitive.  Even though USDOC had the companies’  information, it chose to
expunge it from the record and apply a rate that had no relevance to the transactions for which facts
available were deemed necessary.  USDOC did not apply an inference here, adverse or otherwise:when USDOC chose a margin or price that was as adverse as possible for NSC and NKK, it was not
making an inference based on the companies’ alleged non-cooperation, but rather punishing the
companies for not turning over the information sooner.
16. At the very least, in order to be consistent with its WTO obligations, the United States must
distinguish between respondents who are truly recalc itrant and those who merely make a mistake but
fix it in time for verification (like NSC and NKK), or who try very hard but still cannot provide the
information (like KSC).  The arbitrary application of adverse facts available in cases such as these
must not be permitted.
2. All Others Rate
17. With respect to the all others rate, Article 9.4 prohibits their calculation based on margins tainted
with facts available.  Nothing in the provision su ggests that this prohibition is limited to margins
based on total facts available.  The United States has failed to even respond to the fact that its
proposal to so limit the provision was rejected du ring Uruguay Round negotiations.  It also fails to
explain why there should be any difference between a margin based entirely on facts available versus
one based 90 per cent on facts available.  Either way, the same policy considerations inherent in
Article 9.4 apply:  non-investigated exporters should not be affected by the behaviour of investigated
companies during the course of an investigation.
18. The Panel should take note of the new argument on this issue set forth in the US Second
Submission.  They claim that because Article 9.4 is ambiguous, then multiple interpretations must
apply.  But, it is not for the United States to decide whether the Article is ambiguous.   Further, it
cannot be accepted that a proposal specifically rejected during negotiations is a permissible
interpretation, simply because the Member that made the rejected proposal claims that the resulting
provision is ambiguous.  The European Commission ag rees with Japan that the US law is inconsistent
with Article 9.4.  The United States is clearly taking its permissive interpretations theory too far.
3. Affiliated Sales In The Home Market
19. Japan has not argued that sales to affiliates can never be found to be outside the ordinary course of
trade.  Rather, Japan has argued that Article 2 of the Agreement does not permit the manner in whichWT/DS184/R
Page D-43
the United States decides that such sales are outside the ordinary course of trade.  Japan has further
argued that the Agreement does not permit the replacement of such sales with an affiliates’ resales.
20. In its second submission, the United States attempts to portray its 99.5 per cent test as benign.  It
says that the test must be fair because when sales to an affiliated customer fail the test, all of those
sales are disregarded, not merely the low-priced ones.  What the United States fails to mention is thatthe sales that pass the test are, on average, higher than the sales to all other customers.  No effort is
made by USDOC to discern whether these higher-priced sales are unreliable because of the
relationship between seller and buyer.  The United States says that it would exclude such sales if
respondents were to prove that they were “aberrationally high.”  But, this just proves our point:  low-
priced sales are automatically excluded for being low priced; high-priced sales are excluded only if
specifically requested and only if they are priced really high.  The United States has not explained
how it can justify such a low standard for excludin g low-priced sales—a standard well below the two
per cent de minimis standard--but such a high sta ndard for excluding high-priced sales.  Absent such
an explanation, we are left to interpret that the motivation behind this lopsided policy is to exclude as
many low-priced sales as possible in order to drive up the dumping margin.  This does not comply
with the fair comparison requirement of Article 2.4.
21. The United States also claims that it has the discretion under Article 2.1 to replace sales to
affiliates with the affiliates’ downstream sales.  Th ere is no such authority in the Agreement.  Even if
there were support for this practice, the United States now appears to admit that its use of downstream
sales in the home market is different from its use of downstream sales in the export market.  In the
home market, the United States merely assumes downstream sales prices will be higher and therefore
inflate the dumping margin; but in the US market -- when calculating constructed export price -- theUnited States goes to great lengths to make sure the price is as low as possible by deducting as much
cost and profit as possible.  The United States wants the Panel to believe that the Agreement permits
the use of downstream sales in both markets, but  that the adjustments made to those downstream
prices can be lopsided in favor of higher dumping margins.   Article 2.4 requires a fair comparison.
This means symmetry on both sides of the equation.  The United States has blatantly ignored thisrequirement.
22. The bottom line is this:  if sales are going to be excluded for being outside the ordinary course of
trade, then there must be a rational reason for doing so.  The fact that sales are made between affiliates
at relatively low prices is insufficient.  Further, once the sales are excluded, there is no authority to
replace them with the affiliates’ resales.  Even if there were, there is certainly no support for making
adjustments on the export side that are not also made on the home market side.  The US approach
disregards the goal of Article 2 to ensure a fair comparison between export and home market prices.
4. Critical Circumstances
23. As for critical circumstances, Japan has demonstrated that US law and policy, both on their face
and as applied in this case, are inconsistent with the AD Agreement.  The United States has developed
various excuses for its actions in this case, but its post hoc rationalizations cannot fix what is already
damaged.  What is clear from this case is:
• Article 10.6 requires that imports be dumped before applying retroactive provisional
measures.  No finding of dumping was made when the preliminary critical circumstancesdecision was made.  The United States claims that no such determination is required.  The
United States apparently wants the Panel to believe that the word “dumped” in the
chapeau to Article 10.6 and in Article 10.6(ii) is meaningless.
• Article 10.6 also requires a finding of injury.  USITC had preliminarily found that imports
posed only a threat of injury.  Japan has explained in its written submissions that theWT/DS184/R
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concept of injury under Article 10 is limited to current injury -- not threat of injury, not
material retardation.
• Article 10.6 requires a finding that importers knew or should have known that the
domestic industry would be injured by the increase in imports.  Ignoring again the threat
determination made by USITC, USDOC relied on vague press articles accompanying thepetition.  Vague articles cited in a petition do not constitute sufficient evidence of
importer knowledge of injury.  The few additional press articles found independently by
USDOC were no more specific:  none of them mentioned either Japan or hot-rolled steel
specifically.
24. According to the United States, what petitioners say is inherently reliable -- unless and until
respondents can prove otherwise.  In the United States, respondents are guilty until proven innocent.The United States fails to recognize that the AD Agr eement exists precisely to curb such abuses.  This
is why Article 10.6 requires that findings of dumping and injury already be made; this is also why all
other findings made under Article 10.6 must be supported by sufficient evidence, not merely biased
petition information.
25. The United States wants the Panel to conclude that, because retroactive duties were never actually
collected in this case, the issue is moot.  In other words, USDOC should be permitted to continue to
make early critical circumstances determinations without sufficient evidence, because the USITC
waits to gather sufficient evidence.  But, actions th at chill trade must not be tolerated; even if the
actions eventually are corrected, trade still has been chilled.  This is why the standards for applying
retroactive duties in Article 10 of the AD Agreement use such strict language.  The authority mustcollect sufficient evidence before it can shut down trade with the threat of retroactively imposed
dumping duties.
B. USITC C
LAIMS
1. Captive Production Provision On Its Face
26. Japan’s argument that the captive production provision violates the A-D Agreement “on its face”
is quite straightforward.  The A-D Agreement requires authorities to evaluate the industry as a whole.
The US statute, in contrast, picks two crucial factors -- market share and financial performance -- and
forces the authorities to focus primarily on the me rchant market segment for those two factors.  To
focus primarily on one narrow segment, without any balanced assessment of other segments and
without any explicit effort to relate segments back  to the industry as a whole, impermissibly distorts
the analysis and, thus, violates Articles 3 and 4.
27. The United States has offered many defences for its statute, but the text of the relevant US statute
itself contradicts the US claims.  First, the United States once again claims the statute does not
mandate WTO-inconsistent action.  But the United States sidesteps the mandatory language “shall” in
the statute.  The United States also overlooks the recent Appellate Body decision in the 1916 Act case,
in which the Appellate Body confirmed that subsequent interpretation of a statute cannot save the
WTO inconsistency of mandatory legislation.
28. Second, the United States contorts the phrase “focus primarily” to mean consideration of other
factors.  But, the statute does not merely say to consider merchant market data; it says to focus
primarily on such data.  Moreover, although raised by the United States, the phrase “in determining”
in the US statute actually reinforces Japan’s argument.  The dictionary defines “determine” as “be a
deciding or the decisive factor in.”  Thus, the US statute says that in making the deciding or decisive
evaluation of market share and financial performance, USITC must focus primarily on one segment.WT/DS184/R
Page D-45
29. Third, the United States argues the US statute somehow still permits proper evaluation of the
industry as a whole, since there is other language that follows the analytic framework of considering
the industry as a whole, as set forth in the A-D Agreement.  This argument, however, ignores the
history and structure of the US statute, that makes the primary focus on the merchant market, set out
in subsection (iv) of the statute, take precedent over other statutory language.  The United Statescannot cite old and more general statutory language and overlook the newer and more specific
language of the captive production provision.  Congress added this new language to the statute for a
reason -- to change the old method of analysis that the United States now tries to cite in its defence.
30. Fourth, the US statute does not require or permit USITC to relate its analysis of the merchant
market segment to the industry as a whole, as required by the A-D Agreement.   The statute does not
require consideration of all segments.  It simply makes no sense to think one can understand the
whole without considering all of the parts that make up the whole.
31. Finally, the United States argues that in the hot-r olled steel case the Commissioners applying the
captive production provision did relate its findings back to the industry as a whole.  The merchant
market analysis was just one step on the way to a proper analysis.  This post hoc rationalization is
without basis.  Nowhere does USITC mention this approach in its determination, or say anything
other than parallel recitation of certain market trends.  It is not what the USITC could have said; it iswhat they actually did say that must govern in this proceeding.
2. Injury and Causation In The Hot-Rolled Steel Case
32. One of the central issues in the causation arguments related to the period of time being examined.
The basic flaw in the USITC determination is the failure to consider and address those facts that
undermine the authority’s foregone conclusion.  In 1998, even after the increase in imports, thedomestic industry shipments and operating profits were higher than in 1996 before the import
increase.  It is hard to reconcile this simple fa ct with the claim that imports were causing material
injury.  The legal problem is that the USITC did not even try to address this fact.
33. Of course USITC considered the overall period when doing so reinforced its conclusions.  The
real issue, however, is how USITC addressed those factors for which the consideration of the fullperiod undermined their desired conclusion.  The answer, simply, is that USITC ignored the
inconvenient facts.
34. The time period for the analysis and the captive production issue intertwine.  Part of the reason
several Commissioners wanted to focus primarily on the merchant market for financial performance
was to avoid the inconvenient fact that operating profits were up in 1998 over 1996 levels for the
industry as a whole.  Focusing primarily on the mercha nt market provided legal justification -- at least
under US law -- for essentially ignoring the overall trend in operating profits.  Thus one of the centralfacts of this case -- one that respondents made a major part of their argument -- is not mentioned at all
in the majority opinion.  Not even mentioned.  No matter how much post hoc rationalization the
United States now offers, that rationalization cannot hide this basic omission.  How can USITC be
evaluating the overall trend in operating profits when it does not even mention it?
35. The United States now points to shreds of evidence in the determination.  USITC mentioned cost
of goods sold.  USITC mentioned that the industry remained profitable over the period.  But step back
for a moment.  Such cryptic references just underscore the failure to mention and directly address the
main fact:  that the industry overall made a higher operating margin with imports than without
imports.
36. Nor does the extensive discussion of the 1997 to 1998 decline in operating profits somehow
remedy this glaring omission.  In 1997, even after imports increased, the domestic industry madeWT/DS184/R
Page D-46
more money than in 1996.  Remarkably, in 1998 this fact remained true -- even after another increase
in imports, the domestic industry was still making more money than it did in 1996.  USITC never
addressed why consistent increases in operating profits justified a finding of material injury caused by
imports.
37. This basic omission was compounded by USITC’s inadequate consideration of alternative causes
of any declines being experienced by the domestic industry.  Having decided to make imports the
scapegoat, USITC quickly brushed aside the alternative causes raised by respondents.
38. Under the Tokyo Round Antidumping Code, such casual treatment might have been permitted.
But the A-D Agreement added new language that imposed higher obligations on authorities.  The
United States wants to overlook this new language, and thus clings to the old Atlantic Salmon panel
report.  But the new language in the AD Agreement plugs precisely the gap in the old treaty text
identified by the Atlantic Salmon panel.
39. Moreover, the Wheat Gluten panel has already clarified what it viewed the language “not be
attributed” as requiring.  The United States tries to brush aside Wheat Gluten as a safeguards decision,
but this key phrase is the same in both the anti-dumping and safeguards agreements.  “Not be
attributed” must be given meaning, and USITC did not do so in this case.  Having found that each of
these alternative causes did not entirely explain the problems, USITC then just assumed withoutserious analysis that imports must be the real problem.  The AD Agreement requires more.
II. GATT ARTICLE X:3
40. The United States studiously has avoided resp onding to Japan’s claim under Article X of GATT
1994.  Thus, under established WTO rules, because Japan has made a prima facie demonstration of a
US violation and the US has failed to respond adequately, the Panel should find in Japan’s favour onthis claim.
41. Article X:3 sets standards for the administration of domestic laws.  Even when a domestic law is
consistent with the A-D Agreement, an authority violates Article X:3 where, as here, it fails to
administer the law in a uniform, impartial, or reasonable manner.  As Japan has clarified, Japan’s
Article X:3 claims are independent of it’s a-D Agreement claims and should be reviewed underArticle 11 of the DSU.
42. The US answer to Panel Question 44 confirms Japan’s claim.  For example, the United States told
the Panel: “No information was submitted to and accepted by the USITC after applicable deadlines in
the investigation.”  However, the date the United St ates provides as the applicable deadline is the day
the USITC closed the administrative record.  The deadline for questionnaire responses was much
earlier.  The US answer, therefore, apart from being wrong, highlights the discriminatory manner in
which the United States treats foreign versus domestic producers:
• For domestic producers, the deadline the US imposes is the closing of the administrative
record.
• In contrast, for foreign producers, the day the administrative record closes is irrelevant.
When NKK and NSC supplied data well before the closing of the factual record and intime for USDOC to verify and use it, USDOC  nonetheless applied punitive adverse facts
available.
43. In short, the US required respondents, but not petitioners, to meet questionnaire response
deadlines.  This is a clear example of non-uniform, partial and unreasonable action being taken by anWT/DS184/R
Page D-47
authority.  It is precisely the kind of bias in the administration of domestic law that Article X:3
prohibits.
44. USDOC’s failure to correct the error made in calculating NKK’s preliminary dumping margin is
another violation of Article X:3.  USDOC failed to  follow its own regulation for making corrections,
thus subjecting NKK’s shipments to inflated  provisional measures upon which USDOC wrongly
justified continuing critical circumstances.  In responding to Japan’s Question 30, the United States
begs to be excused from this non-uniform application of a domestic law because USDOC merely
made a mistake.
45. The irony is astounding.  The United States asks the Panel both to accept USDOC’s use of
adverse facts available to punish NKK and NSC, and to treat USDOC’s mistakes as mere oversights.
The US position, therefore, is that mistakes made  by the US Government and US producers must be
tolerated; but mistakes made by foreign producers must not be tolerated.
46. These violations stem from USDOC’s adversarial treatment of respondents. As Japan has
demonstrated, the adversarial approach USDOC takes in its investigations violates GATT Article X:3.
Unless the Panel takes firm action to address the US violations, the US abuses will multiply.
CONCLUSION47. The United States hopes the Panel is too busy to focus on the texts of the Agreements and the US
response to Japan’s prima facie case.  But, Japan is confident that, once the Panel focuses on the text
of the Agreements, the specifics of Japan’s claims and the inadequacies of the US replies, it will find
that the US interpretations are impermissible.  It will find that the US anti-dumping regime, on its face
and as applied, violates the A- Agreement and Article X of GATT 1994.
48. As the Panel deliberates, we urge you to bear in mind Article 1 of the A-D Agreement.  Article 1
explains clearly that anti-dumping measures shall only be applied when the investigation has been
“conducted in accordance with the provisions of this Agreement.”  Japan has identified numerous
ways in which the United States did not act “in accordance” with the A-D Agreement, and the Panel
should not permit the US violations.WT/DS184/R
Page D-48
ANNEX D-10
Closing Statement of Japan at the Second Meeting of the Panel
 (27 September 2000)
49. At the outset, Japan takes issue with the US claim that we have abandoned or changed our
position during the proceeding.  Japan is confident that, by reviewing all of Japan’s submissions in
this proceeding, the Panel will clearly see the thrust of Japan’s argument.  Moreover, contrary to the
US claim, it is Japan, and not the United States, that is respecting the results of the Uruguay Roundnegotiations, as expressed in the texts of the provisions relevant to this proceeding.
50. Japan is impressed with the level of attention the United States devoted this morning to injury and
causation.  Japan is not surprised; given the weakness of the US presentations to date, it needed to
devote some time to USITC’s misconduct.  However, the US effort to rebut Japan’s presentation is
unsuccessful.
51. Japan asks the Panel also to note that the United States continues to repeat the mantras that:
(a) the AD Agreement contains only unclear provisions that admit many meanings—see for
example the new US argument regarding Article 3.5 (para. 13);  indeed the United States
apparently has yet to find a clear provision in the Agreement
(b) due to the efforts of the US negotiators, the US law was enshrined in the A-D Agreement; and
(c) US law is consistent with the A-D Agreement simply because the US Congress says that it is.
52. So, in the view of the United States, this wh ole process has been unnecessary, because US law
inherently complies with US WTO obligations.  This cannot possibly be true.  In addition to the
violations shown by Japan, the DSB already has f ound the US anti-dumping law to be inconsistent
with US WTO obligations in two separate proceedings— US - Anti-Dumping Measure on Korean
DRAMs  and US Anti-Dumping Act of 1916 .
53. Turning now to the US assertions this morning, we note first that the US still has not rebutted
Japan’s prima facie  case.  Accordingly, I will address only some of the US points—causation, captive
production, facts available and Article X of GATT 1994.
54. At the outset, we would like to remind the Panel that we are not here to decide whether or not to
overturn Wheat Gluten .  The United States would like to practice its arguments for Wheat Gluten .
But, the Panel’s focus, of course, is what the United States did in this case.  The United States seems
to think Japan’s argument depends entirely on Wheat Gluten .  It does not.  Japan’s argument stands
whether or not the Panel agrees with Wheat Gluten , and whether or not the Appellate Body reverses
Wheat Gluten .  The USITC in this case was too quick to ignore unfavourable facts, too willing to
gloss over contrary arguments, and too outcome driven in dismissing alternative causes.  The United
States assumes that a large USITC staff, a thick report, and some conclusory language insulates it
from challenge.  But the United States is wrong.  The USITC may collect extensive data, but it is the
way the USITC determination addresses that data that controls this issue.WT/DS184/R
Page D-49
55. To illustrate the defects of the USITC approach, we can find no better example than profits levels.
The United States argues that it “examined” profit levels.  First, the obligation at Article 3.4, is to
“evaluate” the factors, not merely to examine them.  Evaluating a factor means more than selecting
favourable facts and ignoring unfavourable facts.   At the outset of its investigation, the USITC
decided that three years of data should be examined.  Yet, once it collected the data, the USITC foundthat the data for 1997 and 1998 alone supported its desired conclusion, and that the data for 1996
could not logically be reconciled with its desired conclusion.  So what did the USITC do?  It simply
ignored the data for 1996.  Japan cannot imagine how any neutral decision maker could consider such
selective consideration of facts to be “evaluation.”
56. We note that the United States devoted more space to the captive production provision than any
other single issue in its opening statement.  The United States made this issue seem complicated
because they had to do so.  The US statute explicitly mandates an analytically impermissibleapproach.  The statute forces the USITC to undertake an unbalanced and biased analysis that focuses
primarily on one segment at the expense of others.  The United States protests that other parts of the
statute call for a WTO-consistent approach of considering the industry as a whole.   But when one
reads the US statute as a whole, the captive produ ction provision trumps those other provisions.  In
normal cases, the statute might allow the proper approach.  But in those cases where the specialcaptive production provision applies, the flawed, unbalanced approach takes legal precedence and the
USITC has no choice but to violate Articles 3 and 4.
57. I turn now to facts available.  The US opening statement describes the US policy on facts
available as benign and reasonable.  But it is neither.  The USDOC uses facts available as punishment
– punishment to those companies involved in the current case—and as warning--to respondents infuture cases--about the fate that awaits them.
58. Consider the three companies involved in this ca se.  All three were punished.  Why?  KSC was
not able to supply data from a petitioner, a comp any that was affirmatively attacking KSC in this
proceeding.  Not surprisingly, the United States ignored this crucial fact this morning.  With respect to
NSC and NKK, the United States protests that USDOC could not possibly know the motivation forthe companies not providing the information in a tim ely manner.  This claim is absurd.  These two
companies did everything USDOC asked.  When the USDOC said jump, the companies asked “how
high?”  They did provide the information, and did so within the statutory deadlines.  Yet USDOC
looked at these facts and still inferred bad motives and applied adverse facts available.  The
United States argues that motives cannot be determined, but USDOC has no trouble assuming bad
intentions; this is not surprising given the USDOC premise that all respondents are bad secretaries.
59. The United States has failed to rebut Japan’s claim under Article X of GATT 1994, a claim which
is quite important and which is independent from Japan’s other claims.  The United States tries to hide
behind its bifurcated structure for administering its laws, and the different functions involved.  But
this rationalization does not work.  A bifurcated structure does not allow a Member to administer its
laws in biased and inconsistent ways.  We agree that the USITC applies the law consistently to both
US and non-US parties.  If only the USDOC did th e same.  If USDOC adopted the USITC approach,
KSC would not have been punished for not providing a petitioner’s data.  The Commissioners worked
to get the information the USITC needed from the recalcitrant US producers, yet USDOC officials did
nothing to get the information from CSI.  Also, in contrast to USDOC’s treatment of respondents
NSC and NKK, the USITC accepted late data from the petitioners.   In each instance, the different
treatment, and the violation of Article X, could not be more obvious.
60. In closing, Japan urges the Panel to attend closely to the texts, identify the permissible
interpretation of the relevant provisions and recognize the provisions for what they are—limitations
on the discretion of authorities.  Thank you for your attention to this most important matter.WT/DS184/R
Page D-50
ANNEX D-11
Opening Statement of the United States at the
Second Meeting of the Panel
(27 September 2000)
1. Mr. Hirsh.  Thank you, Mr. Chairman and members of the Panel.  The United States
appreciates this opportunity to present its views rega rding the issues in this dispute.  Again for the
record, my name is Bruce Hirsh.  I am a Legal Advisor with the Office of the US Trade
Representative in Geneva.  With me from my office in Washington is Associate General Counsel
Dan Mullaney, who will begin our presentation today with a discussion of two procedural issues.
James Toupin, Deputy General Counsel of the US In ternational Trade Commission, will then present
the issues concerning injury.  Finally, John McInerney, Acting Chief Counsel for Import
Administration at the US Departme nt of Commerce, will present the issues concerning the anti-
dumping calculations and critical circumstances.
2. Mr. Mullaney.   Thank you, Mr. Chairman, and members of the Panel.  With respect to the US
preliminary objection  to extra-record evidence, Japan argues that DSU Article 11 and Article 17.6(i)
of the Anti-Dumping Agreement, taken together, require the panel to consider facts outside of the
administrative records.  This position is directly contrary to Article 17.5(ii) of the Anti-Dumping
Agreement, which requires the Panel’s examination to be based upon "the facts made available in
conformity with appropriate domestic procedures to the authorities of the importing Member.”  It is
also contrary to several panel decisions under the Safeguards Agreement, which, in applying
Article 11 of the DSU, specifically limited the panels’ review to facts placed before the authorities.
3. Japan also claims that the Panel should take account of the statisticians’ affidavit and
attorneys' affidavits concerning alternate margin calculations because they are based on information
on the record. This is incorrect.  The calculation of a margin of dumping, for example, is a very
complicated process that involves numerous decisions.  Simply presenting an alternate dumpingmargin and asserting that it is based on a recalculation of record information is equivalent to
submitting new information.  The affidavit form of the information underscores this deficiency: in
effect, the affiant is saying “you can’t see this number in the record, but you should accept it as true,
because I am swearing that it is true.”  The statisticians’ affidavit is itself new evidence.  If it is
important evidence, the Japanese respondents should have submitted it for the record.
4. We will not repeat points we have already made on the special deferential  standard of
review  specifically adopted by the negotiators for the Anti-Dumping Agreement.  However, we note
that Japan persists in suggesting that somehow Ar ticles 31 and 32 of the Vienna Convention override
the specific text of Article 17.6(ii).  That article, however, reflects the negotiators’ understanding thatthey had left enough issues ambiguous that they needed to make special provision for cases in which
customary rules of treaty interpretation would not provide an unequivocal result.  In fact,
Article 17.6(ii) reflects a deliberate choice by the negotiators to allow for multiple interpretations.
Thus, Japan’s contention that the Convention requires, or even permits, a panel to choose one
interpretation of ambiguous language in the Agreement as the only interpretation, would nullify the
second sentence of Article 17.6(ii) of the Agreement.WT/DS184/R
Page D-51
5. I will now turn to my colleague, Mr. Toupin, of the US International Trade Commission,  to
present the injury issues.
6. Mr. Toupin .  Thank you, Mr. Chairman and members of the Panel.
The Causation Standard under Article 3.5
7. At the outset, I would like to address the arguments that Japan now makes concerning the
examination under Article 3.5 of other factors injuring the industry.  The United States has
demonstrated how the USITC’s findings satisfy the standards for such an examination articulated by
the panel in the Atlantic Salmon  decision.  I will not reiterate those arguments here, and invite any
further questions that the Panel may have about those factual issues.  Here, I will extend our remarksconcerning why Atlantic Salmon,  and not the unadopted panel decision in Wheat Gluten, provides
relevant guidance for this Panel.
8. The first question for construing Article 3.5 of the Anti-Dumping Agreement is, what does it
mean for dumped imports to be “causing injury” under the first sentence of the Article?  As theUnited States has indicated in its Second Written Submission, the ordinary meaning of the word
“cause” includes the possi bility that a factor may be regarded as causing an effect if it assists in
bringing forth that outcome.
1  This definition assumes that a factor may cause an outcome through its
interaction with multiple other causal factors.  Thus , the ordinary meaning of the term contradicts the
Wheat Gluten  panel’s conclusion that an authority must determine the quantum of injury that imports
“alone” cause.
9. This interpretation is reinforced by the second sentence of Article 3.5, which provides that
demonstrating “cause” consists of a “demonstration of a causal relationship  between the dumped
imports and injury.”  The term “relationship” suggests that demonstrating causation consists offinding the connections between dumped imports and the industry’s overall state, not of isolating a
quantum of injury ascribable to imports alone.  This view is consistent with the provision of
Article 3.4 that an authority must evaluate all factors having a bearing on the state of the industry.
Indeed, it is difficult to see how an authority could ever define the injury caused by imports alone in
view of the factors that Article 3.4 states must be considered.  The impact of dumped imports on such
factors as productivity, return on investment, cash flow, inventories, employ ment, growth, wages, and
ability to raise capital, will necessarily reflect the inextricable interaction of dumped imports withother factors.
10. It is in this context that the third sentence of Article 3.5, which requires an authority not to
attribute injuries caused by other factors to dumped imports, must be interpreted.  The third sentence
recognizes that other factors may also have what the second sentence calls a “causal relationship” tothe injured state of the industry.  The third sentence requires an authority to examine such other
factors sufficiently to assure that  the determination of a causal relationship between dumped imports
and injury is not based on effects explained instead by other causes.
11. Moreover, under Article 32 of the Vienna Convention, if the terms of a provision analyzed in
context remain ambiguous, a tribunal may refer to the negotiating history to resolve ambiguity.  The
Tokyo Round Anti-Dumping Code, which the Anti-Dumping Agreement supersedes, and the Atlantic
Salmon  decision, adopted under that Code, were plainly part of that history.  The first clause of the
third sentence of Article 3.5 of the Anti-Dumping Agreement is drawn almost verbatim from the
Atlantic Salmon  decision’ s description of the examination it regarded Article 3:4 of the Code as
implicitly requiring.  The second clause is close to identical to Article 3:4 of the prior Code.  The last
                                                     
1 US Second Written Submission at ¶ 80.WT/DS184/R
Page D-52
sentence of Article 3.5, like footnote 5 in the prior Code, does not instruct an authority how to conduct
the examination, but rather lists exemplary factors which may, but need not be, relevant.
12. Certainly, the documents underlying United States’ implementation of the Agreement show
that the United States, in agreeing to Article 3.5, reasonably understood it as adopting a requirementconsistent with Atlantic Salmon.  We attach as an exhibit the passage from the United States’
Statement of Administrative Action that sets forth the United States’ understanding.
2
13. Finally, unlike the Safeguards Agreement, with which the Wheat Gluten  panel was concerned,
the Anti-Dumping Agreement provides that, when a pr ovision admits of more than one interpretation,
a panel is not to compel adoption of one of those interpretations.  Article 17.6(ii) reflects that the
negotiators of the Anti-Dumping Agreement knew that  they were adopting provisions that did not in
every case mandate one approach.  Since the negotiators adopted language so close to that used in
Atlantic Salmon , the United States must be regarded as choosing a permissible interpretation pursuant
to Article 17.6(ii) when it construes Article 3.5 in accord with Atlantic Salmon .
14. The Wheat Gluten  panel acknowledges that its requirement to determine what injury is due to
imports alone might be impracticable, and explicitly declines to explain how its test might be met.
This should have indicated to the Wheat Gluten  panel that it was adopting an interpretation of the
Safeguards Agreement that the negotiators of that Agreement could not have intended.  Certainly the
negotiators of the Anti-Dumping Agreement did not intend to impose such an impracticable test.
Examination of Relevant Factors and Evidence
15. As for Japan’s argument that the USITC should have relied on certain data from 1996 to
1998, the USITC’s determination reflects that it examined the relevant factors and evidence as
required by the Agreement.  Japan makes much of the fact that the USITC did not make an explicitfinding stating that the industry’s profits rose from 1996 to 1998, when the USITC relied on the
decline in profits from 1997 to 1998.  Japan, however, points to no requirement of the Agreement
requiring such a finding.  Article 3.4 requires the authority to conduct an “examination” of profits, but
requires no particular finding.  The USITC plainly examined profits.   Article 3.5 requires an
“examination of all relevant evidence”, but does not state how that examination shall be reflected.
Here, the USITC plainly examined the data from 1996 to 1998, since it explained why it rejected
arguments that it should rely on a broader period than 1997 to 1998.  Indeed, in doing so, it explainedwhy, in the context of the economic conditions from 1996 to 1998, it did not regard 1997 as a banner
year.  There is no basis in the Agreement to find that the USITC was required to do more.
16. Japan argues -- concerning both the Anti-Dumping Agreement and Article X of the GATT --
that the USITC somehow impermissibly departed from a “rule” that it would rely on data over theentire period of its investigation.  As our submissions demonstrate, there is no such rule.  The USITC
has in fact in numerous determinations -- reaching both affirmative and negative results -- relied on
recent trends rather than on trends over the entire period.  If it could not do so, the USITC would,
when economic circumstances have changed over the period investigated, be forced to violate the
requirement of Article 3.4 that it examine “all relevant economic factors”.
17. These points are illustrated by the USITC’s decision in Elastic Rubber Thread from India
3,
on which Japan relies.  In Rubber Thread , the USITC did indeed give weight to trends over the
three-year period investigated rather than to tre nds in the final year.  Its opinion, however, shows that
it did not do so on the basis of any rule requiring reliance on three-year trends.  It relied on those
                                                     
2 Statement of Administrative Action to Uruguay Round Trade Agreements Implementing Bill, H.R.
83-211, at 181-182, attached as Exh. US/C-31 .
3 USITC Inv. No. 731-TA-805 (Final).WT/DS184/R
Page D-53
trends only after finding that the downward trends in the last year were an “anomaly due to
unanticipated high volumes in 1997, followed by a corresponding drop in 1998."4  The USITC’s
reasoning, therefore, depended on its findings concerning the relevant economic factors.  Here, the
USITC found the relevant economic factors differed from those in  Rubber Thread .  Here, the USITC
found the rise in demand and consumption not to be an anomaly, but rather to represent a persistentdevelopment in the relevant factors having a bearing on the state of the industry.
The captive production provision and analysis of market segments
18. Both the US law concerning captive production and the USITC’s determination in this case
accord with the Agreement’s requirement to make a determination as to injury to the producers as a
whole of the domestic like product.  Japan has moved in its second written submission far from itsoriginal position in its arguments about the consistency of the US captive production provision, in
itself, with the Anti-Dumping Agreement.  Although the United States does not agree with much of
Japan’s characterization of that provision, even under Japan’s portrayal of it, Japan cannot establish
that the US statute violates the requirement that Members assure that their laws conform with their
obligations under the Agreement.
19. In its first written submission, Japan stated that it was improper to consider, either primarily
or secondarily, data for the merchant market sector.
5  Japan has now abandoned this position.  Japan
now acknowledges that  “an analysis of the particular sector in which the competition between the
domestic industry and dumped imports is most dire ct is certainly allowed under the Anti-Dumping
Agreement."6   Japan likewise agrees that the merchant market sector is the sector in which
competition between the domestic industry and dumped imports is most direct.7
20. Similarly, Japan’s First Written Submission stated that under the captive production provision
“the USITC now must  ignore the shielding effect of captive production,” and the provision “makes it
impossible  for USITC to consider all relevant evidence."8  Japan’s position has become more
nuanced, and the nuance is fundamental.  In its Second Written Submission, Japan acknowledges that
it is permissible for an authority to focus on the merchant market sector, but it argues that such an
analysis must be explicitly related back to the industry as a whole and that the US provision “ requires
no such relating back."  Likewise, rather than asserting that the USITC under the captive production
provision must ignore other evidence, Japan now simply states that the provision "encourages USITC
impermissibly to accentuate merchant market data in its determination."9
21. The United States disagrees with this interpretation of the captive production provision.However, even if Japan were correct in its statutory construction, its allegations would not establish
that the US law on its face should be deemed to violate the Agreement.  Japan admits that the
provision does not  preclude  the USITC from relating back its findings on the merchant market sector
to the whole industry.  Moreover, if the statute only encourages  the US authority to accentuate certain
data, the statute cannot be said to require  the USITC to ignore any evidence.  Such a showing does
not meet the traditional standard for finding legislation on its face to violate an Agreement.  Under
that standard, only “legislation which mandated action inconsistent with the General Agreement could
be challenged as such, whereas legislation which merely gave the discretion to the executive authority... to act inconsistently with the General Agreemen t could not be challenged as such; only the actual
                                                     
4 Rubber Thread , at 14 & n.104.
5 Japan First Written Submission at ¶ 45.
6 Japan Second Written Submission at ¶ 219.
7 Japan Second Written Submission at ¶ 186.
8 Japan First Written Submission at ¶¶ 238-239 (emphases added).
9 Japan Second Written Submission at ¶ 186.WT/DS184/R
Page D-54
application of such legislation ... could be challenged."10  Japan is wrong in claiming that this
established principle is no longer applicable or only relevant when a statute has not been applied.11
The Appellate Body in US – 1916 Act  specifically denied that the panel there made such a finding.12
Similarly, the panel in the Section 301  dispute stressed that it was not overturning the jurisprudence
on the mandatory/discretionary distinction.13
22. In fact, as the United States has indicated, its anti-dumping statute does require that theauthority make its determination with respect to th e industry as a whole, and the captive production
provision does not alter this requirement.  Many aspects of the statute support this conclusion.  The
statute requires the USITC to make its determination as to the industry, which it defines as producers
as a whole of the domestic like product.  The requirement to “focus primarily” on the merchant
market for certain factors assumes that, even for those factors, the USITC’s analysis will proceedfurther.  Moreover, the Statement of Administrative Action makes clear that, when the USITC
considers those factors to which the captive production provision applies, it may “focus” on other
evidence in addition to the merchant market sector.  Likewise, the statute requires the USITC to
consider other factors to which the provision does not apply.  Further, the statute requires the USITC
to consider “all relevant economic factors” and no one factor can "necessarily give decisiveguidance."  Thus the statute as a whole provides the USITC with discretion to consider all evidence
and factors, and requires it to make a determination as to the industry as a whole.
23. Even if the US statute did not clearly mandate a determination as to the industry as a whole,
when a statute that an authority administers is ambiguous, US courts defer to an authority’sconsidered interpretation if that interpretation is reasonable.  The Statement of Administrative Action
expresses Congress’ intent that the captive production provision would be consistent with the
Anti-Dumping Agreement.  Consequently, the authority applying that provision properly under US
law resolves any ambiguities in the captive production provision and its relation to the statute in a
manner consistent with the United States’ obligation under the Agreement.
24. Indeed, it is Japan,  not the United States, that forgets that the necessary inquiry pertains to
the industry as a whole.  Japan claims that the US ITC should have made findings about a fall in the
demand by pipe and tube manufacturers for hot rolled steel because two steel producers particularly
depended on that demand.
14  The USITC, however, found that overall demand increased substantially
and that the industry as a whole should have been able to take advantage of that growth in demand.
The USITC concluded that imports prevented the industry as a whole from doing so.  Japan has notshown how, in view of the overall growth in demand, the fact, if tr ue, that two firms faced a fall in
demand in a particular submarket is relevant to the assessment of injury to the industry as a whole.
25. Japan is reduced to arguing that this Panel should hold that the US Congress repealed the
other provisions of the US statute that call on the USITC to make a determination as to the industry asa whole when it enacted the captive production provision -- even though Congress didn’t say so.
15
Frankly, this argument demonstrates the implausibil ity of Japan’s position.  Japan is effectively asking
this Panel to rewrite the US statute in order to make it violate the Anti-Dumping Agreement.
                                                     
10 United States -- Measures Affecting the Importation, Internal Sale and Use of  Tobacco, Panel
Report, adopted 4 October 1994, BISD 41S/131, at 118, quoted in United States -- Antidumping Act of 1916,
AB-2000-5, AB-20006, at ¶ 88.
11 Japan Second Written Submission at  ¶ ¶ 175, 177.
12 United States -- Antidumping Act of 1916, AB-2000-5, AB-2000-6, at ¶ 93.
13 United States - Sections 301-310 of the Trade Act of 1974, adopted 27 Jan. 2000, WT/DS152/R at ¶
6.9.
14 Japan Second Written Submission at ¶ 267.
15 Japan Second Written Submission at ¶ 193.WT/DS184/R
Page D-55
26. The sources concerning United States law that Japan cites, support, rather than conflict with,
the United States’ position here.  As the US Supreme Court stated in the Watt  case that Japan cites,
“repeals by implication are not favoured ... The intention of the legislature to repeal must be ‘clear
and manifest.’"16  Japan presents sections of a treatise on statutory construction as an exhibit17 but
pointedly omits the preceding section of the treatise that makes clear that US courts seek to readstatutes as a whole to avoid finding differen t statutory provisions to be in conflict.
18  We attach that
prior section as an exhibit.  It is clear that a court would uphold the USITC in resolving any
ambiguities to construe the captive production provision to accord with the statutory requirement to
make a determination as to the industry as a whole.
27. The USITC’s consideration in this case of the merchant market was consistent with the
Agreement.  As both Japan and the United States have advised the Panel, under US law only threeCommissioners needed to vote in the affirmative in order to render an affirmative determination, and
three Commissioners who voted in the affirmative found that the captive production provision did not
apply.  The obvious consequence of this fact is that, even if this Panel were to hold that the provision
on its face violated the Agreement, such a ruling would not affect the validity of the USITC’s
determination.  In its First Written Submission, Japan sought to avoid that consequence by arguingthat, although Commissioner Bragg did not apply th e captive production provision, her determination
also erred because she made findings about the merchant market sector “in parallel” with findings
about the industry as a whole.
19  Since Japan now agrees that making findings about a sector do not
per se  violate the Agreement, its Second Written Submission abandons this approach.
28. Instead, Japan now contends that Commissioner  Bragg’s determination is somehow “tainted”
because, although she did not apply the provision, she allegedly “passively” joined the decision of
three commissioners who did.20  This argument does not rise to the level of a prima facie  case.   The
face of the determination shows that the four Commissioners were co-authors of their joint views.
Wherever Commissioner Bragg believed that her views differed from those of her colleagues, shespecifically so noted.  There is simply no evidence that she was in any way “passive.”
29. In the determination at issue here, the Commission considered data on certain factors
concerning “the particular sector in which the competition between the domestic industry and dumped
imports is most direct,"
21 namely, the merchant market sector.  It also made specific findings
concerning the entire industry’s data for those and other factors.  Both sets of data supported an
affirmative determination.  The decisions that Japan cites for the proposition that an authority mustrelate its findings concerning a sector to the industry as a whole, concern determinations in which the
authority did not in fact make findings about the indus try as a whole, either in the entire determination
or with respect to numerous required factors.  Here, the USITC made findings on all relevant factors
concerning the industry as a whole.  The fact that it also made findings about the merchant market
sector does not detract from the fact that its injury determination was based on data as to the industryas a whole.
30. Moreover, those findings necessarily account for trends in the non-merchant market sector.
Here there were only two sectors accounting for all production, and the USITC analyzed, for each
factor, data for one sector and for the industry as a whole.  The difference in results for each factor
                                                     
16 Watt v. Alaska , 451 US 259, 267, quoting Morton v. Mancari, 417 US 535, 549, Posadas v. National
City Bank , 296 US 497, 503 (1936), United States v. Borden Co. , 308 US 188, 198 (1939), Red Rock v. Henry ,
106 US 596, 602 (1883).  See Exh. JP-101 .
17 Exh. JP-101 , including excerpt from 2A Sutherland Stat Const  § 46.06 (6th Ed. 2000).
18 2A Statutes and Statutory Construction § 46.05 (6th Ed. 2000), excerpts attached as Exh. US/C-30 .
19 Japan First Written Submission at  ¶ 250.
20 Japan Second Written Submission at ¶¶ 225-226.
21 Mexico -- High Fructose Corn Syrup, adopted 24 Feb. 2000, WT/DS132/R at ¶ 7.160.WT/DS184/R
Page D-56
necessarily reflected the impact on the industry as a whole of trends in the sector as to which the
authority did not make separate findings.
31. The USITC here further made specific findings demonstrating the consequences for the
industry as a whole of developments in the mercha nt market sector.  For example, the USITC found
that most performance indicators for the US industr y as a whole declined because the US industry was
prevented from participating in the growth of demand and consumption.  The USITC found that the
growth of the dumped imports’ share of the merchant market sector at the expense of the domestic
industry’s share caused the US industry not to partic ipate in the growth in demand.  It also found that,
as a result, capacity that the US industry brought on line to meet the growth in demand immediately
became excess capacity.22  Moreover, the USITC found that the decline in the industry’s operating
income at the end of the investigation coincided wi th the decline in its capacity utilization rates.23
Through these and other findings, the USITC demonstrated the causal relationship between the effects
of dumped imports on the industry’s merchant market performance and injury to the industry as a
whole.
32. In sum, the USITC’s findings amply satisfy the standard that Japan has espoused.  Japan itself
quotes and approves prior panel authority stating that an analysis of the sector most exposed to import
competition can sustain an injury determination if an authority either  analyses all other sectors or
demonstrates the relationship between events in the one segment and the industry as a whole.24
Japan’s contention that the USITC’s determination was flawed unless it made specific findingsconcerning developments in the captive production sector has no basis in prior decisions or in theAgreement.
33. Finally, Japan complains at length that the USITC did not make findings in this case about the
captive production sector in the same way as it did in its 1993 Flat Rolled Steel  determination.
Suffice it to say here that the USITC in 1999 sp ecifically recognized the effects of captive
production.
25  The sole differences between the 1993 and 1999 determinations on this point seem to
be that in 1999, the USITC spoke about relative “sensitivity” to imports rather than using the word
“shielded”; in 1999, the USITC made its findings about the amount of captive production and the
applicability of the provision in the section labelled captive production and made its finding on
"sensitivity" in the next section of its opinion; and, as the facts had changed between 1993 and 1999,
the USITC reached a different conclusion.  With due respect to our Japanese colleagues, such
differences cannot even plausibly suggest a violation.
34. Mr. McInerney will now address Japan’s contentions about the United States’ dumping
calculations and critical circumstances.
35. Mr. McInerney.   Thank you Mr. Chairman.  With respect to the Department’s use of facts
available, Japan’s second written submission emphasizes two points that are both wrong.  First, Japan
claims that adverse inferences are “punitive,” and, therefore, improper.  (Japan’s 2d Sub. , ¶¶ 28 &
30.)  This ignores the fact that, where a party has not submitted necessary information, adverse
inferences are, in fact, the most reasonable and logical conclusion to be drawn about that missing
information.  This is precisely the point recognized by the Appellate Body in the Canada - Civilian
Aircraft   case.  Japan's attempt to distinguish that case as using an adverse inference during the course
of a WTO dispute settlement proceeding, rather than an anti-dumping investigation, disregards the
fact that the rationale for both decisions was identical - - that the adverse inference was made both
                                                     
22 USITC Report at I-17.
23 USITC Report at I-20.
24 Japan Second Written Submission at ¶ 210 and n. 250, ¶ 221, citing and quoting  Mexico -- High
Fructose Corn Syrup, adopted 24 Feb. 2000, WT/DS132/R, at ¶¶ 7.155, 7.160.
25 USITC Report at 11, 19.WT/DS184/R
Page D-57
necessary and reasonable by the non-cooperation of the responding parties.  In addition, Japan has yet
to explain why its own authorities applied exactly this rationale in Japan’s anti-dumping investigation
of cotton yarn from Pakistan.
36. Second, Japan claims that, because the Japanese respondents were generally cooperative, this
licensed them to refuse to cooperate with regard  to certain selected categories of information.
(Japan’s 2d Sub., ¶ 24.)  This position finds no support  in the Agreement.  It would amount to a 70 per
cent or 80 per cent cooperation rule, under which respondents would have to cooperate only up to the
threshold of “general cooperation,” after which they would be free to withhold information.  This
would license respondents to manipulate the resu lts of anti-dumping investigations by withholding
selected categories of adverse  information.
37. With regard to the  application of facts available to KSC , Japan now tries to rationalize
KSC’s refusal to exercise its powers, as a fifty per cent owner of CSI, to obtain the necessary
information by itemizing the ways in which KSC, CVRD, and CSI regularly ignored the CSI
shareholders’ agreement (Japan’s second submission at ¶ 47).  But the fact that KSC regularly ignored
the shareholders' agreement does not prove that it had no power under that agreement - - only thatKSC did not always choose to exercise that power.  As the minutes of the CSI board meetings make
clear (Exh. US/B–23/bis), the parties to the joint venture repeatedly raised, discussed, and made
decisions on business matters, as provided for in the agreement.  In this light, the fact that KSC never
even discussed  with CVRD the need to provide the requested CSI data, and never challenged  the
actions of CSI’s president and CEO (who served at the pleasure of the board members representingKSC and CVRD) is glaring.  (See US 1
st submission, ¶ 90).
38. Finally, Japan’s belated claim that CSI was unable  to supply the requested information is
based on one sentence in one letter from CSI.  This new claim is not supported by the weight of the
record evidence.  Indeed, KSC itself characterized this  statement by CSI as a refusal, not an inability,
to provide the requested information.  (US 2nd submission, ¶ 18; Exh. JP-93(a) and (c)).  Accordingly,
Commerce properly found that KSC failed to cooperate in providing the requested CSI data.
39. As facts available for the sales through CSI, Commerce reasonably chose a dumping margin
calculated by comparing KSC’s own sales to unaffiliated US customers to its sales of that same
product in Japan.  This selection of a dumping margin based upon KSC’s product-specific, verified
data represents a reasonable choice of adverse facts available.  Yielding to KSC’s attempt to forceCommerce into using its transfer prices to CSI as a “plug” for facts available would give every
respondent carte blanche  to shelter dumped sales through its overseas affiliates.
40. With regard to Commerce’s application of facts available to NSC and NKK , the
Department was simply exercising its clear right under the Agreement to enforce reasonabledeadlines.  Japan’s curious theory that any firm limits on the time in which information must be
submitted, even after repeated extensions, are inimical to a “reasonable” understanding of
“timeliness” has no support in the Agreement.  Similarly baseless is Japan’s theory that untimely
information must be accepted if  it is otherwise in compliance with the requirements of the
Agreement.  Paragraph 3 of Annex II requires that parties meet all four  of the basic criteria listed in
that paragraph in order for their information to be considered.  One of these four conditions is that the
information be "supplied in a timely fashion."
41. The weight conversion factors untimely submitted by NSC and NKK were not, as Japan
claims, “corrections” (Japan’ s 2d Sub., ¶ 93).  They were categories of information that NSC andNKK had repeatedly claimed were not necessary and were impossible to submit, at all .  Therefore,
Commerce’s rejection of this new information was perfectly consistent with its acceptance of various
corrections of previously-submitted data very late in the investigation (Japan’s 2d Sub., ¶ 94, fn.91).
Nor did NSC and NKK’s protestations of  “good faith” compel the acceptance of their conversionWT/DS184/R
Page D-58
factors.  It is impossible for investigating authorities to know a party’s motivation for not submitting
data when it is due, and the Agreement does not require the authorities to attempt to discern its
motivation.
42. Finally, we must take issue with the claim that the facts available Commerce chose were not
rationally related to the sales affected by the absence of the conversion factors.  The Department used
an adverse normal value for NKK’s theoretical weight sales in Japan because the only element
affected by the absence of the conversion factor was the normal value.  As we have noted, this highly
circumspect application of facts available had a minuscule effect upon NKK’s margin.  As for NSC,
the Department’s selection of margins from its actual-weight sales in the US market as facts available
for the theoretical-weight sales of the same products in the US market was also reasonable.
43. With regard to the “all-others” rate , Japan is asking the Panel to re-write Article 9.4.
Article 9.4 does not state that the all-others rate must exclude margins calculated in part by “ using ”
facts available (Japan’s 2d submission, at ¶ 117).   Instead, Article 9.4 tells authorities to disregard
margins which were “established”  on the basis of the facts available.  The most obvious
interpretation is that such margins are “established” entirely on the basis of the facts available, forrespondents that have generally failed to cooperate.  Similarly, Article 9.4 does not require the
exclusion of  “portions” of margins based on facts available.  It tells authorities to “disregard”
margins  established on the basis of the facts available, not to “recalculate” them without facts
available.
44. The US reading of Article 9.4 – that a margin is only “established based on the facts
available” when it is not a calculated margin, but is based entirely
 on the facts available – is a
reasonable and permissible one.  Indeed, Japan claims  only that nothing in Article 9.4 "prevents" the
Department from removing "portions" of margins using facts available and that its preferred approach
"better reflects" Article 9.4 than the US interpretation.  However, nothing in Article 9.4 requires the
Department to follow Japan's preferred approach.  If investigating authorities must disregard margins
based only in  part on the facts available, no margins would remain to calculate the all others rate in a
great many cases, including this one.
45. Japan further argues that the Agreement makes clear that companies not individually
investigated should not be affected by the behaviour of investigated companies.  (Japan’s 2d Sub., ¶
117)  Exactly the opposite is true.  Article 9.4 expressly provides for the behaviour of the investigatedcompanies to serve as a proxy for the companies not individually examined.  In so providing,
Article 9.4 avoids either unduly rewarding or penalizing the companies not investigated by
eliminating the margins at both extremes - - the zero and de minimis  margins and the presumably
highest margins based entirely upon facts available.  Reading Article 9.4 to require the exclusion of
margins based even in part on the facts available would defeat its purpose of producing a reasonableaverage by eliminating the margins at each extreme of the range.
46. With regard to the treatment of home market sales through affiliated parties, Japan’s
“symmetry”  argument concerning the Department’s 99.5 per cent test ignores the fact that, although
in the ordinary course of trade a company will sell at prices as high as the market will bear, acompany normally will not sell below  market prices.  The reasonableness of the Department’s
“asymmetrical” approach to sales to affiliated parties in the home market is  demonstrated by the fact
that it is essentially the same as the margin calculat ion itself.  The reason for this similarity is that the
margin calculation and the arm’s-length test have parallel objectives:  the margin calculation discerns
whether the sales in question (which are the export sales) have been sold below normal value in thehome market; the arm’s-length test determines whether the sales in question (which are the sales to
the affiliate in the home market) are sold below average prices to unaffiliated parties.  In each case,
the group of sales is tested to determine whether it is priced below , not above, the applicable
benchmark.WT/DS184/R
Page D-59
47. Japan’s arguments against the use of downstream sales in the home market  are also invalid.
Article 2.1 defines dumping as selling at less than “the comparable price, in the ordinary course of
trade , for the like product when destined for consumption in the exporting country ” (emphasis
supplied).  A sale through a related party to an independent purchaser in the home market is just sucha sale - - a sale of the like product, in the ordina ry course of trade, destined for consumption in the
exporting country.  Accordingly, such sales are an  appropriate basis for normal value.  Article 2.2
calls for authorities to base normal value on constructed value or third country prices only “[w]hen
there are no sales of the like product in the ordinary course of trade in the domestic market of the
exporting country.”  (emphasis supplied).
48. By challenging the Department’s practice of using perfectly valid home market downstream
sales to unaffiliated parties, Japan is seeking to requ ire investigating authorities to use either the prices
of sales to related parties in the home market, which could easily be manipulated, or sources other
than prices in Japan.  This is not speculative - - NKK, for example, sold 93 per cent of its merchandise
through affiliated trading companies at the time of the investigation (64 Fed. Reg. at 24339).  If the
Department were precluded from using such sales, it would be forced to base normal value either onconstructed value or Japan’s sales to third countries.
49. Finally, the United States disagrees with Japan’s claim that the use of downstream sales
violates the fair comparison requirement because the Department’s level of trade adjustment does not
address differences in price comparability due to resellers’ costs and profits.  First, the United Statesnotes that this Panel’s terms of reference do not include any challenge to Commerce’s practice with
regard to level of trade adjustments, either generally or in this investigation.  Thus, Japan cannot now
raise this issue.  In any event, when the Department compares export sales to downstream home
market sales at a different level of trade, the US statute (19 U.S.C. § 1677b(a)(7)) provides that “the
amount of the adjustment shall be based on the price differences between the two levels of trade in thecountry in which normal value is determined.”   Such “price differences” would include the effects of
both cost and profit.
50. With regard to Commerce’s Preliminary  Determination of Critical Circumstances ,
acceptance of Japan’s claims would render Article 10.7 meaningless.  Japan completely ignores the
fact that the “sufficient evidence” required by Article 10.7 may be found at any time “after initiation.”
Japan provides no explanation for the lack of any other temporal restriction, but instead simply insiststhat the decision cannot, “as a practical matter,” be made prior to a preliminary determination of
dumping.  Japan also continues to insist that petition exhibits are nothing more than “allegations,”
despite the obvious fact that the petition in this investigation  contained very substantial evidence.
51. With respect to the injury requirement, Japan continues to ignore the express language of the
Agreement, which provides that the term “injury” in Article 10.6  includes  “threat of injury” because
it does not specify otherwise.  Moreover, Article 10.4 does not prevent a preliminary critical
circumstances finding based upon “threat of injury.”  Article 10.4 merely states that, in accordance
with Article 10.2, if there is a final determination of “threat of injury,” an additional finding must be
made in order to impose retroactive duties.  This additional finding was not necessary in thisinvestigation because the final determination was of  current injury.   The question presented under
Article 10.4 is simply not present here.
52. Japan also argues that the Department’s selection of the comparison periods for volume of
imports and its determinations regarding knowledge of dumping and likely injury were arbitrary.However, the sequence of events fully supports the Department’s determinations.  First , importers
became aware of potential investigations when the US industry declared in published interviews that
it planned to bring anti-dumping actions; second , a surge in dumped imports followed the date of
those interviews; and third , importers during and after the surge became aware of the massiveWT/DS184/R
Page D-60
dumping and consequent threat.  The critical circumstances provisions were intended to address
precisely such surges in dumped imports.
53. Finally, Japan suggests that the United States is asking the Panel to look only at decisions
made at the end of the investigation.  This is not true.  We ask that the Panel look at this preliminary
decision.  You will find ample supporting evidence to satisfy the requirements of  Articles 10.6 and
10.7.  Indeed, it is curious that, to support its arguments, Japan continuously refers the Panel to the
final dumping margins - not the preliminary margins.  It is Japan  that would like the Panel to focus
upon the decisions made at the end of the investigation.
54. With respect to Article X , Japan’s claims are curious.  Although couching its argument in
terms of “due process” and “fairness,” Japan is really trying to have Article X override provisions ofthe Anti-Dumping Agreement.  Japan’s claim is  not about due process, in the sense of the Shrimp-
Turtle  decision it cites.  There is no denying that the US investigation was open and transparent and
allowed full opportunities for the submission of facts, views, and rebuttals.  Rather, this dispute is
about specific decisions fully consistent with and authorized by the Anti-Dumping Agreement that
Japan does not like, and hopes to attack collaterally through Article X:3.  The Panel should not permitsuch a collateral attack.
55. The differences between the Commerce Department and the US International Trade
Commission with respect to information gathering and facts available are attributable to the different
functions of these two agencies, not to any partiality, lack of uniformity, or unreasonableness.  Indeed,the Commission’s approach applies equally to info rmation from all parties before it, whether they be
US or non-US parties.
56. In deciding to accelerate the investigation, Commerce was reacting to an unprecedented surge
in imports which more than justified its modest acceleration of the investigation.  Japan has failedutterly to show that the acceleration prejudiced any of the Japanese respondents.  Agencies must have
the flexibility to respond to such special circumstances.  The same may be said of Commerce’s recent
policy on critical circumstances.  “Fundamental fairness” does not require that Commerce adhere
rigidly to past approaches in the face of an unprecedented import surge.
57. Thank you, Mr. Chairman and members of the Panel.WT/DS184/R
Page D-61
ANNEX D-12
Closing Statement of the United States at
the Second Meeting of the Panel
(27 September 2000)
1. Mr. Toupin .  Japan’s contentions in this case as to injury are characterized by two trends.
First, its legal theories have proved to be completely flexible.
2. In its first written submission, as to other factors causing injury, its claims concerned entirely
whether the USITC’s findings were sufficiently thorough, not whether the standard that the USITC
stated in doing so was adequate.  Beginning with its first oral statement, following the Wheat Gluten
decision, Japan’s argument now concerns entirely whether the USITC isolated injury due to imports
and found that injury in itself material.  The total absence of such a theory in Japan’s original
submission suggests that it, too, did not understa nd the Anti-Dumping Agreement as imposing such
an analysis.
3. Similarly, in its original submission, Japan t ook the position that no analysis of segments was
appropriate.  Now, Japan has abandoned that position.
4. In brief, Japan has changed its position throughout this case, indicating that its positions here
do not seek to vindicate a principled view of the Agreement.  Rather, Japan evidently is prepared to
take any position to seek to overturn the US action in this case.  We are confident, however, that the
Panel will not be misguided by Japan’s opportunistic argumentation and will instead appreciate that itmust base its decision on a principled interpretation of the provisions of the Agreement.
5. The second theme that underlies Japan’s arguments is that the USITC did not make findings
on issues on which the USITC did, in fact, make findings.  The Panel should not be misguided by
such arguments either.
6. Article 3, on which Japan relies, provides no specific form in which an examination should be
reflected.  Japan’s real purpose on each point is not to establish that the USITC’s determination
violates any provision of the Agreement, but that the Panel should regard particular evidence as
entitled to greater weight than the USITC gave it.  Such is not the purpose of panel review under the
standard of review.
7. We thank the Panel for its patience and attention to the detailed factual and legal arguments
that have been made and look forward to the results of its deliberations.
8. Mr. McInerney .  Japan has long opposed the application of any antidumping measures.  Its
announced position is that its producers should be able to dump in the US market and other foreign
markets at will, with impunity.
9. In the Uruguay Round, Japan tried to obtain many changes to the Anti-Dumping Agreement
which, collectively, would have made the applicati on of antidumping measures impossible.  But Japan
did not succeed in this effort.  The Uruguay Round Agreements made a number of important changesWT/DS184/R
Page D-62
in the Anti-Dumping Agreement, but these changes were not intended to,  and did not , render the
application of antidumping remedies impossible.
10. Japan is now pursuing a fall-back strategy - - of attempting to persuade dispute settlement
panels to give Japan what it could not obtain from the Members through negotiation - - rendering theapplication of  antidumping remedies impossible, by interpreting the Agreement as if the Members
had agreed to that result.
11. In pursuit of this goal, Japan has made several claims before this Panel that strike at the heart
of the process by which antidumping measures are implemented.  The most prominent of these is
Japan’s wholesale attack on the facts available provisions, by proposing that an investigating authority
may never make an adverse inference about information not submitted, even where that informationhas been deliberately withheld.  Japan has admitted that this proposal is designed to strip Japanese
respondents of any incentive to cooperate in antidumping investigations.
12. At this hearing, despite its position that the Agreement never permits an investigating
authority to make an adverse inference,  Japan has responded to a question from the panel by agreeingthat an adverse inference could be reasonable in so me circumstances.  I don’t know how an inference
under the Agreement that can be reasonable in itself must nevertheless be based on an unreasonable
interpretation of the Agreement.
13. As a fig leaf for this naked assault on the viability of antidumping remedies, Japan offers that,
where a foreign producer has refused to supply an inve stigating authority with critical information, the
investigating authority might, in  attempting to reach a neutral result, use information that might
coincidentally turn out to be adverse.  The Pane l is supposed to accept this absurd proposition as
something to which the Members that actually employ antidumping remedies conceivably  could have
accepted in the Uruguay Round.  The Members are alleged to have accepted that exporters wouldregard as a sufficient incentive to supply advers e information in an antidumping investigation the
remote possibility that, in attempting to substitute  purely neutral information for the missing data, an
investigating authority might accidentally select some  information that was unfavourable.  This is just
not credible.
14. But Japan has not “put all of its eggs in one basket,” with respect to facts available.  It has
offered other arguments which are intended to look reasonable, when compared to its outright assaulton the facts available rule.  Such arguments should not be viewed in comparison to those that are
more outrageous, but on their own merits.  The seemingly small matter of NKK’s weight conversion
factor is a good example.  This is a small adjustment that had a minuscule effect on NKK’s margin.
But by pressing this argument, along with the more  outrageous claim, Japan hopes to carve some big
holes in the facts available rules.
15. Japan has asked the Panel to rule that investigating authorities cannot enforce reasonable
deadlines for the submission of information, and that non-cooperation confined to “small” matters
must be excused.  If the Panel goes along with this request, Japan will demand that these exceptions
be applied to much larger quantities of information submitted late, or not at all, provided, of course,that the respondent companies have the sense to offer nominal cooperation.
16. Japan’s arguments regarding the 99.5 per cent test are similar in approach to the matter of
NKK’s weight conversion factor, in that they invite the panel to begin dismantling the antidumping
law piece-by-piece. Although  nominally  about the validity of the 99.5 per cent test itself, Japan’s
argument  rapidly branches out to matters that would give Japanese exporters complete control over
antidumping investigations.   First, Japan proposes that an investigating authority should be required
to accept transfer prices to affiliates as a basis for export price.  If this proposition were accepted,WT/DS184/R
Page D-63
exporters would be in the enviable position of being able to make all of their export sales through
related distributors, forcing investigating authoritie s to accept meaningless transfer prices as valid.
17. This strategy is complimented by a similar strategy on the home market side.  Here Japan
seeks to force investigating authorities to accept hom e market transfer prices or, in the alternative,
skip over legitimate resales in the home market in favor of constructed value or third country prices.
Put these two elements together, and Japan effectively could prevent investigating authorities from
comparing a meaningful price in the export market to a meaningful price in Japan.  Instead, exporters
would be able to dictate which transactions must be used on both halves of the dumping equation.
This would enable Japanese exporters to control the outcome of investigations, and therefore avoid
the imposition of any antidumping remedies.
18. Now put it all together.  Japan is trying to give to respondents control over what information
must be submitted, when that information must be submitted, and how the entire dumping calculation
must be set up.  If Japan cannot obtain this all at once, it will try to get it in instalments from
successive panels.
19. Japan should not be allowed either to demolish antidumping measures or to begin their
piecemeal disassembly.  Therefore, we trust that the Panel will consider each of Japan’s arguments on
its individual merits, and uphold each US practice that is based on a permissible interpretation of the
language to which the Members agreed, as required by Article 17 of the Agreement.
20. Thank you for your careful attention to our arguments today and for your consideration in this
proceeding.WT/DS184/R
Page D-64
ANNEX D-4
Closing Statement of the United States
(23 August 2000)
Thank you Mr. Chairman.  This is Mr. Mc Inerney from the Department of Commerce.
I would note at the outset that, in its closing statement, Japan has chosen not to address any of
the specific substantive issues in this case, but instead has returned to its efforts to persuade the Panelthat all of the Department’s actions should be viewed as part of a conspiracy to treat Japan unfairly.
Japan wants this Panel to regard the United States’ repeated resort to its legitimate remedies under the
WTO Agreement to redress repeated dumping by Japa n as an abuse of antidumping measures.  But it
is no abuse to resort repeatedly to antidumping remedies in the face of repeated dumping.  Every time
that  Japan has trouble in its own market, it seeks to export the problem to the United States.Repeated resort to WTO remedies in the face of such repeated dumping is perfectly legitimate and
exactly what the Agreement provides for.  This case does not involve a conspiracy.  As Japan has
acknowledged, it involves substantial dumping in massive quantities.
The AD Agreement is a set of agreed limitations on the exercise of AD remedies.  The
question before this Panel is whether any of the Department’s specific methodologies or applications
of which Japan complains in fact exceed those agreed limitations.   I will now briefly turn to those
specific issues.
First, with regard to facts available, we will await further submissions from Japan  to see
whether they have revised their absolute position on this issue,  taken in their first  written submission,
that adverse inferences are never permitted.  This interpretation would encourage exporters NOT tocooperate in AD investigations, rather than to cooperate, as so plainly intended by Article 6.8 and
Annex II.
I would also encourage the Panel to recall that the Department’s approach to applying facts
available proceeds through three distinct steps: whether a resort to facts available is necessary,whether the selection of adverse facts available is justified, and, finally, if an adverse inference is to
be employed, the selection of the specific adverse facts available.  Japan has repeatedly collapsed
these three steps, so as to imply that, if the last step -- selection of the specific adverse facts available
--  was impermissible, the entire decision to resort to facts available was also impermissible.  This is
incorrect.  I hope that the Panel will keep these distinctions in mind in considering this issue.
With regard to both the joint venture (CSI) and the two companies that did not submit
conversion factors in a timely manner, there is a common thread - - passive resistance, rather than
cooperation.   These two concepts are worth pausing to consider.   First, what is cooperation?  The
Oxford English Dictionary says (approximately) th at cooperation is  “acting together for a common
purpose.”  How does this differ from passive resistance?   I think the most obvious example with
which we are all familiar is the difference between a good secretary and a bad secretary.  A good
secretary works with you to accomplish the same purpose, without having to be told in detail how
each step in this process is to be accomplished.  It is only necessary to tell her where you are going,
and she helps you get there.  A bad secretary does not outright refuse to cooperate.  She does not want
to get fired, just as an uncooperative respondent does not want to have facts available applied to it.
Instead a bad secretary drags her  feet - - needing to be prodded at each step, and requiring extremelyWT/DS184/R
Page D-65
specific instructions.  Occasionally, she will offer excuses along the line of “you didn’t tell me you
wanted a stamp on the envelope.”
This is a subjective line, but I think we all know from our everyday experience what I am
talking about.  And the behaviour of the Japanese co mpanies in this case with regard to the issues in
dispute falls into the category of passive resistance, not cooperation.  This is an especially effective
strategy for them because they control all of the in formation necessary to conduct the investigations.
Their approach was to limply go through the motions, with the Department of Commerce supposedly
obliged to tell them at every stage not only what was required, but how to get it.   The Panel is
supposed to believe that KSC cannot make greater efforts to secure the cooperation of a JV of which
it controls 50 per cent, and that NKK and NSC cannot calculate the weight of the steel they produce.
Half-heartedly going through the motions to generate a few pieces of paper for the file is NOTcooperation.  We all know the difference.
Finally, the Department’s selection of facts available is not punitive.  It is based on the
reasonable inference that the information withheld is less favorable to the respondent than other
information on the record.   The Department’s practice is only designed to give the respondent theincentive to cooperate, by placing it in a position where it will obtain a better result by cooperating.
Even adverse facts available are only presumptively adverse.  The Department cannot know whether
the facts selected are actually adverse, because it does not know the true facts.
With regard to “all others rates,” again, we are not entirely clear on Japan’s position.  Japan
originally seemed to be saying that all portions of facts available must be removed from margins used
to calculate the all-others rate.   This position is untenable because it reads “margins” in Article 9.4 as
“parts of margins.”  On the other hand, if Japan means that all margins that contain even a slight
component of facts available must be excluded, then there very often will be  NO all-others  rate. This
result is unacceptable.
The EC seemed to be searching for some middle ground, without any success.  This is
because Article 9.4 provides no such middle ground.  In any event, the EC’s  99 per cent facts
available hypothetical  is unrealistic.  When a company’s submission is mostly flawed, the
Department  throws out the whole response and resorts  to full facts available.   Such margins are not
used to calculate the all-others rate.
A final element in some of the arguments we heard today was that companies that did not
participate in the investigation should not be punished for the non-cooperation of the participants.  We
have two objections to this argument.  First, as I have noted, we cannot be sure that the
non-participants are really being punished, because we cannot know that the facts available selected
are actually adverse.  Second, to exclude all margins that are nominally based on facts available fromall-others rates would reward non-participants for the non-cooperation of participants.
With regard to the 99.5 per cent test, I would first note that there is every reason to regard
sales to related parties as presumptively outside the ordinary course of trade.  This is a very fair
reading of the Agreement and certainly cannot be considered to be inconsistent with the Agreement.  Iwould also like to emphasize again that, if a reseller passes the 99.5 per cent test, all of that resellers’
sales - - both above and below its average selling price  - - are used.
Japan has attacked the Department’s exception to that rule, on the basis that it imposes a
floor, but not a ceiling on prices treated as being in the ordinary course of trade.  But this is just whatthe cost-of-production test does - - it treats sales below  COP as being outside the ordinary course of
trade, but sales above  COP as usable sales for the purpose of calculating normal value.   This is
consistent with the whole logic of dumping.  Where dumping is occurring, it is precisely becauseWT/DS184/R
Page D-66
high-priced sales in the home market are, in fact, ordinary.  Discarding such sales as aberrations
would mask dumping.
The simple fact is that Japan does not want the United States to use its home-market sales,
presumably because it has a protected home market that ensures high-prices in that market.  This iswhat is behind Japan’s desperate attempt to argue that related-party resales in the home market do not
fall within Article 2.1's requirement for  “the comparable price, in the ordinary course of trade, for the
like product when destined for consumption in the exporting country.”   Japan would like to have all
of its dumping margins in the United States calculated by comparing its export prices to the
United States to its export prices to Canada - - an approach calculated to find no dumping.
Acceptance of Japan’s argument that related-party resales in the home market may not be
used to determine normal value would encourage foreign producers to manipulate normal value by
making all their home-market sales through related parties.  This would be easy to arrange, and would
force investigating authorities to use third-country sales or constructed value in every case - - a result
plainly not intended by the Agreement.
So, in reviewing this issue, I would urge th e Panel to keep in mind not only the individual
pieces of Japan’s argument, but the overall design of  that argument - - to force the Department to base
normal value on prices to third countries or on constructed value, rather than on prices in Japan.
Finally, with regard to critical circumstances, I would like to point out that, during the course
of this hearing, we seem to have heard in great depth and detail about every provision in Article 10
except  Article 10.7, which is the provision pursuant to which the Department acted in making its
preliminary determination of critical circumstances.  This case is not about whether the United States
could have collected final duties retroactively, for the simple reason that the United States did not
collect such duties, and agrees that it cannot do so.  It is about what effectively were preliminarymeasures taken to preserve the  option  of collecting such retroactive duties, if all of the conditions of
Article 10.6 were met in the final determination.
I would like to thank the Panel again for its consideration.  My colleague from the US
International Trade Commission will now present the closing statement for the United States on the
issues relating to injury.
I will now pick up on Mr. McInerney’s issue-by-issue approach.  I will look at two issues:
whether the captive production provision is consis tent with the Antidumping Agreement and whether
the  USITC’s determination in this case was based on objective evidence.
The captive production provision permits a better understanding of the effects of dumped
imports on the domestic industry because it directs the USITC to primarily focus on the merchant
market, where competition occurs.  This provision, de spite Japan’s argument to the contrary, requires
the USITC to consider both the merchant market and the entire industry when making this
assessment.
In this case, the captive production provision was not outcome-determinative because there
was a 3-3 split among the Commissioners as to whether the provision applied, but all the
Commissioners made an affirmative determination.  In any event, those Commissioners that applied
the provision properly analyzed the merchant market data because they looked at it in addition to the
data for the industry as a whole.  Looking at the market in this way, the USITC objectively consideredthe volume, price, and impact of those imports on the domestic industry over the period of
investigation, ensuring not to attribute injury from other causes to those imports.WT/DS184/R
Page D-67
ANNEX D-5
Oral Statement of Canada as a Third Party
 (23 August 2000)
IV. INTRODUCTION
1 The Government of Canada appreciates this opportunity to provide its views to the panel on
certain issues in this dispute.  Canada reserved its right to participate as a third party in this
proceeding because of our substantial systemic interest in the proper interpretation of the Anti-
Dumping Agreement.  In this regard, Canada will  confine its submissions to two issues:  (i) the
drawing of "adverse inferences " when recourse is had to the "facts available" provisions of Article 6.8
and Annex II of the Anti-Dumping Agreement;  and (ii ) the appropriate treatment to be accorded
captive production in injury investigations.
V. LEGAL ARGUMENT:  ISSUES ADDRESSED BY CANADA
(i) "Facts Available "
2. Turning to the issue of the United States' general practice regarding "facts available ", Canada
first wishes to clarify that it takes no position on the jurisdictional question of whether the Japanese
claim is properly before this Panel.  Canada’s  submissions are made in the event that the Paneldecides that it does have jurisdiction over the claim.
3. As set out clearly in our written submission, Canada cannot support Japan 's claim that the US
"practice of applying adverse facts available in certain situations to punish respondents" isinconsistent with Article 6.8 and Annex II to the Anti-Dumping Agreement because neither
Article 6.8 nor Annex II use the word "adverse ".
4. In Canada 's view,  the wording of Article 6.8 makes clear that an investigating authority may
have resort to the "facts available" provisions of the Anti-Dumping Agreement in circumstances
where "any interested party refuses access to, or otherwise does not provide necessary information
within a reasonable period or significantly impedes the investigation".  There is a direct link betweenthe factual circumstances of non-co-operation or impediment by the interested party and the use of
"facts available ".  This direct link, Canada submits, means that the use of "facts available " is, to a large
degree, predicated on actions by interested parties that are intended to hamper or have the effect of
hampering an investigation by an investigating authority.  Thus, Japan 's interpretation of Article 6.8,
which would encourage an interested party not to co- operate with investigating authorities, is clearly
at odds with the wording of Article 6.8.
5. Canada further submits that Article 9.3 of the Anti-Dumping Agreement provides that anti-
dumping duties may be imposed in an amount equal to the margin of dumping.  Where an
investigating authority has recourse to "facts available " as a result of an interested party 's refusal to
co-operate or its efforts to impede the investigati on, the drawing of adverse inferences is appropriate
so as to ensure that the imposition of duties under Article 9.3 is not frustrated by the non-co-operating
party obtaining the benefit of a dumping margin that is lower than would otherwise have been the casehad they cooperated or not sought to impede the investigation.WT/DS184/R
Page D-68
6. Canada submits that its view is reinforced by  a number of provisions in Annex II to the Anti-
Dumping Agreement, including, in particular, paragraph 7 of Annex II.  As the Panel knows,
paragraph 7 provides, in part, that "[i]t is clear, however, that if an interested party does not co-
operate and thus relevant information is being withheld from the authorities, the situation could lead
to a result which is less favourable to the party than if that party did cooperate".  In other words, non-co-operation can lead to higher dumping margins.
7. Further, Canada submits that if an investigating authority is precluded from drawing adverse
inferences when applying "facts available" in the face of non-co-operation or efforts to impede an
investigation, the object and purpose of the Anti-Dumping Agreement would be frustrated to the
extent that the Agreement provides that duties may be imposed as a result of an investigation
conducted in a manner consistent with the requirements of the Agreement.  If adverse inferences
could not be drawn, an interested party who refuses to co-operate or attempts to impede aninvestigation would benefit from actions that the Anti-Dumping Agreement seeks to remedy.  Canadasubmits that an approach to "facts available" that would clearly encourage non-cooperation, as
opposed to cooperation, cannot be consistent with the Anti-Dumping Agreement.
(ii) Captive Production
8. Turning to the issue of captive production, Canada notes that as part of its final injury
determination in this matter, the United States International Trade Commission (ITC) took into
account section 771(c)(iv) of the Tariff Act of 1930, as amended.  As the panel is aware, this provision
provides that in investigations involving domestic producers who internally transfer significant
production of like products, the ITC, when considering certain injury factors, will "focus primarily"
on the domestic merchant (i.e. commercial) market for the goods involved in such investigations.
9. Japan submits that the use of the captive production provision in US law is inconsistent with
Articles 3 and 4 of the Anti-Dumping Agreement because these provisions do not expressly allow for
a "focus " on anything less that all domestic production. Japan, although apparently recognizing the
existence of different segments within a domestic industry
1, submits that in particular, the definition
of "domestic industry " in Article 4.1 of the Anti-Dumping Agreement precludes segmentation of
internal transfers from the "merchant market".  Canada cannot support the Japanese claim of
inconsistency regarding the US captive production provision.
10. Canada first notes that Canadian practice with respect to investigations involving domestic
producers who internally transfer significant production of like products is similar to that of theUnited States.
 2
11. In Canada’s view, the purpose of providing an investigating authority w ith the ability to focus
on sales to the merchant market in appropriate circumstances is because it is in the merchant market
that the dumped imports being investigated compete directly against domestically produced like
products.  For example, in the flat-rolled steel sector, domestically produced hot-rolled steel may besold and used as an end product or may be further processed into, for instance, cold-rolled or
corrosion-resistant steel. Imported hot-rolled steel does not compete with domestically produced hot-
rolled steel destined for further processing into, fo r example, cold-rolled steel or corrosion-resistant
steel.
12. Canada submits that the Anti-Dumping Agreement contains no express provision with respect
to how captive production or internal transfers should  be considered by investigating authorities.  That
being said, the fact that like product is internally transferred for further processing into different goods
                                                     
1 See, for instance, First Submission of Japan at paragraph 36.
2 While an analogous provision does not exist in Canada 's anti-dumping legislation (The Special Import
Measures Act (R.S.C. 1985, c. S-15, as amended) this practice has been   developed by the CanadianInternational Trade Tribunal, the investigating authority that deals with injury investigations in Canada.WT/DS184/R
Page D-69
for different end uses than like product sold into the merchant market is clearly a relevant economic
factor for purposes of Article 3.4 of the Anti-Dumping Agreement.
13. Canada also submits that the Japanese position blurs the distinction between the concepts of
"domestic industry " and  "domestic market(s) ".  This distinction is clearly recognized in Article 3.1 of
the Anti-Dumping Agreement that provides that  a determination of injury shall include "… an
objective examination of  the effect of the dumped imports on prices in the domestic market for like
product  …".
14. Thus, in the very first provision of Article 3 of the Anti-Dumping Agreement, investigating
authorities are expressly directed to examine the impact of dumped imports on sales of like products"in the domestic market for like products", i.e. the market in which dumped imports compete against
domestic like product.  In circumstances involving internal transfers, such as with hot-rolled steel, this
will be the merchant market.
15. Canada further submits that in addition to Articles 3.1 and 3.4 of the Anti-Dumping
Agreement, the price effects described in Article 3.2, which investigating authorities are required to
consider, again necessarily focus on competition between dumped imports and domestic like product.
In circumstances involving internal transfers of domestic production, as well as sales of like productto domestic customers, consideration of the merchant market should be included in an injury analysis
because it is in the merchant market that the price effects of the dumped imports will be reflected.
16. Accordingly, for these reasons, failure to a llow investigating authorities to differentiate
between production that is internally transferred and production that is sold into the domestic market
in competition with dumped imports, in appropriate circumstances, would deprive Article 3 of the
Anti-Dumping Agreement its proper application and result in investigating authorities being unable toaccurately determine whether a domestic industry had been injured, or threatened with injury.
VI. CONCLUSION
17. For these reasons, Canada respectfully submits that, in appropriate circumstances, the
drawing of adverse inferences in dealing with "facts available " and the ability of investigating
authorities to focus on the merchant market in injury  investigations, are both fully consistent with the
Anti-Dumping Agreement.WT/DS184/R
Page D-70
ANNEX D-6
Oral Statement of Chile as a Third Party
(23 August 2000)
Chile is taking part in this case because, like many other countries, it is concerned by the
United States' regulations and practices with respect to investigations and the application of anti-
dumping measures.  What Japan has experienced in this case is a source of constant concern and
constitutes a threat to Chilean exporters.
Chile is a country which depends primarily on its exports, and in spite of the diversity of
destinations, the United States continues to be a very important market for Chilean exports,
accounting for some 20 per cent of total export revenue in 1999.  Because of the way in which the
United States applies these measures, a considerable share of the burden of proof during the
investigation process falls on the exporters, and in spite of the efforts and the resources invested in
their defence, experience has shown that the system ultimately makes it very difficult to avoid beingaccused of dumping.
This Panel is a case in point.  I shall focus my submission on the subjects we consider the
most important, without necessarily following the same order as the other parties.
Captive production
The captive production provision in United States law is, in our view, entirely contrary to the
provisions of the Anti-Dumping Agreement, which require that the determination of injury should be
made on the basis of "total" domestic production, whatever its destination.
Irrespective of whether the application of the United States' domestic provision on captive
production leads to an affirmative or negative determination of injury, what counts is that the relevant
WTO provisions require the investigating authority to analyse injury with respect to total domestic
production covering all of the domestic producers of like products, whether that production is sold or
used for own consumption.  In our view, Articl es 3 and 4 of the Anti-Dumping Agreement, in
particular Article 4, in no way permit that under certain conditions, the determination of injury shouldfocus primarily on sales in the domestic market.  The Agreement is very clear in this respect:  it
requires an examination of the domestic producers as a whole of like products.
To exclude captive production is to disregard an essential element:  the rationality and
behaviour of an industry in deciding to produce greater or lesser quantities for domestic sale or toproduce goods with a higher value added, depending on market conditions.  Failing to consider this
element is tantamount to ignoring the effect of factors other than dumped imports on production
decisions.
In our view, to give greater priority to production sold on the domestic market is contrary to
Articles 3 and 4 of the Anti-Dumping Agreement.WT/DS184/R
Page D-71
Use of adverse facts available
In Chile's view, both the legislation and the practice of the United States with respect to the
use of adverse facts available fall within the terms of reference of the Panel.
A first issue requiring clarification is whether or not there was any cooperation on the part of
the respondent exporting enterprises, and more specifically, whether in this specific case there could
truly have been cooperation, given the particular circumstance that there were two related enterprises
which were opposed to each other (petitioner and respondent).
Irrespective of a company's percentage share in, or level of control over another company
(Kawasaki had a 50 per cent stake in the affiliate), if one is the petitioner and the other is therespondent, there is a clear conflict of interest, and just because one company controls the other does
not mean it can require it to supply information.  As a matter of principle, companies with a conflict
of interests can hardly be expected to cooperate.  Thus, one cannot, in an investigation, accuse the
respondent enterprise of failing to cooperate.
The analysis memorandum submitted by the United States as exhibit US/B-22 recognizes the
conflict of interest between the two related companies (Kawasaki Steel Corporation and California
Steel Industries), and points out that the way to avoid a conflict of interest between petitioners and
respondents that are related would be for the related producer not to join the petition.  However, in the
case at issue this was not possible.  The situation already existed, and the conflict of interest was nolonger avoidable.  Nor does it seem appropriate that the DOC should prescribe, as the only viable
solution in such cases, something so drastic as th e non-participation of the related petitioner in the
petition.
Having recognized the conflict of interest, one would have hoped that the DOC's approach
would have been to refrain from penalizing the exporting enterprise which, for such understandable
reasons was unable to supply information.  Accordingly, we consider the position adopted to be
contrary to Article 6.13 and 6.8 and Annex II.
The second issue is that notwithstanding these considerations, once it is decided to use the
facts available, it is wrong from every point of view to apply the most adverse facts.  This United
States legislation and practice violates Article 6.8 and Annex II of the Anti-Dumping Agreementwhich, while they permit an investigating authority to use other sources of information if there are
parties which do not cooperate, nowhere specify that this must be the most adverse facts.  The spirit of
the provision is to enable the investigating authoritie s to fill in any gaps in their information, but in no
case to "penalize" enterprises which do not supply information.  We must bear in mind that anti-
dumping measures are exceptional, and must not go beyond what is permitted under the relevantprovisions or still less change the meaning and purpose of those provisions.
"All others" rate
Article 9.4 of the Anti-Dumping Agreement is quite clear as to how the margin of dumping
should be calculated for exporters not included in the investigation:  it clearly stipulates that  de
minimis  and zero margins and margins from exporters who do not cooperate should be excluded from
the weighted average.  And yet the DOC, in its inve stigation, included in its calculation the margins of
dumping of companies accused of not cooperating, thus violating the said provision of the Anti-
Dumping Agreement.WT/DS184/R
Page D-72
Determination of critical circumstances
Regardless of the fact that the early determination of special circumstances by the DOC may
not have affected Japan's exports, a view which Chile does not share since any determination,
including an initiation determination, negatively affects exports, what is important is to determinewhether the DOC properly considered the existence of dumping causing injury to the domestic
industry, in conformity with the WTO.  In this connection, we continue to believe that the DOC did
not have sufficient evidence under Article 10.6 and 10.7 of the Anti-Dumping Agreement.  The
information from the petitioner or from press clip pings does not, in our view, meet the standards
established by the Agreement for reaching a conclusion that there was damage caused by dumping,
since such information can hardly be considered as "positive evidence" or as representing an
"objective examination" under Article 3.1 of the Anti-Dumping Agreement.WT/DS184/R
Page D-73
ANNEX D-7
Oral Statement of the European  Communities as a Third Party
(23 August 2000)
1. On behalf of the EC, let me express first our appreciation for the opportunity to submit our
views in this dispute.
2. In our Oral Statement, we will address four issues of legal interpretation raised by this dispute
which, for systemic reasons,  are of particular interest to the EC:
• first, the use of “adverse” inferences in applying the “facts available” provisions of Article
6.8 and Annex II;
• second, the consistency with Article 9.4 of the US practice to include only those dumping
margins which are “entirely” based on “facts available” when calculating thedumping margin for non-investigated exporters;
• third, the consistency with Article 2 of the “99.5 per cent test” applied by the US authorities
in order to determine whether domestic sales between related parties are “in theordinary course of trade”; and
• finally, the treatment of “captive production” in injury determinations.
A. Choice of “facts available”
3. Japan contends that, when resorting to “facts available” in accordance with Article 6.8, the
investigative authorities may not draw “adverse inferences”.
1  According to Japan, “facts available”
may  be used only as “neutral gap fillers”.2
4. The EC disagrees.  Japan’s contention has no basis on the Anti-dumping Agreement and, ifupheld, would encourage systematic non-cooperation and, ultimately, render impossible the conduct
of anti-dumping investigations.
5. Usually, when resorting to Article 6.8,  investigative authorities are required to make a choice
between different sets of “facts available”. In doing so, they have a  large measure of discretion.  Of
course, the facts must be pertinent and, to the extent possible, verified.
3  There is, however, no
requirement in the Anti-dumping Agreement to the effect that the investigative authorities must
choose always “facts available” which yield a “neutral” result,  let alone those facts which lead to the
lowest dumping margin.
6. To the contrary, Paragraph 7 of Annex II contemplates expressly that the use of “facts
available” may lead to “a less favourable result”.  Furthermore, as demonstrated by the detailed
                                                     
1 Japan’s First Written Submission,  para. 57.
2 Ibid., para. 58.
3 Cf. Annex II, paragraph 7, second sentence.WT/DS184/R
Page D-74
textual analysis of Annex II made in the US submission4, many of  the other provisions in that Annex
are premised on the notion that “facts available” may be “adverse”  to the party concerned.
7. When selecting “facts available”  the investigative authorities may take into account, among
other circumstances, the degree of cooperation of the party concerned.  If an exporter refuses toprovide certain information,  it is reasonable to infer that it does so because that information is less
favourable than the information contained in the co mplaint or than the information provided by other
exporters.  Such inferences are not “punitive”.
5  Indeed, strictly speaking, they are not even “adverse”.
They are just logical inferences, based on the assumed rationality of the exporter’s behaviour: a
rational exporter would cooperate, if it could expect to obtain a better result by doing so than on the
basis of “facts available”.
B. Use of dumping margins based “partially” on facts available in the “all- others” rate
8. Article 9.4 prohibits the use of any dumping margin “established under the circumstances
referred to in paragraph 8 of Article 6”, whether “entirely” or “partially”.  Thus, the EC agrees with
Japan that, by excluding from the “all-others rate” only those dumping margins which are based“entirely” on facts available, US law is inconsistent with Article 9.4.
9. The US attempts to justify its practice by arguing that facts available “plugs” with a negligible
impact on the dumping margin are used in many investigations.
6  The US definition of what
constitutes a margin “partially” based on facts available, however, is by no means confined to suchcases.  The measures at issue show that the US authorities do not hesitate to include in the “all-others
rate” margins which are based to a significant extent on facts available.  Indeed, it seems that, under
US law, a dumping margin which was 99 per cent based on facts available would still have to be
included in the “all-others rate”.  In the EC’s vi ew, that would be clearly prohibited by Article 9.4.
10. The EC would agree, nevertheless, that Article 9.4 does not require to disregard the dumping
margin in every instance where facts available have been used.  Such a formalistic interpretation of
Article 9.4 would often lead to a situation where no margins can be used in order to calculate the “all-
others rate” in accordance with the method set out in that provision  That result would be detrimental
to the non-investigated exporters and contrary to the objective sought by Article 9.4.
11. The purpose of excluding the margins based on facts available is to avoid that non-
investigated exporters may be affected adversely by the lack of cooperation of those exporters which
have been given the opportunity to be investigated.  That rationale, however, does not apply in those
cases where, to borrow US terminology, the investigative authority limits itself to use a non-adverse
“plug” in order to fill a gap in the information pr ovided by a cooperative exporter.  The EC, therefore,
considers that Article 9.4, when read in light of its object and purpose, does not prevent the inclusionin the “all-others rate” of margins based on facts available, where resort to such facts is limited and no
adverse inferences have been drawn.
12. While the EC is of the view that US law is inconsistent with Article 9.4,  it concurs with the
US that in Article 9.4 the term “margin” refers to each exporter’s overall dumping margin, and not tothe margins for individual transactions, models or sales channels.
7  Therefore, Japan’s claim that the
US authorities should have excluded from the “all-others rate” only those “portions” of each
                                                     
4 US First Written Submission, paras. 60-68.
5 Japan’s First Written Submission,  paras. 58-59.
6 US First Written Submission, para. 200.
7 US First Written Submission, para. 191.WT/DS184/R
Page D-75
exporter’s margin based on facts available8 is clearly unfounded and should be rejected by the Panel.
As argued by the US, that piecemeal approach  would be unworkable and open to manipulation.9
C. The “99.5  per cent” test
13. Japan does not seem to dispute that sales between related parties may be disregarded as not
being “in the ordinary course of trade” where they  are not made at arm’s length.  Instead,  Japan’s
complaint is directed against the “99.5 per cent” test applied by the US authorities in order to
determine whether sales are at arm’s length
14. In contrast, Korea has put forward the view that the Anti-dumping Agreement “only
recognises one basis for disregarding sales as outside the ordinary course of trade”10, that is, where the
sales are made below cost.  Korea’s position is surprising as it appears to contradict its own anti-
dumping law.11  It is also incorrect.
15. The ordinary meaning of the expression sales not  “in the ordinary course of trade” is by no
means confined to sales below cost.  It may encompass as well other categories of sales, including inparticular sales between related parties where the price is affected by the relationship.
16. Article 2.3 acknowledges that, where the importer and the exporter are associated, the export
price may be “unreliable”.  By the same token, domestic prices may be “unreliable” and, therefore,
not “in the ordinary course of trade”, where the seller is related to the buyer.
17. The terms “sale in the ordinary course of trade” are used also in Article VII.2 b) of GATT.
The explanatory Note Ad paragraph 2 of Article VII confirms that the phrase “in the ordinary course
of trade” may be construed as “excluding any transaction wherein the buyer and seller are not
independent of each other and price is not the sole consideration”.
12
18. Japan  claims that the 99.5 per cent test violates both Article 2.1 and Article 2.4.  The ECconsiders, nevertheless, that the issue raised by Japan is not addressed by Article 2.4.  That Article
governs exclusively the comparison between normal value and export price.  The 99.5 per cent test is
not applied at that stage, but instead at the previous stage of calculating the normal value.
19. Contrary  to Korea’s assertions, the first sentence of Article 2.4 does not impose “a general
fairness requirement in the administration of antidumping proceedings”.
13  By its own terms, that
sentence applies only with respect to the “comparis on” between the export price and the normal value.
The calculation of the normal value precedes that comparison and is not subject to any general
“fairness” requirement.
20. Therefore, the only issue before the Panel is whether the 99.5 per cent test applied by the US
authorities may be considered as a “permissible” interpretation of the terms “in the ordinary course of
trade” in Article 2.1.
21. In the EC’s view,  it is not.   Of course,  if the prices charged to related customers are lower
than those charged to unrelated customers, that is an  indication that the former may be affected by the
                                                     
8 Japan’s First Written Submission, para. 140.
9 US First Written Submission, paras. 201-202.
10 Korea’s Submission, para. 29.
11 US First Written Submission, para. 206.
12 See also Article   1.2   of the Agreement on Implementation of Article VII of the GATT 1994, which
allows to disregard the transaction value of sales between related parties under certain circumstances.
13 Korea’s Submission, para. 8.WT/DS184/R
Page D-76
relationship.14  But a mere 0.5 percentage point average price differential is simply too small to reach
any definitive conclusion.  The EC considers that it is unreasonable, and contrary to Article 2.1, for
the US authorities to treat in all instances such a sm all differential as irrefutable evidence that sales
are not made in the ordinary course of trade.  This does not rule out the possibility, however, that in
the case at hand the price differentials between related and unrelated customers may be large enoughto justify the conclusion that sales to unrelated customers were not “in the ordinary course of trade” .
D. Treatment of Captive Production
22. We will conclude our Oral Statement by addressing briefly Japan’s claim against the captive
production provision in US law.  In answering this claim, the US has provided a description of the EC
practice.
15  That description is not entirely accurate.  The EC, therefore, would request the Panel to
disregard it.
23. The EC agrees with the US that, where a significant portion of domestic output of the like
product is for captive use, it is not inconsistent with the Anti-dumping Agreement to focus the injury
analysis on the “merchant” or “free” market.  To the contrary,  that focus is needed in order to avoidthat the effects of dumped imports become obscured through the use of aggregate data.  Captive
production does not compete directly with dumped imports.  Therefore, the immediate injurious
effects of dumped imports take place in the free market and must be observed and assessed primarily
in that market.
24. Japan’s submission places considerable reliance on Mexico – HFCS
16. That case, however,
was concerned with a very different factual situation.  In Mexico - HFCS , the same product was sold
in two different markets: the industrial market and the household market. The Panel condemned
Mexico for looking into the effects of dumped imports exclusively in one of those two markets.  By
contrast, in the case at hand, there is but one market: the “merchant” market. Therefore, the effects ofdumped imports can be observed only in that market.
25. As a final comment, the EC would note that both Japan and the US appear to assume, on the
basis of Article 4.1, that the existence of injury must be established always with respect to the whole
of the domestic production.  The EC would recall that Article 4.1 allows to consider as the “domestic
industry” those producers who account for a “major proportion” of the total domestic production.  The
US, nevertheless, has not argued in this case that the domestic production for the “merchant market”constitutes a “major proportion” of its domestic production.
                                                     
14 Cf. Article 1.2(b) of the Agreement on Implementation of Article VII of the GATT 1994.
15 US First Written Submission, paras. 44-47.
16 Panel report on Mexico – Anti-dumping Investigation of High Fructose Corn Syrup from the
United States, adopted on 28 January 2000, WT/DS132/R.WT/DS184/R
Page D-77
ANNEX D-8
Oral Statement of Korea as a Third Party
(23 August 2000)
On behalf of the Republic of Korea, I would like to thank the panel for this opportunity to
make an oral statement.  As a third party to this case, we would like to briefly address certain issuesbefore the panel, which supplements the written submission made by Korea on 31 July 2000.
(Fair Comparison)
We would like to begin by drawing the panel's attention to the issue of the fair comparison
requirement in the Anti-Dumping Agreement.  As a preliminary matter, Korea wishes to respond to a
point made by the EC in its oral statement at the first substantive meeting.  EC referred to Korea’s
written submission and argued that the first sentence of Article 2.4 does not impose a general fairness
requirement, since that sentence applies only with respect to the comparison between the export price
and the normal value.  Korea is of the view that fairness is a general principle of law, and the firstsentence of Article 2.4 is a reflection of such a general principle.  In this connection, Japan argued in
its first written submission that administerin g authority should implement the Anti-Dumping
Agreement in good faith, which is again a general principle of law as embodied in Article X.3 of the
GATT of 1994.
Thus, Korea believes that fair comparison is an overarching, free-standing obligation which
must be met and which governs all aspects of the determination of dumping.  Article 2.4 of the Anti-
Dumping Agreement states that "a fair comparison shall be made between the export price and the
normal value."  The requirement is unconditional,  not limited to certain circumstances, and is
fundamental to the Anti-Dumping Agreement.   Any methodology for anti-dumping calculations and
comparisons must respect this fundamental principle which has been set out as an independent, free-
standing requirement of the Anti-Dumping Agreement.  The question is whether the methodologyemployed by the US meets this test of "fairness".
Unfortunately, the US actions in this case did not meet the "fairness" requirement in  many
important instances on top of the fact that they were inconsistent with various articles in the Anti-
Dumping Agreement, including Articles 2, 6 and 9 as well as Annex II.  Korea wishes to elaboratethis point through several specific examples.
First, the Commerce Department applied "facts available" against certain US sales made by
Kawasaki Steel Company ("KSC") even though the information which was allegedly not provided to
the Commerce Department could not be obtained by KSC because it related to transactions with CSI,one of the petitioners.
Let’s be perfectly clear here -- it was CSI which withheld the necessary information.  CSI’s
interests as a petitioner were antithetical to the interests of KSC, as CSI made clear by bringing and
pursuing the petition and refusing to cooperate with KSC and the Commerce Department.  KSC, on
its part, made repeated efforts to obtain the necessary information.  All these efforts were wellWT/DS184/R
Page D-78
documented and reported  to the Commerce Department.  Given the situation, it was not “fair” to
penalize KSC, while it was CSI which withheld the necessary information.
In this context, Korea wishes to refer to a point made by both Canada and the EC through
their oral statements.  Canada and the EC argued that Japan is wrong in interpreting Article 6.8 thatthe investigative authorities may not draw adverse inferences.  Korea wishes to put aside for a
moment the question of interpretation of Article 6.8.  The more immediate question is the factual
circumstance in which the DOC applied ‘facts available’ rule to the KSC’s sales to the CSI.  It was
CSI, and not KSC, that withheld necessary information.  Given such a factual circumstance, it was not
fair to impose punitive dumping margin on KSC.  This point is not affected by any difference in
interpretation of Article 6.8.  Korea wishes to make the same point for the following example as well,
which is DOC’s application of ‘facts available’ rule to the conversion factor.
The Commerce Department also applied adverse "facts available" to certain transactions by
NKK Corporation and Nippon Steel Corporation on the ground that information on a minor
adjustment factor was not provided.  That minor deficiency, which was later corrected in time, was
the basis for applying a very high margin from anot her sale by these companies to the sales with the
alleged deficiency.  The Commerce Department is very clear about the reason that it selected this
margin.  It had nothing to do with the comparability of these sales nor with any other efforts to assure
a "fair comparison."  The Commerce Department selected that margin to obtain a punitive result.
The Commerce Department’s actions were particularly unfair in view of the fact that both
NKK and NSC submitted necessary information on the conversion factor after the Commerce
Department’s preliminary decision but well within the specified period before verification.  The
Commerce Department simply refused to verify the additional information.   Instead, it imposed
punitive margins on relevant sales by NKK and NSC by unfairly applying  “facts available”.  Given
the situation, it was not fair to penalize NKK and NSC irrespective of their best efforts.
Furthermore, the US "arm’s-length test," which it used for sales to affiliated parties, is
fundamentally unfair.  It is biased , because it includes only higher priced sales in the domestic
market.  According to the particular methodology employed by the US, the Commerce Department
includes only the sales to an affiliated party if their weighted-average price is equal to 99.5 per cent or
greater than the weighted-average price of sales to non-affiliated customers.  The gap between the
minimum price included and the weighted-average price of sales to non-affiliated customers is only0.5 per cent.  This level is below the de minimis  level established to determine whether dumping is
occurring.  On the other hand, there is no maxi mum price over which transactions would not be
included in the calculation of margin.  This means that only higher priced sales, which are more likely
to result in dumping margins, are included for compar ison purposes.  Thus, the US arm’s-length test is
arbitrary, biased and cannot be sustained as a "fair comparison".
(New US policy on critical circumstances)
Apart from Korea’s general concern about “fairness” as a fundamental element of anti-
dumping measures, there is one methodology employed  by the US about which Korea is particularly
concerned.  That is with respect to the US decision on critical circumstances.  The US improperly
based a critical circumstances finding in this case on a mere threat of injury finding despite the fact
that present injury is required by Article 10.
The Anti-Dumping Agreement provides for very limited circumstances under which duties
can be applied retroactively.  Article 10.2 and Article 10.6 provide those limited circumstances.  In
the case of Article 10.2, duties can be applied only back to the provisional duty period if a present
injury determination has been made.  In case of determination of threat to injury, duty can be imposed
only from the date of the threat of injury as provided in Article 10.4.  Article 10.6 allows the duties toWT/DS184/R
Page D-79
be applied during the provisional period and 90 days prior to that period in certain limited
circumstances as defined in Article 10.6.  In other words, the Article  10.6 remedy is additional to the
provisional remedy as defined in Article 10.2.  Thus, Article 10.2 and Article 10.6 must be read
together in context to require that there must be an affirmative determination of actual present injury
in order to make a critical circumstances finding.
The plain language of Article 10.6 also leads to such an interpretation.  The only way for an
importer to "know" that dumping is occurring and that  it would cause injury is for injury to actually
exist.  This is not only what Korea believes but also  used to be the view of the ITC of the US as well.
Furthermore, the requirement for present injury is  the only interpretation which comports with the
limited object and purpose of additional retroactive duties as defined by Article 10.6 -- i.e., to assure
that the remedial effect of the final dumping duty is not undermined.  When there is only a threat of
injury, there is no question that final dumping duties alone will suffice to provide a remedial effect to
prevent injury.  The need for additional remedy as defined in Article 10.6  arises only in a present
injury context when the final duties may be too late to serve their full remedial purpose.
From the above, it is clear that the Commerce Department issued critical circumstances
determination in gross violation of the Anti-Dumping Agreement.  The Commerce Department
determination was also at variance with the International Trade Commission’s decision, which found
only threat of injury in the instant case.  Furthermore, Commerce’s action had the very real and
intended effect of chilling trade, as was well described in the first submission of Japan.
The US Government recently announced, as part of its Steel Action Plan, that it intends to
continue its new critical circumstances policy -- at least insofar as steel cases are concerned.  Such a
policy, if not properly sanctioned, would have a serious chilling effect upon the proper functioning of
the rule-based multilateral trading system.  The pur pose of the Anti-Dumping Agreement is not to halt
trade -- it is to investigate whether trade in question has been fair or not.  For this reason, the problems
raised by the critical circumstances decision of the US should be fully addressed by this Panel.
Thank you.WT/DS184/R
Page D-80
ANNEX D-9
Opening Statement of Japan at the Second Meeting of the Panel
(27 September 2000)
INTRODUCTION
61. The right to impose anti-dumping measures is limited and does not allow a Member to run
roughshod over its international obligations.  The United States asks the Panel to convert the A-D
Agreement from a set of international rules restricting imposition of anti-dumping measures into a
weapon with which Authorities can penalize respondent s.  But, the Agreement is not a weapon to be
wielded by Members.  Rather, it is a carefully worded set of restrictions aimed at curbing domesticlaw abuses to the international trade system.
62. Here, the Panel first must ask whether the United States has respected the restrictions set forth
in the treaty text.  Second, the Panel must ask whether the United States has respected its obligation to
interpret the treaty text in good faith.  Analyzed appropriately, it is clear to us that United States has
not respected its obligations.
I. SPECIFIC ANTI-DUMPING AGREEMENT CLAIMS
A. USDOC
1. Facts Available
63. Japan’s claims against USDOC’s use of adverse facts available involve not only the general
practice itself, but also the manner in which that practice was applied in this case.
(a) USDOC Practice
64. I would like to clarify our position on the use of facts available.  We have not asserted, as the
United States claims, that the application of facts available can never turn out to be less favourable.
Our claim is nothing more and nothing less than what a careful reading of Article 6.8, together with
Annex II, yields.
65. What we have said is that facts available must be logical and reasonable.  The most logical or
reasonable facts available, in certain instances, may turn out to be adverse to a respondent.  But, it is
critically important to understand that Paragraph 7 of Annex II does not give the United States a
license to punish.  The goal of Paragraph 7 of Annex II is to find information that most closely
approximates the truth to calculate the most accurate dumping margin given the information available.
The many other detailed provisions in Annex II confirm this objective.
66. The United States tries to make its policy sound benign by suggesting that the adverse
inferences they draw are always reasonable.  Wishing to hide from the Panel the punitive nature of a
policy whose stated purpose is to “provide an incentive to cooperate,” the United States argues that it
is always logical to speculate that any missing information is adverse to the respondent.  We disagree.WT/DS184/R
Page D-81
The US practice has no textual basis and must stop.  The United States improperly interprets
Article 6.8 and Annex II, particularly Paragraph 7 of Annex II, to allow an authority to create
incentives—quite strong incentives, in fact—to force a respondent to do exactly what the authority
tells it to do, just like a bad boss commanding a faithful secretary.  But, Paragraph 7 significantly
restricts an authority’s use of secondary data.  Although the third sentence of Paragraph 7, in and ofitself, may result in an incentive, it does not permit an  authority to create its own incentives to force a
respondent to comply with its instructions.
67. The Agreement contemplates that an authority w ill tailor its choice of facts available to the
specific circumstances surrounding the missing information.  USDOC makes no effort whatsoever to
do this.  Instead, USDOC purposefully homes in on an  extremely high margin as the gap filler; the
United States admits that USDOC does so to give respondents an incentive to cooperate.
68. In addition, Paragraph 7 does not permit an authority to punish a respondent with adverse
facts available even to achieve a goal that is not related to the investigation.  The US has confessed
that it punished KSC, NSC and NKK with adverse facts available to create an incentive for future
respondents to comply with US demands. Japan recognizes the difficulties faced by authorities in
administering anti-dumping investigations, but Article 6.8 and Annex II do not permit the
United States to sacrifice accurate margins, a basic goal of the A-D Agreement, by ignoring recordevidence and drawing unreasonable inferences merely  to send a warning to future respondents.  In
short, the US interpretation is impermissible; it is not supported by the text, object and context of the
A-D Agreement.
(b) KSC
69. KSC’s experience is a classic example of a facts available policy gone bad.  First, USDOC
did not demonstrate that the data it requested was necessary, as required by Article 6.8.  CSI’s resale
data would have been necessary only if USDOC used constructed export price.  But Article 2.3 does
not require authorities to construct an export price; it only allows them to do so if the export price is
“unreliable because of association or a compensatory arrangement.”  USDOC did not check the
reliability of this sales data -- which is demonstrated by the fact that USDOC was unaware that KSChad provided the KSC-to-CSI sales data with its Section A response.
70. Second, USDOC did not establish that KSC withheld the requested data.  USDOC ignored the
fact that the company whose information USDOC demanded was a petitioner.  As we explained in our
second submission, USDOC has taken such peculiar facts into consideration in previous cases, but
chose not to do so here.  USDOC blindly treated KS C and CSI as a single company -- despite the two
companies’ obvious conflict of interest given that  one was suing the other under the US anti-dumping
law.  The decision to apply an adverse inference is all the more inappropriate, as USDOC did notprovide assistance to KSC in spite of the requirement of Article 6.13.
71. Third, even if USDOC had provided the requested guidance and still ultimately deemed
KSC’s situation to require the use of facts available, the selection of the second-highest dumping
margin was neither reasonable nor logical.  Such an adverse inference would assume that KSC was
aware that CSI’s resales would have led to a dumpi ng margin as high as the one used by USDOC.
This was clearly not the case, because KSC lacked access to CSI’s data.
(c) NSC and NKK
72. USDOC’s approach to NSC and NKK is just as troubling.  First, it was clearly unnecessary to
use facts available, because the data requested had already been provided for USDOC to verify.
Second, the mistakes by the companies were unintentional.  They did not malevolently withholdWT/DS184/R
Page D-82
disadvantageous data as the United States suggests.  Rather, USDOC did not satisfy the Article 6.13
requirement to provide assistance.
73. Third, the selection of facts available was neither reasonable nor logical.  The only interest for
USDOC was to select a margin “that is sufficiently adverse so as to effectuate the statutory purposes
of the facts available rule, which is to induce respondents to provide the Department with completeand accurate information in a timely manner”.  In spite of the requirement of special circumspection
stipulated in Paragraph 7 of Annex II, USDOC de monstrated no concern for using an estimate as
close to reality as possible.
74. It is true that USDOC also mentioned in its final determination that it sought a margin “that is
indicative of NSC’s customary selling practices and is rationally related to the transactions to which
the adverse facts available are being applied.”  But this case shows how meaningless and hollow this
standard formula is.  In this case, USDOC had only to look at the data submitted by the companies toget the real dumping margin.
75. Indeed, NSC and NKK’s situation is perhaps the best example of how USDOC’s approach to
adverse facts available is punitive.  Even though USDOC had the companies’  information, it chose to
expunge it from the record and apply a rate that had no relevance to the transactions for which facts
available were deemed necessary.  USDOC did not apply an inference here, adverse or otherwise:when USDOC chose a margin or price that was as adverse as possible for NSC and NKK, it was not
making an inference based on the companies’ alleged non-cooperation, but rather punishing the
companies for not turning over the information sooner.
76. At the very least, in order to be consistent with its WTO obligations, the United States must
distinguish between respondents who are truly recalc itrant and those who merely make a mistake but
fix it in time for verification (like NSC and NKK), or who try very hard but still cannot provide the
information (like KSC).  The arbitrary application of adverse facts available in cases such as these
must not be permitted.
2. All Others Rate
77. With respect to the all others rate, Article 9.4 prohibits their calculation based on margins
tainted with facts available.  Nothing in the provision suggests that this prohibition is limited to
margins based on total facts available.  The United States has failed to even respond to the fact that its
proposal to so limit the provision was rejected du ring Uruguay Round negotiations.  It also fails to
explain why there should be any difference between a margin based entirely on facts available versus
one based 90 per cent on facts available.  Either way, the same policy considerations inherent in
Article 9.4 apply:  non-investigated exporters should not be affected by the behaviour of investigated
companies during the course of an investigation.
78. The Panel should take note of the new argument on this issue set forth in the US Second
Submission.  They claim that because Article 9.4 is ambiguous, then multiple interpretations must
apply.  But, it is not for the United States to decide whether the Article is ambiguous.   Further, it
cannot be accepted that a proposal specifically rejected during negotiations is a permissible
interpretation, simply because the Member that made the rejected proposal claims that the resulting
provision is ambiguous.  The European Commission ag rees with Japan that the US law is inconsistent
with Article 9.4.  The United States is clearly taking its permissive interpretations theory too far.
3. Affiliated Sales In The Home Market
79. Japan has not argued that sales to affiliates can never be found to be outside the ordinary
course of trade.  Rather, Japan has argued that Article 2 of the Agreement does not permit the mannerWT/DS184/R
Page D-83
in which the United States decides that such sales are outside the ordinary course of trade.  Japan has
further argued that the Agreement does not permit the replacement of such sales with an affiliates’
resales.
80. In its second submission, the United States attempts to portray its 99.5 per cent test as benign.
It says that the test must be fair because when sales to an affiliated customer fail the test, all of thosesales are disregarded, not merely the low-priced ones.  What the United States fails to mention is that
the sales that pass the test are, on average, higher than the sales to all other customers.  No effort is
made by USDOC to discern whether these higher-priced sales are unreliable because of the
relationship between seller and buyer.  The United States says that it would exclude such sales if
respondents were to prove that they were “aberrationally high.”  But, this just proves our point:  low-
priced sales are automatically excluded for being low priced; high-priced sales are excluded only if
specifically requested and only if they are priced really high.  The United States has not explainedhow it can justify such a low standard for excludin g low-priced sales—a standard well below the two
per cent de minimis standard--but such a high sta ndard for excluding high-priced sales.  Absent such
an explanation, we are left to interpret that the motivation behind this lopsided policy is to exclude as
many low-priced sales as possible in order to drive up the dumping margin.  This does not comply
with the fair comparison requirement of Article 2.4.
81. The United States also claims that it has the discretion under Article 2.1 to replace sales to
affiliates with the affiliates’ downstream sales.  Th ere is no such authority in the Agreement.  Even if
there were support for this practice, the United States now appears to admit that its use of downstream
sales in the home market is different from its use of downstream sales in the export market.  In the
home market, the United States merely assumes downstream sales prices will be higher and thereforeinflate the dumping margin; but in the US market -- when calculating constructed export price -- the
United States goes to great lengths to make sure the price is as low as possible by deducting as much
cost and profit as possible.  The United States wants the Panel to believe that the Agreement permits
the use of downstream sales in both markets, but  that the adjustments made to those downstream
prices can be lopsided in favor of higher dumping margins.   Article 2.4 requires a fair comparison.This means symmetry on both sides of the equation.  The United States has blatantly ignored this
requirement.
82. The bottom line is this:  if sales are going to be excluded for being outside the ordinary course
of trade, then there must be a rational reason for doing so.  The fact that sales are made between
affiliates at relatively low prices is insufficient.  Further, once the sales are excluded, there is no
authority to replace them with the affiliates’ resales.  Even if there were, there is certainly no support
for making adjustments on the export side that are not also made on the home market side.  The USapproach disregards the goal of Article 2 to ensure a fair comparison between export and home
market prices.
4. Critical Circumstances
83. As for critical circumstances, Japan has demonstrated that US law and policy, both on their
face and as applied in this case, are inconsistent with the AD Agreement.  The United States hasdeveloped various excuses for its actions in this case, but its post hoc rationalizations cannot fix what
is already damaged.  What is clear from this case is:
• Article 10.6 requires that imports be dumped before applying retroactive provisional
measures.  No finding of dumping was made when the preliminary critical circumstancesdecision was made.  The United States claims that no such determination is required.  The
United States apparently wants the Panel to believe that the word “dumped” in thechapeau to Article 10.6 and in Article 10.6(ii) is meaningless.WT/DS184/R
Page D-84
• Article 10.6 also requires a finding of injury.  USITC had preliminarily found that imports
posed only a threat of injury.  Japan has explained in its written submissions that theconcept of injury under Article 10 is limited to current injury -- not threat of injury, not
material retardation.
• Article 10.6 requires a finding that importers knew or should have known that the
domestic industry would be injured by the increase in imports.  Ignoring again the threat
determination made by USITC, USDOC relied on vague press articles accompanying the
petition.  Vague articles cited in a petition do not constitute sufficient evidence of
importer knowledge of injury.  The few additional press articles found independently by
USDOC were no more specific:  none of them mentioned either Japan or hot-rolled steel
specifically.
84. According to the United States, what petitioners say is inherently reliable -- unless and until
respondents can prove otherwise.  In the United States, respondents are guilty until proven innocent.
The United States fails to recognize that the AD Agr eement exists precisely to curb such abuses.  This
is why Article 10.6 requires that findings of dumping and injury already be made; this is also why all
other findings made under Article 10.6 must be supported by sufficient evidence, not merely biased
petition information.
85. The United States wants the Panel to conclude that, because retroactive duties were never
actually collected in this case, the issue is moot .  In other words, USDOC should be permitted to
continue to make early critical circumstances determinations without sufficient evidence, because the
USITC waits to gather sufficient evidence.  But, acti ons that chill trade must not be tolerated; even if
the actions eventually are corrected, trade still has been chilled.  This is why the standards forapplying retroactive duties in Article 10 of the AD Agreement use such strict language.  The authority
must collect sufficient evidence before it can shut down trade with the threat of retroactively imposed
dumping duties.
B. USITC C
LAIMS
1. Captive Production Provision On Its Face
86. Japan’s argument that the captive production provision violates the A-D Agreement “on its
face” is quite straightforward.  The A-D Agreement requires authorities to evaluate the industry as a
whole.  The US statute, in contrast, picks two crucial factors -- market share and financial
performance -- and forces the authorities to focus primarily on the merchant market segment for those
two factors.  To focus primarily on one narrow se gment, without any balanced assessment of other
segments and without any explicit effort to relate segments back to the industry as a whole,
impermissibly distorts the analysis and, thus, violates Articles 3 and 4.
87. The United States has offered many defences for its statute, but the text of the relevant US
statute itself contradicts the US claims.  First, th e United States once again claims the statute does not
mandate WTO-inconsistent action.  But the United States sidesteps the mandatory language “shall” in
the statute.  The United States also overlooks the recent Appellate Body decision in the 1916 Act case,
in which the Appellate Body confirmed that subsequent interpretation of a statute cannot save theWTO inconsistency of mandatory legislation.
88. Second, the United States contorts the phrase “focus primarily” to mean consideration of
other factors.  But, the statute does not merely say to consider merchant market data; it says to focus
primarily on such data.  Moreover, although raised by the United States, the phrase “in determining”
in the US statute actually reinforces Japan’s argument.  The dictionary defines “determine” as “be aWT/DS184/R
Page D-85
deciding or the decisive factor in.”  Thus, the US statute says that in making the deciding or decisive
evaluation of market share and financial performance, USITC must focus primarily on one segment.
89. Third, the United States argues the US statute somehow still permits proper evaluation of the
industry as a whole, since there is other language that follows the analytic framework of considering
the industry as a whole, as set forth in the A-D Agreement.  This argument, however, ignores thehistory and structure of the US statute, that makes the primary focus on the merchant market, set out
in subsection (iv) of the statute, take precedent over other statutory language.  The United States
cannot cite old and more general statutory language and overlook the newer and more specific
language of the captive production provision.  Congress added this new language to the statute for a
reason -- to change the old method of analysis that the United States now tries to cite in its defence.
90. Fourth, the US statute does not require or permit USITC to relate its analysis of the merchant
market segment to the industry as a whole, as required by the A-D Agreement.   The statute does notrequire consideration of all segments.  It simply makes no sense to think one can understand the
whole without considering all of the parts that make up the whole.
91. Finally, the United States argues that in the hot-rolled steel case the Commissioners applying
the captive production provision did relate its findings back to the industry as a whole.  The merchant
market analysis was just one step on the way to a proper analysis.  This post hoc rationalization iswithout basis.  Nowhere does USITC mention this approach in its determination, or say anything
other than parallel recitation of certain market trends.  It is not what the USITC could have said; it is
what they actually did say that must govern in this proceeding.
2. Injury and Causation In The Hot-Rolled Steel Case
92. One of the central issues in the causation arguments related to the period of time being
examined.  The basic flaw in the USITC determination is the failure to consider and address those
facts that undermine the authority’s foregone conclusion.  In 1998, even after the increase in imports,
the domestic industry shipments and operating profits were higher than in 1996 before the import
increase.  It is hard to reconcile this simple fa ct with the claim that imports were causing material
injury.  The legal problem is that the USITC did not even try to address this fact.
93. Of course USITC considered the overall period when doing so reinforced its conclusions.
The real issue, however, is how USITC addressed those factors for which the consideration of the full
period undermined their desired conclusion.  The answer, simply, is that USITC ignored the
inconvenient facts.
94. The time period for the analysis and the captive production issue intertwine.  Part of the
reason several Commissioners wanted to focus primarily on the merchant market for financial
performance was to avoid the inconvenient fact that operating profits were up in 1998 over 1996levels for the industry as a whole.  Focusing primarily on the merchant market provided legal
justification -- at least under US law -- for essentially ignoring the overall trend in operating profits.
Thus one of the central facts of this case -- one that respondents made a major part of their argument -
- is not mentioned at all in the majority opinion.  Not even mentioned.  No matter how much post hoc
rationalization the United States now offers, that rationalization cannot hide this basic omission.  Howcan USITC be evaluating the overall trend in oper ating profits when it does not even mention it?
95. The United States now points to shreds of evidence in the determination.  USITC mentioned
cost of goods sold.  USITC mentioned that the industry remained profitable over the period.  But step
back for a moment.  Such cryptic references just underscore the failure to mention and directly
address the main fact:  that the industry overall made a higher operating margin with imports than
without imports.WT/DS184/R
Page D-86
96. Nor does the extensive discussion of the 1997 to 1998 decline in operating profits somehow
remedy this glaring omission.  In 1997, even after imports increased, the domestic industry made
more money than in 1996.  Remarkably, in 1998 this fact remained true -- even after another increase
in imports, the domestic industry was still making more money than it did in 1996.  USITC never
addressed why consistent increases in operating profits justified a finding of material injury caused byimports.
97. This basic omission was compounded by USITC’s inadequate consideration of alternative
causes of any declines being experienced by the domestic industry.  Having decided to make imports
the scapegoat, USITC quickly brushed aside the alternative causes raised by respondents.
98. Under the Tokyo Round Antidumping Code, such casual treatment might have been
permitted.  But the A-D Agreement added new language that imposed higher obligations on
authorities.  The United States wants to overlook this new language, and thus clings to the old AtlanticSalmon panel report.  But the new language in the AD Agreement plugs precisely the gap in the old
treaty text identified by the Atlantic Salmon panel.
99. Moreover, the Wheat Gluten panel has already clarified what it viewed the language “not be
attributed” as requiring.  The United States tries to brush aside Wheat Gluten as a safeguards decision,
but this key phrase is the same in both the anti-dumping and safeguards agreements.  “Not beattributed” must be given meaning, and USITC did not do so in this case.  Having found that each of
these alternative causes did not entirely explain the problems, USITC then just assumed without
serious analysis that imports must be the real problem.  The AD Agreement requires more.
II. GATT ARTICLE X:3
100. The United States studiously has avoided responding to Japan’s claim under Article X of
GATT 1994.  Thus, under established WTO rules, because Japan has made a prima facie
demonstration of a US violation and the US has failed to respond adequately, the Panel should find in
Japan’s favour on this claim.
101. Article X:3 sets standards for the administration of domestic laws.  Even when a domestic law
is consistent with the A-D Agreement, an authority violates Article X:3 where, as here, it fails toadminister the law in a uniform, impartial, or reasonable manner.  As Japan has clarified, Japan’s
Article X:3 claims are independent of it’s a-D Agreement claims and should be reviewed under
Article 11 of the DSU.
102. The US answer to Panel Question 44 confirms Japan’s claim.  For example, the United States
told the Panel: “No information was submitted to and accepted by the USITC after applicable
deadlines in the investigation.”  However, the date the United States provides as the applicable
deadline is the day the USITC closed the administrative record.  The deadline for questionnaireresponses was much earlier.  The US answer, therefore, apart from being wrong, highlights the
discriminatory manner in which the United States treats foreign versus domestic producers:
• For domestic producers, the deadline the US imposes is the closing of the administrative
record.
• In contrast, for foreign producers, the day the administrative record closes is irrelevant.
When NKK and NSC supplied data well before the closing of the factual record and in
time for USDOC to verify and use it, USDOC  nonetheless applied punitive adverse facts
available.WT/DS184/R
Page D-87
103. In short, the US required respondents, but not petitioners, to meet questionnaire response
deadlines.  This is a clear example of non-uniform, partial and unreasonable action being taken by an
authority.  It is precisely the kind of bias in the administration of domestic law that Article X:3
prohibits.
104. USDOC’s failure to correct the error made in calculating NKK’s preliminary dumping margin
is another violation of Article X:3.  USDOC failed to follow its own regulation for making
corrections, thus subjecting NKK’s shipments to inflated provisional measures upon which USDOC
wrongly justified continuing critical circumstances.  In responding to Japan’s Question 30, the
United States begs to be excused from this non-uniform application of a domestic law because
USDOC merely made a mistake.
105. The irony is astounding.  The United States asks the Panel both to accept USDOC’s use of
adverse facts available to punish NKK and NSC, and to treat USDOC’s mistakes as mere oversights.The US position, therefore, is that mistakes made  by the US Government and US producers must be
tolerated; but mistakes made by foreign producers must not be tolerated.
106. These violations stem from USDOC’s adversarial treatment of respondents. As Japan has
demonstrated, the adversarial approach USDOC takes in its investigations violates GATT Article X:3.
Unless the Panel takes firm action to address the US violations, the US abuses will multiply.
CONCLUSION
107. The United States hopes the Panel is too busy to focus on the texts of the Agreements and the
US response to Japan’s prima facie case.  But, Japan is confident that, once the Panel focuses on the
text of the Agreements, the specifics of Japan’s claims and the inadequacies of the US replies, it willfind that the US interpretations are impermissible.  It will find that the US anti-dumping regime, on its
face and as applied, violates the A- Agreement and Article X of GATT 1994.
108. As the Panel deliberates, we urge you to bear in mind Article 1 of the A-D Agreement.
Article 1 explains clearly that anti-dumping measures shall only be applied when the investigation has
been “conducted in accordance with the provisions of this Agreement.”  Japan has identifiednumerous ways in which the United States did not act “in accordance” with the A-D Agreement, and
the Panel should not permit the US violations.WT/DS184/R
Page D-88
ANNEX D-10
Closing Statement of Japan at the Second Meeting of the Panel
 (27 September 2000)
109. At the outset, Japan takes issue with the US claim that we have abandoned or changed our
position during the proceeding.  Japan is confident that, by reviewing all of Japan’s submissions in
this proceeding, the Panel will clearly see the thrust of Japan’s argument.  Moreover, contrary to the
US claim, it is Japan, and not the United States, that is respecting the results of the Uruguay Roundnegotiations, as expressed in the texts of the provisions relevant to this proceeding.
110. Japan is impressed with the level of attention the United States devoted this morning to injury
and causation.  Japan is not surprised; given the weakness of the US presentations to date, it needed to
devote some time to USITC’s misconduct.  However, the US effort to rebut Japan’s presentation is
unsuccessful.
111. Japan asks the Panel also to note that the United States continues to repeat the mantras that:
(a) the AD Agreement contains only unclear provisions that admit many meanings—see for
example the new US argument regarding Article 3.5 (para. 13);  indeed the United States
apparently has yet to find a clear provision in the Agreement
(b) due to the efforts of the US negotiators, the US law was enshrined in the A-D Agreement; and
(c) US law is consistent with the A-D Agreement simply because the US Congress says that it is.
112. So, in the view of the United States, this whole process has been unnecessary, because US
law inherently complies with US WTO obligations.  This cannot possibly be true.  In addition to the
violations shown by Japan, the DSB already has f ound the US anti-dumping law to be inconsistent
with US WTO obligations in two separate proceedings— US - Anti-Dumping Measure on Korean
DRAMs  and US Anti-Dumping Act of 1916 .
113. Turning now to the US assertions this morning, we note first that the US still has not rebutted
Japan’s prima facie  case.  Accordingly, I will address only some of the US points—causation, captive
production, facts available and Article X of GATT 1994.
114. At the outset, we would like to remind the Panel that we are not here to decide whether or not
to overturn Wheat Gluten .  The United States would like to practice its arguments for Wheat Gluten .
But, the Panel’s focus, of course, is what the United States did in this case.  The United States seems
to think Japan’s argument depends entirely on Wheat Gluten .  It does not.  Japan’s argument stands
whether or not the Panel agrees with Wheat Gluten , and whether or not the Appellate Body reverses
Wheat Gluten .  The USITC in this case was too quick to ignore unfavourable facts, too willing to
gloss over contrary arguments, and too outcome driven in dismissing alternative causes.  The United
States assumes that a large USITC staff, a thick report, and some conclusory language insulates it
from challenge.  But the United States is wrong.  The USITC may collect extensive data, but it is the
way the USITC determination addresses that data that controls this issue.WT/DS184/R
Page D-89
115. To illustrate the defects of the USITC approach, we can find no better example than profits
levels.  The United States argues that it “examined” profit levels.  First, the obligation at Article 3.4, is
to “evaluate” the factors, not merely to examine th em.  Evaluating a factor means more than selecting
favourable facts and ignoring unfavourable facts.   At the outset of its investigation, the USITC
decided that three years of data should be examined.  Yet, once it collected the data, the USITC foundthat the data for 1997 and 1998 alone supported its desired conclusion, and that the data for 1996
could not logically be reconciled with its desired conclusion.  So what did the USITC do?  It simply
ignored the data for 1996.  Japan cannot imagine how any neutral decision maker could consider such
selective consideration of facts to be “evaluation.”
116. We note that the United States devoted more space to the captive production provision than
any other single issue in its opening statement.  The United States made this issue seem complicated
because they had to do so.  The US statute explicitly mandates an analytically impermissibleapproach.  The statute forces the USITC to undertake an unbalanced and biased analysis that focuses
primarily on one segment at the expense of others.  Th e United States protests that other parts of the
statute call for a WTO-consistent approach of considering the industry as a whole.   But when one
reads the US statute as a whole, the captive produ ction provision trumps those other provisions.  In
normal cases, the statute might allow the proper approach.  But in those cases where the specialcaptive production provision applies, the flawed, unbalanced approach takes legal precedence and the
USITC has no choice but to violate Articles 3 and 4.
117. I turn now to facts available.  The US opening statement describes the US policy on facts
available as benign and reasonable.  But it is neither.  The USDOC uses facts available as punishment
– punishment to those companies involved in the current case—and as warning--to respondents infuture cases--about the fate that awaits them.
118. Consider the three companies involved in this case.  All three were punished.  Why?  KSC
was not able to supply data from a petitioner, a company that was affirmatively attacking KSC in this
proceeding.  Not surprisingly, the United States ignored this crucial fact this morning.  With respect to
NSC and NKK, the United States protests that USDOC could not possibly know the motivation forthe companies not providing the information in a tim ely manner.  This claim is absurd.  These two
companies did everything USDOC asked.  When the USDOC said jump, the companies asked “how
high?”  They did provide the information, and did so within the statutory deadlines.  Yet USDOC
looked at these facts and still inferred bad motives and applied adverse facts available.  The
United States argues that motives cannot be determined, but USDOC has no trouble assuming bad
intentions; this is not surprising given the USDOC premise that all respondents are bad secretaries.
119. The United States has failed to rebut Japan’s claim under Article X of GATT 1994, a claim
which is quite important and which is independent from Japan’s other claims.  The United States tries
to hide behind its bifurcated structure for administering its laws, and the different functions involved.
But this rationalization does not work.  A bifurcated structure does not allow a Member to administer
its laws in biased and inconsistent ways.  We agree that the USITC applies the law consistently to
both US and non-US parties.  If only the USDOC  did the same.  If USDOC adopted the USITC
approach, KSC would not have been punished for not providing a petitioner’s data.  The
Commissioners worked to get the information the USITC needed from the recalcitrant US producers,
yet USDOC officials did nothing to get the inform ation from CSI.  Also, in contrast to USDOC’s
treatment of respondents NSC and NKK, the USITC accepted late data from the petitioners.   In each
instance, the different treatment, and the violation of Article X, could not be more obvious.
120. In closing, Japan urges the Panel to attend closely to the texts, identify the permissible
interpretation of the relevant provisions and recognize the provisions for what they are—limitations
on the discretion of authorities.  Thank you for your attention to this most important matter.WT/DS184/R
Page D-90
ANNEX D-11
Opening Statement of the United States at the
Second Meeting of the Panel
(27 September 2000)
1. Mr. Hirsh.  Thank you, Mr. Chairman and members of the Panel.  The United States
appreciates this opportunity to present its views rega rding the issues in this dispute.  Again for the
record, my name is Bruce Hirsh.  I am a Legal Advisor with the Office of the US Trade
Representative in Geneva.  With me from my office in Washington is Associate General Counsel
Dan Mullaney, who will begin our presentation today with a discussion of two procedural issues.
James Toupin, Deputy General Counsel of the US In ternational Trade Commission, will then present
the issues concerning injury.  Finally, John McInerney, Acting Chief Counsel for Import
Administration at the US Departme nt of Commerce, will present the issues concerning the anti-
dumping calculations and critical circumstances.
2. Mr. Mullaney.   Thank you, Mr. Chairman, and members of the Panel.  With respect to the US
preliminary objection  to extra-record evidence, Japan argues that DSU Article 11 and Article 17.6(i)
of the Anti-Dumping Agreement, taken together, require the panel to consider facts outside of the
administrative records.  This position is directly contrary to Article 17.5(ii) of the Anti-Dumping
Agreement, which requires the Panel’s examination to be based upon "the facts made available in
conformity with appropriate domestic procedures to  the authorities of the importing Member.”  It is
also contrary to several panel decisions under the Safeguards Agreement, which, in applying
Article 11 of the DSU, specifically limited the panels’ review to facts placed before the authorities.
3. Japan also claims that the Panel should take account of the statisticians’ affidavit and
attorneys' affidavits concerning alternate margin calculations because they are based on information
on the record. This is incorrect.  The calculation of a margin of dumping, for example, is a very
complicated process that involves numerous decisions.  Simply presenting an alternate dumpingmargin and asserting that it is based on a recalculation of record information is equivalent to
submitting new information.  The affidavit form of the information underscores this deficiency: in
effect, the affiant is saying “you can’t see this number in the record, but you should accept it as true,
because I am swearing that it is true.”  The statisticians’ affidavit is itself new evidence.  If it is
important evidence, the Japanese respondents should have submitted it for the record.
4. We will not repeat points we have already made on the special deferential  standard of
review  specifically adopted by the negotiators for the Anti-Dumping Agreement.  However, we note
that Japan persists in suggesting that somehow Ar ticles 31 and 32 of the Vienna Convention override
the specific text of Article 17.6(ii).  That article, however, reflects the negotiators’ understanding thatthey had left enough issues ambiguous that they needed to make special provision for cases in which
customary rules of treaty interpretation would not provide an unequivocal result.  In fact,
Article 17.6(ii) reflects a deliberate choice by the negotiators to allow for multiple interpretations.
Thus, Japan’s contention that the Convention requires, or even permits, a panel to choose one
interpretation of ambiguous language in the Agreement as the only interpretation, would nullify the
second sentence of Article 17.6(ii) of the Agreement.WT/DS184/R
Page D-91
5. I will now turn to my colleague, Mr. Toupin, of the US International Trade Commission,  to
present the injury issues.
6. Mr. Toupin .  Thank you, Mr. Chairman and members of the Panel.
The Causation Standard under Article 3.5
7. At the outset, I would like to address the arguments that Japan now makes concerning the
examination under Article 3.5 of other factors injuring the industry.  The United States has
demonstrated how the USITC’s findings satisfy the standards for such an examination articulated by
the panel in the Atlantic Salmon  decision.  I will not reiterate those arguments here, and invite any
further questions that the Panel may have about those factual issues.  Here, I will extend our remarksconcerning why Atlantic Salmon,  and not the unadopted panel decision in Wheat Gluten, provides
relevant guidance for this Panel.
8. The first question for construing Article 3.5 of the Anti-Dumping Agreement is, what does it
mean for dumped imports to be “causing injury” under the first sentence of the Article?  As theUnited States has indicated in its Second Written Submission, the ordinary meaning of the word
“cause” includes the possi bility that a factor may be regarded as causing an effect if it assists in
bringing forth that outcome.
1  This definition assumes that a factor may cause an outcome through its
interaction with multiple other causal factors.  Thus, the ordinary meaning of the term contradicts the
Wheat Gluten  panel’s conclusion that an authority must determine the quantum of injury that imports
“alone” cause.
9. This interpretation is reinforced by the second sentence of Article 3.5, which provides that
demonstrating “cause” consists of a “demonstration of a causal relationship  between the dumped
imports and injury.”  The term “relationship” suggests that demonstrating causation consists offinding the connections between dumped imports and the industry’s overall state, not of isolating a
quantum of injury ascribable to imports alone.  This view is consistent with the provision of
Article 3.4 that an authority must evaluate all factors having a bearing on the state of the industry.
Indeed, it is difficult to see how an authority could ever define the injury caused by imports alone in
view of the factors that Article 3.4 states must be considered.  The impact of dumped imports on such
factors as productivity, return on investment, cash flow, inventories, employ ment, growth, wages, and
ability to raise capital, will necessarily reflect the inextricable interaction of dumped imports withother factors.
10. It is in this context that the third sentence of Article 3.5, which requires an authority not to
attribute injuries caused by other factors to dumped imports, must be interpreted.  The third sentence
recognizes that other factors may also have what the second sentence calls a “causal relationship” tothe injured state of the industry.  The third sentence requires an authority to examine such other
factors sufficiently to assure that  the determination of a causal relationship between dumped imports
and injury is not based on effects explained instead by other causes.
11. Moreover, under Article 32 of the Vienna Convention, if the terms of a provision analyzed in
context remain ambiguous, a tribunal may refer to the negotiating history to resolve ambiguity.  The
Tokyo Round Anti-Dumping Code, which the Anti-Dumping Agreement supersedes, and the Atlantic
Salmon  decision, adopted under that Code, were plainly part of that history.  The first clause of the
third sentence of Article 3.5 of the Anti-Dumping Agreement is drawn almost verbatim from the
Atlantic Salmon  decision’ s description of the examination it regarded Article 3:4 of the Code as
implicitly requiring.  The second clause is close to identical to Article 3:4 of the prior Code.  The last
                                                     
1 US Second Written Submission at ¶ 80.WT/DS184/R
Page D-92
sentence of Article 3.5, like footnote 5 in the prior Code, does not instruct an authority how to conduct
the examination, but rather lists exemplary factors which may, but need not be, relevant.
12. Certainly, the documents underlying United States’ implementation of the Agreement show
that the United States, in agreeing to Article 3.5, reasonably understood it as adopting a requirementconsistent with Atlantic Salmon.  We attach as an exhibit the passage from the United States’
Statement of Administrative Action that sets forth the United States’ understanding.
2
13. Finally, unlike the Safeguards Agreement, with which the Wheat Gluten  panel was concerned,
the Anti-Dumping Agreement provides that, when a pr ovision admits of more than one interpretation,
a panel is not to compel adoption of one of those interpretations.  Article 17.6(ii) reflects that the
negotiators of the Anti-Dumping Agreement knew that  they were adopting provisions that did not in
every case mandate one approach.  Since the negotiators adopted language so close to that used in
Atlantic Salmon , the United States must be regarded as choosing a permissible interpretation pursuant
to Article 17.6(ii) when it construes Article 3.5 in accord with Atlantic Salmon .
14. The Wheat Gluten  panel acknowledges that its requirement to determine what injury is due to
imports alone might be impracticable, and explicitly declines to explain how its test might be met.
This should have indicated to the Wheat Gluten  panel that it was adopting an interpretation of the
Safeguards Agreement that the negotiators of that Agreement could not have intended.  Certainly the
negotiators of the Anti-Dumping Agreement did not intend to impose such an impracticable test.
Examination of Relevant Factors and Evidence
15. As for Japan’s argument that the USITC should have relied on certain data from 1996 to
1998, the USITC’s determination reflects that it examined the relevant factors and evidence as
required by the Agreement.  Japan makes much of the fact that the USITC did not make an explicitfinding stating that the industry’s profits rose from 1996 to 1998, when the USITC relied on the
decline in profits from 1997 to 1998.  Japan, however, points to no requirement of the Agreement
requiring such a finding.  Article 3.4 requires the authority to conduct an “examination” of profits, but
requires no particular finding.  The USITC plainly examined profits.   Article 3.5 requires an
“examination of all relevant evidence”, but does not state how that examination shall be reflected.
Here, the USITC plainly examined the data from 1996 to 1998, since it explained why it rejected
arguments that it should rely on a broader period than 1997 to 1998.  Indeed, in doing so, it explainedwhy, in the context of the economic conditions from 1996 to 1998, it did not regard 1997 as a banner
year.  There is no basis in the Agreement to find that the USITC was required to do more.
16. Japan argues -- concerning both the Anti-Dumping Agreement and Article X of the GATT --
that the USITC somehow impermissibly departed from a “rule” that it would rely on data over theentire period of its investigation.  As our submissions demonstrate, there is no such rule.  The USITC
has in fact in numerous determinations -- reaching both affirmative and negative results -- relied on
recent trends rather than on trends over the entire period.  If it could not do so, the USITC would,
when economic circumstances have changed over the period investigated, be forced to violate the
requirement of Article 3.4 that it examine “all relevant economic factors”.
17. These points are illustrated by the USITC’s decision in Elastic Rubber Thread from India
3,
on which Japan relies.  In Rubber Thread , the USITC did indeed give weight to trends over the
three-year period investigated rather than to tre nds in the final year.  Its opinion, however, shows that
it did not do so on the basis of any rule requiring reliance on three-year trends.  It relied on those
                                                     
2 Statement of Administrative Action to Uruguay Round Trade Agreements Implementing Bill, H.R.
83-211, at 181-182, attached as Exh. US/C-31 .
3 USITC Inv. No. 731-TA-805 (Final).WT/DS184/R
Page D-93
trends only after finding that the downward trends in the last year were an “anomaly due to
unanticipated high volumes in 1997, followed by a corresponding drop in 1998."4  The USITC’s
reasoning, therefore, depended on its findings concerning the relevant economic factors.  Here, the
USITC found the relevant economic factors differed from those in  Rubber Thread .  Here, the USITC
found the rise in demand and consumption not to be an anomaly, but rather to represent a persistentdevelopment in the relevant factors having a bearing on the state of the industry.
The captive production provision and analysis of market segments
18. Both the US law concerning captive production and the USITC’s determination in this case
accord with the Agreement’s requirement to make a determination as to injury to the producers as a
whole of the domestic like product.  Japan has moved in its second written submission far from itsoriginal position in its arguments about the consistency of the US captive production provision, in
itself, with the Anti-Dumping Agreement.  Although the United States does not agree with much of
Japan’s characterization of that provision, even under Japan’s portrayal of it, Japan cannot establish
that the US statute violates the requirement that Members assure that their laws conform with their
obligations under the Agreement.
19. In its first written submission, Japan stated that it was improper to consider, either primarily
or secondarily, data for the merchant market sector.
5  Japan has now abandoned this position.  Japan
now acknowledges that  “an analysis of the particular sector in which the competition between the
domestic industry and dumped imports is most dire ct is certainly allowed under the Anti-Dumping
Agreement."6   Japan likewise agrees that the merchant market sector is the sector in which
competition between the domestic industry and dumped imports is most direct.7
20. Similarly, Japan’s First Written Submission stated that under the captive production provision
“the USITC now must  ignore the shielding effect of captive production,” and the provision “makes it
impossible  for USITC to consider all relevant evidence."8  Japan’s position has become more
nuanced, and the nuance is fundamental.  In its Second Written Submission, Japan acknowledges that
it is permissible for an authority to focus on the merchant market sector, but it argues that such an
analysis must be explicitly related back to the industry as a whole and that the US provision “ requires
no such relating back."  Likewise, rather than asserting that the USITC under the captive production
provision must ignore other evidence, Japan now simply states that the provision "encourages USITC
impermissibly to accentuate merchant market data in its determination."9
21. The United States disagrees with this interpretation of the captive production provision.However, even if Japan were correct in its statutory construction, its allegations would not establish
that the US law on its face should be deemed to violate the Agreement.  Japan admits that the
provision does not  preclude  the USITC from relating back its findings on the merchant market sector
to the whole industry.  Moreover, if the statute only encourages  the US authority to accentuate certain
data, the statute cannot be said to require  the USITC to ignore any evidence.  Such a showing does
not meet the traditional standard for finding legislation on its face to violate an Agreement.  Under
that standard, only “legislation which mandated action inconsistent with the General Agreement could
be challenged as such, whereas legislation which merely gave the discretion to the executive authority... to act inconsistently with the General Agreemen t could not be challenged as such; only the actual
                                                     
4 Rubber Thread , at 14 & n.104.
5 Japan First Written Submission at ¶ 45.
6 Japan Second Written Submission at ¶ 219.
7 Japan Second Written Submission at ¶ 186.
8 Japan First Written Submission at ¶¶ 238-239 (emphases added).
9 Japan Second Written Submission at ¶ 186.WT/DS184/R
Page D-94
application of such legislation ... could be challenged."10  Japan is wrong in claiming that this
established principle is no longer applicable or only relevant when a statute has not been applied.11
The Appellate Body in US – 1916 Act  specifically denied that the panel there made such a finding.12
Similarly, the panel in the Section 301  dispute stressed that it was not overturning the jurisprudence
on the mandatory/discretionary distinction.13
22. In fact, as the United States has indicated, its anti-dumping statute does require that theauthority make its determination with respect to th e industry as a whole, and the captive production
provision does not alter this requirement.  Many aspects of the statute support this conclusion.  The
statute requires the USITC to make its determination as to the industry, which it defines as producers
as a whole of the domestic like product.  The requirement to “focus primarily” on the merchant
market for certain factors assumes that, even for those factors, the USITC’s analysis will proceedfurther.  Moreover, the Statement of Administrative Action makes clear that, when the USITC
considers those factors to which the captive production provision applies, it may “focus” on other
evidence in addition to the merchant market sector.  Likewise, the statute requires the USITC to
consider other factors to which the provision does not apply.  Further, the statute requires the USITC
to consider “all relevant economic factors” and no one factor can "necessarily give decisiveguidance."  Thus the statute as a whole provides the USITC with discretion to consider all evidence
and factors, and requires it to make a determination as to the industry as a whole.
23. Even if the US statute did not clearly mandate a determination as to the industry as a whole,
when a statute that an authority administers is ambiguous, US courts defer to an authority’sconsidered interpretation if that interpretation is reasonable.  The Statement of Administrative Action
expresses Congress’ intent that the captive production provision would be consistent with the
Anti-Dumping Agreement.  Consequently, the authority applying that provision properly under US
law resolves any ambiguities in the captive production provision and its relation to the statute in a
manner consistent with the United States’ obligation under the Agreement.
24. Indeed, it is Japan,  not the United States, that forgets that the necessary inquiry pertains to
the industry as a whole.  Japan claims that the US ITC should have made findings about a fall in the
demand by pipe and tube manufacturers for hot rolle d steel because two steel producers particularly
depended on that demand.
14  The USITC, however, found that overall demand increased substantially
and that the industry as a whole should have been able to take advantage of that growth in demand.
The USITC concluded that imports prevented the industry as a whole from doing so.  Japan has notshown how, in view of the overall growth in demand, the fact, if tr ue, that two firms faced a fall in
demand in a particular submarket is relevant to the assessment of injury to the industry as a whole.
25. Japan is reduced to arguing that this Panel should hold that the US Congress repealed the
other provisions of the US statute that call on the USITC to make a determination as to the industry asa whole when it enacted the captive production provision -- even though Congress didn’t say so.
15
Frankly, this argument demonstrates the implausibil ity of Japan’s position.  Japan is effectively asking
this Panel to rewrite the US statute in order to make it violate the Anti-Dumping Agreement.
                                                     
10 United States -- Measures Affecting the Importation, Internal Sale and Use of  Tobacco, Panel
Report, adopted 4 October 1994, BISD 41S/131, at 118, quoted in United States -- Antidumping Act of 1916,
AB-2000-5, AB-20006, at ¶ 88.
11 Japan Second Written Submission at  ¶ ¶ 175, 177.
12 United States -- Antidumping Act of 1916, AB-2000-5, AB-2000-6, at ¶ 93.
13 United States - Sections 301-310 of the Trade Act of 1974, adopted 27 Jan. 2000, WT/DS152/R at ¶
6.9.
14 Japan Second Written Submission at ¶ 267.
15 Japan Second Written Submission at ¶ 193.WT/DS184/R
Page D-95
26. The sources concerning United States law that Japan cites, support, rather than conflict with,
the United States’ position here.  As the US Supreme Court stated in the Watt  case that Japan cites,
“repeals by implication are not favoured ... The intention of the legislature to repeal must be ‘clear
and manifest.’"16  Japan presents sections of a treatise on statutory construction as an exhibit17 but
pointedly omits the preceding section of the treatise that makes clear that US courts seek to readstatutes as a whole to avoid finding different statutory provisions to be in conflict.
18  We attach that
prior section as an exhibit.  It is clear that a court would uphold the USITC in resolving any
ambiguities to construe the captive production provision to accord with the statutory requirement to
make a determination as to the industry as a whole.
27. The USITC’s consideration in this case of the merchant market was consistent with the
Agreement.  As both Japan and the United States have advised the Panel, under US law only threeCommissioners needed to vote in the affirmative in order to render an affirmative determination, and
three Commissioners who voted in the affirmative found that the captive production provision did not
apply.  The obvious consequence of this fact is that, even if this Panel were to hold that the provision
on its face violated the Agreement, such a ruling would not affect the validity of the USITC’s
determination.  In its First Written Submission, Japan sought to avoid that consequence by arguingthat, although Commissioner Bragg did not apply th e captive production provision, her determination
also erred because she made findings about the merchant market sector “in parallel” with findings
about the industry as a whole.
19  Since Japan now agrees that making findings about a sector do not
per se  violate the Agreement, its Second Written Submission abandons this approach.
28. Instead, Japan now contends that Commissioner  Bragg’s determination is somehow “tainted”
because, although she did not apply the provision, she allegedly “passively” joined the decision of
three commissioners who did.20  This argument does not rise to the level of a prima facie  case.   The
face of the determination shows that the four Commissioners were co-authors of their joint views.
Wherever Commissioner Bragg believed that her views differed from those of her colleagues, shespecifically so noted.  There is simply no evidence that she was in any way “passive.”
29. In the determination at issue here, the Commission considered data on certain factors
concerning “the particular sector in which the competition between the domestic industry and dumped
imports is most direct,"
21 namely, the merchant market sector.  It also made specific findings
concerning the entire industry’s data for those and other factors.  Both sets of data supported an
affirmative determination.  The decisions that Japan cites for the proposition that an authority mustrelate its findings concerning a sector to the indus try as a whole, concern determinations in which the
authority did not in fact make findings about the indus try as a whole, either in the entire determination
or with respect to numerous required factors.  Here, the USITC made findings on all relevant factors
concerning the industry as a whole.  The fact that it also made findings about the merchant market
sector does not detract from the fact that its injury determination was based on data as to the industryas a whole.
30. Moreover, those findings necessarily account for trends in the non-merchant market sector.
Here there were only two sectors accounting for all production, and the USITC analyzed, for each
factor, data for one sector and for the industry as a whole.  The difference in results for each factor
                                                     
16 Watt v. Alaska , 451 US 259, 267, quoting Morton v. Mancari, 417 US 535, 549, Posadas v. National
City Bank , 296 US 497, 503 (1936), United States v. Borden Co. , 308 US 188, 198 (1939), Red Rock v. Henry ,
106 US 596, 602 (1883).  See Exh. JP-101 .
17 Exh. JP-101 , including excerpt from 2A Sutherland Stat Const  § 46.06 (6th Ed. 2000).
18 2A Statutes and Statutory Construction § 46.05 (6th Ed. 2000), excerpts attached as Exh. US/C-30 .
19 Japan First Written Submission at  ¶ 250.
20 Japan Second Written Submission at ¶¶ 225-226.
21 Mexico -- High Fructose Corn Syrup, adopted 24 Feb. 2000, WT/DS132/R at ¶ 7.160.WT/DS184/R
Page D-96
necessarily reflected the impact on the industry as a whole of trends in the sector as to which the
authority did not make separate findings.
31. The USITC here further made specific findings demonstrating the consequences for the
industry as a whole of developments in the mercha nt market sector.  For example, the USITC found
that most performance indicators for the US industr y as a whole declined because the US industry was
prevented from participating in the growth of demand and consumption.  The USITC found that the
growth of the dumped imports’ share of the merchant market sector at the expense of the domestic
industry’s share caused the US industry not to partic ipate in the growth in demand.  It also found that,
as a result, capacity that the US industry brought on line to meet the growth in demand immediately
became excess capacity.22  Moreover, the USITC found that the decline in the industry’s operating
income at the end of the investigation coincided wi th the decline in its capacity utilization rates.23
Through these and other findings, the USITC demonstrated the causal relationship between the effects
of dumped imports on the industry’s merchant market performance and injury to the industry as a
whole.
32. In sum, the USITC’s findings amply satisfy the standard that Japan has espoused.  Japan itself
quotes and approves prior panel authority stating that an analysis of the sector most exposed to import
competition can sustain an injury determination if an authority either  analyses all other sectors or
demonstrates the relationship between events in the one segment and the industry as a whole.24
Japan’s contention that the USITC’s determination was flawed unless it made specific findingsconcerning developments in the captive production sector has no basis in prior decisions or in theAgreement.
33. Finally, Japan complains at length that the USITC did not make findings in this case about the
captive production sector in the same way as it did in its 1993 Flat Rolled Steel  determination.
Suffice it to say here that the USITC in 1999 sp ecifically recognized the effects of captive
production.
25  The sole differences between the 1993 and 1999 determinations on this point seem to
be that in 1999, the USITC spoke about relative “sensitivity” to imports rather than using the word
“shielded”; in 1999, the USITC made its findings about the amount of captive production and the
applicability of the provision in the section labelled captive production and made its finding on
"sensitivity" in the next section of its opinion; and, as the facts had changed between 1993 and 1999,
the USITC reached a different conclusion.  With due respect to our Japanese colleagues, such
differences cannot even plausibly suggest a violation.
34. Mr. McInerney will now address Japan’s contentions about the United States’ dumping
calculations and critical circumstances.
35. Mr. McInerney.   Thank you Mr. Chairman.  With respect to the Department’s use of facts
available, Japan’s second written submission emphasizes two points that are both wrong.  First, Japan
claims that adverse inferences are “punitive,” and, therefore, improper.  (Japan’s 2d Sub. , ¶¶ 28 &
30.)  This ignores the fact that, where a party has not submitted necessary information, adverse
inferences are, in fact, the most reasonable and logical conclusion to be drawn about that missing
information.  This is precisely the point recognized by the Appellate Body in the Canada - Civilian
Aircraft   case.  Japan's attempt to distinguish that case as using an adverse inference during the course
of a WTO dispute settlement proceeding, rather than an anti-dumping investigation, disregards the
fact that the rationale for both decisions was identical - - that the adverse inference was made both
                                                     
22 USITC Report at I-17.
23 USITC Report at I-20.
24 Japan Second Written Submission at ¶ 210 and n. 250, ¶ 221, citing and quoting  Mexico -- High
Fructose Corn Syrup, adopted 24 Feb. 2000, WT/DS132/R, at ¶¶ 7.155, 7.160.
25 USITC Report at 11, 19.WT/DS184/R
Page D-97
necessary and reasonable by the non-cooperation of the responding parties.  In addition, Japan has yet
to explain why its own authorities applied exactly this rationale in Japan’s anti-dumping investigation
of cotton yarn from Pakistan.
36. Second, Japan claims that, because the Japanese respondents were generally cooperative, this
licensed them to refuse to cooperate with regard  to certain selected categories of information.
(Japan’s 2d Sub., ¶ 24.)  This position finds no support  in the Agreement.  It would amount to a 70 per
cent or 80 per cent cooperation rule, under which respondents would have to cooperate only up to the
threshold of “general cooperation,” after which they would be free to withhold information.  This
would license respondents to manipulate the resu lts of anti-dumping investigations by withholding
selected categories of adverse  information.
37. With regard to the  application of facts available to KSC , Japan now tries to rationalize
KSC’s refusal to exercise its powers, as a fifty per cent owner of CSI, to obtain the necessary
information by itemizing the ways in which KSC, CVRD, and CSI regularly ignored the CSI
shareholders’ agreement (Japan’s second submission at ¶ 47).  But the fact that KSC regularly ignored
the shareholders' agreement does not prove that it had no power under that agreement - - only thatKSC did not always choose to exercise that power.  As the minutes of the CSI board meetings make
clear (Exh. US/B–23/bis), the parties to the joint venture repeatedly raised, discussed, and made
decisions on business matters, as provided for in the agreement.  In this light, the fact that KSC never
even discussed  with CVRD the need to provide the requested CSI data, and never challenged  the
actions of CSI’s president and CEO (who served at the pleasure of the board members representingKSC and CVRD) is glaring.  (See US 1
st submission, ¶ 90).
38. Finally, Japan’s belated claim that CSI was unable  to supply the requested information is
based on one sentence in one letter from CSI.  This new claim is not supported by the weight of the
record evidence.  Indeed, KSC itself characterized this  statement by CSI as a refusal, not an inability,
to provide the requested information.  (US 2nd submission, ¶ 18; Exh. JP-93(a) and (c)).  Accordingly,
Commerce properly found that KSC failed to cooperate in providing the requested CSI data.
39. As facts available for the sales through CSI, Commerce reasonably chose a dumping margin
calculated by comparing KSC’s own sales to unaffiliated US customers to its sales of that same
product in Japan.  This selection of a dumping margin based upon KSC’s product-specific, verified
data represents a reasonable choice of adverse facts available.  Yielding to KSC’s attempt to forceCommerce into using its transfer prices to CSI as a “plug” for facts available would give every
respondent carte blanche  to shelter dumped sales through its overseas affiliates.
40. With regard to Commerce’s application of facts available to NSC and NKK , the
Department was simply exercising its clear right under the Agreement to enforce reasonabledeadlines.  Japan’s curious theory that any firm limits on the time in which information must be
submitted, even after repeated extensions, are inimical to a “reasonable” understanding of
“timeliness” has no support in the Agreement.  Similarly baseless is Japan’s theory that untimely
information must be accepted if  it is otherwise in compliance with the requirements of the
Agreement.  Paragraph 3 of Annex II requires that parties meet all four  of the basic criteria listed in
that paragraph in order for their information to be considered.  One of these four conditions is that the
information be "supplied in a timely fashion."
41. The weight conversion factors untimely submitted by NSC and NKK were not, as Japan
claims, “corrections” (Japan’ s 2d Sub., ¶ 93).  They were categories of information that NSC andNKK had repeatedly claimed were not necessary and were impossible to submit, at all .  Therefore,
Commerce’s rejection of this new information was perfectly consistent with its acceptance of various
corrections of previously-submitted data very late in the investigation (Japan’s 2d Sub., ¶ 94, fn.91).
Nor did NSC and NKK’s protestations of  “good faith” compel the acceptance of their conversionWT/DS184/R
Page D-98
factors.  It is impossible for investigating authorities to know a party’s motivation for not submitting
data when it is due, and the Agreement does not require the authorities to attempt to discern its
motivation.
42. Finally, we must take issue with the claim that the facts available Commerce chose were not
rationally related to the sales affected by the absence of the conversion factors.  The Department used
an adverse normal value for NKK’s theoretical weight sales in Japan because the only element
affected by the absence of the conversion factor was the normal value.  As we have noted, this highly
circumspect application of facts available had a minuscule effect upon NKK’s margin.  As for NSC,
the Department’s selection of margins from its actual-weight sales in the US market as facts available
for the theoretical-weight sales of the same products in the US market was also reasonable.
43. With regard to the “all-others” rate , Japan is asking the Panel to re-write Article 9.4.
Article 9.4 does not state that the all-others rate must exclude margins calculated in part by “ using ”
facts available (Japan’s 2d submission, at ¶ 117).   Instead, Article 9.4 tells authorities to disregard
margins which were “established”  on the basis of the facts available.  The most obvious
interpretation is that such margins are “established” entirely on the basis of the facts available, forrespondents that have generally failed to cooperate.  Similarly, Article 9.4 does not require the
exclusion of  “portions” of margins based on facts available.  It tells authorities to “disregard”
margins  established on the basis of the facts available, not to “recalculate” them without facts
available.
44. The US reading of Article 9.4 – that a margin is only “established based on the facts
available” when it is not a calculated margin, but is based entirely
 on the facts available – is a
reasonable and permissible one.  Indeed, Japan claims  only that nothing in Article 9.4 "prevents" the
Department from removing "portions" of margins using facts available and that its preferred approach
"better reflects" Article 9.4 than the US interpretation.  However, nothing in Article 9.4 requires the
Department to follow Japan's preferred approach.  If investigating authorities must disregard margins
based only in  part on the facts available, no margins would remain to calculate the all others rate in a
great many cases, including this one.
45. Japan further argues that the Agreement makes clear that companies not individually
investigated should not be affected by the behaviour of investigated companies.  (Japan’s 2d Sub., ¶
117)  Exactly the opposite is true.  Article 9.4 expressly provides for the behaviour of the investigatedcompanies to serve as a proxy for the companies not individually examined.  In so providing,
Article 9.4 avoids either unduly rewarding or penalizing the companies not investigated by
eliminating the margins at both extremes - - the zero and de minimis  margins and the presumably
highest margins based entirely upon facts available.  Reading Article 9.4 to require the exclusion of
margins based even in part on the facts available would defeat its purpose of producing a reasonableaverage by eliminating the margins at each extreme of the range.
46. With regard to the treatment of home market sales through affiliated parties, Japan’s
“symmetry”  argument concerning the Department’s 99.5 per cent test ignores the fact that, although
in the ordinary course of trade a company will sell at prices as high as the market will bear, acompany normally will not sell below  market prices.  The reasonableness of the Department’s
“asymmetrical” approach to sales to affiliated parties in the home market is  demonstrated by the fact
that it is essentially the same as the margin calculat ion itself.  The reason for this similarity is that the
margin calculation and the arm’s-length test have parallel objectives:  the margin calculation discerns
whether the sales in question (which are the export sales) have been sold below normal value in thehome market; the arm’s-length test determines whether the sales in question (which are the sales to
the affiliate in the home market) are sold below average prices to unaffiliated parties.  In each case,
the group of sales is tested to determine whether it is priced below , not above, the applicable
benchmark.WT/DS184/R
Page D-99
47. Japan’s arguments against the use of downstream sales in the home market  are also invalid.
Article 2.1 defines dumping as selling at less than “the comparable price, in the ordinary course of
trade , for the like product when destined for consumption in the exporting country ” (emphasis
supplied).  A sale through a related party to an independent purchaser in the home market is just sucha sale - - a sale of the like product, in the ordina ry course of trade, destined for consumption in the
exporting country.  Accordingly, such sales are an  appropriate basis for normal value.  Article 2.2
calls for authorities to base normal value on constructed value or third country prices only “[w]hen
there are no sales of the like product in the ordinary course of trade in the domestic market of the
exporting country.”  (emphasis supplied).
48. By challenging the Department’s practice of using perfectly valid home market downstream
sales to unaffiliated parties, Japan is seeking to requ ire investigating authorities to use either the prices
of sales to related parties in the home market, which could easily be manipulated, or sources other
than prices in Japan.  This is not speculative - - NKK, for example, sold 93 per cent of its merchandise
through affiliated trading companies at the time of the investigation (64 Fed. Reg. at 24339).  If the
Department were precluded from using such sales, it would be forced to base normal value either onconstructed value or Japan’s sales to third countries.
49. Finally, the United States disagrees with Ja pan’s claim that the use of downstream sales
violates the fair comparison requirement because the Department’s level of trade adjustment does not
address differences in price comparability due to resellers’ costs and profits.  First, the United Statesnotes that this Panel’s terms of reference do not include any challenge to Commerce’s practice with
regard to level of trade adjustments, either generally or in this investigation.  Thus, Japan cannot now
raise this issue.  In any event, when the Department compares export sales to downstream home
market sales at a different level of trade, the US  statute (19 U.S.C. § 1677b(a)(7)) provides that “the
amount of the adjustment shall be based on the price differences between the two levels of trade in thecountry in which normal value is determined.”   Such “price differences” would include the effects of
both cost and profit.
50. With regard to Commerce’s Preliminary  Determination of Critical Circumstances ,
acceptance of Japan’s claims would render Article 10.7 meaningless.  Japan completely ignores the
fact that the “sufficient evidence” required by Article 10.7 may be found at any time “after initiation.”
Japan provides no explanation for the lack of any other temporal restriction, but instead simply insiststhat the decision cannot, “as a practical matter,” be made prior to a preliminary determination of
dumping.  Japan also continues to insist that petition exhibits are nothing more than “allegations,”
despite the obvious fact that the petition in this investigation  contained very substantial evidence.
51. With respect to the injury requirement, Japan continues to ignore the express language of the
Agreement, which provides that the term “injury” in Article 10.6  includes  “threat of injury” because
it does not specify otherwise.  Moreover, Article 10.4 does not prevent a preliminary critical
circumstances finding based upon “threat of injury.”  Article 10.4 merely states that, in accordance
with Article 10.2, if there is a final determination of “threat of injury,” an additional finding must be
made in order to impose retroactive duties.  This additional finding was not necessary in thisinvestigation because the final determination was of  current injury.   The question presented under
Article 10.4 is simply not present here.
52. Japan also argues that the Department’s selection of the comparison periods for volume of
imports and its determinations regarding knowledge of dumping and likely injury were arbitrary.However, the sequence of events fully supports the Department’s determinations.  First , importers
became aware of potential investigations when the US industry declared in published interviews that
it planned to bring anti-dumping actions; second , a surge in dumped imports followed the date of
those interviews; and third , importers during and after the surge became aware of the massiveWT/DS184/R
Page D-100
dumping and consequent threat.  The critical circumstances provisions were intended to address
precisely such surges in dumped imports.
53. Finally, Japan suggests that the United States is asking the Panel to look only at decisions
made at the end of the investigation.  This is not true.  We ask that the Panel look at this preliminary
decision.  You will find ample supporting evidence to satisfy the requirements of  Articles 10.6 and
10.7.  Indeed, it is curious that, to support its arguments, Japan continuously refers the Panel to the
final dumping margins - not the preliminary margins.  It is Japan  that would like the Panel to focus
upon the decisions made at the end of the investigation.
54. With respect to Article X , Japan’s claims are curious.  Although couching its argument in
terms of “due process” and “fairness,” Japan is really trying to have Article X override provisions ofthe Anti-Dumping Agreement.  Japan’s claim is  not about due process, in the sense of the Shrimp-
Turtle  decision it cites.  There is no denying that the US investigation was open and transparent and
allowed full opportunities for the submission of facts, views, and rebuttals.  Rather, this dispute is
about specific decisions fully consistent with and authorized by the Anti-Dumping Agreement that
Japan does not like, and hopes to attack collaterally through Article X:3.  The Panel should not permitsuch a collateral attack.
55. The differences between the Commerce Department and the US International Trade
Commission with respect to information gathering and facts available are attributable to the different
functions of these two agencies, not to any partiality, lack of uniformity, or unreasonableness.  Indeed,the Commission’s approach applies equally to info rmation from all parties before it, whether they be
US or non-US parties.
56. In deciding to accelerate the investigation, Commerce was reacting to an unprecedented surge
in imports which more than justified its modest acceleration of the investigation.  Japan has failedutterly to show that the acceleration prejudiced any of the Japanese respondents.  Agencies must have
the flexibility to respond to such special circumstances.  The same may be said of Commerce’s recent
policy on critical circumstances.  “Fundamental fairness” does not require that Commerce adhere
rigidly to past approaches in the face of an unprecedented import surge.
57. Thank you, Mr. Chairman and members of the Panel.WT/DS184/R
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ANNEX D-12
Closing Statement of the United States at
the Second Meeting of the Panel
(27 September 2000)
1. Mr. Toupin .  Japan’s contentions in this case as to injury are characterized by two trends.
First, its legal theories have proved to be completely flexible.
2. In its first written submission, as to other factors causing injury, its claims concerned entirely
whether the USITC’s findings were sufficiently thorough, not whether the standard that the USITC
stated in doing so was adequate.  Beginning with its first oral statement, following the Wheat Gluten
decision, Japan’s argument now concerns entirely whether the USITC isolated injury due to imports
and found that injury in itself material.  The total absence of such a theory in Japan’s original
submission suggests that it, too, did not understa nd the Anti-Dumping Agreement as imposing such
an analysis.
3. Similarly, in its original submission, Japan t ook the position that no analysis of segments was
appropriate.  Now, Japan has abandoned that position.
4. In brief, Japan has changed its position throughout this case, indicating that its positions here
do not seek to vindicate a principled view of the Agreement.  Rather, Japan evidently is prepared to
take any position to seek to overturn the US action in this case.  We are confident, however, that the
Panel will not be misguided by Japan’s opportunistic argumentation and will instead appreciate that itmust base its decision on a principled interpretation of the provisions of the Agreement.
5. The second theme that underlies Japan’s arguments is that the USITC did not make findings
on issues on which the USITC did, in fact, make findings.  The Panel should not be misguided by
such arguments either.
6. Article 3, on which Japan relies, provides no specific form in which an examination should be
reflected.  Japan’s real purpose on each point is not to establish that the USITC’s determination
violates any provision of the Agreement, but that the Panel should regard particular evidence as
entitled to greater weight than the USITC gave it.  Such is not the purpose of panel review under the
standard of review.
7. We thank the Panel for its patience and attention to the detailed factual and legal arguments
that have been made and look forward to the results of its deliberations.
8. Mr. McInerney .  Japan has long opposed the application of any antidumping measures.  Its
announced position is that its producers should be able to dump in the US market and other foreign
markets at will, with impunity.
9. In the Uruguay Round, Japan tried to obtain many changes to the Anti-Dumping Agreement
which, collectively, would have made the applicati on of antidumping measures impossible.  But Japan
did not succeed in this effort.  The Uruguay Round Agreements made a number of important changesWT/DS184/R
Page D-102
in the Anti-Dumping Agreement, but these changes were not intended to,  and did not , render the
application of antidumping remedies impossible.
10. Japan is now pursuing a fall-back strategy - - of attempting to persuade dispute settlement
panels to give Japan what it could not obtain from the Members through negotiation - - rendering theapplication of  antidumping remedies impossible, by interpreting the Agreement as if the Members
had agreed to that result.
11. In pursuit of this goal, Japan has made several claims before this Panel that strike at the heart
of the process by which antidumping measures are implemented.  The most prominent of these is
Japan’s wholesale attack on the facts available provisions, by proposing that an investigating authority
may never make an adverse inference about information not submitted, even where that informationhas been deliberately withheld.  Japan has admitted that this proposal is designed to strip Japanese
respondents of any incentive to cooperate in antidumping investigations.
12. At this hearing, despite its position that the Agreement never permits an investigating
authority to make an adverse inference,  Japan has responded to a question from the panel by agreeingthat an adverse inference could be reasonable in so me circumstances.  I don’t know how an inference
under the Agreement that can be reasonable in itself must nevertheless be based on an unreasonable
interpretation of the Agreement.
13. As a fig leaf for this naked assault on the viability of antidumping remedies, Japan offers that,
where a foreign producer has refused to supply an inve stigating authority with critical information, the
investigating authority might, in  attempting to reach a neutral result, use information that might
coincidentally turn out to be adverse.  The Pane l is supposed to accept this absurd proposition as
something to which the Members that actually employ antidumping remedies conceivably  could have
accepted in the Uruguay Round.  The Members are alleged to have accepted that exporters wouldregard as a sufficient incentive to supply advers e information in an antidumping investigation the
remote possibility that, in attempting to substitute purely neutral information for the missing data, an
investigating authority might accidentally select some  information that was unfavourable.  This is just
not credible.
14. But Japan has not “put all of its eggs in one basket,” with respect to facts available.  It has
offered other arguments which are intended to look reasonable, when compared to its outright assaulton the facts available rule.  Such arguments should not be viewed in comparison to those that are
more outrageous, but on their own merits.  The seemingly small matter of NKK’s weight conversion
factor is a good example.  This is a small adjustment that had a minuscule effect on NKK’s margin.
But by pressing this argument, along with the more  outrageous claim, Japan hopes to carve some big
holes in the facts available rules.
15. Japan has asked the Panel to rule that investigating authorities cannot enforce reasonable
deadlines for the submission of information, and that non-cooperation confined to “small” matters
must be excused.  If the Panel goes along with this request, Japan will demand that these exceptions
be applied to much larger quantities of information submitted late, or not at all, provided, of course,that the respondent companies have the sense to offer nominal cooperation.
16. Japan’s arguments regarding the 99.5 per cent test are similar in approach to the matter of
NKK’s weight conversion factor, in that they invite the panel to begin dismantling the antidumping
law piece-by-piece. Although  nominally  about the validity of the 99.5 per cent test itself, Japan’s
argument  rapidly branches out to matters that would give Japanese exporters complete control over
antidumping investigations.   First, Japan proposes that an investigating authority should be required
to accept transfer prices to affiliates as a basis for export price.  If this proposition were accepted,WT/DS184/R
Page D-103
exporters would be in the enviable position of being able to make all of their export sales through
related distributors, forcing investigating authoritie s to accept meaningless transfer prices as valid.
17. This strategy is complimented by a similar strategy on the home market side.  Here Japan
seeks to force investigating authorities to accept hom e market transfer prices or, in the alternative,
skip over legitimate resales in the home market in favor of constructed value or third country prices.
Put these two elements together, and Japan effectively could prevent investigating authorities from
comparing a meaningful price in the export market to a meaningful price in Japan.  Instead, exporters
would be able to dictate which transactions must be used on both halves of the dumping equation.
This would enable Japanese exporters to control the outcome of investigations, and therefore avoid
the imposition of any antidumping remedies.
18. Now put it all together.  Japan is trying to give to respondents control over what information
must be submitted, when that information must be submitted, and how the entire dumping calculation
must be set up.  If Japan cannot obtain this all at once, it will try to get it in instalments from
successive panels.
19. Japan should not be allowed either to demolish antidumping measures or to begin their
piecemeal disassembly.  Therefore, we trust that the Panel will consider each of Japan’s arguments on
its individual merits, and uphold each US practice that is based on a permissible interpretation of the
language to which the Members agreed, as required by Article 17 of the Agreement.
20. Thank you for your careful attention to our arguments today and for your consideration in this
proceeding.
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